United States Court of Appeals
For the First Circuit
No. 09-1081
SOUTH BAY BOSTON MANAGEMENT, INC.,
Plaintiff, Appellant,
v.
UNITE HERE, LOCAL 26,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. Senior District Judge]
Before
Boudin, Gajarsa,* and Lipez, Circuit Judges.
Gregory C. Keating, with whom John D. Doran and Ronald S.
Allen were on brief, for Appellant.
Paul L. More, with whom Michael T. Anderson was on brief, for
Appellee.
November 12, 2009
*
Of the Federal Circuit, sitting by designation.
GAJARSA, Circuit Judge. South Bay Boston Management,
Inc. (“South Bay”2) appeals from a final judgment of the United
States District Court for the District of Massachusetts that was
entered upon the district court’s allowance of Unite Here, Local
26’s (“the Union”) motion to compel arbitration and denial of South
Bay’s petition for declaratory judgment. Because we agree with the
district court that the Union neutrality agreement at issue was not
void ab initio and that the arbitration clause of the agreement
remained in effect, we affirm.
I.
In 2001 South Bay began the permitting process to develop
a property in the City of Boston (“City”). It alleges that the
Boston Redevelopment Agency (“BRA”), charged by the City with the
oversight of the City’s economic development, refused to issue the
necessary permits until and unless it entered into a neutrality
agreement with the Union. South Bay and the Union executed a
2
As represented by South Bay in its Complaint, it is the
successor management company to Jiten Hotel Management, Inc. and
currently operates the Courtyard by Marriott Hotel located in South
Boston, Massachusetts. Complaint at 1 ¶2, South Bay Boston Mgmt.,
Inc. v. Unite Here, Local 26, No. 08-cv-11492-EFH (D. Mass. Aug.
29, 2008). South Bay further represents that it became the
successor management company on July 1, 2005. Id. at 6 ¶22. Jiten
Hotel Management is not a party to this appeal. On the record
before us, it is unclear precisely what the relationship is between
the two management companies. It is undisputed, however, that
South Bay has stepped into the shoes of Jiten Hotel Management and
has assumed all rights and obligations relevant to this appeal.
Accordingly, all references in this opinion will be made to “South
Bay,” even when actions may initially have been taken by Jiten
Hotel Management.
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Memorandum of Agreement (“the Agreement”) on August 20, 2003. The
Agreement incorporated the terms and conditions required by the
BRA. The necessary permits were issued immediately thereafter, and
construction of a hotel on the property subsequently proceeded.
By the terms of the Agreement, South Bay was obligated to
recognize the Union and to not object to the Union or speak out
against it. The Agreement further provided that “[i]f the parties
are unable to reach agreement on a collective bargaining agreement
within 90 days after recognition . . . , all unresolved issues
shall be submitted for final resolution to final and binding
arbitration . . . .” The Agreement was structured to remain in
force “until three years from the full public opening of the hotel,
or if sooner upon execution of a collective bargaining agreement or
issuance of an interest arbitration award which concludes the
collective bargaining agreement negotiations, either of which
explicitly supercedes this document.” The hotel opened on May 18,
2005.
The Union requested recognition on October 19, 2007,
asserting that it had obtained signed union authorization cards
from a majority of the eligible employees of the hotel. South Bay,
however, refused to recognize the Union on the ground that several
employees were coerced into signing authorization cards.
Additionally, South Bay terminated two employees who were on the
Union’s organizing committee.
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Thereafter, South Bay requested arbitration pursuant to
the Agreement. After a hearing, the arbitrator issued a decision
on April 21, 2008, requiring South Bay to recognize the Union and
to reinstate one of the two terminated employees. South Bay
proceeded to recognize the Union on April 30, 2008, but refused to
reinstate the terminated employee.
The Union filed suit in district court to enforce the
arbitrator’s decision. See Unite Here, Local 26 v. Jiten Hotel
Mgmt., No. 1:08-cv-10739 (D. Mass. May 1, 2008). In its answer and
counterclaims to the Union’s complaint, South Bay admitted several
facts relevant to the present dispute. In particular, it admitted
that “the parties executed a Memorandum of Agreement,” that “the
parties are subject to contractual obligations under the
Agreement,” and that “the Agreement contains a provision related to
the arbitration of disputes between the parties.” Answer to
Complaint at 2 ¶¶6–8, Unite Here, Local 26 v. Jiten Hotel Mgmt.,
No. 1:08-cv-10739 (D. Mass. May 27, 2008). In its counterclaim,
South Bay further pled that the parties entered into the Agreement
on August 20, 2003, that the Agreement “solely provided the
procedure under which [South Bay] would voluntarily recognize the
Union as the collective bargaining representative of its
employees,” and that the Agreement “provided that disputes over the
Union’s organization of the Hotel’s employees would be submitted to
arbitration.” Id. at 4 ¶¶1–2.
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As the district court proceedings continued, South Bay
and the Union engaged in the collective bargaining process. The
negotiations, however, deteriorated, and on July 23, 2008, the
Union demanded arbitration.
South Bay filed the present action on August 29, 2008, in
the United States District Court for the District of Massachusetts,
seeking a declaratory judgment that they were not bound to
arbitrate the collective bargaining dispute under the Agreement,
because it was void ab initio and, even if it was binding on the
parties, the Agreement had expired. The Union filed a cross-motion
to compel arbitration.
The district court granted the Union’s cross-motion;
denied South Bay’s petition; and ordered the parties to submit to
arbitration. South Bay timely appealed to the First Circuit. We
have jurisdiction over the district court’s final judgment under
28 U.S.C. § 1291.3
II.
On appeal, South Bay requests this court to consider two
questions: first, whether the district court erred in determining
as a matter of law that the Agreement was not void ab initio, in
light of South Bay’s allegations that the City had required it to
3
An earlier motion to this court by South Bay to stay
arbitration proceedings was denied. Arbitration has proceeded in
parallel with this appeal. The parties’ controversy remains
active, as no arbitration decision has yet issued and the parties
have not yet entered into a collective bargaining agreement.
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enter into the Agreement in contravention of the National Labor
Relations Act; and second, whether, assuming the Agreement was
valid, the district court correctly determined as a matter of law
that the arbitration clause remained in effect at the time
arbitration was sought, in light of the fact that the collective
bargaining process that resulted in the request for arbitration
began prior to the expiration of the Agreement. We consider these
issues in turn.
A.
South Bay argues that the National Labor Relations Act
(“NLRA”), 29 U.S.C. § 151 et seq., preempts the neutrality
agreement required by the City of Boston in order to obtain the
necessary permits. We review district court determinations on
issues of preemption de novo. See Carpenters Local Union No. 26 v.
U.S. Fidelity & Guarantee Co., 215 F.3d 136, 139 (1st Cir. 2000).
And we review issues of contract interpretation and enforceability
de novo. See Coffin v. Bowater Inc., 501 F.3d 80, 97 (1st Cir.
2007).
The NLRA preempts state and local efforts to regulate
labor-management relations. In Golden State Transit Corp. v. City
of Los Angeles, the Supreme Court summarized the relevant rules of
federal preemption of local actions in the following manner:
The Court has articulated two distinct NLRA
pre-emption principles. The first, the
so-called Garmon pre-emption, prohibits States
from regulating activity that the NLRA
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protects, prohibits, or arguably protects or
prohibits. The Garmon rule is intended to
preclude state interference with the National
Labor Relations Board’s interpretation and
active enforcement of the integrated scheme of
regulation established by the NLRA.
[T]he second pre-emption principle, the
so-called Machinists pre-emption . . .
precludes state and municipal regulation
concerning conduct that Congress intended to
be unregulated. Although the labor-management
relationship is structured by the NLRA,
certain areas intentionally have been left to
be controlled by the free play of economic
forces. The Court recognized in Machinists
that Congress has been rather specific when it
has come to outlaw particular economic
weapons, and that Congress’ decision to
prohibit certain forms of economic pressure
while leaving others unregulated represents an
intentional balance between the uncontrolled
power of management and labor to further their
respective interests. States are therefore
prohibited from imposing additional
restrictions on economic weapons of self-help,
such as strikes or lockouts, unless such
restrictions presumably were contemplated by
Congress.
475 U.S. 608, 613–15 (1986) (internal quotation marks and citations
omitted). The Court then applied the Machinists preemption
principle to an informal regulation of the City of Los Angeles,
under which the renewal of a taxicab franchise was predicated on
the resolution of a labor dispute. The Court reasoned that “the
city’s insistence on a settlement is pre-empted if the city entered
into the substantive aspects of the bargaining process to an extent
Congress has not countenanced.” Golden State, 475 U.S. at 615-16
(internal quotation marks and brackets omitted). Concluding that
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“[F]ederal law intended to leave the employer and the union free to
use their economic weapons against one another,” the Court held
“that a city cannot condition a franchise renewal in a way that
intrudes into the collective-bargaining process.” Id. at 619–20.
More recently, the Court applied the Machinists
preemption principle to a set of California statutes that
prohibited employers from using state funds “to assist, promote, or
deter union organizing.” Chamber of Commerce v. Brown, 128 S. Ct.
2408 (2008). The Court held that the statutes were preempted,
“because they regulate within a zone protected and reserved for
market freedom.” Id. at 2412.
In this case, the district court determined: “The Hotel’s
argument for pre-emption fails. Pre-emption applies only to state
regulations. The Hotel has not identified any state regulation and
therefore has failed to allege what is necessary in order for the
pre-emption doctrine to be operative.” Memorandum and Order at
3 n.1, South Bay Boston Mgmt., Inc. v. Unite Here, Local 26,
No. 08-cv-11492-EFH (D. Mass. Nov. 6, 2008) (citations omitted).
This determination is erroneous. NLRA preemption applies equally
to city as well as to state regulations. The form of regulation is
irrelevant. See Golden State, 475 U.S. at 614 n.5 (“Our
pre-emption analysis is not affected by the fact that we are
reviewing a city’s actions rather than those of a State. The fact
that the city acted through franchise procedures rather than a
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court order or a general law also is irrelevant to our analysis.”
(citation omitted)). Instead, the proper focus should be on
whether the regulatory action conflicts with the efforts of the
National Labor Relations Board or otherwise interferes with the
unfettered ability of the parties to competitively establish their
respective economic positions – if it controls or impedes the
actions of the parties, it is pre-empted. In this case, South Bay
clearly alleged that it was subjected to regulation by the City in
the form of conditioning the issuance of permits on South Bay’s
execution of a neutrality agreement with the Union.4 The district
court’s conclusion is, therefore, contrary to precedent.
In spite of this erroneous conclusion, the district
court’s decision may nonetheless be affirmed. See Ramos-Pinero v.
Puerto Rico, 453 F.3d 48, 51(1st Cir. 2006) (“We are not bound by
the reasoning of the district court, and may affirm an order of
dismissal on any basis made apparent by the record.”).
Specifically, South Bay does not dispute that the Agreement is not
facially in conflict with the NLRA. Rather, it merely asserts that
it entered into the Agreement involuntarily, pursuant to the City
of Boston’s alleged regulation. Therefore, we need not determine
4
There is no argument made here that the City was acting
as proprietor, rather than regulator. Cf. Building & Construction
Trade Council v. Associated Builders & Contractors, 507 U.S. 218,
226–28 (1993) (identifying a “distinction between government as
regulator and government as proprietor” for purposes of preemption
analysis).
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whether the City’s alleged regulation was preempted; we need only
determine whether the Agreement, allegedly entered into under
coercion, was void ab initio rather than voidable. On this point,
our decision in In re Boston Shipyard Corp., 886 F.2d 451 (1st Cir.
1989), is instructive. In that case, we explained: “It is
well-settled . . . that a contract or release, the execution of
which is induced by duress, is voidable, not void, and the person
claiming duress must act promptly to repudiate the contract or
release or he will be deemed to have waived his right to do so.”
Id. at 455 (internal quotation marks and brackets omitted); see
also Local Lodge No. 1424 v. Nat'l Labor Relations Bd., 362 U.S.
411 (1960) (finding that a facially lawful union agreement is not
void simply because it was entered into unlawfully). Accordingly,
the Agreement was not void ab initio — it was, at most, voidable.
That said, it is readily apparent that the time in which
South Bay should have sought to challenge the Agreement has long
since passed. Its present challenge is untimely. Per our decision
in Boston Shipyard:
If the coerced party does not contest within a
reasonable time the document allegedly
executed under duress, the contract or release
may be ratified and affirmed. A party may
ratify an agreement entered into under duress
in a number of different ways: first, by
intentionally accepting benefits under the
contract; second, by remaining silent or
acquiescing in the contract for a period of
time after he has the opportunity to avoid it;
and third, by recognizing its validity by
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acting upon it, performing under it, or
affirmatively acknowledging it.
886 F.2d at 455 (internal quotation marks, ellipses, and citations
omitted). Here, seven years elapsed between when South Bay and the
Union entered into the Agreement, and it is the first time South
Bay contested the Agreement’s validity. During that period, South
Bay enjoyed the benefits of the Agreement, including the ability to
invoke the same arbitration clause at issue in this case. And
South Bay affirmatively acknowledged the Agreement both in
arbitration and in the United States District Court for the
District of Massachusetts. Because its challenge is not timely,
South Bay has thus waived any right it may have had to void the
Agreement. See id. at 455-56. Accordingly, the district court’s
decision not to declare the Agreement void must be affirmed.
This conclusion, we note, is consistent with traditional
principles of res judicata. See Carteret Savings & Loan Ass’n v.
Jackson, 812 F.2d 36, 38 (1st Cir. 1987) (explaining that res
judicata applies to all claims that were brought or could have been
brought in prior proceedings). South Bay does not contest that it
could have raised the claim that the Agreement was void in the
earlier district court litigation, when it challenged the April
2008 arbitrator’s decision. It failed to do so, and it is now
barred from doing so.
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B.
We must next consider whether the Agreement’s arbitration
clause survived the Agreement’s expiration in May 2008. We review
both the interpretation of arbitration agreements and orders
compelling arbitration de novo. See Pelletier v. Yellow
Transportation Inc., 549 F.3d 578, 580 (1st Cir. 2008); see also
PaineWebber Inc. v. Elahi, 87 F.3d 589, 592 (1st Cir. 1996).
Addressing whether an arbitration clause survived an
agreement in Litton Financial Printing Division v. National Labor
Relations Board, the Supreme Court stated:
The Agreement’s unlimited arbitration clause,
by which the parties agreed to arbitrate all
“[d]ifferences that may arise between the
parties” regarding the Agreement, violations
thereof, or “the construction to be placed on
any clause or clauses of the Agreement,”
places it within the precise rationale of
Nolde Brothers [Inc. v. Bakery Workers, 430
U.S. 243 (1977)]. It follows that if a
dispute arises under the contract here in
question, it is subject to arbitration even in
the postcontract period.
501 U.S. 190, 205 (1991). And referring to its earlier holding in
Nolde Brothers, the Court explained:
We found strong reasons to conclude that the
parties did not intend their arbitration
duties to terminate automatically with the
contract, and noted that the parties’ failure
to exclude from arbitrability contract
disputes arising after termination affords a
basis for concluding that they intended to
arbitrate all grievances arising out of the
contractual relationship. We found a
presumption in favor of postexpiration
arbitration of matters unless negated
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expressly or by clear implication, but that
conclusion was limited by the vital
qualification that arbitration was of matters
and disputes arising out of the relation
governed by contract.
Litton, 501 U.S. at 204 (internal quotation marks, ellipses, and
citations omitted).
This circuit has since imposed a two prong analysis for
post-expiration arbitrability of disputes: “we must determine if
the particular dispute has its real source in the contract, and if
so, we must consider whether postexpiration arbitration of the
issue was negated expressly or by clear implication.” United
Parcel Service v. Union de Tronquistas, 426 F.3d 470, 473 (1st Cir.
2005)(quotation and citation omitted).
Here, both prongs are satisfied. First, the parties’
dispute stems from their inability to arrive at a satisfactory
collective bargaining agreement during the negotiations required by
the Agreement. And second, the arbitration and expiration clauses
specifically, and the Agreement generally, provide no reason to
believe that post-expiration arbitration was negated. Indeed, the
Agreement expressly contemplates that ninety days will pass after
Union recognition before any collective bargaining disputes become
arbitrable, without reference or regard to whether the Agreement
might otherwise expire in the interim. The district court thus
correctly determined that the arbitration clause remained in force
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with respect to any dispute relating to the parties’ initial round
of collective bargaining and properly compelled arbitration.
III.
Accordingly, the district court’s order compelling
arbitration and dismissing South Bay’s petition for declaratory
judgment is affirmed.
Affirmed.
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