Carpenters Health & Welfare Fund of Phila. v. Mgmt. Res. Sys. Inc.

• Decision Date: 13 September 2016
• Docket Number: No. 15-2508,15-2508
• Citation: 837 F.3d 378
• Court: U.S. Court of Appeals — Third Circuit
• Parties: Carpenters Health and Welfare Fund of Philadelphia and Vicinity; Carpenters Pension and Annuity Fund of Philadelphia and Vicinity; Carpenters Savings Fund of Philadelphia and Vicinity; Carpenters Joint Apprentice Committee ; Metropolitan Regional Council of Carpenters, United Brotherhood of Carpenters and Joiners of America; Carpenters Political Action Committee of Philadelphia & Vicinity; Edward Coryell; Interior Finish Contractors Association of Delaware Valley Industry Advancement Program; Carpenters International Training Fund, fka National Apprenticeship and Health and Safety Fund, Appellants v. Management Resource Systems Inc.; Douglas W. Marion

837 F.3d 378

Carpenters Health and Welfare Fund of Philadelphia and Vicinity; Carpenters Pension and Annuity Fund of Philadelphia and Vicinity; Carpenters Savings Fund of Philadelphia and Vicinity; Carpenters Joint Apprentice Committee ; Metropolitan Regional Council of Carpenters, United Brotherhood of Carpenters and Joiners of America; Carpenters Political Action Committee of Philadelphia & Vicinity; Edward Coryell; Interior Finish Contractors Association of Delaware Valley Industry Advancement Program; Carpenters International Training Fund, fka National Apprenticeship and Health and Safety Fund, Appellants

v.Management Resource Systems Inc.; Douglas W. Marion

No. 15-2508

United States Court of Appeals, Third Circuit.

Argued: June 22, 2016

Opinion Filed: September 13, 2016

James E. Goodley, Esq., Stephen J. Holroyd, Esq. [ARGUED], Jennings Sigmond, 1835 Market Street, Suite 2800, Philadelphia, PA 19103, Attorneys for Appellants

Walter S. Zimolong, III, Esq. [ARGUED], Suite 1201, 1429 Walnut Street, Philadelphia, PA 19102, Attorney for Appellees

Before: McKEE, Chief Judge, FISHER and GREENAWAY, JR., Circuit Judges

OPINION OF THE COURT

McKEE

, Chief Judge

Plaintiffs collectively appeal the district court's dismissal of their claims against Management Resource Systems (“MRS”). The district court rejected Plaintiffs' claim that a collective bargaining agreement (“CBA”) obligated MRS to make employee benefit contributions and submit to audits pursuant to a separate “me-too” agreement between MRS and the Plaintiffs. The district court dismissed the Plaintiffs' claims pursuant to Federal Rule of Civil Procedure 12(b)(6)

, agreeing with MRS that the complaint did not sufficiently plead that MRS is bound by the CBA. Because we disagree, we will reverse the district court's dismissal of the complaint.

I. FACTS AND PROCEDURAL HISTORY

Plaintiffs are union and management sponsored trust funds and employee benefit plans that represent construction industry employees.¹ MRS is a corporation that constructs commercial buildings.² At least insofar as this dispute is concerned, the relationship between Plaintiffs and MRS began in the 1990s. In 1994 and again in 1997, MRS signed assent letters (or “me-too” agreements) binding it to CBAs bestowing various rights on Plaintiffs. Pursuant to the 1997 assent letter at issue here, MRS agreed to be bound by a more comprehensive agreement (“1997–2001 CBA”), which was then in force between the Interior Finish Contractors Association (“IFCA”), a multiemployer association, and the union (both Plaintiffs/Appellants).

According to Plaintiffs, by signing the 1997 letter, MRS also agreed to be bound by a later CBA (“2012–2015 CBA”). They claim the 1997 letter contains an “evergreen clause” that empowers the union and IFCA to negotiate successor agreements that bind MRS. Plaintiffs assert that this delegation of negotiating authority remained in force because MRS never gave Plaintiffs the notice required to terminate the 1997 letter's evergreen clause. MRS concedes that it never gave notice of termination. However, it disputes the Plaintiffs' characterization of the letter agreement. MRS denies that the letter continuously granted bargaining rights. Thus, according to MRS, it is not bound by the 2012–2015 CBA.

Under the 2012–2015 CBA and its predecessor 1997–2001 CBA, employers must make specified contributions to various funds of the Plaintiffs and they must permit audits of records relevant to their obligations to employees. For instance, the contested 2012–2015 CBA states that the “Employer shall ... pay ... a sum ... for each hour worked for a Pension and Annuity contribution.”³ With respect to audits, the CBA provides that the

Employer shall ... permit such agent during regular business hours to inspect and make copies of any and all records of the Employer pertaining to compensation paid to employees, hours worked by employees, monies withheld from employees for taxes .... The Parties hereto recognize and agree that the [union] has an obligation and right to collect monies owed the Fringe Benefit Funds by the Employer and/or owed to the [union] ....⁴

Plaintiffs sent MRS several requests for audits because they believed that MRS had failed to make contributions required by the 2012–2015 CBA.⁵ They filed this suit when MRS did not comply. Plaintiffs asked for (1) injunctive relief requiring MRS to submit to an audit; (2) a post-audit judgment for any amount due with liquidated damages, interest, and costs; (3) post-audit relief under 29 U.S.C. § 1145

for any unpaid ERISA contributions; and (4) a permanent injunction compelling MRS to comply with the 2012–2015 CBA and any subsequent CBAs.⁶

MRS moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)

based on its conclusion that the complaint did not state a claim upon which relief could be granted.⁷ MRS argued that it obviously did not sign the 2012–2015 CBA and claimed that the assent letter could not bridge the critical gap. MRS also challenged the complaint on the ground that it failed under Luterbach, a test the NLRB created to determine when an employer that does not sign a CBA can nevertheless be bound by the results of multiemployer bargaining.⁸ The district court agreed with MRS on both fronts and dismissed the Plaintiffs' complaint.⁹ This appeal followed.¹⁰

II. JURISDICTION AND STANDARD OF REVIEW

Our review of the district court's 12(b)(6) dismissal is de novo.¹¹ Thus, we employ the same standard as the district court. Federal Rule of Civil Procedure 8(a)(2)

instructs us that a complaint need not amount to more than a “short and plain statement.” In turn, Rule 12(b)(6) provides that a party may move to dismiss for “failure to state a claim upon which relief can be granted.”

The Supreme Court's analysis in Bell Atlantic v. Twombly¹²

and Ashcroft v. Iqbal guides our inquiry.¹³ Accordingly, we first outline the elements a plaintiff must plead to state a claim for relief.¹⁴ We then “peel away those allegations that are no more than conclusions and thus not entitled to the assumption of truth.”¹⁵ Finally, we look for well-pled allegations, assume their veracity, and determine whether they plausibly give rise to a right to relief.¹⁶ This plausibility standard requires more than a “sheer possibility that a defendant has acted unlawfully,” but it is not akin to a “probability requirement.”¹⁷ In assessing plausibility, we construe the complaint in the light most favorable to the plaintiff.¹⁸

III. DISCUSSION

The resolution of our inquiry turns on the answers to two questions: (1) Did the complaint sufficiently plead that the letter's evergreen clause binds MRS to the 2012–2015 CBA? (2) Does the NLRB's holding in Luterbach

ify the 2012–2015 CBA with respect to MRS?

A. The Evergreen Clause

We think it is clear that the assent letter at issue here functions as a me-too agreement. Such agreements are “common and generally enforceable”¹⁹ contracts whereby an employer that is not a member of a multiemployer association agrees to be bound by the terms of CBAs entered into by the association.²⁰ There is no distinction between actual and “me-too” signatories to a CBA.²¹ This allows individual employers to benefit from the terms of an association's CBAs without actually having to get involved in the collective bargaining process.²²

MRS disputes the “me-too” characterization of the 1997 letter. But it does not offer any explanation as to why that label is a “misnomer,” and we can find none.²³ The objection is meritless. There is no doubt that the 1997 me-too letter attached to the complaint bound MRS to CBAs between the IFCA multiemployer association and the union even though MRS was not a party to CBA negotiations. However, the question before us is which CBAs are covered by the me-too letter. Put another way, we must decide how long the contractual obligations in that letter bound the signatories. Plaintiffs claim that the “evergreen clause” in the me-too letter extends the 1997–2001 CBA to the 2012–2015 CBA.

Courts generally regard evergreen clauses as creating a perpetual agreement²⁴ that can only be terminated with notice. “[I]f neither party terminate[s] the contract, it w[ill] be renewed automatically.”²⁵ Here, Plaintiffs point to the following language in the me-too letter that they claim triggers automatic renewal:

This Agreement shall be effective as of the date set forth below and shall remain in full force and effect for the duration of the collective bargaining agreement between the [union] and [IFCA] that is effective on the date of this Agreement and for the duration of any addition, modification or renewal thereof until one party shall provide to the other written notice ... to terminate.²⁶

According to Plaintiffs, the commitment to be bound to “any addition, modification or renewal” is a prototypical evergreen clause that strictly binds MRS to all successor CBAs until MRS provides “written notice ... to terminate.” Plaintiffs claim that MRS' failure to give the required notice of termination allowed the evergreen clause to continue in effect and that clause operated to bind MRS to the 2012–2015 CBA.

MRS responds that, although Plaintiffs now rely on the fact that the me-too letter states that MRS is bound to “addition[s], modification[s], or renewal [s],” there are no allegations in the complaint that the 2012–2015 CBA falls into any of these categories. Instead, Plaintiffs simply attached the CBA and assent letter to the complaint without explanation. MRS adds that even though Plaintiffs subsequently attempted to make such allegations in their briefing, it is simply too late for such claims. The district court agreed. It explained: “It is axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss.”²⁷

However, that mistakenly ignores the fact that although the complaint did not specifically allege the existence of the evergreen clause in so many words, when the complaint is read in context...