Vera v. Saks & Co.

• Decision Date: 10 July 2003
• Docket Number: Docket No. 02-9141.
• Citation: 335 F.3d 109
• Parties: Angel C. VERA, individually for himself and on behalf of all others similarly situated, Plaintiff-Appellant, v. SAKS & COMPANY, doing business as Saks Fifth Avenue, under the firm name and style Saks Fifth Avenue, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

335 F.3d 109

Angel C. VERA, individually for himself and on behalf of all others similarly situated, Plaintiff-Appellant, v. SAKS & COMPANY, doing business as Saks Fifth Avenue, under the firm name and style Saks Fifth Avenue, Defendant-Appellee.

Docket No. 02-9141.

United States Court of Appeals, Second Circuit.

Argued: June 20, 2003.

Decided: July 10, 2003.

COPYRIGHT MATERIAL OMITTED

Vernon J. Welsh, Woodside, New York, NY, for Plaintiff-Appellant Angel C. Vera.

Richard Granofsky (Lawrence A. Steckman, of counsel), Lester Schwab Katz & Dwyer, LLP, New York, New York, for Defendant-Appellee Saks & Company.

Before: WALKER, Chief Judge, LEVAL and KATZMANN, Circuit Judges.

PER CURIAM.

Plaintiff appeals from the judgment entered by the United States District Court for the Southern District of New York (Koeltl, J.). The District Court denied plaintiff's motion to remand the case to state court, granted defendant's motion for summary judgment dismissing plaintiff's claims for failure to exhaust grievance and arbitration procedures under a collective bargaining agreement, and denied plaintiff's motion for summary judgment on his state law claim. For the reasons that follow, we affirm the judgment of the District Court.

I. Facts and Procedural Background

Defendant Saks & Company ("Saks") operates a retail store commonly known as Saks Fifth Avenue. Plaintiff had been employed at a Saks store as a shoe salesperson whose salary was based at least in part on commissions earned on the sale of shoes. As a member of United Storeworkers, Local 2567, RWDSU, AFL-CIO ("the union"), plaintiff was subject to the terms of a collective bargaining agreement ("CBA") between Saks and the union. Paragraph 7 of the CBA detailed how plaintiff's compensation would be calculated, including tiered commission percentages tied to aggregate sales. Paragraph 7 of the CBA also included procedures for charging shoe returns against a salesperson's commissions. In addition, paragraph 23 required that "[a]ny dispute, claim, grievance or difference arising out of or relating to this Agreement which the Union and the Employer have not been able to settle, shall be submitted to arbitration" ("the arbitration clause"). Further, it provided that "[i]n any arbitration, the arbitrator shall be bound by the terms of this agreement and shall have no authority to add to, subtract from, change or modify any provision of the agreement" ("the `no-change-or-modification' or `no-change' clause").

When customers return shoes to Saks without a receipt, Saks is unable to identify the Saks salesperson who had originally sold the shoes and thus earned a commission based on the sale. To account for these so-called "unidentified returns," the union and employer negotiated paragraph 7(F) of the CBA, which provides:

Unidentified Returns. Effective June 1, 1998, on a monthly basis, all unidentified returns to the New York Store will be charged back against commissions by deducting from sales volume for each salespersons [sic] a prorated figure calculated by dividing the total of said returns among the employees based on each employee's percentage of net sales for that month.

Plaintiff filed this purported class action in New York State Supreme Court, New York County, in June 2000, alleging that the unidentified returns policy as set forth in the CBA and defendant's actions in compliance with this policy violate New York Labor Law section 193 and the common law. Section 193 provides, in pertinent part, that:

1. No employer shall make any deduction from the wages of an employee, except deductions which:

a. are made in accordance with the provisions of any law or any rule or regulation issued by any governmental agency; or

b. are expressly authorized in writing by the employee and are for the benefit of the employee; provided that such authorization is kept on file on the employer's premises. Such authorized deductions shall be limited to payments for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, payments for dues or assessments to a labor organization, and similar payments for the benefit of the employee.

2. No employer shall make any charge against wages, or require an employee to make any payment by separate transaction unless such charge or payment is permitted as a deduction from wages under the provisions of subdivision one of this section.

N.Y. Lab. Law § 193 (McKinney 2002). Plaintiff alleged that defendant's practices consistent with the unidentified returns policy constituted impermissible wage deductions in violation of section 193 because section 193 prohibits deductions from wages for nonspecified items; unidentified returns deductions are not among the itemized deductions in section 193; and yet defendant reduced plaintiff's gross sales according to the unidentified returns policy. Plaintiff sought the amount of the commission reductions for unidentified returns, exemplary damages, an injunction prohibiting defendant from making further deductions for unidentified returns, and attorney's fees.

Defendant timely removed plaintiff's action to federal court pursuant to 28 U.S.C. § 1441, arguing that the District Court had original jurisdiction over the case based on section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185 (2000), which preempted plaintiff's state claims. The District Court denied plaintiff's motion to remand the action to state court for lack of subject matter jurisdiction. It found, inter alia, that plaintiff's section 193 claim necessarily involved interpretation of the CBA and therefore was preempted by section 301.

The parties both moved for summary judgment. The District Court granted defendant's motion, finding that because plaintiff's claims were arbitrable, his failure to exhaust grievance and arbitration procedures required dismissal of his claims. See Vera v. Saks & Co., 218 F.Supp.2d 490, 494 (S.D.N.Y.2002). It then denied plaintiff's cross-motion for summary judgment, given its holding that plaintiff's claims first had to be raised in accordance with the grievance and arbitration provisions of the CBA. Id. at 495.

This appeal followed.

II. Analysis

A. Motion to Remand

A district court must remand a case to state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c) (2000). We review de novo a decision denying a motion to remand an action to state court on the basis of preemption. See Foy v. Pratt & Whitney Group, 127 F.3d 229, 232 (2d Cir. 1997).

A defendant may remove an action originally filed in state court to federal court if the case originally could have been filed in federal court. See 28 U.S.C. § 1441(a) (2000). Absent diversity of citizenship, a case may be filed in federal court in the first instance "when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Pursuant to this rule, commonly referred to as the well-pleaded complaint rule, removal generally is not permitted simply because a defendant intends to defend the case on the basis of federal preemption. See Foy, 127 F.3d at 232. However, the "complete pre-emption corollary to the well-pleaded complaint rule," which applies to claims brought under section 301 of the LMRA, provides "that any claim based on preempted state law is considered a federal claim arising under federal law." Id. (internal quotations omitted). The "unusual pre-emptive power" accorded section 301 extends to create federal jurisdiction even when the plaintiff's complaint makes no reference to federal law and appears to plead an adequate state claim. Livadas v. Bradshaw, 512 U.S. 107, 122 n. 16, 114 S.Ct. 2068, 129 L.Ed.2d 93 (1994).

Thus, even though the parties agree that plaintiff's well-pleaded complaint alleges on its face only state claims, and no one argues that diversity of citizenship exists between the parties, if plaintiff's state "claims are preempted by section 301, federal jurisdiction exists and the removal of his case was proper." Hernandez v. Conriv Realty Assocs., 116 F.3d 35, 38 (2d Cir.1997). The central question we must resolve, therefore, is whether section 301 preempts plaintiff's state claims.

Section 301 provides that:

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

29 U.S.C. § 185(a). The Supreme Court has interpreted section "301 as a congressional mandate to the federal courts to fashion a body of federal common law to be used to address disputes arising out of labor contracts." Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 209, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985). Thus, when a state claim alleges a violation of a labor contract, the Supreme Court has held that such claim is preempted by section 301 and must instead be resolved by reference to federal law. Id. at 210, 105 S.Ct. 1904. Further, and more pertinent to this case, the Supreme Court has extended the preemptive effect of section 301 beyond suits alleging contract violations:

[Q]uestions relating to what the parties to a labor agreement agreed, and what legal consequences were intended to flow from breaches of that agreement, must be resolved by reference to uniform federal law, whether such questions arise in the context of a suit for breach of contract or in a suit alleging liability in tort.

Id. at 211, 105 S.Ct. 1904. "[W]hen resolution of a state-law claim is substantially dependent upon analysis of the terms of an...