AUTO. MECHANICS LOCAL 701 v. VANGUARD CAR RENTALNo. 06-4362.
502 F.3d 740 (2007)
AUTOMOBILE MECHANICS LOCAL 701 WELFARE AND PENSION FUNDS, Plaintiff-Appellant,
VANGUARD CAR RENTAL USA, INC. d/b/a National Car Rental & Alamo, Defendant-Appellee.
VANGUARD CAR RENTAL USA, INC. d/b/a National Car Rental & Alamo, Defendant-Appellee.
United States Court of Appeals, Seventh Circuit.
Argued May 21, 2007.
Decided September 18, 2007.
Steven F. McDowell (argued), Donald D. Schwartz, Arnold & Kadjan, Chicago, IL, for Plaintiff-Appellant. Eric J. Pelton (argued), Kienbaum, Opperwall, Hardy & Pelton, Birmingham, MI, for Defendant-Appellee.
Before RIPPLE, WOOD, and EVANS, Circuit Judges.
WOOD, Circuit Judge.
The Automobile Mechanics Local 701 Welfare and Pension Funds ("the Funds") administer welfare and pension benefits for the members of Local 701. As part of its collective bargaining agreement ("CBA") with the union, Vanguard Car Rental USA d/b/a National Car Rental and Alamo ("Vanguard"), through its predecessor in interest, agreed to make weekly payments to the Funds for the benefit of each regular employee covered by the CBA. Vanguard does not deny this obligation, and it has not refused to make payments during the period in which this dispute has occurred. It is the contribution rate instead that is the bone of contention here. The Funds take the position that Vanguard was required to pay the increased contribution rate authorized by the Funds' Board of Trustees and made effective on August 1, 2005; Vanguard says that it owes only the last rate authorized
We agree with both parties that this dismissal by the district court was improper. Enforcement of a forum selection clause (including an arbitration clause) is not jurisdictional; it is a waivable defense that Vanguard, in fact, waived. Although the district court did not address the summary judgment motions, they are properly before this court. Because the dispositive issue is one of contract interpretation, our review is de novo, and nothing prevents us from addressing this lone question, we hold that Vanguard is entitled to summary judgment. The agreements do not give the Funds the authority to raise the contribution rates until a "renewed term" has been ushered in by the signing of a new CBA.
The facts underlying this case are not in dispute. On June 23, 2003, Vanguard's predecessor in interest entered into a CBA with Local 701. That CBA expired on April 25, 2004. It obligated Vanguard to pay money into the Local's pension and welfare funds on behalf of its employees. Article 7 of the CBA, which deals with welfare benefits, provided:
Referring to welfare benefits, Article 7(D) adds that "[t]he obligation to make the above contribution shall continue during periods when the collective bargaining agreement is being negotiated . . . ." Article 8, the provision for the Pension Fund, is similar: "The Employer shall be obligated to contribute the sum of $48.00 per week for each employee covered by this [A]greement to the Pension Fund of the Automobile Mechanics Union Local 701. . . . The Fund shall in all respects be administered in accordance with the Trust Agreement drawn." Both Article 7(D) and Article 8(D) obligate Vanguard to make the contribution "during periods when the collective bargaining agreement is being negotiated . . . ."
Following the expiration of the CBA on April 2, 2004, the parties entered into extension agreements that prolonged the CBA through January 2, 2005. While the parties have not extended the term of the CBA further since that date, they have continued to operate under its terms during this "status quo" period as provided by Articles 7(D) and 8(D).
On June 23, 2004, the same date that Vanguard signed the CBA with the Union, it also entered into participation agreements with the Pension Fund and the Welfare Fund. Two sections of these agreements are relevant here. (A separate agreement was signed with each fund, but they conform in almost every respect. We quote from the agreement with the Welfare Fund.) Paragraph 5 deals with the automatic renewal of the participation agreement:
Paragraph 8 addresses the termination of the agreement by the Employer:
On August 1, 2005, the Board of Trustees of the Funds informed Vanguard that the contribution rates had been increased to $155 for the Welfare Fund and to $59 for the Pension Fund. Although Vanguard has continued to pay the $124 and $48 per week rates that it paid prior to August 1, it has refused to contribute at the increased rate. As a result, the Funds filed this suit, alleging a violation of ERISA, seeking an accounting, and requesting a judgment and an injunction requiring Vanguard to pay the increased contribution rates.
Vanguard filed a motion for summary judgment on June 28, 2006, and the Funds did the same on August 11, 2006. Rather than addressing those motions, however, the district court seized upon the arbitration clause in Article 18 of the CBA signed between the union (which is not a party to this case) and the Funds. Noting the national policy in favor of arbitration and finding the dispute to be within the terms of Article 18A of the CBA, the district court dismissed the suit, citing FED. R. CIV. P. 12(b)(3) (improper venue). The Funds brought this timely appeal.
A. Right of Action
Vanguard argues that we lack subject-matter jurisdiction over the Funds' suit. That cannot be right, unless the suit is so frivolous that it does not engage the power of the court. See Steel Co. v. Citizens for a Better Environment,
Section 1132(e) complements § 1145 by authorizing certain parties to enforce the substantive right. It empowers various parties to bring actions under ERISA, including the Secretary of Labor or a participant, beneficiary, or fiduciary of a plan. The plaintiff Funds are employee benefit
Notwithstanding this apparent source of authority to sue, Vanguard submits that the Funds' action has been foreclosed by Laborers Health & Welfare Trust Fund for Northern California v. Advanced Lightweight Concrete Co., Inc.,
Questions involving an employer's "promised obligations" to a employee benefit plan—that is, their obligations "under the terms of the plan or under the terms of a collectively bargained agreement"— are not excluded from scope of the statute, nor are they matters within the exclusive jurisdiction of the NLRB. Unlike the plaintiff trust fund in Advanced Lightweight Concrete, the Funds here do not rely on any alleged statutory duty Vanguard might have to continue contributing during the post-contract status quo period. Instead, the Funds claim only that Vanguard has violated a contractual duty stemming from the participation agreements. Because this contract relates to a welfare benefit plan governed by ERISA, the lawsuit falls within the federal question jurisdiction of the court.
B. Forum Selection Clause
To everyone's surprise, the district court dismissed this case for improper venue, based on the existence of the arbitration clause. It raised that issue on its own and resolved the case on this basis without any briefing from the parties. Stranger yet, it did so after Vanguard had already waived whatever right to arbitration it might have had. We review the district court's dismissal of the case on this ground de novo. See Continental Casualty
It is not entirely clear whether a motion seeking dismissal based on a forum selection clause, including an arbitration clause, is better conceptualized as an objection to venue, and hence properly raised under Rule 12(b)(3), or as a failure to state a claim, and thus properly raised under Rule 12(b)(6). See generally 5B Charles A. Wright and Arthur R. Miller, Federal Practice & Procedure § 1352 at 318-19 (3d ed.2004). Wright and Miller observe, however, that "most of the decided cases use [Rule 12(b)(3)] as the basis" for deciding such a motion. Id. at 319. This court has followed the majority rule. See Continental Ins. Co. v. M/V Orsula,
Venue is primarily a "matter of convenience of litigants and witnesses." Firstar Bank, N.A. v. Faul,
District courts should not, as a matter of general practice, dismiss sua sponte either for improper venue or for failure to follow a forum selection clause. See 14D Wright, Miller, and Cooper, Fed. Prac. & Proc. § 3826 ("[B]ecause of the waiver principle and the personal nature of the defense, it generally (but not always) is thought inappropriate for the district court to dismiss an action on its own motion for improper venue if there has been no objection from the party for whose benefit the privilege exists."). In the analogous area of venue, our sister circuits have found sua sponte dismissal to be appropriate only under limited circumstances. See Algodonera De Las Cabezas, S.A. v. American Suisse Capital, Inc.,
Dismissal on the court's own initiative is particularly ill-conceived as an effort to enforce a contractual arbitration clause. The district court thought that the arbitration clause cut the other way. It commented that "because the parties have previously agreed to arbitration, they should not now be allowed to turn their back on that agreement, in favor of litigation in the federal court." This assumes, of course, that the parties who are before the court are the ones who have agreed to arbitrate their disputes. The district court apparently took no notice of the fact that the participation agreements between Vanguard and the Funds do not contain arbitration agreements; the arbitration agreement is in the CBA between Vanguard and Local 701. Arbitration, the Supreme Court constantly reminds us, is a creature of agreement. See, e.g., First Options of Chicago, Inc. v. Kaplan,
Even if the agreement to arbitrate between the employer and the union somehow carried over to the Funds, and we do not see how it could, there is another problem with the court's conclusion. Like many other contractual rights, "[a] contractual right to arbitrate may be waived, either expressly or implicitly." Grumhaus v. Comerica Securities, Inc.,
Undoubtedly, the reason why Vanguard did not file any motion asserting a right to arbitrate is because it had no right under its agreements with the Funds. Had it wished to do so, however, it had ample opportunity. It filed a response to the complaint in which it did not deny plaintiffs' allegation that venue was proper in the Northern District of Illinois, saying instead that "[d]efendant neither admits nor denies the allegations and legal conclusions concerning venue, for lack of sufficient information." Although it made no motion to dismiss, Vanguard's motion for summary judgment, which said nothing about venue or arbitration, was an implicit waiver of any argument for dismissing on either of those grounds. Finally, before this court Vanguard has explicitly waived the forum selection clause as a defense. We too conclude that this was not an appropriate ground on which to dismiss this case.
The question remains what we should do at this point. One option is to remand the case for further proceedings before the district court, and the other is to decide the cross-motions for summary judgment as a matter of first impression. Federal courts of appeals have the authority under 28 U.S.C. § 2106 to provide relief when so doing would "be just under the circumstances." This includes the prerogative to decide motions for summary judgment as a matter of first impression. See Swaback v. American Information Technologies Corp.,
We review the cross-motions for summary judgment under the same standard as we would had the district court addressed them, "construing all facts, and drawing all reasonable inferences from those facts, in favor of . . . the non-moving party." Hall v. Bodine Elec. Co.,
If the participation agreements obligate Vanguard to contribute at the increased rate, then the Funds are entitled to judgment; if not, then Vanguard should prevail. As a matter of ERISA law, the obligations enforceable under § 1145 include those "under the terms of [an employee benefit] plan or under the terms of a collectively bargained agreement," and the contributions agreed to thereunder shall be made "in accordance with the terms and conditions of such plan or such agreement." As the quoted language suggests, these obligations may stem from an agreement other than the CBA. In fact, it is not even necessary that a CBA exist for an employer to incur such obligations. See Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Service, Inc.,
As we noted at the outset, the dispute here is a narrow one: how much does Vanguard have to pay the Funds during the status quo, post-contractual period? There are only two options: the old amount of money established by the expired CBA, or any new amount of money the Funds decide to authorize. The Board of Trustees of the Funds is the body that sets contribution rates. Paragraphs 5 and 8 of the participation agreement provide as follows: "The rate at which contributions are to be made during any renewed term shall be that set by the Board of Trustees." The question thus can be narrowed further to the meaning of the term "renewed term," and whether the period following the expiration of one CBA and prior to the signing of a new CBA (the status quo period) qualifies as a "renewed term."
The Funds argue that a "renewed term," during which the Board of Trustees is free to set new contribution rates on its own, commences with the lapsing of the prior CBA. In advancing their reading of the agreement, the Funds divorce the adoption of a new CBA from the automatic renewal of the agreements. There is, after all, no explicit language in ¶ 5 tying automatic renewal of the agreement to the conclusion of a new CBA. The terms of each are merely made coterminous. There is thus no necessary link between the automatic renewal of the contribution obligation and the entry of a new CBA into force. The Funds argue that this point becomes clear upon examination of ¶ 8, which provides that an employer who fails to give proper notification of its desire to terminate could be bound to the provisions of the agreement for three years, even if no new CBA was ever signed. The Funds claim that such a period would be a renewed term, in spite of the fact that there is no replacement CBA. This means, they conclude, that a "renewed" term commences with the lapsing of the term of the last CBA. If that is true, then the Board of Trustees has the power to fix new contribution rates unilaterally as soon as the old CBA expires.
In contrast, Vanguard focuses on the language in ¶ 5 that provides for automatic renewal of the agreement "for terms coterminous with the CBA." This language, it argues, indicates that a renewed term is triggered by the adoption of a new CBA. This tie between the adoption of a new CBA and the renewal of the agreement for a new term is reiterated in ¶ 8, which binds the employer to the terms of the agreement for the period of the next CBA, in the event that the employer fails to give proper notice that it wishes to terminate the agreement.
While the contract is not the most artfully drafted document we have ever seen, it is nonetheless possible to interpret it without recourse to any extrinsic materials. For several reasons, we conclude that, as drafted, the "status quo" period is not part of a "renewed term." First, the Funds offer no explanation for how a renewed term could be coterminous with a new CBA if the renewed term does not begin at the same time as the CBA. In order for that portion of the agreement to have any meaning at all, the renewed term must be triggered by the passage of the new CBA. Second, the fact that failure to give notice means that an agreement cannot be terminated for three years even if no new CBA is ever passed does not compel the conclusion that the term following the expiration of the old CBA is a renewed term. Paragraph 8 never identifies this period as a "renewed term." It simply reiterates that during a renewed term, the
Since there was no renewed term, the Board of Trustees had no authority to set new contribution rates and Vanguard has no obligation to pay them. As a result, summary judgment should be granted in Vanguard's favor.
* * *
The decision of the district court is REVERSED. We direct the district court to enter judgment in favor of Vanguard.
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