INTERNATIONAL LADIES'GARMENT WKRS.'U. v. Jay-Ann Co., 15636.

• Decision Date: 11 January 1956
• Docket Number: No. 15636.,15636.
• Citation: 228 F.2d 632
• Parties: INTERNATIONAL LADIES' GARMENT WORKERS' UNION, AFL, and San Antonio Joint Board of the International Ladies' Garment Workers' Union, Appellants, v. JAY-ANN COMPANY, Incorporated, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

228 F.2d 632 (1956)

INTERNATIONAL LADIES' GARMENT WORKERS' UNION, AFL, and San Antonio Joint Board of the International Ladies' Garment Workers' Union, Appellants, v. JAY-ANN COMPANY, Incorporated, Appellee.

No. 15636.

United States Court of Appeals Fifth Circuit.

January 11, 1956.

Charles J. Morris, Dallas, Tex., Mullinax & Wells, Dallas, Tex., of counsel, for appellants.

Theo. F. Weiss, San Antonio, Tex., Davis, Clemens, Knight & Weiss, San Antonio, Tex., of counsel, for appellee.

Before HOLMES, RIVES, and CAMERON, Circuit Judges.

HOLMES, Circuit Judge.

This appeal is from a judgment of dismissal of the suit, entered by the court below after considering the complaint, answer, evidence, and motion to dismiss. One of the grounds set forth in the motion to dismiss was that Section 301 of the Labor-Management Relations Act of 1947, 29 U.S.C.A. § 185, which is the sole asserted basis of jurisdiction, did not confer jurisdiction of the type of suit alleged by appellants.

The appellants are unincorporated labor organizations, representing employees in an industry affecting interstate and foreign commerce. The appellee is a Texas corporation, engaged in the business of manufacturing and distributing wearing apparel. A substantial portion of the garments which it manufactures is sold and distributed outside the state of Texas. Appellants and appellee have entered into various contracts covering wages and working conditions, which have been continuously in effect since 1947. It is for breaches of these contracts that this suit was filed; under them the appellee was to pay 1%, and later 1¼%, of their payrolls to a designated commission of five members to create a health and welfare fund for workers. The complaint alleged that the appellee had failed to make these payments, and that as a result thereof the employee whom appellants represent have been damaged in the sum of over four thousand dollars. The appellants prayed that the appellee be ordered to pay said amount in damages to said commission for the benefit of the aforesaid health and welfare funds, be enjoined from withholding future payments, and for general relief.

As appears from a reading of the complaint, the appellants did not seek a money judgment in their favor against the appellee. If the money was due at all, it was payable to said commission, which was to collect and administer the fund. The appellants claim the right to bring the suit under Rule 17(a) of the federal rules of civil procedure, 28 U.S.C. Federal jurisdiction is predicated solely upon section 301, supra. The contracts sued on were made in Texas and were to be performed there. If breached, they were breached in Texas; they are governed largely by the laws of Texas, but in some particulars they may be governed by federal statutes. There is much substantive labor law in the federal statutes regulating interstate and foreign commerce. Wherever the federal law applies it preempts the field, but elsewhere the local law prevails; there is no legal hiatus or no-man's land under our dual form of state and national government; but there is no controversy here between the parties over any governing substantive federal law or laws on which the merits of this case depend.

Our decision of the jurisdictional point on this appeal is controlled by the ruling of the Supreme Court in Association of Westinghouse Salaried Employees v. Westinghouse Electric Corp., 348 U.S. 437, 75 S.Ct. 489, which held that the federal district court did not have jurisdiction of the suit. The opinion of Justice Frankfurter in that case was concurred in by Justices Burton and Minton; the other justices concurred specially, except Justices Black and Douglas who dissented and Justice Harlan who took no part in the decision. For present purposes, only that portion of the decision concurred in by the Chief Justice and Justice Clark is invoked; it held that neither the language nor legislative history of Section 301 was sufficient to indicate that Congress intended to authorize a union to enforce the personal rights of employees (for whom it had bargained) to receive compensation for services rendered their employer. The concurring opinion of Justice Reed assumed that the purpose of section 301 was to make unincorporated labor organizations suable and capable of suing as if they were corporations, with provisions for venue and service.

Labor unions have always been suable whether incorporated or not; but as a practical matter, if not incorporated, it was difficult to sue them. They had many members; in some of the states all of the members had to be served with process; and it was difficult to know whom to serve. Section 301 makes them suable as if corporations, whether incorporated or not; it also abolished some jurisdictional requisites, but it did not abolish the requisite of a normal federal question that has been in the statutes since 1887, which was par. 8, § 24, of the Judicial Code of March 3, 1911, and is now 28 U.S.C. § 1337. All the statutes contain the classic words "arising under" any law regulating commerce or "arising under" any act of Congress regulating commerce. It is the case or controversy that must arise under the law regulating commerce. The crucial problem is the degree to which federal law affects the decision of the controversy; in the instant case federal law does not affect it at all on its merits. Gully v. First Nat. Bank, 299 U.S. 109, 113, 57 S.Ct. 96, 81 L.Ed. 70; Association of Westinghouse Salaried Employees v. Westinghouse Elec. Corp., 348 U. S. 437, 75 S.Ct. 489. If unincorporated labor associations were to sue and be sued as legal entities, the astute legislative thing to do was to abolish the jurisdictional ground of diversity of citizenship and the amount in controversy, thereby conforming section 301 to the general statute, 28 U.S.C. § 1337; and avoiding the opening of a Pandora's box with reference to the legal fiction that corporations are deemed citizens of the state of their incorporation. See "A Supreme Court Fiction" in three installments of the Harvard Law Review, Vol. 56, beginning at pp. 853, 1090, and 1225, respectively.

It is self-evident that if unincorporated labor organizations may sue or be sued as if corporations, such organizations stand in no better or worse position, when suing or being sued, than an incorporated labor organization similarly situated. Corporations under the laws of any state are deemed citizens thereof for federal jurisdictional purposes; corporations organized under the laws of the United States (except national banks, see 28 U.S.C. § 1348) are ordinarily not deemed citizens of any state; but formerly they were permitted to sue and be sued in the federal court, since the suit was held to arise under the laws of the United States. This right was later restricted by a statute which provides that the district courts shall not have jurisdiction of any civil action by or against any corporation upon the ground that it was incorporated by or under an act of Congress, with an exception not pertinent here. 62 Stat. 934, 28 U.S.C. § 1349.

Cases arising under the constitution, laws, and treaties of the United States are customarily referred to as cases containing a federal question, which is the only ground of federal jurisdiction not abolished by Section 301 (a) of the Act of June 23, 1947, 61 Stat. 156; 29 U.S.C.A. § 185. With diversity jurisdiction abolished, and jurisdiction as to federally created corporations restricted, there is no concept other than the normal federal-question by which to determine the original jurisdiction of the district court in this case. Without the normal federal-question concept as a criterion, there is no standard of judging jurisdiction, no test in forming a correct judgment. Federal jurisdiction is limited as to place, persons, or subject matter; and the normal federal-question remains as a jurisdictional requisite in relation to subject matter in a controversy between an employer and a labor union representing employees in an industry affecting commerce.

There is an abnormal type, which has been described as a constructive federal-question and which arises from the mere fact of federal incorporation. This was held to be true even though some state rule of law was applicable to the issue. This abnormal type of federal-question jurisdiction was taken away with reference to federally incorporated railway companies by an act of January 28, 1915. § 5; 38 Stat. 804. In 1925, this kind of federal-question jurisdiction was taken away with respect to all other federal corporations, except those in which the national government owns more than half the capital stock. Act of February 13, 1925, § 12; 43 Stat. 941. This jurisdiction is granted, withdrawn, or...