Scales v. New York Hotel and Motel Trades Council, Local 6

Background

William Scales, who represented himself, sued New York Hotel and Motel Trades Council, Local 6, concerning the placement of his 401(k) contributions. Scales alleged that, after Local 6 became the union representing employees at the Ace Hotel, employees had 30 days to choose between the hotel’s retirement plan and the union’s plan. He alleged that he was laid off during that period and was not informed of the choice. After he returned to work and selected the hotel plan, he later learned that his contributions had been placed into the union’s plan.

Scales alleged that Local 6 told him it could not assist him in recovering the contributions or provide him with a lawyer. He also alleged that Local 6 did not investigate the relevant contracts, pursue mediation, or seek arbitration on his behalf. He claimed that the funds were being held in the union plan and that he had suffered financial losses. He sought $1.4 million plus interest.

The Motion to Dismiss

Local 6 moved to dismiss the Second Amended Complaint. It argued that Scales’s claim was barred by the six-month statute of limitations for claims that a union breached its duty of fair representation. It also argued that Scales had not stated a legally sufficient claim.

The court treated Scales’s claim as a federal claim that Local 6 breached its duty of fair representation. That duty requires a union to represent members without hostility or discrimination, in good faith and honestly, and without arbitrary conduct. The court explained that a union’s conduct must be arbitrary, discriminatory, or in bad faith, and must be connected to the member’s injury.

Statute of Limitations

The court did not resolve whether Scales’s claim was timely. The pleadings gave conflicting and unclear information about when Local 6 refused to assist him. The court concluded that, accepting the allegations and reasonable inferences in Scales’s favor, the claim could have accrued as late as April 2021, less than six months before the original complaint was filed on August 25, 2021. The court therefore declined to dismiss the claim as time-barred at this stage. It stated that Local 6 could raise the statute-of-limitations defense later if the case continued and the facts developed.

Failure to State a Claim

The court held that Scales had not plausibly alleged that Local 6 acted arbitrarily, discriminatorily, or in bad faith. According to the complaint, Local 6 gave a reason for not pursuing the matter: it believed that the 401(k) contract had been created before Local 6 became the active union. The court concluded that Local 6’s decision reflected a potentially reasonable interpretation of the agreement, even if that interpretation was wrong.

The court also found no allegations that Local 6 intentionally discriminated against Scales or acted with a fraudulent, dishonest, or improper motive. Because Scales did not adequately plead the required type of union misconduct, the court granted Local 6’s motion to dismiss. The court did not decide whether the employer breached the relevant agreement or whether Local 6’s conduct caused Scales’s alleged injuries.

Leave to Amend and Disposition

The court dismissed the Second Amended Complaint without prejudice and allowed Scales to file a Third Amended Complaint within 30 days if he could allege facts showing that Local 6 acted arbitrarily, discriminatorily, or in bad faith. The court stated that if Scales did not file another amended complaint within that period and did not show good cause, it would dismiss the action with prejudice.