Nu Image, Inc. v. International Alliance of Theatrical Stage Employees, et al.

Under Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a), federal courts have subject matter jurisdiction over “[s]uits for violation of contracts between an employer and a labor organization.” In Textron Lycoming Reciprocating Engine Div. v. United Auto., Aerospace and Agriculture Implement Workers of America, 523 U.S. 653, 118 S.Ct. 1626, 140 L.Ed. 2d 863 (1998), this Court held that, where neither the employer nor the labor organization asserts that there has been a breach of a labor agreement, federal courts do not have jurisdiction over a suit seeking to invalidate the agreement. In so holding, however, the Court noted that “a declaratory judgment plaintiff accused of violating a collectivebargaining agreement may ask a [federal] court to declare the agreement invalid.” Id. at 658. Petitioner Nu Image and Respondent IATSE entered into a collective bargaining agreement, which Nu Image claims was fraudulently induced based on IATSE’s representations that Nu Image would not have to make any residual contributions to IATSE’s health and pension plans. The plans, third-party beneficiaries of the collective bargaining agreement, sued Nu Image in federal district court, claiming that Nu Image breached the agreement by failing to make residual contributions. Under established authority, Nu Image was unable to raise IATSE’s fraud as a defense and it settled with the plans. Thereafter, IATSE filed an arbitration against Nu Image, also claiming that Nu Image breached the collective bargaining agreement by failing to make residual contributions to the plans. In that arbitration, the arbitrator may be without power to consider Nu Image’s fraud defense. (i)