Local Lodge No. 1266, Intern. Ass'n of Machinists and Aerospace Workers, AFL-CIO v. Panoramic Corp., AFL-CI

• Citation: 668 F.2d 276
• Decision Date: 30 December 1981
• Docket Number: P,No. 81-1379,AFL-CI,81-1379
• Parties: 109 L.R.R.M. (BNA) 2169, 93 Lab.Cas. P 13,218 LOCAL LODGE NO. 1266, INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS,laintiff-Appellee, v. PANORAMIC CORPORATION, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 276

668 F.2d 276

109 L.R.R.M. (BNA) 2169, 93 Lab.Cas. P 13,218

LOCAL LODGE NO. 1266, INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, AFL-CIO Plaintiff-Appellee, v. PANORAMIC CORPORATION, Defendant-Appellant.

No. 81-1379.

United States Court of Appeals Seventh Circuit.

Argued Sept. 25, 1981.

Decided Dec. 30, 1981.

Robert G. Dowling, Shneidman, Myers & Gendlin, Milwaukee, Wis., for plaintiff-appellee.

Robert H. Joyce, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., for defendant-appellant.

Before WOOD and CUDAHY, Circuit Judges, and DUMBAULD, Senior District Judge. ^*

CUDAHY, Circuit Judge.

The issue on this appeal is whether a district court may grant a preliminary injunction restraining an employer from completing a sale of corporate assets pending a decision by an arbitrator on the union's claim that the sale violates the applicable collective bargaining agreement. Because we agree that failure to issue such a status quo injunction under the present circumstances would have resulted in frustration of the arbitral process, we affirm the district court's award of equitable relief. ¹

I.

The controversy in the instant case had its genesis in a decision by the Panoramic Corporation ("Panoramic") to sell its Sintered Specialties Division, located in Janesville, Wisconsin. The plaintiff, Local Lodge 1266 of the International Association of Machinists and Aerospace Workers, AFL-CIO (the "Union") is the recognized bargaining representative of the production and maintenance employees at the Sintered Specialties Division. At the time of the filing of the Union's complaint, there were 113 such workers employed by Panoramic, 29 of whom were on layoff with recall rights. A collective bargaining agreement, due to expire on June 30, 1982, is in effect between Panoramic and the Union. This agreement contains a broad arbitration provision, ² and its Preamble makes the agreement binding on "successors and assigns" of Panoramic. ³ It is the latter provision that forms the basis for the Union's claim that the proposed sale of the Division constitutes a breach of the labor contract.

In December of 1980, employees at the Division were for the first time informed of Panoramic's decision to sell the Division to a group of investors who had formed a corporation known as Sintered Specialties, Inc. ("SSI"). The investors in SSI were identified as officers and supervisors of Panoramic and its parent company, the Parker Pen Company. The employees were told that, although only tentative agreement had been reached, the parties to the sale hoped to close the deal on February 28, 1981. A Vice President of the Sintered Specialties Division further advised the employees that the proposed purchasers contemplated no change in the terms and conditions of employment at the Division, but that some changes might be put into effect at a future time after mutual agreement by the purchasers and the Union. No indication was given whether the purchasers would honor the existing collective bargaining agreement.

During an unrelated grievance meeting on January 29, 1981, a Panoramic official informed the Union that the closing date for the sale of the Division, originally scheduled for February 28, 1981, might be postponed until the end of March. On February 6, the Union learned that the proposed buyers had taken a "new view" with respect to the existing Panoramic employees and were considering a plan under which those employees would be terminated and rehired as new employees. A meeting to discuss the situation was called by Panoramic on February 9, 1981. Panoramic indicated to the Union that it had decided to sell the Division because the operation was incompatible with Panoramic's overall business plans. Panoramic declined to answer the Union's questions regarding the intentions of the purchasers with respect to the existing employees, and insisted that it had no control over the purchasers' plans. Panoramic did note, however, that the closing date had been set for February 28, 1981.

On February 13, 1981, a notice was posted at the Sintered Specialties Division announcing the proposed sale to SSI. The notice informed Panoramic employees that they were being terminated as of February 28 and that they would have to reapply to SSI if they wished to continue their employment at the plant. ⁴ In letters directed both to Panoramic and to SSI, the Union objected to the notice of termination, requested bargaining over the effects of the sale, and sought from Panoramic a disclosure of the arrangements it had made for carrying out its obligation to require SSI to assume the labor agreement. Replies to these letters were received on February 19. In its response, SSI reported that it had not agreed to assume the obligations of the collective bargaining agreement and announced its decision not to recognize or bargain with the Union.

The Union filed its grievance with Panoramic on February 17, 1981. Although it alleged numerous contract violations pertaining to compensation, seniority, holidays, pensions and insurance, and discharge and discipline, the principal grievance related to the contract's "successors" clause, which the Union interprets as requiring Panoramic to secure from any purchaser, as a condition of sale, an assumption of the obligations of the labor agreement. The Union then requested Panoramic to delay the effect of the February 13 notice pending resolution of the grievance. Panoramic declined this request, but has agreed to arbitration of the contract issue.

On February 20, 1981, the Union filed its Complaint and Motion for Preliminary Injunction and Temporary Restraining Order. ⁵ The Complaint sought a preliminary injunction to restrain Panoramic, pending arbitration, from completing the sale of the Sintered Specialties Division to SSI or to any other person without first requiring the transferee to assume the labor agreement between Panoramic and the Union. At the conclusion of a hearing conducted on February 27, 1981, the district court granted the requested relief. ⁶ Panoramic appeals from this ruling.

II.

The dispute in the instant case lies at the intersection of several fundamental policies embodied in the national labor laws: (1) the policy against judicial interference in labor disputes, 29 U.S.C. §§ 101-115 (1976); Buffalo Forge Co. v. United Steelworkers, 428 U.S. 397, 96 S.Ct. 3141, 49 L.Ed.2d 1022 (1976); (2) the promotion of peaceful resolution of labor disputes through voluntary arbitration, Nolde Brothers, Inc. v. Local 358, Bakery & Confectionery Workers, 430 U.S. 243, 253, 97 S.Ct. 1066, 1073, 51 L.Ed.2d 300 (1977); Steelworkers trilogy (United Steelworkers v. American Manufacturing Co., 363 U.S. 564, 80 S.Ct. 1363, 4 L.Ed.2d 1432 (1960); United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960)); and (3) deference to management prerogatives, Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964). Our task in reviewing the propriety of the preliminary injunction granted by the district court in the instant case, therefore, is to attempt to accommodate these often conflicting policies.

In Boys Markets, Inc. v. Retail Clerks Local 770, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970), the Supreme Court recognized a narrow exception to the Norris-LaGuardia Act, 29 U.S.C. §§ 101-115 (1976), which broadly prohibits federal courts from issuing injunctions in labor disputes. The Court held that an employer in a federal court action brought pursuant to § 301(a) of the Labor Management Relations Act ⁷ could secure an injunction against a strike if the collective bargaining agreement between the parties contained a no-strike clause and if the strike involved a grievance that the parties had agreed to submit to arbitration. The union's promise not to strike is generally regarded as the quid pro quo for the employer's agreement to submit grievance disputes to the process of arbitration. See Textile Workers v. Lincoln Mills, 353 U.S. 448, 455, 77 S.Ct. 912, 917, 12 L.Ed.2d 972 (1957). Thus failure to restrain the union from striking over arbitrable disputes would undercut the purpose of the arbitration provision. 398 U.S. at 247-49, 90 S.Ct. at 1590-91. The Court therefore concluded that injunctive relief in such circumstances was essential to the enforcement of the parties' agreement to arbitrate contract disputes. The Court cautioned, however, that injunctions against strikes should not issue routinely, but would be appropriate only when the collective bargaining agreement called for mandatory arbitration and when certain equitable preconditions were satisfied:

When a strike is sought to be enjoined because it is over a grievance which both parties are contractually bound to arbitrate, the District Court may issue no injunctive order until it first holds that the contract does have that effect; and the employer should be ordered to arbitrate, as a condition of his obtaining an injunction against the strike. Beyond this, the District Court must, of course, consider whether issuance of an injunction would be warranted under ordinary principles of equity-whether breaches are occurring and will continue, or have been threatened and will be committed; whether they have caused or will cause irreparable injury to the employer; and whether the employer will suffer more from the denial of an injunction than will the union from its issuance.

398 U.S. at 254, 90 S.Ct. at 1594 (quoting Sinclair Refining Co. v. Atkinson, 370 U.S. 195, 228, 82 S.Ct. 1328, 1346, 8 L.Ed.2d 440 (1962) (Brennan, J., dissenting)).

The scope of the so-called Boys Markets exception to the Norris-LaGuardia Act was narrowed by the Supreme Court's subsequent decision in Buffalo Forge Co. v. United Steelworkers, 428 U.S. 397, 96 S.Ct. 3141, 49...