Unite Here Retirement Fund v. City Of San Jose

Background

The City of San Jose owned the Dolce Hayes Mansion hotel and conference center from 2003 until 2019. Under a management agreement, Dolce International/San Jose, LLC operated and managed the property. Employees at Hayes Mansion were represented by UNITE HERE Local 19 or its predecessor union, and their collective bargaining agreements required employer contributions to the Unite Here Retirement Fund.

After the City sold Hayes Mansion in 2019, the Fund assessed withdrawal liability under the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act. The Fund alleged that either Dolce or the City was the responsible “employer.” The Fund assessed $1,136,944 in principal liability, payable in eighty quarterly installments of $21,744.50, and notified both Dolce and the City of the amount and payment schedule.

Dolce requested review of the assessment, denied that it had an obligation to contribute to the Fund, and asserted that the City was responsible. Dolce nevertheless made the demanded quarterly payments and later demanded arbitration. The City did not request review or make the first demanded payment.

The Fund initially sued the City in the Southern District of New York. After the case was transferred to this court, the Fund amended its complaint to add Dolce and asked the court to determine whether the City or Dolce was the employer responsible for the withdrawal liability.

Motion and parties’ positions

Dolce moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legal claim. Dolce argued that the Fund’s claims should be dismissed because the Employee Retirement Income Security Act requires arbitration before court proceedings. Specifically, Dolce argued that an arbitrator, rather than the court, should decide whether Dolce was an employer of the Hayes Mansion bargaining-unit employees and therefore subject to withdrawal liability.

The Fund agreed that some withdrawal-liability disputes must be arbitrated, but argued that whether Dolce qualified as an employer was a threshold legal question for the court. At the time of the motion, the City had a cross-claim against Dolce, but the City later filed an amended answer that removed that cross-claim.

Court’s reasoning

The court explained that the Employee Retirement Income Security Act generally requires arbitration of disputes between an employer and a multiemployer pension plan concerning certain withdrawal-liability determinations. Issues such as whether an employer withdrew from a plan and the amount of withdrawal liability are generally committed to arbitration.

The court distinguished those disputes from the question presented here: whether Dolce was an employer under the statute in the first place. The Ninth Circuit had not directly addressed that specific issue, but several other federal appellate courts and district courts within the Ninth Circuit had held that employer status is a threshold legal issue for judicial review rather than arbitration. The court adopted that approach.

The court recognized a narrow exception for disputes in which an entity admits that it was once an employer but claims that it later ceased to be one. Those disputes are subject to arbitration. The court found that exception inapplicable because Dolce claimed that it had never been the employer of the Hayes Mansion employees and had never been obligated to contribute to the Fund regarding them.

The court also rejected Dolce’s reliance on several cases. It explained that one cited case involved a dispute over the amount of liability while employer status was undisputed, another involved provisions concerning evasion or avoidance of withdrawal liability, and others did not require arbitration of employer status. The court also noted that Dolce appeared both to claim an existing relationship with the Fund and to deny that it was ever the employer of the Hayes Mansion employees. The court concluded that the employer-status question was appropriate for judicial review.

Disposition

The court deemed Dolce’s motion moot as to the City because the City had removed its cross-claim against Dolce. As to the Fund, the court denied Dolce’s motion to dismiss. The court therefore allowed the Fund’s claims to proceed at this stage, without deciding whether Dolce or the City was ultimately responsible for the withdrawal liability.