Loewen Group Intern., Inc. v. Haberichter

• Decision Date: 17 October 1995
• Docket Number: No. 94-3797,94-3797
• Citation: 65 F.3d 1417
• Parties: 150 L.R.R.M. (BNA) 2326, 130 Lab.Cas. P 11,412, 10 IER Cases 1723 LOEWEN GROUP INTERNATIONAL, INCORPORATED, Plaintiff-Appellant, v. William J. HABERICHTER, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1417

65 F.3d 1417

150 L.R.R.M. (BNA) 2326, 130 Lab.Cas. P 11,412,

10 IER Cases 1723

LOEWEN GROUP INTERNATIONAL, INCORPORATED, Plaintiff-Appellant, v. William J. HABERICHTER, Defendant-Appellee.

No. 94-3797.

United States Court of Appeals Seventh Circuit.

Argued May 12, 1995.

Decided Sept. 18, 1995.

Rehearing and Suggestion for Rehearing En Banc Denied Oct. 17, 1995.

Kevin E. White (argued), Catherine Wozniak Joyce, Susan A. Pipal, Winston & Strawn, Chicago, IL, for plaintiff-appellant Loewen Group International, Incorporated.

Elizabeth A. Knight, Patrick J. Fanning (argued), Kathryn M. Reidy, Knight, Hoppe, Fanning & Knight, Des Plaines, IL, for defendant-appellee William J. Haberichter.

Before BAUER, MANION, and KANNE, Circuit Judges.

MANION, Circuit Judge.

Loewen Group International, Inc. ("Loewen") appeals an order of the district court granting summary judgment in favor of its former employee, William J. Haberichter ("Haberichter"). Loewen sued Haberichter in federal court for breach of his employment agreement (Count I), breach of a covenant not to compete (Count II), breach of fiduciary duty (Count III), and injunctive relief (Count IV). The district court held that Loewen's suit was preempted by section 301 of the Labor Management Relation Act, 29 U.S.C. Sec. 185 ("LMRA"). We reverse.

I. Background

Loewen is incorporated in the state of Delaware with its principal place of business in Covington, Kentucky. The company owns and operates among other things funeral homes and cemeteries. In 1992, Loewen acquired the funeral home business of Donovan and Schaer Funeral Homes, P.C. ("D & S"). D & S has two locations, one in Des Plaines, Illinois and one in Arlington Heights, Illinois. Haberichter was an assistant manager at D & S's Arlington Heights location and part owner (5%) of that facility at the time of the purchase.

D & S, like many small funeral home businesses, was family-operated and relied heavily on the good will and local contacts of its employees. Consequently, Loewen, as a condition of the purchase, negotiated an agreement with certain key management employees who agreed to continue with the business. As part of this acquisition, Loewen also agreed to enter similar agreements with other management employees, including Haberichter, at the election of these other employees. Haberichter agreed to this arrangement and in February, 1992 signed an individual employment contract with Loewen under which he agreed to work for Loewen for at least five years at an annual salary of $52,000.00 and agreed to refrain from competing with Loewen within a ten-mile radius of the facility for a period of ten years from the date of the purchase agreement or for three years immediately following the date that his employment terminates. As separate consideration for the covenant not to compete, Haberichter received $75,000.00. In addition, Haberichter was paid more than $200,000.00 for his partial ownership interest in the facility.

As Loewen tells it, the ink had barely dried on the employment agreement before Haberichter began making plans to set up a competing funeral home. Haberichter allegedly compiled records and information regarding families that D & S had served in Arlington Heights, prepared a business plan and financial projections for his facility, and began getting the financing and permits ready to launch a new funeral home. Soon news began spreading that a new facility in the area was being developed within ten miles of both D & S facilities. Its owners, however, had never been publicly disclosed. In early November, 1993, Loewen learned that it was Haberichter who was establishing the competing business. When confronted with this news, Haberichter admitted that it was true and then attempted, based on his employment agreement with Loewen, to give 90 days notice and resign. He also demanded full pay and benefits for the 90-day period. Loewen, however, rejected his resignation and instead terminated Haberichter for cause under the terms of the agreement.

Loewen then sued Haberichter in federal district court under diversity jurisdiction for breach of the employment agreement (Count I), breach of the covenant not to compete (Count II), breach of fiduciary duty (Count III), and for injunctive relief (Count IV). Haberichter responded with a motion to dismiss Loewen's complaint, arguing that its claims were preempted under Sec. 301 of the LMRA. Haberichter asserted that he was a member of the union representing funeral directors and argued that resolution of Loewen's state law claims required the court to interpret the collective bargaining agreement entered into between the union and D & S. ¹ The district court converted Haberichter's motion to a motion for summary judgment and requested that the parties brief the issues stemming from Haberichter's union status. Following briefing, the court found that there may be potential conflicts between the collective bargaining agreement and Haberichter's individual employment contract and therefore concluded that Loewen's state law contract claims were preempted under Sec. 301. On this basis the district court granted summary judgment for Haberichter.

II. Analysis

The district court in this case granted summary judgment on all four of Loewen's state law claims based on its view that they were preempted under Sec. 301 of the LMRA. We review a grant of summary judgment de novo, viewing the record and all reasonable inferences drawn from it in the light most favorable to the party opposing the motion. Talbot v. Robert Matthews Distrib. Co., 961 F.2d 654, 663 (7th Cir.1992). We must be satisfied that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Id.

A. Sec. 301 Preemption

The Supremacy Clause of Art. VI of the United States Constitution grants to Congress the power to preempt state law. Kohl's Food Stores, Inc. v. Hyland, 32 F.3d 1075, 1077 (7th Cir.1994). Congress exercised this power by enacting Sec. 301(a) of the LMRA, 29 U.S.C. Sec. 185(a), which provides:

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

This section provides federal court jurisdiction over controversies involving collective bargaining agreements and also authorizes federal courts to fashion a body of federal law for the enforcement of these agreements. Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 403, 108 S.Ct. 1877, 1880, 100 L.Ed.2d 410 (1988) (citing Textile Workers Union of Amer. v. Lincoln Mills of Ala., 353 U.S. 448, 451, 77 S.Ct. 912, 915, 1 L.Ed.2d 972 (1957)). In order to ensure uniform interpretation of collective bargaining agreements, Section 301 requires that federal rules of law be applied. Id. at 403-04, 108 S.Ct. at 1880 (citing Local 174, Teamsters, Chauffeurs, Warehousemen and Helpers of Amer. v. Lucas Flour Co., 369 U.S. 95, 82 S.Ct. 571, 7 L.Ed.2d 593 (1962) ("Teamsters")).

In order to determine whether a party's state law claims are preempted under this section, we look to see whether the resolution of the claim depends on the meaning of, or requires the interpretation of, a collective bargaining agreement. Lingle, 486 U.S. at 405-06, 407, 409-10, 108 S.Ct. at 1881, 1882, 1883. "Section 301 governs claims founded directly on rights created by collective-bargaining agreements, and also claims 'substantially dependent on analysis of a collective-bargaining agreement.' " Caterpillar Inc. v. Williams, 482 U.S. 386, 394, 107 S.Ct. 2425, 2431, 96 L.Ed.2d 318 (1987) (quoting International Bhd. of Elec. Workers, AFL-CIO v. Hechler, 481 U.S. 851, 859 n. 3, 107 S.Ct. 2161, 2167 n. 3, 95 L.Ed.2d 791 (1987)).

This is relatively broad language, but the Supreme Court has made clear that preemption is not to be applied in every situation where a collective bargaining agreement is part of the picture. "[N]ot every dispute concerning employment, or tangentially involving a provision of a collective-bargaining agreement, is pre-empted by Sec. 301 or other provisions of the federal labor law." Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211, 105 S.Ct. 1904, 1911, 85 L.Ed.2d 206 (1985). For example, it is clear that the existence of a remedy in a collective bargaining agreement does not deprive a party of separate independent remedies available under state law. Lingle, 486 U.S. at 409-10, 108 S.Ct. at 1883. "[Section] 301 pre-emption merely ensures that federal law will be the basis for interpreting collective-bargaining agreements, and says nothing about the substantive rights a State may provide to workers when adjudication of those rights does not depend upon the interpretation of such agreements." Id. at 409, 108 S.Ct. at 1883. Even if the state law claim would require addressing the same set of facts, therefore, such claim is independent of a collective bargaining agreement for preemption purposes. Id. at 410, 108 S.Ct. at 1883.

Further, the Court has stated that "when the meaning of contract terms is not the subject of dispute, the bare fact that a collective-bargaining agreement will be consulted in the course of state-law litigation plainly does not require the claim to be extinguished." Livadas v. Bradshaw, --- U.S. ----, ----, 114 S.Ct. 2068, 2078, 129 L.Ed.2d 93 (1994); see also Milne Employees Ass'n v. Sun Carriers, 960 F.2d 1401, 1409-10 (9th Cir.1991), cert. denied, --- U.S. ----, 113 S.Ct. 2927, 124 L.Ed.2d 678 (1993) (examination of collective bargaining agreement to see if claims are preempted is not "interpretation" for purposes of preemption). The Court then took pains to stress that "it is the legal character of a claim, as 'indepe...