Int'l Bhd. of Teamsters Local Union No. 50, v. Kienstra Precast, LLC

• Decision Date: 13 December 2012
• Docket Number: 11–2185.,Nos. 11–2097,s. 11–2097
• Citation: 702 F.3d 954
• Parties: INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL UNION NO. 50, Plaintiff–Appellee, v. KIENSTRA PRECAST, LLC, Defendant/Third Party Plaintiff–Appellant, v. Illini Concrete, Inc., Third Party Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

702 F.3d 954

INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL UNION NO. 50, Plaintiff–Appellee,

v.KIENSTRA PRECAST, LLC, Defendant/Third Party Plaintiff–Appellant,

v.Illini Concrete, Inc., Third Party Defendant–Appellant.

Nos. 11–2097, 11–2185.

United States Court of Appeals,

Seventh Circuit.

Argued Dec. 2, 2011.

Decided Dec. 13, 2012.

Daniel M. McLaughlin (argued), Attorney, Spector, Wolfe & McLaughlin, Kirkwood, MO, for Plaintiff–Appellee.

Joshua M. Avigad, Lawrence P. Kaplan (argued), Attorneys, Kaplan & Associates, St. Louis, MO, for Defendant–Third Party Plaintiff–Appellant.

Timothy J. Sarsfield (argued), Attorney, Thompson Coburn LLP, St. Louis, MO, for Third Party Defendant–Appellant.

Before RIPPLE and ROVNER, Circuit Judges, and FEINERMAN, District Judge.^*

FEINERMAN, District Judge.

Illini Concrete, Inc., formally ceased doing business in October 2009 and sold certain of its assets, including delivery trucks, to Kienstra Precast, LLC. According to the complaint filed against Kienstra by the International Brotherhood of Teamsters Local Union No. 50 (“Local”)—which represents concrete mixer drivers and others employed by Illini Concrete and then by Kienstra—Kienstra proceeded to lay off fourteen employees, declined to make good on Illini Concrete's unfunded liability to its employees' union pension fund, subcontracted work to competitors to avoid hiring back the laid-off union employees, and refused to hear grievances regarding the asset sale and its effect on the employees. The complaint alleges that the asset sale was a ruse to allow Illini Concrete to evade its obligations under its collective bargaining agreement with the Local (“Illini CBA”). The Local claims that Kienstra breached the Illini CBA, and seeks a declaration that Kienstra is Illini Concrete's alter ego, that Kienstra thus is bound by the Illini CBA, and that the CBA obligated Kienstra to bargain over the displacement of the laid-off union employees.

Kienstra impleaded Illini Concrete as a third-party defendant, and each moved to compel arbitration, arguing that the Local's claims are covered by an arbitration clause in the Illini CBA. The district court denied the motions to compel arbitration, holding that the question whether Kienstra is Illini Concrete's alter ego, and thus whether Kienstra is bound by the Illini CBA, does not fall within the scope of the Illini CBA's arbitration clause. 2011 WL 1749997 (S.D.Ill. May 6, 2011). Kienstra and Illini Concrete have taken an interlocutory appeal of that ruling.

The merits cannot be reached unless we have appellate jurisdiction. Sections 1291 and 1292(a)(1) of Title 28 do not permit an interlocutory appeal of the district court's denial of Illini Concrete's and Kienstra's motions to compel arbitration. See Sherwood v. Marquette Transp. Co., 587 F.3d 841, 843–45 (7th Cir.2009); IDS Life Ins. Co. v. SunAmerica, Inc., 103 F.3d 524, 530 (7th Cir.1996); Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Cartage Co., 84 F.3d 988, 990–92 (7th Cir.1996). Recognizing this, Kienstra and Illini Concrete submit that appellate jurisdiction lies under a provision of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 16(a)(1), that permits interlocutory appeals of district court rulings that grant or deny motions to compel arbitration or that stay litigation pending arbitration. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 627–29, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009); Janiga v. Questar Capital Corp., 615 F.3d 735, 740 (7th Cir.2010); French v. Wachovia Bank, 574 F.3d 830, 833 (7th Cir.2009).

In its merits brief, the Local maintained that this court does not have appellate jurisdiction because § 1 of the FAA, 9 U.S.C. § 1, exempts from the FAA's scope lawsuits involving any contract of employment. The Local abandoned that broad contention at oral argument, and rightly so. Section 1 states that “nothing [in the FAA] shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1. In rejecting the notion that § 1 exempts all employment contracts from the FAA, the Supreme Court in Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001), held that “[s]ection 1 exempts from the FAA only contracts of employment of transportation workers.” Id. at 119, 121 S.Ct. 1302 (emphasis added). By “transportation workers,” the Supreme Court meant workers, like the “seamen and railroad employees” expressly referenced in § 1, that are “actually engaged in the movement of goods in interstate commerce.” Circuit City, 532 U.S. at 112, 121 S.Ct. 1302.

So, if the Illini CBA is a “contract of employment of ... workers engaged in ... interstate commerce” within the meaning of § 1, then § 16(a)(1) does not apply here, in which case we have no appellate jurisdiction and must dismiss the appeal, just as we did in Central Cartage, 84 F.3d at 993. The Local did not challenge appellate jurisdiction on that particular ground in either its brief or at oral argument. Kienstra and Illini Concrete took affirmative steps in their joint reply brief to fend off such a challenge, arguing that “the operations of Illini prior to the sale of assets and the operation of ... Kienstra subsequent to the sale were restricted to three counties in Southern Illinois.” Reply Br. at 6. From this premise, they argued that “the employees affected by this cause of action were not engaged in the transportation of goods in interstate commerce and do not fall within the narrow exception found in [§ 1 of] the FAA.” Ibid.

Although Kienstra and Illini Concrete argued that their workers were not engaged in the movement of goods in interstate commerce and the Local did not speak to that particular issue, “[a] court of appeals has an obligation to examine its jurisdiction sua sponte, even if the parties fail to raise a jurisdictional issue.” Wingerter v. Chester Quarry Co., 185 F.3d 657, 660 (7th Cir.1998) (per curiam). In an order issued after oral argument, we questioned whether Kienstra and Illini Concrete had truly meant to say in their joint reply brief that their trucking employees' activities were strictly limited to three counties in southern Illinois. We noted that those three counties (St. Clair, Monroe, and Randolph) are in a region of Illinois known as Metro East, directly across the Mississippi River from St. Louis, Missouri, and its environs. Given the nature of the Metro East economy, we said, it would be somewhat unusual if the truckers did not occasionally carry loads into Missouri. And if they did, we added, our appellate jurisdiction likely would fail.

Concluding that the record as it stood did not shed light on that factual question, we ordered a limited remand for the district court to determine whether the truckers ever carried loads into Missouri or other States on behalf of Illini Concrete or Kienstra. The district court held an evidentiary hearing at which the Local called two truckers who had carried loads for Illini Concrete and Kienstra. The district court issued an order finding that the truckers made deliveries into Missouri on Illini Concrete's behalf, but making no finding as to whether the interstate deliveries continued after Kienstra took over. (The two truckers testified that they did not carry loads into Missouri while employed by Kienstra, but the district court appropriately did not offer an opinion as to whether their experience reflects the experience of all other truckers who carried loads for Kienstra.)

After the district court entered its order, we allowed the parties to file supplemental briefs regarding appellate jurisdiction. The Local now takes the position that we lack appellate jurisdiction, while Kienstra and Illini argue the contrary. We agree with the Local.

This case is materially indistinguishable from Central Cartage. The plaintiff in Central Cartage, a union pension fund, sued Central Cartage, a company that employed the union's workers, alleging that Central Cartage had breached its contractual obligation to pay employer contributions to the fund. 84 F.3d at 989. Central Cartage moved to compel arbitration, the district court denied the motion, and Central Cartage appealed. Ibid. We first held that 28 U.S.C. § 1291(a) does not grant jurisdiction over an interlocutory appeal of an order refusing to stay or dismiss district court proceedings in favor of arbitration. Id. at 990–92. We then held—presaging the Supreme Court's ruling in Circuit City that § 1 of the FAA excludes from the FAA's coverage only employment contracts of transportation workers, meaning workers engaged in the movement of goods across state lines—that appellate jurisdiction did not lie under 9 U.S.C. § 16(a)(1). We explained our holding as follows:

The appellant, Central Cartage, is primarily engaged in local trucking and occasionally transports...