Fontainebleau Sues To Skip Up To $5.3M In Benefits Payments

By Joyce Hanson
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Law360 (June 29, 2020, 4:48 PM EDT) -- The iconic Fontainebleau hotel in Miami Beach wants a court to back its position that it doesn't have to pay up to $5.3 million in health care contributions to workers who were laid off while the hotel has been shuttered for months due to the COVID-19 pandemic.

Fontainebleau Florida Hotel LLC, operator of the historic hotel, told a Florida federal court in its Friday complaint that the multimillion-dollar payment claims made by Unite Here, Local 355, run contrary to a collective bargaining agreement inked by the union and hotel management. Also, the hotel said, a trust instrument maintained by employee benefit plan the South Florida Hotel and Culinary Employees Welfare Fund prohibits such payment.

"Fontainebleau asserts that it does not owe contributions for the period in question because the former bargaining unit employees were laid off as of March 30, 2020 and, accordingly, are no longer employees for whom contributions must be paid to the fund pursuant to the CBA," according to the suit.

The hotel, which opened in 1954, contends that an unprecedented March 24 order from the City of Miami Beach, intended to minimize the virus's spread, forced the Fontainebleau to shut down all operations and suffer a sudden drop in room occupancy from 80% to zero.

The closing of the hotel and its restaurants, bars, clubs, retail businesses, spa and pools caused revenue to flatline and led to the layoff of 2,083 of the Fontainebleau's 2,151-person workforce, including all 1,077 people represented by the union, the suit says.

The union and the fund then demanded that the hotel continue to make health care contributions on behalf of the laid-off staff — to the tune of between $3.9 million and $5.35 million — despite the hotel's precarious finances and "the fact that [the workers] are no longer employed by Fontainebleau," according to the suit.

"The uncertainty surrounding defendants' demands for these huge payments has placed and will continue to place Fontainebleau under a financial cloud, as it attempts to re-stabilize itself and regain its ability to again employ 2,000-plus people in the City of Miami Beach," the hotel alleges.

The federal court has jurisdiction over the suit because it arises under the Employee Retirement Income Security Act, and the fund has already threatened to sue under ERISA to collect claimed May 14 and June 12 payment delinquencies from the hotel, the Fontainebleau's suit says.

The Fontainebleau also urged the court to stay a grievance arbitration initiated by the union over whether the hotel owes fund contributions for laid-off workers since it closed, saying the collective bargaining agreement and the fund's trust instrument are separate agreements and the fund's instrument should control in any claim.

"The union's grievance alleges that the CBA requires these payments to the fund despite the fact that the contributions, if any, are owed to the fund and the fund is the only entity that has a viable claim to such amounts," the hotel says. "Allowing the arbitration process to go forward will cause Fontainebleau irreparable harm because it will force Fontainebleau to litigate the same issue before two different tribunals with potentially conflicting results."

The Fontainebleau seeks a stay of arbitration proceedings; a court order that the workers aren't eligible employees under the CBA from the time they were laid off until the potential date when the hotel calls them back to work; and a declaration that the hotel has no obligation to make health care contributions for laid-off workers.

Representatives for the parties did not immediately respond to requests for comment Monday.

The Fontainebleau is represented by Russell S. Buhite and S. Kathleen Massing of Ogletree Deakins Nash Smoak & Stewart PC.

Counsel information for the fund and the union was not immediately available.

The case is Fontainebleau Florida Hotel LLC v. The South Florida Hotel and Culinary Employees Welfare Fund and Unite Here, Local 355, case number 1:20-cv-22667, in the U.S. District Court for the Southern District of Florida.

--Editing by Daniel King.

For a reprint of this article, please contact reprints@law360.com.

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