DETROIT LOC. JT. EXEC. BD., ETC. v. Howard Johnson Co., Inc.

• Decision Date: 12 July 1973
• Docket Number: No. 72-2009.,72-2009.
• Citation: 482 F.2d 489
• Parties: DETROIT LOCAL JOINT EXECUTIVE BOARD, HOTEL AND RESTAURANT EMPLOYES AND BARTENDERS INTERNATIONAL UNION, AFL-CIO, Plaintiff-Appellee, v. HOWARD JOHNSON COMPANY, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

482 F.2d 489 (1973)

DETROIT LOCAL JOINT EXECUTIVE BOARD, HOTEL AND RESTAURANT EMPLOYES AND BARTENDERS INTERNATIONAL UNION, AFL-CIO, Plaintiff-Appellee, v. HOWARD JOHNSON COMPANY, INC., Defendant-Appellant.

No. 72-2009.

United States Court of Appeals, Sixth Circuit.

Argued April 12, 1973.

Decided July 12, 1973.

James D. Tracy, Detroit, Mich., for defendant-appellant; Ronald J. Santo, Dykema, Gossett, Spencer, Goodnow & Trigg, Detroit, Mich., on brief.

Donald F. Sugerman, Detroit, Mich., for plaintiff-appellee; Miller, Klimist, Cohen, Martens & Sugerman, Detroit, Mich., on brief.

Before PHILLIPS, Chief Judge, and CELEBREZZE and MILLER, Circuit Judges.

WILLIAM E. MILLER, Circuit Judge.

The plaintiff, Detroit Local Executive Board, filed this action under § 301 of the Labor Management Relations Act, 29 U.S.C. § 185,¹ seeking to require the defendant, Howard Johnson Company, Inc., to arbitrate grievances that arose during its take-over of a motel and restaurant formerly owned by P. L. Grissom & Son, Inc., and the Belleville Restaurant Company.

On Decembr 7, 1959, the defendant and P. L. Grissom & Son, Inc., entered into a license agreement providing for the operation of a "Howard Johnson Motor Lodge" in Belleville, Michigan. On August 18, 1960, the defendant entered into an operator's agreement with Ben Bibb, P. L. Grissom, and the Belleville Restaurant Company for the operation of a "Howard Johnson's Restaurant" adjacent to the motor lodge. On January 1, 1968, the Belleville Restaurant Company and the Hotel & Restaurant Employees & Bartenders International Union entered into a collective bargaining contract affecting the restaurant employees. On August 1, 1968, P. L. Grissom & Son, Inc., the operator of the motor lodge, entered into a collective bargaining agreement with the Hotel, Motel and Restaurant Employees Union, Local 705, concerning the motel employees. On June 16, 1972, P. L. Grissom & Son, Inc., Charles Grissom, and the Belleville Restaurant Company² sold their interest in the motor lodge and the restaurant to the Howard Johnson Company, Inc. Pursuant to an oral agreement, the transfer date was set for July 24, 1972. On June 28, 1972, Howard Johnson notified Grissoms that it would not recognize or assume any labor agreements entered into by these companies. Also Howard Johnson would not assume any obligations or liabilities of the companies resulting from any labor agreements or from unfair labor practices. On July 9, 1972, Grissoms gave notice to their employees that their employment would be terminated at midnight July 23, 1972. On July 13, 1972, registered mail notices were sent to the union³ notifying it of the termination of the business. Howard Johnson began interviewing prospective employees on July 10, 1972, and the first employees were hired on July 18, 1972. When Howard Johnson took over the operation of the motel and restaurant, it retained only nine of the restaurant's employees and only one of the motel's employees. At least 40 employees were permanently replaced.

On July 21, 1972, the plaintiff union instituted this action in state court and obtained a temporary injunction prohibiting Howard Johnson from locking out or terminating the employment of the 40 employees. The company did not honor the injunction, claiming that it did not receive adequate service and notice. A hearing was held at the state court level at which the injunction was dissolved, pending a further pretrial hearing. The defendant filed a petition for removal and the state court pretrial hearing as such was never held. A hearing was held in federal district court on August 7, 1972, at which time the parties orally agreed on a stipulation of facts. On August 22, 1972, the district court entered its memorandum, finding for the plaintiff.⁴ Notice of appeal was duly filed and the district court granted a stay pending appeal.

The collective bargaining agreement in effect between the motor lodge and the union contained the usual arbitration provisions. The grievance procedures were in four steps, the fourth step being submission of the grievance to an arbitrator.⁵ The arbitration provision provided:

Section 2. An arbitrator shall not have any right or authority to add to, subtract from or modify the terms and provisions of this Agreement. Further, the renewal, extension, modification or amendment of this Agreement shall not be subject matter of any grievance or arbitration procedure.

The agreement also provided:

"This Agreement shall be binding upon the successors, assigns, purchasers, lessees or transferees of the Employer whether such succession, assignment or transfer be effected voluntarily or by operation of law or by merger or consolidation with another company provided the establishment remains in the same line of business."

Apparently neither agreement⁶ attempted to delineate specifically which types of disputes were arbitrable.

The district court examined in close detail the two leading cases of the Supreme Court applicable to this action, John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) and NLRB v. Burns International Security Services, Inc., 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972). The district court concluded that Wiley was more in point than Burns and consequently that the defendant should be required to arbitrate.⁷ This finding was premised on the conclusion that Howard Johnson was a successor employer, and therefore, under Wiley should be required to honor the arbitration clause of the Grissoms' collective bargaining agreements with the union. The district court left to the arbitrator the decision as to which provisions of the agreements should be applicable to Howard Johnson.

The first question we must face is whether Howard Johnson is a successor employer. The Court in Wiley said:

We do not hold that in every case in which the ownership or corporate structure of an enterprise is changed the duty to arbitrate survives. As indicated above, there may be cases in which the lack of any substantial continuity of identity in the business enterprise before and after a change would make a duty to arbitrate something imposed from without, not reasonably to be found in the particular bargaining agreement and the acts of the parties involved. 376 U.S. at 551, 84 S.Ct. at 915.

In Burns the Court cited with approval a number of court decisions enforcing orders of the NLRB delineating a number of factors to consider in determining whether there is a "continuity of interest" so that the purchaser of a business is a successor. These factors include: the prior and subsequent structure of the business operation, NLRB v. Zayre Corp., 424 F.2d 1159, 1163 (5th Cir. 1970); S. S. Kresge Co. v. NLRB, 416 F.2d 1225 (6th Cir. 1969), the location of the operation, NLRB v. Zayre, supra; S. S. Kresge v. NLRB, supra; NLRB v. McFarland, 306 F.2d 219 (10th Cir. 1962), and the identity of the employees and the nature of the work, NLRB v. Zayre, supra, Tom-A-Hawk Transit, Inc. v. NLRB, 419 F.2d 1025 (7th Cir. 1969).⁸

Howard Johnson argues that the controlling factor in all successorship cases is whether the new owner hired a majority of the old owner's employees. For support it points to the Court's language in Burns.

It has been consistently held that a mere change of employers or of ownership in the employing industry is not such an "unusual circumstance" as to affect the force of the Board\'s certification within the normal operative period if a majority of employees after the change of ownership or management were employed by the preceding employer. 406 U.S. at 279, 92 S. Ct. at 1577 (emphasis added).

Also:

But where the bargaining unit remains unchanged and a majority of the employees hired by the new employer are represented by a recently certified bargaining agent there is little basis for faulting the Board\'s implementation of the express mandates of § 8(a)(5) and § 9(a) by ordering the employer to bargain with the incumbent union. 406 U.S. at 281, 92 S.Ct. at 1579.

Moreover, Howard Johnson points to this court's decisions in NLRB v. Interstate 65 Corp., 453 F.2d 269 (6th Cir. 1971) and NLRB v. Wayne Convalescent Center, 465 F.2d 1039 (6th Cir. 1972). Both of these decisions placed great reliance on the hiring of enough of the predecessor's employees to constitute a majority of the successor's work force in finding successorship status. On the other hand, the absence of the hiring of a majority of the predecessor's employees may lead to the refusal to find successorship status. See NLRB v. John Stepp's Friendly Ford, Inc., 338 F.2d 833 (9th Cir. 1964). Apparently the same considerations apply to actions under § 301 of the LMRA. In Wackenhut Corp. v. International Union, United Plant Guards, 332 F.2d 954 (9th Cir. 1964), the Ninth Circuit placed major reliance on the hiring of substantially all of the predecessor's employees to find successorship status. The Court there also followed Wiley and required the successor employer to abide by the substantive terms of the collective bargaining agreements as determined by an arbitrator. In Printing Specialties & Paper Products Union v. Pride Papers Aaronson Bros. Paper Corp., 445 F.2d 361 (2nd Cir. 1971), the Second Circuit refused to find successorship in an action under § 301. The Court stated: "The fact that no predecessor's employees worked at the new enterprise is most compelling evidence of lack of substantial continuity in the business enterprise." 445 F.2d at 363-364. Only one case has been brought to our attention finding successorship in a § 301 action where the successor did not hire a majority of the predecessor's employees. In Monroe Sander Corp. v. Livingston, 377 F.2d 6 (2nd Cir. 1967), the Second Circuit held that where a parent company terminated the employees of a subsidiary in order to continue the same functions at a newly purchased operation, the parent could be required to arbitrate, as a successor, the...