DiPonio Construction Co. v. International Union of Bricklayers & Allied Craftworkers, Local 9

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 12a0228p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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DIPONIO CONSTRUCTION COMPANY., INC.,

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Plaintiff-Appellant,

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No. 11-1034

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v.

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INTERNATIONAL UNION OF BRICKLAYERS

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AND ALLIED CRAFTWORKERS, LOCAL 9,

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Defendant-Appellee, -

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NATIONAL LABOR RELATIONS BOARD,

Intervenor-Appellee. N

Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 2:10-cv-10607—Arthur J. Tarnow, District Judge.

Argued: March 1, 2012

Decided and Filed: July 24, 2012

Before: SILER, ROGERS, and WHITE, Circuit Judges.

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COUNSEL

ARGUED: Steven A. Wright, STEVEN A. WRIGHT, P.C., Shelby Township,

Michigan, for Appellant. Joel F. Dillard, NATIONAL LABOR RELATIONS BOARD,

Washington, D.C., for Intervenor-Appellee. ON BRIEF: Steven A. Wright, Sandra L.

Wright, Kelly M. Kammer, STEVEN A. WRIGHT, P.C., Shelby Township, Michigan,

for Appellant. Joel F. Dillard, Eric G. Moskowitz, Nancy E. Kessler Platt, NATIONAL

LABOR RELATIONS BOARD, Washington, D.C., John G. Adam, LEGGHIO &

ISRAEL, P.C., Royal Oak, Michigan, for Appellees.

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No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 2

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OPINION

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SILER, Circuit Judge. Plaintiff, DiPonio Construction Company, Inc. (DiPonio),

appeals the district court’s decision to grant defendant, International Union of

Bricklayers and Allied Craftworkers, Local 9’s (Union), motion to dismiss and motion

for sanctions. The underlying dispute in this case is whether DiPonio has any obligation

under the National Labor Relations Act (NLRA) to bargain with the Union for a new

collective bargaining agreement (CBA) following the termination of the parties’

previous CBA. At the heart of this question is whether the CBA was entered into

pursuant to section 8(f) of the NLRA, 29 U.S.C. § 158(f), or section 9(a) of the NLRA,

29 U.S.C. § 159(a). If the CBA is a § 8 contract, DiPonio had no duty to negotiate for

a new CBA; however, if it is a § 9(a) contract it did.

The district court held that even if it possibly had concurrent jurisdiction with the

National Labor Relations Board (NLRB) to decide this issue, it would be inappropriate

to exercise it. The court also imposed sanctions against DiPonio under Federal Rule of

Civil Procedure 11, after finding that the magistrate judge’s order denying defendant’s

motion for sanctions was an abuse of discretion. DiPonio argues that because Count

II of its amended complaint alleges the Union breached the CBA by failing to honor the

termination provision, the district court had jurisdiction under section 301(a) of the

Labor-Management Relations Act (LMRA), 29 U.S.C. § 185(a). For the following

reasons we AFFIRM the district court’s decision in its entirety and DENY the Union’s

motion for additional sanctions under Rule 38 of the Federal Rules of Appellate

Procedure.

No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 3

I.

DiPonio is a Michigan masonry company that entered into a CBA with the

Union. On or about July 31, 2009, DiPonio terminated the CBA according to its terms.1

Neither party disputes that DiPonio provided sufficient notice under Article XXV of the

CBA. The Union, however, alleged that DiPonio refused to bargain for a new CBA,

which it claims DiPonio was required to do under the NLRA. As a result, the Union

filed an unfair labor practice (ULP) claim with the NLRB on July 31, 2009. The

Union’s claim alleged that DiPonio failed to bargain with the Union as required by

sections 9(a) and 8(a)(5) of the NLRA. The NLRB filed a ULP complaint against

DiPonio on February 16, 2010.

On February 11, 2010—five days before the NLRB filed its complaint—DiPonio

filed an action in the district court. The original complaint asked the court to declare that

DiPonio properly terminated the CBA, and that there was no existing CBA between the

two parties. After DiPonio moved for summary judgment on this claim, the Union filed

a motion to dismiss, contending that the district court lacked subject matter jurisdiction.

DiPonio then amended its complaint to include a breach of contract claim (Count II).

Specifically, Count II alleges that the Union “failed to honor DiPonio’s termination of

the CBA, and instead attempted to force DiPonio to bargain for a new contract and to

provide information.” DiPonio alleges that the district court had jurisdiction over the

contract claim under section 301(a) of the LMRA.

1

The termination provision of the CBA, Article XXV, states:

This agreement shall continue in full force and effect from August

1, 2006 through July 31, 2009. No more than ninety (90) days and

not less than sixty (60) days before the expiration date of this

Agreement, either party may give notice to the other that it desires to

terminate or modify this Agreement, and upon receipt of such written

notice the parties agree to meet and confer for purposes of attempting

to negotiate a new Agreement.

If neither party gives such notice to amend or terminate, this

Agreement shall remain in full force and effect from year to year

thereafter, unless no more than ninety (90) and not less than sixty

(60) days prior to any annual anniversary date, notice be given in

writing by either party to the other, indicating a desire to amend or

terminate on said annual anniversary date . . . .

No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 4

In April 2010, the NLRB filed a motion to intervene, informing the district court

that it was in the middle of related proceedings involving claims that DiPonio engaged

in unfair labor practices. The NLRB also filed a motion to dismiss claiming the court

did not have subject-matter jurisdiction because DiPonio’s claims are representational,

and, therefore, within either the exclusive or primary jurisdiction of the NLRB. Two

days later, DiPonio asked the administrative law judge (ALJ) to stay the NLRB

proceedings until the district court resolved DiPonio’s claims. The ALJ denied the

motion to stay.

The magistrate judge issued her Report and Recommendation (R&R) on the

pending motions. She recommended the district court find that the NLRB had exclusive

jurisdiction over Count I of the amended complaint because whether DiPonio had a

continuing duty to bargain with the Union is a representational question. The magistrate

judge also recommended that the district court find that even if Count II raised a

colorable breach of contract claim, the district court “should decline to exercise

jurisdiction over this matter and instead defer to the jurisdiction and expertise of the

NLRB.” The district court adopted the recommendations.

The Union also sought attorney fees as sanctions, pursuant to Rule 11 of the

Federal Rules of Civil Procedure and the court’s inherent powers under 28 U.S.C.

§ 1927. The magistrate judge denied the Union’s motion for sanctions. The district

court rejected the magistrate judge’s order in part and awarded the Union a portion of

its requested attorneys fees.

II.

A.

As the district court recognized, this case revolves around whether the CBA was

entered into pursuant to § 8(f) or § 9(a) of the NLRA. Under § 9(a), employers are

required to bargain with a union that has been designated by a majority of the employees

No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 5

in a unit for the purposes of collective bargaining with the employer.2 Section 8(f)

allows unions and employers in the construction industry to enter into CBAs without

requiring the union to establish that it has the support of a majority of the employees in

the unit covered by the CBA. In re Stauton Fuel & Material, Inc., 335 N.L.R.B. 717,

718 (2001). Along with creating an exception to section 9(a)’s rule that unions must

demonstrate a showing of majority support, section 8(f) also is an exception to the

NLRA’s requirement that “the employer is bound to bargain with the exclusive

representative even after the contract has expired.” Int’l Ass’n of Bridge Structural &

Ornamental Iron Workers, Local 3 v. NLRB, 843 F.2d 770, 774 (3d Cir. 1988). As a

result, “[a] construction-industry employer may refuse to bargain after the expiration of

an 8(f) agreement because the union never enjoyed the presumption of majority

support.” Strand Theatre of Shreveport Corp. v. NLRB, 493 F.3d 515, 519 (5th Cir.

2007) (citation omitted).

The district court held that because deciding whether the CBA is a § 8(f) or

§ 9(a) agreement is primarily representational and overlaps with the proceedings already

before the NLRB, it did not have subject-matter jurisdiction to hear DiPonio’s claims

under San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959). We review

the district court’s decision to dismiss the case de novo. Kottmyer v. Maas, 436 F.3d

684, 688 (6th Cir. 2006).

In Garmon, the United States Supreme Court held that “[w]hen an activity is

arguably subject to [section] 7 or 8 of the [NLRA], the States as well as the federal

courts must defer to the exclusive competence of the [NLRB] if the danger of state

interference with national policy is to be averted.” 359 U.S. at 245. Pursuant to section

301(a) of the LMRA, however, federal courts retain jurisdiction over contractual

disputes between employers and unions. Section 301(a) states that:

Suits for violation of contracts between an employer and a labor

organization representing employees in an industry affecting commerce

2

A “unit” simply refers to any group of employees that would be represented together for

collective bargaining.

No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 6

as defined in this chapter, or between any such labor organizations, may

be brought in any district court of the United States having jurisdiction

of the parties, without respect to the amount in controversy or without

regard to the citizenship of the parties.

Thus, the NLRB and federal courts may have concurrent jurisdiction over some

disputes. This situation arises where a party’s conduct leads to charges of both unfair

labor practices under the NLRA and breach of a CBA under § 301(a) of the LMRA.

Alongi v. Ford Motor Co., 386 F.3d 716, 724 (6th Cir. 2004) (quoting Local Union No.

884, United Rubber, Cork, Linoleum & Plastic Workers of Am. v. Bridgestone/Firestone,

Inc., 61 F.3d 1347, 1356 (8th Cir. 1995)). Concurrent jurisdiction may exist even if the

contract dispute involves a representational question, and even if a ruling by the NLRB

could provide an alternative remedy. Paper, Allied-Indus. Chem. & Energy Workers

Int’l Union v. Air Prods. & Chems., Inc., 300 F.3d 667, 673 (6th Cir. 2002) (quoting

Carey v. Westinghouse Elec. Corp., 375 U.S. 261, 268 (1964)).

In International Brotherhood of Electrical Workers, Local 71 v. Trafftech, Inc.,

461 F.3d 690 (6th Cir. 2006), we articulated the test for differentiating between cases

where the NLRB has exclusive jurisdiction under Garmon and those where there is

concurrent jurisdiction pursuant to § 301:

When a dispute is “primarily representational” under § 7 or § 8 of the

National Labor Relations Act, “simply referring to the claim as a ‘breach

of contract’ is insufficient for the purposes of § 301 federal courts’

jurisdiction,” but “matters primarily of contract interpretation, which

potentially implicate representational issues,” remain within the federal

courts’ § 301 jurisdiction.

Id. at 694-95 (quoting Air Prods., 300 F.3d at 672, 675) (brackets omitted). The

Trafftech court identified two scenarios in which a dispute will be treated as “primarily

representational.” Id. at 695. The first is “where the [NLRB] has already exercised

jurisdiction over a matter and is either considering it or has already decided the

matter[.]” Id. The other is “where the issue is an ‘initial decision in the representation

area.’” Id. (quoting Hotel & Rest. Emps. Union Local 217 v. J.P. Morgan Hotel, 996

F.2d 561, 565 (2d Cir. 1993)) (brackets omitted). Specifically, we noted that a district

No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 7

court should not exercise jurisdiction where it could not determine whether the CBA had

been violated “without first deciding whether the union was elected as the employees’

bargaining representative.” Id. (quoting Amalgamated Clothing & Textile Workers

Union v. Facetglas, Inc., 845 F.2d 1250, 1253 (4th Cir. 1988)). In Trafftech, we held

that the district court had jurisdiction under § 301, in part, because the NLRB explicitly

declined to address the representational issue before, deferring to the district court’s

concurrent jurisdiction. 461 F.3d at 692.

But just because the NLRB has initiated proceedings does not mean that it will

always foreclose a district court from having jurisdiction over all claims between the two

parties. See, e.g., Int’l Bhd. of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers

& Helpers v. Olympic Plating Indus., Inc., 870 F.2d 1085, 1089 (6th Cir. 1989).

In Olympic Plating, a union brought three claims against officers of a local division of

the union and an employer, Olympic Plating (Olympic), in district court, and also filed

a ULP claim with the NLRB. Id. at 1086. The first count asked the district court to

enjoin the defendants from violating the union’s constitution. The second count alleged

that the defendants breached the constitution when they rejected a trusteeship, and the

third count demanded an injunction against Olympic to prohibit it from recognizing

another union as the authorized representative of Olympic’s unionized employees. Id.

The district court held that all of the claims were preempted by the exclusive jurisdiction

of the NLRB. Id. at 1087.

We reversed, holding that the first two counts were primarily contract disputes

regarding the union’s constitution, which the district court had jurisdiction to hear under

§ 301(a) of the LMRA. Id. at 1088. Although there was a NLRB proceeding between

some of the parties, we noted that “the NLRB suit did not involve the ‘same facts and

issues of law’ as the instant lawsuit.” Id. at 1089. Counts one and two required

interpreting the union’s constitution, whereas the NLRB proceeding involved the

statutory rights between Olympic and the union. Id. Furthermore, the union did not

name the individual officers as defendants in the NLRB action. Id.

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At the same time, we held that the third count, which alleged that Olympic

breached the CBA by recognizing another union, was preempted. Id. Even though the

claim was styled as a breach of contract claim, we found it was preempted because the

question of which organization was the proper bargaining representative of Olympic’s

employees was clearly a representational matter that the NLRB was already reviewing.

Id. The fact that Olympic would also breach the CBA by recognizing an improper

representative body did not change our analysis. We stated that “[i]n such cases where

the Board’s resolution of non-contractual issues could also resolve the controversial

breach of contract claims brought under § 301, the federal courts should decline to

exercise jurisdiction over the contractual allegations.” Id. We also cautioned that courts

must apply this preemption doctrine even when claims are characterized as contract

disputes in order to prevent “an end run around provisions of the NLRA under the guise

of contract interpretation.” Id. (quoting Facetglas, 845 F.2d at 1252) (quotation marks

omitted).

In the instant case, the district court properly concluded that DiPonio’s claims

are “primarily representational” under the standard articulated in Trafftech, despite the

fact that Count II alleges a breach of contract. DiPonio’s allegation that the Union

breached the CBA by failing to recognize that DiPonio properly terminated the contract

mischaracterizes the parties’ dispute. The Union acknowledges that DiPonio properly

terminated the CBA. The issue is whether DiPonio has a duty to negotiate with the

Union for a new CBA, and this question turns on the § 8(f)/§ 9(a) distinction. The issue

of whether the contract was entered into pursuant to § 8(f) or § 9(a) is the same issue as

that before the NLRB. Under Trafftech, 461 F.3d at 695, claims are “primarily

representational [ ] where the Board has already exercised jurisdiction over a matter and

is either considering it or has already decided the matter.” While we have held that

district courts may retain jurisdiction despite the presence of an ongoing NLRB action,

we have done so only where the issues before the district court and the NLRB were

different, see Olympic Plating, 870 F.2d at 1089, or where the NLRB explicitly declined

to decide the issue and instead deferred to the district court, see Trafftech, 461 F.3d at

No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 9

692. Here, the question is the same, and so the matter is representational. Under

Garmon we defer “to the exclusive competence of the [NLRB].” 359 U.S. at 245.

Because DiPonio’s claims are primarily representational, and, therefore, within

the exclusive jurisdiction of the NLRB, we uphold the district court’s decision to grant

the Union’s motion to dismiss. Additionally, because the district court properly granted

that motion, it did not err by denying DiPonio’s motion for summary judgment as moot.

B.

DiPonio also argues that the district court erred by granting the Union’s motion

for sanctions. The magistrate judge held that, although the Union satisfied Rule 11’s

safe-harbor provision by providing DiPonio with notice of at least twenty-one days,

sanctions were not warranted because federal courts have jurisdiction over contract

violations under § 301(a), and concurrent jurisdiction with the NLRB over cases

involving claims of both ULPs and breaches of a CBA, and DiPonio advanced both of

those theories. With respect to § 1927, the magistrate judge held that she could not “find

that the DiPonio has unreasonably and vexatiously multiplied the proceedings in this

case, or clearly fallen short of obligations owed to a member of the bar.”

The district court held that the magistrate judge abused her discretion in denying

the Union’s motion for sanctions because it found she did not properly

consider: (1) whether Count II had any basis in law or fact; (2) that the Union had been

alerted to the Garmon preemption doctrine before filing its amended complaint; (3) that

there was a pending motion to dismiss when DiPonio filed its amended complaint; or

(4) the timing of DiPonio’s filings in relation to the ongoing NLRB proceeding.

After reviewing those facts, the district court held DiPonio’s claims had no basis

in law or fact, that DiPonio did not conduct a “reasonable inquiry” into the law

surrounding its claim, and that the purpose of DiPonio’s pleadings was to stall the NLRB

proceeding. The district court found DiPonio’s claims did not have any basis in law

because its breach of contract claim did not cite what provision the Union violated, and

alleged that the Union violated the agreement after it was terminated. The court faulted

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DiPonio for failing to research and discuss Trafftech’s analysis of the interplay between

Garmon preemption and the federal courts’ jurisdiction under § 301(a), especially after

the Union’s counsel informed DiPonio that it believed Garmon preempted its claims, and

after the NLRB brought the case to DiPonio’s attention in its motion to dismiss. Finally,

the district court concluded that DiPonio’s purpose was to stall the NLRB’s proceedings

because DiPonio filed its amended complaint two weeks after the NLRB filed a ULP

complaint against it.3 As a result, the district court sanctioned DiPonio for the costs and

attorney fees the Union incurred after DiPonio filed its amended complaint.

We review a district court’s decision to impose sanctions under Rule 11 for abuse

of discretion. Jones v. Ill. Cent. R.R., 617 F.3d 843, 850 (6th Cir. 2010). DiPonio argues

that the district court abused its discretion by rejecting the magistrate judge’s decision

without the benefit of holding its own evidentiary hearing on the matter. This argument

is without merit. “In this circuit, there is no requirement that a full evidentiary hearing

be held before imposing sanctions.” Wilson-Simmons v. Lake Cnty. Sheriff’s Dep’t,

207 F.3d 818, 822 (6th Cir. 2000). All that is required is that the party “be given notice

and an opportunity to be heard.” Id. (quoting Cook v. Am. S.S. Co., 134 F.3d 771, 775

(6th Cir. 1998)). This test was clearly met, as the Union’s motion for sanctions put

DiPonio on notice, DiPonio was able to brief the issue, and there was a hearing before

the magistrate judge. Furthermore, “‘[i]t is within the discretion of the district court to

determine whether an evidentiary hearing would assist the court in its decision.’” Id. at

823 (quoting Cook, 134 F.3d at 775).

DiPonio also argues that the district court abused its discretion by making its own

factual findings, as opposed to reviewing the magistrate judge’s findings for clear error,

and by holding that the magistrate judge abused her discretion. DiPonio contends that

sanctions are not warranted simply because it failed to analyze Trafftech when the Union

did not cite that case, the NLRB only cited it once in a footnote of a brief filed months

after DiPonio amended its complaint, and the magistrate judge did not ask about it at oral

3

Because the district court found sanctions were appropriate under Rule 11, it did not address

whether sanctions pursuant to the court’s inherent powers under 28 U.S.C. § 1927 were appropriate.

No. 11-1034 DiPonio Constr. Co. v. Int’l Union of Bricklayers, et al. Page 11

argument, nor did she cite it in her R&R. Finally, DiPonio claims that the district court

should not have awarded the Union sanctions because the conclusion it ultimately

reached did not even explicitly hold the NLRB had exclusive jurisdiction. However, the

district court found that DiPonio’s contention that the district court had jurisdiction over

the claim under § 301 had no “basis in law or fact.”

The district court did not abuse its discretion in finding some of the facts that it

relied on when granting the motion for sanctions. For example, the court did not abuse

its discretion in finding that DiPonio is alleging that the Union breached a CBA that had

already been terminated. It is also true that Count II of the amended complaint does not

indicate what provision of the CBA the Union allegedly breached. Furthermore,

DiPonio’s argument that the Union breached the CBA by failing to honor the termination

provision does not seem to be a true breach of contract claim. The termination provision

does not speak at all to whether the contract is a § 8(f) or § 9(a) agreement, and it is

difficult to see how believing that the CBA is a § 9(a) contract fails to honor the

termination provision. Additionally, the Union’s claim in the NLRB is a ULP claim, and

bringing such a claim does not breach the CBA.

Ultimately, the district court did not abuse its discretion in awarding the Union

sanctions under Rule 11. Although the district court’s opinion could be read as

somewhat inconsistent, under Trafftech, DiPonio’s claims are clearly “primarily

representational” and fall within the primary jurisdiction of the NLRB. Furthermore, the

timing and circumstances under which DiPonio’s breach of contract claim was

added–especially in light of DiPonio’s motion with the NLRB to stay those

proceedings–support the district court’s conclusion that DiPonio’s conduct was

contrived to avoid or stall the NLRB’s proceedings. Five days after DiPonio filed its

initial complaint, the NLRB filed a ULP complaint against DiPonio. The Union then

filed its motion to dismiss and draft motion for sanctions. DiPonio then filed its

amended complaint alleging a breach of contract claim for the first time.

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III.

Rule 38 of the Federal Rules of Appellate Procedure “affords us discretion to

assess just damages when confronted with a frivolous appeal.” Miller v. Toyota Motor

Corp., 554 F.3d 653, 654 (6th Cir. 2009) (quoting Burlington N. R.R. v. Woods, 480 U.S.

1, 7 (1987)) (quotation marks omitted). Rule 38 states that “[i]f a court of appeals

determines that an appeal is frivolous, it may, after a separately filed motion or notice

from the court and reasonable opportunity to respond, award just damages and single or

double costs to the appellee.”

Sanctions under Rule 38 are not appropriate. It cannot be said that DiPonio’s

entire appeal is wholly without merit, at least with respect to its appeal of the district

court’s decision to grant the original motion for sanctions. If nothing else, the magistrate

judge and the district court disagreed about the propriety of sanctions in this case, and

DiPonio had a right to appeal that decision to this court in the hope that we might side

with the magistrate judge.

Also, that the district court did not abuse its discretion in granting the motion for

sanctions does not mean this court must award further sanctions. Although there is a

strong argument that DiPonio’s appeal of the district court’s decision to dismiss has no

basis in law or fact, we were not able to find, and neither party directed us to, a single

case that explicitly held that deciding whether a contract is a § 8(f) or § 9(a) agreement

is a representative matter or one within the NLRB’s exclusive jurisdiction. Accordingly,

we deny the Union’s motion for additional sanctions under Rule 38.

IV.

For the reasons stated above, we AFFIRM the district court’s decision to dismiss

DiPonio’s claims for lack of subject-matter jurisdiction and to award sanctions under

Rule 11, but DENY the Union’s motion for further sanctions because the appeal is not

wholly without merit.