N.E. Cleaning Svs. v. American Arbitration, 199 F.3d 542, 1st Cir. (1999)
N.E. Cleaning Svs. v. American Arbitration, 199 F.3d 542, 1st Cir. (1999)
N.E. Cleaning Svs. v. American Arbitration, 199 F.3d 542, 1st Cir. (1999)
1999)
of Massachusetts law. The district court allowed the AAA's motion to dismiss
NECS's complaint on the ground that the AAA's actions were protected by
arbitral immunity. We affirm.
BACKGROUND
2
We take the following facts from NECS's complaint and attached documents.
See LaChappelle v. Berkshire Life Ins. Co., 142 F.3d 507, 509 (1st Cir. 1998).
By its terms, the Agreement was effective until August 31, 1996, and would
continue in effect thereafter until terminated by either party. A party could
terminate the Agreement if it did so in writing more than 60 days before the
stated expiration date. On or about September 6, 1994, NECS sent the SEIU a
letter stating that it was terminating the Agreement.
Beginning in early June, 1998, the SEIU filed several grievances with NECS.
NECS denied the grievances as untimely, arguing that it had effectively
terminated the Agreement in 1994. On August 3, 1998, the SEIU filed a
demand for arbitration with the AAA, claiming that NECS had "improperly"
terminated the Agreement. On August 7, having received notice of this demand
from the AAA, NECS wrote a letter to the AAA stating that no collective
bargaining agreement between NECS and the SEIU existed, and that therefore
the AAA lacked jurisdiction or authority over NECS. NECS attached to this
letter copies of the Agreement and its termination letter of September 6, 1994.
The AAA continued to process the SEIU's demand, however, and sent NECS
an invoice for services rendered in connection therewith. Despite NECS's
written warning that it planned to file a complaint in the federal district court,
the AAA continued to proceed toward arbitration, and scheduled a hearing on
the SEIU's demand.
On September 17, 1998, NECS filed a complaint in the district court against the
SEIU and the AAA. Against the SEIU, it sought a declaration pursuant to
section 301 of the Taft-Hartley Act, 29 U.S.C. 185, that there was no
collective bargaining agreement in force between NECS and the SEIU and that
NECS was not obligated to submit to arbitration. Against the AAA, NECS
sought an injunction preventing further processing of the demand for
arbitration as well as damages under M.G.L. c. 93A and c. 12, 11 for
compelling NECS to arbitrate.
8
Following an expedited evidentiary hearing, the district court held that NECS
had properly terminated the Agreement, that there was no collective bargaining
agreement presently in effect between it and the SEIU, and that the issue of the
existence of the Agreement was not arbitrable. In a companion memorandum
and order, the court dismissed NECS's complaint against the AAA on the
ground that its decision to process SEIU's demand for arbitration was protected
by arbitral immunity. NECS appeals from the latter ruling.
DISCUSSION
9
10
The AAA argues that arbitral immunity protects its processing of a facially
valid demand for arbitration pursuant to a collective bargaining agreement that
names it as the arbitral agency. It maintains that the SEIU's demand for
arbitration met this standard, in that it (1) stated that NECS had "improperly
terminated" the Agreement and "failed to meet with the union" in accordance
with the prescribed grievance procedure, and (2) attached a copy of the
Agreement, which explicitly provided for binding arbitration under the rules of
the AAA. The AAA contends that it followed its own internal rules and
procedures in billing the parties, notifying NECS of the demand, selecting an
arbitrator, and scheduling a hearing date. Moreover, it argues that the system
functioned appropriately in this case: upon NECS's complaint, the district court
resolved the issue of the AAA's jurisdiction, and the AAA heeded the ensuing
Settled case law as well as federal policy encouraging labor arbitration favors
the AAA's position. First, we reject NECS's assertion that the district court
erroneously failed to comply with Fed. R. Civ. P. 12(b)(6) when it did not take
as true all of NECS's allegations regarding the Agreement. NECS cannot
preclude dismissal of its complaint under that rule simply by alleging that it had
terminated the Agreement and had no collective bargaining agreement with the
SEIU in effect at the time of the grievances. Such allegations are not assertions
of fact, but rather involve legal issues and conclusions--indeed, the ultimate
disputed issues presented in NECS's action against the SEIU. The court is not
required to accept legal conclusions as true when considering a motion to
dismiss. See Abbott v. U.S., 144 F.3d 1, 2 (1st Cir. 1998); 2A Moore's Federal
Practice, 12.34[1][b].2
12
Second, the district court correctly concluded that the AAA's decision to
process the demand was protected by arbitral immunity. "Because an
arbitrator's role is functionally equivalent to a judge's role, courts of appeals
have uniformly extended judicial and quasi-judicial immunity to arbitrators."
Olson v. National Ass'n of Securities Dealers, 85 F.3d 381, 382-83 (8th Cir.
1996). As with judicial and quasi-judicial immunity, arbitral immunity is
essential to protect decision-makers from undue influence and protect the
decision-making process from reprisals by dissatisfied litigants. See id. In
proper circumstances, organizations that sponsor arbitrations, as well as
arbitrators themselves, enjoy this immunity from civil liability. See Honn v.
National Ass'n of Securities Dealers, Inc., 182 F.3d 1014, 1017 (8th Cir. 1999);
Hawkins v. National Ass'n of Securities Dealers Inc., 149 F.3d 330, 332 (5th
Cir. 1998); Corey v. New York Stock Exchange, 691 F.2d 1205, 1208-11 (6th
Cir. 1982).
13
14
NECS points out that the district court determined that the AAA lacked
16
Not least, failure to extend immunity to the AAA in these circumstances could
discourage it from sponsoring future arbitrations. See Austern, 898 F.2d at 886-
87; Tamari, 552 F.2d at 781. Reluctance by the AAA or similar organizations to
arrange arbitrations would impede the implementation of federal policy
favoring arbitration of labor disputes. See 9 U.S.C. 2, 3, 4; Moses H. Cone
Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983) ("Section 2 [of
the Federal Arbitration Act] is a congressional declaration of a liberal federal
policy favoring arbitration agreements, notwithstanding any state substantive or
procedural policies to the contrary."). Accordingly, we agree with the district
court that the AAA is protected by arbitral immunity from liability for its
actions in this matter.
17
18
Affirmed.
Notes:
1
NECS sued both the SEIU and the AAA under the federal question jurisdiction,
premised on NECS's underlying Taft-Hartley Act claim against the SEIU.
NECS prevailed in the district court on its contention, inter alia, that the
collective bargaining agreement formerly existing between the parties had been
effectively terminated prior to the union's demand for arbitration, vitiating the
arbitration clause. The SEIU's appeal from the district court's determination
that NECS had terminated the agreement was argued to us on the same day as
the instant appeal, and is the subject of a separate opinion issued today. See
New England Cleaning Services, Inc. v. Local 254, Service Employees
International Union, AFL-CIO, 199 F.3d 537 (1st Cir. 1999).
Allegations concerning the termination of the Agreement that were truly factual
rather than conclusory must, of course, be taken as true for purposes of the
motion to dismiss. For example, while the court must accept NECS's allegation
that it sent a letter stating that the Agreement was thereby terminated, it was not
bound under these facts by its statements as to the legal effectiveness of the
termination.
In its brief, the AAA points out: "It would be no more appropriate for AAA, as
a neutral administrative body, to make a determination of arbitrability than it
would be for a court clerk's office to dismiss an action on jurisdictional grounds
at the request of one of the parties, or without order of court."