Serrano v. Jones & Laughlin Steel Co.

• Citation: 790 F.2d 1279
• Decision Date: 08 May 1986
• Docket Number: U,No. 2163,AFL-CIO,T,No. 84-3992,AFL-CIO-CL,2163,84-3992
• Parties: 122 L.R.R.M. (BNA) 2297, 104 Lab.Cas. P 11,889 Joseph SERRANO, et al., Plaintiffs-Appellants. v. JONES & LAUGHLIN STEEL CO., LTV Corporation, Defendants-Third Party Plaintiffs-Appellees. International Union, United Steelworkers of America,; Localnited Steelworkers of America,hird Party Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 1279

790 F.2d 1279

122 L.R.R.M. (BNA) 2297, 104 Lab.Cas. P 11,889

Joseph SERRANO, et al., Plaintiffs-Appellants. v. JONES & LAUGHLIN STEEL CO., LTV Corporation,

Defendants-Third Party Plaintiffs-Appellees.

International Union, United Steelworkers of America,

AFL-CIO; Local No. 2163, United Steelworkers of

America, AFL-CIO-CLC, Third Party

Defendants-Appellees.

No. 84-3992.

United States Court of Appeals, Sixth Circuit.

Argued Jan. 10, 1986.

Decided May 8, 1986.

Staughton Lynd (argued), Northeast Ohio Legal Services, Youngstown, Ohio, for plaintiffs-appellants.

Willis J. Goldsmith (argued), Deborah Cranda, Jones, Day, Reavis & Pogue, Washington, D.C., Richard J. Brean, United Steelworkers of America, Pittsburgh, Pa., for defendants-third party plaintiffs-appellees.

Before LIVELY, Chief Judge, WELLFORD, Circuit Judge, and PORTER, Senior District Judge. ^*

LIVELY, Chief Judge.

The principal question presented by this appeal is whether the National Labor Relations Board (NLRB or Board) has exclusive jurisdiction over a dispute between individual employees and their employer arising out of an agreement between the employer and the employees' union. The agreement provided for concessions by the employees if the employer should decide to modernize an old facility. The district court held that three causes of action pled by the plaintiffs, claiming fraud by the employer, were preempted by federal labor law, and dismissed them. The court further held, with respect to two additional causes of action, that the plaintiffs failed to demonstrate the existence of genuine issues of material fact, and granted summary judgment in favor of the defendants.

I.

A.

Prior to 1981 Jones & Laughlin Steel Co. (J & L) was a major employer in Youngstown, Ohio. As this court has previously noted, a recession in the steel industry in the 1970s hit Youngstown particularly hard. See Local 1330, United Steel Workers v. United States Steel Corp., 631 F.2d 1264 (1980). In an effort to avoid a shutdown of J & L's Campbell Works coke plant, J & L and the United Steelworkers of America (the Union) negotiated and executed an agreement pertaining to rebuilding the coke batteries at the Campbell Works. The negotiations took place in June and July 1981, and the agreement was signed July 13, 1981. The agreement granted J & L the right to depart from the provisions of the basic collective bargaining agreement in certain matters of work practices, manning and scheduling. J & L was to be allowed to implement some of these concessions "[e]ffective as of the date that Management announces its determination to rebuild Campbell Works Coke Batteries." Other provisions of the agreement were not to take effect until the batteries were actually rebuilt.

The preface of the agreement provides:

The Management of the Company is in the process of deciding whether or not the Coke Batteries and associated facilities of the By Product Coke Department at the Campbell Plant should be reconstructed. It is recognized by the Company and the Union that a decision to rebuild the concerned facilities would result in enhanced employment opportunities for many employees, and, as these employees leave the work force, job opportunities for laid off employees and/or for unemployed residents of the Youngstown Area. While it is recognized that the final decision as to whether or not to invest the monies required to rebuild the concerned facilities rests solely with Management, the local parties, without intending any limitation on Management's rights under the terms of the Labor Agreement, hereby agree to the following in an effort to make a rebuilt Coke Making and By Product operation efficient and economical, thereby encouraging Management to invest the monies required to rebuild these facilities at the Campbell Plant.

Sixteen numbered paragraphs follow the preface. Some deal with the concessions to be implemented when J & L announced its decision to rebuild and some with those to take effect only if the coke plant is actually rebuilt. Paragraph 15 gives management the right to use outside contractors for the entire rebuilding project. Paragraph 16 states:

The provisions of this Agreement shall be effective only if Management announces its determination to rebuild Campbell Works Coke Batteries. In the event such a project is not approved, the above provisions are void and will not be referred to by either party in any current or future issue.

The basic collective bargaining agreement referred to in the preface reserved solely to J & L the decision to close or discontinue a plant permanently.

B.

The agreement was ratified by the union members at meetings on July 11 and 13. Local officials of J & L spoke with groups of workers at these meetings, urging ratification. Plaintiffs claim that the plant superintendent promised that if the Union accepted the concessions, the plant would remain open. On July 18 the board of directors of LTV Corporation, corporate parent of J & L, approved an expenditure of $151,000,000 to rebuild the Campbell Works Coke batteries. On July 22, 1981 LTV issued a press release that stated in part:

LTV ANNOUNCES PLANS FOR ADDITIONAL $315 MILLION IN STEEL CAPITAL

... The first coke oven battery scheduled for rehabilitation at Youngstown, number 8 battery, will be in operation in 22 months. Number 7 coke oven battery will be in full production in 42 months.

The press release also quoted a statement by Thomas C. Graham, head of the LTV steel group and chief executive officer of J & L:

"The decision to rebuild the two Youngstown batteries was aided by a recently signed agreement with the local union of the United Steelworkers of America," Mr. Graham said. "The agreement will maximize the effective use of manpower on the batteries following the rebuild."

The concessions triggered by J & L's announcement of its intent to rebuild the coke plants were implemented. Between July 22, 1981 and January 1983 J & L spent approximately $12,000,000 to demolish and rebuild coke battery number 8. In November 1982 J & L notified the Union that it had decided to discontinue operation of the existing Campbell Works coke batteries by December 31, 1982. Thereafter, in accordance with requirements of the collective bargaining agreement, J & L advised the Union that it intended to close the Campbell Works coke plant permanently. Coke production ceased on February 4, 1983.

The Union filed a grievance, but pursued it through only three of the five steps provided for in the collective bargaining agreement. The grievance charged J & L with violating the July 1981 agreement as well as certain provisions of the underlying collective bargaining agreement. As relief the grievance demanded that J & L reopen the coke plant and abide by the July agreement or, in the alternative, make each affected employee whole for wages and benefits until his date of retirement at age 65. At the third stage of the grievance proceedings the Union charged that J & L had not intended to rebuild the Campbell Works coke batteries.

II.

A.

When the Union terminated the grievance without taking it to binding arbitration, 133 former J & L Campbell Works employees filed the present action in an Ohio court. Following removal to the United States District Court for the Northern District of Ohio, the plaintiffs filed a first amended complaint which set forth the five causes of action previously referred to. In the first three causes the plaintiffs charged J & L, respectively, with fraud in the announcement of the decision to rebuild the coke plant, fraud in the execution of the announced plan to rebuild, and fraud in negotiations with the Union at other coke plants. The fourth and fifth causes alleged negligent performance of contractual duties under the July agreement and breach of that agreement. The first four causes of action were presented as pendent state law claims. The plaintiffs asserted jurisdiction under section 301 of the Labor Management Relations Act, (1947, as amended, 29 U.S.C. Sec. 185 (1982), with respect to the fifth cause of action. The plaintiffs did not sue the Union. However, J & L did bring the Union in as a third-party defendant, alleging that if the plaintiffs should be found entitled to damages, the Union would be liable for any amount by which damages were increased by the Union's breach of its duty of fair representation.

The fraud claims were based on the assertion that, despite its unequivocal statements of intent to rebuild the coke plants, J & L actually intended to do so only if it could obtain an extension from the United States Environmental Protection Agency (EPA) of deadlines for bringing the Campbell Works into compliance with Clean Air Act requirements. Union representatives were told in November 1982 that J & L planned to close the Campbell Works. This was before the EPA made a final decision. On December 29, 1982 EPA denied J & L's application for a discretionary extension and less than one month later J & L announced its abandonment of plans to rebuild the plants. The fourth cause of action merely charged J & L with failure to exercise due care to perform all aspects of the July agreement and the fifth claimed that the decision to close the coke plants permanently violated the agreement.

B.

The district court found that the plaintiffs had stated the first three causes of action as state fraud claims in an attempt to circumvent the exclusive jurisdiction of the NLRB. Referring to the guidelines set forth by the Supreme Court in San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959), the district court concluded that the conduct which the plaintiffs sought to have remedied under state law was arguably prohibited under the Labor Act as failure to bargain in good faith. This being so, the claims for relief from J & L's alleged misconduct were within the exclusive jurisdiction of the Board.

Clearly, the manifest...