961 F.2d 654 (7th Cir. 1992), 90-1105, Talbot v. Robert Matthews Distributing Co.

Docket Nº:90-1105.
Citation:961 F.2d 654
Party Name:22 Fed.R.Serv.3d 331, RICO Bus.Disp.Guide 7981 Edward H. TALBOT, Jr., Cecil Blake, Alvin A. Bosma, Ronald Caronti, Gurve Dallas, Jr., George Dvorak, Fred Eidenschink, Mario Fazio, Dennis M. Fitzgerald, Lawrence F. Foldy, George M. Forecki, Richard Glade, Robert L. Goss, Richard Grunert, Roger Harris, Robert A. Johnson, Ralph C. Kamradt, James R. Ke
Case Date:April 10, 1992
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 654

961 F.2d 654 (7th Cir. 1992)

22 Fed.R.Serv.3d 331, RICO Bus.Disp.Guide 7981

Edward H. TALBOT, Jr., Cecil Blake, Alvin A. Bosma, Ronald

Caronti, Gurve Dallas, Jr., George Dvorak, Fred Eidenschink,

Mario Fazio, Dennis M. Fitzgerald, Lawrence F. Foldy, George

M. Forecki, Richard Glade, Robert L. Goss, Richard Grunert,

Roger Harris, Robert A. Johnson, Ralph C. Kamradt, James R.

Kennedy, Roy E. Knighton, Frank Leptich, Edward R. Magnuson,

Edward Nykaza, Donald J. Pellikan, John A. Petrie, William

D. Redis, Roger J. Reeder, George G. Schumert, William J.

Struck, Mario P. Terzo, Robert H. Vengrin, John C. Vogel,

and Robert A. Zuro, Plaintiffs-Appellants,

v.

ROBERT MATTHEWS DISTRIBUTING COMPANY, Neville Bros.

Distributing, Inc., Jewel Companies Inc., Aubrey Neville,

Robert Neville, Frank J. McMahon, James L. McMahon,

individually and as President of Local 753, Milk and Ice

Cream Drivers, and Allied Workers Union, Affiliated with the

International Brotherhood of Teamsters, Chauffeurs,

Warehousemen, and Helpers of America and Local 753, Milk and

Ice Cream Drivers and Allied Workers Union, Affiliated with

the International Brotherhood of Teamsters, Chauffeurs,

Warehousemen, and Helpers of America, Defendants-Appellees.

No. 90-1105.

United States Court of Appeals, Seventh Circuit

April 10, 1992

Argued Sept. 17, 1991.

Page 655

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Charles J. DeGrange (argued), Robert Orman, Chicago, Ill., for plaintiffs-appellants.

Henry W. Sledz, Jr. (argued), M. David Bieber, Kovar, Nelson, Brittain, Sledz & Morris, Chicago, Ill., Stephen G. Daday (argued), Stitt, Klein & Daday, Inverness, Ill., Francis M. Pawlak, Burke, Wilson & McIlvaine, Donnelly A. Dybus, Kevin Conlon, Conlon & Dybus, Chicago, Ill., for defendants-appellees.

Before CUMMINGS, COFFEY and KANNE, Circuit Judges.

KANNE, Circuit Judge.

The plaintiffs are former route drivers for the Hillfarm Dairy division of Jewel Food Stores ("Jewel") under the terms of a collective bargaining agreement between Jewel and Local 753, International Brotherhood of Teamsters ("Union"). In June 1984, Jewel contracted with an independent distributor, Robert Matthews Distributing

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Company ("Matthews"), to deliver Hillfarm Dairy milk to Jewel stores. The Union, through its president, James McMahon, negotiated a collective bargaining agreement with Matthews over the plaintiffs' objections and without a vote by Union members. 1 The agreement was executed on July 27, 1984, and Jewel guaranteed its terms and conditions by a separate letter agreement. The plaintiffs became Matthews employees, and their duties and responsibilities were substantially the same as when they had worked for Jewel. 2

The plaintiffs delivered Hillfarm Dairy products for Matthews from August 1984 until April 1985, when the Hillfarm Dairy was closed in connection with a salmonella outbreak. Jewel then arranged for the plaintiffs to deliver Dean Food Company ("Dean") milk and dairy products to its stores. However, in September 1985, Jewel arranged for Dean's distributor, Neville Brothers Distributing Company ("Neville Brothers"), to deliver the products and the plaintiffs' employment was terminated.

The Union filed grievances alleging that Matthews breached its collective bargaining agreement with the plaintiffs and that Jewel breached its separate agreement by refusing to reemploy the plaintiffs. The Union also claimed that Frank McMahon, Jewel, Matthews, and Neville Brothers engaged in a fraudulent conspiracy to terminate the plaintiffs' employment. The latter grievance was submitted to the National Labor Relations Board (NLRB) for arbitration, but no action was taken for two years. In November 1987, the arbitrator dismissed the grievance because the Union failed to present evidence to support its allegations of a fraudulent conspiracy.

The Union, Jewel and Matthews subsequently agreed to submit to arbitration the question whether Jewel had any obligation under its separate letter agreement to rehire the plaintiffs. The arbitrator determined that Jewel was not required to rehire the plaintiffs to deliver Dean products. The arbitrator found that Jewel's obligations were limited to the terms and conditions of the collective bargaining agreement between Matthews and the plaintiffs, and that Jewel's decision to purchase Dean products did not violate that agreement.

While the arbitration was pending, the plaintiffs filed a complaint in the district court, which they subsequently amended three times. 3 The plaintiffs' third amended complaint alleged that the defendants secreted the ownership of Matthews and that they engaged in a fraudulent conspiracy to deprive the plaintiffs of their employment. Specifically, as amended, Count I asserted common law fraud and misrepresentation against all the defendants. Count II stated a claim against Matthews, Jewel and Neville Brothers for a violation of § 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, and alleged that the Union breached its duty of fair representation with regard to its conspiracy grievance. Count III alleged that Jewel violated § 301 of the LMRA for breaching its separate letter agreement and its collective bargaining agreement with the plaintiffs. The count also alleged that the Union breached its duty of fair representation in grieving the plaintiffs' breach of contract

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claim. Count IV stated a putative claim against all defendants under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962 and 1964. Count V sought to recover overtime pay from Jewel, Neville Brothers and Matthews, and is not at issue in this appeal.

The defendants moved to dismiss Counts I through IV of the plaintiffs' third amended complaint and moved to strike certain paragraphs of the complaint as scandalous. The plaintiffs moved for Rule 11 sanctions and for leave to amend their third amended complaint.

The district court granted the defendants' motion to dismiss Counts I and IV with prejudice. The court found that the defendants' arguments as to Counts II and III requested the court to consider matters outside the pleadings, including the arbitrator's opinion and award and the terms of the plaintiffs' collective bargaining agreements with Matthews and Jewel. The court treated the motions to dismiss as motions for summary judgment under Federal Rule of Civil Procedure 56, and granted summary judgment in favor of the defendants on those counts. 4 The district court also struck three paragraphs of the plaintiffs' third amended complaint as scandalous, and denied the plaintiffs' motions for sanctions and for leave to amend their third amended complaint. The plaintiffs appeal and we affirm.

I

In considering the district court's dismissal of Counts I and IV, we must accept as true all the plaintiffs' well-pleaded factual allegations and the inferences reasonably drawn from them. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); Yeksigian v. Nappi, 900 F.2d 101, 102 (7th Cir.1990). We shall affirm the dismissal only if the plaintiffs have failed to allege any set of facts upon which relief may be granted. Id.

Count I alleged that the defendants fraudulently conspired to deprive the plaintiffs of their jobs. The plaintiffs asserted that James McMahon and Frank McMahon, as Union representatives and majority owners of Matthews, and Aubrey Neville and Robert Neville, owners of Neville Brothers and minority owners of Matthews, colluded with Jewel to transfer and ultimately terminate their employment. The district court dismissed this claim on the basis that it was preempted by two federal labor law preemption doctrines.

The district court found that Count I stated a claim for failure to bargain in good faith. See Brown v. Keystone Consolidated Industries, Inc., 680 F.Supp. 1212, 1219 (N.D.Ill.1988) (claim by employee that union and employer fraudulently withheld information while negotiating a shutdown agreement that lead to his termination constituted a claim for failure to bargain in good faith). Accordingly, the court found that the plaintiffs' state law claim was preempted under San Diego Building Trades Council v. Garmon, 359 U.S. 236, 245-46, 79 S.Ct. 773, 779-80, 3 L.Ed.2d 775 (1959) because the defendants' conduct is arguably prohibited as an unfair labor practice under § 8 of the National Labor Relations Act (NLRA), 29 U.S.C. § 158.

The Garmon doctrine is designed to protect the primary jurisdiction of the NLRB from federal and state courts, Keehr v. Consolidated Freightways of Delaware, Inc., 825 F.2d 133, 136 (7th Cir.1987), by providing the NLRB with exclusive jurisdiction to determine whether given conduct falls within the NLRA. Garmon, 359 U.S. at 244-45, 79 S.Ct. at 779-80.

The plaintiffs argue that the district court mischaracterized their claim as a claim for failure to bargain in good faith because the Union failed to bargain at all due to the majority ownership of Matthews by Union officials. However, the plaintiffs' allegations that the transfer of their employment to Matthews without a vote by

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Union members violated the Union by-laws, that James McMahon illegally terminated their collective bargaining agreement with Jewel and crushed all resistance to the transfer with serious threats of violence, that the defendants failed to disclose pertinent facts and made misrepresentations, that immediately after the transfer Frank McMahon received illegal payments from Neville Brothers, and that the transfer of the delivery work to Neville Brothers resulted in a reduction of labor costs for the defendants support the...

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