Southward v. South Cent. Ready Mix Supply Corp.

• Decision Date: 12 October 1993
• Docket Number: No. 92-4062,92-4062
• Citation: 7 F.3d 487
• Parties: 144 L.R.R.M. (BNA) 2464, 62 USLW 2296, 126 Lab.Cas. P 10,882 Jack SOUTHWARD, et al., Plaintiffs-Appellees, v. SOUTH CENTRAL READY MIX SUPPLY CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 487

7 F.3d 487

144 L.R.R.M. (BNA) 2464, 62 USLW 2296,

126 Lab.Cas. P 10,882

Jack SOUTHWARD, et al., Plaintiffs-Appellees, v.SOUTH CENTRAL READY MIX SUPPLY CORPORATION, Defendant-Appellant.

No. 92-4062.

United States Court of Appeals Sixth Circuit.

Argued Sept. 20, 1993.

Decided Oct. 12, 1993.

David W. Douglas(argued and briefed), Fisher & Douglas, Columbus, OH, for plaintiff-appellee.

Mark E. Lutz(argued and briefed), Denlinger, Rosenthal & Greenberg, Cincinnati, OH, for defendant-appellant.

Before: MILBURN and NELSON, Circuit Judges; and GILMORE, Senior District Judge.^*

MILBURN, Circuit Judge.

In this interlocutory appeal which we granted under 28 U.S.C. § 1292(b), defendant appeals the district court's denial of its motion for reconsideration of defendant's second motion for summary judgment in an action that plaintiffs brought to enforce the terms of a collective bargaining agreement between plaintiffs' union and their former employer.The district court asserted subject matter jurisdiction under § 301 of the Labor Management Relations Act,29 U.S.C. § 185.On appeal, the issue is whether a purchaser of assets who substantially continues the business operations of the seller, but who is not an alter ego of the seller and has not expressly or impliedly assumed the seller's collective bargaining agreement, may nevertheless be bound by the terms of that agreement.For the reasons that follow, we vacate and remand.

I.

A.

Until December 1985, all plaintiffs in this action were employed as readymix concrete truck drivers by Arrow Concrete Company, a division of Ocotillo Plastics, Inc.("Arrow").Arrow employed plaintiffs at its McKinley Avenue and Port Columbus plants in Columbus, Ohio.Plaintiffs were represented for the purpose of collective bargaining by Teamsters Union, LocalNo. 284("Teamsters").On July 1, 1985, Arrow and the Teamsters entered into a collective bargaining agreement ("CBA"), which was to be effective through June 30, 1988.The CBA covered all drivers of readymix concrete trucks and excluded all other Arrow employees.The CBA contained a successorship clause, which provided that the CBA "shall be binding not only upon [Arrow] and the [Teamsters], but also upon any individual, partnership, or corporation who shall succeed [Arrow] or the [Teamsters] in carrying on the business."J.A. 16.

On December 12, 1985, Arrow informed the Teamsters that Arrow was selling certain assets to defendant, South Central Ready Mix Supply Corp.("South Central").On December 17, 1985, the Teamsters learned that all Arrow employees would be terminated, that South Central had not agreed to be bound by the terms and conditions of the CBA, that wages, benefits, and working conditions would be substantially altered by South Central, and that former Arrow employees would have to complete applications for consideration for employment with South Central.

On December 19, 1985, South Central purchased from Arrow the readymix plants located at McKinley Avenue and Port Columbus, together with twenty-eight trucks and other operating equipment.South Central did not purchase the land on which the plants were located, the accounts receivable, fifteen mixer trucks, and five dump trucks.After its sale of assets, Arrow continued to exist through 1986.It kept land on which the McKinley and Port Columbus plants were located and leased this land to South Central.Arrow also kept a smaller readymix plant located in Reynoldsburg, Ohio.South Central's purchase of assets from Arrow was an arms-length transaction for good and valuable consideration.At the time of the sale of assets, Arrow and South Central had no common directors, officers, or shareholders, were incorporated in different states, and had different principal places of business.

In connection with the sale of assets, Arrow president Cyrus W. Spurlino terminated all of Arrow's salaried and hourly employees effective December 21, 1985.South Central invited the terminated Arrow employees to submit applications for consideration of employment by South Central.Before the sale of assets, Arrow employed thirty-one readymix truck drivers represented by the Teamsters.On December 23, 1985, South Central hired twelve readymix truck drivers previously employed by Arrow.In hiring these employees, South Central did not observe the seniority provisions of the CBA between Arrow and Teamsters and used different terms and conditions than those contained in the CBA.

None of the remaining drivers formerly employed by Arrow were ever hired by South Central.The readymix concrete business in Columbus, Ohio, is a seasonal industry.Employment levels traditionally declined as the winter season approached and then increased with the return of warm weather.Reflecting the seasonal nature of employment, the CBA between Arrow and the Teamsters provided for a voluntary layoff procedure for the period December 1 to March 31.The twelve readymix drivers hired by South Central in December 1985 constituted its initial work force for the winter period.On December 20, 1985, South Central advised unsuccessful job applicants that South Central would be adding an additional eight to twenty drivers during the next three months as the weather improved.South Central did not hire its full complement of twenty-eight drivers until March 11, 1986, but none of the additional drivers hired had been employed by Arrow.South Central granted the Teamsters recognition as the bargaining representative for its drivers at its McKinley Avenue and Port Columbus plants on December 23, 1985.South Central and the Teamsters met to negotiate the terms of a new CBA on six occasions between January 10, 1986, and April 28, 1986, but they did not reach an agreement.On April 10, 1986, the Teamsters began a strike against South Central.All of the former Arrow drivers hired by South Central ceased working in connection with the strike.Between April 10, 1986, and April 22, 1986, South Central hired ten more drivers, none of whom were former Arrow employees.

Immediately before the December 1985 sale of assets, Arrow employed ten salaried employees.Following the sale of assets, nine of the salaried employees were hired by South Central.However, four of these employees were terminated on February 11, 1986.Immediately before the December 1985 sale of assets, Arrow employed eight hourly employees not represented by the Teamsters.Following the sale of assets, all eight were hired by South Central.However, two of these employees were terminated on January 15, 1986.As of April 1, 1986, South Central's Columbus payroll register listed forty active employees.Twenty-one of these employees were former Arrow employees.

Arrow's principal product was readymix concrete.South Central's principal product was also readymix concrete.South Central assumed Arrow's supply contracts with Dugan and Meyers and Complete General Construction Company.South Central also supplied concrete to other customers formerly supplied by Arrow.South Central, however, negotiated its own terms and applied its own credit requirements in deciding whether to serve these customers.

B.

On December 18, 1985, the Teamsters filed a grievance against Arrow alleging that its sale of assets to South Central was in violation of the CBA.On December 20, 1985, the Teamsters also filed a complaint against Arrow in federal district court seeking a temporary restraining order and preliminary injunction to block the sale to South Central and maintain the status quo pending arbitration.On December 27, 1985, the request for a temporary restraining order was withdrawn on the ground of mootness in that the transfer of assets which the Teamsters sought to restrain had in fact already occurred.On March 10, 1986, a hearing was held before an arbitrator on the grievance filed by the Teamsters against Arrow.The arbitrator issued his award denying the Teamsters' grievance pertaining to the sale of assets.The arbitrator found that the CBA did not impose upon Arrow a duty to require South Central to assume the CBA in the event of a sale of assets.

On January 21, 1986, the Teamsters filed an unfair labor practice charge alleging that South Central had violated the National Labor Relations Act("Act") by refusing to honor the terms of the CBA between Teamsters and Arrow.On February 20, 1986, the NLRB regional director notified the Teamsters that the NLRB's investigation had failed to establish a violation of the Act.The regional director determined that South Central had no obligation to honor the terms of the CBA between the Teamsters and Arrow.The Teamsters appealed to the general counsel of the NLRB but the general counsel denied the Teamsters' appeal.The general counsel found that South Central clearly enunciated its terms and conditions of employment prior to hiring any of the predecessor's drivers and concluded that South Central was not legally bound to honor the previous CBA.

On April 9, 1986, the Teamsters filed a second unfair labor practice charge alleging that South Central unlawfully refused to hire certain former Arrow drivers because of their membership in the union.The NLRB regional director refused to issue a complaint against South Central, finding no evidence that South Central's hiring decisions were motivated by unlawful considerations.The Teamsters appealed to the general counsel of the NLRB, but the general counsel denied the Teamsters' appeal.The general counsel concluded that South Central did not discriminate against union members in hiring its employees.

On May 30, 1986, South Central filed a petition with the NLRB for an election to determine whether its employees wished to be represented by the Teamsters.The NLRB held a hearing on this petition.At that hearing, the Teamsters stipulated that the contract between Arrow and the Teamsters was not a bar to an election.On August 8, 1986, the NLRB held an election, and...