Retail Clerks Union, Local 7 v. Purity Stores, Inc.

• Decision Date: 02 August 1974
• Citation: 116 Cal.Rptr. 40,41 Cal.App.3d 225
• Court: California Court of Appeals Court of Appeals
• Parties: , 88 L.R.R.M. (BNA) 2513, 74 Lab.Cas. P 10,305 RETAIL CLERKS UNION, LOCAL 775, et al., Plaintiffs and Appellants, v. PURITY STORES, INC., et al., Defendants and Respondents. Civ. 33575.

Page 40

116 Cal.Rptr. 40

41 Cal.App.3d 225, 88 L.R.R.M. (BNA) 2513,

74 Lab.Cas. P 10,305

RETAIL CLERKS UNION, LOCAL 775, et al., Plaintiffs and Appellants, v. PURITY STORES, INC., et al., Defendants and Respondents.

Civ. 33575.

Court of Appeal, First District, Division 4, California.

Aug. 2, 1974.

Hearing Denied Oct. 17, 1974.

Davis, Cowell & Bowe, by Robert P. Cowell, San Francisco, for appellants.

Thelen, Marrin, Johnson & Bridges, San Francisco, for respondent Purity Stores, Inc.

Littler, Mendelson & Fastiff, by George J. Tichy, II, Alan B. Carlson, San Francisco, for respondent Northern California Supermarkets, Inc.

CHRISTIAN, Associate Justice.

Several local unions of the Retail Clerks Union and of the Retail Store Employees Union appeal from a judgment which denied their petition to compel arbitration pursuant to collective bargaining agreements entered into by appellants and Purity Stores, Inc. (hereinafter 'Purity'). An order to arbitrate was also sought in regard to Northern California Supermarkets, Inc. (hereinafter 'NCS').

Purity formerly operated numerous retail food stores throughout Northern California. Appellants, representing the employees of Purity, had entered into collective bargaining agreements with Purity. Each agreement contained a clause calling for arbitration of 'all claims, disputes and grievances arising between the parties during the term of this Agreement over the construction and application of this Agreement, or relating to working conditions arising out of this Agreement, . . .' Each agreement also contained the following clause providing for enforcement of the agreement if Purity was replaced by a successor:

'NEW OWNER: This Agreement shall be binding upon the successors and assigns of the parties hereto. . . . (E)mployee benefits provided for herein shall not be affected by the sale or transfer of the business for those employees who are retained by a new Employer for a period of more than thirty (30) days. For employees who choose to be employed by such new owner, such thirty (30) day period shall be considered a probationary period during which time employees may be terminated without recourse to the grievance procedure, unless such termination is in violation of (sections of the collective bargaining agreement which deal with discharge for discriminatory reasons or for union activities).'

On June 30, 1972, while the agreements just described were in force, Purity sold 18 retail grocery stores to NCS, transferring equipment, inventory, supplies, motor vehicles, accounts receivable, trade names, trademarks, and Purity's leaseholds of realty occupied by the stores. On July 1, 1972, NCS began operating the 18 stores.

NCS immediately offered all employees at the 18 stores continued employment on a 30-day probationary basis; some employees accepted the offer while others did not. During the 30-day period, some probationary employees were discharged. Appellants objected to the discharges and sought arbitration.

After Purity sold its stores to NCS, no performance was required of it under the collective bargaining agreements; accordingly appellants do not attack the judgment in favor of Purity. Appellants assert, however, that NCS, as the successor of Purity, is bound by the arbitration provision in the collective bargaining agreements. When a party petitions for an order to compel arbitration, the court must order arbitration 'if it determines that an agreement to arbitrate the controversy exists, . . .' (Code Civ.Proc., § 1281.2.) A successor of an employer is bound by the arbitration provision in a collective bargaining agreement executed by its predecessor if 'there is substantial similarity of operation and continuity of identity of the business enterprise before and after a change in ownership.' (Paud v. Alco Plating Corp. (1971) 21 Cal.App.3d 362, 367--368, 98 Cal.Rptr. 706, 709; cf. Holayter v. Smith (1972) 29 Cal.App.3d 326, 333--335, 104 Cal.Rptr. 745.)

The doctrine of Holayter and Paud derives from John Wiley & Sons v. Livingston (1964) 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898, a case in which the United States Supreme Court held that under federal law, a successor employer was bound by the arbitration provision in a collective bargaining agreement executed by its predecessor. Respondent NCS asserts that Holayter and Paud should not be followed because '(i)n light of the Supreme Court opinion in (NLRB v. Burns Security Services (1972) 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61), it may be critically questioned whether John Wiley & Sons, . . . now has any validity or viability beyond the limited facts presented in that case.' This argument is not sound. The court in Holayter considered the effect of Burns on the Wiley doctrine and concluded that the doctrine 'was held not to be applicable to a situation where there was no merger, no sale of assets and no dealings whatsoever between the successor employer and its predecessor, and no agreement by the successor to assume a collective bargaining agreement negotiated by the predecessor.' (Holayter v. Smith, Supra, 29 Cal.App.3d at p. 332, 104 Cal.Rptr. at p. 749.) Moreover, Burns did not involve a merger or sale of assets. In that case, a service contract between the Wackenhut Corporation and the Lockheed Aircraft Service Company had expired. Burns Security Services bid for and obtained the service contract with Lockheed and then hired 27 of 42 former employees of Wackenhut. Burns explicitly stated that it had no intention of assuming Wackenhut's agreement with the union, just as it assumed no other obligations of Wackenhut. Wackenhut was in fact a competitor of Burns which had been outbid by Burns for the Lockheed contract. Consequently, Burns was a very different type of successor employer than the successor employers in Wiley, Holayter, and here. (See NLRB v. Burns Security Services, Supra, 406 U.S. at pp. 285--291, 92 S.Ct. 1571, Holayter v. Smith, Supra, 29 Cal.App.3d at p. 336, 104 Cal.Rptr. 745.)

NCS purchased the retail grocery stores, equipment, supplies, inventory, accounts receivable, trade names, and trademarks of Purity. After commencing operation of the stores, NCS continued to make contributions to appellants' welfare and pension funds as required by the collective bargaining agreements. It used the same collective bargaining agent that Purity had used and invoked the grievance procedure for settling some disputes with appellants. Throughout these proceedings NCS claimed that it was a 'new owner' of the retail grocery operation as the term is used in the collective bargaining agreements. There was thus evidence of substantial similarity of operation and continuity of the identity of the business. (Cf. Holayter v. Smith, Supra, 29 Cal.App.3d at pp. 329--330, 335--336, 104 Cal.Rptr. 745; Paud v. Alco Plating Corp., Supra, 21 Cal.App.3d at pp. 367--368, 98 Cal.Rptr. 706.)

Respondent NCS contends that it should not be considered a successor employer because there is no evidence that a majority of Purity employees entered the employment of NCS. It is true that in Howard Johnson Co. v. Detroit Local Joint Executive Board (1974) 417 U.S. 249, 263, 94 S.Ct. 2236, 2244, 41 L.Ed.2d 46, 57, the United States Supreme Court held, applying federal law, that 'continuity of identity in the business enterprise necessarily includes . . . a substantial continuity in the identity of the work force across the change in ownership.' In the present case a considerable number of employees of Purity were evidently retained by NCS. All Purity employees were initially offered employment by NCS; some who accepted were later discharged by NCS. Moreover, NCS continued to deal with appellants as the...