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holding that an alleged scheme of less than two years' duration and six wire fraud predicate acts with a unitary purpose did not support a finding of closed-ended continuity
Summary of this case from Gross v. WaywellOpinion
No. 00 Civ. 4255 (JGK)
September 18, 2001
OPINION AND ORDER
The plaintiff, Patrick Lopresti, as President of Local One-L Amalgamated Lithographers of America, GCIU, AFL-CIO ("Local One-L") a union representing employees in the printing industry, alleges that defendant Andrew Merson ("Merson"), owner of a number of printing businesses, fraudulently induced Local One-L into agreeing to terminate a collective bargaining agreement binding Local One-L and MacNaughton-Einson Graphics, Co. ("MacNaughton-Einson"), one of Merson's printing businesses. The plaintiff claims that when Merson informed Local One-L that he was selling the assets of MacNaughton-Einson to a non-union entity named Unimac Graphics Corp. ("Unimac"), he falsely stated that he had nothing to do with Unimac when in fact Merson owned Unimac. The plaintiff argues that he relied on this false statement in negotiating a plant closing agreement that terminated the collective bargaining agreement binding Local One-L and MacNaughton-Einson. The plaintiff alleges that Merson now controls a "double breasted" operation with a union facility at Command Web Offset Co. ("Command Web") and a facility at Unimac, which is not represented by Local One-L. The plaintiff claims that Merson has falsely represented to clients that Unimac is a Local One-L facility.
The plaintiff asserts claim for (1) violation of section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, based on the alleged violation of its collective bargaining agreement, (2) fraudulent inducement to sign the plant closing agreement, and (3) violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq.
Defendants Merson, MacNaughton Lithograph Company, Inc. ("MacNaughton"), MacNaughton-Einson, and Command Web have moved to dismiss the complaint pursuant to Fed.R.Civ. p. 12(b)(1), (2), and (6). Defendant Unimac has also moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(1), (2), (3), and (6). For the following reasons, the defendants' motions to dismiss are granted.
The parties advised at oral argument that MacNaughton is a holding company for MacNaughton-Einson. The parties have not attempted to distinguish the liabilities of MacNaughton and MacNaughton-Einson and have referred to the two companies interchangeably as "MacNaughton". Therefore, for purposes of this decision, "MacNaughton" refers to either or both of the entities collectively.
MacNaughton also originally moved to dismiss the amended complaint for insufficiency of process pursuant to Fed.R.Civ.P. 12(b)(5), but the defendants advised the Court at oral argument that the service issue had been resolved and the motion for insufficiency of service of process was withdrawn.
I. A.
On a motion to dismiss, the allegations in the complaint are accepted as true. See Grandon v. Merrill Lynch Co., 147 F.3d 184, 188 (2d Cir. 1998). In deciding a motion to dismiss, all reasonable inferences must be drawn in the plaintiff's favor. See Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). The court's function on a motion to dismiss is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). Therefore, the defendants' present motion should only be granted if it appears that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Grandon, 147 F.3d at 188; see also Goldman, 754 F.2d at 1065.
In deciding the motion, the Court may consider documents referenced in the complaint and documents that are in the plaintiff's possession or that the plaintiff knew of and relied on in bringing suit. See Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993);Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991); I. Meyer Pincus Assoc., P.C. v. Oppenheimer Co., Inc., 936 F.2d 759, 762 (2d Cir. 1991); Skeete v. IVF America, Inc., 972 F. Supp. 206, 208 (S.D.N.Y. 1997).
B.
Defendants MacNaughton, MacNaughton-Einson, Command Web, and Unimac are New Jersey employers in the printing business and are owned and controlled by defendant Merson, a New Jersey resident. (Am. Compl. ¶¶ 4-5.) Plaintiff Lopresti is a New York resident and is the President of Local One-L, a labor organization that represents the employees of employers including MacNaughton and Command Web. (Am. Compl. ¶ 3.) Local One-L maintains its principal office in New York. (Am. Compl. ¶ 3.)
MacNaughton-Einson and Command Web belong to the Metropolitan Lithographers Association (the "MLA"), a multiemployer bargaining association. (Am. Compl. ¶ 5.) Through their membership in the MLA, MacNaughton-Einson and Command Web were parties to a collective bargaining agreement with Local One-L effective from July 1, 1997 to June 30, 2001 (the "CBA"). (Ex. A to Am. Compl.; Am. Compl. ¶¶ 5, 11.) In 1997, during negotiations between the MLA and Local One-L in which Merson participated, Local One-L pushed for improvements in wages and benefits and refused to agree to certain concessions requested by MLA such as a demand to reduce the number of employees required to be assigned to each printing press. (Am. Compl. ¶ 7.) In July 1997, Local One-L conducted a strike by employees at MLA members including MacNaughton-Einson to support the union's bargaining demands. (Am. Compl. ¶ 7.) In response, the MLA withdrew its requested concessions and agreed to wage increases. (Am. Compl. ¶ 7.)
Steve Rickets ("Rickets"), a supervisor at MacNaughton-Einson advised Local One-L delegate Anthony Mortillo that the 1997 contract with Local One-L would be the last one for MacNaughton. (Am. Compl. ¶ 7.) The plaintiff alleges that anger at the outcome of the 1997 negotiations and strike motivated Merson to turn his enterprise into a "double-breasted" operation where he would own and control a union facility, Command Web, and a facility, Unimac, which was not represented by Local One-L. (Am. Compl. ¶ 7.) The plaintiff alleges that such an operation would allow Merson to abandon the CBA with MacNaughton-Einson while representing to customers that printing work was done in accordance with the labor and craftmanship standards of Local One-L. (Am. Compl. ¶ 7.)
Prior to June 1998, Merson entered into an arrangement with Union Graphics, Inc. ("Union Graphics") to create Unimac, which is owned and controlled by Merson, MacNaughton, MacNaughton-Einson, and Command Web. (Am. Compl. ¶ 8.) In June 1998, agents of the defendants, including Rickets and Merson, advised members of Local One-L that Merson would be shutting down MacNaughton-Einson and opening a printing operation where they would be employed without Local One-L representation. (Am. Compl. ¶ 8.)
In or about June 1998, Merson told John Tyrrell ("Tyrrell"), a MacNaughton-Einson employee and Local One-L member, that there would be big changes coming to MacNaughton. (Am. Compl. ¶ 9.) In or about July 1998, Merson informed Tyrrell by telephone that the changes at MacNaughton-Einson were imminent and that Merson wanted Tyrrell to be part of them. (Am. Compl. ¶ 9.) In a meeting in or about April 1999, Merson advised Tyrell that Merson "was forming a new company" with state of the art equipment that "would not be Local One-L." (Am. Compl. ¶ 9.) In or about July 1999, Rickets advised Tyrell that MacNaughton was buying Union Graphics. (Am. Compl. ¶ 9.) Tyrell asked Rickets how he could work at Unimac as a Local One-L member when he expected that Local One-L would picket Unimac. (Am. Compl. ¶ 10.) Rickets advised him that "the way this will go down there will be no pickets since Local One-L will not have jurisdiction." (Am. Compl. ¶ 10.)
On or about October 4, 1999, Merson, who was in New Jersey, telephoned Lopresti, who was in New York, and informed him that he was selling MacNaughton and would close the facility. (Am. Compl. ¶ 12.) On or about October 5, 1999, Merson met at the headquarters of Command Web with Lopresti and Joseph Curto ("Curto"), a Vice President of Local One-L, and informed them that he was liquidating MacNaughton because plant manager Robert Quain ("Quain") "was going to retire and I'm too old to run both Command Web and MacNaughton." (Am. Compl. ¶ 12.) Merson also said that he was going to sell MacNaughton's assets to Unimac, that he would not be involved with running Unimac, and that he had "nothing whatsoever to do with Unimac." (Am. Compl. ¶ 12.) After the meeting at Command Web, Merson, Lopresti, and Curto went to the MacNaughton-Einson facility where Merson held a meeting with the MacNaughton employees and repeated what he had said to Lopresti and Curto. (Am. Compl. ¶ 13.)
In reliance on those representations, Local One-L negotiated and entered into a plant closing agreement (the "Plant Closing Agreement") that the MacNaughton employees ratified. (Am. Compl. ¶ 14.) LoPresti and Quain executed the Plant Closing Agreement at the offices of Local One-L on December 8, 1999. (Am. Compl. ¶ 14.) The Plant Closing Agreement terminated the Collective Bargaining Agreement between Local One-L and MacNaughton-Einson. (Ex. B to Am. Compl., Section 1; Am. Compl. ¶ 14.)
The plaintiff alleges that the sale of MacNaughton-Einson assets was not an arms length transaction and instead involved Merson on both sides. (Am. Compl. ¶ 15.) The plaintiff alleges that Quain has not retired and is working at Unimac. (Am. Compl. ¶ 16.) The plaintiff also alleges that since January 1, 2000, after the defendants transferred the assets of MacNaughton-Einson to Unimac, Unimac began a campaign of misrepresenting itself as a Local One-L facility through the mail and by telephone to customers outside New Jersey. (Am. Compl. ¶ 17.)
In or about January 2000, representatives of Command Web, including Justin Palmiero ("Palmiero") phoned representatives of the William Mercer Company of Boston, Massachusetts and advised them that Command Web was "the principal owner of Unimac Graphics." (Am. Compl. ¶ 18.) In a letter on Command Web stationery sent through the mail and by fax on January 14, 2000, Palmiero advised William Mercer representatives that Unimac "is a company formed when our sheet-fed facility, MacNaughton-Einson Graphics, and Union Graphics merged." (Ex. C to Am. Compl.; Am. Compl. ¶ 18.) He stated that "[s]ince the majority of our staff from MacNaughton-Einson now works for Unimac Graphics I mistakenly assumed that we were the principal owners of the company." (Ex. C to Am. Compl.; Am. Compl. ¶ 18.) The letter also stated that Unimac Graphics "is a brand new, state of the art facility with whom [Command Web shares] a seamless working relationship." (Ex. C to Am. Compl.; Am. Compl. ¶ 18.) In a letter on Command Web stationery sent by mail and by fax on January 18, 2000, Palmiero advised William Mercer Company that "Union Graphics purchased MacNaughton-Einsen Graphics to form Unimac Graphics. . . ." (Ex. D to Am. Compl.; Am. Compl. ¶ 18.) The plaintiff alleges that these representations were false and were made with the intent of continuing to deprive Local One-L members of the ability to perform work they would otherwise perform. (Am. Compl. ¶ 18.)
In sum, the plaintiff alleges that Merson, MacNaughton, MacNaughton-Einson, Command Web and Unimac constituted an "enterprise" the "Merson Enterprise" which acted in furtherance of a fraudulent scheme to terminate the MacNaughton employees, terminate the CBA, induce Local One-L and the MacNaughton-Einson employees to enter into the Plant Closing Agreement and to enable Unimac to perform printing work that should have been done by members of Local One-L. (Am. Compl. ¶ 21.)
The plaintiff brings four causes of action seeking money damages and injunctive relief. The first is brought pursuant to section 301 of the LMRA, 29 U.S.C. § 185, and alleges that the defendants breached the CBA by selling MacNaughton-Einson's assets to Unimac and terminating the employees of MacNaughton-Einson. The first cause of action also argues that the Plant Closing Agreement should be voided because it was procured by fraud. The second cause of action alleges that the defendants committed common law fraud by making material misrepresentations concerning the closing of MacNaughton-Einson on which the plaintiff reasonably relied to his detriment. The third cause of action alleges that the defendants, identified as the "Merson Enterprise", terminated the CBA and induced Local One-L to enter into the Plant Closing Agreement through a pattern of racketeering activity in violation of 18 U.S.C. § 1962, by making multiple misrepresentations. In the fourth count, the plaintiff alleges that the defendants conspired to violate RICO, and specifically 18 U.S.C. § 1962 (b), (c), and (d).
II. A.
The defendants move to dismiss the first cause of action for lack of subject matter jurisdiction. The defendants argue that section 301 of the LMRA, 29 U.S.C. § 185, only confers federal subject matter jurisdiction for violations of contracts between an employer and a labor organization. The defendants claim that the amended complaint cannot allege a breach of the CBA because the CBA was terminated by the Plant Closing Agreement. The plaintiff responds that breaches of the CBA are alleged in the amended complaint and that the Court has subject matter jurisdiction to decide the plaintiff's allegation that Local One-L was fraudulently induced into agreeing to the Plant Closing Agreement.
1.
On a motion to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), the court may consider matters outside the pleadings, such as affidavits, documents, and testimony. See, e.g.,Antares Aircraft v. Fed. Republic of Nigeria, 948 F.2d 90, 96 (2d Cir. 1991), aff'd on remand, 999 F.2d 33 (2d Cir. 1993); Kamen v. American Tel. Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986); John Street Leasehold, LLC v. Capital Mgmt. Res., L.P., No. 98 Civ. 1965, 2001 WL 310629, at *2 (S.D.N.Y. March 29, 2001). Thus, the standard used to evaluate a Rule 12(b)(1) motion is similar to that used for summary judgment under Fed.R.Civ.P. 56. See Kamen, 791 F.2d at 1011. The plaintiff has the ultimate burden of proving the Court's jurisdiction by a preponderance of the evidence. See Malik v. Meissner, 82 F.3d 560, 562 (2d Cir. 1996); Beacon Enterprises, Inc. v. Menzies, 715 F.2d 757, 762 (2d Cir. 1983); see also Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991) (when subject matter jurisdiction is challenged under Rule 12, plaintiff must bear burden of persuasion); Martin v. Reno, No. 96 Civ. 7646, 1999 WL 527932 (S.D.N.Y. July 22, 1999).
2.
Section 301 of the LMRA provides in relevant part:
Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . . 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.29 U.S.C. § 185 (a). Section 301 of the LMRA provides for federal jurisdiction over controversies involving breaches of collective bargaining agreements and authorizes the federal courts to fashion a body of federal law to govern the interpretation of such agreements. See Lingle v. Norge Division of Magic Chef, Inc., 486 U.S. 399, 403-04 (1988).
Section 301 does not confer subject matter jurisdiction for claims that a labor contract is invalid because it was fraudulently induced. See Textron Lycoming Reciprocating Engine Division, Avco Corp. v. United Auto., Aerospace and Agric. Implement Workers of America, Inter. Union, 523 U.S. 653, 657 (1998) ("Suits for violation of contracts' under § 301(a) are not suits that claim a contract is invalid, but suits that claim a contract has been violated."); see also Hanley v. Lobster Box Restaurant, 35 F. Supp.2d 366, 368-69 (S.D.N.Y. 1999) However, once a federal court has subject matter jurisdiction over an action alleging a breach of a labor contract, the federal court also has subject matter jurisdiction to hear an affirmative defense arguing that the contract is invalid. Textron, 523 U.S. at 657-58.
The only allegation in the first cause of action involving a breach of a labor contract is the allegation that the defendants breached the CBA. However, Local One-L agreed in the Plant Closing Agreement that the CBA would terminate effective with the closing of MacNaughton-Einson. (Ex. B to Am. Compl. at 1-2.) While the amended complaint alleges that the defendants violated the CBA by selling the assets of MacNaughton-Einson to Unimac and terminating the employees of Unimac, (Am. Compl. ¶ 24.), the phasing out of the operations at MacNaughton-Einson was agreed to in the Plant Closing Agreement. (Ex. B to Am. Compl. at 1-2.) Moreover, the Plant Closing Agreement contains a release by Local One-L on behalf of itself and its members for "any and all charges, complaints, demands, obligations and grievances. through the date of this agreement including, but not limited to, those arising out of or by reason of the employment relationship or the termination thereof, the collective bargaining agreement or any other agreement or understanding between or among [MacNaughton-Einson], [and] the Union and/or any individual represented by the Union. . . ." (Ex. B to Am. Compl. at 5.) A plant closing agreement that supersedes a collective bargaining agreement precludes jurisdiction pursuant to section 301 of the LMRA over a claim based on an alleged violation of the superseded collective bargaining agreement. See, e.g., Adcox v. Teledyne, Inc., 21 F.3d 1381, 1385-86 (6th Cir. 1994).
The first cause of action also alleges that the Plant Closing Agreement was procured through fraud, but this is precisely the sort of challenge to the validity of a labor contract that does not state a claim under section 301 of the LMRA. See, e.g., Textron, 523 U.S. at 657; Hanley, 35 F. Supp.2d at 368-69.
The plaintiff argues that the defendants breached the CBA by repudiating it. Repudiation is the unilateral termination of a contract and breaches a contract if the contract does not provide the right to terminate a contract unilaterally. See, e.g., Rochdale Village, Inc. v. Public Serv. Employees Union Local No. 80, 605 F.2d 1290, 1297 (2d Cir. 1979). But the amended complaint does not allege that the defendants repudiated the CBA. The first cause of action alleges that the CBA was breached through the sale of assets and termination of employees. This conduct is permissible under the Plant Closing Agreement and does not describe a unilateral termination. The parties negotiated and signed the Plant Closing Agreement and there is no allegation that the defendants somehow unilaterally withdrew from the CBA. Therefore, the amended complaint does not allege a breach of the CBA or any other labor agreement that would support subject matter jurisdiction under section 301 of the LMRA.
The plaintiff cites Garcia v. Eidal Inter. Corp., 808 F.2d 717, 721-22 n. 3 Cloth Cir. 1987) in support of their argument that the CBA was repudiated. But in Garcia, the defendant unilaterally withdrew from a contract. In this case, the plaintiff and MacNaughton-Einson negotiated an agreement that superseded the CBA.
The Court does not have subject matter jurisdiction pursuant to section 301 of the LMRA to decide the plaintiff's first cause of action.
B.
Moreover, the defendants correctly argue that the first cause of action should be dismissed because any dispute concerning the interpretation or breach of the CBA or the Plant Closing Agreement is subject to arbitration. Both the CBA and the Plant Closing Agreement contain arbitration clauses. The CBA provides for arbitration of "any dispute with reference to the interpretation application or breach of any of the terms contained in this contract. . . ." (Ex. A to Am. Compl. at ¶ 38 (a).) The Plant Closing Agreement provides that "[a]ny dispute over the interpretation or application of this Plant Closing Agreement which the parties are unable to resolve will be referred for arbitration. . . ." (Ex. B to Am. Compl. at Art. I, Section 5.)
Unless the parties explicitly provide otherwise, this Court, rather than an arbitrator, determines whether the parties did in fact agree to submit a dispute to arbitration. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995); ATT Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649 (1986); Garten v. Kurth, No. 01-7379, 2001 WL 1019317 (2d Cir. Sep. 7, 2001). Whether an agreement to arbitrate governs a particular dispute is essentially a matter of contract interpretation. See Collins Aikman Products Co. v. Building Systems, Inc., 58 F.3d 16, 19 (2d Cir. 1995) ("Federal arbitration policy respects arbitration agreements as contracts that are enforceable in the same way as any other contract"). Any doubts about the scope of arbitral issues should be resolved in favor of arbitration.Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Moreover, there is a particularly strong national policy favoring the arbitration of labor disputes. See ATT Technologies, Inc., 475 U.S. at 650; Rochdale Village, Inc., 605 F.2d at 1294-95.
The arbitration clauses contained in the CBA and the Plant Closing Agreement are broad arbitration clauses. They cover "any dispute" with respect to both interpretation and application of the contract, and the CBA specifically includes "any dispute" with reference to a "breach" of the CBA. In view of the breadth of the clauses, there is a presumption that such disputes are arbitrable. See, e.g., ATT Technologies, Inc,. 475 U.S. at 650; Louis Dreyfus Negoce S.A. v. Blystad Shipping Trading Inc., 252 F.3d 218, 224 (2d Cir. 2001); McKee v. Transco Products, Inc., 874 F.2d 83, 87 (2d Cir. 1989); Associated Brick Mason Contractors of Greater New York, Inc. v. Harrington, 820 F.2d 31, 35 (2d Cir. 1987). If a court determines that the allegations in the complaint "touch matters" covered by the parties' arbitration agreement, then those claims must be arbitrated. Campaniello Imports, Ltd. v. Saporiti Italia, 117 F.3d 655, 668 (2d Cir. 1997); Genesco, Inc. v. T. Kakiuchi Co., 815 F.2d 840, 846 (2d Cir. 1987).
Any claim that the plaintiff attempts to bring under section 301 of the LMRA is subject to arbitration. A section 301 claim necessarily involves the breach or interpretation of the CBA and such a dispute would fall squarely within the language of the CBA's arbitration clause. Moreover, to the extent that the plaintiff's claim is based on allegations of fraudulent inducement, the plaintiff does not allege that the arbitration clauses themselves were procured by fraud. Under Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395 (1967), this claim is thus not subject to judicial resolution. See id. at 404 (holding that claims of fraud in the inducement are only subject to judicial resolution, when a contract contains an applicable arbitration clause, if the fraud is alleged to have induced the agreement to arbitrate, specifically, rather than the contract as a whole); Sphere Drake, Ins. Ltd. v. Clarendon Nat'l Ins. Co., No. 00-9464, 2001 WL 968392 (2d Cir. Aug. 28, 2001)..
The plaintiff also does not allege that the arbitration clause itself was part of the fraudulent scheme, or was used to effect the alleged fraud. See H.W. Moseley v. Elec. Missile Facilities, Inc., 374 U.S. 167, 171-72 (1963); Garten, 2001 WL 1019317. Indeed, the allegations of fraud in this case center on representations that allegedly induced the plaintiff to terminate the CBA and enter into the Plant Closing Agreement. Both of these agreements had similar and similarly broad arbitration clauses, and the issue of arbitrability is thus peripheral to these transactions.
The Court would thus dismiss the first cause of action in any event.
C.
Unimac also moves to dismiss the first cause of action on the ground that it is not a party to the CBA or the Plant Closing Agreement. The plaintiff did not respond to this argument and has therefore abandoned its first cause of action against Unimac.
II.
The defendants next move to dismiss the plaintiff's second cause of action, which is a claim of common law fraud. The plaintiff alleges that the defendants made material misrepresentations for the purpose of terminating MacNaughton employees, terminating the CBA, inducing the execution of the Plant Closing Agreement, and enabling Unimac to perform work intended for Local One-L members. The defendants argue that this fraud claim is preempted by section 301 of the LMRA and subject to arbitration. Alternatively, the defendants argue that the second cause of action is preempted by the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151, et seq.
A.
Section 301 of the LMRA authorizes federal courts to establish "a body of federal law for the enforcement of. collective bargaining agreements."United Steelworkers of America, AFL-CIO-CLC v. Rawson, 495 U.S. 362, 368 (1990) (quoting Texile Workers v. Lincoln Mills of Alabama, 353 U.S. 448, 451 (1957)). The defendants argue that the plaintiff's state law fraud claim is preempted by the federal law developed pursuant to section 301. "State law is . . . 'pre-empted' by § 301 in that only the federal law fashioned by the courts under § 301 governs the interpretation and application of collective-bargaining agreements." Rawson, 495 U.S. at 368. Thus, a state law claim is preempted by section 301 if it relies on the interpretation of a collective bargaining agreement. Lingle, 486 U.S. at 413; Operating Engineers Pension Trust v. Wilson, 915 F.2d 535, 538-39 (9th Cir. 1990). However, "when the meaning of contract terms is not the subject of dispute, the bare fact that a collective bargaining agreement will be consulted in the course of state-law litigation plainly does not require the claim to be extinguished." Lividas v. Bradshaw, 512 U.S. 107, 124 (1994) (citation omitted)
The plaintiff's common law fraud claim is not preempted by section 301 of the LMRA. A claim for fraud under New York or New Jersey common law consists of the following elements: (1) a material false representation of an existing fact; (2) made with knowledge of its falsity; (3) with an intent to defraud; (4) reasonable reliance; (5) and damages. See, e.g., Four Finger Art Factory, Inc. v. Dinicola, No. 99 Civ. 1259, 2001 WL 21248, at *3 (S.D.N.Y. Jan. 9, 2001); Jewish Center of Sussex County v. Whale, 432 A.2d 521, 524 (N.J. 1981)
The parties assumed in their papers that either New York or New Jersey law governs the second cause of action. No other state law is suggested.
The defendants argue that the plaintiff's fraud claim relies upon the interpretation of the CBA's transfer of equipment clause, which provides:
The parties agree that an Employer will not physically transfer any lithographic equipment to any other plant which results in the removal of jobs or work from under this contract. In such event, the Union shall have the option, as to such Employer only, to terminate this contract. The provisions herein shall not be applicable to the bona fide sale or transfer of equipment in the normal course of business.
CBA at ¶ 30. The defendants argue that the plaintiff's fraud claim is an allegation that the plant closing was not a "bona fide" sale. The misrepresentations alleged in the complaint are not, however, misrepresentations with respect to this contract provision. Moreover, the "bona fide" sale provision is only a defense that may be used by the employer to justify the sale or transfer or equipment in the "normal course of business." The employer does not rely on that defense but rather on the Plant Closing Agreement, which allegedly allowed the plant closure. Furthermore, the plant closure occurred pursuant to the Plant Closing Agreement and could not reasonably be viewed as "in the normal course of business." The resolution of the plaintiff's fraud claim does not depend on an interpretation of the "bona fide" sale provision or on any other provision in the CBA.
The defendants argue that this case is controlled by Dougherty v. ATT, 902 F.2d 201 (2d Cir. 1990), in which the Court of Appeals found that the state law claims of the plaintiff employees were preempted by section 301. In Dougherty, the plaintiff alleged that the defendants fraudulently induced them to transfer from an ATT subsidiary to a new ATT subsidiary by failing to advise them about the plans or possibilities of work force reductions. However, in Dougherty, there was in fact a modification of the collective bargaining agreement that set forth the continuation of the employment rights of the union members in the ATT organization for a period after the employee transfers. The Court of Appeals for the Second Circuit concluded that the gravamen of the plaintiffs' complaint concerned breaches of obligations on the part of ATT that were inextricably intertwined with the collective agreement governing plaintiffs' employment relationship, Dougherty, 902 F.2d at 204. In this case, on the other hand, the alleged misrepresentations are not intertwined with specific provisions of the CBA and do not require the interpretation of any labor agreement.
This case is more analogous to Voilas v. General Motors Corp., 170 F.3d 367 (3d Cir. 1999). In Voilas, the Court of Appeals for the Third Circuit found that there was no section 301 preemption for claims by former employees of General Motors ("GM") that they had been fraudulently induced to take early retirement by GM's false representations that a plant was going to be closed. As the Court of Appeals found: "[T]he fraud claim in this case is not directly based upon the collective bargaining agreements in force between the parties; nor will the resolution of the elements of common-law fraud require the interpretation of those bargaining agreements." Voilas, 170 F.3d at 378.
Therefore, because no interpretation of any labor agreement is required to resolve the plaintiff's claim of common law fraud, the plaintiff's second cause of action is not pre-empted by section 301.
B.
The defendants next argue that the second cause of action should be dismissed because it is preempted by section 8 of the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151, et seq. When conduct is arguably subject to section 7 or section 8 of the NLRA, "the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board if the danger of state interference with national policy is to be averted." San Diego Building Trades Council, Millmen's Union, Local 2020 v. Garmon, 359 U.S. 236, 245 (1959). Garmon recognizes that Congress conferred primary jurisdiction over disputes that fall within section 7 and section 8 of the NLRA on the National Labor Relations Board ("NLRB") to ensure uniform interpretation of the NLRA. See International Longshoremen's Assoc., AFL-CIO v. Davis, 476 U.S. 380, 389-90 (1986)
However, the NLRA does not completely preempt all state law causes of action relating to labor disputes. "Under Garmon, a state may regulate conduct that is of only peripheral concern to the Act or which is so deeply rooted in local law that the courts should not assume that Congress intended to preempt the application of state law." Belknap, Inc. v. Hale, 463 U.S. 491, 509 (1983); accord Sears, Roebuck and Co. v. San Diego County District Council of Carpenters, 436 U.S. 180, 194-98 (1978); Farmer v. United Brotherhood of Carpenters and Joiners of America, Local 25, 430 U.S. 290, 296-97 (1977). In determining whether a state law cause of action arising out of conduct that is arguably prohibited by section 8 of the NLRA is preempted pursuant to Garmon, a court must consider whether the controversy at issue is identical to or different from that which could have been, but was not, presented to the NLRB. Sears, Roebuck and Co., 436 U.S. at 197. If the controversies are not identical, then the NLRA does not preempt the state cause of action because only a situation where the controversies are identical "necessarily involves a risk of interference with the unfair labor practice jurisdiction of the Board which the arguably prohibited branch of the Garmon doctrine was designed to avoid."
Id.
The controversy presented by the plaintiff's fraud claim is identical to a controversy that could have been presented to the NLRB. Under section 8(a)(5) of the NLRA, an employer has a duty to bargain in good faith with respect to subjects where there is a mandatory duty to bargain, namely wages, hours, and other terms and conditions of employment. See NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 349 (1958). While the closure of a plant for purely economic reasons is not a mandatory subject of bargaining, See First Nat'l Maintenance Corp. v. NLRB, 452 U.S. 666, 686 (1981), an employer does have a mandatory duty to bargain about the results or effects of a decision to close a plant.See id. at 679 n. 15, 681; see also NLRB v. Waymouth Farms, Inc., 172 F.3d 598, 599 (8th Cir. 1999); Serrano v. Jones Laughlin Steel Co., 790 F.2d 1279, 1286-87 (6th Cir. 1986).
The plaintiff's fraud claim essentially alleges that Merson did not bargain in good faith with respect to the Plant Closing Agreement. The Plant Closing Agreement had the effect of terminating the CBA. Prior to the negotiations, Merson allegedly informed the plaintiff that he was going to close the MacNaughton plant and sell its assets to Unimac. Merson allegedly misrepresented to the plaintiff that he had nothing to do with Unimac. Through this misrepresentation, Merson conveyed the impression that he was closing the plant permanently and hid the fact that he was essentially relocating the business. The plaintiff relied on these representations and the assumption that the business was being closed instead of being relocated in negotiating the Plant Closing Agreement, which terminated the CBA. The plaintiff's fraud claim is identical to a claim that the defendants did not bargain in good faith with respect to the effects of a plant closing agreement, which would be presented to the NLRB as a violation of section 8(a)(5). See, e.g.,Waymouth Farms, Inc., 172 F.3d at 599-600 (affirming NLRB order finding violation of section 8(a)(5) when employer made misrepresentations with respect to relocation of business that affected negotiation of the effects of relocation). Therefore, it is preempted by the NLRA underGarmon.
Moreover, the gist of the plaintiff's claim is that Merson's misrepresentation and failure to bargain in good faith with respect to the effects of the plant closing were part of a scheme to rid himself of the Local One-L and the CBA through a sham transaction so that he could transfer work to a facility not represented by Local One-L. This is the sort of allegation that would be presented to the NLRB. See, e.g., Talbot v. Robert Matthews Distrib. Co., 961 F.2d 654, 660 (7th Cir. 1992) (finding Garmon preemption of claim alleging scheme to terminate collective bargaining agreement and transfer work to different employer); NLRB v. Triumph Curing Center, 571 F.2d 462, 473-74 (9th Cir. 1978); see generally Voilas, 170 F.3d at 379-80 (listing cases involving decision to close plant, which are not preempted by the NLRA, and cases involving duty to bargain over effects of plant closing, which are preempted by the NLRA).
The parties agreed at oral argument that the statute of limitations for presenting this case to the NLRB has not expired, and the defendants specifically agreed that they would not assert that a claim presented to the NLRB was time barred.
Therefore, while the plaintiff's second cause of action is not preempted by section 301 of the LMRA, it is preempted by the NLRA. See, e.g., Sheehan v. United State Postal Serv., 6 F. Supp.2d 141, 149-51 (N.D.N.Y. 1997) (finding that misrepresentation claim was not preempted by section 301 but was preempted by the NLRA).
Because the second cause of action is preempted by the NLRA, there is no need to address the defendants' argument that the second cause of action fails to meet the particularity requirements of Fed.R.Civ.P. 9(b).
C.
Unimac moves to dismiss the plaintiff's second cause of action on the ground that the amended complaint does not specify any wrongdoing on its part. The plaintiff responds that Unimac is a defendant because Merson controls Unimac. However, there are no specific allegations that Unimac made any fraudulent statements to the plaintiff. Therefore, the plaintiff's second cause of action must be dismissed with respect to Unimac.III.
The defendants move to dismiss the plaintiff's third and fourth causes of action, which allege substantive violations of RICO and a conspiracy to violate RICO. The defendants argue that the amended complaint does not allege the required continuity of racketeering activity necessary to support a RICO claim, that the plaintiff has not described the underlying predicate acts of wire and mail fraud with sufficient particularity, and that the plaintiff's allegations of a RICO conspiracy are conclusory. The defendants also argue that the RICO claim is subject to arbitration and that the NLRA preempts any RICO action.
A.
Pursuant to 18 U.S.C. § 1962 (c) it "shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity. . . ." To establish a civil RICO claim under 18 U.S.C. § 1962 (c), a plaintiff must show: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985) (footnote omitted); Cofacredit, S.A. v. Windsor Plumbing Supply Co. Inc., 187 F.3d 229, 242 (2d Cir. 1999). The plaintiff alleges that the defendants committed mail and wire fraud, each of which are acts of "racketeering activity." 18 U.S.C. § 1961 (1).
Mail fraud is prohibited by 18 U.S.C. § 1341. Wire fraud is prohibited by 18 U.S.C. § 1343. The elements of mail and wire fraud are: "(1) a scheme to defraud, (2) money or property as the object of the scheme, and (3) the use of the mails or wires to further the scheme."Schnell v. Conseco, Inc., 43 F. Supp.2d 438, 443 (S.D.N.Y. 1999)
A "pattern of racketeering activity" must involve at least two predicate acts of racketeering activity committed in a ten year period. 18 U.S.C. § 1961 (5). Moreover, for there to be a pattern of racketeering activity, the predicate acts of racketeering activity must be related and continuous. H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239-40 (1989); Schlaifer Nance Co. v. Estate of Andy Warhol, 119 F.3d 91, 97 (2d Cir. 1997). Predicate acts are "related" if they "have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." H.J., Inc., 492 U.S. at 240 (internal quotations marks omitted); Schlaifer Nance Co., 119 F.3d at 97.
The defendants do not dispute the relatedness of the predicate acts alleged in the amended complaint. Instead, they argue that these allegations do not meet the continuity requirement. "'Continuity' is both a closed and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition." H.J., Inc., 492 U.S. at 241 (citation omitted); Fisher v. Offerman Co., Inc., No. 95 Civ. 2566, 1996 WL 563141, at *3 (S.D.N.Y. Oct. 2, 1996). The plaintiff argues that the amended complaint alleges both closed ended and open-ended continuity.
1.
The amended complaint does not sufficiently allege closed ended continuity. "A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement. . . ." H.J. Inc., 492 U.S. at 242. While there is no bright-line test for determining what is a substantial amount of time,Metromedia Co. v. Fugazy, 983 F.2d 350, 369 (2d Cir. 1992), since the Supreme Court decided H.J. Inc., the Second Circuit Court of Appeals has never held that a period of less than two years is a period of time substantial enough to establish closed-ended continuity. Cofacredit, S.A., 187 F.3d at 242. Moreover, "[a]lthough closed-ended continuity is primarily a temporal concept, other factors such as the number and variety of predicate acts, the number of both participants and victims, and the presence of separate schemes are also relevant in determining whether closed-ended continuity exists." Id. at 242; GICC Capital Corp. v. Technology Fin. Group, Inc., 67 F.3d 463, 467 (2d Cir. 1995)
With regard to the temporal factors in this analysis, the parties disagree as to when the predicate acts in the alleged pattern of racketeering activity began. The plaintiff argues that the scheme lasted for twenty months, from June 1998 to January 2000. The first two predicate acts were a June 1998 phone call and a July 1998 phone call each from Merson to Tyrell, in which Merson advised Tyrell that changes were imminent. The defendants argue that the June 1998 and July 1998 phone calls cannot be predicate acts for purposes of determining closed-ended continuity because there is no allegation that they were interstate calls. A purely intrastate phone call would be beyond the reach of the federal wire fraud statute and cannot be a predicate act. See, e.g.,Cofacredit, S.A., 187 F.3d at 243; Brooke v. Schlesinger, 898 F. Supp. 1076, 1082 (S.D.N.Y. 1995).
There was a substantial gap between the June 1998 and July 1998 telephone calls and the next alleged predicate act-an October 4, 1999 telephone call from Merson to LoPresti announcing the closing of MacNaughton. The last alleged predicate act was a facsimile transmission on or about November 9, 1999 from Quain to LoPresti with proposed revisions to the Draft Closing Agreement. Measured from the October 1999 date, the pattern of racketeering activity lasted only slightly more than a month.
Even if the alleged pattern of racketeering activity began in June 1998, the acts alleged span only twenty months, about four months short of the two year mark. The relative brevity of this period suggests that the plaintiff has failed to plead closed-end continuity.
The non-temporal factors relevant to this analysis similarly support this conclusion. The third cause of action lists only six alleged predicate acts. (Am. Compl. ¶ 35.) The scheme also had the unitary purpose of creating a "double breasted" operation. Such a discrete and limited scheme is insufficient to support closed-ended continuity. See, e.g., Oak Beverages, Inc. v. Tomra of Mass. LLC, 96 F. Supp.2d 336, 348 (S.D.N.Y. 2000); Pier Connection, Inc. v. Lakhani, 907 F. Supp. 72, 78 (S.D.N.Y. 1995); Airlines Reporting Corp. v. Aero Voyagers, Inc., 721 F. Supp. 579, 584-85 (S.D.N.Y. 1989)
In sum, these temporal and non-temporal factors demonstrate that the plaintiff has failed to plead closed-ended continuity.
2.
The plaintiff also argues that the plaintiff has established open-ended continuity. When a RICO action is brought before there is long term criminal conduct that would establish closed ended continuity, a plaintiff may establish open-ended continuity by showing that there is a threat of continuity. H.J. Inc., 492 U.S. at 242. The nature of the predicate acts and the nature of the enterprise involved in the predicate acts are relevant in determining whether there is open-ended continuity.Cofacredit, S.A., 187 F.3d at 242; Schlaifer Nance Co., 119 F.3d at 97; GICC Capital Corp., 67 F.3d at 466. When the enterprise is a legitimate business, "there must be some evidence from which it may be inferred that the predicate acts were the regular way of operating that business, or that the nature of the predicate acts themselves implies a threat of continued criminal activity." Cofacredit, S.A., 187 F.3d at 243 (citations omitted); accord GICC Capital Corp., 67 F.3d at 466; Azrielli v. Cohen Law Offices, 21 F.3d 512, 521 (2d Cir. 1994)
The plaintiff alleges in the third cause of action that the defendants caused the termination of the CBA and the signing of the Plant Closing Agreement. There is no threat that this aspect of the scheme will be repeated or continued in the future because the CBA has been terminated and the Plant Closing Agreement has been signed. A single act with no chance of repetition cannot support open-ended continuity. See, e.g.,Calka v. Kucker Kraus Bruh, LLP, No. 99 Civ. 4999, 2000 WL 557266, at *8 (S.D.N.Y. May 8, 2000), aff'd 242 F.3d 364 (2d Cir. 2000). Therefore, the first scheme cannot support a claim of open-ended continuity.
The plaintiff also alleges that the defendants are making misrepresentations in a scheme to lure business by representing Unimac as a Local One-L Union facility. The allegations that this scheme has begun or will continue into the future are insufficient to support open-ended continuity. Allegations that a defendant has committed mail or wire fraud are subject to the particularity requirements of Rule 9(b). See, e.g.,Citadel Mgmt., Inc. v. Telesis Trust, Inc., 123 F. Supp.2d 133, 154-55 (S.D.N.Y. 2000); Calka, 2000 WL 557266, at *8; Schnell, 43 F. Supp. 2d at 443; A. Terzi Productions, Inc. v. Theatrical Protective Union, 2 F. Supp.2d 485, 499 (S.D.N.Y. 1998). The amended complaint generally claims that Unimac has misrepresented itself to out of state customers as a Local One-L facility. (Am. Compl. ¶¶ 17-18, 39.) These allegations, however, do not specify the time of the statement, the speaker, the substance of the statement, or the reason why the statement is fraudulent. The only specific statements the plaintiff points to are two letters sent by a representative of Command Web to a customer in New Jersey. (Exs. C and D to Am. Compl.) The plaintiff alleges that these letters contain misrepresentations. However, both letters clearly indicate that Unimac is not a Local One-L facility. (Exs. C and D to Am. Compl.) Therefore, there is no allegation that would establish that the defendants have engaged in illegal activity or will threaten to do so in the future. The plaintiff has not established that there is open-ended continuity.
The plaintiff has not pleaded the continuity of predicate acts needed to support a RICO claim. Therefore, the third cause of action is dismissed. However, because the Court cannot conclude that the plaintiff is unable to allege a RICO claim, this cause of action is dismissed without prejudice to repleading.
B.
The defendants also move to dismiss the fourth cause of action, which alleges a RICO conspiracy. 18 U.S.C. § 1962 (d) makes it unlawful to conspire to violate RICO. A RICO conspiracy requires "the existence of an agreement to violate RICO's substantive provisions." Cofacredit, S.A., 187 F.3d at 244 (internal quotations and citations omitted). To support a RICO conspiracy claim, a complaint must specifically allege facts to support an allegation that each of the defendants agreed to associate themselves with a RICO enterprise and to commit two predicate acts in furtherance of a pattern of racketeering activity in connection with the enterprise. Id. Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 25-26 (2d Cir. 1990).
The fourth cause of action does not allege the existence of the requisite agreement. Its conclusory allegations are insufficient to support a claim of RICO conspiracy. See, e.g., Hecht, 897 F.2d at 25;Laverpool v. New York City Transit Auth., 760 F. Supp. 1046, 1060 (E.D.N.Y. 1991); Morin v. Trupin, 747 F. Supp. 1051, 1065-66 (S.D.N.Y. 1990). Therefore, the plaintiff's fourth cause of action must be dismissed. However, because the Court cannot conclude that the plaintiff is unable to allege a claim of RICO conspiracy, this cause of action is dismissed without prejudice to repleading..
Because the plaintiff has not stated a cause of action for a violation of RICO, either the substantive or the conspiracy provisions, there is no claim that would be pre-empted by the NLRA or subject to arbitration. Therefore, the Court will address the defendants' arguments that the plaintiff's RICO claims are subject to arbitration and are pre-empted if the plaintiff chooses to file an amended complaint asserting such claims. The issues of arbitration and preemption should be decided in the context of specific RICO claims that are sufficient to withstand a motion to dismiss.
C.
Unimac moves to dismiss the third and fourth causes of action against it. The plaintiff has not alleged that Unimac committed any predicate acts, nor has the plaintiff made specific allegations with respect to any agreement by Unimac to perform two predicate acts in furtherance of a pattern of racketeering activity. A RICO action cannot be sustained against a defendant when the complaint does not describe any wrongdoing on the part of the defendant. See, e.g., First Interregional Advisors Corp. v. Wolff, 956 F. Supp. 480, 485 (S.D.N.Y. 1997); Morin, 747 F. Supp. at 1065-66. Therefore the third and fourth causes of action must be dismissed with respect to Unimac. These causes of action are, however, dismissed without prejudice because it cannot be said that the plaintiff cannot plead sufficient facts to support such claims against Unimac.
CONCLUSION
For all of the foregoing reasons:
1. The defendants' motion to dismiss the first and second causes of action is granted.
2. The defendants' motion to dismiss the third and fourth causes of action is granted without prejudice to repleading. Any amended complaint shall be served and filed within twenty (20) days of the date of this opinion.
SO ORDERED.