New England Mechanical, Inc. v. Laborers Local Union 294

• Decision Date: 30 July 1990
• Docket Number: 89-15594,Nos. 89-15569,s. 89-15569
• Citation: 909 F.2d 1339
• Parties: 134 L.R.R.M. (BNA) 3048, 116 Lab.Cas. P 10,231 NEW ENGLAND MECHANICAL, INC., d/b/a Independent Plumbing Company, Petitioner-Appellant, v. LABORERS LOCAL UNION 294; Laborer's Contract Admin. Trust Fund, Respondents-Appellees. NEW ENGLAND MECHANICAL, INC., d/b/a Independent Plumbing Company, Petitioner-Appellant, v. LABORERS LOCAL UNION 294, and Northern California District Council of Laborers, Respondents-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1339

909 F.2d 1339

134 L.R.R.M. (BNA) 3048, 116 Lab.Cas. P 10,231

NEW ENGLAND MECHANICAL, INC., d/b/a Independent Plumbing

Company, Petitioner-Appellant, v. LABORERS LOCAL UNION 294; Laborer's Contract Admin. Trust

Fund, Respondents-Appellees.

NEW ENGLAND MECHANICAL, INC., d/b/a Independent Plumbing

Company, Petitioner-Appellant, v. LABORERS LOCAL UNION 294, and Northern California District

Council of Laborers, Respondents-Appellees.

Nos. 89-15569, 89-15594.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 7, 1990.

Decided July 30, 1990.

Spencer H. Hipp, Littler, Mendelson, Fastiff & Tichy, Fresno, Cal., for petitioner-appellant.

Sandra R. Benson, Van Bourg, Weinberg, Roger & Rosenfeld, San Francisco, Cal., for respondents-appellees.

Appeal from the United States District Court for the Northern District of California.

Before SNEED, FARRIS and FERNANDEZ, Circuit Judges.

FERNANDEZ, Circuit Judge:

New England Mechanical, Inc. d/b/a Independent Plumbing Company ("NEM") appeals the district court's grant of summary judgment in favor of Laborers Local Union No. 294 ("Laborers"). The district court ruled that NEM must abide by two arbitration awards previously entered against NEM. NEM argues that the district court erred when it found there were no material disputes of fact as to whether the arbitration panel had jurisdiction over NEM.

We reverse.

BACKGROUND FACTS

NEM is a plumbing contractor in Fresno, California. It installs plumbing and air conditioning piping for commercial and residential developments. In April of 1986 Independent was originally formed as a sole proprietorship. Some time in the early 1970's, Independent became a corporation. One of the shareholders was John Sequeira. Beginning in 1970, Independent established a bargaining relationship with the Laborers. Independent and the Laborers entered into a collective bargaining agreement ("CBA") in 1970 and renewed that agreement in 1972 and 1977. The CBA required Independent to use Laborers for such work as digging and backfilling ditches. Each of those agreements contained a clause that the CBA would automatically renew itself unless either of the parties invoked a termination provision. Neither Independent nor the Laborers has invoked the termination provision since they signed the 1977 CBA.

NEM purchased the assets, inventory and some accounts receivable and payable from another Fresno business, Independent Plumbing Company ("Independent"). NEM also purchased the right to use the business name of "Independent Plumbing Company."

In the sales agreement between Independent and NEM, the parties agreed that NEM would only assume those obligations specifically listed in the agreement. Independent also warranted that the sales agreement would not breach any contract that Independent may have had before the sale. The agreement does not discuss whether NEM would assume the CBA that Independent had with the Laborers. The agreement did list Independent's employees at the time of the sale and the list indicated whether the employees belonged to a union.

At the time of NEM's purchase of Independent, none of NEM's officers had any financial or legal interest in Independent. Soon after the sale, NEM's sole shareholder sold 25% of his stock to John Sequeira. Sequeira was also hired to be the general manager of NEM. Also after NEM's purchase of Independent, NEM entered into a bargaining relationship with the Pipe Trades District Council ("Pipe Union"). NEM executed a CBA with the Pipe Union in which NEM agreed that Pipe Union members would perform various jobs including digging and backfilling ditches. ¹

After NEM purchased Independent, several Independent employees continued on their jobs. Two of those employees were members of the Laborers. NEM continued to pay wages to those employees at their union rates. NEM also forwarded payments on behalf of the employees to the Laborers' pension fund. The employees did other work besides those jobs covered by the Laborers' CBA. In October of 1987 and March of 1988, NEM discharged its employees who belonged to the Laborers. Mr. Sequeira told the employees that he was assigning their work to employees who were members of the Pipe Union.

The discharged employees complained to the Laborers and the Laborers filed grievances on behalf of the employees. The disputes were set for hearing in front of a Board of Adjustment. The Board of Adjustment was created by the CBA between Independent and the Laborers. The Board was a permanent entity and consisted of two members selected by the union, two members selected by the employer bargaining association and an arbitrator agreed upon by both the union and the employer association. NEM was notified that the Board of Adjustment would hold a hearing to resolve the employee disputes. NEM responded that it would not attend the hearings because the Board of Adjustment had no authority over NEM. NEM also indicated it believed that even if NEM was bound to the Laborers' CBA, the CBA exempted the disputes from arbitration since the disputes regarded the jurisdictional boundaries of two unions.

The Board of Adjustment proceeded to hear each dispute and decided each in favor of the employee. The Board ordered that NEM reinstate the discharged employees and pay those employees for their lost wages and benefits. NEM did not attend either Board hearing. After the hearings, the Laborers filed a petition in district

court to confirm the awards. NEM filed a petition to vacate the awards.

JURISDICTION AND STANDARDS OF REVIEW

The district court had jurisdiction pursuant to 29 U.S.C. Sec. 185. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291.

This panel reviews de novo a district court's grant of summary judgment. West Coast Theater Corp. v. City of Portland, 897 F.2d 1519, 1525 (9th Cir.1990). Summary judgment is not appropriate in those cases where the non-moving party has established that there is an actual dispute about a material fact. There will be a material dispute of fact if there is sufficient evidence from which a person could reasonably resolve the dispute in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

DISCUSSION

The district court found that NEM was bound to the Laborers' CBA for two separate reasons. First, NEM was bound merely because NEM was a successor employer to Independent. Second, NEM was bound because its actions indicated that it had adopted the CBA. The district court ruled that summary judgment was appropriate because NEM had failed to present sufficient evidence to create any material disputes of fact. We disagree.

A. Successor Employer.

In general, if an employer takes over another business, the employer is not bound by its predecessor's collective bargaining agreements. Fall River Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S. 27, 107 S.Ct. 2225, 2234, 96 L.Ed.2d 22 (1987); Sheet Metal Workers Int'l Ass'n, Local No. 359 v. Arizona Mech. & Stainless, Inc. 863 F.2d 647, 651 (9th Cir.1988). At most, the employer will be required to bargain with any unions that the predecessor employer had recognized. Fall River, 482 U.S. at 40, 107 S.Ct. at 2234; Local No. 359, 863 F.2d at 651. Even then, the new employer will only have a duty to bargain with a union if the new employer is a "successor" employer. Local No. 359, 863 F.2d at 651.

An employer is a successor if there is substantial continuity between the new and the old employer. Fall River, 482 U.S. at 43, 107 S.Ct. at 2236. In order to assess substantial continuity, the courts and the NLRB look to factors such as "whether the business of both employers is essentially the same; whether the employees of the new company are doing the same jobs in the same working conditions under the same supervisors; and whether the new entity has the same production process, produces the same products, and basically has the same body of customers." Id.

In this case, the district court found that NEM was a successor employer to Independent. The court noted that NEM had continued to use the same business name as Independent, had maintained the same place and type of business as Independent, and had hired most of Independent's employees. The court concluded that NEM had substantially continued Independent's business. Therefore, NEM was a successor employer. As a successor employer, NEM was bound to any CBA to which Independent was bound.

The flaw in the district court's reasoning is that it assumed that all successor employers will always be bound by the terms of a predecessor's CBA. However, the Supreme Court has continually indicated that a successor employer is only bound to bargain with a union which had a CBA with the predecessor. Fall River, 482 U.S. at 43, 107 S.Ct. at 2236; Howard Johnson Co., Inc. v. Detroit Local Joint Exec. Bd., 417 U.S. 249, 261-62, 94 S.Ct. 2236, 2242-43, 41 L.Ed.2d 46 (1974); N.L.R.B. v. Burns Int'l Sec. Serv., 406 U.S. 272, 284, 92 S.Ct. 1571, 1580, 32 L.Ed.2d 61 (1972). In only one case has the Supreme Court indicated that a successor employer may be bound to some of the terms of a predecessor's CBA. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964). In Wiley, a large printing company merged with a smaller We recognize that some of our prior decisions may have suggested that a finding of "successorship" was enough to bind an employer to a previous CBA. See Hawaii Carpenters Trust Funds v. Waiola Carpenter Shop, Inc., 823 F.2d 289 (9th Cir.1987) (employees purchased business from their employer; employees bound to terms of employers CBA); Trustees for Alaska Laborers-Constr. Indus. Health & Sec. Fund v. Ferrell, 812 F.2d 512 (9th Cir.1987) (partner in joint venture continues business as sole proprietor; partner bound by terms of CBA entered into by joint venture). However, we have also suggested, without deciding, that any inconsistencies...