No. 93-56170, 48 F.3d 1227 (9th Cir. 1995)

Before: BEEZER and NOONAN, Circuit Judges, EZRA,^*  District Judge.

MEMORANDUM^** 

David Feitl ("Feitl") appeals the district court's dismissal of his Complaint. Initially, the district court held that Feitl's state law claims, including his claim for fraud, were preempted by Section 301(a) of the Labor-Management Relations Act ("LMRA"), 29 U.S.C. § 185(a), and compelled arbitration as established by the collective bargaining contract ("CBA"). At arbitration Feitl's claims were dismissed in their entirety, as untimely filed. Thereafter, the district court dismissed the Complaint.

Feitl claims: (1) Section 301(a) of the LMRA does not preempt a state law claim for fraud; and (2) the arbitration clause provision of the CBA does not cover a cause of action for fraud. We affirm.

Feitl, a National Basketball Players Association ("NBPA") member, has played with several National Basketball Association ("NBA") teams. Appellee LAC Basketball Club, Inc. ("LAC"), owns and operates the Los Angeles Clippers (the "Clippers"), an NBA member team. Employment of an NBPA member by the NBA is covered by a collective bargaining agreement ("CBA").

Feitl alleges that he and his manager/agent, Warren LeGarie ("LeGarie"), entered into contract negotiations with LAC for the 1991-92 NBA season resulting in an oral agreement between the parties wherein LAC promised to hire Feitl. Feitl asserts that in reliance upon this oral agreement he turned down an opportunity to play professional basketball in Spain. No written contract was ever executed for this alleged agreement. Subsequently, the Clippers general manager called LeGarie and informed him that the Clippers were not going to employ Feitl.

Feitl filed suit against LAC in state court.¹  LAC removed this action to the United States District Court for the Central District of California on the ground that Feitl's lawsuit called for interpretation of the CBA and therefore created federal question jurisdiction under Section 301(a) of the Labor-Management Relations Acts ("LMRA"), 29 U.S.C. § 185(a).

The district court granted LAC's motion to stay the federal proceedings and compel arbitration of Feitl's grievance pursuant to the terms of the CBA. The district court noted that Feitl claimed a "breach of an employment contract for services as an NBA player, a position clearly covered by the CBA," and relying on Young v. Anthony's Fish Grottos, Inc., 830 F.2d 993 (9th Cir. 1987), concluded that Feitl's claims were "enforceable only under the CBA." Rec. at 15.

Arbitration commenced on April 19, 1993. Upon Feitl's concession that his grievance was untimely, the arbitrator dismissed the grievance with prejudice, and terminated the hearing. The arbitrator never reached the merits of Feitl's claims.

Thereafter, Feitl moved the district court to lift its stay so that he might pursue his cause of action for fraud. The district court granted Feitl's Motion and then granted LAC's Motion to Dismiss the Complaint, concluding that any evaluation of Feitl's fraud claim would "require [ ] interpretation of the CBA to which he was a party," and that his "fraud claim is based upon the very same alleged acts and conduct as are his other claims." Rec. at 20-21. Feitl appealed.

A district court's determination that state law claims are preempted by federal labor law (Section 301 of the LMRA) is a question of law that is reviewed de novo. Bale v. General Tel. Co. of Cal., 795 F.2d 775, 779 (1986). A district court's decision concerning whether a dispute should be referred to arbitration is a question of law that is reviewed de novo. Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 474 (9th Cir. 1991), cert. denied, --- U.S. ----, 112 S. Ct. 1294 (1992).

A dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b) (6) is a ruling on a question of law, as such it is reviewed de novo. Oscar v. University Students Coop. Ass'n, 965 F.2d 783, 785 (9th Cir. 1992) (en banc) cert. denied 113 S. Ct. 655 (1992); Kruso v. Int'l Tel. Y Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989).

A. Feitl's Fraud Cause of Action Is Preempted by Sec. 301

In enacting Sec. 301 of the Labor Management Relations Act of 1947 [LMRA] Congress intended to ensure that collective bargaining agreements are interpreted uniformly. Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 404 & n. 3 (1988); Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 209-210 (1985); Milne Employees Ass'n v. Sun Carriers, Inc., 960 F.2d 1401, 1407-08 (9th Cir. 1992) cert. denied, 113 S. Ct. 2927 (1993).

To invoke jurisdiction under Sec. 301, "all that is required ... is that the suit be based on an alleged breach of contract between an employer and a labor organization and that the resolution of the lawsuit must be focused upon and governed by the terms of the contract." Carpenters Health & Welfare Trust Fund v. Tri Capital, Corp., 25 F.3d 849, 858 (9th Cir. 1994) (citing Painting & Decorating Contractors Ass'n v. Painters & Decorators Joint Comm., Inc., 707 F.2d 1067, 1071 (9th Cir. 1983), cert. denied, 466 U.S. 927 (1984)).

Where resolution of state tort claims is "substantially dependent upon analysis of the terms of an agreement made between parties in a labor contract," then the claims are preempted by Sec. 301. Allis-Chalmers, 471 U.S. at 220; Bale, 795 F.2d at 779. A state law claim is not preempted if "the state law factual inquiry [does] not turn on the meaning of any provision of the collective bargaining agreement." Ackerman v. Western Elec. Co., Inc., 860 F.2d 1514, 1517 (9th Cir. 1988). The fact that the court must examine the CBA to determine the preemption issue is not enough. Milne, 960 F.2d at 1409; Burnette v. Godshall, 828 F. Supp. 1439, 1445 (N.D. Cal. 1993). " [A]s long as the state-law claim can be resolved without interpreting the [collective bargaining] agreement itself, the claim is 'independent' of the agreement for Sec. 301 pre-emption purposes." Lingle, 486 U.S. at 410.

Lingle dictates that we begin by setting forth the elements of Feitl's fraud claim. The elements of a cause of action for fraud in California are:

(1) a False representation or concealment of a material fact (or, in some cases, an opinion) susceptible of knowledge, (2) made with Knowledge of its falsity or without sufficient knowledge on the subject to warrant a representation, (3) with the Intent to induce the person to whom it is made to act upon it; and such person must (4) act in Reliance upon the representation (5) to his Damage.

South Tahoe Gas Co. v. Hofman Land Improvement Co., Inc., 25 Cal. App. 3d 750, 765 (1972); see also, Milne, 960 F.2d at 1408.

The first three elements of Feitl's claim for fraud--misrepresentation, knowledge of falsity, and intent to defraud--do not require interpretation of the CBA. They turn on LAC's frame of mind. Resolution of these elements are "purely factual questions pertain [ing] to ... the conduct and motivation of the employer." Milne, 960 F.2d at 1408 (quoting Lingle, 486 U.S. at 407). Nor does evaluation of Feitl's fifth element of fraud--damages--require interpretation of the CBA. It too is completely fact oriented. Feitl must merely prove facts about his rejection of the offer of employment in Spain, and the type and degree of damages he sustained.

The fourth element of Feitl's claim for fraud, justifiable reliance, requires a two-part analysis. First, reliance must be established. This is also a "purely factual inquiry pertain [ing] to ... the conduct of the employee [s]" Id. Feitl has stated that he acted upon LAC's representations by foregoing employment with the Spanish basketball team. Second, the reliance must be shown to be justified. "The employee [ ] must show that the 'circumstances were such to make it reasonable for plaintiff to accept defendant's statements without an independent inquiry or investigation.' " Id. (quoting Wilhelm v. Pray, Price, Williams & Russell, 186 Cal. App. 3d 1324, 1332 (1986)). Because Feitl knew at the time of the alleged fraud that any employment he might have with LAC was governed by a CBA, Feitl must prove that his reliance was justified in light of the CBA. See, Milne, 960 F.2d at 1409.

Feitl was a veteran NBA player; he had been a member of the NBPA, and was therefore subject to the CBA, for at least five (5) years. He, and certainly his agent LeGarie, must have had knowledge of the terms of the CBA. The CBA is clear that:

neither the NBA nor the Players Association shall contend that any agreement concerning terms and conditions of employment is binding upon the player or the team until a Player Contract embodying such terms and conditions has been duly executed by the parties.

Supp.Rec. at 93 (emphasis added).

Only by examining the CBA can one determine whether it is reasonable or justifiable for Feitl to rely on oral representations of employment by LAC. A claim of fraud is preempted where "reference to, and interpretation of, the terms of the collective bargaining agreement" is necessary. Bale, 795 F.2d at 780. Accordingly, Feitl's state law cause of action for fraud was " 'inextricably intertwined' with an analysis of the CBA," and was therefore preempted by Sec. 301. Schlacter-Jones v. General Tel. of Cal., 936 F.2d 435, 440 (9th Cir. 1991).

B. The Fraud Claim is Covered by the Arbitration Clause

Feitl argues that the arbitration provision of the CBA does not cover his cause of action for fraud.

However, the CBA states:

Any dispute ... involving the interpretation or application of, or compliance with, the provisions of this Agreement or the provisions of a Player Contract ... including a dispute concerning the validity of a Player Contract, shall be resolved exclusively in accordance with the procedures set forth in this Article....

Supp.Rec. at 123 (emphasis added).

The CBA unequivocally requires that any dispute that involves interpretation of the CBA or relates to the establishment and validity of a player contract must be resolved through arbitration. Therefore, the district court did not err in finding that Feitl's state law cause of action for fraud was preempted by Sec. 301, and therefore properly before the arbitrator. This dispute was in fact referred to arbitration, and was resolved by the arbitrator. Accordingly, the district court's subsequent dismissal of the complaint was proper.

C. Feitl's Fraud Claim is Not a Non-negotiable State Right

The preemptive effect of Sec. 301 extends to suits alleging liability in tort and is not limited to suits alleging contract violations. Allis-Chalmers, 471 U.S. at 212. The Court held that "state-law rights and obligations that do not exist independently of private agreements, and that as a result can be waived or altered by agreements of private parties, are preempted by those agreements." Id. at 213. The Court's analysis turned to whether the state tort action conferred nonnegotiable rights or depended on terms of the collective bargaining agreement. Id. Preemption is proper if "evaluation of the tort claim is inextricably intertwined with consideration of the terms of the labor contract." Id.

The Supreme Court has stated that " [w]hile it may be true that most state laws that are not preempted by Sec. 301 will grant nonnegotiable rights that are shared by all state workers, we note that neither condition ensures nonpre-emption." Lingle, 486 U.S. 399, 408 n. 7. In determining nonnegotiable state rights this court has held that " [t]he critical inquiry is ... whether the state law claim is 'independent' of the collective bargaining agreement in the sense that its resolution does not turn on the interpretation of the agreement." Schlacter-Jones, 936 F.2d at 442 (quoting Lingle, 486 U.S. at 407). " 'Nonnegotiability' may be a factor in that determination, but not the only one." Id.

Feitl's right to assert a claim for fraud against LAC is not independent of the CBA, because the claim is necessarily "inextricably intertwined" with language of both the CBA and the arbitration clause. Accordingly, he has no "nonnegotiable state right" to assert fraud in this case. The Los Angeles Clippers' request for sanctions under Rule 30-2 is denied.

AFFIRMED.