Burlington Educ. Associates v. Future Planning Associates ( 2020 )

Burlington Educ. Associates v. Future Planning Associates, No. 683-12-18 Wncv (Tomasi, J., Jan. 31, 2020).
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
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VERMONT SUPERIOR COURT
SUPERIOR COURT CIVIL DIVISION
Washington Unit Docket No. 683-12-18 Wncv
│
Burlington Education Associates, et al. │
Plaintiffs │
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v. │
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Future Planning Associates, Inc. │
Defendant │
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Opinion and Order on Defendant’s Motion to Dismiss
Plaintiffs consist of 30 specifically named local labor unions representing
Vermont school employees affiliated with the National Education Association and
the Vermont–National Education Association, which are also named plaintiffs.
None of Plaintiffs’ members (school district employees) are parties. Plaintiffs claim
that the many school districts in which their members work contracted with
Defendant Future Planning Associates, Inc., (“Future Planning”) to administer their
health insurance plans beginning on January 1, 2018. Plaintiffs assert that Future
Planning administered those plans incompetently, causing financial and emotional
harm to many of their members. They plead breach of contract and breach of the
covenant of good faith and fair dealing based on the assertion that their members
are intended third-party beneficiaries of the contracts between the relevant school
districts and Future Planning. Plaintiffs also claim that Future Planning’s conduct
violated Vermont’s Consumer Protection Act (CPA), 9 V.S.A. §§ 2451–2481x, and
they seek punitive damages.
Procedural and Factual Background
In earlier proceedings, Future Planning sought dismissal of all claims against
it, arguing that Plaintiffs, as organizational (or associational) parties, lack
constitutional standing to represent the interests of their members. The court
denied the motion to dismiss on the basis asserted, reasoning that the case may
raise a question about whether Plaintiffs are the real parties in interest, Vt. R. Civ.
P. 17, but that, formally understood, there is no apparent constitutional standing
question. See 13A Richard D. Freera and Edward H. Cooper, Fed. Prac. & Proc.
Juris. § 3531 (3d ed.) (“Confusions of standing with real-party-in-interest doctrine
occur with some frequency.”).
Future Planning then filed a new motion to dismiss arguing that Plaintiffs
are not the real parties in interest to the claims asserted against it. It seeks a
determination of that issue with regard to all claims and a period of time to allow
any real parties in interest to be substituted for the current plaintiffs prior to
outright dismissal. See Vt. R. Civ. P. 17(a). It seeks dismissal of the CPA claim on
the assertion that Plaintiffs’ members are, at best, third-party beneficiaries of the
contracts with Future Planning, and the CPA does not apply to third-party
beneficiaries.
Plaintiffs argue that, as unions, they are empowered to represent their
members’ interests in this litigation, and they thus are real parties in interest with
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regard to both contract and CPA claims against Future Planning. Plaintiffs did not
address in writing Future Planning’s argument that the CPA does not apply to
third-party beneficiaries of contracts, although they noted at oral argument that
they are not conceding the matter.
Plaintiffs’ claims are predicated on the following facts. The underlying school
districts have certain collectively bargained contractual obligations with regard to
providing health coverage to the employee–members of Plaintiff-unions. The
Plaintiffs negotiated and signed those bargained-for contracts. To aid in the
provision of those benefits, relevant school districts independently contracted for
particular services with Future Planning. Plaintiffs are neither parties to nor third-
party beneficiaries of the contracts between the school districts and Future
Planning. They claim, however, that relevant school employees are third-party
beneficiaries of those contracts and were harmed by Future Planning’s
incompetence in the provision of those contracted-for services. On that basis,
Plaintiffs claim the representational right to litigate the private interests of their
members directly against third-party contractor Future Planning without the direct
involvement of their employee–members or the school districts that contracted with
Future Planning.
Analysis
“Every action shall be prosecuted in the name of the real party in interest.”
Vt. R. Civ. P. 17(a). “The effect of this passage is that the action must be brought by
the person who, according to the governing substantive law, is entitled to enforce
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the right.” 6A Mary Kay Kane, Fed. Prac. & Proc. Civ. § 1543 (3d ed.). “[T]he
modern function of the rule . . . is simply to protect the defendant against a
subsequent action by the party actually entitled to recover, and to insure generally
that the judgment will have its proper effect as res judicata.” Id. (quoting Fed. R.
Civ. P. 17 advisory committee’s note to 1966 amendment).
In briefing, Plaintiffs assume without analysis that the burden of proof on the
real party in interest issue falls to Future Planning. What little authority exists on
this question is conflicting. Contrast OSRecovery, Inc. v. One Groupe Intern., Inc.,
380 F. Supp. 2d 243 (S.D.N.Y. 2005) (burden is on party purporting to be real party
in interest because it must demonstrate a substantive right to recover) with
Lexington Ins. Co. v. Western Roofing Co., Inc., No. 03-2036-JWL, 2003 WL
22205614, at *1 (D. Kansas Sept. 23, 2003) (burden is on party opposing real party
in interest status as matter is akin to affirmative defense). The Court declines to
resolve this issue here. The real party in interest question in this case presents a
legal issue, does not depend on disputed facts or inferences, and can be resolved on
this record regardless how the burden may be allocated.
The general rule is that, “[a]bsent statutory authority . . . an association is
not the appropriate party for bringing suit to assert the personal rights of its
members.” 6A Mary Kay Kane, Fed. Prac. & Proc. Civ. § 1552 (3d ed.) (emphasis
added). Against that and in support of their claim to being real parties in interest
in this case, Plaintiffs rely on case law largely arising out of Section 301 of the
federal Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185. See id. §
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185(b) (“Any such labor organization may sue or be sued as an entity and in behalf
of the employees whom it represents in the courts of the United States.”). That
section, however, allows such lawsuits principally against employers and others
only in special circumstances clearly evincing a direct interest in enforcement of the
terms of a collective bargaining agreement (CBA), such as successors-in-interest to
employers, receiverships, or similar circumstances. See Greater Lansing
Ambulatory Surgery Ctr. Co., L.L.C. v. Blue Cross & Blue Shield of Michigan, 952 F.
Supp. 516, 520 (E.D. Mich. 1997) (“[O]nly those parties with an interest in the [CBA
may] bring suit under § 301.”); 29 U.S.C. § 185(a) (“Suits for violation of contracts
between an employer and a labor organization representing employees in an
industry affecting commerce as defined in this chapter, or between any such labor
organizations, may be brought in any district court of the United States having
jurisdiction of the parties.”); see generally 12 Emp. Coord. Labor Relations §§ 53:33–
53:67 (discussing variety of proper parties to Section 301 suits).
Plaintiffs assert that Section 301 has been interpreted to permit unions to
sue to enforce contracts beyond mere CBAs, including “supplemental” and
“subsidiary” agreements: “The existence of a supplemental or subsidiary agreement,
specifically intended to effectuate the provision of benefits under the CBA, cannot
logically divest the Association of its right and duty to litigate enforcement of its
members’ rights to those benefits.” Plaintiffs’ Opposition at 3 (filed Aug. 26, 2019).
Plaintiffs have come forward, however, with no authority meaningfully supporting
this proposition as they employ it in this case, in the context of an employer
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contract, to which neither the union nor its member–employees are parties, with a
third-party service provider who is not a signatory to the CBAs. They rely generally
on Intl. Union, United Auto., Aerospace and Agr. Implement Workers of Am. (UAW),
AFL-CIO v. Hoosier Cardinal Corp., 383 U.S. 696 (1966); Smith v. Evening News
Ass’n, 371 U.S. 195 (1962); J.I. Case Co. v. N.L.R.B., 321 U.S. 332 (1944); and Off. &
Prof. Employees Intern. Union, Loc. 2 v. F.D.I.C., 962 F.2d 63 (D.C. Cir. 1992).
In J.I. Case Co., the U.S. Supreme Court explained that a CBA typically
controls conditions of employment though individual employees nevertheless will
have separate, congruent employment contracts with the employer. 321 U.S. at
335–36 (“In the sense of contracts of hiring, individual contracts between the
employer and employee are not forbidden, but indeed are necessitated by the
collective bargaining procedure.”). Based on the dual contractual nature of such
arrangements, the Court ruled that an employer could not rely on the existence of
one (employment contracts with specific employees) to refuse to negotiate over the
other (collective bargaining on related terms). It affirmed a ruling of the National
Labor Relations Board (NLRB) to that effect. See id. 341–42.
In Evening News, the district court had dismissed a Section 301 claim
brought by an employee against an employer for a violation of the CBA, ruling that
the employee alleged an unfair labor practice within the exclusive jurisdiction of the
NLRB. Evening News, 371 U.S. at 197. The Supreme Court ruled, however, that
the NLRB’s jurisdiction over unfair labor practices is not exclusive of jurisdiction in
federal court under Section 301. Id. The Court also determined that the claim
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against the employer did not fall outside the scope of Section 301 merely because it
sought to vindicate rights personal to employees—unpaid wages. It ruled that,
regardless whether those rights are “personal,” they also arise under the CBA and
fall within the scope of Section 301. Id. at 200 (“The rights of individual employees
concerning rates of pay and conditions of employment are a major focus of the
negotiation and administration of collective bargaining contracts.”).
Hoosier Cardinal called upon the Court to determine whether, in a suit
between a union and an employer, both parties to a CBA, there is a time limitation
applicable to Section 301 claims, although that is not the issue relevant here. As a
preliminary matter, the Court summarily concluded that the wage and vacation pay
claim at issue properly fell within Section 301 regardless that it may be considered
to have arisen under the CBA as well as under each employee’s employment
contract. Hoosier Cardinal, 383 U.S. at 700 (“This conclusion is unimpaired by the
fact that each worker’s claim may also depend upon the existence of his individual
contract of employment.” (citing for this principle both J.I. Case Co. and Evening
News)).
J.I. Case Co., Evening News, and Hoosier Cardinal make clear that while the
heart of a Section 301 action is enforcement of the terms of a CBA between the
union or the employees it represents and the employer, such actions can touch on
personal rights of the employees that are integral to the CBA but that are also
grounded in separate contracts directly between the employer and the employee.
All three cases were suits between employees or a union and the employer, and at
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issue in each were the contractual rights between them. None of these cases
supports the proposition urged by Plaintiffs that Section 301 somehow enables a
union to sue any third-party with a contract with the employer if that contract in
some way has an effect on employees or rights of employees related in some fashion
to a CBA.
In the F.D.I.C. case, the D.C. Circuit Court of Appeals addressed a dispute
involving a “unionized bank put into receivership under the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) § 212, 12 U.S.C. § 1821.”
F.D.I.C., 962 F.2d at 64. The union filed two “group claims” with the F.D.I.C.
receiver on behalf of member–employees for severance benefits and accrued
vacation pay. Id. The receiver rejected the claims as advanced by the union, taking
the position that it would accept claims by individual employees only. The union
sued and the district court ruled that, under FIRREA, the union was not a creditor
of the bank and thus could not be a claimant. The Circuit Court reversed,
reasoning that Section 301 permits the union to do more than simply enforce a CBA
in the context of employer insolvency. “Most germane to the issue we confront,” it
explained, “bankruptcy courts recognize a union’s authority to pursue, after the
debtor’s rejection of a labor agreement, employees’ collectively bargained rights to
wages and benefits.” Id. at 66.
In response to the objection that Section 301 is more strictly limited to suing
on the CBA, the Court then said, “[c]ase law, however, sets this guiding principle:
when a claim derives from a collective bargaining agreement—an arrangement
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negotiated by a union and to which it is a signatory—the labor organization is an
appropriate party (although not the only appropriate party) to vindicate employees’
rights.” Id. Hence, under Section 301, the union could seek to enforce the rights
that had been in the CBA under FIRREA even though the CBA had been set aside
and the bank was in receivership. The case arose out of a claim presented to a
receiver; it did not address whether an improper party had been sued.
Plaintiffs, however, seize on F.D.I.C.’s “guiding principle” and seek to apply
it here in a completely different context. In their view, the rights at issue in this
case “derive from” CBAs in the sense that the various employers contracted with
Future Planning to provide services that affect their employees’ health care benefits
and those benefits were the subject of the CBAs. Nothing in the F.D.I.C. case,
however, supports Plaintiffs’ boundless interpretation of Section 301 that would
enable them to sue any third party with a contract with the employer if that
contract in some way has an effect on employees or rights of employees that have
some connection to the terms of a CBA. The F.D.I.C. decision plainly addresses the
effect of Section 301 in the context of a FIRREA receivership after the CBA has
been rejected. That case is not analogous to this one and has no application here.
Indeed, Plaintiffs’ application of F.D.I.C. and the U.S. Supreme Court case
law on which it is based is substantially overbroad, and Plaintiffs have come
forward with no authority that would extend Section 301 to cases such as this one.
To the extent Plaintiffs are seeking to enforce rights in the relevant CBAs, they
have not sued the school district–employers that they presumably believe have
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breached them. In any event, Future Planning has no connection to any of the
underlying CBAs and it does not stand in the shoes of any school districts in
relation to any rights relating to the CBAs.
Future Planning simply has no legal interest whatsoever in the CBAs and
Plaintiffs have no cognizable right to enforce CBA rights against Future Planning.
Any “rights” or obligations in the contracts between Future Planning and the school
districts are enforceable by appropriate parties under ordinary contract law, not
Section 301. In that regard, this case is similar to Loc. Union No. 185, Intern.
Broth. of Elec. Workers v. Copeland Elec. Co., 273 F. Supp. 547 (D. Mont. 1967). In
Copeland, a union brought an action against, among others, the third-party
company, U.S.F. & G., that furnished the employer with a performance bond related
to a particular project. The union was not a party to the bond contract. It relied on
Section 301, however, as a legal basis for suing U.S.F. & G. directly even though, as
here, the defendant was a mere third-party contractor with the employer and had
no direct interest in or connection to the CBA. The Court dismissed the claim as
follows:
As the case affects U.S.F. & G., the plaintiff [union] is not the
real party in interest. As against U.S.F. & G., the plaintiff can claim
no rights which flow from the Labor Management Relations Act or the
collective bargaining agreement for itself or for its members. Any
rights to be asserted against U.S.F. & G. must be found in the
performance bond. The court expresses no opinion as to whether the
obligations to pay created by the bond are co-extensive with the
obligations created by the collective bargaining agreement. If they are,
it is simply coincidental because the bond does not guarantee the
collective bargaining agreement.
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Id. at 549 (footnote omitted; emphasis added). The same is so here: any rights to be
asserted against Future Planning must be sourced from the contracts between
Future Planning and the school districts. Plaintiffs’ argument that the claims at
issue in this case are merely derivative of the rights set out in the CBA is not
persuasive and would wash Section 301 well beyond its banks.
Other courts have rejected such overbroad applications of Section 301. For
example, in Rock Drilling, Blasting, Roads, Sewers, Viaducts, Bridges, Foundations,
Excavations & Concrete Work on All Const., Hod Carriers’, Bldg. & Com. Laborers’
Loc. Union No. 17 v. Mason & Hanger Co., 217 F.2d 687 (2d Cir. 1954), a union
attempted to sue several employers on behalf of hundreds of employees claiming
diminution of wages and poor working conditions resulting from a conspiracy
between the employer and an agent of the parent–union. The Court made clear
that the claims sounded in tort. Id. at 690. They thus could not be properly framed
under Section 301. Section 301 is not a “blanket . . . grant of authority to unions to
maintain on behalf of their members suits of any character, whether of tort or
contract, and irrespective of the nature of the rights, obligations or duties involved,
provided only that the litigation arises in some vague way ‘out of the employment
relationship.’” Id. at 692. The Court rejected any argument that the claim fell
within Section 301 simply because it “relates to” the CBA: “Here the claim sought to
be enforced ‘relates’ to the collective bargaining contract only in an incidental way.
The gist of the action is the wrongful conduct of defendant in conspiring with
[conspirator] and bribing him as alleged. This is neither a suit to enforce the
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contract nor to recover for a breach thereof.” Id. at 694. A mere incidental
connection to a CBA is insufficient under Section 301.
Similarly, in U.S. ex rel. United Broth. of Carpenters and Joiners Loc. Union
No. 2028 v. Woerfel Corp., 545 F.2d 1148, 1151 (8th Cir. 1976), three unions
attempted to litigate claims for retroactive pay increases against the employer and
its payment bond surety under the Miller Act (which requires payment bonds on
governmental projects). The Court ruled that the claims, as advanced by the union,
were not cognizable under the Act because the union could not claim to be in the
position of an “unpaid creditor.” Id. at 1151. The union’s argument under Section
301 fared no better. “While § 301(b) does give a union capacity to sue and be sued
as an entity under the LMRA, it does not appoint the union as the general litigating
agent of its members. Section 301(b) is simply a rule defining capacity to sue and
does not give the unions a general right to represent its employees.” Id. at 1151
(citations omitted). Again, it is insufficient under Section 301 to merely assert that
the claim being advanced has some relation to the rights in a CBA.
Plaintiffs also cite to Vermont’s Labor Relations for Teachers and
Administrators Act (LRTAA), 16 V.S.A. §§ 1981–2028, for evidence of the breadth of
their representational authority. In the Court’s view, nothing in the LRTAA
arguably gives Plaintiffs real-party-in-interest status in an action like this one.
As a result, Plaintiffs are not the real parties in interest in this case with
regard to their contract or covenant of good faith claims as framed against Future
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Planning.1 Plaintiffs have failed to explain how they nevertheless could be real
parties in interest with regard to their CPA claim, and the Court is unable to see
any way in which that could be so.
If only by way of analogy, the Court notes that Plaintiffs fare no better under
formal standing analysis. “An association has standing to bring suit on behalf of its
members when (1) its members have standing individually; (2) the interests it
asserts are germane to the organization’s purpose; and (3) the claim and relief
requested do not require the participation of individual members in the action.”
Parker v. Town of Milton, 169 Vt. 74, 78 (1998) (citing Hunt v. Washington State
Apple Adver. Comm., 432 U.S. 333, 343 (1977)). Assuming the first two prongs of
the test could be met, there is no cogent way that the third could be. At a
minimum, each employee’s claim necessarily would be subject to an employee-
specific proof, including with regard to damages. In fact, Plaintiffs’ Complaint
expressly alleges that the purported misconduct in this case impacted its members
in different and highly individualized ways: some employees received debit cards for
healthcare savings arrangements and flexible spending arrangements while some
did not, some debit cards worked while others did not, and some had the wrong
names on them; some employees were improperly billed for medical services; some
medical providers refused to provide services after not being paid; some employees
1
Given the Court’s determinations, it is unnecessary to address whether Plaintiffs’
member–employees may be third-party beneficiaries of the contracts with Future
Planning, and thus capable as such of enforcing those contracts against Future
Planning, because no employees are parties to this case.
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had to go without necessary medical care; some employees with expensive
prescriptions were unable to afford them out of pocket, and some suffered adverse
health effects as a result; some employees were forced to pay for care on personal
credit cards; some were referred to debt collectors because they could not afford the
expenses; and some employees had to forgo other necessary expenses, such as for
housing, food, and childcare, in favor of paying for medical care. See Complaint 5–6.
Plaintiffs object that the third prong of the Hunt test is prudential rather
than constitutional, citing United Food and Com. Workers Union Loc. 751 v. Brown
Group, Inc., 517 U.S. 544 (1996). That determination in Hunt, however, was used
by the Court to avoid concluding that a statute that otherwise would have violated
the third prong is unconstitutional. Id. at 558 (“Because Congress authorized the
union to sue for its members’ damages, and because the only impediment to that
suit is a general limitation, judicially fashioned and prudentially imposed, there is
no question that Congress may abrogate the impediment.”). That the prong is
“prudential” does not mean that the Court should simply disregard it. Prudential
limitations on standing are “designed to deny standing as a matter of judicial
prudence rather than constitutional command.” 13A Edward H. Cooper, Fed. Prac.
& Proc. Juris. § 3531.7 (3d ed.); see also Hinesburg Sand & Gravel Co., Inc. v. State,
166 Vt. 337, 341 (1997) (“Standing embodies a core constitutional component and a
prudential component of self-imposed judicial limits.”). The third prong of the Hunt
test would counsel strongly in favor of a determination that Plaintiffs lack standing
in this case.
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In sum, Plaintiffs are not the real parties in interest in this action. It is
unnecessary to address Future Planning’s additional argument for dismissal of the
CPA claim at this time, because there is no appropriate party presently advancing
the CPA.
Rule 17(a) provides that an action shall not be dismissed “on the ground that
it is not prosecuted in the name of the real party in interest until a reasonable time
has been allowed” for joinder or substitution of any real parties in interest.
Accordingly, while Future Planning’s motion is granted, this case will not be
dismissed before any real parties in interest have a fair chance to join the litigation.
Conclusion
For the foregoing reasons, Future Planning’s motion to dismiss is granted to
the extent that the Court determines that Plaintiffs are not real parties in interest
to this case. The case will be dismissed in 30 days unless real parties in interest
join this litigation as parties plaintiff.
Dated this __ day of January 2020 at Montpelier, Vermont.
_____________________________
Timothy B. Tomasi,
Superior Court Judge
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