United States Court of Appeals, Second Circuit.: Docket No. 02-9141
United States Court of Appeals, Second Circuit.: Docket No. 02-9141
3d 109
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.
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").
3
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:
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.
9
10
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.
11
12
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.
13
II. Analysis
A. Motion to Remand
14
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).
15
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).
16
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:
17
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.
18
19
[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.
20
21
Federal law preempts such state claims to further the federal goal of developing
a uniform federal common law to govern labor disputes, "lest common terms in
bargaining agreements be given different and potentially inconsistent
interpretations in different jurisdictions." Livadas, 512 U.S. at 122, 114 S.Ct.
2068. Not every suit concerning employment or tangentially involving a CBA,
however, is preempted by section 301. See Allis-Chalmers, 471 U.S. at 211,
105 S.Ct. 1904.
22
[T]he pre-emption rule has been applied only to assure that the purposes
animating 301 will be frustrated neither by state laws purporting to determine
questions relating to what the parties to a labor agreement agreed, and what
legal consequences were intended to flow from breaches of that agreement, nor
by parties' efforts to renege on their arbitration promises by relabeling as tort
suits actions simply alleging breaches of duties assumed in collectivebargaining agreements.
23
Livadas, 512 U.S. at 122-23, 114 S.Ct. 2068 (internal citations and quotation
marks omitted).
24
For example, if a state prescribes rules or establishes rights and obligations that
are independent of a labor contract, actions to enforce such independent rules or
rights would not be preempted by section 301. Allis-Chalmers, 471 U.S. at 212,
105 S.Ct. 1904. Nor would a state claim be preempted if its application required
mere referral to the CBA for "information such as rate of pay and other
economic benefits that might be helpful in determining the damages to which a
worker prevailing in a state-law suit is entitled." Lingle v. Norge Div. of Magic
Chef, Inc., 486 U.S. 399, 413 n. 12, 108 S.Ct. 1877, 100 L.Ed.2d 410 (1988).
25
Plaintiff asserts that section 193 creates state rights that are independent of the
CBA, that is, that he can establish defendant's liability under section 193
without any analysis of the terms of the CBA. Although the court may need to
refer to the collective bargaining agreement to establish the amount of his
damages, plaintiff asserts that such reference would not amount to
interpretation of the CBA. To support his argument, plaintiff recites the
common law default rule that commissions are earned at the time of sale,
apparently reasoning that under state law, because commissioned salespeople
earn commissions at the time of the sale, any action taken after the time of the
sale that reduces one's commission is a deduction from wages within the
meaning of section 193. Although plaintiff acknowledges that parties may
contract to alter this default rule, he contends that there is no need to interpret
the CBA to see if Saks and the union here agreed to alter the rule because the
CBA is silent on this issue.
26
27
29
Plaintiff maintains that his claim that defendant violated section 193 is not
arbitrable and that therefore the District Court erred when it granted defendant's
motion for summary judgment dismissing his claims for failure to exhaust
grievance and arbitration procedures in the CBA. "We review the district
court's legal conclusions de novo and its findings of fact for clear error." Castle
Rock Entm't, Inc. v. Carol Publ'g Group, Inc., 150 F.3d 132, 137 (2d Cir.1998).
We review de novo a district court's determination that a claim is arbitrable. See
ACE Capital Re Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24, 28
(2d Cir.2002).
30
"The Federal Arbitration Act, 9 U.S.C. 1 et seq. (1988), requires the federal
courts to enforce arbitration agreements, reflecting Congress' recognition that
arbitration is to be encouraged as a means of reducing the costs and delays
associated with litigation." Deloitte Noraudit A/S v. Deloitte Haskins & Sells,
U.S., 9 F.3d 1060, 1063 (2d Cir.1993). However, "since arbitration is a matter
of contract ... a party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit." Transit Mix Concrete Corp. v. Local
Union No. 282, 809 F.2d 963, 967 (2d Cir.1987) (internal citations and
quotation marks omitted).
31
Whether a CBA creates a duty for the parties to arbitrate a particular claim is an
issue for judicial determination. Id. "[I]n deciding whether the parties have
agreed to submit a particular grievance to arbitration, a court is not to rule on
the potential merits of the underlying claims." Id. at 967-68 (internal citations
and quotation marks omitted). "The Second Circuit has established a two-part
test for determining arbitrability of claims not involving federal statutes: (1)
whether the parties agreed to arbitrate disputes at all; and (2) whether the
dispute at issue comes within the scope of the arbitration agreement." ACE
Capital, 307 F.3d at 28.
32
33
made pursuant to the CBA were illegal presents a dispute arising out of or at
least relating to the CBA, particularly given our duty to resolve all doubts in
favor of arbitration.
34
35
The District Court rejected plaintiff's argument, finding that the "no-change"
clause merely prohibits the arbitrator from changing the terms of the CBA and
does not exempt any category of dispute from arbitration. See Vera, 218
F.Supp.2d at 495. In support of this conclusion, it relied on our decision in
Cleveland Wrecking Co. v. Iron Workers Local 40, 136 F.3d 884 (2d Cir.1997).
Cleveland Wrecking involved a provision in a CBA stating that the arbitration
provisions "are not intended and shall not be construed as in anywise qualifying
or making subject to change any provisions of this Agreement including, but not
limited to the handling of negotiations for a new Agreement, change in wage
scale or jurisdictional disputes." Id. at 886. We held that this language "does not
exempt anything from arbitration" but rather "simply cautions that the general
arbitration provisions should not be interpreted to `qualify[]' or `change' any
other aspect of the CBA" because "notwithstanding the informal, often
freewheeling, nature of arbitration, arbitrators are not at liberty to depart from
or to vary the terms of the agreement." Id. at 889.
36
challenges the lawfulness of a provision of the CBA will Saks contend to the
arbitrator that the "no-change" clause bars the arbitrator from finding the
provision unlawful and accordingly granting relief to the employee.
37
Given the ambiguity of the clause in its relation to this issue, the presumption in
favor of coverage, see id. at 968, and the binding undertaking of Saks not to
argue in any case that the arbitrator lacks authority by reason of the "nochange-or-modification" clause to find a CBA provision illegal and award relief
accordingly, we conclude that Vera's section 193 claim is arbitrable.
38
The parties do not seem to dispute that the CBA contains clear grievance and
arbitration procedures, and that plaintiff failed to file a grievance or to seek
arbitration of his claim concerning the illegality of the unidentified returns
policy or defendant's behavior in conformity therewith. "Ordinarily ..., an
employee is required to attempt to exhaust any grievance or arbitration
remedies provided in the collective bargaining agreement." DelCostello v. Int'l
Bhd. of Teamsters, 462 U.S. 151, 163, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983).
Because plaintiff failed to exhaust his remedies under the CBA to grieve and
arbitrate his section 193 claim, the District Court properly granted defendant
summary judgment. See generally Allis-Chalmers, 471 U.S. at 220-21, 105
S.Ct. 1904 ("A rule that permitted an individual to sidestep available grievance
procedures would cause arbitration to lose most of its effectiveness, as well as
eviscerate a central tenet of federal labor-contract law under 301 that it is the
arbitrator, not the court, who has the responsibility to interpret the labor
contract in the first instance... This complaint should have been dismissed for
failure to make use of the grievance procedure established in the collective
bargaining agreement, or dismissed as pre-empted by 301.") (internal
citations omitted).3
C. Plaintiff's Motion for Summary Judgment
39
Given our conclusion that the District Court properly granted defendant's
motion for summary judgment with respect to plaintiff's section 193 claim,
plaintiff's argument that the District Court erred in denying his motion for
summary judgment with respect to this same claim is meritless.
Conclusion
40
For the reasons stated above, we affirm the judgment of the District Court.
Notes:
Notes:
1
Cf. Allis-Chalmers, 471 U.S. at 215-16, 105 S.Ct. 1904 ("[T]he Wisconsin
court's statement that the tort was independent from a contract claim apparently
was intended to mean no more than that the implied duty to act in good faith is
different from the explicit contractual duty to pay. Since the extent of either
duty ultimately depends upon the terms of the agreement between the parties,
both are tightly bound with questions of contract interpretation that must be left
to federal law."); Atchley v. Heritage Cable Vision Assocs., 101 F.3d 495, 50001 (7th Cir.1996) (finding a claim brought under the Indiana wage payment
law preempted because resolution of the state claim required interpretation of
the CBA to determine the date on which the employer was required to pay the
relevant wages; rejecting plaintiffs' argument that the court merely had to
consult or refer to the CBA to determine the date on which wages were due,
since the written CBA did not include a specific date; and ruling that it was a
matter of federal contract interpretation whether there was an implied contract
term in the CBA requiring payment on a specific date); Nat'l Metalcrafters Div.
of Keystone Consol. Indus. v. McNeil, 784 F.2d 817, 824 (7th Cir.1986) ("[The
defendant-company's] interpretation of the contract may have been correct, an
issue we do not want to prejudge. But it was an interpretation. The company
was not violating what any fool would know was an express obligation of the
contract. It was exploiting a gap in the language of the contract. A court or
arbitrator might fill the gap just as [the defendant-company] did, by interpreting
the silence of the contract as pregnant in light of other provisions ...; but it can
be made only in a proceeding under section 301. If there is an arguable contract
dispute, and there is here, the power to resolve it is confined to such
proceedings.").
See also Atchley, 101 F.3d at 501-02 (affirming the dismissal of a state claim
that was preempted by section 301 for failure to grieve the claim in accordance
with the mandatory arbitration clause in the CBA); Wheeler v. Graco Trucking
Corp., 985 F.2d 108, 113 (3d Cir.1993) (explaining that although the plaintiff
was entitled to assert his preempted state law claim under section 301(a) of the
LMRA, "he was first required to attempt to make use of the exclusive grievance
and arbitration procedures contained in the collective bargaining agreement").