John J. Keller

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA LABORERS’ COMBINED FUNDS OF WESTERN PENNSYLVANIA, as agent for Philip Ameris, and Paul V. Scabilloni, trustees ad litem, Laborers’ District Council of Western Pennsylvania Welfare and Pension Funds, Western Pennsylvania Heavy & Highway Construction Advancement Fund, and the Laborers’ District Council of Western Pennsylvania and its affiliated local unions, ) ) ) ) ) ) ) ) ) Civil Action No. 2:21-cv-829 ) Plaintiffs, v. BROWNSVILLE BOROUGH & TRACY S. ZIVKOVICH, President of the Brownsville Borough Council & BETH KENDALL BOCK a/k/a BETH R. EASTMAN, JACQUELINE D. JACKSON, JAMES S. LAWVER, BARBRA A. PEPPER, PAUL SYNURIA, and LESTER WARD, Brownsville Borough Council Members, Defendants. ) ) ) ) ) ) ) ) ) ) ) MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT’S MOTION TO DISMISS THE COMPLAINT I. STATEMENT OF FACTS The Plaintiffs, the Laborers’ Combined Funds Of Western Pennsylvania, the Construction, General Laborers Local Union 373 and its affiliated welfare and pension funds (Hereinafter “Plaintiffs,” the “Union” or the “Funds”) and the Defendants, i.e., the Brownsville Borough and the Borough Council Individual Members (Hereinafter “Borough” and “Defendants”), entered into an Agreement 1|Page effective on January 1, 2021, but signed by the parties on June 25, 2021. It declares at the outset, in Article I, DECLARATION OF PRINCIPLE, POLICY AND PURPOSE, that its principal purpose is to promote the efficiency of the Borough and to “render the most efficient public service.” See Article I, Agreement, page 1. Article II states that the “Union” is the exclusive bargaining agent for the nonprofessional employees of the Borough, which is located in Fayette County, Commonwealth of Pennsylvania. All Borough employees categorized as anything other than nonprofessional employees, are excluded from the Agreement. In practical terms, there are only now two employees who are covered by the Agreement. The Union is to deduct dues and other assessments from the covered employees and be “remitted to the Union by the Borough”, with an itemized statement of deductions. See Article III, “Check-Off.” In Article VII, the parties include charts that set forth the wages and classification of employees. The Agreement is unusual in that it only applies at this time to two individuals employed as laborers by the Borough; there have never been more than a small handful of employees covered by the arrangement. This is due to the fact that the Borough is diminutive in size and does not have a sizable work force. That fact explains why the principal amount claimed by the Union in its Complaint is $9,909.40 plus interest, for the alleged period of January 31, 2019, through May 31, 2021. 2|Page A. The Four-Step Grievance Procedure. The Agreement contains a four-step Grievance Procedure at Article XXI, which is generally used for individual employee grievances. However, the Article starts off with the following critical definition: “Any grievance or dispute which may arise between the parties, including the application, meaning or interpretation of this Agreement, shall be settled in the following manner:” (emphasis provided). It goes on to provide in Step 4 that if the parties don’t resolve the grievance, they will appeal to a neutral Arbitrator appointed by their mutual agreement. See Article XXI, page 8, Steps 1, 2, 3, and 4. If the parties cannot agree on a neutral arbitrator, then the Pennsylvania Bureau of Mediation takes over management of the process of picking an arbitrator. The Plaintiffs did not engage in this step of the agreement and the specified grievance procedure, thereby failing to exhaust its administrative remedies. B. The Borough Must Make Payments To The Pension Fund. Article XVI is entitled “Pension.” It provides specified amounts that the Borough must pay over to the Laborers’ District Council of Western Pennsylvania Pension Fund. This section provides the graduated amounts that the Borough will pay to the Pension Fund through December 31, 2024. C. Seniority Coverage In The Agreement Implies An Ongoing Governmental Program. 3|Page Article XXIV, “Seniority”, states that the Borough is not required to rehire any employee on the basis of seniority who is working for the Borough and sponsored through a federal, state or local program. If the cessation of the person’s employment is due to the termination of a governmental program, then the Borough must rehire based on seniority. Consequently, the Borough may do as it wishes with respect to rehiring when the termination takes place under an ongoing governmental program. D. The Agreement Provides That Disputes Between The Parties Regarding The Amount And Timeliness Of The Borough Payments Be Adjudicated In Fayette Count, I.E., In A State Court. Article XXVI is a “Security and Penalty Clause.” It governs the penalties for the Borough if it violates Article XVI regarding the amounts paid to the Pension Fund, and it provides that the Union may demand a cash or surety bond in the event of the Borough falling behind. It requires due notice of the alleged deficiencies in the payments. And, if the parties do not resolve the dispute, they agree specifically to bring the action in Fayette County, i.e., in the state court. E. Procedural Status Of The Case. In response to the Plaintiffs’ Complaint, the Defendant Borough has filed a Motion to Dismiss for lack of subject matter jurisdiction, improper venue and the failure to state a claim upon which relief may be granted. The Borough requests that the Court dismiss the complaint or transfer the case to the Court of Common Pleas 4|Page of Fayette County, where jurisdiction will be valid and appropriate pursuant to the specific intention of the parties and the law regarding the exemption of governmental entities. These issues are now before this Honorable Court for determination. II. INTRODUCTION AND SUMMARY OF DEFENDANTS’ ARGUMENT Defendant Borough asserts that Article XXVI proves that the parties intended state court jurisdiction if there were any disputes regarding the amount of funds sent by the Borough to the Pension Fund. The facts indicate that the parties knew that the amount would likely be modest and not necessarily appropriate for a federal forum. No part of the subject Agreement in any way refers to ERISA or the LRMA. The words, “It is agreed that . . . ” such disputes may be filed in Fayette County is not inconsequential and indicates a specificity of jurisdiction by mutual assent. Certainly, the parties did not view federal law as particularly applicable when they signed the contract. It is likely from all indications that both parties viewed the Borough’s Plan as strictly governmental. Assuming arguendo but not conceded, that the Plaintiffs are entitled to any of the relief requested, all of their demands could be easily managed through the state court, as the parties first intended. However, the Union reverses its contractual intentions by demanding that that the dispute is now under ERISA and LRMA jurisdiction, despite their specific agreement with the Borough to place disputes of this kind in Fayette County. That 5|Page particular provision indicates that the parties at signing perceived a governmental plan. The agreement fails to mention ERISA anywhere. This small contract dispute involving a governmental plan is not the kind of subject matter intended by the parties or by the law for handling by the federal courts. The Union and the Fund at their own whim have acted to compel federal jurisdiction on a matter that was mutually agreed by the parties to be governmental in nature. III. STANDARD OF REVIEW. A. Rule 12(b)(1) — Lack of Subject Matter Jurisdiction A motion to dismiss under Rule 12(b)(1) challenges the power of a federal court to hear a claim or case. Gould Elecs. Inc. v. United States , 220 F.3d 169, 178 (3d Cir. 2000). In the face of a 12(b)(1) motion, the plaintiff "will have the burden of proof that jurisdiction does in fact exist." Petruska v. Gannon Univ., 462 F.3d 294, 302 (3d Cir. 2006), cert denied, ___ U.S. ___, 127 S. Ct. 2098 (2007); Carpet Group International v. Oriental Rug Importers Association, 227 F.3d 62, 69 (3d Cir. 2000).”) Motions under 12(b)(1) may take one of two forms. A "facial" attack assumes the veracity of the allegations in the complaint but argues that the pleadings fail to present an action within the court's jurisdiction. Tolan v. United States , 176 F.R.D. 507, 509 (E.D. Pa. 1998). The court should grant such a motion only if it appears with certainty that assertion of jurisdiction would be improper. Id.; Carpet Group 6|Page Int'l, supra, 227 F.3d at 69. If the complaint is merely deficient as pleaded, the court should grant leave to amend before dismissal with prejudice. See Shane v. Fauver, 213 F.3d 113, 116-17 (3d Cir. 2000). In contrast, a "factual" attack argues that, although the pleadings facially satisfy jurisdictional prerequisites, one or more of the allegations is untrue, rendering the controversy outside of the court's jurisdiction . Tolan, 176 F.R.D. at 510; see also Mortensen v. First Fed. Sav. Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). Because the instant 12(b)(1) motion presents a facial attack on this court's subject matter jurisdiction, the factual standard is the applicable principle. B. Rule 12(b)(6) — Failure to State a Claim Upon Which Relief May Be Granted. In considering a motion to dismiss under Rule 12(b)(6) a court is to presume all facts alleged in the complaint to be true and should not dismiss the complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Miree v. DeKalb County, 433 U.S. 25, 27 n. 2 (1977). Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005)). Although the court is generally limited in its review to the facts in the complaint, it "may also consider matters of public record, orders, exhibits attached to the complaint and items appearing in the record 7|Page of the case." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997). IV. ARGUMENT A. The Plaintiffs Failed to Exhaust Their Administrative Remedies Prior To Filing Suit And They Filed In The Federal Court Without There Being Subject Matter Jurisdiction. Here, the complaint is deficient as a matter of law because it fails to allege or plead exhaustion of administrative remedies because Plaintiff actually did not engage in any manner in the required arbitration procedure. Whenever a plaintiff has a claim under an ERISA-covered employee benefit plan, there is an initial requirement to exhaust all administrative remedies before filing suit in federal court. Except in limited circumstances . . . a federal court will not entertain an ERISA claim unless the plaintiff has exhausted the remedies available under the plan." Weldon v. Kraft, Inc., 896 F.2d 793, 800 (3d Cir. 1990). Therefore, even assuming arguendo that ERISA applies, the parties first have a duty to go through the agreed-upon arbitration procedure prior to contemplating filing suit. Courts around the country, including the Third Circuit, have repeatedly held that § 1401 of the MPPAA "mandates arbitration for disputes between an employer and the plan sponsor." Galgay v. Beaverbrook Coal Co., 105 F.3d 137, 142 (3d Cir. 1997) (internal quotation marks and emphasis omitted) (quoting Doherty v. Teamster Pension Tr. Fund of Phila. & Vicinity, 16 F. 3d 1386, 1390 (3d 8|Page Cir. 1994); Steelworkers Pension Tr. by Bosh v. Renco Grp., Inc., 694 F. App'x 69, 71 (3d Cir. 2017). Therefore, the Plaintiffs have failed to exhaust their administrative remedies and procedures, which is a clear-cut violation of the Collective Bargaining Agreement and a certain indication that there is no subject matter jurisdiction. There is a "long settled rule" that a party is not "entitled to judicial relief . . . until the prescribed administrative remedy has been exhausted." Republic Indus., Inc. v. Cent. Pa. Teamsters Pension Fund, 693 F.2d 290, 293 (3d Cir. 1982) (quoting Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51 (1938)). In this case, the Plaintiffs did not follow the prescribed administrative remedy of pursuing arbitration, which resulted in a filing that lacked jurisdiction. Some parties complain that going through arbitration would be futile. When determining whether a failure to exhaust should be excused as futile, the court should consider several factors, such as whether the plaintiff "diligently pursued administrative relief" and whether the plaintiff "acted reasonably in seeking immediate judicial review under the circumstances." Lawson v. Nationwide Mut. Ins. Co., No. 05-1249, 2005 WL-, at *4 (E.D. Pa. June 29, 2005) (citing Harrow v. Prudential Ins. Co., 279 F.3d 244, 249 (3d Cir. 2002)). There can be no talk about diligence in the instant case because the Plaintiffs filed without any noticeable or active consideration of the arbitration clause. 9|Page Defendants' motions present a facial challenge to subject matter jurisdiction under Rule 12(b)(1) and an objection to the sufficiency of the complaint under Rule 12(b)(6). The failure to exhaust remedies may be determinative for each challenge. As dictated by the United States Supreme Court, where similar issues are on the table, the court must consider first the issue of subject matter jurisdiction . See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 93-94 (1998) (rejecting the "doctrine of hypothetical jurisdiction " and holding that courts are not permitted to "`assum[e]' jurisdiction for the purpose of deciding the merits"); see also Tolan, 176 F.R.D. at 509 (requiring court to address subject matter jurisdiction first because of mootness concerns). Again, assuming arguendo but not conceding, that ERISA does apply, the parties must consequently engage in performing the grievance procedures under the contract. This mandates dismissal of the case pending the parties completing the arbitration process. Hence, the case need not proceed any further: a dismissal for lack of jurisdiction must be issued. The Court may properly dismiss the complaint without prejudice under these circumstances. B. The Complaint Is Not Specific Enough To Convey Sufficient Facts That Would Allow The Defendants to Frame An Answer. Plaintiffs requested information and the Plaintiffs did not provide it. When reading the complaint, it becomes apparent that there is no detailed or even perfunctory explanation of what reasons and explanatory facts explain the Plaintiffs’ 10 | P a g e requests for relief. Prior to the initiation of this action, Defendant Borough requested, in writing, that Plaintiff provide specificity as to the nature of the dispute. Plaintiff has yet to provide such written detail, and as result, Defendant Borough is unable to properly formulate a responsive pleading. See Rule 12(e). C. The Borough’s Plan Is A Governmental Plan That Is Exempt Substantially From ERISA; That Fact Establishes That There Is No Subject Matter Jurisdiction Regarding The Plaintiffs’ Federal Court Complaint. The agreement here represents a governmental plan. 1 The law excludes governmental plans from ERISA coverage. See 29 U.S.C. §§ 1003(b)(1), 1321(b). See also, Feinstein v. Lewis, 477 F. Supp. 1256, 1259-60 (S.D.N.Y. 1979) (“As noted above, ERISA defines a "governmental plan " as "a plan established or maintained for its employees" by a governmental body or instrumentality. The use of the conjunction "or" indicates that a plan is a governmental plan if it is either established or maintained by a government body for its employees. See United States v. Astolas, 487 F.2d 275, 279 (2d Cir. 1973), cert. denied, 416 U.S. 955, 94 S.Ct. 1968, 40 L.Ed.2d 305 (1974).”) D. The Union’s Participation Does Not Rule Out A Government Plan. The Court in Feinstein, supra, 477 F. Supp. at 1260, holds that the mere fact that a town or school district sets up a benefit plan for its employees as a consequence 29 U.S.C. § 1002 -- The subsection states in relevant part: “32) The term "governmental plan" means a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. . . “ 1 11 | P a g e of negotiations and collective bargaining rather than because of a unilateral action or decision does not mean that the plan was not "established" by the town or school district. The towns and school districts involved herein did nevertheless "establish" the Plans within the meaning of the governmental exception. In Kirkpatrick v. Merit Behavioral Care Corp., 70 F. Supp. 2d 443, 447 n.3 (D. Vt. 1999), the court held that a schools plan remained as a governmental plan and did not morph into something else simply because of the union’s involvement. See also, Lovelace v. Prudential Ins. Co, 775 F. Supp. 228, 229 (S.D.Ohio 1991) (plan established by government employer through collective bargaining meets governmental plan exception); Feinstein, supra, 477 F. Supp. at 1260 (plan jointly administered by union and school districts through board of trustees was funded by school districts, thus maintained by governmental employers).”) See also, Tyler v. Livonia Schools, 220 Mich. App. 697, 701 (Mich. Ct. App. 1996) (ERISA provides a blanket exemption from its regulatory ambit for "government plans" established or maintained by the government of any state or political subdivision for its employees.) See 29 U.S.C. § 1002(2)(a)(32) and 1321(b)(2). Trang v. Local 1549, No. 98 Civ. 5927, 2001 U.S. Dist. LEXIS 12676, at *18 n. 1 (S.D.N.Y. Aug. 7, 2001) (holding that because ERISA exempts government plans, the court cannot entertain plaintiff's ERISA claim; claim dismissed). E. 12 | P a g e There Is Also An Exemption Of The LMRA For Similar Reasons. Feinstein also reasoned that the same would result with respect to the LMRA. See Feinstein, 477 F. Supp. at 1260 n.8 (S.D.N.Y. 1979) (“A similar result would undoubtedly be reached under the Labor Management Relations Act. . . See 29 U.S.C. § 141-188.” In Crilly v. Southeastern Pennsylvania Transportation Authority, 529 F.2d 1355 (3d Cir. 1976), the third circuit held that LMRA exempted state and local government employees from its control. Id. at 1362-63. F. The Category Of Governmental Plans Dealing With Health And Other Benefits Are Also Exempt. The same exemption applies to governmental plans that contain employee benefit and health plans, which applies in part to the instant Plan. See State v. United States, 154 F. Supp. 3d 621, 643-44 (S.D. Ohio 2016). See e.g., Gualandi v. Adams, 385 F.3d 236, 242 (2d Cir.2004) (“Title I of ERISA specifically excludes from its coverage any employee benefit plan that is a governmental plan.”); Shirley v. Maxicare Tex., Inc. , 921 F.2d 565, 567 (5th Cir.1991) (“Under 29 U.S.C. § 1003(b), however, ERISA shall not apply to any employee benefit plan if such plan is a governmental plan.”); Lovelace v. Prudential Ins. Co. of Am., 775 F.Supp. 228, 229 (S.D.Ohio 1991) (Government Plans are exempt under ERISA); Weiner v. Klais & Co. , 108 F.3d 86, 89 (6th Cir.1997) (explaining that 29 U.S.C. § 1003(b)(1) excludes ERISA provisions for governmental plans); Clissuras v. Teachers' Ret. Sys., Nos. 02 Civ. 8130, 8138, 2003 WL-, at *4 (S.D.N.Y. Mar. 28, 2003) (holding 13 | P a g e that plaintiff's ERISA claims are dismissed because the plan dealt with public employees and qualified as a governmental plan). G. In The Agreement Signed By The Union And Borough, The Parties Agree Specifically To Submit Jurisdiction Over Fund Payments To The State Court In Fayette County, Where The Borough Is Located. On the issue of state jurisdiction, as indicated, Article XXVI of the parties’ agreement specifies that the parties file any litigation in state court in the event that they cannot resolve their differences. “It is agreed that, if legal action is deemed necessary, said action will be instituted in Fayette County.” State court jurisdiction would require that this be a governmental plan. If the Grievance Procedure has precedence over the state court provision, then the parties must engage in the arbitration procedure. The Plaintiffs did not do that; instead, they failed to exhaust their administrative remedies. In that event, when the arbitration process plays out, any lawsuit would have jurisdiction in state court instead of federal court as per the agreement’s stipulation to exercise only state jurisdiction. That line of analysis leads to a conclusion that supports the idea that both parties believed this to be a governmental plan. That is consistent with the court’s likely dismissal of the case due to lack of ERISA jurisdiction. In Shannon v. Shannon, 965 F.2d 542, 546 (7th Cir. 1992), the Court explained that a government plan can be determined in a state court where federal jurisdiction does not exist. 14 | P a g e Therefore, depending on how this Court treats the federal jurisdictional issues, the establishment of Fayette County jurisdiction as per the mutual agreement of the parties, most likely premised on their mutual belief that this is a government plan, may rightly prevail as the true depositary of jurisdiction over these matters. V. CONCLUSION For the foregoing reasons, the Defendants request that this Honorable Court dismiss the within Complaint and Order such other relief as the Court deems to be just and fair. Respectfully submitted, _____________________ Attorney for Defendants 15 | P a g e