Trustees of the Laundry v. FDR Services Corp. of New York

Background

The Funds sued FDR under the Employee Retirement Income Security Act of 1974 (ERISA), seeking an audit and payment of allegedly delinquent contributions. The Health Fund’s audit determined that FDR had failed to remit approximately $300,000 for covered employees.

FDR brought a third-party action against the Laundry, Distribution, and Food Service Joint Board and Union representatives Alberto Arroyo and Wilfredo Larancuent. FDR claimed the Union Defendants failed to forward 39 forms signed by employees who sought to waive Health Fund coverage. FDR argued that, if the forms had been submitted, its required contributions would have been reduced, and it sought approximately $150,000 from the Union Defendants under ERISA and common-law theories of contribution and breach of fiduciary duties.

The court previously ordered the third-party claims to arbitration. After 11 days of hearings held between November 2020 and June 2022, the arbitrator issued a final award on February 1, 2023.

Arbitration Award

The arbitrator framed the issue as whether the employees were covered by the collective bargaining agreement and therefore entitled to contributions. The arbitrator ruled for the Union Defendants, finding that FDR had not presented sufficient clear and convincing evidence that the 39 employees and others who signed waivers were exempt from coverage because of an alleged past practice.

The arbitrator relied on Article 16(A) of the collective bargaining agreement, which required FDR to contribute monthly to the Health Fund to provide coverage for employees. The arbitrator found no waiver or exemption for individual employees and concluded that all employees—including those who purportedly signed waivers—were covered. The arbitrator also found that FDR had not shown that the Union authorized the shop steward to handle the forms, and that FDR, as the shop steward’s employer, was responsible for determining the employee’s duties.

FDR’s Motion to Vacate

FDR asked the court to vacate, meaning set aside, the arbitration award. It argued that a letter sent by the Union Defendants’ counsel after the arbitrator accidentally disclosed a draft award improperly influenced the final award. The court rejected that argument. The letter was sent to both the arbitrator and FDR’s counsel, FDR had an opportunity to respond, and FDR did not show that the letter deprived it of a fair hearing or changed the outcome. The court also found that the draft and final awards reached the same result on substantially the same basis.

FDR also argued that the arbitrator decided the wrong issue and exceeded his authority. The court disagreed. It had previously determined that interpreting whether the collective bargaining agreement required contributions for employees who waived coverage was within the arbitration clause. The court further held that the arbitrator’s decision addressed the substance of FDR’s claims: if the employees remained covered, forwarding waiver forms would not have reduced FDR’s contribution obligations, and the Union Defendants could not be liable for that alleged reduction.

The court also rejected FDR’s argument that the arbitrator failed to consider testimony from three FDR witnesses. The witnesses were allowed to testify, and the court stated that an arbitrator is not required to explain every part of the reasoning supporting an award.

Ruling and Effect

Judge Briccetti denied FDR’s motion to vacate the final award and granted the Union Defendants’ cross-motion to confirm it. The court then dismissed the third-party complaint and directed counsel to submit a joint report addressing how the related cases should proceed. The court also vacated the previously entered stay and directed the Clerk to terminate the pending motions.