Gipson Mechanical Contractors v. U.A. Local 572

• Decision Date: 24 January 2019
• Docket Number: Case No. 3:18-cv-00768
• Citation: 362 F.Supp.3d 451
• Parties: GIPSON MECHANICAL CONTRACTORS, INC., Plaintiff, v. U.A. LOCAL 572 OF THE UNITED ASSOCIATION OF THE JOURNEYMAN AND APPRENTICES OF THE PLUMBING AND PIPEFITTERS INDUSTRY OF THE UNITED STATES AND CANADA (AFL-CIO), and Plumbers & Pipefitters Local 572 Building Corporation, Defendants.
• Court: U.S. District Court — Middle District of Tennessee

362 F.Supp.3d 451

GIPSON MECHANICAL CONTRACTORS, INC., Plaintiff,

v.U.A. LOCAL 572 OF THE UNITED ASSOCIATION OF THE JOURNEYMAN AND APPRENTICES OF THE PLUMBING AND PIPEFITTERS INDUSTRY OF THE UNITED STATES AND CANADA (AFL-CIO), and Plumbers & Pipefitters Local 572 Building Corporation, Defendants.

Case No. 3:18-cv-00768

United States District Court, M.D. Tennessee, Nashville Division.

Signed January 24, 2019

Scott A. Frick, The Frick Law Firm, PLLC, Memphis, TN, for Plaintiff.

Deborah Godwin, Godwin, Morris, Laurenzi & Bloomfield, PC, Memphis, TN, for Defendants.

MEMORANDUM

Aleta A. Trauger, United States District Judge

Pending before the court is a Motion to Dismiss (Docket No. 12) filed by the defendants, U.A. Local 572 of the United Association of the Journeyman and Apprentices of the Plumbing and Pipefitters Industry of the United States and Canada (AFL-CIO) ("U.A. Local 572") and Plumbers & Pipefitters Local 572 Building Corporation ("Local 572 Building Corp."), in response to an Amended Complaint filed by the plaintiff, Gipson Mechanical Contractors, Inc. ("Gipson") (Docket No. 6.) Gipson has filed a Response in opposition (Docket No. 16), and the defendants have filed a Reply (Docket No. 17). For the reasons discussed herein, the defendants' motion will be granted in part and denied in part.

BACKGROUND ¹

Gipson is a construction services corporation specializing in industrial mechanical work, pipefitting, mechanical service, and related work. U.A. Local 572 is a labor union with its principal place of business located at 225 Ben Allen Road, Suite 102, Nashville, TN 37207-3031. Local 572 Building Corp. is a public benefit corporation formed to acquire and maintain property for labor organizations. Its principal place of business is also located at 225 Ben Allen Road, Suite 102, Nashville, TN 37207-3031. Local 572 Building Corp. has owned the property located at 225 Ben Allen Road for nearly forty years. Both U.A. Local 572 and Local 572 Building Corp. conduct their business operations out of the same facilities there. U.A. Local 572 lists the property as its asset in Form LM-2 Labor Organization Annual Reports that U.A. Local 572 files with the U.S. Department of Labor. U.A. Local 572 has pledged the property located at 225 Ben Allen Road as collateral for one or more loans obtained by U.A. Local 572. In 2015, U.A. Local 572 was represented by attorney James Stranch, III, who was also Local 572 Building Corp.'s registered agent for service of process. (Docket No. 6 at 10–11.)

In 2008, Gipson opened a new operations branch in Nashville, TN, in order to provide heavy industrial mechanical work on construction projects and service for existing mechanical systems in commercial buildings and structures in the Middle Tennessee area. Gipson contacted U.A. Local 572 to arrange for union employees to work on both its construction and commercial services business operations. Gipson and U.A. Local 572 agreed to be bound by a previously-negotiated agreement between U.A Local 572 and the master plumbing, heating, piping, and air conditioning contractors of Middle Tennessee. That agreement was entitled "Working Agreement Between Plumbers and Pipefitters U.A. Local 572 and the Master Plumbing Heating, Piping and Air Conditioning Contractors of Nashville and Vicinity" ("2007 Master Agreement"). The parties subsequently agreed to successor versions of the 2007 Master Agreement—the "2010 Master Agreement" and "2013 Master Agreement," collectively the "Master Agreements"—that were, for the purposes of this motion, substantially similar in terms.² All three agreements contained the following Grievance Procedure:

ARTICLE XII GRIEVANCE PROCEDURES

Section 1. In recognition of the jurisdiction claims as set out in this Agreement, it is understood that the assignment of work, and the settlement of jurisdictional disputes with other Building Trade Organizations shall be adjusted in accordance with the procedure established by the National Joint Board for the settlement of jurisdictional disputes, or any successor Agency of the Building and Construction Trades Department.

There shall be no stoppage of work because of jurisdictional disputes.

Section 2. All differences as to interpretation and meaning of the Agreement between the parties shall be settled in accordance with the following procedures:

(A) The Contractor and the Union, through their authorized representatives, shall attempt to settle the matter in dispute.

(B) In the event that the dispute is not so settled, it shall be referred to the Joint Arbitration Committee consisting of three (3) representatives designated by the "Historical Bargaining Group" and three (3) representatives designated by the "Union." Said Committee shall meet within twenty-four (24) hours following receipt of a notice in writing from either of the parties hereto.

The Joint Committee reserves the right to make the final decision in any dispute, and final interpretation of any of the Articles of this Agreement subject to the rules of Arbitration set forth herein. If said Committee is unable to reach a decision within three (3) days following its first meeting, said Committee shall submit the dispute to the Industrial Relations Council for the Plumbing and Pipe Fitting Industry. Pending final decision of the Industrial Relations Council, in accordance with its published procedures and rules, all terms and conditions for this Agreement shall continue in full force and effect, meanwhile, there shall be no work stoppage. The determination reached in this Grievance Procedure shall be final and binding upon all parties involved.

(Docket 6-1 at 19.)

The Master Agreements were supplemented with a Memorandum of Understanding, which included the following provision:

To compete for commercial work against non-union contractors, the union recognizes that the contractors' average cost per hour (including labor burden) must be competitive. A "Target Rate" will be established based upon the average hourly cost of non-union labor. The union and the contractor mutually agree to use increased ratios, promotional funds and any other legal means available to provide skilled labor at an average rate equal to the target rate when competing against non-union contractors for commercial work. Helpers and pre-apprentices will not be used when first year apprentices are available.

As economic conditions change, the Target Rate shall be re-calculated and adjusted as recommended by the Work Recovery Committee.³ The hourly rates used to forecast the contractor's average labor cost per hour and the Target Rate shall be calculated using spreadsheets which are maintained by the Work Recovery Committee.

(Id. at 22.) This provision served to level the playing field for union employers. Mechanical contractors who utilize non-union employees typically pay lower wages to their employees than contractors who utilize union employees. Thus, to allow employers who were signatories to the Working Agreements to be able to compete with mechanical contractors who retained non-union employees, the Working Agreements require signatory employers to deduct a specified amount from the wages of the union employees for union-related contributions, including a Market Recovery Fund that was maintained by U.A. Local 572. U.A. Local 572 would then issue grants to the signatory employers in the form of a wage supplement, which would in turn allow signatory employers to reduce the amounts of their bids for work in order to make signatory employers more competitive with contractors who relied upon non-union labor to perform work.

The Market Recovery Fund is mentioned only once in the Master Agreements or Memorandum of Understanding.⁴ Neither the Master Agreements nor Memorandum of Understanding outline the process by which Market Recovery Funds are allocated or the parameters of such allocations. The Master Agreements designated Billy Borchert as U.A. Local 572's Business Manager. From 2009 through 2015, Borchert authorized Market Recovery Fund grants to Gipson and other signatory employers. The process operated as follows: upon authorization, Gipson provided an estimate of the number of man-hours needed to complete a qualifying project. Borchert would then provide Gipson a maximum grant amount that could be committed for the project and a corresponding amount-per-man-hour-worked that would be paid upon submission of time sheets validating the hours worked by U.A. Local 572 members. In reliance on those commitments, Gipson would then adjust its bid estimates by reducing labor costs. When bids were successful, Gipson would enter contracts to perform work at the reduced labor costs made possible by the Market Recovery Fund grants. Once work commenced, Gipson would submit invoices to U.A. Local 572 for the number of man-hours worked on the project in a given billing period, multiplied by the hourly rate previously authorized by U.A. Local 572. Gipson was awarded Market Recovery Fund grants by Borchert for the following projects:

(Id. at 8.) As work proceeded on these projects and wages were paid accordingly, Gipson periodically submitted invoices and accompanying documentation to U.A. Local 572 for Market Recovery Fund payments. From 2012 to 2017, U.A. Local 572 made four Market Recovery Fund payments to Gipson, totaling approximately $ 250,000. During this same time period, U.A. Local 572 paid millions of dollars to other employers on grants issued months or years after the grants issued to Gipson.

Gipson alleges that, in addition to its failure to pay the Market Recovery Fund moneys it owed, U.A. Local 572 consistently failed to provide appropriately skilled and competent workers. As a result, defective mechanical work was installed by U.A. Local 572 journeymen and foremen on Gipson jobs. Gipson was required to remove and correct the defective work at substantial costs. Gipson incurred $ 133,736.25 to correct defective work on the Williamson County Performing Arts & Enrichment ...