BEACON SALES ACQUISITION, INC. v. BOARD OF TRUSTEES OF THE TEAMSTERS INDUSTRIAL EMPLOYEES PENSION FUND

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

BEACON SALES ACQUISITION, INC.

D/B/A ARZEE SUPPLY .

Plaintiff, AMENDED OPINION

Vv.

BOARD OF TRUSTEES OF THE

TEAMSTERS INDUSTRIAL

EMPLOYEES PENSION FUND; THE

TEAMSTERS INDUSTRIAL

EMPLOYEES PENSION FUND; BOARD

OF TRUSTEES OF THE TEAMSTERS

INDUSTRIAL EMPLOYEES WELFARE

FUND; AND THE TEAMSTERS

INDUSTRIAL EMPLOYEES WELFARE

FUND,

Defendants.

KEVIN MCNULTY, U.S.D.J.:

Pending before the Court is a motion for preliminary injunction filed by

the plaintiff, Beacon Sales Acquisition, Inc. d/b/a Arzee Supply Corporation

(“Beacon”). (DE 3). Beacon seeks to enjoin an arbitration commenced by

defendants: the Teamsters Industrial Employees Pension Fund (the “Pension

Fund”) and Welfare Fund (the “Welfare Fund,” and together with the Pension

Fund, the “Funds”); and the Boards of Trustees of the Pension Fund and

Welfare Fund (collectively, unless otherwise specified, “the Trustees”). The

arbitration hearing is scheduled to commence on December 16, 2019.

Defendants allege that Beacon was delinquent on contributions that were

due under collective bargaining agreements (CBAs) signed by Beacon as the

employer. Defendants also assert that Beacon contributed on behalf of

ineligible employees, causing Defendants to pay medical expense benefits that

were not in fact due. Each of these claims, say the Funds, is to be resolved via

arbitration in accordance with the terms of the trust indentures. The Funds

maintain that Beacon is bound by the arbitration clauses in the trust

indentures because the CBAs signed by Beacon explicitly or impliedly

incorporate the terms of the trust indentures.

Beacon asserts that it never agreed to arbitrate these claims. Although

Beacon signed the CBAs, it says it never signed the trust indentures and

therefore cannot be bound by the indentures’ arbitration clauses.

A preliminary word about the backwards procedural posture of this case:

The cases governing arbitrability, cited herein, are commonly decided in the

context of a motion to compel arbitration brought by the party who seeks it.

This action, however, is brought by the party opposing arbitration, and it seeks

a preemptive declaration or injunction that arbitration should not occur. The

caselaw principles governing arbitrability, mutatis mutandis, apply equally to a

motion to compel or to enjoin arbitration.

For the reasons provided below, Beacon’s motion (DE 3) will be denied in

part and granted in part. This Opinion, previously filed (DE 19), is amended at

pp. 21-22 in response to the defendant’s motion for reconsideration (DE 23).

I. Summary?

Plaintiff Beacon is a distributor of roofing materials. The Fund

defendants are multiemployer pension plans within the meaning of the

Citations to the record will be abbreviated as follows. Citations to page numbers

of docket items refer to the page numbers assigned through the Electronic Court Filing

system, unless otherwise indicated:

“DE” = Docket entry number in this case.

“Compl.” = The complaint filed in this action (DE 1).

“CBA” = Any of three collective bargaining agreements,

collectively spanning 2011-2019 (DE 18; excerpted

DE 14-1).

“Trust Indenture” = Third Restated Agreement and Declaration Trust of

Pension Fund / Welfare Fund (DE 3-4; DE 3-5).

Employee Retirement Income Security Action, as amended (“ERISA”). (Compl.

17 9, 11).

A. The CBAs

Beacon is a signatory to a series of CBAs with Teamsters Local Union No.

560. These govern the wages, hours, and conditions at four Beacon facilities in

New Jersey and New York. Each of the CBAs covers a period of three years; the

CBAs at issue cover (1) January 1, 2011 to December 31, 2013; (2) January 1,

2014 to December 31, 2016; and (3) January 1, 2017 to December 31, 2019.

(DE 14-1 at 6-21). The relevant provisions of the CBAs are materially identical.

(DE 18-1, 18-2, 18-3).

The CBAs require Beacon to remit contributions to the Funds on behalf

of covered employees. (Compl. 4 17). In each CBA, pursuant to Article 14,

Section 1, Beacon agreed:

to make contribution at the rates set forth below and participate in

the TIE Pension and Welfare Funds, pursuant to the Trust

Indenture, its rules and regulations as amended.

(DE 14-1 at 6-21 (emphasis added)). Monthly contribution obligations are

established in each CBA based on the number of hours each employee worked.

Under Section 4, Beacon also agreed to allow the Funds to inspect and audit

its records in order to verify contributions remitted by Beacon to the Funds.

(Id.).

B. The Trust Indenture

As noted above, the CBA refers to the “Trust Indenture.” The trust

indentures at issue here were entered into on April 10, 2014. They are (a) the

Third Restated Agreement and Declaration Trust of Teamsters Industrial

Employees Pension Fund and (b) the Third Restated Agreement and

Declaration Trust of Teamsters Industrial Employees Welfare Fund. (DE 3-4

and DE 3-5). Those two agreements are identical, except that the first is for the

Pension Fund and the second for the Welfare Fund.”

Beacon is not a direct signatory to the Trust Indenture; the parties to the

Trust Indenture are the trustees of the relevant Fund, consisting of union and

employer trustees. Each Trust Indenture begins by acknowledging that it is

being executed in connection with CBAs that will endow the Funds:

WHEREAS, the Union will be continuing to enter into collective

bargaining agreements with the Employers and with other

participating Employers requiring amongst other things, payment

by said Employers to the Pension Fund [or Welfare Fund] of

periodic contributions for the purpose of providing inter alia, for

eligible employees, through the self-administration, a plan of

retirement benefits. ..

(DE 3-4 at 2). Article 1, Section 4, goes on to define “Employer” as follows:

an Employer who employs Employees, as defined in Section 5

herein below, in a bargaining unit represented by the Union,

and pursuant to a collective bargaining agreement with the

Union or participation agreement with the Fund or other writing

providing for the payment of contributions, pays monies required

therein to the Teamsters Industrial Employees Pension Fund for

the purpose of having benefits provided by the Teamsters

Industrial Employees Pension Fund, or some of said benefits

provided to said bargaining unit employees.

Ud. at 4 (emphasis added}). “Employees” are defined as “Employees of an

Employer, as defined in Section 4 hereinabove, employed in a bargaining unit

under a Collective Bargaining Agreement with the Union and for whom the

Employer pays required monies to the Teamsters Industrial Employees Pension

Fund.” (Id.)

Article I, Section 10, then defines “Employer Contributions’:

The term “Employer Contributions” or “Employers’ Contributions”

means any and all payments made by or obligated any and all

Employers to the Teamsters Industrial Employees Pension Fund,

in accordance with or as required by any collective bargaining

agreement, or other agreement or arrangement, between the

2 Because both Trust Indenture agreements are materially identical, any citation

to one agreement (DE 3-4) shall be deemed a citation to the other (DE 3-5).

Employer and the Union for the purposes set forth and expressed

in Article II, Section 3 hereof, pursuant to a participation

agreement, contribution reports, and as may be provided by the

Trustees or in the Teamsters Industrial Employees Pension Fund.

The Employer, as a function and consequence of having made

any contributions to the Pension Fund, shall be and is

deemed to have agreed to, and adopted, the terms,

provisions, and obligations of this Third Restated Agreement

and Declaration of Trust.

(Id. at 5 (emphasis added)).

The Trust Indenture then states its essential purpose: “The Trust Fund

shall be held for the exclusive purposes of providing benefits to participants in

the Fund.” (id. at 7 (Article II). To effectuate this purpose, the Trustees shall

have the following audit authority:

to audit Employer contribution records to determine

compliance with contribution obligations, and recover

expenses incurred in connection with the auditing and

collection efforts thereof, including but not limited to, requiring

payment of interest upon such delinquencies as established

herein, to require the posting of security for payment of

delinquencies or protect against future delinquencies, establishing

penalties in the event of delinquencies, requiring payment of

auditing fees, liquidated damages, arbitration fees and court costs,

counsel fees, and other costs and expenses which were or would

otherwise be incurred by the Fund in connection with the

monitoring and collection of Employer contributions as the

Trustees deem advisable....

(Id. at 7-8 (emphasis added)).

Article III governs “Employer Payments to the Teamsters Industrial

Employees” Funds. Under this article, “Employers,” such as Beacon, are

required to make contributions to the Funds. (See id. at 10 (Section 2)).

Moreover, this article also endows the Trustees with the power to:

(1) “demand, collect, receive and hold Employer contributions”

(Section 3);

(2) “require any Employer, when so required, to furnish to the

Trustees such information and reports as the Trustees may

require in the performance of their duties” and to provide the

Trustee with a copy of their books and records (Section 4);

(3) “enforce against any Employer, and an Employer shall be

bound by, all rules and regulations duly formulated and

established by the Trustees, . .. .” (Section 5); and

(4) “to prescribe such forms as they deem necessary for the

Employers to utilize in the making of contributions... .”

(Section 6).

(Id. at 10-11). Article III, Section 10, also provides the Trustees with the ability

to commence actions against Employers to recover contributions:

All suits, arbitrations, and proceedings to recover contributions or

any other payments due to the Trustees or the Teamsters

Industrial Employees Pension Fund, to recover Fund assets, or to

enforce or protect other rights of the Fund, the Teamsters

Industrial Employees Pension Fund may institute an action or

arbitration in its name as such or in the names of the Trustees.

The Trustees are empowered to designate one or more arbitrators

to serve as arbitrators on claims of delinquencies brought by the

Trustees against the Employer.

(Id. at 12).

The parties dispute the relevance of Article X to this dispute. Article X of

the Trust Indenture is titled “Claims and Individual Rights.” (id. at 27). Article

X, Section 1 provides that “No Employer, or Union, shall have any right, title or

interest in or to the Trust Fund or any part thereof.” (/d.). Section 2 concerns

the rights of employees, participants, or beneficiaries in the Funds.

Article X, Section 3, is an Arbitration Clause:

Section 3. Arbitration Clause. Any and all disputes arising under

this Agreement or arising under any of the Plans, rules and

regulations of the Trustees, excluding deadlock disputes but

including any dispute raised by any plan beneficiary, or any party

claiming any rights under this Trust Agreement, may be submitted

by either party to final and binding arbitration before the Board of

Arbitration appointed in accordance with this Agreement. The

Trustees may appoint a “standing” arbitrator to serve to hear and

decide participant or beneficiary challenge to Trustee

determination. If no “standing" arbitrator has been appointed, the

arbitrator shall be appointed by and in accordance with the rules

of the New Jersey State Board of Mediation. The arbitration

proceeding shall be conducted under the rules of the N.J. State

Board of Mediation. In such arbitrated dispute, each party to the

dispute shall be responsible for its own fees and expenses in

preparing and presenting its case, and the fees of the Arbitrator

shall be equally split. In order for a disputed claim to be timely

asserted, it must be submitted to arbitration within 180 calendar

days from the date the aggrieved party received notice of the

Trustee's adverse disposition of the claim, or from when the

aggrieved party has reason to know or believe that the Trustees

disposed of, or refused to act or further consider, the claim.

(Trust Indenture, Article 10, § 3).

Six months after adopting the Trust Indenture, on October 30, 2014, the

Trustees adopted resolutions providing “that any action by the Trustees to

recover delinquent contributions owed to the [Pension or Welfare] Funds or to

compel a payroll audit is subject to binding arbitration before” the Trustees’

permanently designated arbitrators, either Gerard Restaino or Ira Cure.

(Compl. 4 23). The resolution stated that the Trustees could submit to

arbitration any disputes arising from “any contributing employer becoming

delinquent in its contributions and/or audit amounts to the Fund, or should

any dispute arise concerning the obligation to make contributions or to submit

to a payroll audit.” (Id. 24).

C. This Action

This action arose after the defendants conducted an audit of Beacon’s

contributions for the 2013 and 2014 calendar years. As a result of that audit,

defendants assert that Beacon owes $49,383.98 in delinquent contributions

and interest (the “Contributions Claim”). (Compl. {Jj 27-28). Defendants also

assert that Beacon improperly made contributions on behalf of employees who

no longer qualified for Fund benefits. As a result, the Funds extended coverage

to these ineligible employees, and paid medical benefits to those ineligible

employees (the “Damages Claim”). (Id. [4] 29-31). Initially, defendants asserted

that the amount of those unwarranted payments owed by Beacon totaled

$466,284.25. Ud. | 30). However, defendants subsequently increased their

Damages Claim to $838,692 (Id. 31).

To recover on their claims, on July 22, 2019, defendants submitted a

demand for arbitration to Arbitrator Restaino. (Id. | 29). Beacon objects to the

arbitration; it does not believe that defendants’ claims for delinquent

contributions and damages are arbitrable. (/d. J 33).

On October 18, 2019, Beacon filed a declaratory judgment complaint

pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02 seeking the

following relief:

i. adeclaration that Beacon is not bound to submit to

arbitration in accordance with the Trusts; or

ii. in the event the Court finds that Beacon is bound to

arbitrate in accordance with the Trusts, a declaration that

the Welfare Fund Trustees’ Damages Claim is not within the

scope of the agreement to arbitrate and an order enjoining

the Damages Claim from being arbitrated; or

iii. in the event the Court finds that the Welfare Fund Trustees’

Damages Claim is subject to arbitration, a declaration that it

is not subject to arbitration before the “permanently

designated arbitrator” selected by the Welfare Fund Trustees

and an order enjoining the Welfare Fund Trustees from

arbitrating the Damages Claim before their “permanently

designated arbitrator” and requiring the parties, or the Court

if the parties cannot agree, to appoint an independent

arbitrator to arbitrate the Damages Claim...

(Compl. 7).

Beacon then moved for an order enjoining the arbitration. (DE 3). The

Funds opposed that motion. (DE 14). On November 1, 2019, I held a show

cause hearing, at which I heard arguments of counsel. (DE 16).

Ii. Legal Standard

A. Preliminary injunction

“Preliminary injunctive relief is an ‘extraordinary remedy, which should

be granted only in limited circumstances.” Ferring Pharms., Inc. v. Watson

Pharms., Inc., 765 F.3d 205, 210 (3d Cir. 2014) {quoting Novartis Consumer

Health, Inc. v. Johnson & Johnson-Merck Consumer Pharms. Co., 290 F.3d 578,

586 (3d Cir. 2002)). In order to obtain a preliminary injunction, the moving

party must show the following:

(1) a reasonable probability of eventual success in the litigation,[5]

and (2) that it will be irreparably injured . . . if relief is not granted.

... [In addition,] the district court, in considering whether to grant

a preliminary injunction, should take into account, when they are

relevant, (3) the possibility of harm to other interested persons from

the grant or denial of the injunction, and (4) the public interest.

Reilly v. City of Harrisburg, 858 F.3d 173, 176 (3d Cir. 2017) (alteration in

original; footnote added) (quoting Del. River Port Auth. v. Transamerican Trailer

Transport, Inc., 501 F.2d 917, 919-20 (3d Cir. 1974)). The movant bears the

burden of establishing “the threshold for the first two ‘most critical’ factors...

. If these gateway factors are met, a court then considers the remaining two

factors and determines in its sound discretion if all four factors, taken together,

balance in favor of granting the requested preliminary relief.” id. at 179.

The decision to grant or deny a preliminary injunction is within the

Court’s discretion. See Am. Express Travel Related Servs., Inc. v. Sidamon —

Eristoff, 669 F.3d 359, 366 (3d Cir. 2012). Moreover, the primary purpose of

preliminary injunctive relief is “maintenance of the status quo until a decision

on the merits of a case is rendered.” Acierno v. New Castle Cty., 40 F.3d 645,

647 (3d Cir. 1994), Particular scrutiny is required where, as here, the plaintiff

is asking the Court to order an affirmative act rather than a stay to maintain

the status quo. See Bennington Foods LLC v, St. Croix Renaissance, Group LEP,

528 F.3d 176, 179 (3d Cir. 2008) (“where the relief ordered by the preliminary

injunction is mandatory and will alter the status quo, the party seeking the

injunction must meet a higher standard of showing irreparable harm in the

absence of an injunction.”); Acierno, 40 F.3d at 653 (“A party seeking a

mandatory preliminary injunction that will alter the status quo bears a

particularly heavy burden in demonstrating its necessity.”).

3 In this context, again, “eventual success” means a party’s success in compelling

or resisting an arbitral forum, as opposed to prevailing on the substantive

Contribution or Damages Claims.

B. Standards to compel arbitration

The principal issue on the preliminary injunction application is whether

Beacon may be compelled to arbitrate based on the Trust Indenture’s

arbitration clauses.

This Circuit’s case law has meandered somewhat in defining the proper

standard of review of a motion to compel arbitration. The upshot, however, is

fairly clear. Where the issue can be decided without evidence, it will be, based

on an application of the familiar Rule 12(b)(6) standard to the face of the

pleadings. Failing that, however, the Court will permit discovery and decide the

issue on a Summary judgment standard, pursuant to Rule 56. If there isa

genuine issue of fact, summary judgment will be denied and the issues will be

tried.

Because arbitration is a “matter of contract” between two parties, “a

judicial mandate to arbitrate must be predicated upon the parties’ consent.”

Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 771 (3d Cir.

2013) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51,

54 (3d Cir. 1980)). Pursuant to the Federal Arbitration Act (*FAA”), a court may

enforce a contract to arbitrate, but only if the court is satisfied that the

“making of the agreement” to arbitrate is not “in issue.” Jd.

In Guidotti v. Legal Helpers Debt Resolution, the Third Circuit stated the

approach a court must take on a motion to compel arbitration. The judiciary

must balance the competing goals of the FAA: the speedy and efficient

resolution of disputes, and the enforcement of private agreements. Id. at 773.

Reconciling sometimes murky precedent in light of those competing interests,

the Guidotti court reasoned that where “the affirmative defense of arbitrability

of claims is apparent on the face of a complaint (or ... documents relied upon in

the complaint), ... the FAA would favor resolving a motion to compel

arbitration under a motion to dismiss standard without the inherent delay of

discovery.” id, at 773-74. Such an approach “appropriately fosters the FAA’s

interest in speedy dispute resolution. In those circumstances, ‘t]he question to

i0

be answered . . . becomes whether the assertions of the complaint, given the

required broad sweep, would permit adduction of proofs that would provide a

recognized legal basis’ for rejecting the affirmative defense.” Id. at 774 (quoting

Leone v. Aetna Cas. & Sur. Co., 599 F.2d 566, 567 (3d Cir. 1979).

“In many cases, however, a more deliberate pace is required, in light of

both the FAA’s insistence that private agreements be honored and the judicial

responsibility to interpret the parties’ agreement, if any, to arbitrate.” Id.

[The Rule 12(b}(6) standard will not be appropriate] when either the

motion to compel arbitration does not have as its predicate a

complaint with the requisite clarity to establish on its face that the

parties agreed to arbitrate or the opposing party has come forth

with reliable evidence that is more than a naked assertion .. . that

it did not intend to be bound by the arbitration agreement, even

though on the face of the pleadings it appears that it did. Under

the first scenario, arbitrability not being apparent on the face of

the complaint, the motion to compel arbitration must be denied

pending further development of the factual record. The second

scenario will come into play when the complaint and incorporated

documents facially establish arbitrability but the non-movant has

come forward with enough evidence in response to the motion to

compel arbitration to place the question in issue. At that point, the

Rule 12(b)(6) standard is no longer appropriate, and the issue

should be judged under the Rule 56 standard.

Under either of those scenarios, a restricted inquiry into factual

issues will be necessary to properly evaluate whether there was a

meeting of the minds on the agreement to arbitrate and the non-

movant must be given the opportunity to conduct limited discovery

on the narrow issue concerning the validity of the arbitration

agreement. In such circumstances, Rule 56 furnishes the correct

standard for ensuring that arbitration is awarded only if there is

an express, unequivocal agreement to that effect.

Id. (internal citations and quotations and external citation omitted).

Thus, where the complaint and supporting documents are unclear as to

an agreement to arbitrate, or where a plaintiff responds to a motion to compel

with additional facts sufficient to place the issue of arbitrability “in issue,” then

the parties should be entitled to discovery. After limited discovery, a court may

then “entertain a renewed motion to compel arbitration” and should review

such a motion under the summary judgment standard.‘

Here, the procedure is simplified somewhat. At the show-cause hearing,

counsel for both sides stipulated that this was a matter properly decided on the

briefs, affidavits, and exhibits submitted, without the need for further discovery

or testimony.

III. Discussion

A. Likelihood of success on the merits

On this motion for a preliminary injunction, Beacon must demonstrate a

likelihood of success on its contention that it is not required to arbitrate. See

SK & F. Co. v. Premo Pharm. Labs., Inc., 625 F.2d 1055, 1066 (3d Cir. 1980).

That standard requires “a reasonable probability, [but] not the certainty, of

success on the merits.” Id.

In order to resolve this dispute, I must consider whether Beacon agreed

to be bound by the arbitration provisions in the Trust Indenture. Jones Lang

LaSalle Americas, Inc. v. Int’l Bhd. of Elec. Workers, Local 313, No. 16-190,

2017 WL 2957816, at *3 (D. Del. July 11, 2017) (citing First Options of Chi., Inc.

v. Kaplan, 514 U.S. 938, 943 (1995)). Because I find that the answer to that

question is yes, I must then determine whether the dispute falls within the

scope of the Trust Indenture’s arbitration provisions. Again, I find that the

parties’ dispute does fall within the scope of the Trust Indenture’s arbitration

provisions.

4 If summary judgment is unwarranted in light of material factual disputes

regarding an agreement’s enforceability, a court should then proceed to trial

“regarding ‘the making of the arbitration agreement or the failure, neglect, or refusal to

perform the same,’ as Section 4 of the FAA envisions.” Id. (quoting Somerset

Consulting, LLC v. United Capital Lenders, LLC, 832 F. Supp. 2d 474, 482 (E.D. Pa.

2011)). In every instance, “[b]efore a party to a lawsuit can be ordered to arbitrate and

thus be deprived of a day in court, there should be an express, unequivocal agreement

to that effect.” Id. (quoting Par-Knit Milis, 636 F.2d at 54).

12

i. Valid arbitration provision

“(A] party cannot be compelled to arbitrate unless that party has entered

into a written agreement to arbitrate that covers the dispute.” Century Indent.

Co., 584 F.3d at 526, Whether a party has done so is determined by applying

“ordinary state-law principles that govern the formation of contracts.” Jd.

(quotation and citation omitted).

Beacon argues that it is not subject to the arbitration provisions in the

Trust Indenture because it is not a signatory to the Trust Indenture. (DE 3-1 at

12). The CBA, which Beacon concededly did sign, contains an arbitration

provision that provides for the arbitration of disputes between Beacon and any

employee or the Union. (DE 3-3 at 4). The Funds, however, are not parties to

the CBA, and the CBA does not contain any arbitration provision that would

require Beacon to arbitrate disputes with the Funds. Nor, says Beacon, does

the CBA explicitly incorporate the Trust Indenture; it merely requires the

employer to contribute and participate in the Funds “pursuant to” the Trust

Indenture. (/d. at 12-13).

In the alternative, should Beacon be bound by the Trust Indenture at all,

it contends that it is bound only by the “essential” provisions of the indenture.

Those essential provisions, says Beacon, are those requiring it to make

contributions. They do not include the arbitration clauses. (Id. at 13-14(citing

Jaspan v. Glover Bottled Gas Corp., 80 F.3d 38 (2d Cir. 1996))).

The Funds respond that the CBA incorporates all of the provisions of the

Trust Indenture by reference; that being so, Beacon agreed in the CBA to

arbitrate the present dispute. (DE 14 at 11). In defendants’ view, Beacon is

bound by all the terms of the Trust Indenture, not just the “essential” ones. (Id.

at 5, 13-14). Defendants point the Court to two cases, which, unlike Jaspan,

supra (cited by Beacon), have held non-signatory contributing employers to the

terms of trust agreements governing the fund to which they contributed. (See

id. at 13-14 (citing Plumbers & Steamfitters Local 150 v. Vertex Constr. Co., 932

F.2d 1443 (11th Cir. 1991); Santa Monica Culinary Welfare Fund v. Miramar

13

Hotel Corp., 920 F.2d 1491 (9th Cir. 1990))). Alternatively, defendants argue,

the arbitration provisions are “essential” to the Trust Indenture, and would

bind Beacon in any event. (DE 14 at 14).

a) Incorporation of trust agreement terms by

implication

The parties devote considerable attention to the question of whether and

to what extent a contributing employer, simply by virtue of that status, is

impliedly bound by the terms of a trust agreement to which it is nota

signatory. I discuss that issue briefly, as essential background. In the end,

however, it is not consequential to my decision. See Section HI.A.i.b, infra.

In Jaspan, supra, the Second Circuit considered the fund trustees’ action

to compel an employer, Glover, to produce books and records for audit, and to

make a supplementary payment of 50% over and above actual contributions.

80 F.3d at 38. The claimed basis for that supplementary payment was a

liquidated damages provision in the trust agreements, applicable where the

employer failed to keep adequate records. Jd. at 38-39. All agreed that the

employer was obligated under a CBA to contribute to the funds. Like the

employer here, however, Glover objected to the liquidated damages claim,

saying that it had never signed the trust agreement containing the liquidated

damages provision.

The Court of Appeals agreed that Glover’s CBA did not explicitly

incorporate the terms of the trust agreement:§

Glover was not a party to the Trust Agreement. Had the parties

intended to bind Glover to its terms, they could easily have done so

by having Glover sign the Agreement or by referencing it in the

collective bargaining agreements. It is true, Glover had agreed

through the collective bargaining agreements to pay contributions

to the Funds. But this does not justify holding Glover to the terms

5 Indeed, the fund had sought in an earlier action te reform the CBA to provide

that the employer would be bound by the trust agreement, but that action had been

settled and discontinued. Jd. at 39.

14

of a liquidated damages provision of a trust agreement that it never

joined in.

Id. at 40. It went on to consider, however, whether the very nature of the

relationship gave rise to an implied commitment to be bound by the trust

agreement.

Jaspan, like the Funds here, cited the Eleventh and Ninth Circuit

opinions in Vertex and Miramar, supra. Both of those cases contain broad

language to the effect that a contributing employer, simply by virtue of that

status, must necessarily be bound by the trust agreement:

[T]he Vertex and Miramar opinions used broad language that would

cover this case, (e.g., “We fail to see how [the employer] can avail

itself of the benefits of the [flunds without being subjected to the

rules that govern them.” Vertex, 932 F.2d at 1451)....

Id. at 41. Still, said Jaspan, those cases stood on a different footing because

they involved the fund trustees’ fundamental (and ERISA-based) right to locate

fund property via audits. In the Jaspan case, by contrast,

the Funds [were] seeking to enforce a liquidated damages

provision. Such a provision may be helpful to the trustees, but it is

not essential to their management of the Funds in the same way as

is the right to audit to make sure contributing employers have

contributed in accordance with their obligations. Despite the broad

language in their opinions, we have no confidence that the Ninth

and Eleventh Circuits would have held a non-signatory

contributing employer liable had the trust provision in question

been, as here, one for liquidated damages—a provision of far less

importance to the fund trustees’ performance of their duties than

their right to audit, and one which raises far greater concerns

regarding the fairness of imposing contract liability on a non-

signatory.

Id. at 41. The Second Circuit therefore declined to hold that the employer was

impliedly bound to this liquidated damages provision, which was not

“essential” to the trustees’ functions in relation to contributing employers.

On this “essential /nonessential” distinction, Beacon builds an argument,

or rather a fallback argument. Assuming it is bound at all, says Beacon, it is at

15

most bound to the essential obligations to make contributions and submit to

an audit. The liquidated damages provision, it says, is not an essential term of

the Trust Indenture, and it therefore does not impliedly bind a non-signatory

contributing employer.®

The Third Circuit has not yet ruled on whether an employer, simply by

virtue of signing a CBA requiring it to contribute to a fund, is impliedly bound

by all the terms, only the “essential” terms, or none of the terms of the fund’s

trust agreement. For the reasons stated in the following section, however, I do

not need to resolve that legal question.

b) The CBA’s explicit incorporation of trust

agreement terms

I do not need to resolve that legal question because I find that, in this

particular case, the CBA explicitly, not impliedly, incorporated the Trust

Indenture by reference. Because Beacon explicitly agreed to be bound by the

terms of the Trust Indenture, the question of whether and to what extent it

would be impliedly bound, simply by virtue of its status as a contributing

employer, does not arise.

Unlike the CBA in Jaspan, Beacon’s CBA contains language that, while

perhaps not perfectly pellucid, is sufficient to incorporate the terms of the

Trust Indenture. I find that the parties to the CBA here have done just what

Jaspan suggested would be necessary to explicitly bind the employer to the

terms of the trust agreement: they have “referenc[ed] it [Le., the trust

agreement] in the collective bargaining agreements.” 80 F.3d at 40.

6 Even on Beacon’s terms, I would have difficulty with the notion that the

arbitration provision is not essential. The purpose of the Trust Indenture is to “provide

benefits to participants to the fund” and the Trustees are provided with numerous

avenues through which to effectuate this purpose. (DE 3-4 at 7-8). Both of defendants’

claims in the arbitration stem from an audit conducted in 2015. Neither party

disputes that under both the CBA and the Trust Indenture, the Trustees had the right

to conduct this audit. Any arbitration to recover contribution delinquencies uncovered

by the audit would seem to be part and parcel of the audit process. See Teamsters-

Employer Local No. 945 Pension Fund v. Acme Sanitation Corp., 963 F. Supp. 340, 348

(D.N.J. 1997) (citing Jaspan as “contra” authority but finding “collection power” of

trustees, including power to initiate arbitration, to be “essential”).

16

In such a case of explicit incorporation, the Jaspan analysis is beside the

point. For example, in Central States, Se. & Sw. Areas Pension Fund v, Bomar

Nat., Inc., 253 F.3d 1011 (7th Cir. 2001), a withdrawal-liability case, the Hable

employer sought to disallow the post-judgment interest rate provided for in the

trust agreement, to which the employer was not a signatory. The trustees

pointed to language in the CBA itself, by which the employer authorized the

employer representatives to enter into the agreements and ratified those

representatives’ actions in advance.

Hi-Way argues that employers are not automatically bound to the

terms of a trust agreement by virtue of their participation in a

fund. Absent an agreement, this might be true, but in this case

there was an agreement. Hi-Way cites Jaspan v. Glover Bottled Gas

Corp., in which the Second Circuit found that the employer had

not agreed to be bound by the trust agreement. 80 F.3d 38 (2d Cir.

1996). As Central States points out, the court noted [in Jaspan]

that ‘had the parties intended to bind [the employer] to [the trust

agreement’s] terms, they could easily have done so by having [the

employer] sign the Agreement or by referencing it in the collective

bargaining agreements.’ Jd. at 40. Here, of course, the trust

agreement was specifically referenced.

253 F.3d at 1020.

Central States, then, stands for the unremarkable general proposition

that, even if the employer is not impliedly bound simply by virtue of its

contributor status, it may be explicitly bound by language in the CBA. The

question, then, is whether the language in this CBA is sufficient to incorporate

the Trust Indenture, including its arbitration clause.’

7 At oral argument, I asked whether the employer representative who signed the

Trust Indenture had the authority to bind Beacon directly; neither side’s counsel had

a definitive answer. Because only excerpts of the CBA appeared in the motion papers, I

requested that counsel supply a full copy, and they have done so. (DE 18). I have now

reviewed the CBA, and I find that it does not contain language of delegation or

prospective ratification of the acts of the employer representative, as did the CBA in

Central States. So if this CBA is to bind Beacon to the Trust Indenture, it must be by a

different route.

17

The answer to that question depends on the doctrine of incorporation by

reference. See N. Pension Fund v. Nutrition Mgmt. Servs. Co., 935 F.3d 93, 99

(2d Cir. 2019) (clarifying that Jaspan did not intend to signal a relaxation of the

usual requirements of the doctrine of incorporation by reference). That well-

established doctrine of contract law “allows parties to ‘incorporate contractual

terms by reference to a separate, contemporaneous document ... including a

separate document which is unsigned.” Bd. of Trustees of the Int’l Union of

Operating Engineers Local 825 Pension Fund v. River Front Recycling Aggregate,

LLC, No. CV 15-8957, 2016 WL 6804869, at *4 (D.N.J. Nov. 16, 2016) (citing

11 Williston on Contracts § 30:25 (4th ed.) (May 2016)). However, “in order to

uphold the validity of terms incorporated by reference, it must be clear that the

parties to the agreement had knowledge of and assented to the incorporated

terms.” 11 Williston on Contracts § 30:25. Thus, in River Front Recycling,

supra, the court denied a motion to dismiss a complaint seeking to compel an

audit where the employers signed a one-page “job site CBA,” which referred to

and incorporated the full version of the CBA. (And that CBA, in turn,

incorporated the trust agreements by reference.)

“Incorporation by reference is proper where the underlying contract

[1] makes clear reference to a separate document,

[2] the identity of the separate document may be ascertained, and

[3] incorporation of the document will not result in surprise or

hardship.”

Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 447 (3d Cir.

2003) (paragraph breaks and numbering added).

I begin with the first, “clear reference” requirement, which depends on

the language of the CBA itself. In Article 14, Section 1 of each CBA, Beacon

agreed “to make contribution at the rates set forth below and participate in the

TIE Pension and Welfare Funds, pursuant to the Trust Indenture, its rules and

regulations as amended.” (DE 14-1 at 6-21 (emphasis added)). Beacon’s

agreement to contribute to and “participate in” the Funds “pursuant to the

18

Trust Indenture,” as well as the Funds’ rules and regulations, manifests a clear

intent to be bound by that separate document.

Beacon urges that the phrase “pursuant to the Trust Indenture” is not

clear language of incorporation, but rather a “mere reference.” (DE 3-1 at 13). It

does not suggest a persuasive alternative reason for having “referred” to the

Trust Indenture in this manner, if not for purposes of incorporation. Moreover,

relevant authority is lacking. Beacon directs this court to, for example, a

purportedly analogous case involving the dismissal of a court case “pursuant

to” a settlement agreement. (Id. (citing In re Phar-Mor, Inc. Sec. Litig., 172 F.3d

270, 274 (3d Cir. 1999)}. But this is inapposite. Judicial notice that a

settlement agreement exists, as referenced by an order of dismissal, has little

to do with the circumstances here.

N. Pension Fund v. Nutrition Mgmt. Servs. Co., supra, not cited by the

parties, is closer to the mark, from Beacon’s point of view. There, the court

noted that the CBA merely referred to the parties’ “understand|ing]” that a

trust agreement would be executed at some time in the future. 935 F.3d at 96.

(“The parties understand that the ... Fund will be held and managed under the

terms and provisions of an Agreement and Declaration of Trust to be executed

in connection with the said Fund ....”). Here, however, there were three

essentially identical iterations of the CBA, each for a three-year term, which

together covered calendar years 2011 through 2019. (DE 18). The Trust

Indenture was simultaneously in effect; the Third Restated versions, for

example, were signed on April 10, 2014. (DE 3-4 and DE 3-5). In the CBAs

Beacon did not merely state that a trust indenture would be entered into at

some time in the future; rather, Beacon agreed to participate in the Funds

“oursuant to” that contemporaneous Trust Indenture, as well as the rules and

regulations of that existing Trust.

The second requirement, that the separate document be clearly

identified, is also met. Here, the CBA makes clear reference to the Trust

Indenture. It cannot be said that Beacon was unable to ascertain what

document was referred to.

19

Moving to the third requirement, Beacon has no valid claim of surprise or

hardship at being required to arbitrate. Since approximately 2011, Beacon has

entered into three separate CBAs, all containing the same agreement that it

would contribute to and participate in the Pension and Welfare Funds,

“pursuant to the Trust Indenture, its rules and regulations as amended.” (DE

14-1 at 10). That language, as I have already found, is clear; Beacon not only

was aware of the Trust Indenture at the time it signed the CBA, but expressly

agreed to participate in the Trusts pursuant to the Trust Indenture. Beacon

claims hardship in that the procedures in arbitration lack the formality of court

procedures, but it cannot be heard to complain of the hardship of complying

with that to which it agreed.

Satisfaction of the three Glassrobots requirements establishes that the

CBA adequately incorporated the Trust Indenture, including its arbitration

clause.

Turning to the Trust’s “rules,” I find further corroboration for that

conclusion. The incorporation is, as it were, at both ends. Although Beacon did

not sign the Trust Indenture, it surely was or should have been aware of the

nature of the trust that it was agreeing to contribute to. Its own CBA bespeaks

knowledge of the existence and binding effect of the Trust’s rules and

regulations, including amendments thereto. And the Trust Indenture’s rules

lead back to the Indenture, with its arbitration provision: “The Employer, as a

function and consequence of having made any contributions to the Pension

Fund, shall be and is deemed to have agreed to, and adopted, the terms,

provisions, and obligations of this Third Restated Agreement and Declaration of

Trust.” (DE 3-4 at 5 (Article I, Section 10 (“Employer Contributions’).

Accordingly, I find that Beacon has not demonstrated any significant

likelihood of succeeding in its quest to resist arbitration. To the contrary, I find

that Beacon is bound by the Trust Indenture, as well as the Trust’s rules and

regulations, because those documents, including the arbitration clause, are

incorporated by reference in the CBA.

20

ii. Scope of the arbitration provisions

I next consider whether the dispute here falls within the scope of the

Trust Indenture’s arbitration provisions, which are found at Article III, § 10,

and Article X, § 3. Beacon as much as concedes that, if the Trust Indenture

binds it, the Contributions Claim would fall within the arbitration provision of

Article III, Section 10. (DE 3-1 at 14-15). Even so, says Beacon, the Trustee’s

Damages Claim would not be arbitrable under that provision. (Id. at 14-16).

Defendants counter that the Trust Indenture’s arbitration provisions are

broad enough to cover both claims. (/d. at 10-12). It is possible to quibble, they

say, over whether this is a true claim for damages, and whether it falls under

Article III, Section 10.8 But it does not matter, say the defendants; the

Damages Claim is subject to arbitration under another of the Trust Indenture’s

provisions: the “any and all disputes” language of Article X, Section 3. (id. at

12).9 Defendants further submit that, while not conceding the point, they

would not object to the Contribution and Damages Claims being heard by

separate arbitrators. (Id. at 14-15; see Section III.C, infra.).

Strong federal policies favor arbitration of disputes generally, see Moses

H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983) (Federal

Arbitration Act, 9 U.S.C. § 2, is a “congressional declaration of a liberal federal

policy favoring arbitration agreements”), and arbitration of labor disputes in

particular, see Rite Aid of Pa., Inc. v. United Food & Commercial Workers Union,

Local 1776, 595 F.3d 128, 131 (3d Cir. 2010). Defendant, citing Schneider

Moving & Storage Co. v. Robbins, 466 U.S. 364 (1984), objects that the Trust

Indenture is not a collective bargaining agreement, and that the presumption of

8 With respect to the Damages Claim, defendants assert that Beacon’s

nomenclature is misleading. Defendants says they are not seeking “damages” as such

but rather are seeking restitution or recoupment of benefits that it paid to ineligible

employees as a result of Beacon’s wrongful conduct. (/d. at 14-15).

9 In reply, Beacon further disputed the applicability of this provision, claiming

that it only applied to claims for benefits by participants and beneficiaries against the

Funds. (DE 15 at 2).

21

arbitrability does not apply.!° No such presumption is necessary. These

disputes are subject to the arbitration provisions contained in Article II,

Section 10, and Article X, Section 3.

With respect to the Contributions Claim, I find that the Trustees’ efforts

to collect delinquent contributions falls within the scope of Article III, Section

10, an arbitration clause that is explicitly dedicated to such claims. Section 10

covers “[aJll suits, arbitrations, and proceedings to recover contributions or

any other payments due to the Trustees or the Teamsters Industrial

Employees Pension Fund’ and it provides that “the Teamsters Industrial

Employees Pension Fund may institute an action or arbitration in its name as

such or in the names of the Trustees.” (DE 3-4 at 12 (emphasis added)).

With respect to the Damages Claim, I find that the Trustees’ efforts to

recover benefits overpaid to ineligible Beacon employees falls within the scope

of Article X, Section 3, a catchall arbitration clause. Article X broadly covers

“Claims and Individual Rights.” (DE 3-4 at 27). Section 3 begins by broadly

proclaiming that “[aJny and all disputes arising under this Agreement or arising

under any of the Plans, rules and regulations of the Trustees . . . may be

submitted to by either party to final and binding arbitration.” (Id.). This broad

arbitration clause excepts only “deadlock disputes.” In general, disputes are to

be submitted to “the Board of Arbitration appointed in accordance with this

Agreement.” As to one class of claims, however — “a participant or beneficiary

challenge to Trustee determination” — Section 3 provides that a “standing”

arbitrator may be appointed. (Id.). But no matter who hears the arbitration, it

must be conducted in accordance with N.J. State Board of Mediation rules.

(Id.).

10 When a CBA contains an arbitration clause, there is a presumption that a

dispute is arbitrable unless “it may be said with positive assurance that the

arbitration clause is not susceptible of an interpretation that covers the asserted

dispute.” Lukens Steel Co. v. United Steelworkers of Am. (AFC-CIO}, 989 F.2d 668, 672

(3d Cir. 1993) (quoting AT&T Techs., Inc. v. Commce’ns Workers of Am., 475 U.S.

643,650 (1986).

22

Here, I find that Article X, Section 3 (incorporated, as I have found, by

the CBA) very broadly provides that disputes are arbitrable. Contributions on

behalf of no-longer-eligible employees, and the Fund’s payment of benefits to

such employees fall with the clause’s subject matter (“disputes arising under

this Agreement or arising under any of the Plans, rules and regulations of the

Trustees”). In relation to that subject matter, the “any and all disputes”

language of Article X, Section 3, is clearly intended to be very broad indeed. I

therefore find that the Damages claim is subject to arbitration.

In sum, then, | find that defendants’ claim for delinquent contributions

and their claim for damages arising from Beacon’s contributions on behalf of

ineligible employees are arbitrable.

B. Irreparable harm

Beacon first argues that irreparable harm can be found per se if a party

is compelled to arbitrate a dispute beyond the scope of its consent. (DE 3-1 at

16). See generally PaineWebber Inc. v. Hartmann, 921 F.2d 507, 515 (3d Cir.

1990) (forcing a party to arbitrate a claim it did not agree to arbitrate

constitutes per se irreparable harm).!! Beacon alternatively argues that it

would be harmed if it were required to litigate the Damages claim in a forum

that does not afford the procedural and substantive protections of a court of

law. (/d.).

In general, a party does not suffer “irreparable harm” by being compelled

to arbitrate in accordance with its own agreement. My finding, supra, that

Beacon assented to arbitrate the Contribution and Damages disputes

dispenses with the bulk of Beacon’s first irreparable-harm argument.

“The irreparable harm requirement is met if a plaintiff demonstrates a

significant risk that he or she will experience harm that cannot adequately be

compensated after the fact by monetary damages. This is not an easy burden.” Adams

v. Freedom Forge Corp., 204 F.3d 475, 484-85 (3d Cir. 2000) (citations omitted); see

Reedy v. Borough of Collingswood, 204 F. App’x 110, 114 (3d Cir. 2006). Affirmative

relief that alters, rather than maintains, the status quo may also be granted, but in

such a case “the burden on the moving party is particularly heavy.” Am. Fin. Res., Inc.

v. Nationstar Mortgage, LLC, 2016 WL 8201959, at *2 (D.N.J. 2016).

23

Beacon’s second argument is in the nature of a general complaint; to

accept it is to reject the idea of arbitration, which federal law and policy

emphatically does not. Beacon offered no specific evidence that it would be

deprived of any particular due process rights should it be required to arbitrate

the Damages claim. Arbitration proceedings are, by design, more flexible and

less cumbersome than court proceedings. It cannot be said, however, that an

order to arbitrate a claim that falls within the scope of arbitration clauses in

the Trust Indenture deprives Beacon of the ability to meaningfully defend itself

or denies it essential procedural and substantive protections.

Beacon has failed to satisfy either of the first two, most essential

prerequisites to the granting of a preliminary injunction. I therefore need not

decide whether the remaining preliminary injunction factors — (3) the

possibility of harm to other interested persons from the grant or denial of the

injunction, and (4) the public interest — weigh in favor of Beacon. Reilly, 858

F.3d 179. Beacon’s motion for a preliminary injunction barring arbitration will

be denied.

C. Selection of arbitrator for the Damages Claim

One issue remains, concerning the identity of the arbitrator who should

hear the Damages claim. If arbitration of the Damages Claim is ordered,

Beacon requests in the alternative that it be heard separately, by an arbitrator

other than the one hearing the Contributions Claim.

Article X, Section 3, does not require, or even authorize, the Damages

claim to be heard by the Trustee’s standing arbitrator. It authorizes the

appointment of a standing arbitrator — here, Mr. Restaino — to hear any claim

that arises out of a “participant or beneficiary challenge to a Trustee

determination.” (DE 3-4 at 27). The Damages claim is not such a claim, and is

not to be heard by the standing arbitrator. Section 3 provides that cases not

submitted to the standing arbitrator shall be submitted to “the Board of

Arbitration appointed in accordance with this Agreement,” ie., “by and in

accordance with the rules of the New Jersey State Board of Mediation. The

24

arbitration proceeding shall be conducted under the rules of the N.J. State

Board of Mediation.” (Trust Indenture, Article X § 3, DE 3-4 at 27).

Those State Board rules cover, inter alia, selection of an arbitrator. Rule

12:105-3.1, for example, outlines the procedures for nominating arbitrators,

including the furnishing of a list of 10 arbitrators from which to choose. See

https: / /www.state.nj.us/mediation/references/regulations/Arbitration Rules

& Regulations.pdf.

This knot is cut by a concession. The Funds state that they do not object

to an order requiring that these claims be arbitrated separately. I shall

therefore order that the Damages Claim be arbitrated separately from the

Contributions Claim, and heard by a separate arbitrator in accordance with the

rules of the N.J. State Board of Mediation.

IV. Conclusion

For the reasons set forth above, Beacon’s motion for a preliminary

injunction (DE 3) is DENIED IN PART AND GRANTED IN PART:

i. Beacon’s motion to preliminarily enjoin the arbitration of the

Contributions Claim is DENIED.

ii. Beacon’s motion to preliminarily enjoin the arbitration of the

Damages claim is DENIED.

iii. Beacon’s request, in the alternative, that the Trustees’

Damages claim be preliminarily enjoined from being heard

before the “permanently designated arbitrator” selected by

the Trustees is GRANTED. The Damages Claim shall be

arbitrated separately from the Contributions Claim, before a

separate arbitrator in accordance with the rules of the N.J.

State Board of Mediation.

This amended opinion changes certain language in the Court’s analysis.

See pp. 21-22. The result, however, and the order previously entered by the

Court (DE 20), remain in effect.

Dated: December 3, 2019. :

Kevin McNulty

United States District Judge

25