By Michael Angell

Law360 (December 17, 2020, 6:23 PM EST ) A Florida federal judge has refused to nix a union's bid to pursue $5.3 million from Miami's Fontainebleau Hotel, saying the union didn't break its contract by launching arbitration to collect what the hotel allegedly owes a health fund for laid-off workers.

U.S. District Judge Robert N. Scola granted a motion to dismiss the hotel's declaratory judgment case against Unite Here Local 355 and the union's Welfare fund, saying Wednesday that the union appears within its rights under the collective bargaining agreement to ask the hotel to arbitrate the dispute.

"The court is not convinced that Fontainebleau has adequately alleged that a contract, here the CBA between Fontainebleau and Local 355, has been violated," Judge Scola said. "The court disagrees with Fontainebleau that Local 355 and the Welfare Fund violated the CBA by initiating an arbitration."

In March, the famed art deco hotel laid off nearly all its staff, including 1,077 Local 355 members, as guests cleared out following the widespread lockdown ordered by the City of Miami because of the COVID-19 pandemic.

According to Fontainebleau, since the laid-off workers weren't covered by the CBA anymore, arbitrating on their behalf was a violation of the Labor Management Relations Act, and the court was obligated to intervene.

However, Judge Scola said Fontainebleau didn't cite any authority that would back up its argument as to why arbitration provisions in the CBA wouldn't cover this dispute as well. He also disagreed with the hotel's take that a provision in the CBA limiting debt collection efforts to "legal action" would bar out-of-court efforts such as arbitration.

Because Fontainebleau couldn't show that the union violated the CBA in asking for arbitration, Judge Scola said he couldn't make a judgment that would void the payments entirely.

The union and health care plan lobbed their own counterclaim in August to force Fontainebleau to arbitrate the matter of the disputed payments, and those remain before the court.

Judge Scola also didn't buy Fontainebleau's arguments that it could ask the court to halt the debt collection efforts because of its jurisdiction over benefits plans through the Employee Retirement Income Security Act.

The hotel claimed one section of ERISA allowed it to bring a suit against the union because it was a party to a contract that provides benefits to workers. But Judge Scola said that section was limited to actions involving pensions, not health care benefits.

Fontainebleau also argued that since it makes payments to an ERISA benefits plan that it could litigate a dispute with others involved in the plan. Yet Judge Scola said that section of ERISA limits litigation only to those who directly receive the benefits or administer them, which means the hotel can't bring a case.

Attorneys for Fontainebleau, Local 355 and the Welfare fund did not respond to a request for comment. The Fontainebleau Hotel also did not respond to a request for comment.

The Fontainebleau is represented by Steffie Kathleen Massing, Charles E. Engeman, and Russell Scott Buhite of Ogletree Deakins Nash Smoak & Stewart PC.

Unite Here Local 355 and the Welfare fund are represented by D. Marcus Braswell Jr. of Sugarman & Susskind PA. The local is additionally represented by Kristin L. Martin of McCracken Stemerman & Holsberry LLP.

The case is Fontainebleau Florida Hotel LLC v. The South Florida Hotel and Culinary Employees Welfare Fund et al., case number 1:20-cv-22667, in the U.S. District Court for the Southern District of Florida.

--Editing by Haylee Pearl.

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