LOCAL LODGE 2040, INTERNAT'L ASS'N OF MACH v. Servel, Inc.

• Decision Date: 24 June 1959
• Docket Number: No. 12580.,12580.
• Parties: LOCAL LODGE 2040, INTERNATIONAL ASSOCIATION OF MACHINISTS, AFL-CIO, International Association of Machinists, AFL-CIO, Robert H. Brown, et al., Plaintiffs-Appellants, v. SERVEL, INC., a Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

268 F.2d 692 (1959)

LOCAL LODGE 2040, INTERNATIONAL ASSOCIATION OF MACHINISTS, AFL-CIO, International Association of Machinists, AFL-CIO, Robert H. Brown, et al., Plaintiffs-Appellants, v. SERVEL, INC., a Corporation, Defendant-Appellee.

No. 12580.

United States Court of Appeals Seventh Circuit.

June 24, 1959.

Sydney L. Berger, Evansville, Ind., Plato E. Papps, Washington, D. C., for appellants.

Walter J. Cummings, Jr., Chicago, Ill., Isidor Kahn, Evansville, Ind., Newton D. Crane, New York City, Harry P. Dees, Willard C. Shrode, Evansville, Ind., Kenneth F. Burgess, Chicago Ill., for appellee.

Before DUFFY, Chief Judge, and HASTINGS and KNOCH, Circuit Judges.

HASTINGS, Circuit Judge.

This action was brought in the district court by appellants, two labor unions, Local Lodge 2040, International Association of Machinists, AFL-CIO, and International Association of Machinists, AFL-CIO (the unions), and Robert H. Brown and a large number of employees of defendant, on their own behalf and for all other employees similarly situated (the employees), against defendant, Servel, Inc. (Servel), appellee. The unions are the representative of the production and maintenance employees of Servel for purposes of collective bargaining. A collective bargaining agreement (the agreement) was entered into between the unions and Servel on April 25, 1957.

The unions, as the collective bargaining representative of the employees and on their behalf, invoked jurisdiction of the court under Section 301(a) of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 185. The employees asserted jurisdiction based upon diversity of citizenship. The complaint charged a breach of the agreement and sought a declaratory judgment that the agreement was then in force and a mandatory injunction ordering Servel to allow its employees to exercise pension and insurance rights provided for therein. It also demanded judgment in favor of the employees on their claims for wages arising out of holiday pay alleged due them for Christmas Day, 1957, and vacation pay for the year 1958.

Servel moved to dismiss the complaint as to all plaintiffs. The district court granted such motion as to the unions for want of federal jurisdiction and overruled it as to the individual plaintiffs, the employees. Treating the motion to dismiss as to the individual plaintiffs as a motion for summary judgment, and after considering the pleadings, a stipulation and the several depositions and affidavits offered by all parties, both in support of and against the motion, the trial court made findings of fact and entered an order and declaratory judgment that the agreement was in force but interpreting it contrary to plaintiffs' contentions, and granted Servel's motion for summary judgment as to all individual plaintiffs, except Maston Wright, whose claim for certain insurance benefits will proceed to trial. This appeal is taken from such order and judgments of dismissal and for summary judgment.

In their complaint appellants alleged that among certain rights and privileges conferred upon the employees by the agreement¹ were the following:

"A. Employees, who completed three months of service with the defendant, Servel, Inc., acquired seniority. * * *

"B. Employees, who were laid off, retained their seniority for a period of time ranging from at least 12 months to 24 months, depending upon the amount of their seniority at the time of their layoff. * * *

"C. All employees who reached the age of 65 years, while they had seniority with Servel, Inc. were granted the right to retire and receive a pension in accordance with the pension plan of Servel, Inc. which was not subject to modification during the life of the Agreement. * * *

"D. Employees who had earnings during the two weeks immediately prior to Christmas Day, 1957, were granted holiday pay for said day. * * *

"E. Employees with six months seniority as of January 1, 1958, who worked 350 or more hours during 1957, were granted vacations with pay of from 1 to 3 weeks, depending upon the number of hours they worked in 1957, and the length of their seniority. * * *

"F. All employees were given group insurance, including life insurance, accidental death and dismemberment insurance, weekly benefit, sickness and accident insurance and hospital and surgical insurance. * * *

"G. Employees who were laid off, but who retained their seniority, were given the right by said group insurance plan to continue said insurance.

"H. Employees who were disabled so that they could not work, were granted by said insurance plan a period of continuation of life insurance, depending on their seniority at the time of their disability."

Appellants further alleged that these rights were part of the wages paid to the employees for work performed for Servel; that all of such employees have attained seniority pursuant to the agreement and were entitled to such benefits; that payment of these benefits had been refused by Servel and that such unpaid benefits were now wages due the employees. It was also alleged that, on December 20, 1957, Servel attempted to discharge all employees in violation of the agreement, and this alleged breach was the basis of the relief sought.

The evidence in the record shows that, on December 20, 1957, Servel had completely discontinued all of its manufacturing operations at its plant in Evansville, Indiana where the employees had been employed. Prior to that date Servel had disposed of portions of its business and all but nine of its employees who are plaintiffs herein had been on a laid-off status for some time since their services were not needed. On or about December 20, 1957, each of the employees received a letter from Servel notifying them that:

"Servel, Inc., has completely discontinued all of its manufacturing operations.

"For the above reason, you are hereby regretfully notified that your employment with Servel, Inc., is permanently terminated and you are discharged effective December 20, 1957."

At the time it sent out this letter of discharge, Servel had completed arrangements for the sale of the last division of its business in Evansville. Although all of the plaintiff-employees had more than five years seniority, each of them was discharged prior to his sixty-fifth birthday, which is the year in which employees would first be eligible for any pension. No individual plaintiff was employed by Servel on Christmas Day, 1957, and none of them actually performed services for Servel in 1958.

It further appears from the record that, when Servel first began to dispose of portions of its business in 1956, the jobs of the affected employees were permanently discontinued and such employees were given permanent layoffs with their various rights under the agreement being continued in effect. It was not until Servel had completely closed all of its manufacturing operations on December 20, 1957 that the employees were discharged and such rights were terminated. There is no dispute as to continuing insurance benefits for employees who, at the time of their discharge, were disabled so they could not work, except with respect to plaintiff, Maston Wright.

Appellants contend that the employees were discharged in violation of Section 185 of the agreement which provides that they "may be disciplined or discharged only for just cause." (Emphasis added.) However, the district court found that their discharge did not violate the agreement, but "was solely by virtue of the right to manage the business and to direct its employees reserved in the defendant, Servel, Inc., including the right to discontinue all its manufacturing operations when it saw fit * * *." Section 15 of the agreement provides that: "The management of the business of the Company and the direction of its employees are the exclusive responsibilities of the Management, except as expressly modified by the terms of this Agreement." Appellants concede Servel's right to discontinue its manufacturing operations and to terminate the services of its employees when they are no longer needed. They contend, however, that Section 185 of the agreement modifies Section 15 and that such discontinuance is not "just cause" for discharge and not grounds for terminating benefits payable under the agreement.

I.

Does Section 301(a) of the Labor Management Relations Act of 1947 confer federal jurisdiction on the district court to entertain this action by the plaintiff unions?²

We have already set out the rights of the employees as alleged in the complaint. The only allegations in the complaint relating to the unions are that (1) they are the representatives of the employees for the purpose of collective bargaining with respect to pay, wages, hours and all other conditions of employment; (2) that they entered into the subject agreement with Servel; and (3) that they bring this action as such collective bargaining representative to enforce the rights of the unions in the agreement. The relief prayed for is a money judgment in favor of the discharged employees, a declaration that the agreement is still in full force and effect and an order allowing pension and insurance rights to employees pursuant to the agreement.

The unions claim no pecuniary interest in the benefits the individual plaintiffs seek to recover, and they could not properly do so since these rights flow directly to the employees. They have not alleged the specific violation of any rights reserved to them under the contract, other than the right to challenge the discharge of the employees on December 20, 1957, as being without "just cause" in violation of Section 185 of the agreement. However, a fair reading of Sections 185 and 15 of the agreement, quoted in part above, shows that Section 185 was not intended to modify Section 15 which deals with management prerogative. Section 185 clearly applies to cases where an employee is subjected to discipline or discharge without just cause at which time the union is given the...