Tolentino v. Saito

• Docket Number: CIVIL 23-00280 SOM-KJM
• Decision Date: 26 October 2023
• Parties: ARTHUR B. TOLENTINO; RICK V. PAULINO; JEANINE LUM in their capacities as the Union Trustees of the Hawaii Sheet Metal Workers Training Fund; and SHEET METAL WORKERS INTERNATIONAL ASSOCIATION, LOCAL 203, ALF-CIO, Plaintiffs, v. PAUL SAITO; GLENN SAITO; SAM FUJIKAWA; and KEVIN HIRAYAMA, in their capacities as the Employer Trustees of the Hawaii Sheet Metal Workers Training Fund; and SHEET METAL CONTRACTORS ASSOCIATION, Defendants.
• Court: U.S. District Court — District of Hawaii

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ARTHUR B. TOLENTINO; RICK V. PAULINO; JEANINE LUM in their capacities as the Union Trustees of the Hawaii Sheet Metal Workers Training Fund; and SHEET METAL WORKERS INTERNATIONAL ASSOCIATION, LOCAL 203, ALF-CIO, Plaintiffs, v. PAUL SAITO; GLENN SAITO; SAM FUJIKAWA; and KEVIN HIRAYAMA, in their capacities as the Employer Trustees of the Hawaii Sheet Metal Workers Training Fund; and SHEET METAL CONTRACTORS ASSOCIATION, Defendants.

CIVIL No. 23-00280 SOM-KJM

United States District Court, D. Hawaii

October 26, 2023

ORDER DENYING MOTION TO DISMISS COMPLAINT OR FOR A MORE DEFINITE STATEMENT

Susan Oki Mollway United States District Judge

I. INTRODUCTION.

As an offshoot of a collective bargaining agreement, an association of employers agreed with a union that each side would select trustees to manage a training fund to train union members. The number of employer trustees was the same as the number of union trustees. The document establishing the training fund set forth a procedure for settling matters on which the trustees were deadlocked. Under that procedure, when “the number of votes on any matter is deadlocked, the matter may be submitted to an impartial umpire mutually agreed upon by the Union and Association.” If the parties cannot agree on an umpire, the umpire is to be selected by the chief judge of this court.

After what the union says was a deadlocked vote, the union trustees and the union sought arbitration of the matter. The employer trustees and the association of employers they represent are refusing to participate in arbitration. The union trustees and the union therefore filed this action to compel arbitration. The employer trustees and the association of employers have moved to dismiss, arguing that this court lacks subject matter jurisdiction and that the Complaint fails to state a claim because the use of the word “may” indicates that arbitration is only permitted, not required.

This court reads the Complaint as asserting colorable, nonfrivolous claims under the Employee Retirement Income Security Act (“ERISA”) and the Labor Management Relations Act (“LMRA”). While this court is not ruling that those claims succeed, the claims suffice to support this court's exercise of jurisdiction. Defendants fail to establish that the Complaint should be dismissed under Rule 12(b)(1) of the Federal Rules of Civil Procedure. Additionally, the court denies the motion to dismiss based on an alleged failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, ruling that Defendants fail to demonstrate that the use of the word “may” makes arbitration optional and creates no arbitration agreement enforceable under the Federal Arbitration Act (“FAA”).

II. BACKGROUND.

According to its website, Defendant Sheet Metal Contractors Association (“Association”) is a statewide trade association that represents management with respect to labor relations with unionized sheet metal and air conditioning contractors. See https://smacnahawaii.org/home (last visited October 25, 2023). Plaintiff Sheet Metal Workers International Association, Local 293, AFL-CIO (“Union”), is one of those unions. There is no dispute that, under a collective bargaining agreement (“CBA”), a Training Fund has been established. It is managed by trustees appointed by the Association and the Union. The Training Fund provides vocational training to its beneficiaries. See Complaint ¶ 7, ECF No. 1, PageID # 3; Labor & Management Agreement, ECF No. 32-3, PageID #s 129-30 (agreeing to continue the existing Training Fund managed by a board of trustees).

The Association's trustees are Defendants Paul Saito, Glenn Saito, Sam Fujikawa, and Kevin Hirayama (“Association Trustees”). The Union's trustees are Plaintiffs Arthur B. Tolentino, Rick V. Paulino, Jeanine Lum, and nonparty Marc Rifkind (“Union Trustees”).

On May 25, 2023, a Union Trustee moved to allow the Training Fund (1) to purchase a laser welding machine for $3,020 (the balance owed after use of grant funds); and (2) to send two people to Las Vegas for laser welding training for $4,250. See Complaint ¶ 17, ECF No. 1, PageID #s 5-6. All of the Association Trustees voted against the motion, and all of the Union Trustees voted for the motion, creating a deadlock. See id. ¶ 18, PageID # 6.

The document governing the trustees of the Training Fund has a provision regarding deadlocked votes:

Section 6. Voting Deadlocked. If the number of votes on any matter is deadlocked, the matter may be submitted to an impartial umpire mutually agreed upon by the Union and the Association. If the Union and Association cannot agree upon the selection of a person as an impartial umpire, then the impartial umpire shall be selected by the chief judge of the United States District Court of Hawaii.

Complaint ¶ 7, ECF No. 1, PageID # 3; Restated Agreement and Declaration of Trust Establishing the Sheet Metal Workers Health and Welfare Fund, ECF No. 25.

This provision for breaking a deadlock appears to be based on § 302(c) of the LMRA, see ECF No. 32, PageID #s 120-21, which restricts certain financial transactions between management (i.e., employers, associations of employers, and persons acting on their behalf) and labor (i.e., representatives of employees, labor organizations, and employees). An exception to this prohibition involves

money or other thing of value paid to a trust fund established by such representative, for the sole and exclusive benefit of the employees of such employer, and their families and dependents (or of such employees, families, and dependents jointly with the employees of other employers making similar payments, and their families and dependents): Provided, . . . (B) the detailed basis on which such payments are to be made is specified in a written agreement with the employer, and employees and employers are equally represented in the administration of such fund, together with such neutral persons as the representatives of the employers and the representatives of employees may agree upon and in the event the employer and employee groups deadlock on the administration of such fund and there are no neutral persons empowered to break such deadlock, such agreement provides that the two groups shall agree on an impartial umpire to decide such dispute, or in event of their failure to agree within a reasonable length of time, an impartial umpire to decide such dispute shall, on petition of either group, be appointed by the district court of the United States for the district where the trust fund has its principal office ....^[1]

29 U.S.C. § 186 (c)(5) (emphasis added).

III. THIS COURT HAS SUBJECT MATTER JURISDICTION WITH RESPECT TO PLAINTIFFS' COMPLAINT.

A. Rule 12(b)(1) Governs Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction.

Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, Defendants seek dismissal for lack of subject matter jurisdiction. Under that rule, an attack on subject matter jurisdiction “may be facial or factual.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9^th Cir. 2004). A facial attack asserts that “the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction.” Id. A factual attack, on the other hand, “disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction.” Id.

If the moving party makes a facial challenge, the court's inquiry is “confin[ed] . . . to allegations in the complaint.” Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.2 (9^th Cir. 2003). Those allegations are taken by the court as true. See Courthouse News Serv. v. Planet, 750 F.3d 776, 780 (9^th Cir. 2014). On the other hand, if the moving party makes a factual challenge, the court may consider evidence beyond the complaint and “need not presume the truthfulness of the plaintiff's allegations.” Safe Air, 373 F.3d at 1039. “Once the moving party has converted the motion to dismiss into a factual motion by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction.” Id. (quoting Savage, 343 F.3d at 1039 n.2) (internal quotation marks omitted).

Here, although the facts are not in dispute, Defendants bring a “factual challenge” to this court's jurisdiction, as they submit evidence to supplement the allegations contained in the Complaint. Even if the court disregarded that evidence and examined only the allegations of the Complaint, the court's analysis would be unchanged.

Plaintiffs' Complaint asserts claims under the FAA, ERISA, and the LMRA. Defendants' motion fails to establish that this court lacks jurisdiction under ERISA and the LMRA.

B. The Federal Arbitration Act Does Not Provide This Court With Subject Matter Jurisdiction With Respect to the Complaint.

The FAA “governs the enforceability of arbitration agreements in contracts involving interstate commerce.” Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126 (9^th Cir. 2013). Under the FAA, private agreements to arbitrate are “valid, irrevocable, and enforceable save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA, however, does not supply this court with federal question jurisdiction. See Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581-82 (2008) (“As for jurisdiction over controversies touching arbitration, the Act does nothing, being something of an anomaly in the field of federal-court jurisdiction in bestowing no federal jurisdiction but rather requiring an independent jurisdictional basis.” (quotation marks and citation omitted)). Cases asserting rights under the FAA must...