LOCAL 397 v. Midwest Fasteners, Inc.

• Decision Date: 14 November 1990
• Docket Number: Civ. No. 90-4114 (CSF).
• Citation: 763 F. Supp. 78
• Parties: LOCAL 397, INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND FURNITURE WORKERS, AFL-CIO, Plaintiff, v. MIDWEST FASTENERS, INC., d/b/a, Erico Fastening Systems, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

763 F. Supp. 78

LOCAL 397, INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE AND FURNITURE WORKERS, AFL-CIO, Plaintiff, v. MIDWEST FASTENERS, INC., d/b/a, Erico Fastening Systems, et al., Defendants.

Civ. No. 90-4114 (CSF).

United States District Court, D. New Jersey.

November 14, 1990.

Theodore M. Lieverman, Tomar, Simonoff, Adourian & O'Brien, Haddonfield, N.J., for plaintiff.

Steven W. Suflas, Archer & Greiner, Haddonfield, N.J., for defendants.

OPINION

CLARKSON S. FISHER, District Judge.

Before the court is a motion by plaintiff for a preliminary injunction under rule 65 of the Federal Rules of Civil Procedure. Plaintiff seeks to preliminarily enjoin defendants from dissipating assets or money that would be needed to satisfy a final judgment in plaintiff's action against defendants under the Worker Adjustment and Retraining Notification Act of 1988 ("WARN" or the "Act"), 29 U.S.C.A. §§ 2101-2109 (West Supp.1990). For the reasons that follow, the court will deny this motion.

I. FINDINGS OF FACT

Plaintiff ("Local 397" or the "union") was the exclusive bargaining agent for all production and maintenance employees at the Moorestown, New Jersey, plant of defendant Midwest Fasteners, Inc., doing business as Erico Fastening Systems ("EFS"). Local 397 is a labor organization and a "representative" within the meaning of the National Labor Relations Act, 29 U.S.C. § 152(5), and it is a "representative" within the meaning of WARN, 29 U.S.C. § 2101(a)(4).

EFS is engaged in the manufacture and sale of stud welding fasteners and equipment. EFS has its primary facility in Moorestown, New Jersey. It also has a small manufacturing facility in Houston and warehouse facilities in Boston, Chicago, San Francisco and Los Angeles. EFS is a wholly-owned subsidiary of defendant Erico International Corp. ("International"). Employing over 100 employees, EFS is an employer within the meaning of the Act. 29 U.S.C. § 2104(a)(1).

International is a wholly-owned subsidiary of defendant Erico Investment Inc. ("Investment").

Local 397 and EFS entered a collective bargaining agreement on July 1, 1989, expiring June 30, 1992.

During the calendar year 1987, EFS sustained a book loss of approximately $5,000,000. For calendar year 1988, EFS broke even, but its overall fiscal health remained precarious. During calendar year 1989, EFS suffered a book loss of over $3,100,000, requiring International to provide EFS with intercompany loans totalling $1,900,000.

Since 1987, AmeriTrust Company National Association ("AmeriTrust") has held a security interest in all of EFS's assets other than real property to secure an asset-based credit agreement of approximately $6,000,000. AmeriTrust is a secured lender to International, providing it with a revolving line of credit. AmeriTrust is also a lender to Investment.

During the latter part of 1989, AmeriTrust informed EFS that it was dissatisfied with its continuing losses and advised Investment that "a decision must be made" regarding EFS.

During the first five months of 1990, International funnelled approximately $2,000,000 to EFS through intercompany loans to counter EFS's continuing operational losses.

In early 1990, AmeriTrust threatened to reduce EFS's loan by $650,000 and to lower advance rates. EFS was able to convince AmeriTrust to postpone any action until May 1, then to June 30, and finally to August 24, 1990. EFS was not able to extend the deadline any further.

By the spring of 1990, EFS, International and Investment had exhausted their sources of credit from AmeriTrust.

In the late winter and spring of 1990, EFS contacted a number of lenders, including Citicorp, Manufacturers Hanover, National City Bank, Prudential and others in an attempt to refinance EFS's debt. All talks terminated in May of 1990.

As early as February 1990, EFS initiated efforts to sell its Moorestown facility. EFS contacted ESAB, Nelson Stud Welding, Betterman, Cromp Arc and Rostra. The three expressing the most interest in EFS were Nelson, ESAB and Rostra. On August 3, 1990, Nelson informed EFS that it would not acquire EFS.

In a letter to EFS dated May 15, 1990, Rostra indicated that it would prefer to keep all discussions of a possible sale "on a strictly confidential basis." On August 10, 1990, Rostra notified EFS that it would not purchase EFS.

On August 24, 1990, ESAB notified EFS that it would not acquire EFS.

On August 24, 1990, the Board of Directors of International decided that EFS should be closed immediately. That decision was communicated to the general manager of EFS's Moorestown facility, Jeffrey Church.

On July 20, 1990, EFS laid off five employees. On August 14, 1990, EFS laid off another 21 employees.

On August 27, 1990, EFS closed its Moorestown plant. The closing of the plant was effective immediately, terminating all employees. EFS had given no prior notice of the closing to Local 397 or the employees.

As of the date of the closing of the plant, there were approximately 135 employees covered by the collective bargaining agreement between Local 397 and EFS (excluding the 26 who had been laid off within the five weeks prior to the closing).

On August 27, 1990, Jeffrey Church announced that the closing of the plant and the termination of all employees were due to "the financial situation" at the company.

On August 28, 1990, representatives of the union met with EFS representatives to discuss employee benefits in connection with the closing. At that meeting, EFS indicated that it would need 26 employees to complete work already in progress.

On August 29, 1990, EFS rehired 26 bargaining unit employees to continue to perform production, maintenance and shipping duties.

On September 28, 1990, EFS terminated 13 of the 26 recalled employees. On October 5, 1990, EFS released another two. As of October 12, 1990, eleven employees remained.

As of October 12, 1990, EFS had nearly 400 creditors, secured and unsecured, with claims totalling approximately $1,700,000.

As of October 12, 1990, EFS was in the process of completing work in progress, paying its present employees, and attempting to bring about an orderly liquidation of its assets.

On October 9, 1990, Local 397 brought this action on behalf of the union-eligible employees of EFS under section 2104(a)(5) of WARN. On that date, the court entered a temporary restraining order. On October 10, 1990, the parties agreed to a modified temporary restraining order, with the consent of the court. The union now seeks a preliminary injunction under rule 65 of the Federal Rules of Civil Procedure to ensure the satisfaction of a potential future judgment in its WARN action.

II. CONCLUSIONS OF LAW

A. Jurisdiction

"Rule 65 concerns the procedure for issuing a preliminary injunction. The substantive basis and the jurisdictional authority for use of this procedure must be sought elsewhere." FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1109 (9th Cir.1982).

The court has jurisdiction over this action under the Act, 29 U.S.C. § 2104(a)(5), as well as under 28 U.S.C. §§ 1331, 1337.

B. Exclusivity of Remedies under WARN

Defendants argue that, by virtue of the exclusivity of remedies clause in WARN, this court is without authority to issue a preliminary injunction.

The Act provides:

The remedies provided for in this section shall be the exclusive remedies for any violation of this chapter. Under this chapter, a Federal court shall not have authority to enjoin a plant closing or mass layoffs.

29 U.S.C. § 2104(b). In this Act, Congress did not specifically prohibit a court from enjoining a potential future damages award. Consequently, Congress did not intend to deprive a court of the equity power granted it under the All Writs Act, 28 U.S.C. § 1651(a).

Under the All Writs Act, federal courts have the power to "issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651(a). In Renegotiation Board v. Bannercraft Clothing Co., 415 U.S. 1, 19-20, 94 S.Ct. 1028, 1038-39, 39 L.Ed.2d 123 (1974), the Supreme Court noted that if Congress intended to deprive a court of equitable powers, it would specifically limit the equitable jurisdiction vested in the district court. See also FTC v. Dean Foods Co., 384 U.S. 597, 608, 609-10, 86 S.Ct. 1738, 1744, 1745-46, 16 L.Ed.2d 802 (1966) (Congress must express intent to circumscribe traditional judicial remedies).

In WARN, Congress has expressly restricted the power of a federal court to enjoin a plant closing or a mass layoff. 29 U.S.C. § 2104(b). However, Congress has not specifically restricted the power of a federal court to issue a preliminary injunction to protect a future damages award. Therefore, Congress has expressed its intent to limit the power to enjoin only in certain instances. This court will not infer from Congress's silence an intent to restrict any other particular exercise of power by federal courts.

C. Writ of Attachment

EFS argues that the union, by seeking a preliminary injunction under rule 65 of the Federal Rules of Civil Procedure, has sought relief unavailable to it. Because Local 397 requests a seizure of assets, EFS argues, rule 64, which concerns the issuance of a writ of attachment, should control this action.

However, in Hoxworth v. Blinder, Robinson & Co., 903 F.2d 186, 197 (3d Cir.1990), the Third Circuit determined that a district court may issue a preliminary injunction to protect a potential future damages remedy, provided that the plaintiff demonstrated that the traditional requirements for obtaining equitable relief had been met.

Consequently, the court has the power to issue a preliminary injunction and the union need not request the relief of a writ of attachment under rule 64. But in order to obtain the injunction, plaintiff must show that it is likely to become entitled to encumbered funds upon final judgment. Id. Plaintiff must also demonstrate that without the...