Arrow Automotive Industries, Inc. v. N.L.R.B., 87-3105

• Decision Date: 01 August 1988
• Docket Number: No. 87-3105,87-3105
• Parties: 128 L.R.R.M. (BNA) 3137, 57 USLW 2089, 109 Lab.Cas. P 10,651 ARROW AUTOMOTIVE INDUSTRIES, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW), Intervenor.
• Court: U.S. Court of Appeals — Fourth Circuit

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853 F.2d 223 128 L.R.R.M. (BNA) 3137, 57 USLW 2089,
109 Lab.Cas. P 10,651 ARROW AUTOMOTIVE INDUSTRIES, INC., Petitioner,
v.
NATIONAL LABOR RELATIONS BOARD, Respondent,
International Union, United Automobile, Aerospace, and
Agricultural Implement Workers of America (UAW), Intervenor. No. 87-3105. United States Court of Appeals,
Fourth Circuit. Argued March 8, 1988.
Decided Aug. 1, 1988.

James F. Smith (Steven S. Greene, Constangy, Brooks & Smith, Atlanta, Ga., Paul Stanzler, Burns & Levinson, Boston, Mass., on brief), for petitioner.

Frederick Havard, N.L.R.B. (Rosemary E. Collyer, Gen. Counsel, John E. Higgins, Jr., Deputy Gen. Counsel, Robert E. Allen, Associate General Counsel, Aileen A. Armstrong, Deputy Associate Gen. Counsel, William R. Stewart, Deputy Asst. Gen. Counsel, Washington, D.C., on brief), for respondent.

Wendy Kahn, Washington, D.C. (Jordan Rossen, Gen. Counsel, Michael B. Nicholson, Daniel W. Sherrick, Associate Gen. Counsel, Intern. Union, UAW, Detroit, Mich., on brief), for intervenor.

Before WINTER, Chief Judge, and CHAPMAN and WILKINSON, Circuit Judges.

WILKINSON, Circuit Judge:

Arrow Automotive Industries, Inc. appeals the National Labor Relations Board's decision that Arrow was obligated to bargain with Local 1596, International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America, over Arrow's decision to close its Hudson, Massachusetts facility and perform the work previously done at that plant in Spartanburg, South Carolina. Because the Board's order contravenes controlling Supreme Court precedent, First National Maintenance Corp. v. NLRB, 452 U.S. 666, 101 S.Ct. 2573, 69 L.Ed.2d 318 (1981), we deny enforcement and hold that the company has no duty to bargain over the closing decision.

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I.

Arrow Automotive Industries, Inc. is a Massachusetts corporation engaged in the remanufacture and distribution of automobile and truck parts. Arrow operated plants in Hudson, Massachusetts, Spartanburg, South Carolina, Morrilton, Arkansas, and Vernon, California. Each plant engaged in the production of identical product lines, and each primarily served a market corresponding to its geographic area.

The Hudson plant had a history of unprofitable operations. The northeast market served by Hudson was declining, and sales from the plant fell over forty percent between 1976 and 1980. Labor costs at the Hudson plant were also higher than costs at Arrow's other facilities. As a result, the Hudson plant operated at a loss from 1977 on, with the exception of 1979, culminating in a loss of $1,092,000 in 1980. During this same period, Arrow was planning to open a new facility in Santa Maria, California, to replace the small Vernon plant and tap an expanding western market.

Beginning in 1978, Arrow management considered closing the Hudson plant in order to increase Arrow's profitability. Despite the declining market and escalating costs at the plant, Arrow President Harry Holzwasser apparently resisted the closure for sentimental reasons. Holzwasser's father had founded the company in Massachusetts, and he felt family ties to the Hudson operation.

The union had represented the employees at the Hudson plant since 1971 and had entered into a series of collective bargaining agreements, the last of which expired on November 30, 1980. Arrow and the union entered negotiations over a new agreement in October of 1980. The parties held a total of nine meetings between October 22 and November 30. The negotiations involved a number of issues, including wages, vacations and holidays, pension benefits, and, predominantly, health insurance. The parties failed to reach agreement on a new contract, and the union called a strike at the Hudson plant on November 30. Arrow thereupon began servicing the northeast from its Spartanburg facility. The parties met twice during the strike, but could not reach agreement despite Arrow's indication it might hire replacement workers or consider closing the plant. On March 2, 1981, the union membership voted to reject what turned out to be Arrow's final offer.

After the union vote, Arrow financial officer David Koontz prepared an analysis of the possible closing of Hudson. Koontz estimated that closing Hudson would increase the earnings per share of Arrow stock from $1.31 to $1.63, and concluded that the work done by the Hudson plant could be performed more efficiently at Spartanburg. During this same period, Arrow sent a telegram to the union withdrawing all of Arrow's contract proposals and stating that Arrow was debating whether to close the Hudson plant. Arrow's telegram requested a meeting with union representatives to discuss the closing decision. ¹ Representatives of Arrow and the union met on March 23, 1981. The union, after being prompted by a federal mediator, reduced some of its contract demands, but the parties did not reach agreement.

On March 25, Arrow's Board of Directors met for three hours to consider the closing decision. The directors reviewed Koontz' conclusion that economic considerations supported the closing. Koontz told the Board that the Hudson work could be performed more efficiently in Spartanburg, and that the declining market and escalating costs at the Hudson plant meant that substantial savings would result from closure. Closure of Hudson could be expected to result in a $1.7 million increase in gross profit, an improvement of twenty-four percent. Koontz testified that he told the directors that closure of Hudson would also free substantial capital, which would be helpful in the upcoming opening of the Santa Maria plant. The minutes of the meeting, however, are ambiguous on the role of the Santa Maria plant in the decision to close Hudson. After discussion, the

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Board voted to close the Hudson plant. The parties have stipulated that the declining market and escalating production costs at Hudson led the directors to close the plant. There has been no finding that anti-union animus in any way influenced the closing decision.

Arrow informed the union by telegram on March 25 that it had decided to close the Hudson plant, and requested a meeting to bargain over the effects of the closing on the Hudson employees. On March 26, the union demanded that Arrow bargain further with it over the decision to close. Arrow declined to participate in further decision bargaining, and took the position that any further bargaining was to be restricted to the effects of the closing. ²

On April 6, 1981, the union filed an unfair labor practice complaint with the National Labor Relations Board alleging that Arrow had failed to bargain over the decision to close the Hudson plant as required by section 8(a)(5) of the National Labor Relations Act, 29 U.S.C. Sec. 158(a)(5). Following a hearing, the Administrative Law Judge held on August 16, 1982 that Arrow did have an obligation to bargain over the closure decision. The ALJ found, however, that Arrow had satisfied its duty to bargain over the closing, and dismissed the complaint. The union and the NLRB's general counsel filed exceptions to the ALJ's determination that sufficient bargaining had occurred, and Arrow filed exceptions to the ALJ's holding that Arrow had a duty to bargain over the closing decision.

On June 25, 1987, almost five years after the exceptions and cross-exceptions were filed, the NLRB issued its decision. The Board found that Arrow had an obligation to bargain over the decision to close because the decision "turned on labor costs," and reversed the ALJ's finding that Arrow had satisfied its bargaining obligation. Arrow Automotive, Inc., 284 NLRB No. 57 (1987). The Board thus ordered Arrow to bargain with the union over the closing decision that had been made six years earlier. The Board further ordered Arrow to pay the Hudson workers their normal wages from March 25, 1981 until Arrow and the union reached agreement over the closing or bargained to impasse, or the union failed to request bargaining or failed to bargain in good faith. Arrow appeals.

II.

The Supreme Court's decision in First National Maintenance Corp. v. NLRB, 452 U.S. 666, 101 S.Ct. 2573, 69 L.Ed.2d 318 (1981), governs our approach to this case. In First National Maintenance, the Supreme Court construed the provisions of the National Labor Relations Act, which requires employers and unions to bargain collectively "with respect to wages, hours, and other terms and conditions of employment." Refusal to bargain over such matters constitutes an unfair labor practice. See 29 U.S.C. Secs. 158(a)(5), 158(b)(3), and 158(d). In First National Maintenance, the Supreme Court held that an employer's partial closing decision is not a "term or condition of employment," and is therefore not a subject of mandatory bargaining. The Board contends that it has followed First National Maintenance in holding that any management decision that discontinues employment is a subject of mandatory bargaining if the decision "turns on labor costs." Arrow, on the other hand, argues that First National Maintenance precludes enforcement of the Board's bargaining order. We agree with Arrow and hold that it was not required to bargain over the decision to close the Hudson plant.

In First National Maintenance the Supreme Court held that a maintenance company's decision to terminate its service contract with one of its customers and discharge the employees who worked at that location was not a subject of mandatory bargaining. In so doing, the Court followed

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an approach suggested by Justice Stewart's Fibreboard concurrence, dividing management decisions into three groups. See Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203, 217-26, 85 S.Ct. 398, 406-11, 13 L.Ed.2d 233 (1964). First, some decisions, such as the choice of advertising, product type, and financing arrangements, "have only an indirect and attenuated impact on the employment relationship," and bargaining about these decisions is not...