Local 3-7, Intern. Woodworkers of America v. DAW Forest Products Co.

• Decision Date: 30 November 1987
• Docket Number: No. 86-3891,86-3891
• Citation: 833 F.2d 789
• Parties: 127 L.R.R.M. (BNA) 2353, 108 Lab.Cas. P 10,250 LOCAL 3-7, INTERNATIONAL WOODWORKERS OF AMERICA, Plaintiff-Appellant, v. DAW FOREST PRODUCTS COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 789

833 F.2d 789

127 L.R.R.M. (BNA) 2353, 108 Lab.Cas. P 10,250

LOCAL 3-7, INTERNATIONAL WOODWORKERS OF AMERICA, Plaintiff-Appellant, v. DAW FOREST PRODUCTS COMPANY, Defendant-Appellee.

No. 86-3891.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 2, 1987.

Decided Nov. 30, 1987.

Robert D. Durham, Kulongoski, Durham, Drummonds & Colombo, Portland, Or., for plaintiff-appellant. On brief was Lynn-Marie Crider, Gladstone, Or.

Norman J. Wiener and Maureen R. Sloane, Miller, Nash, Wiener, Hager & Carlsen, Portland, Or., for defendant-appellee.

Appeal from the United States District Court for the District of Oregon.

Before SNEED and HALL, Circuit Judges, and LEGGE, ^* District Judge.

CYNTHIA HOLCOMB HALL, Circuit Judge:

Local 3-7 of the International Woodworkers of America (Union) brought this action in the district court against DAW Forest Products Company (Company) for specific performance of their "Memorandum of Agreement." In a published opinion, the district court found that the Memorandum was not an enforceable contract and dismissed the Union's claims. Local 3-7, International Woodworkers of America v. Daw Forest Products Co., 643 F.Supp. 122 (D.Or.1986). The district court found that the Memorandum's key terms were "simply too vague," providing an insufficient basis for determining the existence of a breach or the appropriate remedy. Id. at 124. The Union now appeals.

We reverse and remand to the district court.

I.

In late 1983, the Company began negotiations with Diamond International Corporation (Diamond) to purchase Diamond's sawmill and logging operations in the Bend, Oregon area. The Company ultimately purchased the logging operations in May of 1984 with the intention of operating the logging portion of the business as long as it was profitable. At the time of the purchase, Diamond had collective bargaining agreements with both the sawmill and logging employees. The Company assumed the collective bargaining agreement for the Prior to the May, 1984 purchase, Company and Union officials met in October, 1983 and on March 2, 1984. Company officials stated that they did not intend to continue logging operations unless they could compete with logging by independent contractors. At the March 2, 1984 meeting, Company and Union officials entered into a Memorandum of Agreement, reproduced in the appendix to this opinion.

sawmill employees, but refused to assume the agreement for the logging employees. This action concerns the logging employees.

The Memorandum of Agreement basically provided the Union with the opportunity to present a plan to keep the logging operations competitive. The first clause of the Memorandum states that the Union could submit proposals for a new "Working Agreement" to the Company within two weeks of the execution of the Memorandum. The Company agreed to consider these proposals in good faith and to determine, in its opinion, whether they had "merit." The first clause also explained that an acceptable "Working Agreement" would create an employee incentive program and provide for the continuation of Company logging as long as it could "perform in a competitive basis with area Contract Loggers and [could] operate economically and efficiently." If a Union proposal had "merit," further discussions were to be conducted within the subsequent two weeks.

If the Company determined that a Union proposal was "without merit," it agreed to follow certain procedures outlined in clauses two and three of the Memorandum. The second clause provided that the Company would continue the logging operation so long as Company equipment was operable, economically feasible to operate, and safe. However, "[w]hen in the opinion of the Company, the logging equipment is determined to be inoperative, unsafe or uneconomical to operate, it shall be retired and will not be replaced by the Company." The third clause provided that as employees became unemployed due to equipment retirement, the Company would make a reasonable effort to reemploy as many displaced employees as possible in other company jobs.

On March 13, 1984, the Union submitted a letter to the Company expressing an interest in formulating an incentive-based logging program competitive with independent contract logging. The Union letter explained, however, that it was impossible to present a detailed proposal without contractor, inventory, and equipment cost information from the Company. A Company official apparently stated that this letter had "some merit," but expressed doubts regarding it.

Over the next several months, the Company and the Union discussed an incentive program. However, the Company never supplied the requested cost data and the Union failed to submit a detailed proposal.

In March of 1985, the Company decided to end company logging operations. The Company based its decision on its staff's recommendation that $865,000 had to be spent on major equipment repairs and replacement necessary for safety and efficiency. The Company believed that in light of such an expenditure, Company logging could not be competitive with independent logging.

On March 21, 1985, the Company notified the Union of its decision to end logging operations and laid off sixty-two of its sixty-eight logging employees. The district court found that the "Company made reasonable efforts to reemploy these workers." Daw Forest, 643 F.Supp. at 124.

The Union brought this action in district court, claiming that the Company breached the first clause of the Memorandum of Agreement by failing to engage in good faith negotiations by failing to provide cost data. The Union also claimed that the Company's shutdown of the logging operations breached the Memorandum's second clause, arguing that the Memorandum required a piecemeal phase-out of logging operations.

The district court ordered a bifurcated trial. After a bench trial on the question of Company liability, the district court found: (1) the first clause of the Memorandum

is unenforceable because its terms are too vague to provide a basis for determining the existence of a breach and an appropriate remedy; and (2) the second and third clauses are unenforceable since they are dependent on the unenforceable first clause Id. at 125-26. Alternatively, the court found that the second clause itself is unenforceable because it is too vague to provide a basis for determining the existence of a breach, and that the third clause was not breached. Id. On appeal, the Union disputes the court's finding that the first and second clauses are unenforceable.

II.

We have jurisdiction over this action pursuant to section 301(a) of the Labor Management Relations Act (LMRA), 29 U.S.C. Sec. 185(a), since it is a suit alleging violation of a contract between an employer and a union. The parties do not dispute the fact that this court has jurisdiction even though the Memorandum of Agreement is not a collective bargaining agreement. Cf. Retail Clerks International Ass'n., Local Union Nos. 128 and 633 v. Lion Dry Goods, Inc., 369 U.S. 17, 25-28, 82 S.Ct. 541, 546-548, 7 L.Ed.2d 503 (1962) (section 301 jurisdiction exists over agreements "significant to the maintenance of labor peace," id. at 28, 82 S.Ct. at 548); Rehmar v. Smith, 555 F.2d 1362, 1366 (9th Cir.1977) (jurisdiction exists over alleged breach of pension benefit eligibility rules).

The Company argues that even if the contract is valid, the question of whether it failed to negotiate in good faith is for the National Labor Relations Board. This contention is based on the fact that the existence of an unfair labor practice, such as a breach of the statutory duty to bargain in good faith under 29 U.S.C. Sec. 158(a)(5), is within the expertise of the Board. Burke v. French Equipment Rental, Inc., 687 F.2d 307, 311 (9th Cir.1982). However, in section 301 suits, the courts and the Board generally exercise concurrent jurisdiction, even where an unfair labor practice may be implicated. Lumber Production Industrial Workers Local No. 1054 v. West Coast Industrial Relations Ass'n., 775 F.2d 1042, 1045 (9th Cir.1985); cf. Laborers Health and Welfare Trust Fund v. Kaufman & Broad of Northern California, Inc., 707 F.2d 412, 415 (9th Cir.1983) (Board has primary jurisdiction when section 301 suits involve questions of representation and proper bargaining units.).

In a section 301 case, we must apply the federal substantive law of labor contracts, which is fashioned to effectuate the policy of our national labor laws. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57, 77 S.Ct. 912, 917-18, 1 L.Ed.2d 972 (1957). We may apply state law, however, if it is compatible with federal labor policy. Id. at 457, 77 S.Ct. at 918.

III.

We first address the Union's contention that the district court erred in finding that the first clause of the Memorandum (governing submission and consideration of Union proposals for a Working Agreement) was overly vague and therefore unenforceable. We review the district court's interpretation of language on the face of the Memorandum de novo. Irwin v. Carpenters Health & Welfare Trust Fund, 745 F.2d 553, 555 (9th Cir.1984). However, a trial court's interpretation of an ambiguous contract in light of surrounding circumstances is factual and will be reversed only if its interpretation is clearly erroneous. Hanson v. Prudential Insurance Co., 783 F.2d 762, 764 (9th Cir.1986); In re U.S. Financial Securities Litigation, 729 F.2d 628, 632 & n. 1 (9th Cir.1984).

The district court properly recognized that an agreement is unenforceable if its terms are not sufficiently specific to enable a court to determine breach and remedy. Daw Forest, 643 F.Supp. at 124; see Restatement (Second) of Contracts, Sec. 33(2) (1981). The district court concluded that the Company had too much discretion under the written terms and surrounding circumstances such that it could not determine whether the Company had given a Union proposal good faith...