South Bay Boston Mgmt. v. Unite Here, Local 26

• Decision Date: 12 November 2009
• Docket Number: No. 09-1081.,09-1081.
• Parties: SOUTH BAY BOSTON MANAGEMENT, INC., Plaintiff, Appellant, v. UNITE HERE, LOCAL 26, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

587 F.3d 35

SOUTH BAY BOSTON MANAGEMENT, INC., Plaintiff, Appellant, v. UNITE HERE, LOCAL 26, Defendant, Appellee.

No. 09-1081.

United States Court of Appeals, First Circuit.

Heard September 11, 2009.

Decided November 12, 2009.

Gregory C. Keating, with whom John D. Doran and Ronald S. Allen were on brief, for Appellant.

Paul L. More, with whom Michael T. Anderson was on brief, for Appellee.

Before BOUDIN, GAJARSA,^* and LIPEZ, Circuit Judges.

GAJARSA, Circuit Judge.

South Bay Boston Management, Inc. ("South Bay"²) appeals from a final judgment of the United States District Court for the District of Massachusetts that was entered upon the district court's allowance of Unite Here, Local 26's ("the Union") motion to compel arbitration and denial of South Bay's petition for declaratory judgment. Because we agree with the district court that the Union neutrality agreement at issue was not void ab initio and that the arbitration clause of the agreement remained in effect, we affirm.

I.

In 2001 South Bay began the permitting process to develop a property in the City of Boston ("City"). It alleges that the Boston Redevelopment Agency ("BRA"), charged by the City with the oversight of the City's economic development, refused to issue the necessary permits until and unless it entered into a neutrality agreement with the Union. South Bay and the Union executed a Memorandum of Agreement ("the Agreement") on August 20, 2003. The Agreement incorporated the terms and conditions required by the BRA. The necessary permits were issued immediately thereafter, and construction of a hotel on the property subsequently proceeded.

By the terms of the Agreement, South Bay was obligated to recognize the Union and to not object to the Union or speak out against it. The Agreement further provided that "[i]f the parties are unable to reach agreement on a collective bargaining agreement within 90 days after recognition ..., all unresolved issues shall be submitted for final resolution to final and binding arbitration...." The Agreement was structured to remain in force "until three years from the full public opening of the hotel, or if sooner upon execution of a collective bargaining agreement or issuance of an interest arbitration award which concludes the collective bargaining agreement negotiations, either of which explicitly supercedes this document." The hotel opened on May 18, 2005.

The Union requested recognition on October 19, 2007, asserting that it had obtained signed union authorization cards from a majority of the eligible employees of the hotel. South Bay, however, refused to recognize the Union on the ground that several employees were coerced into signing authorization cards. Additionally, South Bay terminated two employees who were on the Union's organizing committee.

Thereafter, South Bay requested arbitration pursuant to the Agreement. After a hearing, the arbitrator issued a decision on April 21, 2008, requiring South Bay to recognize the Union and to reinstate one of the two terminated employees. South Bay proceeded to recognize the Union on April 30, 2008, but refused to reinstate the terminated employee.

The Union filed suit in district court to enforce the arbitrator's decision. See Unite Here, Local 26 v. Jiten Hotel Mgmt., No. 1:08-cv-10739, 2008 WL 7026489 (D.Mass. May 1, 2008). In its answer and counterclaims to the Union's complaint, South Bay admitted several facts relevant to the present dispute. In particular, it admitted that "the parties executed a Memorandum of Agreement," that "the parties are subject to contractual obligations under the Agreement," and that "the Agreement contains a provision related to the arbitration of disputes between the parties." Answer to Complaint at 2 ¶¶ 6-8, Unite Here, Local 26 v. Jiten Hotel Mgmt., No. 1:08-cv-10739 (D.Mass. May 27, 2008). In its counterclaim, South Bay further pled that the parties entered into the Agreement on August 20, 2003, that the Agreement "solely provided the procedure under which [South Bay] would voluntarily recognize the Union as the collective bargaining representative of its employees," and that the Agreement "provided that disputes over the Union's organization of the Hotel's employees would be submitted to arbitration." Id. at 4 ¶¶ 1-2.

As the district court proceedings continued, South Bay and the Union engaged in the collective bargaining process. The negotiations, however, deteriorated, and on July 23, 2008, the Union demanded arbitration.

South Bay filed the present action on August 29, 2008, in the United States District Court for the District of Massachusetts, seeking a declaratory judgment that they were not bound to arbitrate the collective bargaining dispute under the Agreement, because it was void ab initio and, even if it was binding on the parties, the Agreement had expired. The Union filed a cross-motion to compel arbitration.

The district court granted the Union's cross-motion; denied South Bay's petition; and ordered the parties to submit to arbitration. South Bay timely appealed to the First Circuit. We have jurisdiction over the district court's final judgment under 28 U.S.C. § 1291.³

II.

On appeal, South Bay requests this court to consider two questions: first, whether the district court erred in determining as a matter of law that the Agreement was not void ab initio, in light of South Bay's allegations that the City had required it to enter into the Agreement in contravention of the National Labor Relations Act; and second, whether, assuming the Agreement was valid, the district court correctly determined as a matter of law that the arbitration clause remained in effect at the time arbitration was sought, in light of the fact that the collective bargaining process that resulted in the request for arbitration began prior to the expiration of the Agreement. We consider these issues in turn.

A.

South Bay argues that the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151 et seq., preempts the neutrality agreement required by the City of Boston in order to obtain the necessary permits. We review district court determinations on issues of preemption de novo. See Carpenters Local Union No. 26 v. U.S. Fidelity & Guaranty Co., 215 F.3d 136, 139 (1st Cir.2000). And we review issues of contract interpretation and enforceability de novo. See Coffin v. Bowater Inc., 501 F.3d 80, 97 (1st Cir.2007).

The NLRA preempts state and local efforts to regulate labor-management relations. In Golden State Transit Corp. v. City of Los Angeles, the Supreme Court summarized the relevant rules of federal preemption of local actions in the following manner:

The Court has articulated two distinct NLRA pre-emption principles. The first, the so-called Garmon pre-emption, prohibits States from regulating activity that the NLRA protects, prohibits, or arguably protects or prohibits. The Garmon rule is intended to preclude state interference with the National Labor Relations Board's interpretation and active enforcement of the integrated scheme of regulation established by the NLRA.

[T]he second pre-emption principle, the so-called Machinists pre-emption ... precludes state and municipal regulation concerning conduct that Congress intended to be unregulated. Although the labor-management relationship is structured by the NLRA, certain areas intentionally have been left to be controlled by the free play of economic forces. The Court recognized in Machinists that Congress has been rather specific when it has come to outlaw particular economic weapons, and that Congress' decision to prohibit certain forms of economic pressure while leaving others unregulated represents an intentional balance between the uncontrolled power of management and labor to further their respective interests. States are therefore prohibited from imposing additional restrictions on economic weapons of self-help, such as strikes or lockouts, unless such restrictions presumably were contemplated by Congress.

475 U.S. 608, 613-15, 106 S.Ct. 1395, 89 L.Ed.2d 616 (1986) (internal quotation marks and citations omitted). The Court then applied the Machinists preemption principle to an informal regulation of the City of Los Angeles, under which the renewal of a taxicab franchise was predicated on the resolution of a labor dispute. The Court reasoned that "the city's insistence on a settlement is pre-empted if the city entered into the substantive aspects of the bargaining process to an extent Congress has not countenanced." Golden State, 475 U.S. at 615-16, 106 S.Ct. 1395 (internal quotation marks and brackets omitted). Concluding that "[F]ederal law intended to leave the employer and the union free to use their economic weapons against one another," the Court held "that a city cannot condition a franchise renewal in a way that intrudes into the collective-bargaining process." Id. at 619-20, 106 S.Ct. 1395.

More recently, the Court applied the Machinists preemption principle to a set of California statutes that prohibited employers from using state funds "to assist, promote, or deter union organizing." Chamber of Commerce v. Brown, ___ U.S. ___, 128 S.Ct. 2408, 171 L.Ed.2d 264 (2008). The Court held that the statutes were preempted, "because they regulate within a zone protected and reserved for market freedom." Id. at 2412.

In this case, the district court determined: "The Hotel's argument for pre-emption fails. Pre-emption applies only to state regulations. The Hotel has not identified any state regulation and therefore has failed to allege what is necessary in order for the pre-emption doctrine to be operative." Memorandum and Order at 3 n.1, South Bay Boston Mgmt., Inc. v. UNITE HERE, Local 26, 584 F.Supp.2d 428 (D.Mass.2008) (citations omitted). This determination is erroneous. NLRA preemption applies equally to city as well as to state regulations. The form of regulation is irrelevant. See Golden State, 475 U.S. at 614 n.5, 106 S.Ct. 1395 ("Our pre-emption...