International Union of Operating Engineers, Local 150, AFL-CIO v. Rabine

• Decision Date: 03 November 1998
• Docket Number: No. 97-2043,P,AFL-CI,97-2043
• Parties: 159 L.R.R.M. (BNA) 2713, 136 Lab.Cas. P 10,283 INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 150,laintiff-Appellant, v. Gary RABINE, individually and d/b/a Rabine Brothers, and G. Rabine & Sons, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 427

161 F.3d 427

159 L.R.R.M. (BNA) 2713, 136 Lab.Cas. P 10,283

INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 150, AFL-CIO, Plaintiff-Appellant, v. Gary RABINE, individually and d/b/a Rabine Brothers, and G.

Rabine & Sons, Inc., Defendants-Appellees.

No. 97-2043.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 5, 1997.

Decided Nov. 3, 1998.

Louis E. Sigman, Dale D. Pierson, Catherine Chapman (argued), Baum, Sigman, Auerbach, Pierson & Neuman, Chicago, IL, for Plaintiff-Appellant.

Christine L. Olson, D. Kendall Griffith (argued), Hinshaw & Culbertson, Chicago, IL, Louis W. Brydges, Sr., Hinshaw & Culbertson, Waukegan, IL, for Defendants-Appellees.

Before BAUER, RIPPLE, and DIANE P. WOOD, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

In 1989, Gary T. Rabine (Gary Jr.) signed a contract with Local 150 of the International Union of Operating Engineers, in which he purported to be the owner-operator of a company called Rabine Brothers. The agreement on its face bound Rabine Brothers to the collective bargaining agreement (CBA) between Local 150 and the Mid-America Regional Bargaining Association. Rabine Brothers in fact was a business solely owned by Gary Jr.; it had no employees, either then or at any time pertinent to this case. When Gary Jr. needed extra hands, he hired independent contractors. Gary Jr.'s father, Gary L. Rabine (Gary Sr.), owned a different company called G. Rabine & Sons, Inc. (Rabine & Sons), which did have a few employees. No one ever signed any agreement with Local 150 on behalf of Rabine & Sons, but the names of the companies and their lines of business were similar enough that confusion ensued, leading to this lawsuit.

Rabine Brothers was in the business of providing snowplowing services during the winter, and occasional retaining wall work during the summer. Rabine & Sons specialized in paving, with sidelines in grading, hauling, tree-trimming, and related services. In 1991, Gary Sr. incorporated Rabine & Sons and divided the shares among himself, his wife Pauline, and Gary Jr. In addition to owning his own company, Gary Jr. had been a full-time employee of Rabine & Sons since 1981. After the winter of 1991-92, Gary Jr. abandoned Rabine Brothers so that he could devote all his efforts to Rabine & Sons. Rabine & Sons picked up some of Rabine Brothers' work, but it amounted to less than 5% of the corporation's business. In June 1994, Gary Jr. became the sole shareholder, director, and officer of Rabine & Sons, when his parents decided to retire.

Meanwhile, in 1992, Local 150 became concerned that Gary Jr. was not employing union members pursuant to Article XII of the 1989 CBA. It wrote to "Rabine Brothers" (which no longer existed), claiming that it had twice violated the CBA, and "Rabine Brothers" settled the complaints in 1993. During late 1994 and early 1995, Local 150 contacted "Rabine Brothers" on three occasions, each time claiming an additional violation of the CBA. Gary Jr., however, had become less accommodating. He refused to have anything at all to do with the union, or with the grievance and arbitration processes between the union and Rabine Brothers that followed. An arbitrator then entered awards of $20,837.00, $7,675.11, and $1,952.32 against "The Employer," without specifying who that might be, and the union mailed the documentation of the arbitrator's decisions to what it designates in its briefs as "The Company" (a label apparently intended to reflect the union's position that Rabine Brothers and Rabine & Sons are interchangeable) with demands for payment.

Gary Jr. ignored the awards instead of paying them by the end of the 90-day limitations period within which parties must challenge federal labor arbitration awards. See International Union of Operating Eng'rs, Local 150, AFL-CIO v. Centor Contractors, Inc., 831 F.2d 1309, 1311 (7th Cir.1987). The union finally got his attention by filing this suit under § 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, to enforce the arbitral awards against Gary Jr. (both individually and doing business as Rabine Brothers) and against Rabine & Sons. The defendants, to whom we refer collectively as "the Rabines" when appropriate, responded with a challenge to the subject matter jurisdiction of the district court, arguing that the CBA was invalid at the outset because Rabine Brothers did not satisfy the statutory definition of an "employer" with the capacity to enter into a CBA under § 301 of the LMRA. See International Union of Operating Eng'rs Local 487 Health and Welfare Trust Fund and Heavy Const. Ass'n of South Florida, Inc., 141 L.R.R.M. 1113, 1116 (N.L.R.B.1992) (organization with no employees is not a statutory "employer"). Local 150 countered that the 90-day limitations period rendered the arbitral awards impervious to all challenges, including jurisdictional ones. Since, the union asserted, Rabine & Sons was a successor to, alter ego of, or joint employer with Rabine Brothers, Rabine & Sons had to satisfy the awards. Ruling on cross-motions for summary judgment, the district court rejected all three of the union's arguments, and agreed with the Rabines that Rabine Brothers, the only "employer" to sign the CBA, was not empowered by the LMRA to enter such an agreement. Finding as a result no subject matter jurisdiction, the court granted the Rabines' motion for summary judgment (although if the jurisdictional theory had been correct, dismissal for lack of jurisdiction would have been the proper disposition of the case). The union appealed the court's rejection of its alter ego theory, and the court's conclusion that the 90-day limitations period did not bar the Rabines' challenge.

I

Before addressing the merits of the appeal, we pause briefly to discuss once again the troublesome question of when it is proper to characterize something as a defect in subject matter jurisdiction, and when the problem is really a failure to state a claim. This distinction is of critical importance, because only if an issue relates to subject matter jurisdiction can it be raised at any time during litigation, regardless of normal rules governing the presentation of issues. See Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 704, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982); Cook v. Winfrey, 141 F.3d 322, 324-25 (7th Cir.1998); Fed.R.Civ.P. 12(h)(3). Here, if the question whether a federal court can entertain a § 301 case even though there was never any "employer" capable of entering into a CBA is jurisdictional, then the Rabines were entitled to raise it before the district court despite their failure to act within the 90-day limitations period. If that question relates only to the statement of a claim, then we confront a serious problem of waiver. Another way of putting the same point is to ask under what circumstances the non-waiver rule of Rule 12(h)(3) applies, short of a showing (for example) that a claim does not even "arise under" federal law for purposes of 28 U.S.C. § 1331, or that the parties are not of diverse citizenship for purposes of 28 U.S.C. § 1332.

The federal courts are courts of limited jurisdiction. We have no authority to adjudicate cases outside our purview, but "[j]urisdiction is a many-hued term," and its use does not always mark a case as beyond our reach. See United States v. Wey, 895 F.2d 429, 431 (7th Cir.1990). In Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998), the Supreme Court at least partially specified the circumstances in which "jurisdiction" is the proper lens through which to view issues that come before us. As a result, although this court and others have in the past occasionally treated the need for a valid agreement between an employer and a labor organization as a "jurisdictional" prerequisite for actions to enforce arbitral awards under the LMRA, see, e.g., Sheet Metal Workers Local Union No. 20 v. Baylor Heating and Air Conditioning, Inc., 877 F.2d 547, 556 (7th Cir.1989); Sheet Metal Workers Int'l Ass'n, Local Union No. 150 v. Air Systems Eng'g, Inc., 948 F.2d 1089, 1091-92 (9th Cir.1990); see also Domino Group, Inc. v. Charlie Parker Mem'l Found., 985 F.2d 417, 420 n. 1 (8th Cir.1993), and we have done the same in the analogous area of benefit plans governed by the Employee Retirement Income Security Act (better known as ERISA), see, e.g., Cvelbar v. CBI Illinois Inc., 106 F.3d 1368, 1373 (7th Cir.1997), today we follow the guidance of Steel Co. and hold that the absence of a statutory "employer" does not deprive this court of jurisdiction to hear a claim to enforce an arbitral award. Rather, a complaint which fails to allege the presence of such an employer fails to state a claim, and a plaintiff who fails to prove the presence of such an employer loses on the merits. See Sharpe v. Jefferson Distrib. Co., 148 F.3d 676, 677 (7th Cir.1998) (Title VII; citing Steel Co.); Strasburger v. Board of Educ., Hardin County Community Unit Sch. Dist. No. 1, 143 F.3d 351, 359-60 (7th Cir.1998) (LMRA). See also United States v. Martin, 147 F.3d 529, 531-33 (7th Cir.1998).

In Steel Co., the Supreme Court began with the basics:

It is firmly established in our cases that the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction, i.e., the courts' statutory or constitutional power to adjudicate the case.... Rather, the District Court has jurisdiction if "the right of petitioners to recover under the complaint will be sustained if the Constitution and laws of the United States are given one construction and will be defeated if they are given another."

523 U.S. at ----, 118 S.Ct. at 1010 (quoting Bell v. Hood, 327 U.S. 678, 685, 66 S.Ct. 773, 90 L.Ed. 939 (1946)). See also Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 690, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949). In the case before this court, Local 150 alleged that Rabine B...