UNITED RUBBER, CORK, ETC. v. GREAT AM. INDUSTRIES

Citation479 F. Supp. 216
Decision Date20 September 1979
Docket NumberNo. 72 Civ. 3269 (KTD).,72 Civ. 3269 (KTD).
PartiesUNITED RUBBER, CORK, LINOLEUM AND PLASTIC WORKERS OF AMERICA, AFL-CIO, an unincorporated association, Plaintiff, v. GREAT AMERICAN INDUSTRIES, INC., Linear, Inc., Rubatex Corp., and Rubatex Holding Corp., Defendants.
CourtU.S. District Court — Southern District of New York

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Auerbach & Labes, New York City, for plaintiff; Stanley W. Taylor, William Auerbach, New York City, of counsel.

Stolz, Goldfine & Stolz, New York City, for defendants; Irving H. Stolz, Ernest Swiedler, New York City, of counsel.

OPINION

KEVIN THOMAS DUFFY, District Judge:

This diversity action was commenced in 1972 by United Rubber, Cork, Linoleum and Plastic Workers of America hereinafter referred to as "United Rubber" representing the members of its former Local 204 who, until July 14, 1967, were employed by the defendant Linear, Inc. hereinafter referred to as "Linear". Plaintiff charges Linear with numerous violations of a Collective Bargaining Agreement hereinafter referred to as "the Bargaining Agreement", to which Local 204 and Linear were parties. The complaint also names as co-defendants Linear's parent corporation, Great American Industries, Inc. hereinafter referred to as "Great American", together with two of Great American's wholly-owned subsidiaries, the Rubatex Corporation hereinafter referred to as "Rubatex", and the Rubatex Holding Corporation hereinafter referred to as "Rubatex Holding". While the latter three co-defendants admittedly were not parties to the Bargaining Agreement, plaintiff, under numerous theories, seeks to impute Linear's liability under that Bargaining Agreement to these separate, albeit related, corporations.

This case was the subject of a 15 day bench trial before the late Frederick van Pelt Bryan, District Judge, in the latter part of 1976. Judge Bryan, however, passed away before rendering a decision and following his death the case was assigned to me. Thereafter, in November 1978, the parties entered into a stipulation which provided, in essence, that rather than retrying the case, they would submit the case to me for a decision based upon the trial transcript, all the exhibits received into evidence by Judge Bryan and the various pre and post-trial memoranda submitted by the parties. In addition, the parties requested, and were granted, the opportunity to present a summation-type argument to the Court in order to extract the most relevant testimony, exhibits and arguments from the voluminous documents generated by this action.

BACKGROUND OF THE ACTION

During the period relevant to the instant action, Great American was involved in a wide variety of business enterprises. These included the manufacture of various rubber component products for the automotive, aircraft and sporting goods industries, and the manufacture and distribution of finished sporting goods, food products and construction materials. Great American conducted its myriad of business activities through a complex of wholly-owned subsidiaries. See, e. g., Trial Exhibits 1-8, hereinafter referred to as "Tr. Ex.". Great American's rubber manufacturing interests were quite profitably conducted through the efforts of Rubatex which, prior to October, 1962, was a division of Great American. Given Rubatex's financial success, Great American decided in 1961 to expand its interests in the rubber industry and acquired all the common stock of Linear, a rubber concern located in Dallas, Pennsylvania.1 While Linear, like Rubatex, was engaged in the manufacture and distribution of specialized rubber products, its products were not duplicative of those produced by Rubatex and consequently appealed to a different product market.

Prior to the acquisition, Linear had been something less than a profitable enterprise. In an effort to revive the severely distressed rubber concern, Great American expended vast sums in 1961 and 1962. Finally, in late December, 1962, after advancing to Linear over $700,000, Great American determined that it could no longer carry these sizable advances on its books. Having made these advances, however, Great American was unwilling to sell Linear to a purchaser outside the Great American complex. Consequently, it looked to Rubatex as the logical purchaser. Indeed, Rubatex was its very successful subsidiary in the rubber industry and if the business were at all salvageable, Rubatex had the requisite expertise and ready capital. Thus, in December 1962, Great American transferred its total investment in Linear to Rubatex.2 Pre-Trial Order at ¶ 7, hereinafter referred to as "P.T.O.".

After the transfer, Rubatex began where Great American had left off by continuing to pump funds into Linear. In order to maintain Linear as a viable enterprise, Rubatex was required to make substantial advances either directly to Linear or to its creditors. These advances continued from January, 1963 through September, 1966— the bulk of which occurred in 1965 and 1966.

Finally, on July 14, 1967, Linear—perennially plagued by financial woes and the recent victim of a prolonged labor dispute— terminated its manufacturing operations. This action, however, is not grounded in the financial decline of Linear, the reasons underlying its shutdown or even about its labor problems. Rather, the crux of the instant suit is Linear's Bargaining Agreement with United Rubber's affiliate Local 204.3 In particular, the central issue is what effect, if any, the linear shutdown had upon the most recent Bargaining Agreement executed by Linear and Local 204 just three months prior to the shutdown.

I. The Bargaining Agreement

For many years Linear and Local 204 had been parties to successive collective bargaining agreements. P.T.O. ¶ 3. Over the years the Bargaining Agreement underwent various modifications and amendments to reflect the increasingly complex relationship between employer and employee. While the earlier agreements focused primarily upon wages and working conditions, the later agreements came to include a wide variety of employee benefits including incentives, life insurance, hospitalization, pension and severance awards.

The last Bargaining Agreement to run its full term expired on July 30, 1966. Thereafter, all manufacturing operations at Linear ceased when the parties failed to renew the Agreement. This work stoppage4 continued from August 1, 1966 through April 12, 1967 at which time the parties renewed the Bargaining Agreement for a term to expire on April 14, 1971.5 P.T.O. ¶ 15.

Linear resumed operations in April, 1967 on a reduced basis. Only 98 of the 264 individuals employed in July, 1966 were recalled by the management. Finally, after a brief and unsuccessful attempt to recapture that portion of the market it held prior to the work stoppage, Linear terminated its operations in July, 1967.

Following the plant closing the liquidation of Linear commenced. The first occurrence was a filing by Local 204 of certain grievances for final and binding arbitration with the American Arbitration Association pursuant to the terms of the Bargaining Agreement. Tr. Ex. 53. These grievances charged, in essence, that Linear had failed to meet its obligations under the Bargaining Agreement with respect to a host of employee benefits. For reasons not made clear at trial, Local 204 abandoned the arbitration procedures set forth in the Bargaining Agreement and consequently never obtained a final resolution. P.T.O. ¶¶ 19, 20, 29.

Apparently the next step taken by the Union was to initiate an amended charge of unfair labor practice against Linear with the National Labor Relations Board. Tr. Ex. 77. The end result of these procedures, including an appeal to the General Counsel of the National Labor Relations Board, was a withdrawal of the charges based in part on the following findings:

(1) The shutdown of the Linear plant was lawful Tr. Ex. 80;
(2) The Employer has indicated its willingness to meet with the Union at any time to discuss the effects of termination on employees Tr. Ex. 80;
(3) The Company had informed two Union officials on July 14 1967 that the shutdown would be permanent . . .. Tr. Ex. 82; but see Tr.Ex. 86; and
(4) Although the Employer deemed it futile to proceed to arbitration in lieu of its financial condition the Union could have invoked arbitration. Tr. Ex. 80.

In addition, quite apart from the arbitration procedures, by letter dated November 17, 1967 George Spohrer, Linear's local Pennsylvania attorney, informed the Union's legal representative that Linear was willing "to discuss the effects and the implications of the shutdown as it effects the rights of Union employees." Tr. Ex. 58. Mr. Spohrer went on to say that although there was "little point in pressing pending arbitration cases having to do with work rules . . . concerning the other arbitration cases having to do with vacation pays and other matters which are contractually due, it has always been our position that we do not propose to defend these honest claims." Id. The letter continues:

The Company has always taken the position that whatever is contractually due its employees under the terms of pre-existing bargaining contracts are valid, legal obligations. There seems little point in arbitrating what is clearly due. The problem is, of course, that Linear has no assets of any kind against which any of these sums could be paid.
Again, we stand ready to meet with you at any time in order to discuss any of these matters. As you know, Linear is completely insolvent, and all of its assets have been transferred in order to partially meet the obligations of secured creditors.

The apparent willingness of Linear to sit down with the Union and discuss the effects of the shutdown was again the subject of a letter by Mr. Spohrer to the Union's counsel dated June 19, 1968. Spohrer stated that although all of Linear's books and records had been shipped...

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