NEW JERSEY REGIONAL COUNCIL OF CARPENTERS AND NEW JERSEY CARPENTERS FUNDS AND THE TRUSTEES THEREOF v. GT MILLWORK, LLC, No. 1:2015cv02171 - Document 16 (D.N.J. 2015)
Court Description: OPINION filed. Signed by Judge Joseph H. Rodriguez on 12/14/2015. (drw)
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NEW JERSEY REGIONAL COUNCIL OF CARPENTERS AND NEW JERSEY CARPENTERS FU...THEREOF v. GT MILLWORK, LLC Doc. 16 U N ITED STATES D ISTRICT COU RT D ISTRICT OF N EW JERSEY _________________ ____ New J ersey Regional Council of : Carpenters & New J ersey : Carpenters Funds an d The : Trustees, : : Petition ers, : Hon. J oseph H. Rodriguez : v. : Civil Action No. 15-2171 : GT Millwork, LLC, : : Opinion Responden ts. : _______________________ : Presently before the Court are Motions of Petition er, New J ersey Regional Council of Carpenters & New J ersey Carpenters Funds an d the Trustees, to Confirm Arbitration [2] and of Respondents GT Millwork, LLC to Vacate Arbitration Award [9]. The Court has con sidered the written subm issions of the parties and the argum ents advan ced at the hearing on Novem ber 17, 20 15. For the reasons stated on the record that day and the reasons that follow, the m otions are granted an d denied in part. Specifically, the Court will retain jurisdiction of the Arbitration Award and rem and the dam ages portion of the award to the arbitrator for a lim ited review. I. Background Responden t GT Millwork is a n on-union lim ited liability com pany, currently em ploying eight people in addition to the two owners, engaged in com m ercial construction con tracting. GT Millwork produces high end specialty 1 Dockets.Justia.com cabin ets and perform s both fabrication work and installation. J . Gary Teyhan form ed GT Millwork and is the sole owner. Michael Lem ing has been a salaried em ployee of GT Millwork since 20 0 2. Petitioner is a Union an d fringe ben efit fund adm inistered under the Em ploym en t Retirem ent In com e Security Act (“ERISA”). On March 10 , 20 0 5, April 12, 20 0 7, and J uly 23, 20 0 8, Michael Lem ing, on behalf of GT Millwork, executed Short Form Agreem en ts which incorporate the full Collective Bargaining Agreem ent (“CBA”) at issue. See Parsons Cert., J une 1, 20 15, Ex. A; CBA, Petition to Confirm Arb. Award., Ex. B. On the 20 0 7 and 20 0 8 agreem ents, Michael Lem ing identifies him self as “Partn er” an d “Own er.” See Parsons Cert., J une 1, 20 15, Ex. A. The agreem ents entitled GT Millwork to perform union jobs and required GT Millwork to pay union scale wages and benefits for the workers on those jobs. GT Millwork acknowledged perform ing substantial am oun ts of work covered by the CBA an d, in return, rem itted som e benefits to the union. See id., GT Millwork J ob Cost Breakdown, Ex. D; id. ¶ 3. The fabrication work perform ed by GT Millwork is not coun ted as work under the CBA and, therefore, GT Millwork does not have to rem it paym en t of benefits into the Union fun ds. Id., Ex. D. Only installation work is covered under the CBA. Id. The Union con ducted a payroll com pliance audit of GT Millwork for the period of J anuary 1, 20 10 to Decem ber 31, 20 13 (“audit period”). On Decem ber 23, 20 13 the Union ’s auditor, Margaret William s (“William s”) issued a report 2 finding that GT Millwork failed to rem it paym ents in the am ount of $ 90 9, 350 .0 4 for addition al n on-union em ployees, including Teyhan and Lem ing. The m atter was arbitrated on J une 26, 20 14, J uly 31, 20 14, and August 28, 20 14. The Arbitrator found, and the record supports, a conclusion that GT Millwork had difficulty com plying with William s’ requests for job cost data. The job cost data inform s the decision of whether to in clude or exclude certain work as installation or fabrication. Ultim ately, Arbitrator J .J . Pierson issued the Union an award in the am oun t of $ 477,366.48. GT Millwork argues the award should be vacated for several reasons. Its prim ary argum en t is that Michael Lem ing did not have authority to bin d GT Millwork to the CBA because Lem ing is not a signatory to the Operating Agreem ent of GT Millwork. In the absence of proof that GT Millwork was bound by the CBA, there is no authority for the Arbitrator’s award. In addition, GT Millwork con tends that the audit captured installation work outside of the audit period and that that the hours of work perform ed by owner operators Teyhan an d Lem ing should not have been coun ted under the CBA. Finally, Auditor William s disregarded the K-1 form s issued to Teyhan and Lem ing during the audit period and sim ply divided the gross incom e on the partn ership tax return. As a result, William s’ opinions and calculations are a net opinion. If it is boun d by the CBA, GT Millwork argues the am ount of the award should be $ 139, 368.25. 3 Petition er m oves to confirm the award an d argues that Respon dent’s argum en ts were considered and then rejected by the Arbitrator’s reasonable decision. The Arbitrator determ ined that GT Millwork was a signatory to the CBA and was therefore required to pay benefits. In so finding, the Arbitrator rejected GT Millwork’s argum ent that it was m isled by the Short Form Agreem ents and con sidered GT Millwork’s extensive experience with con tracts. GT Millwork also failed to tim ely produce detailed job cost records which would have established the num ber of qualifying jobs an d was uncooperative with the auditor. The Arbitrator considered that GT perform ed work covered by the CBA during the audit period an d noted that Un ion observed em ployees working without applying the CBA as well as GT Millwork’s testim ony that m uch of the covered work was perform ed by the owners. In addition, the GT Millwork appears to have subm itted false affidavits of em ployees which attested to m inim al work. For exam ple, J erom e Littlejohn swore that he worked strictly as a truck driver for 6 hours durin g the audit periods. J ob costs docum ents show, however, that Littlejohn did an install job in Princeton for 68 hours. Therefore, the Arbitrator found the Auditor’s conclusions reasonable in light of GT Millwork’s failure to cooperate and apparen t deception . The Court will address the m otions. II. Standard of Review 4 Pursuant to the Federal Arbitration Act (“FAA”), there is a strong presum ption in favor of en forcing arbitration awards. Bren twood Medical Assoc. v. United Min e Workers of Am ., 396 F.3d 237, 241 (3d Cir. 20 0 5). A district court m ay only vacate an arbitration award on lim ited grounds where: (1) the award was procured by corruption, fraud, or undue m eans; (2) there was evident partiality or corruption in the arbitrators, or either of them ; (3) the arbitrators were guilty of m iscon duct in refusing to postpone the hearing, upon sufficien t cause shown, or in refusing to hear eviden ce pertinent and m aterial to the controversy; or of an y other m isbehavior by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers, or so im perfectly executed them that a m utual, final, and definite award upon the subject m atter subm itted was not m ade. 9 U.S.C. § 10 ; H all Street Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584 (20 0 8); Laborers' Local Union Nos. 472 & 172 v. Griffin Sign Co. Inc., No. CIV.A. 15-527 J BS, 20 15 WL 3648798, at *2 (D.N.J . J une 11, 20 15). “As lon g as the arbitrator’s award ‘draws its essence from the collective bargaining agreem en t,’ and is not m erely ‘his own brand of industrial justice,’ the award is legitim ate.” United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 36 (198 7) (quotin g Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960 )). This is because “arbitration is a m atter of con tract,” United Steelworkers of Am . v. Warrior & Gulf Navigation Co., 363 U.S. 574, 58 2 (1960 ), so if an “‘arbitrator is even arguably construing or applying the contract an d acting within the scope of his authority,’ the fact that ‘a court is convinced he 5 com m itted serious error does n ot suffice to overturn his decision.’” Eastern Associated Coal Corp. v. United Mine Workers of Am ., Dist. 17, 531 U.S. 57, 62 (20 0 0 ) (quoting Misco, 484 U.S. at 38). As relevan t here, the FAA perm its vacatur of an arbitral award “where there was evident partiality ... in the arbitrators, or either of them ; ... where the arbitrators were guilty of m isconduct ... in refusing to hear evidence pertinen t and m aterial to the controversy; or of any other m isbehavior by which the rights of an y party have been prejudiced; or ... where the arbitrators exceeded their powers.” 9 U.S.C. § 10 (a). A court m ay also vacate an award rendered “in m anifest disregard of the law.” Schwartz v. Merrill Lyn ch & Co., Inc., 665 F.3d 444, 451– 52 (2d Cir. 20 11) (intern al quotation m arks om itted). III. Analysis The NJ LLC Act provides that when “a lim ited liability com pan y is m an aged by its m em bers, unless otherwise provided in the operating agreem en t, each m em ber shall have the authority to bind the lim ited liability com pan y.” N.J .S.A. § 42:2B– 27(b)(1). “Except as otherwise provided in an operating agreem ent, a m em ber or m an ager m ay len d m on ey to, borrow m oney from , act as a surety, guarantor or endorser for, ... [an LLC].” § 42:2B– 9. Mem bers, therefore, are free to structure an operating agreem ent to either restrict or expan d rights, responsibilities and authority of its m an agers an d m em bers. See Kuhn v. Tum m inelli, 366 N.J .Super. 431, 841 A.2d 496 (N.J . App. Div. 20 0 4). 6 Consequen tly, the statutory provisions of the NJ LLC Act control in the absence of a con trary provision in an operating agreem ent. Id. The Court m ust liberally construe the NJ LLC Act “to give the m axim um effect to the principle of freedom of con tract and to the enforceability of operating agreem en ts.” N.J .S.A. § 42:2B– 66(a); In re D'Am ore, 472 B.R. 679, 68 7 (Bankr. D.N.J . 20 12). The LLC Act was repealed by L.20 12, c. 50 , § 95 on March 1, 20 14. N.J . Stat. Ann. § 42:2B-27. Here, the Arbitrator noted Teyhan’s confirm ed in testim ony that n o Operating Agreem en t existed. See Pierson Award, p. 8. In addition, the Arbitrator considered Lem ing’s testim on y that he was an “owner/ operator” of GT Millwork and concluded, based upon the testim ony suggesting a strong fam iliarity of contracts, that Lem ing had the experien ce and the apparen t authority to bind GT Millwork. See, id. p. 2, n. 2. In addition, the Funds produced rem ittan ce paperwork bearing both Teyhan’s and Lem ing’s signatures which the Arbitrator considered as an ackn owledgem ent of GT Millwork’s status as a CBA signatory. Id. Based upon the inform ation presented to the Arbitrator, and given the deferential standard applied here, the conclusion that GT Millwork is bound by the CBA is reason able an d not subject to scrutiny. See Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57 (20 0 0 ) (An award rationally derived from the facts and the CBA, even is m ade in error m ust stand); see also Roberts & Schaefer Co. v. Mine Workers, 648 F.2d 863 (3d Cir. 198 1) (An award m ust be upheld where the conclusion can be rationally derived from the CBA an d facts.) 7 For the sam e reasons, GT Millwork’s claim s of fraud are un availing, given the consideration an d conclusion that GT Millwork dealt with num erous contracts and perform ed Union jobs in the past. See Pierson Award, 2, 7. As a result, the Arbitrator’s determ ination that GT Millwork was bound by the CBA m ust stand on this record. Though urged to do so by Petitioner, the Court need not delve into the calculations underscoring the Arbitrator’s determ in ation of dam ages. The Arbitrator considered, and GT Millwork’s CPA Expert Fred Milner adm itted, that there are different m ethodologies for arriving at figures in the audit. See Pierson Award, 7. Ms. William s has extensive experience in perform ing payroll audits and the Arbitrator n otes that in 20 14, Ms. William s perform ed eighty (8 0 ) audits. Id. at 5. Moreover, Ms. William s explain ed why Mr. Lem ing and Mr. Teyhan were included in the audit. Id. at 7, n .11. The Arbitrator also found that Ms. William s was not given reason able access to GT Millwork’s fin ancial docum ents. Despite GT Millwork’s recalcitrance, the Arbitrator discoun ted Ms. William s’ original audit of $ 90 9,350 .0 4 to $ 323,0 11.0 9. To this end, the Arbitrator credited her determ inations of dam ages and considered GT Millwork’s opposition. Vacatur is appropriate where evidence is n ot considered. 9 U.S.C. § 10 (a); Schwartz, 665 F.3d at 451– 52. Such is the case here, where Ms. William s and the Arbitrator failed to consider the detailed job cost data subm itted by GT Millwork 8 at the eleventh hour. Whereas the Arbitrator’s findings of liability m ust stand, the Court will retain jurisdiction over the award and rem and the m atter to the Arbitrator for a reconsideration of the award am ount in light of the detailed job cost data subm itted by GT Millwork an d the treatm ent of Teyhan’s and Lem ing’s K-1 tax form s. Dated: Decem ber 14, 20 15 s/ J oseph H. Rodriguez Hon. J oseph H. Rodriguez, UNITED STATES DISTRICT J UDGE 9
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