International Broth. of Teamsters, Chauffeurs, Warehousemen & Helpers, General Truck Drivers, Office Food & Warehouse Local 952 v. American Delivery Service Co., Inc.

• Decision Date: 23 March 1995
• Docket Number: No. 93-55978,93-55978
• Citation: 50 F.3d 770
• Parties: 148 L.R.R.M. (BNA) 2841, 129 Lab.Cas. P 11,299, 10 IER Cases 801 INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN & HELPERS, GENERAL TRUCK DRIVERS, OFFICE, FOOD & WAREHOUSE LOCAL 952, Plaintiff-Appellant, v. AMERICAN DELIVERY SERVICE CO., INC.; Montgomery Ward & Co., Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 770

50 F.3d 770

148 L.R.R.M. (BNA) 2841, 129 Lab.Cas. P 11,299,

10 IER Cases 801

INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS WAREHOUSEMEN & HELPERS, GENERAL TRUCK DRIVERS OFFICE, FOOD & WAREHOUSE LOCAL 952 Plaintiff-Appellant, v. AMERICAN DELIVERY SERVICE CO., INC.; Montgomery Ward & Co Inc., Defendants-Appellees.

No. 93-55978.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 7, 1994.

Decided March 23, 1995.

Robert D. Vogel, John A. Siqueiros, Wohlner Kaplon Phillips Young & Barsh, Encino, CA, for plaintiff-appellant.

Glenda E. Martinez, Timothy F. Ryan, Morrison & Foerster, Los Angeles, CA, for defendant-appellee American Delivery Service Co.; Peter D. Holbrook, McDermott, Will & Emery, Newport Beach, CA, for defendant-appellee Montgomery Ward & Co., Inc.

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

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

GOODWIN, Circuit Judge:

General Truck Drivers, Office, Food and Warehouse Local 952, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO ("the Union") filed this action against American Delivery Service Company, Inc. ("ADS"), and ADS's parent, Montgomery Ward & Company, Inc. ("Ward"), under Section 301(a) of the Labor Management Relations Act of 1947 ("Section 301(a)"), 29 U.S.C. Sec. 185, and the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. Sec. 2101 et seq.

Ward operates a merchandise warehouse in Garden Grove, California, known as the Big Ticket Distribution Center ("BTDC"). ADS, a wholly-owned subsidiary of Ward, formerly provided Ward with customer delivery service from the BTDC. Ward's contract with ADS gave Ward the right to terminate this arrangement, either upon thirty days' written notice, or immediately in the event of a work stoppage. ADS had a work stoppage, and Ward exercised its right. The Union represents individuals who formerly worked for ADS at the BTDC, but lost their jobs when Ward cancelled its delivery arrangement with ADS.

The Union brings claims against ADS and Ward under Section 301(a) and WARN. According to the Union, its members were fraudulently or negligently induced into ratifying the terms of the new collective bargaining agreement ("CBA") by false assurances that Ward would not cancel its contract with ADS. Under Section 301(a), the Union seeks to recover the wages and benefits that it lost by relying on this misrepresentation. Under WARN, the Union seeks sixty days' salary and benefits as damages for the "employment loss" ADS drivers suffered on March 30, 1991, when Ward's cancellation of its carrier contract suddenly ended ADS's Garden Grove delivery business. ¹

The District Court granted summary judgment to Ward on all claims, holding that ADS and Ward are not a "single employer" under either Section 301(a) or WARN, and therefore that Ward is not responsible to ADS's employees. The District Court granted summary judgment to ADS on the WARN claim, holding that "unforeseen business circumstances" relieved ADS of its duty to give sixty days' advance warning before terminating its employees. The District Court denied summary judgment to ADS on the Section 301(a) claim.

We affirm the District Court's finding of jurisdiction over the Union's section 301(a) claims, but reverse the grant of summary judgment. Because the evidence, when viewed in the light most favorable to the Union, creates a genuine question whether ADS was under the actual or constructive control of Ward, the District Court should have permitted the Union to go forward with its Section 301(a) and WARN claims.

Jurisdiction

We review de novo the District Court's jurisdictional finding that the Union's fraud and misrepresentation claims are within Section 301(a) and not within the primary jurisdiction of the NLRB. See Milne Employees Ass'n v. Sun Carriers, Inc., 960 F.2d 1401, 1406 (9th Cir.1991), cert. denied, --- U.S. ----, 113 S.Ct. 2927, 124 L.Ed.2d 678 (1993).

Ward contends that the District Court lacked jurisdiction under Section 301(a) to entertain the Union's claim that it was induced to ratify the CBA by fraud or negligent misrepresentation. See 29 U.S.C. Sec. 185. Because a state law claim that does not require interpretation of a CBA is not preempted by federal law under Section 301(a), Ward argues that a federal law claim that does not require interpretation of a CBA cannot be brought under Section 301(a). That is not correct.

Section 301(a) encompasses not only a claim that a CBA has been breached--a claim that would require "interpretation" of the terms of the CBA--but also a claim that a CBA is invalid on the basis of fraud in the inducement--a claim that would not, strictly speaking, require "interpretation" of the terms of the CBA. See Operating Engineers Pension Trust v. Wilson, 915 F.2d 535, 538-39 (9th Cir.1990), cert. denied, --- U.S. ----, 112 S.Ct. 3013, 120 L.Ed.2d 886 (1992) (Holding that claim for fraudulent inducement to ratify CBA did not require interpretation of the collective bargaining agreement).

Ward's argument requires us to examine the tricky relationship between the doctrines of Section 301(a) preemption and Garmon preemption. See San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959).

I.

In Garmon, the Supreme Court articulated the general rule regarding the scope of the NLRB's primary jurisdiction:

When an activity is arguably subject to Sec. 7 or Sec. 8 of the [National Labor Relations] Act, the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board....

Id. at 245, 79 S.Ct. at 779. Fraudulently inducing a union to enter into a CBA is "arguably" an unfair labor practice subject to the primary jurisdiction of the NLRB. Rozay's Transfer v. Local Freight Drivers, Local 208, 850 F.2d 1321, 1325-26 (9th Cir.1988), cert. denied, 490 U.S. 1030, 109 S.Ct. 1768, 104 L.Ed.2d 203 (1989).

Not all unfair labor practices are swept into the NLRB under Garmon, however. Claims brought under Section 301(a) of the LMRA may be heard in federal court even if they allege conduct that is arguably an unfair labor practice. William E. Arnold Co. v. Carpenters Dist. Council of Jacksonville and Vicinity, 417 U.S. 12, 15-18, 94 S.Ct. 2069, 2071-73, 40 L.Ed.2d 620 (1974); Smith v. Evening News Ass'n, 371 U.S. 195, 197, 83 S.Ct. 267, 268, 9 L.Ed.2d 246 (1962). Thus, if the Union's claim is within the scope of Section 301(a), the District Court had jurisdiction to hear it.

In Rozay's, an employer brought suit against Teamster's Local 208 alleging that it had been induced by Local 208's fraud to execute a CBA. The employer sought rescission and indemnification for its losses. ² 850 F.2d at 1323. Its complaint alleged jurisdiction under Section 301(a) of the LMRA. We rejected the contention that the NLRB had exclusive jurisdiction over the dispute. Id. at 1326. We acknowledged that Local 208's conduct was arguably an unfair labor practice, but stated that Section 301(a) of the LMRA "carves out a broad exception to the NLRB's primary jurisdiction for claims arising out of collective bargaining agreements, whether or not such claims would also be an unfair labor practice...." Id. That exception, we explained, "applies not only to suits for breach of a collective bargaining agreement once it is duly formed"--suits requiring "interpretation"--"but also to suits impugning the existence and validity of a labor agreement...." Id. (citations omitted) (emphasis added). Fraud in the inducement is an issue that may be interposed as a traditional contract defense in an action for breach of a CBA, as well as raised directly in an action to invalidate a CBA. Accordingly, Rozay's held that Section 301(a) conferred federal jurisdiction over "this action alleging fraudulent inducement in the formation of the agreement." Id. See also Operating Engineers, 915 F.2d at 539 ("[A]n action for fraud in the inducement is cognizable under section 301...." ).

Therefore, the Union's claim for fraud in the inducement may be brought directly in federal court under Section 301(a), and is not swept by Garmon into the primary jurisdiction of the NLRB.

II.

Ward stumbles over Milne, 960 F.2d 1401, and falls into the belief that a claim cannot be brought under Section 301(a) unless the claim requires interpretation of a CBA. Milne belongs to a line of cases that consider when a claim brought under state law is preempted by federal law under Section 301(a). Milne holds that "[t]o determine whether a state law claim is completely preempted under section 301(a), the relevant inquiry is whether resolution of the claim requires the interpretation of a collective bargaining agreement." Id. at 1408. Only if a claim requires interpretation of the CBA does Section 301(a) preempt state law. Because a claim of fraud in the inducement does not require interpretation of a CBA, it is not preempted by Section 301(a). Operating Engineers, 915 F.2d at 538-39. ³

In this circuit, the test for state law preemption under Section 301(a) sweeps less broadly than the test for whether Section 301(a) provides an exception to the Garmon doctrine. As we have already seen, Section 301(a) provides an exception to the Garmon doctrine where fraud is asserted to set aside a CBA, even though resolution of the fraud claim is a factual inquiry that does not turn on the meaning of the CBA. Claims that invalidate CBAs, as well as claims that interpret them, fall under Section 301(a). See Rozay's, 850 F.2d at 1326. When the question is one of preemption of state law, however, only claims that interpret CBAs fall exclusively under Section 301(a). See Milne, 960 F.2d at 1408; Operating Engineers, 915 F.2d at 538-39. ⁴

The District Court had jurisdiction to hear the Union's claims under Section 301(a).

Single Employer

The Union contends that ADS and Ward are...