Unpublished Disposition, 855 F.2d 860 (9th Cir. 1988)

No. 86-2355.

United States Court of Appeals, Ninth Circuit.

Before SKOPIL and POOLE, Circuit Judges, and JESSE W. CURTIS,^*  District Judge.

MEMORANDUM^** 

Millmen Local 550 appeals the district court's decision to vacate an arbitrator's ruling that a successor employer is bound by the collective bargaining agreement negotiated by its predecessor. The district court held that the arbitrator's decision was a manifest disregard of the law in that it imposed the substantive terms of the collective bargaining agreement upon a successor employer. We reverse.

DISCUSSION

We have held that a successor employer may be bound by the substantive provisions of its predecessor's collective bargaining agreement where a substantial continuity of identity exists between the two employers. See Hawaii Carpenters Trust Funds v. Waiola Carpenter Shop, Inc., 823 F.2d 289, 294-95 (9th Cir. 1987); Trustees for Alaska Laborers-Constr. Indus. Health and Sec. Fund v. Ferrell, 812 F.2d 512, 515-16 (9th Cir. 1987); Audit Services, Inc. v. Rolfson, 641 F.2d 757, 762-63 (9th Cir. 1981). The facts in this case indicate that on balance there was a substantial continuity of identity. Buckley immediately hired all of Markus' employees. There was no hiatus during the transfer of ownership. The employees worked in the same line of products for the same supervisors and at the same location. Buckley also used Markus' name and purchased all of the assets. Importantly, the arbitrator found that Buckley, through these actions, impliedly assumed the substantive obligations of the prior collective bargaining agreement. Thus, the arbitrator found that Buckley as a successor employer is bound by its predecessor's agreement.

This result is consistent with Supreme Court precedent. Although the Court has recognized that a new employer is not bound by the substantive provisions of the predecessor's agreement where the successor does not assume or agree to the provisions, NLRB v. Burns Int'l Security Services, Inc., 406 U.S. 272, 284 (1972), the Court has noted that "in a variety of circumstances involving a merger, stock acquisition, reorganization, or assets purchase, the Board might properly find as a matter of fact that the successor assumed the obligations under the old contract." Id. at 291. That is exactly the case here. We may not reject the arbitrator's finding on this point simply because we may disagree with it. See United Paperworkers Int'l Union v. Misco, Inc., 108 S. Ct. 364, 371 (1987).

REVERSED.

JESSE W. CURTIS, District Judge, dissenting:

I respectfully dissent, for in my view the district court was correct in setting aside the arbitrator's decision as demonstrating a "manifest disregard of the law." The arbitrator's decision would require Buckley, the successor employer, to recognize seniority rights earned retrospectively by certain employees during their employment by Markus, seniority rights which were negotiated away during the labor negotiations between Buckley and the union at the time of the transfer.

FACTS

At the time of the transfer, which admittedly was at arms length, the old employees were informed that Buckley was a new employer who was not assuming any of the provisions of the Markus collective-bargaining agreement, but was offering employment as a new and separate employer according to terms and conditions contained in an eleven-page written offer. Buckley agreed to negotiate with the union, but while the negotiations were underway, the union ordered a strike. On the first day of the strike Buckley sent a telegram to the union which stated, "Buckley East Bay, Inc. agrees to sign independent LAMEA contract with no break in benefits on condition employees do not recognize Teamster Local 70 or Local 853 pickets at Buckley's East Bay, Inc." This offer was rejected, and the strike continued.

After further negotiations Buckley finally became a member of LAMEA, an organization composed of a multi-employer labor relations association and a lumber and mill employers association, and signed the master agreement to which Markus had previously been a signatory.

Section 1(g) of the LAMEA Master Agreement provides:

The terms of this agreement shall apply and be binding upon any purchaser, lessee, successor, or transferee of any operation or any portion thereof covered by this agreement which is continued or resumed as a going concern at any covered location.

It is this section which forms the basis of the union's request for the continued application of Markus's collective bargaining-agreement. At this point it should be noted that the LAMEA agreement does not purport to deal with the question of retroactive seniority rights, nor does it purport to require Buckley to continue any of the benefits provided in Markus's collective-bargaining agreement.

The parties finally agreed to submit to arbitration the issue of whether Buckley should be required to recognize retrospectively seniority rights earned during employment by Markus.

The arbitrator based his decision upon a finding that Buckley was a "successor employer" under the successorship doctrine, and as such was bound by the terms of Markus's collective-bargaining agreement.

I have no problem with the arbitrator's finding that Buckley was a "successor," but to rule that as such it is obligated to perform the substantive portions of the Markus collective-bargaining agreement is contrary to rulings of the United States Supreme Court. In NLRB v. Burns International Security Services, Inc., 406 U.S. 272 (1972), the Supreme Court upheld an NLRB order which required a successor employer to bargain with an incumbent union. But, in doing so the Court warned:Although successor employers may be bound to recognize and bargain with the union, they are not bound by the substantive provisions of a collective-bargaining contract negotiated by their predecessor but not agreed to or assumed by them.

Id. at 284. Citing H.K. Porter Co. v. NLRB, 397 U.S. 99, 102 (1970), the Burns court held that the NLRB was without power to compel a company or a union to agree to any substantive contractual provisions of a collective-bargaining agreement to which they were not a party.

In our own circuit, in Bartenders & Culinary Workers Union Local 340 v. Howard Johnson Co., 535 F.2d 1160 (9th Cir. 1976), we said:

Courts and secondary authorities alike are virtually unanimous in the view that a court may not impose the substantive provisions of a collective bargaining contract, as distinguished from the obligation to arbitrate, upon a nonconsenting successor employer. (Citations omitted.)

535 F.2d at 1162.

Again in Audit Services, Inc. v. Rolfson, 641 F.2d 757, 763 (9th Cir. 1981), we said:

It has now been long settled that although a successor employer may be bound to recognize and bargain with a union with whom its predecessor had a contract, it is not bound by substantive provisions of a collective bargaining agreement negotiated by its predecessor, but not agreed to or assumed by it. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964); Howard Johnson Co. v. Hotel Employees, 417 U.S. 249 (1974); Wood v. International Broth. of Teamsters, 807 F.2d 493 (6th Cir. 1986).

In Audit, although we found that a successorship relationship existed, we further found that under the facts in that case the successor employer had assumed the provisions of the collective-bargaining agreement.

It is true as the majority notes that the courts have found as a fact that a successor employer had assumed the obligations of the old collective-bargaining agreement in a variety of circumstances where there has been a substantial continuity of ownership involving mergers, such as stock acquisitions, reorganization, or asset purchases. The three cases in our circuit cited by the majority, Hawaii Carpenters Trust Funds v. Waiola Carpenter Shop, Inc., 823 F.2d 189 (9th Cir. 1987); Trustees for Alaska Laborers-Constr. Indus. Health and Sec. Fund v. Ferrell, 812 F.2d 5132 (9th Cir. 1987); and Audit Services, Inc. v. Rolfson, 641 F.2d 757 (9th Cir. 1981), are all cases in which the successor employer permitted the employees to work under the preexisting conditions throughout the transition and thereafter without objection in an apparent recognition of his willingness to be bound by the agreement.

As the Burns decision noted, employers may decide to honor provisions of collective-bargaining agreements even though they have not signed the agreements.

"In many cases, of course, successor employers will find it advantageous not only to recognize and bargain with the union, but also to observe the preexisting contract rather than to face uncertainty and turmoil. Also in a variety of circumstances involving a merger, stock acquisition, reorganization, or asset purchase, the board might properly find, as a matter of fact, that the successor had assumed the obligations under the old contract.

406 U.S. at 291.

But this is not our case. Although the arbitrator found an implied assumption of the prior collective-bargaining agreement, such an assumption is entirely without factual support and disregards the law as stated by the very authorities upon which the arbitrator relies. In fact, the arbitrator's award imposes on Buckley the very terms which it had expressly repudiated and which the employees negotiated away. Buckley offered to recognize seniority rights and certain overscale payments if the employees would abandon their strike. The employees refused, and so Buckley refused. Seniority rights and overscale payments are terms properly subject to negotiation in any collective-bargaining agreement, and Buckley is entitled to the results of its negotiations and the benefit of its contractual bargain.

I am aware of the narrow scope of our review. It has been held that an arbitrator's award may not be set aside unless it demonstrates a "manifest disregard of the law." George Day Construction Co. v. United Brotherhood of Carpenters and Joiners of America, Local No. 354, 722 F.2d 1471 (9th Cir. 1984). Other decisions in this circuit have been more specific. In Riverboat Casino, Inc., etc. v. Local Joint Executive Board of Las Vegas, 578 F.2d 251 (9th Cir. 1978), we said: "An award is legitimate so long as it 'draws its essence' from the collective bargaining agreement and does not 'manifest an infidelity' to the agreement." United Steel Workers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597-99 (1960); W.R. Grace & Co. v. Local Union 759, International Union of the United Rubber, Cork, Linoleum & Plastic Workers of America, 461 U.S. 757 (1983). We have further said: "A court may not enforce a collective bargaining agreement that is contrary to public policy." See Hurd v. Hodge, 334 U.S. 24, 34-35 (1948); United Paperworkers International Union, AFL-CIO v. Misco, Inc., 484 U.S. ----, 98 L. Ed. 2d 286, 301, 108 S. Ct. ---- (1987). From these cases it would appear that the court must uphold an arbitrator's award if it "draws its essence" from the collective-bargaining agreement and does not "manifest an infidelity" to the agreement. Furthermore, it must not violate public policy. It would appear, therefore, that an award which does not draw its essence from the collective-bargaining agreement and does manifest an infidelity to the agreement and is contrary to public policy may not be upheld. Applying these criteria, in my view, the arbitrator's award cannot be upheld.

The award here does not draw its essence from the LAMEA Agreement, but from a dispute arising clearly outside of the LAMEA Agreement and is an attempt to compel Buckley to abide by a contract to which it never was a party.

The arbitrator's result manifestly disregards applicable labor law that a party cannot be obligated to abide by a collective-bargaining agreement unless it has either expressly or impliedly agreed to it.

In addition to these considerations the award conflicts with the well defined and dominant congressional policy expressed in many way throughout labor law and legal precedents by which parties to collective-bargaining agreements are assured of a wide latitude in their negotiations unrestricted by governmental power to regulate the substantive solutions of their differences. See NLRB v. Burns, supra; NLRB v. American National Ins. Co., 343 U.S. 395 (1952); H.K. Porter Co. v. NLRB, 406 U.S. 272 (1972).

CONCLUSION

This result, at first blush, may seem to produce a harsh result in depriving transferred employees of retroactive seniority and other rights which they enjoyed under their agreement with the previous employer. However, as Justice Rehnquist observed, "Congress has been unwilling to purchase industrial peace at the price of substantial curtailment of free collective bargaining...." Burns, 406 U.S. at 303. Moreover, in this case seniority rights were specifically discussed and negotiated, and one can only presume that the quid pro quo in the overall employment agreement was sufficient to persuade the employees to continue their employment which they were not required to do, but which they did, knowing that these benefits were not going to be included.

For these reasons I would AFFIRM the trial court.