Pittsburgh Mack Sales & Serv. V. Local Union No. 66

580 F.3d 185

PITTSBURGH MACK SALES & SERVICE, INC., doing business as Pittsburgh Truck Center, Appellant v. INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL UNION NO. 66.

No. 07-3938.

United States Court of Appeals, Third Circuit.

Argued September 29, 2008.

Filed September 4, 2009.

James P. Thomas (Argued), Richard I. Thomas, Pepper Hamilton LLP, Pittsburgh, PA, for Appellant.

Joshua M. Bloom (Argued), Joshua M. Bloom and Associates, P.C., Pittsburgh, PA, for Appellee.

Before: FISHER, CHAGARES, and HARDIMAN, Circuit Judges.

OPINION OF THE COURT

CHAGARES, Circuit Judge.

This case requires us to determine whether an agreement by a union to purportedly indemnify or hold harmless an employer for the employer's withdrawal liability to a pension plan under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA"), and the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381-1461 ("MPPAA"), is unenforceable because it violates public policy. We hold that it is not. As a result, we will vacate the District Court's judgment to the contrary and will remand this matter to the District Court.

I.

Pittsburgh Mack Sales & Service, Inc. ("Pittsburgh Mack") serviced and sold Mack Trucks.¹ At issue are two Collective Bargaining Agreements ("CBAs") between Pittsburgh Mack and the International Union of Operating Engineers Local Union No. 66 (the "Union"). The CBAs were effective January 13, 2004 through January 12, 2007, and applied to certain groups of employees at Pittsburgh Mack's Pittsburgh, Pennsylvania, facility. The CBAs provided, inter alia, that Pittsburgh Mack would make specific contributions to the Operating Engineer Construction Industry and Miscellaneous Pension Fund (the "Fund") — a multiemployer pension fund covered by ERISA and the MPPAA — and that the Union would hold Pittsburgh Mack harmless for liability to the Fund in excess of its specified contribution. Specifically, the relevant section of the CBAs (hereinafter "Section 1 of the CBAs") provided:

During the term of this Agreement, the employer agrees to contribute to [the Fund] for each man hour paid [] to the Employees covered by this Agreement . . . $1.65.

The Union will hold [Pittsburgh Mack] harmless for any liability to the Fund for any amounts claimed over and above this hourly contribution.

Appendix (App.) 66, App. 104.² Pittsburgh Mack made all of the hourly contributions to the Fund required under Section 1 of the CBAs. The CBAs also contained a "successor clause," which provided that the contract would be binding on a new owner if Pittsburgh Mack was purchased by an outside third party.

On October 5, 2005, during the period that the CBAs were in effect, Pittsburgh Mack executed a letter of intent to sell substantially all of its assets to Allentown Mack. During the following two weeks, "the Union voluntarily negotiated a new labor agreement and/or agreements with Allentown Mack to govern the wages, hours and other conditions of employment for the bargaining unit employees of Allentown Mack after it purchased the assets of Pittsburgh Mack." App. 37 (Complaint ¶ 11). A product of the Union's bargaining with Allentown Mack was that "the Union eliminated agreement provisions requiring hourly contributions to the Fund on behalf of the bargaining unit employees." Id. (Complaint ¶ 12). Pittsburgh Mack had no involvement in the negotiations between the Union and Allentown Mack.

Pittsburgh Mack and Allentown Mack entered into an Asset Purchase Agreement on December 19, 2005. In a letter dated November 20, 2006, the Fund notified Pittsburgh Mack of its determination that Pittsburgh Mack had "incurred a complete withdrawal from the Plan on December 31, 2005," and made a demand on Pittsburgh Mack for the resulting withdrawal liability in the amount of $413,389 plus interest.

In a letter dated November 29, 2006, Pittsburgh Mack advised the Union of the Fund's demand and, in turn, demanded that the Union indemnify or otherwise hold it harmless for the withdrawal liability. Pittsburgh Mack, in support of its demand on the Union, cited Section 1 of the CBAs and argued that because "the alleged withdrawal liability to the Plan is in addition to, and in excess of, Pittsburgh Mack's required hourly contribution, [the Union] is responsible for this withdrawal liability to the Plan." App. 125. The Union has refused to indemnify or hold harmless Pittsburgh Mack for the withdrawal liability to the Fund.

Pittsburgh Mack brought a declaratory judgment action seeking a determination that pursuant to Section 1 of the CBAs, the Union is obligated to indemnify it or hold it harmless against claims for withdrawal liability by the Fund. The Union moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing, inter alia: (1) the District Court lacked jurisdiction; (2) Pittsburgh Mack's claims were not ripe; and (3) Section 1 of the CBAs was unenforceable because it was contrary to public policy.

After considering a Magistrate Judge's Report and Recommendation ("R & R"), the District Court granted the Union's motion to dismiss and adopted the R & R. The District Court determined that Section 1 of the CBAs was "unenforceable as contrary to the public policy manifested in ERISA and the MPPAA." Pittsburgh Mack Sales & Serv., Inc. v. International Union of Operating Engineers, No. 07-00092, 2007 WL 2907950, at *8 (W.D.Pa. Sept. 30, 2007). In support of its determination the District Court noted that the "controlling principle" of the case "is that Congress' intent that withdrawal liability under the MPPAA be born by the employer, and that the employees' retirement benefits be thereby protected, may not be defeated by private contractual arrangement." Id. at * 1. This appeal followed.

II.

A.

Pittsburgh Mack alleges that the District Court had jurisdiction pursuant to section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185. Section 301 provides that:

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce ... may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

29 U.S.C. § 185(a). The Union contends that there is no jurisdiction under section 301 once a CBA has been terminated. It further contends that because the CBAs were terminated when Pittsburgh Mack no longer employed Union workers, the District Court lacked jurisdiction. Pittsburgh Mack responds that the CBAs were not terminated. It is unnecessary for us to resolve whether or not the CBAs were terminated, however, because despite the Union's assertions to the contrary, the existence of a contract is not a jurisdictional element of a section 301 claim.

This Court has, in the past, noted that "a prerequisite for section 301 jurisdiction is a contract between the employer and labor organization." International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America, Local 249 v. W. Pa. Motor Carriers Ass'n, 660 F.2d 76, 83 (3d Cir.1981). However, after the Supreme Court's decision in Arbaugh v. Y & H Corp., 546 U.S. 500, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006), this is no longer the case.

In Arbaugh, the Supreme Court addressed concerns that courts were conflating and confusing subject matter jurisdiction with the need to prove the essential elements of a claim for relief. Id. at 511, 126 S.Ct. 1235. The Court adopted a "bright line" test to determine whether a statute (or a provision thereof) was jurisdictional or part of the merits. Id. at 515-16, 126 S.Ct. 1235. The test, the Court in Arbaugh explained, is as follows:

If the Legislature clearly states that a threshold limitation on a statute's scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.

Id. (citation and footnote omitted).

The Court of Appeals for the Sixth Circuit in Winnett v. Caterpillar, Inc., 553 F.3d 1000, 1006, 1007 (6th Cir.2009), applied the Arbaugh test to the question of whether the existence of a union contract is a jurisdictional prerequisite under section 301. The court in Winnett held that the existence of a union contract is not a jurisdictional prerequisite under section 301 because Congress did not "clearly state[]" that the existence of such a contract was a limit on subject matter jurisdiction. Id. at 1006. In so holding, the court in Winnett analyzed section 301, noting that the only time jurisdiction is mentioned in the statute is in the context of personal jurisdiction. Id. The court observed that the statute actually "relaxes subject-matter jurisdiction by permitting federal courts to handle such cases without regard to the amount in controversy or the existence of diversity jurisdiction." Id. Finally, the court explained that because "[a]ll of the elements of a plaintiff's prima facie case for the breach of a union contract appear in the same subsection," a finding that the existence of a union contract had jurisdictional consequences would necessitate a finding that all of the other parts of the subsection were also jurisdictional in nature. Id. (emphasis in original). The court concluded that even if Arbaugh was not considered, such a finding would suggest that "Congress intended to create a cause of action that has no non-jurisdictional elements," a result that the court was "reluctant" to reach. Id.

We adopt the reasoning of the Court of Appeals for the Sixth Circuit in Winnett and hold that the existence of a union contract is not a jurisdictional requirement under section 301. Regardless of whether or not the CBAs were terminated, then, the District...