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International Association of Sheet Metal Air, Rail, and Transportation Local Union No. 10 v. A-1 Refrigeration of Hibbing, Inc.

United States District Court, D. Minnesota

December 14, 2018

International Association of Sheet Metal, Air, Rail, and Transportation Local Union No. 10, Plaintiff and Counterclaim Defendant,
v.
A-1 Refrigeration of Hibbing, Inc., d/b/a A-1 Refrigeration Heating and Air Conditioning, Inc., Defendant and Counterclaimant.

          Justin D. Cummins, Cummins & Cummins, PLLP, Minneapolis, MN, for Plaintiff and Counterclaim Defendant International Association of Sheet Metal, Air, Rail, and Transportation Local Union No. 10.

          Joseph J. Roby, Jr. and Susan L. Waldie, Johnson, Killen & Seiler, P.A., Duluth, MN, for Defendant and Counterclaimant A-1 Refrigeration of Hibbing, Inc., d/b/a A-1 Refrigeration Heating and Air Conditioning, Inc.

          MEMORANDUM OPINION AND ORDER

          Eric C. Tostrud United States District Judge

         This matter is before the Court on the motion of Plaintiff and Counterclaim Defendant International Association of Sheet Metal, Air, Rail, and Transportation Local Union No. 10 (“Local 10”) to dismiss the claims for breach of contract and defamation (Counts II and III, respectively, of the Counterclaim) filed by Defendant and Counterclaimant A-1 Refrigeration of Hibbing, Inc., d/b/a A-1 Refrigeration Heating and Air Conditioning, Inc. (“A-1”). See ECF No. 25. The Court has subject-matter jurisdiction over the breach-of-contract counterclaim pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 185(a) and (c) and supplemental jurisdiction over the defamation claim pursuant to 28 U.S.C. § 1367(a).

         For the reasons described below, the Court grants Local 10's motion to dismiss with respect to the defamation claim and denies it with respect to the breach-of-contract claim.

         I

         A

         On July 13, 2018, Local 10 filed a one-count Complaint seeking enforcement of a February 2018 arbitration award of more than $140, 000 in unpaid fringe-benefit contributions it alleged A-1 owed under a 2017 collective-bargaining agreement (“CBA”). Compl. [ECF No. 1] ¶¶ 8, 12-13, 16-23. A-1 filed an Answer and Amended Counterclaim, denying that it was bound by the 2017 collective-bargaining agreement under which Local 10 pursued arbitration and sought fringe-benefit contributions, Am. Countercl.[1][ECF No. 22] ¶¶ 6-13, and asserting claims for a declaratory judgment that the arbitration award is void ab initio for lack of any valid written arbitration agreement (Count I), for breach of an alleged verbal contract between Local 10 and A-1 (Count II), and for business defamation (Count III). Local 10 brings this motion for partial dismissal only as to Counts II and III, arguing that each is preempted under federal labor law. See Mot. [ECF No. 25]

         After the Court heard argument on Local 10's motion, the parties stipulated to allowing A-1 to file an Answer and Second Amended Counterclaim to change an approximate date range in one paragraph of the counterclaim's factual allegations. ECF No. 39 (“Stipulation”). A-1 subsequently filed that amendment. ECF No. 40. The parties agreed that Local 10's motion for partial dismissal “and any related ruling on the Motion by the Court shall apply with identical scope and effect to the Second Amended Counterclaim Complaint as they do to the Amended Counterclaim Complaint.” Stipulation at 1-2. U.S. Magistrate Judge Leo I. Brisbois subsequently entered an order adopting that stipulation. ECF No. 42. Because the parties and the Court agree that none of the changes in the Second Amended Counterclaim affects the disposition of Local 10's pending motion, the Court will address the parties' arguments as though they were made in reference to the Second Amended Counterclaim.

         B

         A-1 acknowledges that on December 23, 2001, it signed a one-sentence document (the “2001 Document”) agreeing to abide by the CBA with Local 10 that was then in effect (the “2001 CBA”). Second Am. Countercl. ¶ 5. The 2001 CBA required covered employers to make contributions to certain fringe-benefit funds and to adhere to certain grievance procedures, including binding arbitration. Aff. of Michael McCauley (“McCauley Aff.”), Ex. 1 (“2001 CBA”), Arts. X, XVI-XXI [ECF No. 28-1 at 14, 21-26]. A-1 asserts that the 2001 Document “expired by its own terms on April 30, 2004, and it has not been renewed or reinstated.” Second Am. Countercl. ¶ 6. Similarly, it asserts that the 2001 CBA, to which A-1 was undisputedly bound under the 2001 Document, was “expressly scheduled to expire [on] April 30, 2004.” Id. ¶ 5. Since April 30, 2004, A-1 has not considered itself bound by the 2001 CBA or by any other written arbitration agreement. Id. ¶ 9.

         The 2001 Document, which A-1's president signed, states in full: “I hereby agree to abide by the labor agreement negotiated between Northern Minnesota Division of SMARCA of Minnesota, Inc., and Sheet Metal Workers' International Association, Local Union Number 10, effective May 1, 2001[, ] with an expiration date of April 30, 2004.”[2] McCauley Aff., Ex. 2 [ECF No. 28-1 at 34]. The 2001 CBA referenced in the 2001 Document[3] contains an evergreen clause that provides:

This Agreement shall become effective on the 1st day of May, 2001, and remain in full force and effect through the 30th day of April, 2004, and shall continue in force from year to year thereafter, unless written notice of reopening is given not less than ninety (90) days prior to the expiration date. In the event such notice of reopening is served, this Agreement shall continue in force and effect until conferences relating thereto have been terminated by either party.

McCauley Aff., Ex. 1 at 30-31. The 2001 CBA further provides that “[e]ach Employer hereby waives any right it may have to repudiate this Agreement during the term of the Agreement, or any modification or amendment to this Agreement.”[4] Id. at 31. Nowhere in A-1's Answer and Second Amended Counterclaim does it allege that it has ever provided Local 10 with written notice of reopening, as contemplated by the 2001 CBA's evergreen clause; conducted or terminated any conferences relating to the reopening of the 2001 CBA; or undertaken any other affirmative act to terminate the 2001 CBA.

         Notwithstanding the above-quoted contract language, A-1 alleges that at about the same time it signed the 2001 Document, it also reached a verbal agreement with Local 10. See Second Am. Countercl. ¶¶ 3, 4. Specifically, A-1 alleges the parties verbally agreed that one of A-1's co-owners, Mr. Aikey, would become a member of a different union, the Plumbers & Steamfitters Local 589; that A-1's other co-owner, Mr. Lees, would become a member of Local 10; and that dues and fringe-benefit contributions would be paid for each co-owner to his respective union. Id. ¶ 4. It appears that, according to A-1, from the time the initial term of the 2001 CBA “expired” in April 2004 and for six or seven years thereafter, the parties continued exclusively under the verbal agreement. See Id. ¶¶ 6, 10, 15. Then, in “late 2010 or early 2011, ” at Local 10's request, the parties verbally agreed that dues for Local 10 also would be paid for Mr. Aikey, with the result that both owners of A-1 also became members of Local 10. Id. ¶¶ 10-12. A-1 alleges that the verbal agreements did not obligate it to make fringe-benefit contributions for Mr. Aikey or to arbitrate any disputes with Local 10. Id. ¶¶ 13, 14.

         Local 10 did not object to the sufficiency of the payments A-1 made on Mr. Aikey's behalf until mid-2016, when Local 10's affiliated fund, the Sheet Metal Local No. 10 Control Board Trust Fund (the “Fund”), audited A-1 and preliminarily assessed fringe-benefit contributions allegedly owed on behalf of Mr. Aikey for 2012 through 2014. Id. ¶¶ 4, 15-16. A-1 objected to the assessment, citing the verbal agreements described above, and the Fund did not pursue the assessment for the years 2012 through 2014. Id. ¶ 16. In late 2017, the Fund again audited A-1 and preliminarily assessed fringe-benefit contributions allegedly owed on behalf of Mr. Aikey, this time for 2015 through 2017. Id. ¶ 17. It is this 2017 assessment that Local 10 ultimately pursued in the arbitration underlying its Complaint. Id.

         Throughout the grievance process, including at the arbitration and subsequent appeal, A-1 argued that it was not bound by any written CBA during the relevant time period, was not obligated to arbitrate disputes with Local 10, and was participating in the arbitration process only under protest. See generally Id. ¶¶ 18-31. The hearing panel found in favor of Local 10, and the appeal panel denied A-1's appeal. Id. ¶¶ 29, 31. Neither the arbitration panel nor the appeal panel explicitly addressed A-1's contention that it was under no obligation to arbitrate disputes with Local 10. Id. ¶¶ 29, 32.

         A-1 further alleges that in late 2017 or early 2018-at roughly the same time the Fund was conducting its second preliminary audit and the parties were engaged in arbitration related to Local 10's conclusions in that audit-Local 10's agent made statements “to the effect that [A-1] is not qualified or authorized to perform work on projects because Mr. Aikey is not a union member.” Id. ¶ 54. The statement was made to at least six “persons or entities”: three unidentified Max Gray Construction superintendents, one unidentified Hawk Construction superintendent, the Pipefitters local union, and the Electricians local union. Id. Max Gray and Hawk Construction were both important customers of A-1, id. ¶ 50, and Local 10's statements dissuaded both from doing business with A-1, id. ¶ 58. A-1 asserts that Local 10's statements were false and were made with actual malice-that is, that Local 10 either knew they were false or acted with reckless disregard of their truth or falsity-for three reasons: first, because Local 10 should have possessed records showing membership and dues payments for Mr. Aikey; second, because the statements were made by Local 10's business agent, who was familiar with the terms of the parties' verbal agreements; and third, because “nothing [A-1] could have said or did would have rendered it unqualified or unauthorized to perform sheet metal and other work.” Id. ¶ 56. A-1 claims Local 10's contractual breaches and defamatory statements have cost, and will continue to cost, A-1 $40, 000 to $60, 000 per year in lost profits, and that it has suffered reputational damages of at least $100, 000. Id.

         Local 10 has moved to dismiss Counts II and III of the Counterclaim pursuant to Fed.R.Civ.P. 12(b)(1), arguing that federal labor law preempts those claims. Mot.; Mem. in Supp. at 4, 10-23 [ECF No. 27]. Local 10 further argues that, even if the defamation claim were not preempted, it nevertheless should be dismissed pursuant to Rule 12(b)(6) both because the statements at issue constitute non-actionable expressions of opinion and because A-1 has not satisfied the heightened pleading standard governing statements made in relation to a labor dispute. Mem. in Supp. at 23-30.

         II

...


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