Laborers' Local Union Nos. 472 and 172 v. Interstate Curb & Sidewalk

• Decision Date: 09 August 1982
• Docket Number: Nos. 472 and 172,s. 472 and 172
• Citation: 90 N.J. 456,448 A.2d 980
• Parties: , 98 Lab.Cas. P 55,404 LABORERS' LOCAL UNION NOS. 472 AND 172, unincorporated labor organizations; Laborers' Local UnionWelfare and Pension Funds, unincorporated trust funds; Zazzali, Zazzali & Whipple, P.A.; and Arbitrator J. Malkin, Plaintiffs-Appellants, v. INTERSTATE CURB & SIDEWALK; Meyer Brothers, Inc.; Universal Utility, Inc.; and Cardell Construction Co., Defendants, and Cardell Enterprises Corp., Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 456

90 N.J. 456

448 A.2d 980, 98 Lab.Cas. P 55,404

LABORERS' LOCAL UNION NOS. 472 AND 172, unincorporated labor organizations; Laborers' Local Union Nos. 472 and 172 Welfare and Pension Funds, unincorporated trust funds Zazzali, Zazzali & Whipple, P.A.; and Arbitrator J. Malkin Plaintiffs-Appellants, v. INTERSTATE CURB & SIDEWALK; Meyer Brothers, Inc. Universal Utility, Inc.; and Cardell Construction Co., Defendants and Cardell Enterprises Corp., Defendant-Respondent.

Supreme Court of New Jersey.

Argued May 3, 1982.

Decided Aug. 9, 1982.

James R. Zazzali, Newark, for plaintiffs-appellants (Zazzali, Zazzali & Kroll, Newark, attorneys; Albert G. Kroll, Newark, of counsel; Francis J. Vernoia, Newark, on the brief).

Karl R. Meyertons, South River, for defendant-respondent.

The opinion of the Court was delivered by

HANDLER, J.

This case presents the question whether a nonsignatory party to a collective bargaining agreement is subject to the binding arbitration provisions of that agreement as the alter ego of the signatory party. More specifically, we must determine whether an arbitrator had the authority to decide whether there was such an identity between the signatory and nonsignatory parties as to bind the latter to an arbitration award under the agreement.

Universal Utility, Inc. (hereinafter "Universal") is a party to a collective bargaining agreement with Laborers Local Unions 472 and 172. Pursuant to Articles 15, 16 and 17 of this agreement, Universal must pay contributions to the unions' Welfare Fund, Pension Fund, and Safety Education and Training Fund. These contributions are used to provide certain medical and pension benefits to covered employees.

In 1978, a dispute arose regarding the payment of these contributions. ¹ Specifically, the unions alleged that Universal was using various alter ego corporations to perform work subject to the collective bargaining agreement, thereby evading Universal's pension and welfare fund obligations under that agreement.

After informal efforts to resolve the dispute were unsuccessful, the matter was sent to arbitration. At a hearing scheduled on July 26, 1979, both the unions and the funds were represented by counsel, but no one appeared for either Universal or its alleged alter ego corporations, Cardell Enterprises and Cardell Construction Company (hereinafter "Cardell"). ² The arbitrator found that Universal and the Cardell companies were, in fact, the same business enterprise. In reaching this conclusion, he noted that all three companies were located at the same address, that all had the same telephone numbers, and that two secretaries answer the telephone "Cardell" but when asked for Universal, each responds that it is the same company. ³ He further found that Universal had concealed the use of its employees through its creation of alter ego corporations, and that it had been conducting its business and using employees entitled to the benefits of the funds in such a manner as to circumvent its obligations under the collective bargaining agreement. On the basis of these findings, the arbitrator ruled that the trustees of the funds were to audit the payroll and other records of Universal and its alter ego corporations in order to determine the amount of contributions owed by Universal to the various funds. Jurisdiction was retained.

The unions and funds later filed a complaint, seeking to confirm the arbitrator's awards, pursuant to N.J.S.A. 2A:24-7. ⁴ The complaint alleged that the court had jurisdiction both under the New Jersey statute governing arbitration and awards, N.J.S.A. 2A:24-1 et seq., and under 29 U.S.C. § 185(a), more commonly known as § 301 of the federal Labor Management Relations Act. Further, it alleged that the defendants, Universal and the two alleged alter ego corporations, had refused to comply either with their contractual obligations or the arbitrator's awards. Universal answered the complaint by admitting the court's jurisdiction under N.J.S.A. 2A:24-7 but denying it under the Labor Management Relations Act. Universal further contended that it was no longer an operating company and, therefore, no longer subject to the collective bargaining agreement; that it made all due contributions to the funds, with the exception of the amount awarded in the first arbitration; and that that amount had been tendered but not accepted. Finally, Universal contended that it could not be bound by the second arbitrator's award because he was without jurisdiction to hear the matter. The Cardell defendants responded by denying the arbitrators' jurisdiction and adding that, as to them, the second set of arbitration hearings lacked due process.

After a hearing at which all the parties were represented, the Chancery Division confirmed both arbitration awards. On appeal, the Appellate Division reversed, holding that, in the absence of proof of the existence of a collective bargaining agreement to which the alleged alter ego corporations were a party and signatory, and without proof of any party's consent, in the contract or otherwise, to submit to arbitration the issue of the unity of identity among the parties, the arbitrator was without authority to hear or determine such questions. Accordingly, it vacated and set aside those portions of the Chancery Division's order that confirmed the second arbitrator's award and directed enforcement thereof, and that directed the payment of all auditing fees, as well as the payment of the sum of $500.00 to the arbitrator. We granted the unions' petition for certification. 88 N.J. 492, 443 A.2d 707 (1981).

We now affirm the Appellate Division to the extent that it held the arbitrator had no jurisdiction to determine the question whether any party, other than Universal, was subject to the binding arbitration terms of the agreement. However, it erred in vacating the arbitration award. The proper course is to remand this matter to the Chancery Division to have that court decide the issue of the identity among the defendant corporations. If the court determines that there is identity among defendants, then it must decide whether Cardell is bound by the arbitration award, despite its nonparticipation in the arbitration proceedings.

At issue in this case is not whether either of the Cardell companies was the alter ego of Universal but, rather, whether the arbitrator had the authority to decide that question. The arbitrator's jurisdiction to determine whether an entity other than a signatory party can be subject to the binding arbitration provisions of a collective bargaining agreement will depend upon what the actual parties to the contract have agreed should be submitted to arbitration. Recently, we stated that

in the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be. Stated another way, the arbitrator's authority is circumscribed by whatever provisions and conditions have been mutually agreed upon. Any action taken beyond that authority is impeachable. [ In the Matter of Arbitration Between Grover, 80 N.J. 221, 229, 403 A.2d 448 (1979) ]

In the absence of an express contract provision conferring authority on the arbitrator, it is uniquely within the province of the courts, and not arbitrators, to make the initial and threshold determination regarding the arbitrability of a particular issue. Grover; Aysseh v. Lawn, 180 N.J.Super. 391, 434 A.2d 1146 (Ch.Div.1981). See generally Annot., "Collective Labor Contract--Arbitration," 24 A.L.R.2d 752, 766 (1952).

The parties in this case recognize that the collective bargaining agreement does not expressly vest in the arbitrator the authority to determine who, other than the signatory parties, can be bound by its compulsory arbitration terms. Accordingly, the proper course regarding arbitrability, as reflected in the collective bargaining agreement between Universal and the unions, is to remand the matter to the Chancery Division for a hearing at which the parties may adduce the relevant facts that bear upon the question of whether the Cardell companies are identical to Universal and whether the collective bargaining agreement reflects a mutual understanding that the Cardell companies should be bound by the binding arbitration provisions of the agreement. ⁵

Assuming the Cardell companies are found to be alter egos of Universal, the Chancery Division must then decide whether those companies are bound by the arbitration award, even though they failed to participate in the arbitration proceedings. The fact that the Cardell companies were not signatory parties to a collective bargaining agreement with the unions does not necessarily preclude their being bound by an arbitrator's decision. For example, successor corporations that acquired their predecessors through bona fide mergers, acquisitions or similar transactions have been held to be bound, under certain circumstances, by some of the provisions in a collective bargaining agreement made by the predecessor and the union. See, e.g., Golden State Bottling Co. v. N.L.R.B., 414 U.S. 168, 94 S.Ct. 414, 38 L.Ed.2d 388 (1973); N.L.R.B. v. Burns International Security Services, Inc., 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972); John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964). See generally Note, "Contractual Successorship: The Impact of Burns," 40 U.Chi.L.Rev. 617 (1973). Moreover, there are cases where a nonsignatory party to a contract with a union has been held bound by that contract where the party is a new employer and found to be the alter ego of the signatory party to the agreement. See Southport Petroleum Co. v. N.L.R.B., 315 U.S. 100, 62 S.Ct. 452, 86 L.Ed. 718 (1942); Shultz v. Mack Farland & Sons Roofing Co., 413 F.2d 1296 (5 Cir. 1969); N.L.R.B. v. Herman Bros. Pet Supply,...