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Gipson Mechanical Contractors, Inc. v. U.A. Local 572 of United Association of Journeymen

United States District Court, M.D. Tennessee, Nashville Division

October 8, 2019

GIPSON MECHANICAL CONTRACTORS, INC. Plaintiff,
v.
U.A. LOCAL 572 OF THE UNITED ASSOCIATION OF THE JOURNEYMEN AND APPRENTICES OF THE PLUMBING AND PIPEFITTERS INDUSTRY OF THE UNITED STATES AND CANADA AFL-CIO, and PLUMBERS & PIPEFITTERS LOCAL 572 BUILDING CORPORATION, Defendants.

          MEMORANDUM AND ORDER

          ALETA A. TRAUGER UNITED STATES DISTRICT JUDGE

         Gipson Mechanical Contractors, Inc. (“Gipson”) has filed a Motion to Amend Complaint (Docket No. 27), to which U.A. Local 572 of the United Association of the Journeymen and Apprentices of the Plumbing and Pipefitters Industry of the United States and Canada (AFL-CIO) (“U.A. Local 572”) and Plumbers & Pipefitters Local 572 Building Corporation (“Local 572 Building Corp.”) have filed a Response (Docket No. 28), and Gipson has filed a Reply (Docket No. 30). For the reasons set out herein, the motion will be granted.

         I. BACKGROUND[1]

         Gipson is a construction services corporation specializing in industrial mechanical work, pipefitting, mechanical service, and related work. U.A. Local 572 is a labor union, and Local 572 Building Corp. is a public benefit corporation formed to acquire and maintain property for labor organizations. In 2008, Gipson opened a new operations branch in Nashville, in order to provide heavy industrial mechanical work on construction projects and service for existing mechanical systems in commercial buildings and structures in the surrounding area. Gipson contacted U.A. Local 572 to arrange for union employees to work on both its construction and commercial services business operations. Gipson and U.A. Local 572 agreed to be bound by a previously-negotiated agreement between U.A Local 572 and the master plumbing, heating, piping, and air conditioning contractors of Middle Tennessee. That agreement was entitled “Working Agreement Between Plumbers and Pipefitters U.A. Local 572 and the Master Plumbing Heating, Piping and Air Conditioning Contractors of Nashville and Vicinity” (“2007 Master Agreement”). The parties subsequently agreed to successor versions of the 2007 Master Agreement-the “2010 Master Agreement” and “2013 Master Agreement, ” collectively the “Master Agreements”-that were, for the purposes of this motion, substantially similar in terms.

         The Master Agreements were supplemented with a Memorandum of Understanding, which included the following provision:

To compete for commercial work against non-union contractors, the union recognizes that the contractors' average cost per hour (including labor burden) must be competitive. A “Target Rate” will be established based upon the average hourly cost of non-union labor. The union and the contractor mutually agree to use increased ratios, promotional funds and any other legal means available to provide skilled labor at an average rate equal to the target rate when competing against nonunion contractors for commercial work. . . .
As economic conditions change, the Target Rate shall be re-calculated and adjusted as recommended by the Work Recovery Committee.[2] The hourly rates used to forecast the contractor's average labor cost per hour and the Target Rate shall be calculated using spreadsheets which are maintained by the Work Recovery Committee.

         This provision was intended to level the playing field for union employers. Mechanical contractors who utilize non-union employees typically pay lower wages to their employees than contractors who utilize union employees. Thus, to allow employers who were signatories to the Working Agreements to be able to compete with mechanical contractors who retained non-union employees, the U.A. Local 572 maintained a Market Recovery Fund, from which it would issue grants to the signatory employers in the form of a wage supplement.

         On January 19, 2018, Gipson transmitted through counsel a demand letter requesting allegedly unpaid sums to which it was entitled under the Market Recovery Fund program. The demand letter included the following passage:

[M]y client has obtained information that the Local 572 has engaged in a repeated practice of showing preferential treatment regarding the payment of Market Recovery Funds to other mechanical contractors. It is difficult to understand what possible rationale the Local 572 could have to justify the preferential treatment of one mechanical contractor over another. However, one obvious possible explanation for this conduct is the fact that Gipson Mechanical is a minority contractor. Given the importance of minority participation in construction projects of any substantial size, it is difficult to understand why the Local 572 would engage in discriminatory conduct against Gipson Mechanical. However, the process of elimination simply does not provide any other viable explanation for the Local 572's conduct.

(Docket No. 30-1 at 1-2.) On March 2, 2018, counsel for U.A. Local 572 sent a letter in response, “categorically den[ying] that [Gipson] was subjected to any type of discriminatory treatment with regard to the Market Recovery Fund.” (Docket No. 30-2 at 1.) The attorney wrote that Gipson's “suggestion that [it] was treated in a disparate fashion due to its status as a minority contractor is frivolous and any such allegation in a lawsuit would be met with a Rule 11 [m]otion.” (Id.) Finally, U.A. Local 572's attorney alleged that Gipson had “grossly overstated” the amount of money owed to it, but she expressed a willingness to “finalize a resolution on these matters.” (Id. at 2.) On March 19, 2018, Gipson's counsel responded with another letter, demanding that U.A. Local 572 produce records of the payments made to other employers, in order to establish that Gipson was, in fact, treated equitably as compared to U.A. Local 572's treatment of others who had been entitled to Market Recovery Funds. (Docket No. 30-3 at 2.)

         On July 19, 2018, Gipson filed suit against Local 572 Building Corp. in the Circuit Court of Davidson County, Tennessee, alleging breach of contract. (Docket No. 1-2.) On August 16, 2018, Local 572 Building Corp. removed the case to this court pursuant to Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185(a), which provides that “[s]uits for violation of contracts between an employer and a labor organization . . . may be brought in any district court of the United States having jurisdiction of the parties . . . .” On September 6, 2018, Gipson amended its Complaint, adding U.A. Local 572 as a defendant. (Docket No. 6.)

         On September 27, 2018, the defendants filed a Motion to Dismiss. (Docket No. 12.) On January 24, 2019, the court granted the motion in part and denied it in part. (Docket No. 20.) Specifically, the court dismissed Gipson's claim for breach of contract stemming from defective employee work but declined to dismiss the breach of contract claim related to unpaid Market Recovery Fund sums. (Id. at 1.)

         In the meantime, the parties had begun the early stages of discovery. Gipson again sought information about the grant of Market Recovery Fund payments to other companies, in order to establish that other employers had been treated more favorably than Gipson. (See Docket No. 28 at 3.) U.A. Local 572, however, objected to the request, arguing that its disbursement of Market ...


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