Pauley v. Ford Electronics and Refrigeration Corp.

• Decision Date: 16 August 1996
• Docket Number: No. NA 95-117-C H/H.,NA 95-117-C H/H.
• Citation: 941 F.Supp. 794
• Parties: Martha R. PAULEY, Plaintiff, v. FORD ELECTRONICS AND REFRIGERATION CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Indiana

941 F.Supp. 794

Martha R. PAULEY, Plaintiff, v. FORD ELECTRONICS AND REFRIGERATION CORPORATION, Defendant.

No. NA 95-117-C H/H.

United States District Court, S.D. Indiana, New Albany Division.

August 16, 1996.

COPYRIGHT MATERIAL OMITTED

Thomas M. McDonald, Applegate, McDonald, Koch & Arnold, Bloomington, IN, for plaintiff.

Susan B. Tabler, Ice Miller Donadio & Ryan, Indianapolis, IN, for defendant.

ENTRY ON JURISDICTIONAL QUESTION

HAMILTON, District Judge.

This case raises a deceptively simple question. Where an employer recruits a new employee by overstating (whether intentionally or negligently) the wage rate the employee will be paid, and where wages are controlled by a collective bargaining agreement governed by federal law, does the new employee have any ability to recover damages for the employer's false promise or representation concerning the wage rate? The parties have identified, and the court has found, surprisingly little authority on this question. However, for reasons explained below, the court concludes that it lacks federal question jurisdiction and must remand this action to state court without deciding the merits.

Background

Plaintiff Martha R. Pauley works for defendant Ford Electronics and Refrigeration Corporation ("FERCO"). She brought this suit in state court to collect the difference between wages that FERCO allegedly promised her when she was hired and the lower wages she has actually received. She also sought to recover related damages. FERCO responded by saying that it has paid Pauley according to the terms of the collective bargaining agreement between FERCO and its employees' union. FERCO removed the action from state court to federal court on the theory that the collective bargaining agreement covers the subject of wages and therefore any dispute regarding an employee's wages necessarily arises under that agreement and pursuant to federal labor law. FERCO then moved for summary judgment, arguing that Pauley did not pursue the administrative remedies spelled out in the agreement, as federal labor law requires. Pauley responded by arguing that her state law claims do not arise under and are not preempted by federal labor law. After reviewing the parties' submissions on the motion for summary judgment, the court had doubts about its subject matter jurisdiction. The court raised that issue, invited further briefs, and heard oral argument on that question and the summary judgment issues.

The issue here is whether the action was properly removed from state court. The critical facts for deciding that jurisdictional question are the contents of the allegations in the plaintiff's complaint filed in state court. In addition, FERCO's answer and the parties' submissions on FERCO's motion for summary judgment provide some important undisputed information for deciding the scope of FERCO's federal preemption theories relating to both the court's jurisdiction and to FERCO's defenses to Pauley's claims.

In October 1991, William Vollmer, an agent of FERCO, contacted Martha Pauley and asked her to interview for a position with FERCO. Compl. ¶ 4. Pauley interviewed for a service maintenance position and was told at the interview that the beginning wage rate for service maintenance employees was $15.395 per hour. Compl. ¶¶ 5-6. In a letter dated October 18, 1994, Kenneth McKee of Employee Relations at FERCO offered Pauley the position. Compl. ¶ 7 & Ex. A. The letter states: "Your hourly rate will commence at $15.395 per hour coupled with the FERCO compensation package." Compl. Ex.A. FERCO has admitted in its answer that McKee sent the letter, and asserts that the letter speaks for itself. Answer ¶ 7. Pauley accepted FERCO's offer and resigned from her previous position at On-Line Plastics, Inc. where she had been earning $15.00 per hour. Compl. ¶ 4, 9-10; Pauley Aff.Ex. 3.

When Pauley started work at FERCO, she joined the contract unit of the pertinent union — the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers (AFL-CIO), Local 907. Godsey Aff. ¶ 7 & Ex.C. A collective bargaining agreement between FERCO and the union was in effect at the time. Pauley soon discovered that Article IV of the agreement provided that the stated wage rate for new hires in service maintenance positions was $15.395 per hour, Godsey Aff.Ex. A at 56, but the stated rate was also subject to a graduated pay scale:

[T]he starting rate for new hires shall be 75% of the job rate shown in Appendix A [$15.395 per hour for service maintenance positions]. An employee shall have his rate increased to 80% after fifty-two (52) weeks of employment, to 85% after one hundred and four (104) weeks of employment, to 90% after 156 weeks of employment, to 95% after 208 weeks of employment, and to 100% after 260 weeks of employment.

Godsey Aff.Ex. A at 8-9. Article I of the collective bargaining agreement provided that FERCO "agrees to and does hereby recognize the Union as the sole collective bargaining representative relative to rates of pay, wages, hours of employment, and other conditions of employment, for all employees of the Company in the contract unit." Godsey Aff.Ex. A at 1. Pursuant to these provisions in the collective bargaining agreement, Pauley (as a "new hire") was paid 75% of the $15.395 rate, or $11.55 per hour. That was $3.45 per hour less than she had earned at the job she left behind. Under the graduated pay scale, Pauley would need to work five years at FERCO before her wage rate would catch up with the wage she had been earning in her previous job.

The foregoing facts are not disputed, at least for purposes of the pending motion for summary judgment and the jurisdictional issue. There is a dispute about Pauley's actions after she learned that FERCO was paying her less than it had promised, and about the legal consequences of those actions. FERCO says that Pauley failed to exhaust the mandatory grievance procedures under the collective bargaining agreement. Pauley says that such efforts would certainly have been futile. FERCO also argues that Pauley, by continuing to work after she learned the "correct" wage rate, gave up any claim she may have had to the higher rate in the future. These matters do not affect subject matter jurisdiction. The central point is that both parties (and Pauley's union) agree that Pauley is seeking relief that would violate crystal-clear wage terms of the collective bargaining agreement.

Pauley brought suit against FERCO in state court. In her complaint, she did not articulate by name the legal theories she would use, but the facts she alleges establish that she seeks to recover the difference between the amount of wages she has been paid and the amount she was told she would be paid. The complaint also seeks liquidated damages and attorney's fees under Ind.Code § 22-2-5-1, et seq. FERCO in response relies on Article I of the collective bargaining agreement (quoted above), which recognizes the union as the sole collective bargaining representative for issues of pay for all union employees. Article V of the collective bargaining agreement details a procedure to be used in resolving disputes between FERCO, the union, and employees. Pauley took the first step in the grievance procedure by talking to her supervisors, but it is clear that she abandoned her efforts to seek an administrative remedy through the union.

Discussion

Both parties have addressed several issues critical to the ultimate resolution of this case. The court will not reach those issues, however, before resolving the initial question of whether the court has subject matter jurisdiction over Pauley's claims. The central jurisdictional issue is whether Pauley's state law claims are "completely" preempted by federal labor law. If they are completely preempted, FERCO properly removed the case to federal court, and it is not at all clear that Pauley's claims could survive as federal claims under which she could obtain any relief. Accordingly, the exhaustion issue may be moot. On the other hand, if Pauley's state law claims are not completely preempted, this court lacks subject matter jurisdiction over the case. Furthermore, the exhaustion issue would certainly be moot, for there is no exhaustion requirement applicable to those state law claims.

A. The Well-pleaded Complaint and "Jurisdictional" Preemption

FERCO removed the suit from state court on the theory that federal labor law controls and that plaintiff's claims necessarily arise under federal law. "The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. In Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983), Justice Brennan reviewed for a unanimous Court some of the difficulties the courts have had in wrestling with the question when an action "arises under" federal law. Although some cases and commentators had suggested that a case might arise under federal law if the plaintiff would have to prove some proposition of federal law to prevail, or if a question of federal law appeared to be decisive in a case, Justice Brennan explained that the "well-pleaded complaint" rule had emerged as a doctrine that severely limits the number of cases that can "arise under" federal law for purposes of § 1331 where state law "creates the cause of action." 463 U.S. at 9, 103 S.Ct. at 2846. The well-pleaded complaint rule may be stated as follows:

[W]hether a case is one arising under the Constitution or a law or treaty of the United States, in the sense of the jurisdictional statute, ... must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose.

463 U.S. at 10, 103 S.Ct....