International Oil, Chemical & Atomic Workers, Local 7-517 v. Uno-Ven Co.

• Decision Date: 19 March 1999
• Docket Number: P,No. 98-2659,UNO-VEN,AFL-CI,98-2659
• Citation: 170 F.3d 779
• Parties: 160 L.R.R.M. (BNA) 2788, 137 Lab.Cas. P 10,415 INTERNATIONAL OIL, CHEMICAL & ATOMIC WORKERS, LOCAL 7-517, and International Oil, Chemical & Atomic Workers, International,laintiffs-Appellants, v.COMPANY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 779

170 F.3d 779

160 L.R.R.M. (BNA) 2788, 137 Lab.Cas. P 10,415

INTERNATIONAL OIL, CHEMICAL & ATOMIC WORKERS, LOCAL 7-517 and International Oil, Chemical & Atomic Workers International, AFL-CIO, Plaintiffs-Appellants, v. UNO-VEN COMPANY, et al., Defendants-Appellees.

No. 98-2659.

United States Court of Appeals Seventh Circuit.

Argued Dec. 4, 1998.

Decided March 19, 1999.

Jeffrey B. Gilbert (argued), Johnson, Jones, Snelling & Gilbert, Chicago, IL, Reuben A. Guttman, Provost & Umphrey, Washington, DC, for Plaintiffs-Appellants.

Columbus R. Gangemi, Jr., Winston & Strawn, Chicago, IL, for Defendant-Appellee Uno-Ven Company.

Jeffrey R. Witham, Dewey Ballantine LLP, Los Angeles, CA, for Defendant-appellee Union Oil Company of California.

Julia A. Martin, Matkov, Salzman, Madoff & Gunn, Chicago, IL, for Defendants-Appellees Petroleos de Venezuelas, SA, PDV America, Incorporated and PDV Midwest Refining, L.L.C.

Paul W. Schroeder, Jones, Day, Reavis & Pogue, Chicago, IL, Stanley Weiner (argued), Jones, Day, Reavis & Pogue, Dallas, TX, for Defendant-Appellee Citgo Petroleum Corporation.

Before POSNER, Chief Judge, and EASTERBROOK and KANNE, Circuit Judges.

POSNER, Chief Judge.

This is a suit by a union (actually an international and one of its locals, but we can ignore that detail) against an employer and others, to enforce a collective bargaining contract. 29 U.S.C. § 185. The suit was dismissed on summary judgment, on the ground that none of the defendants is a party to the contract or otherwise bound by it. There are a couple of subsidiary issues that we take up later, but the principal issue is whether the employer, though not a signatory of the collective bargaining contract, should be bound nevertheless as an agent or successor of the signatory, an affiliate of the employer.

The union signed a collective bargaining contract with Uno-Ven Company covering workers at an oil refinery in Illinois that Uno-Ven owned. Uno-Ven was a 50-50 partnership between VPHI Midwest, Inc. (a wholly owned subsidiary of Venezuela's national petroleum company, PDV) and a wholly owned subsidiary of Unocal. Unocal wanted to get out of the domestic refining business. So it decided to relinquish its interest in the Illinois refinery and, to this end, to dissolve Uno-Ven. On the eve of dissolution, VPHI Midwest transferred its interest in the partnership to PDV Midwest Refining, LLC, another wholly owned subsidiary of PDV. (The parties call PDV Midwest Refining, LLC, "LLC," and we shall follow their usage, though, like "Inc.," the term LLC merely denotes a form of business organization--the limited liability company, similar to a corporation.) After the transfer, Uno-Ven, the partnership, was dissolved, with LLC receiving the Illinois refinery as its share of the partnership assets and the Unocal subsidiary receiving the remaining partnership assets as its share.

LLC, now the sole owner of the refinery, hired another wholly owned subsidiary of PDV, Citgo Petroleum Corporation, to operate it. Citgo hires and fires the workers employed in the refinery, establishes the conditions of their employment, and determines and pays their salaries and fringe benefits. Citgo is thus their "employer" in the ordinary sense of the word, as well as the sense it bears in federal labor law. NLRB v. E.C Atkins & Co., 331 U.S. 398, 413-14, 67 S.Ct. 1265, 91 L.Ed. 1563 (1947); NLRB v. International Measurement & Control Co., 978 F.2d 334, 340 (7th Cir.1992) ("enterprise with effective direction over labor relations"). But it is not a signatory of the collective bargaining contract.

The union's complaint names as defendants all the companies mentioned in the preceding paragraph, even though the only employer of workers represented by the union is Citgo. Although an employer's duty to bargain collectively over terms and conditions of employment ceases when he leaves the business and thus ceases to be the employer of the workers in the bargaining unit, see, e.g., Pittsburgh & Lake Erie R.R. v. Railway Labor Executives' Ass'n, 491 U.S. 490, 507, 109 S.Ct. 2584, 105 L.Ed.2d 415 (1989); Textile Workers Union v. Darlington Mfg. Co., 380 U.S. 263, 270-72, 85 S.Ct. 994, 13 L.Ed.2d 827 (1965); NLRB v. Bell Co., 561 F.2d 1264, 1268 (7th Cir.1977); Railway Labor Executives' Ass'n v. CSX Transportation, Inc., 938 F.2d 224, 228 (D.C.Cir.1991); MT Properties, Inc. v. Transportation-Communications Int'l Union, 914 F.2d 1083, 1087-90 (8th Cir.1990), he remains bound by the contract, just like any other obligor who decides to go out of business before the contract expires. E.g., Textile Workers Union v. Darlington Mfg. Co., supra, 380 U.S. at 271, 85 S.Ct. 994; Wheelabrator Envirotech Operating Services Inc. v. Massachusetts Laborers District Council Local 1144, 88 F.3d 40 (1st Cir.1996); Zady Natey, Inc. v. United Food & Commercial Workers Int'l Union, 995 F.2d 496, 498-99 (4th Cir.1993). This could be important if the union were seeking damages for breach of the collective bargaining agreement. But it is not. It just wants the workers at the Illinois refinery to be treated in accordance with the terms and conditions of employment set forth in the agreement. In other words, it wants Citgo, the employer of those workers, to comply with the agreement. Whether Citgo must do so is independent of whom else besides Citgo the union has decided to sue.

Had Uno-Ven made a bona fide sale of the Illinois refinery to an unaffiliated corporation, call it X, but had not assigned any of the refinery's contracts to X, then X would not be bound by the collective bargaining contract, NLRB v. Burns Int'l Security Services, Inc., 406 U.S. 272, 284-91, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972); Howard Johnson Co. v. Detroit Local Joint Executive Board, 417 U.S. 249, 257, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974); New England Mechanical, Inc. v. Laborers Local Union 294, 909 F.2d 1339, 1342-43 (9th Cir.1990), although it would be required to bargain with the union over a new contract. NLRB v. Burns Int'l Security Services, Inc., supra, 406 U.S. at 277-81, 92 S.Ct. 1571; Canteen Corp. v. NLRB, 103 F.3d 1355, 1361 (7th Cir.1997). This result--the nonassumption of the seller's liabilities under the collective bargaining contract by the buyer of the assets sold by the seller--would hold even if X, our hypothetical buyer, were wholly owned by Uno-Ven, or if X and Uno-Ven were wholly owned subsidiaries of the same parent corporation. Esmark, Inc. v. NLRB, 887 F.2d 739, 759-60 (7th Cir.1989); NLRB v. Bell Co., supra, 561 F.2d at 1268; Gartner-Harf Co., 308 N.L.R.B. 531 (1992). For, consistent both with dicta in Howard Johnson Co. v. Detroit Local Joint Executive Board, supra, 417 U.S. at 255-56, 94 S.Ct. 2236, and with the general principle that the law applicable in breach of contract cases under 29 U.S.C. § 185 is federal common law, the parties agree that the federal common law of labor contracts both governs the issue of affiliate liability in this case and follows the general common law policy of respecting the separateness of corporations without regard to common ownership. But this is provided that each corporation complies with the formalities required by corporation law; that the splitting of the overall enterprise into separate corporations does not have an improper purpose, such as to mislead creditors or otherwise avoid contractual obligations or to defeat taxation or regulation; that the unlawful act was not authored by a corporate affiliate, in which event that affiliate as the unlawful actor would be a proper defendant; and that the affiliate did not assume by assignment or otherwise the contractual obligation that the union is suing to enforce. For the general approach, see Papa v. Katy Industries, Inc., 166 F.3d 937 (7th Cir.1999), and for its application in labor cases see, e.g., Howard Johnson Co. v. Detroit Local Joint Executive Board, supra, 417 U.S. at 259 n. 5, 94 S.Ct. 2236; Trustees of Pension, Welfare & Vacation Fringe Benefit Funds v. Favia Electric Co., 995 F.2d 785, 788-89 (7th Cir.1993); Esmark, Inc. v. NLRB, supra; Lihli Fashions Corp. v. NLRB, 80 F.3d 743, 748-49 (2d Cir.1996) (per curiam); New England Mechanical, Inc. v. Laborers Local Union 294, supra, 909 F.2d at 1343.

We must consider whether this case falls into any of the exceptions to the principle of respecting the formal separateness of affiliated corporations. Suppose that in our hypothetical sale by Uno-Ven of the Illinois refinery to its wholly owned subsidiary it could be shown that Uno-Ven was continuing to manage the labor relations at the refinery. Then Uno-Ven would still be the employer of the refinery's workers in a realistic sense, and X would be bound by the contract as Uno-Ven's agent. Esmark, Inc. v. NLRB, supra, 887 F.2d at 755-60. The union cannot succeed with such a theory here, however, because it cannot prove that Uno-Ven or any affiliated entity, except Citgo itself of course, was calling the shots at the refinery after Citgo took charge. Citgo is running things.

The union asks us to consider closely the method by which Uno-Ven was dissolved and the operation of the refinery transferred to Citgo. Had the partnership been dissolved before the formation of LLC, with VPHI Midwest getting the refinery and then selling it to LLC, the chain that the union tries to forge between itself and Uno-Ven would have been broken right there, at the dissolution. The case would then be like our hypothetical case in which X is a wholly owned subsidiary of Uno-Ven and there is no string-pulling. Instead, LLC was brought into the partnership in substitution for VPHI Midwest, and the union points out that under the normal principles of partnership law, each partner is bound by the partnership's contracts. Revised Uniform Partnership Act § 306(a); Life Care Centers of America, Inc. v. Charles Town Associates Limited Partnership, 79 F.3d 496, 512 (6th Cir.1996); Kiewit Eastern Co. v. L & R...