Howard Johnson Co. v. Detroit Local Joint Executive Board

Mr. Justice Douglas,

dissenting.

The petitioner, Howard Johnson, in 1959 and 1960 entered into franchise agreements with P. L. Grissom, P. L. Grissom & Son, Charles T. Grissom, Ben Bibb, and the Belleville Restaurant Company (hereinafter collectively the Grissoms) under which the franchise operated a Howard Johnson Restaurant and Motor Lodge. In 1968 the Grissoms entered into collective-bargaining agreements with the respondent Union affecting both their restaurant and motel employees. On June 16, 1972, the Grissoms sold the business to Howard Johnson, the transfer of management to take place on July 34, 1972. On June 28, Howard Johnson notified the Grissoms that it would not recognize or assume their labor agreements and on July 9, 1972, the Grissoms gave notice to their employees that they would be terminated at midnight, July 23. Howard Johnson began interviewing prospective employees in early July, and when it took over the operation on July 24 it retained only nine of the Gris-soms’ employees; at least 40 were permanently replaced. The Union brought this action under § 301 of the Labor Management Relations Act, and the District Court issued an order compelling petitioner to arbitrate. The Court of Appeals affirmed, but today this Court reverses, holding that Howard Johnson was not a successor employer. I believe that the principles of successorship laid down in John Wiley & Sons v. Livingston, 376 U. S. 543 , and NLRB v. Burns International Security Services, 406 U. S. 272 , require affirmance, and thus I dissent.

Wiley was also a § 301 suit, to compel arbitration. There the company had merged with Interscience, *266 another and smaller publisher, 40 of whose employees were represented by the union. The union contended that the merger did not affect its right to represent these employees in negotiations with Wiley, and that Wiley was bound to recognize certain rights of these employees which had been guaranteed in the collective-bargaining agreement signed by Interscience. Wiley contended that the merger terminated the collective-bargaining agreement for all purposes and refused to bargain with the union. We held that the union could compel arbitration of this dispute under the arbitration provision of the collective-bargaining agreement even though Wiley had never signed the agreement. We pointed out that the duty to arbitrate will not in every case survive a change of ownership, as when “the lack of any substantial continuity of identity in the business enterprise before and after a change would make a duty to arbitrate something imposed from without, not reasonably to be found in the particular bargaining agreement and the acts of the parties involved.” Wiley, supra, at 551 . But that was not the case in Wiley: “[T]he impressive policy considerations favoring arbitration are not wholly overborne by the fact that Wiley did not sign the contract being construed. This case cannot readily be assimilated to the category of those in which there is no contract whatever, or none which is reasonably related to the party sought to be obligated.” Id., at 550 .

It must follow a -fortiori that it is also not the case here. The contract between the Grissoms and the Union explicitly provided that successors of the Grissoms would be bound, 1 and certainly there can be no question that *267 there was a substantial continuity — indeed identity — of the business operation under Howard Johnson, the successor employer. Under its .franchise agreement Howard Johnson had substantial control over the Grissoms' operation of the business; 2 it was no stranger to the enterprise it took over. The business continued without interruption at the same location, offering the same products and services to the same public, under the same name and in the same manner, with almost the same number of employees. The only change .was Howard Johnson’s replacement of the Union members with new personnel, but as the court below pointed out, petitioner’s reliance upon that.fact is sheer “bootstrap”: “[Howard Johnson] argues that it need not arbitrate the refusal to hire Grissoms’ employees because it is not a successor. It is not a successor, because it did not hire a majority of Grissoms’ employees.” 482 F. 2d 489, 493 .

As we said in Wiley, “[i]t would derogate from .‘the federal policy of settling labor disputes by arbitration,’... if a change in the corporate structure or ownership of a business enterprise had the automatic consequence of removing a duty to arbitrate previously established . .. 376 U. S., at 549 .

NLRB v. Burns International Security Services; supra, does not require any different result. There the *268 original employer, Wackenhut, had- a contract with Lockheed to provide security services, and at the expiration of that contract Lockheed took bids on providing the service and hired Burns to replace Wackenhut. Wackenhut employees had been represented by the union, but Burns, which hired 27 Of the 42 Wackenhut guards, refused to bargain with the union or honor the collective-bargaining agreement signed by Wackenhut. We affirmed the NLRB’s order requiring Burns to bargain with the union, but concluded that Burns was not bound by the substantive provisions of the collective-bargaining agreement between the union and Wacken-hut. In distinguishing Wiley, we pointed out in Burns that unlike Wiley it did not involve a § 301 suit to compel arbitration, and thus was without the support of the national policy favoring arbitration. Burns, supra, at 286 . Moreover, .in Burns “there was no merger or sale of assets, and -there were no dealings whatsoever between Wackenhut and Burns. On the contrary, they were competitors for the same work, each bidding for the service contract at Lockheed. Burns purchased nothing from Wackenhut and became liable for none of its financial obligations.” Ibid.

All of the factors distinguishing Burns and Wiley call here for affirmance of the order to arbitrate. This is a § 301 suit, and Howard Johnson did purchase the assets from the Grissoms. As a matter of federal labor law, when Howard Johnson took over the operation that had been conducted by its franchisee, it seems clear that it also took over the duty to arbitrate under the collective-bargaining agreements which expressly bound the Gris-soms’ successors. Any other result makes nonsense of the principles laid down in Wiley. The majority, by making the number of prior employees retained by the successor the sole determinative factor, accepts petition *269 er’s bootstrap argument, The effect is to allow any new employer to determine for himself whether he will be bound, by the simple expedient of arranging for the termination of all of the prior employer’s personnel. • I cannot accept such a rule, especially when, as here, all of the other factors point so compellingly to the conclusion that petitioner is a successor employer who should be bound by the arbitration agreement.

“This Agreement shall be binding .upon the successors, assigns, purchasers, lessees or transferees of the Employer whether such succession, assignment or transfer be effected voluntarily or by operation of law or by merger or consolidation with another com *267 pany provided the establishment remains in the same line of business.” 482 F. 2d 489, 491 .

The motel • franchise agreement provided, for example, that Howard Johnson would determine and approve standards of construction, operation, and service, and would have the right at any time to enter the premises for that purpose; that prior approval would be required for equipment and supplies bearing the name “Howard Johnson”; that Howard Johnson would have the first option to purchase if the business were to be sold, and that in any event Howard Johnson must' approve any successor. See the District Court opinion, 81 L. R. R. M. 2329, 2330, and App. 50a et seq.