Unpublished Disposition, 940 F.2d 1534 (9th Cir. 1982)

MEMORANDUM^* 

This case involves the enforceability of a contract signed in 1982 by Hanna Car Wash Systems ("Hanna") and the union defendant ("Union"). The district court ruled that the contract was unenforceable and, in the alternative, that Hanna had repudiated it. It then granted summary judgment for Hanna. We reverse and remand for further proceedings consistent with this disposition.

Facts

Hanna is an Oregon business that manufactures, markets, sells, delivers, and assembles car wash systems for commercial and private operations. The district court found, and the parties agree on appeal, that Hanna is not primarily engaged in the business of construction.

In early 1982, Hanna sold one of its car wash systems to a Toyota facility that was under construction in Long Beach, California. That May, the system was delivered to the Toyota site and some of Hanna's employees began to assemble it. Union representatives approached Hanna and requested that Hanna use labor dispatched from the union hiring hall for the assembly work. Hanna and the Union signed a Memorandum Agreement to that effect on June 2, 1982.¹  Hanna then hired two employees through the union hiring hall and submitted contributions to the defendant trust funds for the hours that those employees worked at the Toyota site.

Over the course of the next six years, according to the facts found by the district court and not appealed by the defendants, "Hanna engaged in acts overtly contrary to the terms of the Memorandum Agreement." The district court found that despite Hanna's acts, at no time prior to May 1988 did the defendants assert that Hanna was in breach of contract.

In May 1988, Hanna delivered a car wash system to an Alamo Rental Car facility that was under construction at the Los Angeles International Airport. Hanna's employees began to assemble the system. The Union demanded that Hanna use labor assigned through the union hiring hall for the assembly, but Hanna refused.

The Union filed a grievance pursuant to the grievance arbitration process set forth in the Master Labor Agreement (incorporated by reference into the Memorandum Agreement). The trust fund defendants sought to audit Hanna's books.

Hanna filed this action to enjoin the Union from proceeding with the grievance and the trust funds from proceeding with the audit. Hanna also sought a declaration that the Memorandum Agreement is unenforceable or, in the alternative, that it has been repudiated.

The district court granted summary judgment to Hanna. The court ruled that the Memorandum Agreement constitutes a "prehire agreement" pursuant to Sec. 8(f) of the Labor Management Relations Act, 29 U.S.C. § 158(f), but that because Hanna is not an employer engaged primarily in the business of construction, the prehire agreement is unenforceable. The district court also ruled that Hanna had repudiated the Memorandum Agreement by acts overtly inconsistent with it. The defendants now appeal the grant of summary judgment.

Discussion

The Labor Management Relations Act generally requires that a union represent a majority of the employer's work force before the union and the employer may lawfully enter into a collective bargaining agreement; the execution of a contract prior to that time generally constitutes an unfair labor practice. See 29 U.S.C. § 158(a) (1), (a) (2), (b) (1) (A); NLRB v. Local Union No. 103, Int'l Ass'n of Bridge, Structural and Ornamental Iron Workers, 434 U.S. 335, 344 (1978); International Ladies' Garment Workers' Union v. NLRB, 366 U.S. 731 (1961); Operating Eng'rs Pension Trust v. Beck Eng'g & Surveying Co., 746 F.2d 557, 562 (9th Cir. 1984). Section 10(b) of the statute requires that challenges to unfair labor practices, including a challenge to the legality of a collective bargaining agreement entered into by a union that does not represent a majority of the employer's employees, must be made within six months after the commission of the unfair labor practice. 29 U.S.C. § 160(b); see Glaziers & Glassworkers Local Union # 767 v. Custom Auto Glass Distribs., 689 F.2d 1339, 1344 (9th Cir. 1982). The overriding purpose of the six month statute of limitations is "to stabilize existing bargaining relationships" by preventing lawsuits many years after an unfair labor practice has occurred. Local Lodge No. 1424 v. NLRB, 362 U.S. 411, 419 (1960). The six-month statute precludes an employer who fails to object to the union's majority status within six months after the contract is executed from challenging the contract on that basis thereafter. The employees, however, are free to file a decertification petition pursuant to Sec. 9(c) of the Labor Management Relations Act, 29 U.S.C. § 159(c).

Section 8(f) of the Labor Management Relations Act provides a limited exception to the generally applicable rules by authorizing "prehire" agreements in the construction industry regardless of the fact that the union does not yet represent a majority of the employer's workforce. 29 U.S.C. § 158(f); see Clark v. Ryan, 818 F.2d 1102, 1106-07 (4th Cir. 1987); New Mexico Dist. Council of Carpenters v. Jordan & Nobles Constr. Co., 802 F.2d 1253, 1255 (10th Cir. 1986); Operating Eng'rs Pension Trust, 746 F.2d at 562; Todd v. Jim McNeff, Inc., 667 F.2d 800, 801-02 (9th Cir. 1982), aff'd, 461 U.S. 260 (1983). Where the requirements of Sec. 8(f) are satisfied, the execution of a prehire contract is not an unfair labor practice. In such cases, the employer was until recently permitted to repudiate the contract at any time prior to the time the union achieved majority status. See Mesa Verde Constr. Co. v. Northern Cal. Dist. Council of Laborers, 861 F.2d 1124, 1128, 1134 (9th Cir. 1988) (en banc). Where the requirements of Sec. 8(f) are not satisfied, however, the limited Sec. 8(f) exception does not apply. The agreement remains subject to the general rules of the Labor Management Relations Act, including the requirement that the union represent a majority of the employees at the time the contract is signed and the Sec. 10(b) statute of limitations.

By its terms, Sec. 8(f) only covers agreements in which: (1) the employees are engaged in the building and construction industry, (2) the labor organization has members who are building and construction employees, and (3) the employer is "engaged primarily in the building and construction industry." Operating Eng'rs Pension Trust, 746 F.2d at 562. All three requirements must be satisfied for an agreement to qualify under Sec. 8(f) as an 8(f) agreement.

In this case, the district court found, and the parties agree, that Hanna is not an employer engaged primarily in the building and construction industry. Thus, one of the three necessary requirements of Sec. 8(f) was not satisfied and the contract did not qualify under Sec. 8(f). In short, it was not an 8(f) agreement.

The district court recognized that Hanna failed to satisfy the requirements of Sec. 8(f), but erred in its conclusion as to the legal consequences of that failure. Apparently the district court relied on the parties' post hoc representations that they had intended to create an 8(f) agreement.²  According to the district court, given that intention, the fact that the requirements of Sec. 8(f) were not satisfied does not mean that the general rules of the Labor Management Relations Act apply, but rather that the contract falls into a third category of collective bargaining agreements: unenforceable 8(f) contracts. We are aware of no authority for the creation of such a class of collective bargaining agreements and neither the district court nor Hanna cites any. Notably, the district court's conclusion is inconsistent with the express provisions of the Labor Management Relations Act. Pursuant to the Act, a contract is exempted from the application of the general rules only if it satisfies all three requirements of Sec. 8(f). Failure to satisfy all three requirements means that the Sec. 8(f) exception is inapplicable. The contract is then simply an ordinary collective bargaining agreement governed by the normal collective bargaining rules.

On appeal, the defendants urge that Sec. 10(b), which is part of the normal collective bargaining rules, bars Hanna from raising its challenge to the validity of the Memorandum Agreement at this late date. Hanna responds that by not raising the argument regarding the six month time bar below, the defendants have waived that argument.

Hanna's claim that the defendants waived the time-bar argument is not supported by the record. In their opposition to the motion for summary judgment, the defendants specifically stated: "In the instant case, Hanna is attempting to rely on conduct occurring six years ago, the execution of the collective bargaining agreement, to allege that the agreement is illegal and unenforceable.... Hanna's claim is time barred pursuant to Sec. 10(b)."

The defendants are correct that Sec. 10(b) precludes Hanna from challenging the validity of the Memorandum Agreement on the basis of the Union's alleged minority status. See Glaziers & Glassworkers, 689 F.2d at 1342-45. As we have explained supra, where the three requirements of Sec. 8(f) are not satisfied, the general rules of the Labor Management Relations Act apply, including the time bar of Sec. 10(b). Section 10(b) required Hanna to challenge the execution of the Memorandum Agreement within six months of its signing or lose its right to do so. Instead, Hanna waited six years. The Sec. 10(b) time bar was designed precisely to prevent such belated challenges to unfair labor practices. Thus, there is nothing unfair about applying it to this case.

Hanna next argues that we should uphold the district court's finding that the Memorandum Agreement was repudiated by Hanna's conduct. Had the Memorandum Agreement constituted an 8(f) contract, then Hanna could have unilaterally repudiated it. See Mesa Verde Constr. Co. v. Northern Cal. Dist. Council of Laborers, 895 F.2d 516, 519 (9th Cir. 1989), cert. denied, 111 S. Ct. 209 (1990). However, Hanna sought and obtained a ruling from the district court that the Agreement did not qualify as a valid 8(f) contract and it must now accept the consequences of that action. All parties on appeal agree with the district court's finding. Under such circumstances, we will not ordinarily look behind the finding, and no reason for doing so exists here.

Unfortunately for Hanna, the doctrine of unilateral repudiation only applies to 8(f) contracts. Collective bargaining agreements other than 8(f) contracts may not be unilaterally repudiated. See International Bhd. of Elec. Workers, AFL-CIO, Local Union No. 411 v. KBR Elec., 812 F.2d 495, 498 (9th Cir. 1987). Since the agreement in question does not qualify as an 8(f) contract, Hanna's repudiation argument must fail.

REVERSED AND REMANDED FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS DISPOSITION.