Chicago Bridge and Iron Company, N.V. v. Fairbanks Joint Crafts Council, AFL-CIO et al

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UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA
Chicago Bridge and Iron )
Company, N.V., )
)
Plaintiff, ) 3:18-cv-100 JWS
)
vs. ) ORDER AND OPINION
)
) [Re: Motion at Docket 19]
Fairbanks Joint Crafts Council, )
AFL-CIO, et al., )
)
Defendants. )
)
I. MOTION PRESENTED
At docket 19 Defendants Fairbanks Joint Crafts Council, AFL-CIO (“FJCC”) and
the International Brotherhood of Electrical Workers, Local #1547 (“IBEW”) jointly move
pursuant to Federal Rule of Civil Procedure 12(c) for an order dismissing the complaint
of Plaintiff Chicago Bridge and Iron Company, N.V. (“CB&I”). CB&I opposes the motion
at docket 20, and FJCC and IBEW jointly reply at docket 21. Oral argument was not
requested and would not assist the court.
II. BACKGROUND
In February 2013, CB&I acquired The Shaw Group, Inc. (“Shaw”) whose
subsidiary was party to a collective bargaining agreement (“CBA”) with FJCC covering
the period from October 1, 2012, through September 30, 2014 (the “2012-2014 CBA”).1
1Doc. 1 at 3 ¶ 6; Doc. 1-1.
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After that contract expired, CB&I entered into a successor CBA with FJCC “and its
affiliates,” including IBEW (the “2014-2016 CBA”).2 Section 15.04 of the CBAs required
first Shaw and then CB&I to make contributions to various multiemployer pension plans,
including the Alaska Electrical Pension Fund (the “Fund”), according to Schedule A of
each CBA.3 That section further provided that the “Union warrants and represents that
the Employer’s liability, with respect to providing retirement benefits, shall be no greater
than as provided” in Schedule A.4
Although the parties dispute the attendant circumstances,5 it is undisputed that
the Fund determined that CB&I withdrew from the Fund during the 2015 plan year and
assessed $678,171 in withdrawal liability against it.6 CB&I informed IBEW of its intent
to seek recovery from the union for any withdrawal liability.7 According to CB&I,
“withdrawal liability represents an increase in the cost of providing the pension benefits
that CB&I was required to provide” pursuant to Section 15.04 in violation of the express
warranty in that section.8 CB&I then sent a letter formally demanding that FJCC and
IBEW pay CB&I for the withdrawal liability.9 In response, counsel for IBEW denied that
2Doc. 1 at 3 ¶ 7; Doc. 1-2. The 2014-2016 CBA refers to FJCC and the various trades,
including IBEW, collectively as the “Union.” Doc. 1-2 at 3. The relevant provisions in the 2014-
2016 CBA are identical to those in the 2012-2014 CBA, but the 2014-2016 CBA lists each
section numerically by article number. For example, Article 9, Section 1 of the 2012-2014 CBA
appears as Section 9.01 in the 2014-2016 CBA. Compare Doc. 1-1 to Doc. 1-2. For ease of
reference, this opinion uses the heading convention utilized in the 2014-2016 CBA when
referring to the relevant sections found in each CBA.
3Doc. 1-1 at 15; Doc. 1-2 at 15.
4Id.
5Doc. 19 at 5; Doc. 20 at 3-4.
6Doc. 1 at 4 ¶ 12; Doc. 1-3 at 1.
7Doc. 1-4.
8Id. at 1.
9Doc. 1-5 at 1-2.
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the CBAs required IBEW or FJCC to indemnify or hold harmless CB&I, and further
stated that CB&I was required to pursue any such claim under the grievance and
arbitration provision of the CBAs.10 CB&I did not file a grievance or request arbitration
prior to filing the instant lawsuit alleging that FJCC and IBEW breached the CBAs.11
CB&I’s complaint also seeks a declaration that FJCC and IBEW are liable to CB&I for
the withdrawal liability.12 FJCC and IBEW now jointly move to dismiss all claims on the
ground that CB&I failed to arbitrate and grieve this dispute under the terms of the
CBAs.13 FJCC and IBEW also contend that CB&I’s request for declaratory relief
attempts to evade or avoid withdrawal liability and is therefore unlawful and against
public policy and cannot form the basis of a breach of contract action.14
III. STANDARD OF REVIEW
“After the pleadings are closed—but early enough not to delay trial—a party may
move for judgment on the pleadings.”15 Because “Rules 12(b)(6) and 12(c) are
substantially identical,”16 a motion for judgment on the pleadings is assessed under the
standard applicable to a motion to dismiss for failure to state a claim upon which relief
may be granted under Rule 12(b)(6).17 Rule 12(b)(6) tests the legal sufficiency of a
plaintiff’s claims. In reviewing such a motion, “[a]ll allegations of material fact in the
complaint are taken as true and construed in the light most favorable to the nonmoving
10Doc. 1-6.
11Doc. 13 at 9; Doc. 1 at 5-6 ¶¶ 17-23.
12Doc. 1 at 7-8 ¶¶ 26-31.
13Doc. 19 at 6-20.
14Id. at 20-23.
15Fed. R. Civ. P. 12(c).
16Strigliabotti v. Franklin Resources, Inc., 398 F. Supp. 2d 1094, 1097 (N.D. Cal. 2005).
17See Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9th Cir. 1980).
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party.”18 Dismissal for failure to state a claim can be based on either “the lack of a
cognizable legal theory or the absence of sufficient facts alleged under a cognizable
legal theory.”19 “Conclusory allegations of law . . . are insufficient to defeat a motion to
dismiss.”20
To avoid dismissal, a plaintiff must plead facts sufficient to “state a claim to relief
that is plausible on its face.”21 “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant
is liable for the misconduct alleged.”22 “The plausibility standard is not akin to a
‘probability requirement’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.”23 “Where a complaint pleads facts that are ‘merely consistent’
with a defendant’s liability, it ‘stops short of the line between possibility and plausibility of
entitlement to relief.’”24 “In sum, for a complaint to survive a motion to dismiss, the non-
conclusory ‘factual content,’ and reasonable inferences from that content, must be
plausibly suggestive of a claim entitling the plaintiff to relief.”25
In ruling on a Rule 12(c) motion, then, a court must “determine whether the facts
alleged in the complaint, . . . taken . . . as true, entitle the plaintiff to a legal remedy.”26
“If the complaint fails to articulate a legally sufficient claim, the complaint should be
18Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997).
19Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990).
20Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001).
21Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
22Id.
23Id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
24Id. (quoting Twombly, 550 U.S. at 557).
25Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).
26Strigliabotti, 398 F. Supp. 2d at 1097.
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dismissed or judgment granted on the pleadings.”27 A Rule 12(c) motion is thus
properly granted when, taking all the allegations in the pleading as true, the moving
party is entitled to judgment as a matter of law.28
IV. DISCUSSION
A. Enforceability of Arbitration Clause
“[A]rbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.”29 In light of
congressional policy that favors arbitration of disputes, however, if parties to a CBA
dispute whether a grievance is covered by the CBA’s arbitration clause and that clause
is ambiguous, a rebuttable presumption in favor of arbitrability applies.30 Under this
presumption courts should order arbitration “unless it may be said with positive
assurance that the arbitration clause is not susceptible of an interpretation that covers
the asserted dispute. Doubts should be resolved in favor of coverage.”31 If the court
determines that an asserted dispute is covered by a mandatory arbitration clause, it
may dismiss the case.32
Courts apply federal common law principles of contract interpretation when
construing a CBA.33 The starting point for the court’s analysis is the CBA’s express
27Id.
28Knappenberger v. City of Phoenix, 566 F.3d 936, 939 (9th Cir. 2009).
29United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960).
30Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 742 (9th Cir. 2014); see also Int’l
All. of Theatrical Stage Emp. & Moving Picture Technicians, Artists, & Allied Crafts of the U.S.,
Its Trusteed Local 720 Las Vegas, Nev. v. InSync Show Prods., Inc., 801 F.3d 1033, 1042 (9th
Cir. 2015).
31Warrior, 363 U.S. at 582–83.
32Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1060 (9th Cir.
2004).
33Alday v. Raytheon Co., 693 F.3d 772, 782 (9th Cir. 2012).
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written terms, considering the CBA as a whole.34 The relevant provision in this case is
Article 9 of the CBAs, entitled “Grievance Procedure and Arbitration.”35 Section 9.01
enumerates the 3-step grievance procedure agreed to by “[t]he parties to this
Agreement, in the interest of resolving all disputes, complaints, or grievances in
connection with the interpretation or application of the terms of this Agreement.”36 FJCC
and IBBEW rely on Section 9.01’s reference to “all disputes, complaint, or grievances,”
coupled with the strong presumption in favor of arbitrating labor disputes, to argue that
the grievance procedure is the exclusive remedy for resolving the parties’ dispute over
the interpretation of Section 15.04.37
But the strong presumption in favor of arbitrating labor disputes may be
overcome where the plain language of the CBA refers only to employee-initiated
grievances.38 Here, as in Standard Concrete, the language of Steps One and Two
describe only the unions’ and employees’ duties in initiating and forwarding a grievance
against CB&I (“The employee shall promptly report to the Chief Steward any
complaints, disputes, or grievances . . .”); (“The [FJCC] President or his designee shall
refer the matter in writing to the Labor Relations Manager or his designee.”).39 Likewise,
CB&I’s actions are limited to responding to an employee grievance (“[In the event the
[FJCC] President or his designee believes the grievance has merit, [he or she] shall
promptly attempt to resolve the dispute with the Project Manager or his designee.”);
34Id.
35Doc.1-1 at 10; Doc. 1-2 at 11.
36Doc. 1-1 at 10-11; Doc. 1-2 at 11.
37Doc. 19 at 9.
38Standard Concrete Prods. v. Gen. Truck Drivers, Office, Food & Warehouse Union,
Local 952, 353 F.3d 668, 673-75 (9th Cir. 2003).
39See Doc. 1-1 at 10-11; Doc. 1-2 at 11.
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(after the FJCC informs the Labor Relations Manager of the grievance, “[t]he parties will
then meet in an effort to settle the grievance”).40
FJCC and IBEW argue that Standard Concrete is nonetheless distinguishable
because the CBA in that case lacked a “broad preamble consigning all matters to
arbitration” and did not contemplate grievance procedures aside from those specifically
enumerated in the employee-initiated process.41 Specifically, FJCC and IBEW urge that
Sections 9.02 through 9.05 provide that a dispute or complaint other than an employee-
initiated grievance may be resolved through a grievance procedure outside that
described in Section 9.01.42
The plain language of these sections, however, reflects that they are appropriate
provisions applicable to the three-step employee arbitration process contemplated by
Section 9.01. Section 9.02, which allows the parties to “select a mutually acceptable
neutral” as an arbitrator, establishes an alternative to Step 3’s more complicated
method of selecting an arbitrator through the Federal Mediation and Conciliation
Service.43 Likewise, Sections 9.03 through 9.05, which set limits on what the arbitrator
may consider, deal with fees and expenses, and allow transcripts, respectively, are
entirely consistent with the employee arbitration described in Section 9.01 and do not
relate to any other type of dispute.44
It is clear from the plain text of the CBAs that the mandatory arbitration provision
of Section 9.01 unambiguously applies to employee grievances only. Because CB&I
was not required to arbitrate its dispute with FJCC and IBEW, dismissal is not warranted
here.
40Id.
41Doc. 21 at 3-4.
42Doc. 21 at 3-7.
43Doc. 1-1 at 11; Doc. 1-2 at 11.
44Id.
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B. Alleged Violation of Public Policy
FJCC and IBEW additionally contend that CB&I’s claims should be dismissed as
futile because the unions could not contractually assume the employer’s withdrawal
liability.45 The Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1381,
(“MPPAA”), created the concept of withdrawal liability to prevent employers from
withdrawing from a multiemployer pension plan without paying their share of unfunded,
vested benefits, which could threaten the solvency of such plans. Under the MPAA, a
multiemployer pension plan determines whether an employer has withdrawn from the
fund, and, if withdrawal has occurred, assesses the employer’s share of the unfunded,
vested benefits as withdrawal liability.46 FJCC and IBEW argue that interpreting
Section 15.04 as an indemnification agreement or express warranty would contravene
the MPAA by allowing CB&I to evade its withdrawal liability obligations.47 The unions
therefore argue that such interpretation would be unlawful and contrary to public policy,
and thus cannot form the basis of a breach of contract claim.48
Courts may not enforce contractual provisions that violate public policy.49 The
question of public policy is ultimately one for resolution by the courts.50 The public
policy must be “well defined and dominant, and is to be ascertained by reference to the
45Doc. 19 at 20-23.
4629 U.S.C. § 1382, 1399(b)(1).
47Doc. 19 at 22-23.
48Id.
49See W.R. Grace & Co. v. Local Union 759, Int’l Union of United Rubber, Cork,
Linoleum & Plastic Workers of Am., 461 U.S. 757, 766 (1983).
50United Paperworkers v. Int’l Union v. Misco, Inc., 484 U.S. 29, 43 (1987) (quoting id.).
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laws and legal precedents and not from general considerations of supposed public
interest.”51
As FJCC and IBEW concede, the Ninth Circuit has not yet addressed the public
policy concerns of whether a third party may contractually agree to be held liable for an
employer’s withdrawal liability obligations under the MPAA.52 Moreover, the only two
Courts of Appeal that have addressed similar indemnity claims for withdrawal liability
have held that employers may enforce against unions valid indemnification provisions in
CBAs.53 Those courts found no violation of public policy because the employer
remained liable to the fund and merely sought reimbursement from the union, and thus
the pension funds remained adequately funded.54
The unions argue that Shelter Distribution and Pittsburgh Mack are
distinguishable here because, unlike the employers in those cases, “far from accepting
responsibility for their withdrawal liability, CB&I has instead pressed the court to have
the FJCC and IBEW accept their payments.”55 CB&I’s complaint, however, requests
that the unions “reimburse” CB&I rather than become directly liable to the Alaska
Electrical Pension Fund.56 FJCC and IBEW therefore fail to establish a well-defined and
dominant public interest that the scope of CB&I’s requested relief would violate. And to
the extent FJCC and IBEW dispute CB&I’s characterization of the requested relief, such
51W.R. Grace, 461 U.S. at 766 (quoting Muschany v. United States, 324 U.S. 49, 66
(1945)).
52Doc. 19 at 21.
53See Shelter Distrib., Inc. v. General Drivers, Warehousemen & Helpers Local Union
No. 89, 674 F.3d 608, 612 (6th Cir. 2012); Pittsburgh Mack Sales & Serv. v. Int’l Union of Oper.
Eng’rs, Local No. 66, 580 F.3d 185, 195 (3d Cir. 2009).
54Shelter Distrib., 674 F.3d at 612-13; Pittsburgh Mack, 580 F.3d at 192-95.
55Doc. 19 at 22.
56Doc. 1 at 7-8 ¶¶ 30-31.
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contention presents a factual determination that this court cannot make at this early
pleading stage.
V. CONCLUSION
For the reasons above, the motion to dismiss at docket 19 is DENIED.
DATED: October 3, 2018.
/s/ JOHN W. SEDWICK
SENIOR JUDGE, UNITED STATES DISTRICT COURT2
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