Building Materials and Const. Teamsters Local No. 216 v. Granite Rock Co.

• Decision Date: 11 July 1988
• Docket Number: No. 87-1959,87-1959
• Citation: 851 F.2d 1190
• Parties: 128 L.R.R.M. (BNA) 3060, 57 USLW 2100, 109 Lab.Cas. P 10,598 BUILDING MATERIALS AND CONSTRUCTION TEAMSTERS LOCAL NO. 216, Plaintiff- Appellee, v. GRANITE ROCK COMPANY, a corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1190

851 F.2d 1190

128 L.R.R.M. (BNA) 3060, 57 USLW 2100,

109 Lab.Cas. P 10,598

BUILDING MATERIALS AND CONSTRUCTION TEAMSTERS LOCAL NO. 216 Plaintiff- Appellee, v. GRANITE ROCK COMPANY, a corporation, Defendant-Appellant.

No. 87-1959.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 10, 1988.

Decided July 11, 1988.

Garry G. Mathiason, Littler, Mendelson, Fastiff & Tichy, San Francisco, Cal., for defendant-appellant.

Duane B. Beeson, Beeson, Tayer, Silbert & Bodine, San Francisco, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of California.

Before WALLACE, REINHARDT and LEAVY, Circuit Judges.

WALLACE, Circuit Judge:

Granite Rock Company (Granite Rock) appeals the district court's order granting summary judgment in favor of Building Materials and Construction Teamsters Local No. 216 (union). The district court's order requires the parties to arbitrate the question whether Granite Rock violated an implied covenant in the multi-union, multi- employer bargaining agreement (agreement) to which it is a party. Granite Rock challenges the district court's determination of arbitrability on three grounds: (1) the union's grievance is not arbitrable because the union failed to demonstrate that its interpretation of the agreement was plausible; (2) the union's claim was decided adversely to the union in proceedings before the National Labor Relations Board (Board) and is therefore barred by principles of res judicata and collateral estoppel; and (3) the implied covenant, if it exists, is unenforceable because it violates section 8(e) of the National Labor Relations Act (NLRA), 29 U.S.C. Sec. 158(e), and public policy. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291, and we affirm.

I

Granite Rock operates various businesses in Northern California, including a concrete manufacturing plant in San Jose, California. The union represents employees in the construction industry, including ready-mix truck drivers, in San Francisco and San Mateo counties. Both Granite Rock and the union are parties to the agreement between six locals, including the union, and the Aggregates and Concrete Association of Northern California, Inc., an employer association of which Granite Rock is a member. The agreement covers ready-mix truck drivers operating out of signatory concrete plants within the geographical jurisdictions of the locals.

In 1984, Granite Rock's shareholders decided to reactivate Central Supply Company (Central), an assetless subsidiary of Granite Rock. Granite Rock lent Central more than $300,000 by making its line of bank credit available to its subsidiary. Central then created a new concrete ready-mix plant in San Mateo County and began business operations in 1985 under the name of Harbor Ready-Mix (Harbor).

On August 5, 1985, the union filed a grievance against Granite Rock, asserting that Harbor and Granite Rock were "alter egos" and that Granite Rock had breached the agreement by operating Harbor without applying the economic and hiring provisions of the agreement to Harbor's employees and by refusing to recognize the union as the representative of Harbor's employees. Granite Rock refused to process the grievance. Instead, it filed a unit clarification proceeding before the Board for the purpose of determining whether Harbor's employees were governed by the agreement.

In February 1986, the union brought this action in the United States District Court. In its complaint, the union sought to compel Granite Rock to comply with the grievance and arbitration provisions of the agreement with respect to its grievance concerning the establishment of Harbor. A few days after the complaint was filed, the Board's regional director held a hearing in the unit clarification proceeding initiated by Granite Rock. The regional director issued his decision on March 12, 1986, in which he rejected the union's alter ego claim and determined that the bargaining unit of ready-mix truck drivers at Granite Rock's San Jose plant did not include any of Harbor's employees. In reaching his decision, the regional director found that Harbor was not and never had been a signatory to the agreement, that Granite Rock and Harbor's business operations were dissimilar and that they neither shared nor exchanged personnel, and that Granite Rock did not play a consequential role in Harbor's business and personnel decisions. The union failed timely to appeal the regional director's decision and order, and the decision thereby became a final decision of the Board. NLRB Rules and Regulations Sec. 102.67(b), (f), 29 C.F.R. Sec. 102.67(b), (f) (1987).

Relying on the Board's order, Granite Rock moved for summary judgment in the union's action in the district court. Granite Rock argued that arbitration of the union's grievance would be futile because the Board's decision precluded the arbitrator from finding that the agreement applied to Harbor's employees. In response, the union filed a cross-motion for summary judgment, in which the union conceded that the Board's decision foreclosed arbitration on the representational question whether Harbor's employees were governed by the agreement. The union argued, however, that the Board's decision did not address or decide whether Granite Rock breached the agreement by establishing Harbor without applying the hiring and economic provisions of the agreement to Harbor's employees.

The district court granted the union's cross-motion for summary judgment. The court observed that while the Board's decision precluded arbitration of the representational issues decided by the Board, it did not bar arbitration of the remaining contractual issues raised by the union's complaint. Therefore, the court ordered arbitration of the question whether Granite Rock breached the agreement by establishing Harbor to compete with other employers without conforming to the hiring and economic provisions of the agreement.

Granite Rock moved under Fed.R.Civ.P. 59(e), to alter the district court's judgment. Granite Rock argued, among other things, that it was not required to arbitrate the union's grievance because any arbitration award favoring the union would necessarily conflict with NLRA Sec. 8(e). On March 30, 1987, the district court granted in part and denied in part Granite Rock's motion to amend the judgment.

The district court agreed with Granite Rock that a clause requiring an employer to apply the hiring provisions of its agreement to a newly established business would facially violate NLRA Sec. 8(e), which prohibits "work acquisition" agreements. The district court, however, found that a clause requiring an employer to apply the economic provisions of its agreement to a new business could be analogized to a "union standards" or "work preservation" clause, and thus might survive a facial attack under section 8(e). Consequently, the court modified its earlier decision by removing the issue involving the implied hiring provisions of the agreement from arbitration, and limited its order compelling arbitration to the following question: "Whether defendant has violated the collective bargaining agreement between the parties by establishing Harbor Ready Mix to compete with other employers covered by the agreement without conforming to the economic provisions of the agreement."

Granite Rock appeals the modified decision of the district court. The union has not appealed the district court's refusal to include the hiring provisions issue in the order compelling arbitration. We thus need decide only whether the district court erred in ordering the parties to arbitrate the question whether Granite Rock violated the agreement by establishing Harbor without ensuring that Harbor's employees would enjoy the economic benefits guaranteed to employees covered by the agreement. We review the district court's entry of summary judgment de novo. Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986). We will uphold the summary judgment if it clearly appears that no genuine issue of material fact remains for trial and that the union is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986).

II

Granite Rock argues that the district court erred in determining that the union's grievance is subject to the dispute resolution provisions of the agreement. The district court based its finding of arbitrability on section 18 of the parties' agreement, which provides that "[a]ll disputes arising under this agreement" shall be resolved in accordance with a procedure that requires, in order of priority, (a) discussions between the union and the employer, (b) referral to a Board of Adjustment, and (c) submission to an impartial arbitrator. The union alleged that Granite Rock violated an implied covenant in the agreement prohibiting Granite Rock from establishing a company that would compete with signatory employers without observing the economic provisions of the agreement. Granite Rock responded that the agreement could not reasonably be interpreted to include the implied covenant alleged by the union. Because the parties' dispute clearly involves the proper interpretation of the agreement, the district court correctly determined that the parties agreed to submit this dispute to arbitration. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 1419, 89 L.Ed.2d 648 (1986) (AT & T ) (holding that there is a strong presumption of arbitrability where the labor contract purports to subject "any" or "all" grievances related to contract interpretation to arbitration); United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 568-69, 80 S.Ct. 1343, 1346-47, 4 L.Ed.2d 1403 (1960) (American Manufacturing ) (same).

Granite Rock contends that by determining that the union's grievance was arbitrable without first determining that the alleged noncompetition clause...