Puerto Rico MM Inc. v. INTERNATIONAL L. ASS'N, AFL-CIO

• Decision Date: 20 May 1975
• Docket Number: Civ. No. 75-387.
• Parties: PUERTO RICO MARINE MANAGEMENT INC., and Marine Transportation Management, Inc. of Puerto Rico, Plaintiffs, v. INTERNATIONAL LONGSHOREMENS' ASSOCIATION, AFL-CIO, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

398 F. Supp. 118

PUERTO RICO MARINE MANAGEMENT INC., and Marine Transportation Management, Inc. of Puerto Rico, Plaintiffs, v. INTERNATIONAL LONGSHOREMENS' ASSOCIATION, AFL-CIO, et al., Defendants.

Civ. No. 75-387.

United States District Court, D. Puerto Rico.

May 20, 1975.

Rafael Cuevas Kuinlam, Cancio, Cuevas & Mayo, Santurce, P. R., for plaintiffs.

Demetrio Fernandez and Nicolas Delgado Rio Piedras, P. R., for defendants.

DECISION AND ORDER

TORRUELLA, District Judge.

This matter is before us on a Complaint requesting injunctive relief pursuant to Section 301(a) of the Labor Management Relations Act,¹ 29 U.S.C. § 141 et seq. and Boys Markets, Inc. v. Retail Clerk's Union, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970). An order to show cause issued and thereafter a hearing was conducted to determine whether a preliminary injunction should issue against Defendants.

Defendants, who are labor organizations representing employees in an industry affecting interstate commerce, have moved to dismiss for lack of jurisdiction alleging that Plaintiffs are not "employers" within the meaning of Section 301(a). This term is defined in Section 2(2) of the Act, 29 U.S.C. § 152(2) as follows:

". . . `Employer' includes any person acting as an agent of an employer, directly or indirectly, but shall not include . . . any State or political subdivision thereof . . ."

We are thus charged with making an initial inquiry into the nature of Plaintiffs and their relationship, if any, to "any State or political subdivision thereof."

Plaintiff Puerto Rico Marine Management, Inc., hereinafter called "Management", is a Delaware Corporation organized in August, 1974. It is a wholly-owned subsidiary of McLean Industries, Inc. All of its stock is privately held and none of it is owned by any public corporation or governmental entity.² All officers of Management are appointed by its Board of Directors, who in turn is elected by the stockholders. No officer or member of the Board is a publicly elected or appointed official.

Management has a wholly owned subsidiary called Puerto Rico Marine Operating Company, Inc., hereinafter called "Operator", which although not a party Plaintiff, because of its close relationship to Management as will be seen shortly, should also be commented upon. All of the above concerning Management related to incorporation, ownership, officers, board of directors and similar matters is substantially applicable to Operator, as well as to the other Plaintiff, Marine Transportation Management, Inc. of Puerto Rico, hereinafter called "Transportation", and also to two additional wholly-owned subsidiaries, Trans Ocean Transportation Executives Management, Inc. and Puerto Rico Marine Services, Inc., hereinafter called "Trans Ocean" and "Services" respectively. It seems, but is unclear from the record, that Transportation, Trans Ocean and Services are subsidiaries of Transamerican Trailer Transportation, Inc., a holding company similar to McLean Industries, Inc., but in any event that conclusion is unimportant to the decision of this matter.

As will be seen hereafter, notwithstanding what is stated in the certificates of incorporation of Management, Operator, Transportation, Trans Ocean and/or Services, the sole business of these companies is to act as agents for the Puerto Rico Maritime Shipping Authority, hereinafter called the "Authority", in carrying out different phases of an ocean common carrier operation.

The Authority is a public corporation of the Commonwealth of Puerto Rico created by virtue of Law No. 62 of June 10, 1974. The purpose of this entity is to provide ocean common carrier transportation between Puerto Rico and the exterior. To comply with said purpose the Authority purchased or leased the facilities of several private carriers engaged in said business, including ships, trailer vans, shore installations, terminals and related facilities.

Law No. 62 refers to the Authority as an instrumentality of the Commonwealth of Puerto Rico. It is directed by a board of directors appointed by the Governor with the consent of the Senate. The Authority has the power of eminent domain. Its income, property and bonds are exempt from taxation. The interest paid by the Authority on said bonds is guaranteed by the Commonwealth of Puerto Rico up to the amount of $60,000,000. The Authority's yearly net income enters into the general funds of the Treasury of the Commonwealth. The Authority is required to report annually to the Governor and Legislature.

It can not be seriously disputed but that the Authority is a political subdivision of the Commonwealth of Puerto Rico,³ and as such not an "employer" within the meaning of the Statute here in question. NLBR v. Natural Gas Utility District, 402 U.S. 600, 91 S.Ct. 1746, 29 L.Ed.2d 206 (1971); NLRB v. E. C. Atkins & Co., 331 U.S. 398, 67 S.Ct. 1265, 91 L.Ed. 1563 (1947); NLRB v. Natchez Trace Electric Power Assoc., 476 F.2d 1042 (CA 5, 1973); NLRB v. Randolph Electric, 343 F.2d 60 (CA 4, 1965).

The issue, however, is whether the relationship between the Authority and Management, and the other related companies, is such as to affect their status as employers within the statutory scheme of the Labor-Management Relations Act, supra. To determine this question we must look at this relationship in some detail.

On July 1, 1974, Management and Operator entered into a so-called "management services contract" with the Authority, whereby the former became exclusive agents of the later for the commercial management and operation of ocean carriage sevice between Puerto Rico and the East Coast and Gulf Coast of the United States.⁴ Under this agreement the Authority provided all the assets necessary for this operation including the vessels, equipment and terminals. The agents are to operate "in accordance with such directions as may from time to time be given" by the Authority. The Authority is "responsible for developing and promulgating the policy governing the operation and utilization" of the facilities in the service. It is the duty of Management, "subject to the policies determined by the Authority", to be charged with full responsibility for the maintenance, repair, marketing, sales and related systems and operation of the facilities. Management, as agent for the Authority and as directed by it, must abide by tariffs promulgated by the Authority, which retains the ultimate responsibility for all amendments and changes and has an absolute right to veto or reject any tariff amendments or charges proposed by Management. Both Management and Operator, for the account of Authority, are to supervise and perform all matter of duties regarding the operation, including the making of contracts on behalf of the Authority for the transportation of goods. Operator is to employ all the operating personnel, including stevedoring personnel, but in so acting both Management and Operator are to "adhere to policies established by the Authority." Among these are that the service "be operated in such manner as to avoid and eliminate inefficient or wasteful transportation practices"⁵ and certain personnel hiring practices.⁶ Management is to report to the Authority "at such times and in such forms" as may be required by the Authority. Initial budgets setting out the capital requirements and costs and expenditures of Management and Operator have to be submitted for approval by Authority, who may then "appropriate and pay over the Management Company such amounts as may be approved by the Authority as working capital and start up costs." Annual budgets are to follow similar procedures and cash shortages are to be covered by the Authority after appropriate supplemental budgets are justified by Management, and approved by the Authority. All revenues are to be collected by Management for the account of the Authority and so held in trust in such banks as the Authority directs. Accounting procedures acceptable to the Authority are to be established. Any excess of revenues over expenditures are to be paid over to the Authority on a quarterly basis. The Authority has the right at any time to inspect the records and books of Management and Operator. Independent auditors are engaged by the Authority and the internal auditors are employees of the Authority. The Authority has "the final decision as to the risks to be insured against, the amount and condition of such coverage, and the insurers." The Authority reserves the power to make contracts by which it will be bound, but can delegate to Management the power to enter into contracts binding the Authority up to the amount of $50,000. Masters of vessels employed by Operator bind the Authority as is customary for masters of vessels in the United States Merchant Marine. Any transaction between Management and its parent company must first be approved by the Authority. A complicated formula is established for compensation of Management. Suffice it to say that this is a fee for services which can be increased by certain factors bearing on the efficiency of the operation, but which has a minimum which is independent of profit or loss. There is an arbitration provision for settlement of disputes between the parties. Without the express written permission of the Authority, neither Management nor Operator can in any way dispose of or sell any property used in the service, nor engage in any business other than the operation of these facilities, nor engage in any transaction other than what is required by the management services contract. Any employment contract between Management and Operator with an annual salary of $35,000 or more is subject to review by the Authority. The headquarters of Management and Operator must be located in San Juan, Puerto Rico. The remaining portions of this agreement deal with certain mutual warranties of the parties, contractual remedies and other matters which we do not deem pertinent to the issues at hand.

On or about October 1s...