Truck Drivers Local Union No. 807, I.B.T. v. Regional Import & Export Trucking Co., Inc.

• Decision Date: 24 September 1991
• Docket Number: D,No. 1706,1706
• Citation: 944 F.2d 1037
• Parties: 138 L.R.R.M. (BNA) 2486, 60 USLW 2299, 120 Lab.Cas. P 10,947 TRUCK DRIVERS LOCAL UNION NO. 807, I.B.T., Plaintiff-Appellant, v. REGIONAL IMPORT & EXPORT TRUCKING CO., INC.; Regional Distribution & Warehousing Service, Inc., Newport Transportation Co., Inc.; Defendants-Appellees. ocket 91-7067.
• Court: U.S. Court of Appeals — Second Circuit

Page 1037

944 F.2d 1037

138 L.R.R.M. (BNA) 2486, 60 USLW 2299,

120 Lab.Cas. P 10,947

TRUCK DRIVERS LOCAL UNION NO. 807, I.B.T., Plaintiff-Appellant, v. REGIONAL IMPORT & EXPORT TRUCKING CO., INC.; Regional

Distribution & Warehousing Service, Inc., Newport

Transportation Co., Inc.; Defendants-Appellees.

No. 1706, Docket 91-7067.

United States Court of Appeals, Second Circuit.

Argued June 19, 1991.

Decided Sept. 24, 1991.

J. Warren Mangan (O'Connor & Mangan, Long Island City, N.Y., of counsel) for plaintiff-appellant.

Michael T. McGrath (Putney, Twombly, Hall & Hirson, New York City, of counsel) for defendants-appellees.

Before MESKILL, KEARSE and McLAUGHLIN, Circuit Judges.

McLAUGHLIN, Circuit Judge:

Truck Drivers Local Union No. 807 ("Local 807" or "Union") seeks to arbitrate certain alleged breaches of contract by three related corporations: Regional Import & Export Trucking, Regional Distribution & Warehousing Service (collectively "Regional"), and Regional's alleged alter ego, Newport Transportation Co. ("Newport"). Were this our only concern, the inquiry would be rather simple. Our task is complicated, however, because the National Labor Relations Board ("NLRB" or "Board") has recently issued a ruling in this case, based on the same nucleus of facts, holding that the actions of Regional, Newport, and Local 807 constituted unfair labor practices in violation of Section 8 of the National Labor Relations Act ("Act"). 29 U.S.C. § 158. With the statutory issues decided by the NLRB closely intertwined Local 807 brought this action in the United States District Court for the Eastern District of New York under Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, to compel Regional and Newport to arbitrate certain contractual grievances arising under the collective bargaining agreement between Local 807 and Regional ("Regional Agreement"). Local 807 promptly moved for summary judgment, which Regional opposed on the ground that the Board's decision precluded arbitration. Co-defendant Newport cross-moved for summary judgment on the ground that, because it was not a party to the Regional Agreement, it could not be bound by the arbitration clause of the Regional Agreement. In opposing Newport's cross-motion, Local 807 took the position that material issues of fact existed as to whether Newport could be bound by the Regional Agreement.

with the contractual issues in the present controversy, we proceed gingerly.

While these motions were pending, a related charge of unfair labor practices on the part of Regional and Newport and a charge against the Union for breach of its duty of fair representation were proceeding apace before the NLRB. The Board sustained the charges against Regional, Newport, and the Union, and also refused to defer the unfair representation claim pending arbitration because it found an intrinsic conflict of interest on the part of the Union. The Board's ruling was eventually enforced by the Third Circuit Court of Appeals. Because the NLRB held that deferral to arbitration was inappropriate, the district court in the present proceeding determined that the Union was collaterally estopped from demanding arbitration. The district court, accordingly, denied Local 807's motion for summary judgment and granted Newport's cross-motion for summary judgment. This appeal ensued.

BACKGROUND

Regional is in the trucking industry. This includes pick-up and transportation of freight from piers in the New York metropolitan region, as well as warehousing and distribution. Regional Import & Export opened for business in 1965, performing the pick-up and transportation services; Regional Distribution & Warehousing, a separately incorporated entity, began providing warehousing and distribution services to customers in 1974. All of these operations were consolidated in 1978, although the corporations maintained their distinct corporate identities.

Local 807 is the exclusive bargaining representative of Regional's truck drivers, platform men, checkers, warehousemen, and hi-lo operators. After the 1978 consolidation of operations, employees from Regional Distribution & Warehousing became disgruntled by what they viewed as inequities between their own pay rates and those of the employees of Regional Import & Export. In 1985, as the Local 807/Regional Import & Export collective bargaining agreement was due to expire, the Union began negotiating a single renewal contract to cover all of Regional's bargaining-unit employees and, in the process, to eliminate the alleged pay inequities. Negotiations were heated, with Regional steadfastly opposing any significant wage increases. Eventually, Regional grudgingly agreed to an across-the-board wage increase of fifty cents per hour and to several additional provisions designed to resolve the disparity between the terms and conditions of employment of the two groups of Regional employees.

Regional and Local 807 memorialized this contract in a memorandum, which contained eight substantive provisions, and specifically incorporated all the terms and conditions of employment contained in the 1982 collective bargaining agreement between Local 807 and Regional Import & Export. One of the incorporated terms was the arbitration clause, providing for arbitration of "any controversy which might arise" between the parties.

Shortly thereafter, Andrew Ferrara entered the picture. Ferrara was Regional's overseer of operations, and he asked Patrick Nastro, Regional's president, to turn over several Regional accounts to him, which he would then personally manage Pursuant to the understanding between Nastro and Ferrara, Newport entered into several agreements with Regional which provided for the lease and/or transfer of certain Regional vehicles and equipment to Newport. Regional also transferred a number of its accounts to Newport. Additionally, a significant portion of Regional's managerial staff moved over to Newport's payroll. In turn, Regional began to trim its staff, necessitating the layoff of approximately twenty-seven employees. Thus, while Regional remained a going concern, its operations, management, and equipment were significantly streamlined by the agreements with Newport.

                through an independent business entity.   Nastro eventually agreed.   Ferrara then proceeded to incorporate a new company--defendant Newport--which, like Regional, would provide various services in the trucking industry
                

Once Newport commenced operations, Local 807 demanded to be recognized as the exclusive bargaining representative of Newport's employees. Newport eventually granted recognition to Local 807, and the two entered into a collective bargaining agreement (the "Newport Agreement").

Fernando Sanches, who used to work for Regional, filed an unfair labor practice charge with the NLRB, alleging that he had been laid off because of the unlawful creation of Newport by Regional. He charged that Newport was a sham, that it was actually the alter ego of Regional and had been created solely to avoid Regional's obligations under the 1985 collective bargaining agreement. Sanches also filed a grievance with his union, Local 807, alleging that the sham transaction was a breach of the Regional Agreement. Local 807, which it will be recalled now represented the employees of both Regional and Newport, failed to accept and process Sanches' grievance, so Sanches filed another unfair labor practice charge against Local 807 for breach of its duty of fair representation. The NLRB thereafter issued an amended consolidated complaint, charging the corporations (Regional and Newport) with violating Section 8(a)(1) and (3) of the Act, 29 U.S.C. § 158(a)(1) & (3), and charging the Union (Local 807) with violating Section 8(b)(1)(A) of the Act.

Reacting to the NLRB complaint, Local 807 filed a demand for arbitration of Sanches' grievance against Regional; and Regional and Local 807 initially agreed to arbitrate, provided the grievance was "otherwise arbitrable." Regional and Local 807, in their respective answers to the NLRB unfair labor practice charges, then interposed the affirmative defense that all issues were subject to binding arbitration, and, therefore, the NLRB should defer to arbitration. As the NLRB proceeding progressed, however, Regional withdrew this affirmative defense because it believed that Local 807, representing, as it did, the employees of both Regional and Newport, had an inherent conflict of interest that made deferral to arbitration improper. The Union, however, continued to maintain that there was no conflict and that the NLRB proceedings should be deferred pending the outcome of arbitration.

Because Regional now refused to go to arbitration, Local 807 commenced the present action in the Eastern District of New York, seeking to compel Regional and Newport to arbitrate pursuant to the Regional Agreement. Local 807 then moved for summary judgment against Regional to compel arbitration. ¹ In opposing this motion, Regional argued that the ALJ assigned to the NLRB proceeding would be deciding whether deferral to arbitration was proper. Newport also cross-moved for summary judgment on the ground that, because it was neither a party to the Regional Agreement nor a successor or alter ego of Regional, it could not be bound by the provisions of the Regional Agreement.

Before the district court could rule on these motions, the ALJ issued a voluminous decision on the unfair labor practice charges. The ALJ determined that all Squarely addressing the deferral issue, the ALJ stated that deferral to arbitration was inappropriate for several reasons, including the fact that Local 807 faced a conflict "in representing the Newport employees at the same time it [sought] to replace them with the Regional unit workers." ALJ's Decision at 49. The ALJ continued that "[a] further aspect of this conflict is [Local 807's] alignment with ... Newport against [the interests] of the Regional work force...