Opinion ID: 4565238
Heading Depth: 2
Heading Rank: 2

Heading: MZM’s Action in the District Court

Text: That same month, MZM filed a complaint against the Funds in the District Court, seeking to enjoin arbitration. It also sought a declaratory judgment that MZM is not a signatory to any CBA, that MZM has no obligation to arbitrate under any CBA, and that MZM is not liable to the Funds under any CBA. The gravamen of the complaint is that fraud in the execution voided the SFA and the incorporation of the CBAs, and therefore, no agreement exists between MZM and the Funds. In a supporting declaration submitted with the complaint, Perry admits that she signed the SFA in 2002 but claims she never intended to execute a “statewide [CBA]” requiring MZM to hire union workers and pay fringe benefits on all of its construction projects within the state. JA59 (Perry Decl. ¶ 10); see also JA44 (Compl. ¶ 15). According to Perry, while MZM was working on the Newark Airport project, a local union representative, Joe Taylor, approached and asked her to “sign a single-project agreement . . . because the union had nothing on record for MZM for the Newark Airport job.” JA58 (Perry Decl. ¶ 9). Taylor “confirmed” that the document he needed her to sign “was only for the Newark Airport job.” Id. “[A]t no time did . . . Taylor advise” Perry that he wanted her to sign a statewide CBA. Id. He said that if she did not sign the SFA, the union would pull its workers from the job. Perry “signed the one-page document to avoid any labor interruptions on the job.” Id. Perry avers that she relied on Taylor’s characterization of the SFA when signing it. Taylor “normally dealt with [Perry] over the years,” and she contends that he knew from their “many dealings” that MZM is an “open shop,” id., meaning that MZM does not ordinarily hire workers based on 6 union affiliation and only hires union workers “from time to time,” for instance, when directed to do so by a site owner or general contractor for a specific project. JA57 (Perry Decl. ¶¶ 5-6). Taylor was also aware that MZM “had no interest in becoming a party to any statewide [CBA].” JA58 (Perry Decl. ¶ 9). Perry claims she never received or even saw a copy of the 2002 CBA or any CBA until after the audit in 2018. According to the complaint, MZM and the union’s conduct during the sixteen years following the execution of the 2002 SFA did not accord with a statewide CBA but rather reflected their regular course of dealing. When MZM needed union labor because an owner or general contractor required it, the union would provide laborers and MZM would pay wages and fringe benefits to the Funds. The Funds moved to dismiss the complaint and opposed the injunction application. They asked the District Court to refer MZM’s fraud-in-the-execution claim to the arbitrator, along with the underlying collection dispute, in accordance with the 2002 CBA’s arbitration provision. The Funds further asserted that MZM had not stated a claim of fraud in the execution but rather fraud in the inducement. They argued that this distinction is material to whether the court or the arbitrator decides if an enforceable contract exists. The Funds submitted evidence about the parties’ alleged course of dealings that, according to the Funds, demonstrated a mutual intent to be bound by the CBAs. In December 2018, the District Court held a hearing in which it framed the issue as follows: “The task before us . . . is to figure out whether this [dispute] stays here or goes to the arbitrator.” JA422. After hearing argument, the court expressed doubt that a valid arbitration agreement existed 7 between the parties based on MZM’s claim of fraud in the execution and granted a preliminary injunction to preserve the status quo while it resolved that claim. The District Court later entered an order enjoining arbitration during the pendency of this action. It also “denied” the motion to dismiss “because the arbitrability issue cannot be decided without further factual development.” JA7. The court authorized “expedited discovery.” JA7. The Funds timely appealed from that order. While that appeal was pending, the Funds moved the District Court for reconsideration under Rules 54(b) and 60(b) and for an indicative ruling under Rule 62.1, which authorizes a district court to rule on motions that are barred pending appeal. The Funds asked the court to indicate that, if the case were remanded, it would enforce the arbitration agreement based on newly discovered evidence showing that, in 1999, Perry had signed an earlier SFA that expressly incorporated the predecessor to the 2002 CBA. The Funds argued that this new evidence further demonstrated that Perry understood what she was signing in 2002 and intended to be bound by the CBA and its arbitration provision. In August 2019, the District Court denied the motion. It determined that, despite the production of the 1999 SFA, there were still “several disputed facts that suggest that the parties did not intend to incorporate the CBA.”3 JA31. The court elucidated its reasoning for refusing to compel arbitration, noting that there was a presumption that issues of “arbitrability” are for the court to decide and that to “overcome 3 The opinion is reported at MZM Constr. Co., Inc. v. New Jersey Bldg. Laborers’ Statewide Benefit Funds, No. 1816328, 2019 WL 3812889 (D.N.J. Aug. 14, 2019). 8 this presumption, an arbitration clause must contain clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.” JA21 (internal quotation marks, alterations, and citations omitted). The court concluded that the 2002 CBA’s arbitration provision—empowering the arbitrator to decide whether an agreement exists—was not “sufficient to send the matter to an arbitrator where a party legitimately disputes whether it ever saw, heard about, or agreed to a CBA at all, and where it even disputes the scope of the SFA that supposedly incorporated the CBA.” JA32 (Op. 25 n.8). The Funds timely appealed that decision, and we consolidated both of their appeals.4