Lewis v. Tuscan Dairy Farms, Inc.

• Decision Date: 26 November 1990
• Docket Number: No. 87 Civ. 7607 (MBM).,87 Civ. 7607 (MBM).
• Citation: 752 F. Supp. 116
• Parties: Ernest LEWIS, et al., Plaintiffs, v. TUSCAN DAIRY FARMS, INC. and Willie Whelan, as President of Local 584, International Brotherhood of Teamster, Defendants.
• Court: U.S. District Court — Southern District of New York

752 F. Supp. 116

Ernest LEWIS, et al., Plaintiffs, v. TUSCAN DAIRY FARMS, INC. and Willie Whelan, as President of Local 584, International Brotherhood of Teamster, Defendants.

No. 87 Civ. 7607 (MBM).

United States District Court, S.D. New York.

November 26, 1990.

Louie Nikolaidis, Lewis, Greenwald, Kennedy, Lewis, Clifton & Schwartz, P.C., New York City, for Ernest Lewis, et al.

Martin Gringer, Robert Lipp, Kaufman, Frank, Naness, Schneider & Rosensweig, P.C., Melville, N.Y., for Tuscan Dairy Farms, Inc.

James J. Delaney, Driscoll & Delaney, New York City, for Willie Whelan.

OPINION AND ORDER

MUKASEY, District Judge.

Plaintiffs are former utility workers at the Ozone Park, New York plant of Liberty Farms, Inc., a milk processor and distributor. Utility workers work in the milk processing plant and deliver milk to schools or to customers who need supplemental deliveries or who order milk irregularly; they are distinguished from route workers, who deliver milk along regular routes. Plaintiffs claim that defendant William Whelan, sued here as Willie Whelan, president of the local union they belonged to, violated his and the union's duty to represent them fairly in connection with defendant Tuscan Dairy Farms, Inc.'s purchase of the assets of Liberty Farms. In particular, they claim that they were unfairly denied the contractual right to be hired at Tuscan's Lindenhurst and Woodside, New York plants with their seniority determined based on their tenure at Liberty Farms, a right they assert is guaranteed by the terms of the collective bargaining agreement. As a result, they seek recovery against both Whelan and Tuscan under § 301 of the National Labor Relations Act, 29 U.S.C. § 185.¹ Following denial of Tuscan's summary judgment motion in June 1989, the case was tried to the court as to liability only from July 30 to August 3, 1990, with post-trial submissions received thereafter.

After evaluating all the evidence, including but not limited to the credibility of the witnesses, I find for the reasons set forth below that plaintiffs have proved liability, and accordingly will recover such damages as may be either determined in a later proceeding or agreed to among the parties.

I.

Liberty Farms was one of 11 affiliated companies owned or controlled by Jules Kotcher that were the subject of a series of purchase contracts signed on June 22, 1987. These contracts gave Tuscan the exclusive right to the output of the Kotcher companies, referred to herein collectively as Liberty Farms, and obligated Tuscan to buy Liberty Farms within 18 months or when Tuscan terminated the output contract, whichever came first. In addition, Kotcher and other owners and principals of Liberty Farms signed non-competition agreements which Tuscan could enforce even if the output agreement was abrogated. Tuscan also agreed to indemnify Liberty Farms for all liability arising under the Employee Retirement Income Security Act of 1974, known as ERISA. Tuscan exercised the option to buy Liberty Farms on July 20, 1987. (PX 2-9, 33, 34, 45; see also, PX 35, 38, 40 reflecting payment of ERISA liability)

That acquisition occurred during a period of upheaval in the milk business in New York State following a court decision declaring unconstitutional New York laws that had restricted distribution of milk originating outside the state. Farmland Dairies v. Commissioner of New York State Department of Agriculture and Markets, 650 F.Supp. 939 (E.D.N.Y.1987). After that decision, the unions representing milk industry workers in New York agreed to and did renegotiate their contracts in order to help in-state milk processors try to meet the price competition from out-of-state employers with lower labor costs. (Tr. 357-62) Beginning in January 1987, soon after the Farmland opinion, Whelan, president of Teamsters Local 584, began meeting with Kotcher and with Tuscan president Louis Caiola to discuss Tuscan's possible acquisition of Kotcher's companies, a move Whelan welcomed because he believed Kotcher did not have the resources or the will to compete with Farmland. (Tr. 374-88)

Among the entities related to Liberty Farms was Queens Farms, Inc., which operated a milk processing plant in Ozone Park. In February 1987, soon after Whelan commenced his discussions with Caiola and Kotcher, rumors of a possible sale began to circulate at the Ozone Park plant, and grew more persistent by the spring. Eventually, the rumors were discussed at general membership meetings of the local, but Whelan provided no definite information to the members as to whether a sale was imminent. (Tr. 81-84, 89-90) Of particular concern to the employees at Ozone Park was what rights they would have if Tuscan bought the plant, closed it, and then switched production to other Tuscan facilities. General Rule IV C of Schedule C of the master agreement between Local 584 and the milk producers, including Liberty Farms, provided in pertinent part as follows:

C. Consolidations and Mergers

In all consolidations of branches or plants, company craft group seniority shall prevail for the purpose of layoffs, vacations, bidding and in all other usual respects.

If the employer acquires all or any part of a milk business or all or any part of a route in any milk business and merges or consolidates the same with its own business, or handles the same in any other manner, ... the employer shall be required to assume responsibility for the employment of the employees who elect to or who are transferred to the new employer as provided herein who shall enjoy craft group seniority, on the basis of the period of employment in the business acquired for the purpose of layoffs, vacations, bidding and in all other usual respects.

(PX 1, p. 30)

Whelan was up for reelection in 1987 and the potential shutdown of Ozone Park and the insistence of the workers at that plant that their seniority be honored presented him with a political problem, as he acknowledged at trial. (Tr. 415) Indeed, one Ozone Park employee testified that Whelan told him explicitly that because it was a political year, Whelan could not risk the wrath of the more than 200 men at Tuscan's Lindenhurst and Woodside plants, which would pick up most of the production capacity and distribution functions of the Ozone Park plant after the acquisition, simply to please the 100 or so utility workers at the Ozone Park plant, who were relatively senior and would displace workers at Lindenhurst and Woodside if allowed to take their Ozone Park seniority to those plants. (Tr. 335-36, 407-08) Another testified to a similar conversation on the day the Ozone Park plant closed. (Tr. 297-98)

How Whelan responded to the concerns of the Ozone Park employees, and what position he took publicly as to the applicability of the clause quoted above, was sharply disputed at trial.

Whelan conceded at trial that although General Rule IV C applied as a general matter to utility employees (Tr. 449), he made no attempt to determine how the Tuscan—Liberty Farms transaction was structured or to examine the documents underlying that transaction. (Tr. 451-52) Union counsel John Driscoll testified that in late May or early June Whelan told him that the men at Ozone Park were beginning to ask about their seniority rights and about the applicability of Section IV C, and that he then did what he considered to be sufficient legal research and reported to Whelan as follows:

"The result of all of this is I came to the conclusion what Willie had to do is to make a determination what is in the best interest of the general membership? Not what is in the best interest of Ozone Park. Not what is in the best interest of Willie Whelan. But what is in the best interest of the general membership. Having done that, I advised him that it was my legal opinion that he had the power even if Article 4(c) was held to apply, that he had the power to modify that or to ignore that if he thought it necessary in order to promote the interest of the general membership."

(Tr. 490-91) That conversation as well occurred in "late May, early June of 1987" (Tr. 491)—i.e., before the Tuscan—Liberty Farms agreements were signed. Whelan testified as follows to his view of the union's power to ignore contractual provisions:

"Q. You testified on direct examination that, `You could ignore it, but not change it,' referring to the collective bargaining agreement. Is that correct?

A. Certainly." (Tr. 441)

"Q. Does the international constitution and the local bylaws permit the local union executive board to modify a contract?

A. To change it?

Q. Modify.

A. What do you mean?

Q. To change the language of the contract?

A. No, you can't change the language. We cannot change the contract.

Q. Without membership ratification?

A. That's right.

Q. Is the union allowed to ignore provisions of the contract?

A. Sure." (Tr. 444)

The collective bargaining agreement provides for the possibility that problems may arise during the term of the contract that must be resolved by collective bargaining, and grants to both the union and Greater New York Milk Dealers Labor Committee the right to seek a meeting to resolve such problems. "Any meeting so convened shall have plenary authority to resolve any such matter, notwithstanding any provision of the contract." (PX 1 p. 9 ¶ 26) But no meeting was called pursuant to that provision. Rather, Whelan and Caiola of Tuscan apparently worked out an ad hoc arrangement which Whelan felt empowered to implement. He was not so empowered. The union by-laws provide that amendments to collective bargaining agreements must be ratified by vote of the membership. (PX 19 p. 14 § 27) The union constitution is to the same effect. (PX 20 Art. XII Sec. 2(b) p. 75) As set forth below, to the extent Whelan suggested in his testimony that he had in fact secured the approval of the union membership, that testimony cannot be credited.

At the time Whelan made his decision not to seek merger of the seniority lists...