International Alliance of Theatrical and Stage Employees and Moving Picture Mach. Operators, AFL-CIO v. Compact Video Services, Inc.

• Decision Date: 23 March 1995
• Docket Number: P,No. 93-56664,AFL-CI,93-56664
• Citation: 50 F.3d 1464
• Parties: , 129 Lab.Cas. P 11,296, 10 IER Cases 612 INTERNATIONAL ALLIANCE OF THEATRICAL AND STAGE EMPLOYEES AND MOVING PICTURE MACHINE OPERATORS,laintiff-Appellant, v. COMPACT VIDEO SERVICES, INC.; Compact Video Group, Inc.; Meridian Studios; Image Transform, Inc.; and John Donlon, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1464

50 F.3d 1464

63 USLW 2601, 129 Lab.Cas. P 11,296,

10 IER Cases 612

INTERNATIONAL ALLIANCE OF THEATRICAL AND STAGE EMPLOYEES AND MOVING PICTURE MACHINE OPERATORS, AFL-CIO Plaintiff-Appellant, v. COMPACT VIDEO SERVICES, INC.; Compact Video Group, Inc. Meridian Studios; Image Transform, Inc.; and John Donlon, Defendants-Appellees.

No. 93-56664.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 7, 1994.

Decided March 23, 1995.

Ira L. Gottlieb, Taylor, Roth, Bush & Geffner, Burbank, CA, for plaintiff-appellant.

Marita T. Covarrubias, Richard W. Kopenhefer, Raymond W. Thomas, Loeb & Loeb, Los Angeles, CA, for defendants-appellees.

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

Before: BROWNING, GOODWIN, and FERGUSON, Circuit Judges.

Opinion by Judge GOODWIN; Dissent by Judge FERGUSON.

GOODWIN, Circuit Judge:

Legislation is enlisted from time to time in the chronic tension between labor and management, to the advantage of one side and to the disadvantage of the other. In this case we decide whether the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. Sec. 2101 et seq., applies to this contest between a union and a selling corporation which tried to rid itself of the union.

The selling corporation sold its unionized business to a nonunion entity. The acquiring entity kept on nearly all of the old work force, though at slightly lower rates of pay and without the fringe benefits that had been called for in the collective bargaining agreement between the union and the selling corporation. A handful of workers either were not invited to remain with the new owner, or declined to do so.

Reserving its rights and remedies by instituting proceedings before the National Labor Relations Board, and judicial proceedings under relevant sections of the National Labor Relations Act, the union also commenced these WARN proceedings in the District Court to obtain for each former employee of the selling corporation sixty days salary and benefits, as a penalty for the seller's failure to give the workers sixty days' advance notice of an "employment loss."

The District Court on summary judgment ruled that employees who find themselves transferred from the payroll of one company to the payroll of another as the result of a sale have not suffered a compensable "employment loss" under WARN, whatever may be the consequences of that scheme for purging a work force of its unionized character in appropriate proceedings before the NLRB, or under other provisions of labor law. Because the District Court correctly construed the applicable law, the summary judgment is affirmed.

Background

In July 1993, Compact Video Services, Inc., Compact Video Group, Inc., Meridian Studios, and Image Transform, Inc. ("Compact") owned a videotape post-production business in Burbank, California. The business employed 314 people (the "Compact employees"). International Alliance ("The Union") represented about a third of them. By July, 1993, Compact was saddled with heavy corporate debt, and was looking for a way out. ATS Acquisition Corp., Inc. ("ATS"), a holding company, agreed to renegotiate and restructure Compact's debt with Compact's lenders, and release Compact from responsibility for its debt. In return, ATS would acquire Compact's Burbank videotape post-production business.

Sometime in late July, the Union learned that the Hollywood Reporter was advertising employment openings at a company to be formed pending acquisition of the assets of Compact. On July 29, the Union wrote to Compact's president, seeking information about the sale. The following day, July 30, Compact's CEO, John Donlon, sent a letter to the Compact employees informing them that its business was going to be sold, and that "after the sale closes, you will no longer be employed by the Compact companies." Donlon encouraged the Compact employees to apply with ATS for employment. That same day, Robert Watson, ATS's Chairman and CEO, wrote a letter to the Compact employees encouraging them to apply for employment with ATS.

The sale closed the week of August 2, 1993. Prior to the sale's closing, ATS notified 309 of the 314 Compact employees that it would keep them on board. Three Compact employees declined the invitation to work under the new management. Another 306 Compact employees accepted employment with ATS. They became ATS employees immediately upon the sale of Compact to ATS, without missing a day's work.

Many of the new ATS employees were paid less than before the sale, and were afforded fewer "fringe" benefits. The Union estimates that of approximately 105 Union members hired by ATS, seventy-three took pay cuts. All employees represented by the Union are now required by ATS to make health plan co-payments, and many of them lost Union pension plans. ATS apparently does not recognize the Union's representation of the former employees of Compact Video Services, Inc. ATS considers its employees to be "at will," and subjects them to a 180 day "probationary period" (which period, presumably, has since expired for all former Compact employees).

On August 11, 1993, the Union filed this action against Compact, seeking damages under WARN because Compact did not give its employees 60 days advance notice of their "mass layoff." In September 1993, the Union filed a second action against Compact and ATS, alleging violations of federal labor law and collective bargaining agreements.

The Union demanded discovery of the Compact-ATS sales agreement. Compact cried "fishing expedition!" The Union's ex parte motion to discover the agreement was denied. On September 13, 1993, Compact moved for summary judgment. In support of its motion, Compact submitted the declaration of its Chief Financial Officer, John Sabin. Sabin stated that he had personal knowledge that a sale had taken place. It was undisputed that only five Compact employees were not retained by ATS.

The Union opposed summary judgment on the ground that Compact had not adequately shown that a sale had taken place, because Compact CEO Donlon had stated in a deposition that no one in Compact management (including Sabin) had participated in the negotiations for the transaction, and because Compact had not produced the sales agreement. The Union also moved for a continuance under Federal Rule of Civil Procedure 56(f), seeking leave to discover more about the Compact-ATS sales agreement.

The District Court denied the Union's Rule 56(f) motion, and granted summary judgment to Compact. The District Court reasoned that there were no triable issues of material fact, and that additional discovery could not possibly create any, in light of the court's conclusion that fewer than fifty employees had suffered an "employment loss" as defined in WARN. ¹

Standard of Review

We interpret the provisions of WARN de novo. We review the District Court's denial of discovery pursuant to Rule 56(f) for abuse of discretion. Qualls v. Blue Cross of California, 22 F.3d 839, 844 (9th Cir.1994). There can be no abuse of discretion where the movant failed to show how allowing additional discovery would have precluded summary judgment. Id.

WARN Applied

WARN requires that an employer give 60 days advance warning before any "plant closing" or "mass layoff." A "plant closing" is a shutdown of a single site of employment that causes an "employment loss" for fifty or more employees during a thirty-day period. 29 U.S.C. Sec. 2101(a)(2). A "mass layoff" is any other "employment loss" within any thirty-day period for either (a) fifty to 499 full-time employees, if the number laid off equals thirty-three percent of the work force; or (b) 500 full-time employees. 29 U.S.C. Sec. 2101(a)(3). Thus, when fewer than fifty full-time employees suffer an "employment loss," WARN notice is not required.

"Employment loss" is defined as

(A) An employment termination, other than a discharge for cause, voluntary departure, or retirement, (B) a layoff exceeding 6 months, or (C) a reduction in hours of work of more than 50 percent during each month of any 6-month period[.]

29 U.S.C. Sec. 2101(a)(6). The Department of Labor ("DOL") added to its final regulations under the Act a comment explaining that the word "termination" is "to have [its] common sense meaning[ ]" as "the permanent cessation of the employment relationship...." 54 Fed.Reg. 16,047 (1989).

The Union argues that this case turns on the statement in Donlon's letter: "after the sale closes, you will no longer be employed by the Compact companies." According to the Union, this statement shows that Compact "terminated" its employees, and was therefore under a statutory duty to give them 60 days advance warning. The Union denies that workers shifted from one employer to another as a result of a sale are excepted from the definition of "employment loss." The law, however, is entirely the other way. The statutory language, the legislative history, the regulations, and a persuasive Tenth Circuit opinion confirm the existence of a "sales exception" to WARN.

Section 2101(b) reads:

Exclusions from definition of employment loss

(1) In the case of a sale of part or all of an employer's business, the seller shall be responsible for providing notice for any plant closing or mass layoff in accordance with section 2102 of this title, up to and including the effective date of the sale. After the effective date of the sale of part or all of an employer's business, the purchaser shall be responsible for providing notice for any plant closing or mass layoff in accordance with section 2102 of this title. Notwithstanding any other provision of this chapter, any person who is an employee of the seller (other than a part-time employee) as of the effective date of the sale shall be considered an employee of the purchaser immediately after the effective date of the sale.

The accompanying regulation explains:

This provision preserves the notice...