IUBAC Local Union No. 31 v. Anastasi Bros. Corp.

• Decision Date: 11 December 1984
• Docket Number: No. 84-180-CIV-EPS.,84-180-CIV-EPS.
• Citation: 600 F. Supp. 92
• Parties: I.U.B.A.C. LOCAL UNION # 31, et al., Plaintiffs, v. ANASTASI BROTHERS CORP., a foreign corporation, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

600 F. Supp. 92

I.U.B.A.C. LOCAL UNION # 31, et al., Plaintiffs, v. ANASTASI BROTHERS CORP., a foreign corporation, et al., Defendants.

No. 84-180-CIV-EPS.

United States District Court, S.D. Florida, Miami Division.

December 11, 1984.

Howard Susskind, Miami, Fla., for plaintiffs.

Michael W. Casey, III, Miami, Fla., for defendants.

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFFS' MOTION TO STRIKE AND MOTION TO DISMISS

SPELLMAN, District Judge.

This is an action by I.U.B.A.C. Local Union # 31 (Union) and the Trustees of the various I.U.B.A.C. Local # 31 Fringe Benefit Trust Funds (Funds) to confirm and enforce an award rendered by a grievance committee pursuant to the terms of a collective bargaining agreement between the Defendant Anastasi Brothers Corp. (ABC) and the Union. The award of the grievance committee required the Defendant, ABC, to pay to the Plaintiffs certain damages based upon the hours worked by the non-union employees of Anastasi Brothers Corp. of Florida (ABC of Florida), an alleged alter-ego of the Defendant ABC.

In their complaint to enforce the award, the Union and the Funds claim that the award of the grievance committee is final and binding on ABC. The Defendants, ABC and ABC of Florida, deny any liability. Although it is undisputed that they had notice of the hearing on the Union's grievance before the grievance committee, neither ABC nor ABC of Florida attended the hearing. Nor did they file a motion to vacate the committee's award. Instead, they responded to the complaint with numerous affirmative defenses and counterclaims. The gist of these defenses and counterclaims is that the provision of the collective bargaining agreement upon which the award is based is illegal and therefore unenforceable.

The Union and the Funds have filed a Motion to Dismiss and a Motion to Strike the Defendants' affirmative defenses and counterclaims arguing that these claims are barred by the statute of limitations applicable to petitions to vacate arbitration awards. The Union and the Funds claim that if ABC and ABC of Florida were not satisfied with the decision of the grievance committee, they were required to move to vacate the arbitration award within the ninety (90) day period prescribed by the Florida statute governing arbitration. Section 682.13(2) Florida Statutes (1983). The failure of the Defendants to use the proper procedure to vacate the award, should, according to the Union and the Funds, bar the Defendants from later seeking the same relief in the form of an affirmative defense or a counterclaim in an enforcement action.

The question this Court must determine is whether the Defendants waived their illegality defense when they failed to timely move to vacate the arbitration award. For the following reasons, the Court finds that the Defendants have not waived their claim that the contract clause upon which the arbitration award is based is illegal. Accordingly, the Motions to Dismiss and to Strike are DENIED.

I.

The failure to timely file a motion to vacate an arbitration award generally bars a defendant in an enforcement action from later seeking the same relief in the form of a counterclaim. See, e.g., Chauffeurs, Teamsters, Warehousemen & Helpers, Local 135 v. Jefferson Trucking Co., 628 F.2d 1023 (7th Cir.1980), cert. denied, 449 U.S. 1125, 101 S.Ct. 942, 67 L.Ed.2d 111 (1981); Service Employees International Union, Local No. 36, AFL-CIO v. Office Centers Services Inc., 670 F.2d 404 (3d Cir.1982). These cases also support the proposition that the applicable statute of limitations is the state law governing arbitration awards as opposed to the Federal Arbitration Act.

Barring a party from seeking to invalidate an award that was not timely challenged comports with the strong federal policy favoring voluntary arbitration as the most expedient method of resolving labor disputes. See, e.g., United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960); Boys Markets, Inc. v. Retail Clerks Union, Local 770, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970). The short period of time prescribed by the federal and state arbitration statutes for moving courts to vacate an award ensures that an arbitration award becomes final in a timely fashion. As the Seventh Circuit found in Jefferson Trucking:

This policy would seem to condemn the conduct of the defendant who ignored an award disfavorable to it, failed to move to vacate the award and then sought to be given its day in court when the plaintiff brought suit in frustration to have the arbitration award enforced. If the defendant's defenses were of such vital importance to it, the defendant nevertheless had an opportunity to raise them in the manner contemplated by the statute.

628 F.2d at 1027.

While there are sound reasons for requiring parties to adhere to the procedures governing arbitration, it is also well-established that a court may not enforce a contract that is illegal or contrary to public policy. E.g., Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 102 S.Ct. 851, 70 L.Ed.2d 833 (1982); Hurd v. Hodge, 334 U.S. 24, 68 S.Ct. 847, 92 L.Ed. 1187 (1948).

In Kaiser Steel, a collective bargaining agreement between the United Mine Workers of America and the employer coal producers contained a clause requiring the employer to report his purchases of coal not under contract with the union and to make contributions to the union welfare fund on the basis of these purchases. Kaiser failed to make these reports or pay the contributions and the union brought suit in federal court to enforce the collective bargaining agreement. Kaiser admitted its failure to report and contribute, but defended the lawsuit on the grounds that the "purchased coal" clause of the contract violated the Sherman Anti-Trust Act and the National Labor Relations Act. The district court, on the union's motion for summary judgment, disregarded the illegality defense, and did not review the legality of the "purchased coal" clause. The court of appeals affirmed, but the Supreme Court reversed.

The Supreme Court held that federal courts have a duty to determine whether a contract violates federal law and must reach the merits of an illegality defense before enforcing a contract. According to the Court:

It is ... well established ... that a federal court has a duty to determine whether a contract violates federal law before enforcing it. "The power of the federal courts to enforce the terms of private agreements is at all times exercised subject to the restrictions and limitations of public policy of the United States as manifested in ... federal statutes.... Where the enforcement of private agreements would be violative of that policy, it is the obligation of the courts to refrain from such exertions of judicial power." Hurd v. Hodge, 334 U.S. 24, 34-35 68 S.Ct. 847, 852-853 (1948) (footnotes omitted) .... A court must reach the merits of an illegality defense in order to determine whether the contract clause has any legal effect in the first place.

455 U.S. at 83-84, 102 S.Ct. at 859.

Thus, a party cannot waive the defense of illegality of the contract. The Court itself is bound to raise the issue sua sponte. Nyhus v. Travel Management Corp., 466 F.2d 440, 447 (D.C.Cir.1972); California Pacific Bank v. Small Business Admin., 557 F.2d 218, 223 (9th Cir. 1977).

This Court therefore will not dismiss or strike the Defendants counterclaims and affirmative defenses because they failed to move to vacate the arbitration award within the statutory time limits. Although this Court does not approve of the Defendants' failure to abide by the appropriate procedures to challenge the decision of the grievance committee, the legality of the contract clause at issue here must be determined before the arbitration award can be enforced.

II.

At a status conference, this Court indicated that it would treat the Defendants' claims that the contract clause is illegal as a motion to dismiss for failure to state a claim upon which relief could be granted. Upon further reflection, the Court finds that it is unable to determine the legality of the provision in question based on the pleadings alone.

This Court recognizes that the Defendants' illegality claim may have considerable merit. The clause in the contract that ABC allegedly violated binds the employer to the terms of the collective bargaining agreement even for his related non-union businesses.¹ The former fifth circuit analyzed a very similar provision in Florida Marble Polishers v. Edwin M. Green, Inc., 653 F.2d 972 (5th Cir. Unit B 1981), cert. denied, 456 U.S. 973, 102 S.Ct. 2235, 72 L.Ed.2d 846 (1982), and found that, under the circumstances of that case, the clause was illegal. The Court's decision rested on two grounds. First, the Court found that the clause usurped the rights of the non-union company's employees to choose their own bargaining representatives pursuant to Section 7 of the National Labor Relations Act, 29 U.S.C. § 157. Second, the Court found that the clause usurped the authority of the National Labor Relations Board to determine the...