International Brotherhood of Teamsters Local Union No. 50 v. Kienstra Precast, LLC ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 11-2097, 11-2185
INTERNATIONAL B ROTHERHOOD OF
T EAMSTERS L OCAL U NION N O . 50,
Plaintiff-Appellee,
v.
K IENSTRA P RECAST, LLC,
Defendant/Third Party
Plaintiff-Appellant,
v.
ILLINI C ONCRETE, INC.,
Third Party Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 3:10-cv-00695-GPM-SCW— G. Patrick Murphy, Judge.
A RGUED D ECEMBER 2, 2011 — D ECIDED D ECEMBER 13, 2012
2 Nos. 11-2097, 11-2185
Before
R IPPLE and R OVNER, Circuit Judges, and
F EINERMAN, District Judge.Œ
F EINERMAN, District Judge. Illini Concrete, Inc., for-
mally ceased doing business in October 2009 and
sold certain of its assets, including delivery trucks,
to Kienstra Precast, LLC. According to the complaint filed
against Kienstra by the International Brotherhood
of Teamsters Local Union No. 50 (“Local”)—which repre-
sents concrete mixer drivers and others employed by Illini
Concrete and then by Kienstra—Kienstra proceeded to
lay off fourteen employees, declined to make good on
Illini Concrete’s unfunded liability to its employees’
union pension fund, subcontracted work to competitors
to avoid hiring back the laid-off union employees,
and refused to hear grievances regarding the asset sale
and its effect on the employees. The complaint alleges
that the asset sale was a ruse to allow Illini Concrete
to evade its obligations under its collective bargaining
agreement with the Local (“Illini CBA”). The Local claims
that Kienstra breached the Illini CBA, and seeks a declara-
tion that Kienstra is Illini Concrete’s alter ego, that
Kienstra thus is bound by the Illini CBA, and that the
CBA obligated K ienstra to bargain over the
displacement of the laid-off union employees.
Kienstra impleaded Illini Concrete as a third-party
defendant, and each moved to compel arbitration, arguing
that the Local’s claims are covered by an arbitration clause
Œ
The Honorable Gary Feinerman, of the Northern District of
Illinois, sitting by designation.
Nos. 11-2097, 11-2185 3
in the Illini CBA. The district court denied the motions
to compel arbitration, holding that the question whether
Kienstra is Illini Concrete’s alter ego, and thus
whether Kienstra is bound by the Illini CBA, does not
fall within the scope of the Illini CBA’s arbitration clause.
2011 WL 1749997 (S.D. Ill. May 6, 2011). Kienstra and
Illini Concrete have taken an interlocutory appeal of that
ruling.
The merits cannot be reached unless we have appellate
jurisdiction. Sections 1291 and 1292(a)(1) of Title 28 do
not permit an interlocutory appeal of the district court’s
denial of Illini Concrete’s and Kienstra’s motions to
compel arbitration. See Sherwood v. Marquette Transp.
Co., 587 F.3d 841, 843-45 (7th Cir. 2009); IDS Life Ins. Co.
v. SunAmerica, Inc., 103 F.3d 524, 530 (7th Cir. 1996);
Cent. States, Se. & Sw. Areas Pension Fund v. Cent.
Cartage Co., 84 F.3d 988, 990-92 (7th Cir. 1996). Recognizing
this, Kienstra and Illini Concrete submit that
appellate jurisdiction lies under a provision of the Federal
Arbitration Act (“FAA”), 9 U.S.C. § 16(a)(1), that permits
interlocutory appeals of district court rulings that grant
or deny motions to compel arbitration or that stay litigation
pending arbitration. See Arthur Andersen LLP v. Carlisle,
556 U.S. 624, 627-29 (2009); Janiga v. Questar Capital
Corp., 615 F.3d 735, 740 (7th Cir. 2010); French v.
Wachovia Bank, 574 F.3d 830, 833 (7th Cir. 2009).
In its merits brief, the Local maintained that this
court does not have appellate jurisdiction because § 1 of the
FAA, 9 U.S.C. § 1, exempts from the FAA’s scope
lawsuits involving any contract of employment. The
4 Nos. 11-2097, 11-2185
Local abandoned that broad contention at oral argument,
and rightly so. Section 1 states that “nothing [in the
FAA] shall apply to contracts of employment of seamen,
railroad employees, or any other class of workers
engaged in foreign or interstate commerce.” 9 U.S.C. § 1.
In rejecting the notion that § 1 exempts all employment
contracts from the FAA, the Supreme Court in Circuit
City Stores, Inc. v. Adams, 532 U.S. 105 (2001), held that
“[s]ection 1 exempts from the FAA only contracts
of employment of transportation workers.” Id. at 119(emphasis added). By “transportation workers,” the
Supreme Court meant workers, like the “seamen
and railroad employees” expressly referenced in § 1, that
are “actually engaged in the movement of goods in inter-
state commerce.” Circuit City, 532 U.S. at 112.
So, if the Illini CBA is a “contract of employment of . . .
workers engaged in . . . interstate commerce” within the
meaning of § 1, then § 16(a)(1) does not apply here, in
which case we have no appellate jurisdiction and
must dismiss the appeal, just as we did in Central Cartage,
84 F.3d at 993. The Local did not challenge appellate
jurisdiction on that particular ground in either its brief
or at oral argument. Kienstra and Illini Concrete took
affirmative steps in their joint reply brief to fend off
such a challenge, arguing that “the operations of Illini prior
to the sale of assets and the operation of . . . Kienstra
subsequent to the sale were restricted to three counties
in Southern Illinois.” Reply Br. at 6. From this premise,
they argued that “the employees affected by this cause
of action were not engaged in the transportation of
goods in interstate commerce and do not fall within the
narrow exception found in [§ 1 of] the FAA.” Ibid.
Nos. 11-2097, 11-2185 5
Although Kienstra and Illini Concrete argued that their
workers were not engaged in the movement of goods
in interstate commerce and the Local did not speak to
that particular issue, “[a] court of appeals has an obligation
to examine its jurisdiction sua sponte, even if the
parties fail to raise a jurisdictional issue.” Wingerter v.
Chester Quarry Co., 185 F.3d 657, 660 (7th Cir. 1998)
(per curiam). In an order issued after oral argument,
we questioned whether Kienstra and Illini Concrete
had truly meant to say in their joint reply brief that
their trucking employees’ activities were strictly limited
to three counties in southern Illinois. We noted that
those three counties (St. Clair, Monroe, and Randolph)
are in a region of Illinois known as Metro East, directly
across the Mississippi River from St. Louis, Missouri,
and its environs. Given the nature of the Metro
East economy, we said, it would be somewhat unusual
if the truckers did not occasionally carry loads into Mis-
souri. And if they did, we added, our appellate jurisdiction
likely would fail.
Concluding that the record as it stood did not shed light
on that factual question, we ordered a limited remand
for the district court to determine whether the truckers
ever carried loads into Missouri or other States on behalf
of Illini Concrete or Kienstra. The district court held
an evidentiary hearing at which the Local called
two truckers who had carried loads for Illini Concrete
and Kienstra. The district court issued an order finding
that the truckers made deliveries into Missouri on
Illini Concrete’s behalf, but making no finding as
to whether the interstate deliveries continued after
6 Nos. 11-2097, 11-2185
Kienstra took over. (The two truckers testified that they
did not carry loads into Missouri while employed
by Kienstra, but the district court appropriately did
not offer an opinion as to whether their experience reflects
the experience of all other truckers who carried loads
for Kienstra.)
After the district court entered its order, we allowed the
p a rties to file supplem ental briefs regard in g
appellate jurisdiction. The Local now takes the
position that we lack appellate jurisdiction, while Kienstra
and Illini argue the contrary. We agree with the Local.
This case is materially indistinguishable from Central
Cartage. The plaintiff in Central Cartage, a union pension
fund, sued Central Cartage, a company that employed
the union’s workers, alleging that Central Cartage had
breached its contractual obligation to pay employer
contributions to the fund. 84 F.3d at 989. Central
Cartage moved to compel arbitration, the district court
denied the motion, and Central Cartage appealed. Ibid.We first held that 28 U.S.C. § 1291(a) does not grant
jurisdiction over an interlocutory appeal of an
order refusing to stay or dismiss district court proceedings
in favor of arbitration. Id. at 990-92. We then
held—presaging the Supreme Court’s ruling in Circuit City
that § 1 of the FAA excludes from the FAA’s coverage
only employment contracts of transportation workers,
meaning workers engaged in the movement of goods
across state lines—that appellate jurisdiction did not
lie under 9 U.S.C. § 16(a)(1). We explained our holding
as follows:
Nos. 11-2097, 11-2185 7
The appellant, Central Cartage, is primarily engaged in
local trucking and occasionally transports cartage
across state lines. We hold that the workers of Central
Cartage (covered in the collective bargaining agree-
ment at issue between Central Cartage and the Pension
Fund) therefore qualify as “transportation” workers.
Because the Arbitration Act does not apply to “trans-
portation” workers, see § 1, Central Cartage’s NMFA
(the collective bargaining agreement) for its workers is
not covered by the Act. Thus the jurisdictional provi-
sions of § 16 of the Act are not applicable to Central
Cartage’s appeal.
84 F.3d at 993.
The same result obtains here. Although Illini Concrete
was primarily engaged in operations within Illinois,
its truckers occasionally transported loads into Mis-
souri. This means that the truckers were interstate trans-
portation workers within the meaning of § 1 of the FAA as
interpreted by Circuit City, which in turn means that the
Illini CBA is excluded from the FAA’s coverage. Because
the Illini CBA is excluded from the FAA’s coverage,
jurisdiction over this appeal cannot lie under § 16(a)(1) of
the FAA. And without § 16(a)(1), we are left without a
source of appellate jurisdiction. Illini Concrete and
Kienstra offer four arguments to support the contrary
position, but none is persuasive.
First, they seek to distinguish Central Cartage on the
ground that the employees in that case delivered the
goods of third parties rather than the goods of their own
employer, while Illini Concrete’s truckers delivered Illini
8 Nos. 11-2097, 11-2185
Concrete’s goods. Illini Concrete and Kienstra do not
explain why the distinction, which is nowhere to be found
in Central Cartage or Circuit City, should matter. The
distinction in fact does not matter: a trucker is a transporta-
tion worker regardless of whether he transports his em-
ployer’s goods or the goods of a third party; if he
crosses state lines he is “actually engaged in the movement
of goods in interstate commerce.” Circuit City, 532 U.S. at
112.
Second, Illini Concrete and Kienstra seek to distinguish
Central Cartage on the ground that the employer there
was a party to an interstate collective bargaining agreement,
meaning that it covered workers in more than one
State, while the Illini CBA is an intrastate CBA, covering
only workers in Illinois. That distinction, too, is irrelevant
to the § 1 analysis, which focuses on whether the workers
employed under a given contract are or are not
interstate transportation workers, not on whether the
contract covers workers in multiple States. In fact, Circuit
City makes clear that an interstate CBA covering non-
transportation workers (in that case, sales counsel-
ors) would not invoke the § 1 exclusion. See 532 U.S. at 119.
Third, Illini Concrete and Kienstra point out that the
number of interstate deliveries made by Illini Concrete’s
truckers was a small proportion of their total workload,
the remainder of which was intrastate. That is true:
each trucker who testified at the hearing estimated that he
had made 1500 to 1750 deliveries each year, of which only
a few dozen were to Missouri. But that does nothing
to distinguish this case from Central Cartage, which held
Nos. 11-2097, 11-2185 9
that § 1 applied where the employer was “primarily en-
gaged in local trucking and occasionally transport[ed]
cartage across state lines.” 84 F.3d at 993 (emphases
added). Central Cartage was correct in this respect, as
there is no basis in the text of § 1 for drawing a line be-
t w e e n w o rk e rs w h o d o a lo t o f i n t e r s t a t e
transportation work and those who cross state lines only
rarely; both sorts of worker are “engaged in foreign or
interstate commerce.”
Fourth, Illini Concrete and Kienstra contend that § 1 does
not apply to this case because the district court did not find
that truckers crossed the Illinois-Missouri state line while
working for Kienstra. Because Illini Concrete employees
engaged in interstate transportation work, it does not
matter whether Kienstra employees did so as well. The
Local brought this suit to enforce the Illini CBA against
Kienstra—including to hold Kienstra responsible for
unfunded liabilities to the union pension fund that accrued
while Illini Concrete employed the workers —and Kienstra
is seeking to enforce the Illini CBA’s arbitration clause to
require that the Local’s claims be submitted to an arbitra-
tor. The heart of this case is the Illini CBA, which, as shown
above, is a contract of employment of interstate transporta-
tion workers because the workers made interstate deliver-
ies for Illini Concrete. Kienstra’s takeover and the
cessation of interstate deliveries (if they indeed did cease)
did not change the nature of the Illini CBA, and the
nature of the CBA suffices under § 1 to exclude it, and thus
this case, from the FAA’s coverage.
Because the Illini CBA is properly classified under § 1 of
the FAA and Circuit City as a contract of employment of
10 Nos. 11-2097, 11-2185
workers engaged in the movement of goods in interstate
commerce, and there being no basis for distinguishing
Central Cartage, this appeal is dismissed for lack of appel-
late jurisdiction.
12-13-12