Cremation Soc'y of Ill., Inc. v. Int'l Bhd. of Teamsters Local 727

• Decision Date: 28 August 2017
• Docket Number: No. 16-2322,16-2322
• Citation: 869 F.3d 610
• Parties: CREMATION SOCIETY OF ILLINOIS, INC., Plaintiff-Appellant, v. INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL 727, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

869 F.3d 610

CREMATION SOCIETY OF ILLINOIS, INC., Plaintiff-Appellant,

v.INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL 727, Defendant-Appellee.

No. 16-2322

United States Court of Appeals, Seventh Circuit.

Argued February 22, 2017

Decided August 28, 2017

Todd K. Hayden, Susan W. Glover, Attorneys, Robbins Schwartz Nicholas Lifton & Taylor, Mokena, IL, for Plaintiff–Appellant.

David Huffman-Gottschling, Attorney, Jacobs, Burns, Orlove & Hernandez, Chicago, IL, for Defendant–Appellee.

Before Bauer and Williams, Circuit Judges, and DeGuilio,^* District Judge.

Bauer, Circuit Judge.

Sullivan Olson, Inc. ("Sullivan Olson"), which is now Cremation Society of Illinois, Inc., filed suit against the International Brotherhood of Teamsters Local No. 727 ("the Union"), under Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185(a), seeking a declaration that it had properly repudiated and was no longer bound by the collective bargaining agreement with the Union. The Union counterclaimed for a confirmation of an arbitration award and to compel arbitration pursuant to the LMRA and the Federal Arbitration Act, 9 U.S.C. §§ 4 and 6. It also filed a third-party complaint against Cremation Society. The district court ruled in the Union's favor on cross-motions for summary judgment. Cremation Society appeals the district court's rulings. For the following reasons, we affirm.

I. BACKGROUND

A. Parties

Sullivan Olson operated a funeral home known as Olson Burke/Sullivan Funeral & Cremation Center ("OBS") in Chicago, Illinois, until it was purchased by Cremation Society on December 31, 2013, merged into Cremation Society in April 2014, and ceased to exist as an entity thereafter. The Company's President and sole shareholder was Gerald Sullivan. Sullivan is also the President and one of two shareholders of Cremation Society (the other shareholder being his wife). Cremation Society also conducts business in the funeral services industry under the name OBS, and has nine other locations in northern Illinois.

The Union is a labor organization affiliated with the International Brotherhood of Teamsters. Sullivan Olson's relationship with the Union began after a settlement stemming from an unrelated lawsuit brought by the trustee of the Union's benefit funds. The Union's bargaining relationship with Cremation Society terminated in 2007.

B. Compliance Agreement and Collective Bargaining Agreement

On October 7, 2003, Sullivan Olson executed a Compliance Agreement, binding it to the terms and conditions of the Union's collective bargaining agreement ("CBA") with the Funeral Directors Services Association of Greater Chicago ("FDSA"). The Compliance Agreement provided that it would remain in effect until June 30, 2007, and from year to year thereafter. However, it could be terminated by either party upon written notice to the other at least 60 days prior to June 30 of 2007, or any subsequent year.

The CBA between the Union and the FDSA recognized that the Union was the exclusive collective bargaining agent for all employees performing "bargaining unit work." As defined in the CBA, "bargaining unit work" is "the performance of embalming, whether in training or licensed, funeral directing, whether training or licensed, and auto livery chauffeur services." The definition also explicitly includes "removals, transportation of remains, embalming, funeral directing and all other work historically done by the bargaining unit."

Article 19 of the CBA set out a grievance and arbitration procedure for "[a]ny complaint, grievance or dispute arising under or concerning the meaning, application, or compliance with the terms of this Agreement between the Employer and the Union and/or an employee." This article provides that, if the employer cannot resolve the dispute in two required meetings, then the grievance may be referred to the Grievance Board ("Board"), which is made up of three individuals selected by the FDSA and three individuals selected by the Union. The Board is required to conduct a hearing and render a decision on the referred grievance. If the Board fails to hold a hearing or issues a split decision, the Union or employer may submit the matter to arbitration. Either a majority decision of the Board or a decision of the arbitrator is final and binding upon the parties.

C. Grievances

On November 30, 2013, Sullivan Olson sent a letter to the Union, informing them that it was repudiating the Compliance Agreement and CBA. On December 19, 2013, a Union representative called Sullivan Olson to inquire about dues. Sullivan Olson responded by letter from its counsel on December 29, 2013, referencing the November 30, 2013, repudiation letter. In response, the Union sent a letter denying that the Compliance Agreement and CBA were no longer in effect. On February 13, 2014, the Union filed a grievance ("Grievance 3930"), complaining that Sullivan Olson had attempted to improperly repudiate the Compliance Agreement and CBA. The Union also alleged that Sullivan Olson failed to respond to the Union's request for documentation on the individuals performing bargaining unit work.

In January 2013, Sullivan Olson had a single employee on its payroll, funeral director Douglas Klein, who was a member of the bargaining unit represented by the Union. On December 16, 2013, Vicki Grantham, Cremation Society's Comptroller, sent Klein an email stating that, as of December 30, 2013, he would be employed by Cremation Society, not Sullivan Olson. On March 10, 2014, Sullivan gave Klein a long-term termination memorandum, referencing a February 2014 incident, where Klein left the doors to his van wide upon while it contained a deceased person, and ongoing performance difficulties. The memorandum also notified Klein that Cremation Society would terminate him, effective August 31, 2014. On March 14, 2014, the Union filed another grievance ("Grievance 3621"). In this grievance, the Union alleged that Sullivan Olson violated the discipline and discharge provisions of the CBA.

Both grievances were referred to the Board because the parties were unable to come to a resolution on Grievance 3930 after the two required meetings, and Sullivan Olson completely refused to follow the grievance procedure for Grievance 3621. The Board scheduled a hearing for May 1, 2014; Sullivan Olson was provided notice but did not attend the hearing.

On May 2, 2014, the Board issued its decision. The Board sustained Grievance 3930, finding that the November 30, 2013, termination notice was not given within the time period of at least 60 days prior to June 30th of any subsequent contract year. The Board determined that Sullivan Olson was still bound by the Compliance Agreement until June 30, 2017, and from year to year thereafter until it provides timely notice to the Union. As for Grievance 3621, the Board ordered Sullivan Olson to meet with the Union to process the grievance within 30 days. After the Board's ruling, Sullivan Olson and Cremation Society refused to recognize the Union as the collective-bargaining representative of any employees and have failed to process Grievance 3621.

D. Procedural History

After the Union filed Grievance 3621, Sullivan Olson filed a complaint on March 21, 2014, seeking a declaration that it had properly repudiated the CBA, and no longer was bound by the agreement with the Union. On May 23, 2014, the Union counterclaimed and filed a third-party complaint against Cremation Society, seeking to compel arbitration and enforce the Board's awards. The parties filed cross-motions for summary judgment.

The basis of Sullivan Olson's declaratory action was the National Labor Relations Board's "one-man unit rule," which allows an employer, who employs one or fewer unit employees on a permanent basis, to repudiate its contract with a union without affording it an opportunity to bargain. See J.W. Peters, Inc. v. Bridge, Structural & Reinforcing Iron Workers, Local Union 1 , 398 F.3d 967, 973 (7th Cir. 2005). Sullivan Olson argued that it properly repudiated the CBA because it terminated the agreement when it had only one bargaining unit employee.

The Union alleged that Sullivan Olson and Cremation Society constituted a "single employer" before the two companies merged. The Union argued that the repudiation was unlawful because the bargaining unit was never down to one employee when one considers the Cremation Society employees as conducting bargaining unit work. It also claimed that the repudiation was untimely under the provisions of the CBA and that Cremation Society remained bound by Article 19's grievance procedure. In response, Sullivan Olson argued that, because the Union had operated as if Sullivan Olson and Cremation Society were two separate entities for at least a decade, the Union had impliedly waived, or was equitably estopped from asserting, the single-employer theory.

The district court granted summary judgment in favor of the Union on the cross-motions. First, the district court found that Sullivan Olson and Cremation Society failed to cite any pertinent authority in support of their implied waiver and equitable estoppel arguments or indicate that this is an area in which federal common law borrows from state law. Assuming that either of the defenses were applicable to this type of case, the district court found that there was no evidence to support their application here. Second, the district court concluded that Sullivan Olson and Cremation Society constituted a single employer. Third, it found that the Sullivan Olson and Cremation Society failed to rebut the Union's evidence that Klein was not the only permanent employee who performed bargaining unit work. Fourth, since there was no genuine dispute of material fact that Sullivan Olson and Cremation Society constituted a single employer prior to their merger and had more than one employee who performed bargaining unit work, Sullivan Olson's unilateral repudiation was not effective under the one-man unit rule. Therefore,...