Unpublished Disposition, 905 F.2d 1540 (9th Cir. 1990)

Nos. 88-15721, 88-15758.

United States Court of Appeals, Ninth Circuit.

Before CHOY and FLETCHER, Circuit Judges, and JAMES M. FITZGERALD,^*  District Judge.

MEMORANDUM^** 

Jerry Witcher is a self-employed electrician running a one-person business under the name of "Just Electric." The International Brotherhood of Electrical Workers Local 234 ("IBEW" or "Union") is a labor organization within the meaning of the Labor-Management Relations Act, 29 U.S.C. § 185. The Union, Jerry Witcher, and Just Electric appeal from a district court order which denied the Union's motion for summary judgment to enforce an arbitration award and ordered the parties to arbitrate their dispute at another hearing. We affirm the denial of summary judgment but vacate the order compelling Jerry Witcher and Just Electric to arbitration.

FACTS

Originally, Jerry Witcher was the sole owner of Witcher Electric, Inc., a California corporation in the business of providing electrical contracting services ("Witcher Electric"). He employed five full-time journeymen and an office staff. In 1978, Witcher Electric executed a "Letter of Assent-A," designating the Monterey Bay California Chapter of the National Electrical Contractors Association ("NECA") as its collective bargaining representative to negotiate with IBEW under the Inside Wiremen's Agreement ("CBA" or "Agreement"). By its terms, the Letter of Assent remained in effect for the duration of the Agreement and any successive agreements negotiated between IBEW and NECA, unless Witcher Electric notified both NECA and IBEW of its intention to terminate the Letter of Assent.

In May 1985, NECA and the Union entered into a collective bargaining agreement effective for three years. Among other provisions, the CBA specified a procedure for resolving differences arising between the IBEW and any signatory employer; unresolved disputes were referred to a Labor-Management Committee ("the Committee) whose decisions were final and binding. Of particular relevance to this appeal, the CBA also contained the following "work preservation clause:"

(a) In order to protect and preserve, for the Employees covered by this Agreement, all work heretofore performed by them, and in order to prevent any device or subterfuge to avoid the protection and preservation of such work, it is hereby agreed as follows: If and when the Employer shall perform any on-site construction work of the type covered by this Agreement, under its own name or under the name of another, including a corporation, company, partnership, or any other business entity, including a joint venture, wherein the Employer, through its officers, directors, partners or stockholders, exercises either directly or indirectly, management, control or majority ownership, the terms and conditions of this Agreement shall be applicable to all such work. All charges of violations of this section shall be considered as a dispute and shall be processed in accordance with the provisions of this Agreement covering the procedure for the handling of grievances and the final and binding resolution of disputes.

In February 1984, allegedly due to economic losses, Witcher Electric went out of business, laying off its last employees and ceasing to participate as an active member of NECA. Although Jerry Witcher claims that he notified the Union that Witcher Electric was no longer a member of NECA, a step that would have obviated this entire case, it does not appear that he did so at the time he went out of business as required by the Letter of Assent. In late 1985, Jerry Witcher bid on some one-man electrical jobs in his own name. He claimed that at that time he regarded himself as self-employed in light of the fact that Witcher Electric had been out of business for four years.

In April 1986, the Union filed a grievance against Witcher Electric. The basis of this grievance is not entirely clear from the record, but it appears that the Union was seeking to make Witcher Electric responsible for the work performed by Jerry Witcher individually. The matter went to arbitration; Jerry Witcher appeared solely to object to the arbitrator's jurisdiction, but left before the hearing on the merits. The Union obtained an award in its favor. Again, the exact nature of the award is not clear from the record. The district judge in the present action characterized the award as merely finding that Witcher Electric was subject to the terms of the collective bargaining agreement. The Union states that the Committee found that Witcher Electric had violated the collective bargaining agreement by failing to abide by the hiring hall provisions and by its failure to pay the contractually required wages and fringe benefits. The Union, in a prior proceeding not the subject of appeal here, petitioned the district court to confirm the arbitration award. The court, after ruling that Witcher Electric waived any objection to jurisdiction by appearing at the arbitration hearing, confirmed the award.

Four months later, in July 1987, the Union sought to bring Jerry Witcher and Just Electric before the Committee, claiming that Jerry Witcher and Just Electric were signatories to and bound by the collective bargaining agreement and charging Witcher Electric, Jerry Witcher, and Just Electric with violations of the work preservation clause. Once again, it is not clear from the record exactly what the basis of the complaint was or the purpose of bringing it, although at oral argument, the Union stated that it sought among other things to require Jerry Witcher to pay fringe benefit contributions on his own behalf.

An arbitration hearing was scheduled for August 1987. Jerry Witcher, apparently challenging the Committee's jurisdiction over him personally and over Just Electric, did not appear. Nevertheless, the Committee proceeded without him. On the basis of evidence that Jerry Witcher was doing business as Just Electric, the Committee held Jerry Witcher and Just Electric bound by the Collective Bargaining Agreement. The Committee decision in its entirety reads as follows:

M/S/C to find Witcher Electric, Inc., Jerry Witcher individually, and Just Electric bound to the Inside Agreement, in accordance with Section 2.08 [the work preservation clause] of the Inside Agreement.

In November 1987, the Union commenced suit against all three entities and moved for summary judgment, asking the court to confirm the arbitration award. The district court decided the matter without a hearing. The court characterized the issue presented as whether the Committee has the authority to decide that a non-signatory employer is a successor or alter ego of a signatory company, and thus bound by the agreement. The court held that under the terms of the CBA, the Committee was authorized to decide if Jerry Witcher and Just Electric were alter egos of Witcher Electric. However, the court denied IBEW's motion to confirm the arbitration award because the parties had not appeared, and instead ordered Witcher Electric, Jerry Witcher, and Just Electric to arbitrate the issue at another hearing before the Committee. The Union appeals from the court's denial of summary judgment. Jerry Witcher and Just Electric appeal from the order compelling arbitration. Witcher Electric does not contest the district court's order.

JURISDICTION

We have jurisdiction over this timely appeal pursuant to 28 U.S.C. § 1291. Although denials of summary judgment generally are not appealable, in this case the court's denial of the Union's motion to enforce the arbitration award combined with the court's order compelling the parties to arbitrate the issue finally disposed of all issues before the court.

DISCUSSION

I. Denial of Motion to Enforce Arbitration Award.

The district court denied the Union's motion to enforce the Committee's award. The court held that once Jerry Witcher and Just Electric challenged the arbitrators' jurisdiction and refused to attend the hearing, the Union was obliged to move the court to compel arbitration rather than proceed ex parte. We agree. If the party who refuses to arbitrate is not a signatory to the agreement, there is no contractual basis for binding that party to an arbitration award absent some clear indication of an intent upon the part of that party to be bound by the arbitration or a judicial determination that the non-signatory is an alter-ego of the signatory. Therefore, the party seeking arbitration must move the court to order the balking party to arbitrate. See, e.g., John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964). As we stated in George Day Construction Co. v. United Brotherhood of Carpenters, 722 F.2d 1471, 1476 (9th Cir. 1984) in the usual case, an employer who objects to arbitration on jurisdictional grounds may refuse to arbitrate the case. The union is then put to the task of petitioning the court to compel arbitration.

The Union argues that this does not apply where the parties to the CBA have specified in advance the forum for resolving grievances. Even assuming that this is true as to signatories, it cannot be applied to non-signatories. The Union relies on cases where we have approved an arbitrator's right to proceed ex parte with an arbitration. These cases are inapposite. In Toyota of Berkeley v. Local 1095, 834 F.2d 751 (9th Cir. 1987) the recalcitrant party, Toyota, was a signatory to the collective bargaining agreement. It merely was presenting an eleventh hour objection to arbitration on the ground that the grievance and request for arbitration were not timely filed. As the court noted, both Toyota and the union had agreed to arbitration as a general proposition as well as to the time and the place for this particular arbitration. In pointed contrast, Jerry Witcher and Just Electric were not signatories to the agreement. They objected at all times to the exercise of jurisdiction.

II. Order Compelling Arbitration.

The judge sua sponte ordered the parties to arbitrate again the issue of whether Jerry Witcher and Just Electric are bound by the agreement as successors or alter egos of the signatory company. In light of the fact that the district court had just refused to confirm the arbitrators' award because the Union had failed to seek an order compelling the non-signatories to arbitrate, the court's decision to issue such an order rather than to await the inevitable motion to be presented is understandable. However, it is possible that the Union may never have brought the motion to compel arbitration, and it was improper for the district court to shape the course of the proceedings in this way. More important, the district court improperly deprived the parties of adequate notice. See generally, Mullane v. Central Hanover Bank & Trust Company, 339 U.S. 306 (1950). Not only did the parties have no notice that the court contemplated compelling them to arbitration, the court issued the order on the summary judgment papers, without granting the parties a hearing. Therefore, we vacate the district court's order compelling Jerry Witcher and Just Electric to arbitration.

We further note that a party not a signatory to an arbitration agreement cannot be forced to arbitration until and unless the court has found that it is bound by the agreement as an alter ego or successor of the signatory company or has in some other way consented to arbitration.

As a general matter, the court rather than the arbitrator should resolve disputes over arbitrability, including questions of whether a party is bound by the arbitration agreement. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986). For instance, in John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964), the Court examined the issue of whether a non-signatory employer which merged with another company was bound by the arbitration provision of the latter's collective bargaining agreement. The Court identified the threshold question in the controversy as who shall decide whether the arbitration provisions of the CBA survived the merger. Relying on previous caselaw that whether or not a company is bound to arbitrate as well as what issues it must arbitrate "is a matter to be determined by the Court on the basis of the contract entered into by the parties," the Court held that it would be improper to compel arbitration on the issue because, "just as an employer has no obligation to arbitrate issues which it has not agreed to arbitrate, so a fortiori, it cannot be compelled to arbitrate if an arbitration clause does not bind it at all." Id. at 547. The Court went on to evaluate whether the similarity and continuity of operations across the change in ownership was sufficient to find the successor company bound by the CBA. See also, Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960) (" 'arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit.' " (citations omitted)). Cf. Howard Johnson Co. v. Detroit Local Joint Executive Bd., 417 U.S. 249 (1974) (Court rather than arbitrator determined whether non-signatory successor was bound by arbitration agreement of its predecessor).

We have relied on these cases to find that whether a non-signatory was bound by a collective bargaining agreement under the alter ego doctrine is a question to be determined by the courts. In Local No. 359 v. Arizona Mechanical & Stainless, 863 F.2d 647 (9th Cir. 1988), a union and a company were parties to a collective bargaining agreement. The company notified the union that it was going out of business. Subsequently, two former owners of the company purchased the company's assets and began to operate the business under a different name. The union filed a grievance alleging that the successor company was violating the CBA by using non-union labor. The successor company participated in the grievance procedure but at all times contended that it was not bound by the CBA and was not a signatory to the agreement. The arbitrator decided in favor of the union. The union brought an action to enforce the arbitrator's award that the successor employer was bound by the collective bargaining agreement between the union and the predecessor employer. We held that the question of whether the successor company had adopted the CBA or was bound by it under the alter ego theory was a question for the district court to decide, and we remanded the case to the district court for a de novo determination of whether the successor company was in fact an alter ego of its predecessor and thereby bound by the CBA. See also, Amalgamated Clothing and Textile Workers Union v. Ratner Corp., 602 F.2d 1363, 1368 (9th Cir. 1979) ("The court, not an arbitrator, must decide whether an entity is bound by the arbitration clause in a collective bargaining agreement which it did not sign.")

In the present case, the district court correctly recognized the general rule that whether or not one is a party to a collective bargaining contract is a question for the court, not an arbitrator. Nevertheless, the court concluded that the parties' dispute over whether a "non-signatory employer is a successor or alter ego of a signatory company is subject to determination" by the arbitration committee under the work preservation clause.¹ 

It is true that a court in certain situations may order a signatory to arbitrate the question of the extent of its obligations under a collective bargaining: "Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator." AT & T 475 U.S. at 649 (emphasis added). Thus, it was not improper for the court--based on its interpretation of the work preservation clause as clearly and unmistakably expressing the signatories' intent to arbitrate any disputes as to whether Witcher Electric would be held accountable for the work performed by other entities--to order Witcher Electric to arbitrate the question of whether it will be held responsible for actions done by Jerry Witcher and Just Electric. Witcher Electric and Jerry Witcher concede this point. However, the work preservation clause can provide no basis for subjecting Jerry Witcher and Just Electric, non-signatories, to the jurisdiction of the Committee absent a judicial determination that they are alter egos of Witcher Electric or that they otherwise consented to the arbitration provision. The court did not conclude that Jerry Witcher and Just Electric are alter egos. (This question is very fact specific and presumably would require an evidentiary hearing in most cases. See, e.g., Carpenters Local U. No. 1478 v. Stevens, 743 F.2d 1271 (9th Cir. 1984).) Absent such a finding by the district court, there appears to be no basis for the court to order Jerry Witcher and Just Electric to submit to the jurisdiction of the Committee.

SUMMARY

We affirm the district court's refusal to enforce the Committee's award finding Jerry Witcher and Just Electric bound by and in violation of the collective bargaining agreement. We vacate the district court's order compelling Jerry Witcher and Just Electric to submit to the jurisdiction of the arbitration Committee and remand to the district court for proceedings not inconsistent with this disposition.