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Butcher v. Teamsters Local 955

United States District Court, D. Kansas

November 28, 2018

JEREMY BUTCHER, et al., Plaintiffs,
v.
TEAMSTERS LOCAL 955, et al., Defendants.

          MEMORANDUM AND ORDER

          JULIE A. ROBINSON CHIEF UNITED STATES DISTRICT JUDGE

         Plaintiffs Jeremy Butcher and Jeremy Butcher, Inc. bring claims against Defendant Teamsters Local 955 (“Local 955”) for conversion, tortious interference with a business expectancy, tortious interference with business relations, and civil conspiracy. Plaintiffs allege the same state-law claims against Defendants John Does 1-5, as well as breach of constructive trust, unjust enrichment, violation of the Kansas Uniform Trade Secrets Act, [1] (“KUTSA”), and violation of the Defend Trade Secrets Act of 2016, [2] (“DTSA”). Before the Court is Local 955's Motion to Dismiss (Doc. 7), brought pursuant to Fed.R.Civ.P. 12(b)(6). Local 955 asserts that Plaintiffs' claims are preempted by federal labor law and that Plaintiff has failed to allege facts sufficient to state a claim upon which relief can be granted. For the reasons set forth in detail below, Local 955's motion is denied.

         I. Legal Standard

         To survive a motion to dismiss brought under Fed.R.Civ.P. 12(b)(6), a complaint must contain factual allegations that, when assumed to be true, “raise a right to relief above the speculative level”[3] and must include “enough facts to state a claim for relief that is plausible on its face.”[4] Under this standard, “the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”[5] The plausibility standard does not require a showing of probability that “a defendant has acted unlawfully, ” but requires more than “a sheer possibility.”[6] “[M]ere ‘labels and conclusions,' and ‘a formulaic recitation of the elements of a cause of action' will not suffice; a plaintiff must offer specific factual allegations to support each claim.”[7] Finally, the court must accept the nonmoving party's factual allegations as true and may not dismiss on the ground that it appears unlikely the allegations can be proven.[8]

         The Supreme Court has explained the analysis as a two-step process. For the purposes of a motion to dismiss, the court “must take all the factual allegations in the complaint as true, [but is] ‘not bound to accept as true a legal conclusion couched as a factual allegation.'”[9] Thus, the court must first determine if the allegations are factual and entitled to an assumption of truth, or merely legal conclusions that are not entitled to an assumption of truth.[10] Second, the court must determine whether the factual allegations, when assumed true, “plausibly give rise to an entitlement to relief.”[11] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[12]

         Generally, preemption is an affirmative defense and the defendant bears the burden of proof.[13] “A district court may grant judgment as a matter of law under Federal Rule of Civil Procedure 12(b)(6) on the basis of an affirmative defense like preemption when the law compels that result.”[14] If the facts establishing the affirmative defense are apparent on the face of the complaint itself, a motion to dismiss is proper.[15] Notably, the Supreme Court has held that preemption arising under the NLRA is jurisdictional in nature.[16] “A court has a duty to examine its jurisdiction to determine whether it can review a matter.”[17] Accordingly, although Local 955 pled preemption as an affirmative defense, the Court must consider, sua sponte, whether Local 955's motion should be construed as a 12(b)(1) motion.

         The Tenth Circuit has not explicitly considered whether Garmon preemption should be dismissed under 12(b)(1) or 12(b)(6).[18] A review of other courts' decisions reveals that some courts have dismissed under 12(b)(1), some under 12(b)(6), and others without stating under which 12(b) subsection they are dismissing.[19] Although the Supreme Court has stated that Garmon preemption is jurisdictional, the Supreme Court has also clearly stated that the burden to demonstrate Garmon preemption is on the party claiming preemption.[20]

“The Supreme Court has suggested that, unlike most jurisdictional determinations-which courts can undertake sua sponte, Fed.R.Civ.P. 12(h)(3), and under which courts may assume the truth of pleaded facts and make decisions as a matter of law-Garmon preemption is a defense that must be raised and proved with facts “the party claiming pre-emption is required to demonstrate that his case is one that the Board could legally decide in his favor . . . . The party must then put forth enough evidence to enable the court to find that the Board reasonably could uphold [his] claim.”[21]

         In Taylor, the court reasoned that because the court had initial jurisdiction through diversity to consider whether the conduct was arguably covered by the NLRA, and because the burden to establish preemption was on the party claiming preemption, a motion to dismiss under 12(b)(6) was proper.[22]

         Under 12(b)(1), the “the party invoking federal jurisdiction bears the burden of proof.”[23]However, the Supreme Court has clearly placed the burden of demonstrating Garmon preemption on the party asserting preemption.[24] To apply the standards of 12(b)(1) when considering Garmon preemption would necessarily shift that burden and require Plaintiffs to demonstrate that the Court has jurisdiction over their arguably preempted claims. The Court declines to impose that contradictory result here. The case is properly before the Court on diversity jurisdiction and the Court has subject matter jurisdiction to consider whether Plaintiffs' claims are arguably subject to §7 and §8 of the NLRA. Accordingly, the Court will consider Local 955's preemption argument under 12(b)(6) and apply the standard articulated by the Supreme Court in Davis.

         II. Factual Allegations

         The Court summarizes the facts alleged in the Complaint and assumes them to be true for purposes of deciding this motion. Jeremy Butcher was an Independent Operator for Bimbo Foods Bakeries Distribution, LLC (“Bimbo”). Bimbo developed and acquired, then resold to small businesses and individuals, the exclusive right to purchase, resell, and distribute certain fresh-baked products (“Distribution Rights”)-including brands such as Nature's Harvest, Arnold, Brownberry, Oroweat, and Entermann's-throughout the United States, including the Greater Kansas City metropolitan area. Bimbo operated an “Independent Operator Distribution Network, ” through which it sold and conveyed exclusive Distribution Rights to distributors including Plaintiffs, who would then resell the product to retail food outlets, restaurants, and other institutions within a defined “Sales Area” or “Route.” The Distribution Rights included the Route, exclusive Distribution Rights, customer lists, customer data, handheld computing equipment networked with Bimbo's computers, advertising and marketing rights, other business assets, and the actual bakery products for resale.

         Plaintiffs executed a bill of sale for the purchase of their Route and have owned from the date of said sale to the present, all rights, title, and interest in the Distribution Rights for Bimbo products in that particular Route in the Greater Kansas City area. Plaintiffs also entered into a Distribution Agreement with Bimbo, effective May 26, 2008, which set forth Bimbo's obligations with respect to Plaintiffs.

         In 2011, Bimbo's parent company, Mexico-based Grupo Bimbo, S.A.B. de C.V., purchased Sara Lee Corporation's North American Fresh Bakery (“Sara Lee NAFB”) business. At the time, Sara Lee NAFB operated forty-one plants and approximately 4, 800 distribution routes. The complementary product lines and geographies gave rise to overlapping routes between Bimbo and Sara Lee.

         Around 2017, Bimbo undertook negotiations with Local 955 to establish a new pay schedule for union drivers to take over the Route owned by Plaintiffs and other independently-owned routes in the Kansas City area. Bimbo and Local 955 entered into a Memorandum Agreement by which they agreed to extend their then-current agreement-set to expire on September 29, 2018-for three years, through October 3, 2021. Union drivers began servicing Plaintiffs' Route on June 17, 2018.

         Local 955 knew that Bimbo had not properly acquired Plaintiffs' Distribution Rights. On October 27, 2017, counsel for Plaintiffs wrote Local 955, advising that Plaintiffs owned the exclusive rights to distribute Bimbo products in certain geographic areas, and that any action to service Plaintiffs' Route would constitute interference with Plaintiffs' business expectancy. Bimbo attempted to purchase Plaintiffs' Route in furtherance of its agreement with Local 955; Plaintiffs, however, were unwilling to sell. The Distribution Agreement between Bimbo and Plaintiffs provides, “[e]xcept as set forth in this Article, or upon the sale or transfer of all of the DISTRIBUTOR's Distribution Rights, this Agreement may not be terminated or canceled, provided DISTRIBUTOR carries out the terms hereof.”[25] The Distribution Agreement does not allow Bimbo to terminate the Agreement except for cause (defined in the Agreement) or death.

         On June 26, 2018, Local 955 published an article on the “News” section of its website. The article states, in part:

• The benefits of hiring a union driver instead of an independent operator are obvious to Teamsters. Every once in a while, it becomes obvious to large multinational corporations as well.
• “Bimbo bakeries is our largest employer, and throughout the years I've consistently pushed them to think differently about their distribution methods-specifically their independent operator model, ” Bakery and Laundry Conference (BLC) Chairman and Director Dave Dudas said. “Over time, the company has bought out their independent operators (IOs) and given those bread routes to Teamster drivers. This has led to greater sales for the company, which in turn has led to more earnings for our membership.”
• The story of how the Teamsters and Bimbo Bakeries provides a fantastic model for building mutually beneficial relationships for union members, the companies they work at and the customers they serve. . . . .
Kansas City, Missouri . . . the company approached Dave Dudas about a large-scale project that he had been advocating on behalf of for a number of years-the transitioning of an entire geographic area into a Teamsters-only distribution network.”
• The BLC successfully negotiated a plan for Bimbo Bakeries to transition all of the IO routes in the Kansas City metropolitan area to Teamster drivers.
• . . . .the move has led to increased sales, particularly in Bimbo brands that the Teamsters previously weren't selling such as Oroweat, Entenmann's and Thomas.
• “We anticipate that the company will be able to scale up in Kansas City to at least 16 more small stop routes to cover more than 800 locations that we currently do not service, ” Dudas said. “The significance of the Kansas City project cannot be undervalued. The company was under no pressure to transition from IOs to Teamster route sales, but because of this program we are adding new members . . . ” . . . .
• “Before the implementation of this program, we controlled less than 35 percent of the bread routes in the Kansas City metropolitan area, ” said Woods. “Now we control more than 50 percent, and pretty soon it will be 100 percent. We knew that at a certain point the company was going to switch over to either our drivers or IOs completely. We needed to figure something out, and we did.”[26]

         Although Plaintiffs have not sold, and Bimbo has not acquired, Plaintiffs' Distribution Rights, union drivers have serviced Plaintiffs' Route, pursuant to Local 955's “plan” and agreement with Bimbo. Plaintiffs have demanded the return of possession and control of their Distribution Rights.

         Following Bimbo's agreement with Local 955, Bimbo prevented Plaintiffs from accessing the computer and software needed to order products and perform the Distribution Agreement; refused to allow Plaintiffs to place orders for products; demanded Plaintiffs make their trucks available for repainting; assigned union drivers and personnel to service Plaintiffs' Route and furnished those employees with tools, marks, and other trade necessities; received and deposited into their own accounts monies from the sale and delivery of products to outlets in Plaintiffs' Sales Area; and refused to pay to Plaintiffs the profits from the sales and deliveries of products since union drivers took over the Route on June 17, 2018.

         III. Discussion

         Local 955 asserts that Plaintiffs' claims fail to state a claim upon which relief can be granted for two reasons: (1) Plaintiffs claims are preempted by federal labor law and (2) Plaintiffs fail to assert essential elements of their underlying causes of action.[27] The Court addresses each issue in turn.

         A. Preemption

         Local 955 argues that all of Plaintiffs' state-law tort claims are preempted by federal labor laws, specifically the National Labor Relations Act (“NLRA”) and the Labor Management Relation Act (“LMRA”), under the principles set forth in San Diego Building Trades Council v. Garmon.[28] Under Garmon “[w]hen an activity is arguably subject to § 7 or § 8 of the [NLRA], the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board if the danger of state interference with national policy is to be averted.”[29]The purpose of Garmon preemption is to protect “the primary jurisdiction of the NLRB to determine in the first instance what kind of conduct is either prohibited or protected by the NLRA.”[30]

         The Supreme Court has elaborated on what it meant by “arguably.”

If the word “arguably” is to mean anything, it must mean that the party claiming pre-emption is required to demonstrate that his case is one that the Board could legally decide in [its] favor. That is, a party asserting preemption must advance an interpretation of the Act that is not plainly contrary to its language and that has not been “authoritatively rejected” by the courts or the Board. The party must then put forth enough evidence to enable the court to find that the Board reasonably could uphold a claim based on such an interpretation.[31]

         Courts applying this standard do not require that the Board arrive at a particular outcome; rather, the question is whether a court can conclude that the activity is prohibited or protected by the NLRA.[32] In the 12(b)(6) context, “the party claiming preemption bears the burden of demonstrating that the challenged activity is prohibited [or protected] by the NLRA.”[33] In Nw. Ohio Adm'rs, Inc. v. Walcher & Fox, Inc., the Sixth Circuit affirmed the district court's denial of a motion to dismiss because “the Union has offered no evidence demonstrating that its activities are unfair labor practices [under § 8], ” and consequently had failed to meet their burden of proof to establish preemption at the motion to dismiss stage.[34] Accordingly, at this stage, Local 955 must establish that the conduct alleged in Plaintiffs' Complaint is arguably within the scope of § 8; namely, that the conduct alleged by Plaintiffs arguably constitutes an unfair labor practice.

         Local 955 asserts that because Plaintiffs “are, in effect, arguing that the terms of the CBA” constitute an unfair labor practice, the claims are preempted under §8(e) and/or § 8(b)(4) of the NLRA, or in the alternative, §303 of the LMRA provides the exclusive right of action.[35]Plaintiffs respond that the alleged conduct does not fall within the scope of § 8(e), § 8(b)(4), or §303 because Plaintiffs' state tort claims do not touch on matters giving rise to a claim under the NLRA. The Court finds-based on the facts alleged in Plaintiffs' Complaint-Local 955 has not established that Plaintiffs' claims are preempted.[36]

         1. Section 8 of the NLRA

          Local 955 argues that the conduct alleged in Plaintiffs' Complaint is arguably encompassed by Section 8(e) of the NLRA. Section 8(e) states, in relevant part:

It shall be an unfair labor practice for any labor organization and any employer to enter into any contract or agreement, express or implied, whereby such employer ceases or refrains or agrees to cease or refrain from handling, using, selling, transporting or otherwise dealing in any of the products of any other employer, or to cease doing business with any other person, and any contract or agreement entered into heretofore or hereafter containing such an agreement shall be to such extent unenforceable and void . . . .[37]

         Section 8(e) prohibits so-called “hot cargo” agreements, by which unions secure agreements from employers to boycott the goods and services of other employers who do not operate under union contracts, which Plaintiffs have not alleged here. “The ‘touchstone' and ‘central theme' of § 8(e) is the protection of neutral employers . . . which are caught in the middle of a union's dispute with a third party.”[38] Similarly, § 8(b)(4) prohibits any attempt by a labor organization to “threaten, coerce, or restrain any person” for the purpose of forcing or requiring that person to cease doing business with any other person.[39] This activity has been labeled as a “secondary boycott” or “secondary picketing.” The purpose of § 8(b)(4) is to “protect neutral employers, i.e., those not directly involved in a labor dispute.”[40] Notably, “[s]ection 8(b)(4)(A) prohibits union activities designed to force an employer to enter into an agreement which is prohibited under section 8(e).”[41] Thus, the Court will consider preemption based on § 8(e) and/or § 8(b)(4) together.

         Plaintiffs assert that because there is no “labor dispute” or “neutral employer” here, §§ 8(b)(4) and 8(e) do not apply.[42] Local 955 responds that Plaintiffs' interpretation requiring a neutral employer and a labor dispute ignores the plain language of the statute; rather, Local 955 argues, the plain language of the statute only requires “any labor organization and any employer to enter into any contract or agreement . . . to cease doing business with any other person.”[43]Local 955's argument that the plain language of the statute establishes preemption, without more, is not sufficient. Rather, Local 955 must “put forth enough evidence” for the Court to find that the NLRB can adjudicate Plaintiffs' claims.[44] Further, the mere fact that a union is the defendant in this case does not establish preemption: “The Board is not involved in this case essentially because the Employer merely filed a lawsuit against the Union.”[45]

         In evaluating whether Plaintiffs' claims are preempted, the Court considers the purpose of Garmon preemption, namely, to protect “the primary jurisdiction of the NLRB to determine in the first instance what kind of conduct is either prohibited or protected by the NLRA.”[46] ...


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