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Law360 (March 31, 2021, 5:42 PM EDT ) A Florida federal judge has dismissed claims by the iconic Fontainebleau hotel in Miami Beach that it didn't have to pay laid-off union workers up to $5.3 million in health care contributions while it was shuttered for months because of COVID-19, saying the parties have settled.
U.S. District Judge Robert N. Scola Jr.'s order administratively closing the case was entered in the docket on Monday after he received a Friday notice of settlement from Fontainebleau Florida Hotel LLC, Unite Here Local 355, the South Florida Hotel and Culinary Employees Welfare Fund health plan and the fund's trustees.
"The court directs the clerk to close this case. Any party may move to reopen the case if there is a problem in reaching a final settlement agreement," the judge wrote. "Any pending motions are denied as moot."
Terms of the settlement were not available in court filings. The two-page notice only said that all parties, including the hotel, had reached a settlement in the litigation, and that the union, the Welfare Fund health plan and the trustees will file their dismissal fully resolving the case within the next two weeks as of Monday.
Attorneys for Fontainebleau, Unite Here and the Welfare Fund did not respond to requests for comment Wednesday.
Judge Scola had refused Dec. 16 to throw out the union's bid to pursue $5.3 million from Fontainebleau, saying the union didn't break its contract by launching arbitration to collect what the hotel allegedly owed the health plan for laid-off workers during the pandemic. The judge granted the union's motion to dismiss for failure to state a claim, saying the union appeared 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 famously opulent 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. Currently, according to the Fontainebleau website, the hotel, its pools and restaurants are open again for business.
According to Fontainebleau's June 26 complaint, because 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. The union and health plan lobbed their own counterclaim in August to force Fontainebleau to arbitrate the matter of the disputed payments.
Judge Scola said Dec. 16 that Fontainebleau didn't cite any authority that would support its argument as to why arbitration provisions in the CBA wouldn't cover this dispute as well. He also disagreed with the hotel's view 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.
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 Hotel Florida LLC is represented by Russell S. Buhite and Charles E. Engeman of Ogletree Deakins Nash Smoak & Stewart PC.
Unite Here Local 355, the South Florida Welfare Fund and the fund trustees 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.
--Additional reporting by Michael Angell. Editing by Amy Rowe.
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