J.F. New & Assocs., Inc. v. Int'l Union of Operating Eng'rs

• Decision Date: 30 March 2015
• Docket Number: CAUSE NO. 3:14-CV-1418 RLM
• Court: U.S. District Court — Northern District of Indiana
• Parties: J.F. NEW & ASSOCIATES, INC., d/b/a CARDNO JFNEW, Plaintiff v. INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 150, ALF-CIO, et al., Defendants

J.F. NEW & ASSOCIATES, INC.,d/b/a CARDNO JFNEW, Plaintiff v. INTERNATIONAL UNION OF OPERATING ENGINEERS,LOCAL 150, ALF-CIO, et al., Defendants

CAUSE NO. 3:14-CV-1418 RLM

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA SOUTH BEND DIVISION

March 30, 2015

OPINION and ORDER

On April 16 2014, J.F. New & Associates Inc., d/b/a Cardno JFNew (JFNew), brought suit against defendants International Union of Operating Engineers, Local 150, ALF-CIO; Railroad Maintenance and Industrial Health and Welfare Fund; Midwest Operating Engineers Health and Welfare Fund; and Midwest Operating Engineers Pension Fund of the International Union of Operating Engineers, Local 150, seeking a declaratory judgment based on the Union's attempt to enforce two collective bargaining agreements. JFNew alleges those agreements were fraudulently induced by Local 150 officials, which amounted to constructive fraud (Count I), and the agreements were signed by unilateral or mutual mistake (Count II). Local 150 has moved to dismiss the complaint, and in a separate motion, the Midwest Operating Engineers Health andWelfare Fund and the Midwest Operating Engineers Pension Trust Fund ("the Funds") have moved to dismiss the complaint, as well. Local 150 and the Funds seek dismissal of JFNew's complaint based on a lack of subject matter jurisdiction, FED. R. CIV. P. 12(b)(1), and for failure to state a claim, FED. R. CIV. P. 12(b)(6). The motions to dismiss are ripe for review.

Background

JFNew, an Indiana corporation, performs ecological consulting and restoration in the landscape field, specializing in "scientific approaches to endangered species, wetlands, erosion control, prairie establishment, federal and state permitting, ecological mitigation, and native plants." Compl., ¶ 11. According to the complaint, JFNew entered into discussions in 2013 with officials of JF Brennan Company about JFNew's participation in a construction project known as The East Branch Grand Calumet River - Reaches 4A and 4B Project ("the Project"). JFNew learned from JF Brennan, the general contractor on the Project, that use of union subcontractors was required, so JFNew, a non-union firm, contacted officials of Local 150 to discuss the possibility of satisfying the union subcontractor requirement by entering into "a project specific agreement" with the Union to complete JFNew's portion of the Project. Compl., ¶ 15. A project specific agreement, JFNew explains, "allows a nonunion contractor to employ union labor for a single construction project of a limited duration . . . . In that way, thecontractor is able to maintain its nonunion status, yet perform construction work on a union construction project." Compl., at 5 n.4.

JFNew says that in May 2013 company officials met with Local 150 representative Gabe Restrepo, who agreed that JFNew could use union labor provided by Local 150 for the Project without entering into a collective bargaining agreement. Shortly after that meeting, the Union forwarded copies of two separate memoranda to JFNew for its signature, one memorandum relating to the plantsmen on the Project and one memorandum relating to the operators on the Project. JFNew company officials signed the memoranda a month later, and work on the Project began on August 8, 2013.

JFNew says that in October 2013, after a conversation with Mr. Restrepo in which he raised questions about JFNew's union affiliation, company officials reviewed the memoranda and discovered that those documents incorporated collective bargaining agreements. JFNew says that unbeknownst to company officials, the memoranda incorporated by reference certain "Master Agreements," which were later identified as collective bargaining agreements, and also incorporated by reference two trust documents relating to the Funds. JFNew claims it signed the memoranda under the assumption that the documents were the previously discussed project specific agreements granting JFNew the use of union labor on the Project without entering into a collective bargaining agreement. JFNew notified Mr. Restrepo of the error and asked that the Union forward theproject specific agreement that was originally discussed and agreed to by the parties. According to JFNew, Mr. Restrepo forwarded a number of unrelated and incorrect documents to the company. JFNew says it made several attempts to get the correct project specific agreement from the Union, but when those requests were unsuccessful, JFNew notified Local 150 in writing in October 2013 that the company was rescinding and terminating the memoranda and CBAs. "In response, the Union accused JFNew of violating the termination provisions of the memoranda and CBAs." Resp., at 3.

JFNew filed its declaratory judgment action in this court in April 2014 pursuant to 28 U.S.C. § 2201(a) and Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a), alleging that the Union fraudulently induced the company into signing the memoranda and that the memoranda were signed based on a mistake by the parties about the content of the documents. JFNew claims that the "essential terms of the memoranda and the CBAs that the Union now seeks to enforce against JFNew are materially different than the terms and effect agreed upon by JFNew and the Union." Compl., ¶ 28. JFNew seeks a declaration that "the memoranda, the CBAs, and the related trust documents are void and otherwise not enforceable contracts." Compl., at 9.

Local 150 and the Funds have moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction or,alternatively, under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

Motions Under Rule 12(b)(1)

Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of complaints that bring no actionable claim within the subject matter jurisdiction of the federal courts. A motion to dismiss for lack of subject matter jurisdiction presents a threshold question about the court's power to act: a federal court must assure itself that it has jurisdiction over the subject matter of a case before it can proceed to take any action on the merits of the action. Baker v. Kingsley, 387 F.3d 649, 656 (7th Cir. 2004); Olson v. United States, No. 1:12-CV-34-RLM, 2012 WL 5411542, at *1 (N.D. Ind. Nov. 6, 2012).

In deciding a motion brought under Rule 12(b)(1), the court must take the facts alleged in the complaint as true, but may "properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted . . . to determine whether in fact subject matter jurisdiction exists." Miller v. FDIC, 738 F.3d 836, 840 (7th Cir. 2013). The party asserting jurisdiction bears the burden of demonstrating subject matter jurisdiction by competent proof. Thomas v. Gaskill, 315 U.S. 442, 446 (1942).

Local 150

Local 150 has moved to dismiss JFNew's complaint under Rule 12(b)(1) based on its argument that Section 301 of the LMRA is inapplicable to this action. The Union maintains that JFNew hasn't alleged a violation of the contracts, but, instead, is challenging the validity of those contracts. Jurisdiction over a challenge to the validity of the parties' contract, the Union says, lies not with this court, but with the National Labor Relations Board or a mutually agreed-upon arbitrator per the terms of the CBA.

The Declaratory Judgment Act, 28 U.S.C. § 2201, "allows a party like [JFNew] who expects to eventually be sued, to determine [its] rights and liabilities without waiting for [its] adversary, the presumptive plaintiff, to bring suit. That act, however, is not an independent grant of federal subject-matter jurisdiction, so jurisdiction depends upon the nature of the anticipated claims. . . . In the context of this action for a declaratory judgment, therefore, the allegations in [JFNew's] complaint must demonstrate that the defendants could file a federal claim." DeBartolo v. Healthsouth Corp., 569 F.3d 736, 741 (7th Cir. 2009) (internal citations omitted); see also Public Service Comm'n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 248 (1952) ("Where the complaint in an action for declaratory judgment seeks in essence to assert a defense to an impending or threatened . . . action, it is the character of the threatened action, and not of the defense, which will determine whether there is federal-question jurisdiction in the district court.").

JFNew bases the claims of its complaint on Section 301(a) of the Labor Management Relations Act, which provides federal courts with jurisdiction over "[s]uits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce." 29 U.S.C. § 185(a). A claim brought under Section 301 of the LMRA "must satisfy three requirements before it can be properly asserted in federal court: it must be (1) a claim of a violation of (2) a contract (3) between an employer and a labor organization." Laborers' Pension Fund v. Joe Cachey Const. Co., Inc., 947 F. Supp. 365, 368 (N.D. Ill. 1996). JFNew has alleged that this dispute involves a collective bargaining agreement that JFNew has been accused of violating; the company qualifies as an "employer" under the Act; and the Union is a "labor organization representing employees in an industry affecting commerce" as defined in Section 301 of the LMRA. JFNew's allegations are sufficient to assert a claim under Section 301 of the LMRA.

Local 150 next argues that this court lacks jurisdiction because JFNew's claims are, in reality, a challenge to the validity of the contracts, and claims relating to the validity of a contract aren't encompassed within Section 301 of the LMRA. The issue of a challenge to the validity of a contract under Section 301 was addressed by the Court in Textron Lycoming Reciprocating Engine Div. v. U.A.W. Local 787, 523 U.S. 653 (1998), a case relied on by both parties:

'Suits for violation of contracts' under § 301(a

...