International Union of Operating Engineers, Local Union No. 542 v. Allied Erecting & Dismantling Co., Inc, 020414 FED3, 13-2160

Docket Nº:13-2160
Opinion Judge:VAN ANTWERPEN, Circuit Judge.
Party Name:INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL UNION NO. 542 v. ALLIED ERECTING & DISMANTLING CO., INC, Appellant
Attorney:Edward R. Noonan, Esq. [ARGUED] Eckert, Seamans, Counsel for Appellant Regina C. Hertzig, Esq. [ARGUED] Cleary, Josem & Trigiani Counsel for Appellee
Judge Panel:Before: JORDAN, VANASKIE, and VAN ANTWERPEN, Circuit Judges. VANASKIE, Circuit Judge, concurring in part and dissenting in part.
Case Date:February 04, 2014
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL UNION NO. 542

v.

ALLIED ERECTING & DISMANTLING CO., INC, Appellant

No. 13-2160

United States Court of Appeals, Third Circuit

February 4, 2014

NOT PRECEDENTIAL

Argued on December 16, 2013

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil No. 2:12-cv-06579) District Judge: Honorable Berle M. Schiller

Edward R. Noonan, Esq. [ARGUED] Eckert, Seamans, Counsel for Appellant

Regina C. Hertzig, Esq. [ARGUED] Cleary, Josem & Trigiani Counsel for Appellee

Before: JORDAN, VANASKIE, and VAN ANTWERPEN, Circuit Judges.

OPINION

VAN ANTWERPEN, Circuit Judge.

Appellant Allied Erecting & Dismantling Co., Inc. ("Allied") appeals the District Court for the Eastern District of Pennsylvania's declaratory judgment in favor of the International Union of Operating Engineers, Local Union No. 542 ("Union"), holding that their collective bargaining agreements were indefinite, contrary to the aims of federal labor law, and terminable by either party with reasonable notice. Int'l Union of Operating Eng'rs, Local Union No. 542 v. Allied Erecting & Dismantling Co., No. 12-6579, 2013 WL 1234729, at *3–4 (E.D. Pa. Mar. 26, 2013). For the reasons that follow, we will vacate the decision of the District Court and remand for further proceedings.

I. BACKGROUND

Writing solely for the parties, we briefly review the essential facts. In 1992, the parties entered into two collective bargaining agreements pertaining to work dismantling a closed steel plant in Fairless Hills, Pennsylvania.1 The agreements established wages, working conditions, and other terms.2 The Fairless Hills project continues to date, and the Union anticipates it to continue at least another five years. (Compl. ¶ 13.)

The agreements define the Fairless Hills project as "[Allied's] jobsite at the USX Corporation Fairless Hills Pennsylvania facility at which [Allied] performs dismantling work on decommissioned property pursuant to a contract with USX Corporation (herein referred to as the 'Project')." (Joint Appendix "JA" at 63, 83.) USX decides what is to be dismantled by Allied at the Fairless Hills project. Article I, Section 4 of the agreements states that "[i]n the event [Allied] is successful in procuring dismantling work at jobsites other than the Project within the Union's geographical jurisdiction, [Allied], in its complete discretion, may elect to extend this Agreement to such other jobsites on a jobsite-by-jobsite basis." (Id. (emphasis added).) The termination provision of each agreement provides that

this Agreement shall terminate upon [Allied's] completion of the Project. As to any jobsite to which this Agreement is extended on a jobsite-by-jobsite basis[, ] . . . the Agreement and [Allied's] recognition of the Union for employees employed at such jobsite shall terminate upon the completion of [Allied's] work at such jobsites.

(Id. at 78, 97.) The agreements also contain a severability clause3: "Any provision of this

Agreement which now or subsequently is found . . . to contravene [the] law . . ., shall be suspended in operation . . . . Such suspension shall not affect the operation or validity of the remainder of the provisions of this Agreement." (Id. at 77, 96.)

In August, 2011, the Union notified Allied that it intended to terminate the agreements and requested negotiations for successor agreements. Allied filed a complaint with the National Labor Relations Board ("NLRB"), alleging that such notice violated the National Labor Relations Act ("NLRA"). The NLRB Regional Director dismissed the charge and Allied appealed. The NLRB held Allied's appeal in abeyance during the pendency of the proceedings below. The NLRB Office of Appeals then terminated its consideration of Allied's appeal following the issuance of the District Court's opinion.

The Union requested the District Court to declare the agreements terminable upon reasonable notice, which the Union claimed it provided.4 (See Compl. ¶¶ 18, 20.) Allied argued that the termination provisions were valid and sought a declaration that the agreements remained in effect until completion of the Fairless Hills project. (See Answer ¶ 3.) The District Court held that the agreements were of "indeterminate duration" and were "inconsistent with the aims of federal labor law." Allied Erecting & Dismantling Co., 2013 WL 1234729, at *3. Therefore, the parties could terminate them upon reasonable notice. Id. at *4. Allied appealed.

II.5 DISCUSSION

"[F]ederal law governs the construction of collective bargaining agreements, [and] traditional rules of contract interpretation apply when not inconsistent with federal labor law." Teamsters Indus. Emps. Welfare Fund v. Rolls–Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993) (citation omitted). "If less than all of an agreement is unenforceable [as against public policy], a court may nevertheless enforce the rest of the agreement in favor of a party who did not engage in serious misconduct if the performance as to which the agreement is unenforceable is not an essential part of the agreed exchange." Restatement (Second) of Contracts § 184(1) (1981); see also Puleo v. Chase Bank USA, N.A., 605 F.3d 172, 186 (3d Cir. 2010). A severability analysis requires that we determine whether a contract provision is unenforceable, and, if so, whether it may be severed from the remainder of the agreement. See Puleo, 605 F.3d at 186.

A. Article I, Section 4 is unenforceable.

Labor contracts of indefinite duration contravene federal labor policy and are terminable at will. E.g., Montgomery Mailers' Union No. 127 v. Advertiser Co., 827 F.2d 709, 715 (11th Cir. 1987). However, a contract may terminate upon a specified event rather than a predetermined date. E.g., UAW v. Randall Div. of Textron, Inc., 5 F.3d 224, 229 (7th Cir. 1993).

The District Court concluded that the agreements were of indefinite duration and terminable by both parties with reasonable notice. Allied Erecting & Dismantling Co., 2013 WL 1234729, at *3. It concurred with the Eleventh Circuit's reasoning in Montgomery Mailers' Union, 827 F.2d at 715–16. The contract therein "continue[d] in effect for such reasonable time . . . as may be required for negotiation of a new agreement." Id. at 715. The union argued that under this provision, the agreement terminated only upon successful negotiation of a new agreement. Id.

The Eleventh Circuit noted that the union, which was disinclined to enter into a new agreement, "could perpetuate the existing contract by continuing negotiations but never reaching an agreement." Id. "The side not desiring a change could refuse to agree . . . . Each side could stand entrenched knowing the contract would continue as it was. The side desiring to alter the terms or conditions of the relationship would never have a prayer of success." Id. (quoting Kaufman & Broad Home Sys. v. Int'l Brotherhood of Firemen, 607 F.2d 1104, 1110 (5th Cir. 1979)). This was "contrary to fundamental principles of law, our established national labor relations policy and the intent of Congress expressed in the Labor Management Relations Act of 1947." Id.

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