Nu Image, Inc. v. International Alliance of Theatrical Stage Employees, et al.
Arbitration ERISA LaborRelations Privacy JusticiabilityDoctri
Do federal courts have subject matter jurisdiction pursuant to Section 301(a) of the Labor Management Relations Act over a complaint for intentional and negligent misrepresentation and declaratory relief, where the lawsuit seeks relief from claims that the plaintiff violated the parties' collective bargaining agreement?
QUESTION PRESENTED Under Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a), federal courts have subject matter jurisdiction over “[s]uits for violation of contracts between an employer and a labor organization.” In Textron Lycoming Reciprocating Engine Div. v. United Auto., Aerospace and Agriculture Implement Workers of America, 523 U.S. 653, 118 S.Ct. 1626, 140 L.Ed. 2d 863 (1998), this Court held that, where neither the employer nor the labor organization asserts that there has been a breach of a labor agreement, federal courts do not have jurisdiction over a suit seeking to invalidate the agreement. In so holding, however, the Court noted that “a declaratory judgment plaintiff accused of violating a agreement may ask a [federal] court to declare the agreement invalid.” Id. at 658. Petitioner Nu Image and Respondent IATSE entered into a collective bargaining agreement, which Nu Image claims was fraudulently induced based on IATSE’s representations that Nu Image would not have to make any residual contributions to IATSE’s health and pension plans. The plans, third-party beneficiaries of the collective bargaining agreement, sued Nu Image in federal district court, claiming that Nu Image breached the agreement by failing to make residual contributions. Under established authority, Nu Image was unable to raise IATSE’s fraud as a defense and it settled with the plans. Thereafter, IATSE filed an arbitration against Nu Image, also claiming that Nu Image breached the collective bargaining agreement by failing to make residual contributions to the plans. In that arbitration, the arbitrator may be without power to consider Nu Image’s fraud defense. (i) ll Accordingly, Nu Image filed suit in federal district court against IATSE for fraud and declaratory relief. In a decision that misinterprets this Court’s decision in Textron and conflicts with decisions from the Fifth and Seventh Circuits, the Ninth Circuit held that Section 301(a) permits the exercise of jurisdiction only when a plaintiff asserts that a defendant breached a labor agreement. As a result, the Ninth Circuit affirmed the district court’s dismissal of Nu Image’s lawsuit for lack of subject matter jurisdiction, effectively precluding Nu Image from seeking any relief for the millions of dollars of damages it has suffered as a result of IATSE’s fraud. Against this factual backdrop, the question presented by this Petition is: Do federal courts have subject matter jurisdiction pursuant to Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a) over a complaint for intentional and negligent misrepresentation and declaratory relief, where the lawsuit seeks relief from claims that the plaintiff violated the parties’ collective bargaining agreement?