Petition — Russom v. Sears

Supreme Court, U. 5.

FILLED

SEP 22 1977

a JR., CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1977

No. ..... 977455 "

ALFRED RUSSOM, et al.,

Petitioners,

VS.

SEARS, ROEBUCK AND CO., a Corporation, and LOCAL 610, INTER-

NATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSE:

MEN AND HELPERS OF AMERICA, and LOCAL 688, INTERNATIONAL

BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN - AND

HELPERS OF AMERICA,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

for the Eighth Circuit

DANIEL P. REARDON, JR.

411 North Seventh—Suite 1401

St. Louis, Missouri 63101

Attorney for Petitioners

Of Counsel

KENNETH V. BYRNE

411 North Seventh Street

St. Louis, Missouri 63101

St. Louis Law Printing Co.. Inc., 812 Olive eae 63101 314-231-4477

TABLE OF CONTENTS

Page

EN oo Cua cu ek Cae eK dS) pores sku bay bes ewe l

Es ckua cts GeV SC SCAR EWE SR Oas AROS bR RE WS) 2

RP COP ee Ter eRe eer Teer 2

ey er ed Pi eb edu e cceweeaaVense 3

Reasons for Granting the Writ ...............00008. 7

Ne de uh bab none de 08S Cd ORE e ede 12

EEE oye i Shaded See aOR NA AON eee eee R ene A-1

EE iin @ po 6:kk Maes He ede awd eons Cketens A-2

PE ers See ee ere a er eee A-11

I es a ON ee A-13

Me Tot a cid Minin dakova A-20

EN 6 acn cs ua dw he SeNReee be 62 seseen neds A-21

Cases Cited

John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct.

eee EF Ferree eee rerire 2,11

N.L.R.B. v. Burns In’t] Security Servs., Inc., 406 U.S. 272,

52 GAN. 1971, 3B L.E2e Gh (IS7Z ........-0.. 11

Vaca v. Sipes, 386 U.S. 171, 77 S. Ct. 903, 17 L.Ed.2d

Se ED, xc cpb Ac aus eee R Va Ree eu Rees kt ree OK 3,9

Statutes Cited

Se ee eee wi ehebeees cn ae es 2

Ns be eh nn eeadedaeseeecee sos 3

57 Minnesota Law Review 1051 .................... 11

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1977

re ios

ALFRED RUSSOM, et al.,

Petitioners,

VS.

SEARS, ROEBUCK AND CO., a Corporation, and LOCAL 610, INTER-

NATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSE-

MEN AND HELPERS OF AMERICA, and LOCAL 688, INTERNATIONAL

BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND

HELPERS OF AMERICA,

Respondents.

PETITION FOR A WRIT OF CERTICRARI

To the United States Court of Appeals

for the Eighth Circuit

Petitioners, Alfred Russom, et al., pray that a writ of cer-

tiorari be granted to review the judgment of the United States

Court of Appeals for the Eighth Circuit entered in this case on

June 29, 1977.

OPINIONS BELOW

The opinion of the Court of Appeals for the Eighth Circuit is

not reported as of this date and is reprinted in the Appendix D.

os

The Eighth Circuit's Order of July 20, 1977 denying the Pe-

tition for Rehearing is reprinted as Appendix A. The other opin-

ions below are also reprinted in the Appendix and in addition,

petitioners have also set out in the Appendix a copy of their

Petition for a Rehearing and a Statement of Errors in the opin-

ions below.

JURISDICTION

The judgment of the Court of Appeals for the Eighth Circuit

was entered on June 29, 1977. Petition for rehearing was de-

nied by order of the Eighth Circuit on July 20, 1977. This

Court has jurisdiction under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

CAN EMPLOYEES BE FOREVER DEPRIVED OF

NEGOTIATED PENSION BENEFITS AND FOREVER

DEPRIVED OF OVER ONE MILLION DOLLARS

($1,000,000.00) CONTRIBUTED BY SAID EMPLOY-

EES THROUGH THE DEVICE OF CHANGE OF COR-

PORATE FORM?

CAN A UNION SIT IDLY, NOT ONLY FAILING TO

ENFORCE THE COLLECTIVE BARGAINING

AGREEMENT AND FAILING TO ADVISE ITS MEM-

BERS, BUT ALSO ABANDONING ITS MEMBERS

AND NOT BREACH ITS DUTY OF FAIR REPRESEN-

TATION BY ITS CONDUCT?

CAN EMPLOYEES BE DENIED AND DEPRIVED OF

THE REMEDY GIVEN THEM BY THE SUPREME

COURT IN “John Wiley & Sons v. Livingston, 376 U.S.

543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) and subse-

quent cases,” BY THE REFUSAL OF THEIR UNION TO

ACT?

STATEMENT OF THE CASE

This case was brought by certain named plaintiffs as a class

action against their employer, Sears, Roebuck and Co., a cor-

poration, and against their unions, Locals 610 and 688, Inter-

national Brotherhood of Teamsters, Chauffeurs, Warehousemen

and Helpers of America; the suit was basically a “301” suit

against the employer for breach of contract and the unions for

breach of the duty of fair representation, the remedy granted to

employees by this Court in Vaca v. Sipes, 386 U.S. 171, 77 S.

Ct. 903, 17 L.Ed. 2d 842 (1967). Jurisdiction of the court was

invoked under Title 29 U.S.C. 185, et seq.; this particular case

was probably a case of first impression because it also involved

this Court’s decisions concerning co-employer or successor em-

ployer, as well as questions concerning interference with con-

tract and piercing the corporate veil. The trial court denied the

class action status and the case proceeded to trial with approxi-

mately forty-five (45) named plaintiffs.

The basic facts in this case are not seriously disputed and pe-

titioners will set forth a concise statement of the facts material

to the questions presented for review by this Court. In 1956,

Sears was having a labor problem with Local 1, International

Brotherhood of Electrical Workers over the contract which

covered employees of Sears performing service work on appli-

ances. In April, 1956, John Baumler (who had previously been

employed by Sears for approximately 16 years and who had

previously set up a company called “B Right” in 1952 which

company did 100% of its business with Sears, “B Right” hav-

ing been set up due to a strike situation in St. Louis) set up a

company called “Dependable Appliance Service”. Mr. Baum-

ler obtained space in a building, put an ad in the newspaper, in-

terviewing applicants who answered the ad and so on; about this

same time, a labor contract was secured with Local 610 of the

Teamsters although “Dependable” had no business and no em-

—_" om

ployees. (Although not directly an issue in this case, it should

be noted upon charges being filed with the NLRB in 1956, the

NLRB held that the “contract with Local 610” was void be-

cause “Dependable had no employees when it entered into such

contract” and ordered an election.) During the period from

1956 through October 1, 1974, Sears, through the “Dependable

operation” performed its “service work on appliances” in the

St. Louis area, “Dependable” having little or no other business.

The “Dependable” operation began in a building in the 1900

block of Locust (Sears parts department occupying part of the

same building); in about 1966, it was moved to the Sears ware-

house operation building at 1024 South Vandeventer in St.

Louis.

Alfred Russom and the other forty-four (44) or so petition-

ers were employed by the Dependable operation as appliance

servicemen and their employment was covered by a collective

bargaining agreement entered into between the Dependable

operation and Local 610 of the Teamsters; there had been nu-

merous contracts between 1956 and October, 1974, with the

contract in effect during that period having effective dates of

approximately May 8, 1972 to May 3, 1975. Although Sears

did not have its name on these labor contracts, did not sign the

contracts and did not have its own labor people present at the

bargaining table, the petitioners have contended throughout and

have produced substantial evidence that Sears was Dependable,

Dependable merely being a “name or shell” set up to get Sears

out of its labor problem with Local 1 of IBEW back in 1956.

The evidence produced showed that Sears trained the employees

without any cost; Sears sent the people for training at its Sears

Niles Training Center; Sears gave the people training courses

which were only available to employees of Sears; Sears accom-

panied the people on service calls; Sears provided all parts with-

out charge; Sears directed that trucks be taken home by the

people; Sears increased and decreased the work force; Sears

owned the equipment and tools used by the people; some of the

people worked in the Sears stores under direct supervision of

Sears employees; the people sold Sears’ maintenance agreements

on a commission basis; the people participated in Sears’ con-

tests; records of the production of these people were kept by

Sears on computer readouts; Sears supervisors gave out work

orders to the people on a regular basis and even put notes on his

work orders to contact a Sears employee and other abundant

evidence.

Concerning the “labor function”, there was substantial evi-

dence that Local 610 both knew and considered Sears to be the

real person behind the Local 610-Dependable contracts; this

evidence was from the testimony of business agents of Local 610

and a specific example was a “dispute over the jurisdiction of

service work” in 1970. When this dispute arose, Local 610 went

to Sears’ labor people and had the jurisdictional problem straight-

ened out with the work being awarded to Local 610.

Having provided some of the necessary background, petition-

ers will now detail the occurrences which gave rise to the litiga-

tion. In August, 1974, the people employed in the Dependable

operation were notified that this operation was going to be closed

down as of September 30, 1974; on receiving this notice, the

people, including petitioners, immediately contacted their union,

Local 610 of the Teamsters to see what their rights were under

the collective bargaining agreement which was in effect and had

over a year left prior to its expiration date and which contract

had a successor clause. There can be no dispute that Local 610

was the duly elected bargaining agent for these people at least

up to and including September 30, 1974 which is the date on

which Dependable said that it was ceasing operations.

A meeting of member: of Local 610 was held on September

9, 1974, to “discuss” ine problems due to the announcement

made by the Dependable operation. Mr. Horn, the secretary-

treasurer and chief officer of this union, testified at the trial that

— we

he did not recall this meeting. Other evidence at trial proved

that at that meeting on September 9, 1974, Mr. Horn told the

people that the Dependable-Local 610 contract was non-existent

on that date, September 9, 1974; Mr. Horn refused to take a

grievance; Mr. Horn would not discuss the successor clause and

Mr. Horn said there was nothing he was going to do for the peo-

ple, closed his briefcase and left.

Another meeting was held on September 23, 1974. Mr.

Horn remembered this meeting and testified that he did not dis-

cuss the “successor clause” with the people. He further testified

that he told the people that Local 688 of the Teamsters had

jurisdiction over them and advised the people to sign authoriza-

tion cards for Local 688. Petitioners testified that they were told

that “they had to sign authorization cards for Local 688 that

evening” if they desired to work for Sears any longer.

As the result of this, the people were transferred to Local 688

of the Teamsters and lost their seniority, lost their pension con-

tributions, lost their pension rights, lost their cost of living

clause, lost vacation benefits, lost numerous other benefits and

basically lost their livelihoods.

Petitioners specifically call the attention of this Court to the

Statement of Errors in Opinions Below on page A-11 because

petitioners believe that the lower courts have not understood the

case, but have rendered decisions while “looking the other way”

at both the evidence and the law governing this case. Petition-

ers state that “their case” has not received fair consideration

which was apparent from the first day of trial when the trial

court stated that it had never seen a case like it.

REASONS FOR GRANTING THE WRIT

This case, being a case of first impression, and more par-

ticularly the questions presented involve a very important and

basic concept of the relation between employees, their unions

and their employers. Naturally, the petitioners, employees in

this case are extremely concerned about the loss out of their

pockets of over one million dollars ($1,000,000.00) which

they personally had paid in contributions to their pension;

however, it is imperative for this Court to grant the Writ for

the further and broader reason that if this judgment is allowed

to stand, the two very important remedies of employees, first,

breach of the duty of fair representation and second, responsi-

bility of successor employers, will be virtually eliminated

which in effect means that denial of a Writ in this case will

effectively overrule conflicting decisions of this Court.. Peti-

tioners state that allowing this lower court decision to stand

will be a signal to employers and unions that the Supreme

Court is no longer committed to protecting the rights of the

innocent employees from abuse by employers and/or unions

in the area of labor-management relations.

AS TO THE FIRST QUESTION RAISED BY PETITION-

ERS, both of the lower court opinions noted that the employees

lost pension and other benefits; neither of the opinions faced the

fact that the employees also lost “the monies which they had

contributed to the pension fund for over fifteen (15) years, not

to mention interest.” In other words, through this device of

change of form, the approximately one hundred twenty (120)

employees of Dependable each lost “out-of-pocket money” in

the approximate amount of $10,000.00 or a total loss to the

120 employees of over $1,200,000.00 not to mention the interest

on this money during the years.

This Court, as well as the lower courts, has steadfastly and

consistently protected the rights of individuals from this type

idan

of action over the years and has created such legal theories as

“unjust enrichment’, “estoppel”, “piercing the corporate veil”

and other equity theories to prevent the wholesale sellout of the

rights of individuals by other third parties. The facts in this case

cry out for such relief, but the lower court opinions have ignored

the equities, relying on technicality and form. Although the

equities in the case are the case, the lower courts concerned

themselves with whether the petitioners should have gone to

the forum of the N.L.R.B: and other collateral issues instead

of meeting the real issue ‘head on. When the petitioners went

to the N.L.R.B. prior to obtaining counsel, they were advised

to get private counsel and bring suit in court.

Petitioners state to this Court that the “sole basis for the de-

cisions of the lower courts” was the single fact that Sears “did

not sign any contract between “DAS and Local 610.” In making

the decision, the Eighth Circuit recognized that “there is an

indication that DAS may have been formed because of labor

relations problems experienced by Sears” and some of the other

overpowering evidence that Dependable was merely a front for

Sears. However, neither the trial court nor the Eighth Circuit

considered the 1970 occurrence when Sears tried to give this

“appliance service work” to Local 688 of the Teamsters under

a “secret addendum”; in 1970, Local 610 knew who the real

party in interest was because they went directly to Sears labor

relations people to enforce the contract. As a result, the contract

was enforced and Local 610 had jurisdiction over the appliance

service work; in other words, Local 610 enforced the DAS-Local

610 contract against Sears back in 1970, but the lower courts

State in their opinion that the contract cannot be enforced against

Sears.

In summary, petitioners state that the lower courts were so

concerned with the form that they missed the substance; it mat-

ters little whether relief is granted on the theory of co-employer,

successor employer (incidentally, the lower courts did find Sears

—

was a successor), unjust enrichment, estoppel, piercing the cor-

porate veil or another theory. As this Court stated in Vaca v.

Sipes, supra, “the court must fashion an appropriate remedy.”

AS TO THE SECOND QUESTION RAISED BY PETI-

TIONERS, the decision of the lower ccurts in this case is an

implied overruling of Vaca v. Sipes, supra, and the majority of

the subsequent case law in the area of “breach of the duty of

fair representation”. The decision of the lower courts repre-

sents a giant step backwards which the lower courts base on

the technical questions of “unfair labor practice preempted by

the N.L.R.B.” (it is interesting to note that this argument was

raised in the Vaca case, but rejected by this Court when it

stated “The employees’ suit against the employer, however,

remains a 301 suit, and the jurisdiction of the courts is no

more destroyed by the fact that the employee, as part and par-

cel of his 301 action, finds it necessary to prove an unfair

labor practice by the union, than it is by the fact that the suit

may involve an unfair labor practice by the employer himself”) ;

“conspiracy allegations over which courts do not have juris-

diction” (Petitioners argued strenuously in the Eighth Circuit

that “the evidence of conspiracy or whatever” was presented

to show a breach of the duty of fair representation, but the

Eighth Circuit opinion disposes of the evidence on the techni-

cal ground. Certainly Local 610 would be guilty of a breach

of the duty of fair representation if “it made an under the table

deal to force the employees into Local 688”, but the Eighth

Circuit Opinion holds this is not true since a conspiracy might

be involved); “the old, outdated argument of ‘non-feasance

versus malfeasance’ as to liability for breach of the duty of

fair representation” (Petitioners argued strenuously in this

case that Local 610 had a duty of fair representation to the

employees in the negotiation, administration and enforcement

of the contract between Dependable operation and Local 610;

but the Eighth Circuit held that Local 610’s contract was not

arbitrary, discrimine*ory or in bad faith because Harland Horn

ontitan

did not recall any discussion with Local 610 members con-

cerning the successor clause. The evidence in this case was

overwhelming and basically undisputed that Local 610, dur-

ing August and September, 1974 (during this period of time,

it cannot be disputed that the Dependable operation was in

existence, the petitioners were working every day for the De-

pendable operation, the petitioners were working under the De-

pendable-Local 610 contract which was in full force and effect,

Local 610 was the exclusive bargaining representative for peti-

tioners and owed them the statutory duty of fair representation

and Sears was in existence) not only failed and refused to rep-

resent petitioners by failing to enforce the contract, by failing

to advise the petitioners, by refusing to accept grievances and

generally by abjectly failing to protect the rights of petitioners;

but also affirmatively abandoned petitioners and coerced peti-

tioners into Local 688 by threats, lies and gross misrepresenta-

tion. The courts below virtually ignored this evidence by re-

verting to the problem of preemption and by referring to the

state of facts after “discontinuation of business by DAS and

employment by Sears of the former DAS employees”; the issue

in this case was whether Local 610 fulfilled its duty of fair

representation “prior to DAS ceasing operations” by exercising

complete good faith and honesty of purpose in protecting the

rights of petitioners, protecting their very livelihoods as well

as the over $1,000,000.00 in employee contributions to the

pension fund; unfortunately for petitioners, the lower courts

missed, sidestepped and refused to decide this issue) and other

questions of form, ignoring the substance.

In summary, petitioners state that the lower courts in this

case have completely rejected Vaca AND HELD THAT

THERE IS NO SUCH THING AS A DUTY OF FAIR REP-

RESENTATION.

AS TO THE THIRD QUESTION RAISED BY PETI-

TIONERS, the decision of the lower courts in this case basi-

erewre nee

cally overrules the decisions of this Court in John Wiley &

Sons v. Livingston, 376 U.S. 543. 84 S.Ct. 909, 11 L.Ed.2d

898 (1964); N.L.R.B. v. Burns In'tl Security Servs., Inc.,

406 U.S. 272, 92 S.Ct 1571, 32 L.Ed.2d 61 (1972), and

other cases concerned with the question of successor employ-

ers. This Court stated that although a successor employer may

not be bound to all of the substantive terms of the predeces-

sor’s collective bargaining agreement, the successor is definitely

bound to the arbitration provisions. In reviewing the impact

of the successor doctrine of the Supreme Court, the writer of

the article stated that although the Supreme Court had limited

itself to committing the successor to “arbitrate under the prede-

cessor agreement” and to “bargain with the union”, this had

the practical effect of enforcing the predecessor contract since

the successor would rather negotiate than have an arbitrator

make his contract for him. 57 Minnesota Law Review 1051.

The case brought by petitioners, both as to the contract ques-

tion and the fair representation question, was based on pro-

nouncements and statements of this Court of what the national

labor policy was; for example, in Wiley, supra, this Court stated:

“employees, and the union which represents them, ordinar-

ily do not take part in negotiations leading to a change in

corporate ownership. The negotiations will ordinarily not

concern the well-being of the employees, whose advantage

or disadvantage, potentially great will inevitably be inci-

dental to the main considerations. The objectives of na-

tional labor policy, reflected in established principles of

federal law, require that the rightful prerogat've of owners

independently to rearrange their business and even elimi-

nate themselves as employers be balanced by some protec-

tion to the employees from a sudden change in the employ-

ment relationship.” (376 U.S. at 549)

The decision of the lower courts in this case, if permitted to

stand, overrules the Wiley decision because the lower court hold-

—_— io

ing is that petitioners must be denied the remedy against the suc-

cessor for the reason that the union did not request or demand

arbitration or bargaining. This Court enunciated a policy to

protect employees, such as petitioners, from potentially great

disadvantage; the remedy is thus for the employees. However,

the Eighth Circuit is holding that if the union breaches its duty

of fair representation and does not seek arbitration, does not seek

negotiation and does not bring suit, then the employees, for

whom the remedy was created, are barred from any relief. Pe-

titioners state that this Court cannot allow this type of frustra-

tion of national labor policy to exist.

In summary, petitioners state that the lower courts have used

the national labor policy of Wiley against employees for whom

the remedy was created.

CONCLUSION

By reason of the foregoing, petitioners respectfully submit that

this petition for a writ of certiorari should be granted due to this

being a case of first impression and due to the national labor

policy being frustrated and disregarded and the judgment of

the United States Court of Appeals for the Eighth Circuit be re-

versed.

DANIEL P. REARDON, JR.

411 North Seventh—Suite 1401

St. Louis, Missouri 63101

Attorney for Petitioners

OF COUNSEL:

KENNETH V. BYRNE

411 North Seventh Street

St. Louis, Missouri 63101

APPENDIX

—

APPENDIX A

United States Court of Appeals

For the Eighth Circuit

76-1702 September Term, 1976

Alfred Russon, et al.,

Appellants, Appeal from the

VS. United States Dis-

+ trict Court for the

Sears Roebuck and Company, etc., et. Eastern District of

al., Missouri

Appellees. |

The Court having considered petition for rehearing en banc

filed by counsel for appellants and, being fully advised in the

premises, it is ordered that the petition for rehearing en banc

be, and it is hereby, denied.

Considering the petition for rehearing en banc as a petition

for rehearing, it is ordered that the petition for rehearing also

be, and it is hereby, denied.

_ July 20, 1977

—_

APPENDIX B

United States Court of Appeals

For the Eighth Circuit

No. 76-1702

Alfred Russom, et al.,

Appellants,

v.

Sears, Roebuck and Co., a corpora- Appeal from the

tion, and Local 610, International United States Dis-

Brotherhood of Teamsters, Chauf- $ trict Court for the

feurs, Warehousemen and Helpers Eastern District of

of America, and Local 688, Inter- Missouri

national Brotherhood of Teamsters,

Chauffeurs, Warehousemen and

Helpers of America,

Appellees. J

Petition for Rehearing and Suggestions

for a Rehearing in Banc

Pursuant to Rules 35 and 40 of the Federal Rules of Ap-

pellate Procedure, appellants, Alfred Russom, et al., hereby

seek and pray a rehearing and suggest a rehearing in banc with

respect to the decision of the Court filed on June 29, 1977.

I

A rehearing in banc is sought and prayed because the de-

cision filed on June 29, 1977 is not in conformity with other

decisions of this circuit under Rules 35(a)(1) and for the fur-

= <

ther reason that the “question presented is of exceptional, if

not unique importance” in the sense of Rule 35(a)(2). If the

decision is not changed, this decision (a) will create a jurisdic-

tional anomally in labor-management relations law, (b) will

effectively abolish and emasculate the established doctrine of

“fair representation”, (c) will effectively abolish and emasculate

the established doctrine of “successor employer” and (d) will be

a signal to both unions and management that the courts will

not protect the helpless persons in these situations, the em-

ployees.

The cause of the infirmity in the decision is that the two

primary conclusions of the court must rest on states of the law

which are in contradiction to decisions of this circuit and de-

cisions of the Supreme Court.

Basically, the action was brought as a class action’ on behalf

of all employees of DAS-Sears and members of Local 610

against their employer and unions for wrongful breach of con-

tract and for wrongful breach of the duty of fair representation

pursuant to Section 301 of the amended National Labor Re-

lations Act, 29 U.S.C. 185. Following an “abbreviated non-

jury trial”,? the trial court found in favor of both defendants.

On appeal, this court affirmed the decision of the trial court

while “looking the other way” at both the evidence and the

law governing this case.

II

The Supreme Court in Vaca v. Sipes, 386 U.S. 171, 77 S.Ct.

903, 17 L.Ed. 2d 842 (1967), in establishing and broadening

the “fair representation theory” clearly mandated that the

remedy must be provided for an employee who suffers damage

1 The trial court denied the class action which was also affirmed.

2 The trial court severely limited testimony which was also af-

firmed.

— So

by actions of his employer and who is abandoned by his union.

In the decision, this court was faced with clear, cogent and un-

disputed evidence of capitulation and abandonment by defend-

ant Local 610, but somehow arrived at the erroneous conclusion

that this total abandonment was not a breach of the duty of fair

representation.

The Court cited an Eighth Circuit opinion in Emmanuel v.

Omaha Carpenters District Council, 535 F. 2d 420 (8th Cir.

1976). Appellants respectfully submit that the language used

by this circuit in that opinion is in direct conflict with the de-

cision in the instant case. In the Emmanuel decision, this Court

stated that the union’s duty of fair representation is a statutory

one, requiring the union to serve the interests of all the mem-

bers without hostility or discrimination both in the conduct of

collective bargaining and in the enforcement of the resulting

agreement. Going further concerning the possible waiving of

provisions of a collective bargaining agreement, this court stated

that on the face of it, such an agreement would lack good faith

and honesty of purpose.

This court, in the case of Minnis v. Intern. U., United Auto.,

Aerospace, etc., 531 F. 2d 850 (8th Cir. 1975), stated that the

“utter failure by the unions to make even a minimal attempt

to investigate or process his grievance” would support an “in-

ference of bad faith and arbitrary and capricious conduct”, stat-

ing that a union must act with “complete good faith and honesty

of purpose”. This language again is in direct conflict with the

decision in the instant case and ironically, this court was willing

to insure that one employee received fair representation in Min-

nis while not being willing to apply that same duty in the in-

stant case where over one hundred twenty employees lost their

livelihoods.

This court, in the case of Butler v. Local 823, Int'l Brother-

hood of Teamsters, 514 F. 2d 442 (8th Cir. 1975), stated that

the duty of fair representation definitely included the duty to

—

“insist that the employer adhere to the contract” and further

stated that a breach of the duty could be found in the fact that

the “union acquiesced in an irrational interpretation.” This

language again is in direct conflict with the decision in the in-

stant case where this court had to hold that the union’s acquies-

cence and abandonment did not constitute a breach of the duty

of fair representation. Almost unbelievably, the court in the

instant case stated that “substantial evidence supporting the find-

ing of no breach of the duty of fair representation” consisted of

“an officer of Local 610 testifying that he did not recall any

discussion concerning the successor clause, that he did not re-

fuse to accept grievances, that he believed Local 688 had juris-

diction over the service employees after discontinuance of busi-

ness by DAS and employment by Sears of the former DAS em-

ployees” (Page 5 of Decision). First of all, there is a serious

error in the decision since the above statement and footnote 5

assume that Horn made this statement and decision “after the

employees accepted employment with Sears”; footnote 5 states

“A majority of the DAS employees signed Local 688 authoriza-

tion cards after they accepted employment with Sears”. This is

a misstatement since the undisputed evidence was that “the au-

thorization cards were signed at a meeting on September 23,

1974, at a time when the DAS-Local 610 agreement was still

in full force and effect and at a time when DAS was still in busi-

ness.” The other “evidence” which the decision referred to ig-

nored the undisputed evidence from Mr. Horn’s own mouth that

he did not “recall a meeting on September 9, 1974” which is

the meeting at which the employees testified that they asked

about the successor clause and at which time they stated they

desired to file grievances. It ignores the undisputed testimony of

Mr. Gamache, a Local 688 officer, that he did not feel that

“Local 688 had jurisdiction” and the stipulation filed in Court

prior to trial admitting that Local 610 had jurisdiction. It fur-

ther ignores the undisputed testimony of Mr. Vaughn, the busi-

ness representative of Local 610, who stated that “he recalled

that the people raised the question of the ‘successor’ clause at the

—_

meetings” and further stated that “he may have told ‘Toll and

others’ that they should not have signed the Local 688 authoriza-

tion cards while the Local 610-DAS contract was still in effect.”

Although Vaughn was the paid business agent of the appellants,

he did rot advise them because “Horn was there.”

This court, in the cases of Richardson v. Communications

Workers, 443 F. 2d 974 (8th Cir. 1971) and Bond v. Local

Un. 823, Int. Bro. of T., C., W. & H. of America, 521 F. 2d

(8th Cir. 1975), stated that the duty of fair representation was

in the nature of a “fiduciary duty” and required “complete good

faith, honesty of purpose and the avoidance of any semblance of

arbitrary conduct.” These decisions are in direct conflict with

the instant decision in that a “fiduciary” definitely could not

capitulate or abandon his trust and the action of Local 610 in

abandoning the Local 610-DAS contract without negotiation,

request to bargain, request for arbitration or without even filing

a grievance is definitely not only arbitrary, but apricious action

and inaction. This set of facts in the instant case definitely

represents the “utter failure” spoken of by this circuit in prior

decisions.

In summary, the decision of June 29, 1977 must be reexam-

inec and changed to comply with decisions of the Supreme Court

and with prior decisions of this circuit on the issue of fair repre-

sentation.

iil

An even more disturbing part of the decision concerns the

question of successor employer and the implications created by

the finding of the status of successor. In the instant case, this

court found that there was definitely the relation of successor;

although appellants raised the issues of co-employer, alter ego

and so on, there was no argument about the successor relation-

ship of defendant Sears.

—~ oe

The Supreme Court, in John Wiley & Sons v. Livingston,

376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964), and

N.L.R.B. v. Burns In'tl Security Servs., Inc., 406 U.S. 272, 92

S.Ct. 1571, 32 L.Ed.2d 61 (19/2), clearly established that

although a successor employer may not be bound to all the

substantive terms of the predecessor's collective bargaining

agreement, said employer is definitely bound to the predeces-

sor’s collective bargaining agreement's arbitration provisions.

In subsequent cases, this doctrine has not been changed or

modified to any great extent and there can be no doubt that

Wiley was held even though a non-signatory; the instant deci-

sion is directly in conflict with the Wiley case when the opinion

states on p. 8 that “Most significantly, the record reflects that

Sears did not sign any contract.” In the Wiley case, there was

no suggestion of any ulterior motives while in the instant case,

this court found that there “was an indication that DAS was

formed due to labor relations problems; Mr. Baumler, Owner

of DAS, was a 16 year employee of Sears; substantially all of

DAS business was with Sears” plus much other evidence set

out in appellants’ brief, but not mentioned in the dec‘sion.

As the Supreme Court stated in Wiley, the national labor

policy encompasses the following:

“employees, and the union which represents them, ordi-

narily do not take part in negotiations leading to a change

in corporate ownership. The negotiations will ordinarily

not concern the well-being of the employees, whose ad-

vantage or disadvantage, potentially great, will inevitably

be incidental to the main considerations. The objectives

of national labor policy, reflected in established principles

of federal law, require that the rightful prerogative of

owners independently to rearrange their business and even

eliminate themselves as employers be balanced by some

protection to the employees from a sudden change in the

employment relationship.”

yy?

In journal article stressing the importance of this doctrine and

examining it, 57 Minnesota Law Review 105]—the writer

reviewed the cases and stated that in his examination, he had

found that although the Supreme Court had limited itself to

committing the successor employer to “arbitrate under the pred-

ecessor agreement” and to “bargain with the union”, this had

the practical effect of enforcing the predecessor contract since

the successor was obligated to arbitrate and was obligated to

bargain.

With this precedent, the instant decision has nevertheless

been rendered which states in effect that the employer, Sears

had no responsibility and has no responsibility which is a frus-

tration of the national labor policy as set out in Wiley.

What is the real effect of this decision? The real effect is

to state the following theory for a situation of this type. First,

if the union sues for enforcement of the arbitration provision

of the predecessor agreement, for an order to bargain or for

other relief, the courts will give a remedy under Wiley, Burns

and other cases which hold that a successor is bound whether

he signed the contract or not.

However, in the second instance, if the union does nothing

and even if the union abandons its member-employees, the

court will not give the remedy to the employees under Wiley,

Burns and other cases. Appellants respectfully submit that

this “abandonment by the union” should not and cannot be

allowed by this court or any court to bar a remedy. Although

Wiley and Burns involved actions by unions for arbitration

and for order to bargain, the Supreme Court made it very

clear in the quoted section that the whole purpose of the “ob-

jectives of national labor policy” was to protect the “Well-

being of the employees” and to afford “some protection to the

employees” in cases involving successor employers. This deci-

sion cannot stand as this would effectively deny the employees

the protection afforded while giving it to the union.

— >

For Local 610 to capitulate and abandon the employees,

appellants, at a time when the DAS-Local 610 contract was

timely and in existence, knowing or charged with knowledge

of the Wiley and Burns decisions, Local 610 is not only guilty

of breach of duty of fair representation by using arbitrary and

capricious methods, but is also guilty of the “utter failure to

make even a minimal attempt” and is guilty of “waiving pro-

visions of collective bargaining agreement which on the face

of it, lacks good faith and honesty of purpose.” When you add

to this the “questionable motives”, involving two locals of

same international as well as the substantial monies to be

saved by the union, then any court must consider the question

of capriciousness and punitive damages.

IV

The decision of this court further must be reexamined since

this court applied the “limited scope of review” to its decision

even though the appellants made it clear that the scope of re-

view must necessarily have been broader in the instant case due

to the trial court’s severe limitation on “live testimony” (trial

court did not want testimony unless it was not in the depositions),

due to trial court’s severe limitation on number of witnesses and

due to trial court’s not having benefit of trial transcript because

trial court refused request of appellants to obtain transcript prior

to submission of written after-trial briefs.

Although a question concerning scope of review was asked

at oral argument and appellees had to admit that scope might

be broader due to above circumstances, the decision states that

“limited review” was used.

Vv

The decision of this court must be changed due to “errors in

the decision”.

—_<

The first serious “error” is very material to the whole de-

cision; the decision in discussing “the signing of cards au-

thorizing Local 688” does not consider the fact that the cards

were signed both when the DAS-610 contract was still in exist-

ence and when DAS was still in business.

The second serious error states that 688 was the “bargaining

agent of service employees of Sears”; this is not true as Sears had

no service employees.

In footnote 4, Local 688 had authorization cards prior to time

DAS ended its business.

VI

For the above reasons, as well as other points raised in the

briefs, it is respectfully urged and submitted that the court re-

consider its June 29, 1977 decision, and/or that rehearing in

banc be ordered. Appellants respectfully urge and submit this

action is necessary in this case because the decision as it now

stands is in direct conflict not only with prior decisions of this

circuit, but also in conflict with decisions of the Supreme Court.

Respectfully submitted,

/s/ KENNETH VY. BYRNE

Attorney for Appellants, Petitioners

411 North 7th—Suite 1401

314-421-0390

St. Louis, Missouri 63101

— A-ll —

APPENDIX C

Statement of Errors in Eighth Circuit Opinion

Petitioners point out the following errors in the Opinion for

the reason that petitioners feel these “serious errors” resulted in

the erroneous decision:

1) page 2 of Opinion—A majority of the former DAS em-

ployees signed cards authorizing representation by Local 688,

the bargaining agent of service employees of Sears”.

This statement is erroneous in that the evidence was that the

former DAS employees were told they had to sign the Local 688

authorization cards at a time, September 23, 1974 when they

were still DAS employees; further, Local 688 was not a bargain-

ing agent of service employees of Sears because Sears did not

have any service employees until they: hired the DAS em-

ployees.

2) page 5 of Opinion—Footnote 5 states “A majority of the

DAS employees signed Local 688 authorization cards after they

accepted employment with Sears.”

This statement is erroneous in that the evidence definitely

proved that “the Local 688 authorization cards” were signed

under duress and were signed on September 23, 1974 when the

people were still employed by DAS.

3) page 7 of Opinion—*“DAS was in total control of the

wages, hours, working conditions and fringe benefits of its em-

ployees. DAS hired and fired its own employees and maintained

its own personnel records.”

This statement is erroneous in that the evidence clearly showed

that DAS hired and fired at the request of Sears, worked over-

— A-12 —

time at the request of Seavs; additional examples of control

abound in the evidence.

4) page 8 of Opinion—“Most significantly, the record re-

flects that Sears did not sign any contract between DAS and

Local 610 and that Sears did not participate in any labor ne-

gotiations which preceded formation of such a contract.”

This statement is erroneous in that the evidence clearly showed

that although Sears labor people did not sit at the table, Sears

definitely did participate in labor negotiations and even griev-

ances.

— A-13 —

APPENDIX D

United States Court of Appeals

For the Eighth Circuit

No. 76-1702

Alfred Russom, et ai., 7

Appellants,

Sears, Roebuck and Co., a Corpora-| Appeal from the

tion, and Local 610, International United States Dis-

Brotherhood of Teamsters, Chauf- ¢ trict Court for the

feurs, Warehousemen and Helpers Eastern District of

of America, and Local 688, Inter- Missouri

national Brotherhood of Teamsters,

Chauffeurs, Warehousemen and

Helpers of America,

Appellees.

Submitted: May 17, 1977

Filed: June 29, 1977

Before Stephenson and Webster, Circuit Judges, and Benson,*

District Judge. |

Stephenson, Circuit Judge.

This appeal involves claims initiated by Alfred Russom and

other individuals against Teamsters Local 610, Teamsters Local

688 and Sears, Roebuck and Co. pursuant to section 301 of

the Labor Management Relations Act, 29 U.S.C. § 185(a). In

* The Honorable Paul Benson, Chief Judge, United States Dis-

trict Court for the District of North Dakota, sitting by designation.

— <' yo

general, the complaint alleges that Local 610 breached its duty

of fair representation, that Sears breached ‘4 collective bargain-

ing agreement, and that all three defendants engaged in a con-

spiracy to deprive union members of pension and seniority

benefits. The district court,’ sitting without a jury, entered judg-

ment in favor of the defendants, and we affirm.

The facts are detailed comprehensively in the district court’s

opinion and need only be briefly summarized. See Russom y.

Sears, Roebuck and Co., 415 F. Supp. 792 (E.D. Mo. 1976).

In 1956 Dependable Appliance Service, Inc. (DAS) was formed

for the purpose of providing service for home appliances. DAS

performed substantially all of its business for Sears. In 1974 the

president and owner of DAS, John Baumler, decided to retire

and cease business operation of DAS. Baumler’s retirement

was motivated by reasons attributable to his death and age.

Sears and Local 610, the representative of the DAS employees,

were informed of his decision. Sears subsequently determined

to establish its own appliance service department and offered

employment to the DAS employees. Sears purchased some of

the DAS assets.

When DAS terminated its business operation, the employees

recived severance pay. Substantially all of the employees then

accepted employment with Sears. A majority of the former

DAS employees signed cards authorizing representation by Local

688, the bargaining agent of service employees of Sears.

It is undisputed that the DAS employees lost important bene-

fits through their termination with DAS and subsequent employ-

ment with Sears. The DAS-Local 610 collective bargaining

agreement had required that DAS contribute to the Teamsters’

pension fund, but the employees’ rights in the fund would not

have vested until 1978. When DAS ceased operation the em-

! The Honorable John F. Nangle, United States District Judge

for the Eastern District of Missouri.

——

— A-15 —

ployees lost their pension rights. After employment with Sears,

the former DAS employees entered into negotiations through

Local 688 toward a new collective bargaining agreement, and a

contract was ultimately approved by a majority of the employ-

ees on February 13, 1975. This agreement, however, did not

provide for contribution by Sears to the Teamsters’ pension

fund,? and the former DAS employees were not given seniority

status from the date of their employment with DAS.

Alfred Russom and other former DAS employees filed their

claims under section 301 on the basis of these lost employment

benefits. They maintain that Sears was bound to the DAS-Local

610 collective bargaining agreement because it allegedly con-

trolled the operation of DAS as a co-employer, that Sears

breached the agreement, that Local 610 refused to enforce their

rights under the contract, and that Local 688 assisted Sears and

Local 610 in depriving the former DAS employees of their pen-

sion and seniority benefits.

The district court, sitting without a jury, found that Sears

and DAS wee not co-employers but that Sears was a successor

employer to DAS. The trial court concluded that Sears was

not bound by the provisions of the DAS-Local 610 collective

bargaining agreement. The district court further found that

Local 610 may have acted erroneously in failing to demand

bargaining or arbitration with Sears but that Local 610 did not

breach its duty of fair representation by acting arbitrarily or in

bad faith. The Court also concluded that it did not have juris-

diction over the conspiracy allegation.* This appeal followed.

2 Sears had never agreed to make contributions to the pension

fund.

% Courts are not vested with jurisdiction to review claims of con-

spiracy to violate either a labor contract or an individual’s rights

under the Labor Management Relations Act. See Abrams v. Car-

rier Corp., 434 F.2d 1234, 1253 (2d Cir. 1970), cert. denied, 401

U.S. 1009 (1971). Cf. Woody v. Sterling Aluminum Products, Inc.,

365 F.2d 448, 456 (8th Cir. 1966), cert. denied, 386 US. 957

(1967). In any event, we are satisfied there is insufficient evidence

of a conspiracy.

— A-16 —

Appellants contend the trial court's finding, that Local 610

did not breach its duty of fair representation, is clearly errone-

ous. More specifically, appellants emphasize that the DAS-

Local 610 collective bargaining agreement contained a suc-

cessor clause which bound Sears to the terms of the contract and

that Loca! 610 would not accept grievances on behalf of DAS

employees seeking to invoke the successor clause.*

A breach of the duty of fair representation occurs “only

when a union’s conduct toward a member of the collective bar-

gaining unit is arbitrary, discriminatory, or in bad faith.” Vaca

v. Sipes, 386 U.S. 171, 190 (1967). See Emmanuel v. Omaha

Carpenters District Council, 535 F.2d 420, 423 (8th Cir.

1976); Richardson v. Communications Workers, 443 F.2d 974,

978-85 (8th Cir. 1971). Moreover, our scope of review in

this appeal is limited. A trial court’s findings are clearly errone-

ous “only when the reviewing court on the entire evidence is left

with the definite and firm conviction that a mistake has been

committed.” St. Louis Typographical Union No. 8 v. Herald

Co., 402 F.2d 553, 557 (8th Cir. 1968).

The DAS employees lost valuable pension and seniority

rights when their employmerit with DAS was terminated and

they accepted employment with Sears under a new collective bar-

gaining agreement. Some evidence in the record also suggests

that DAS employees wanted to assert their rights under the

DAS-Local 610 contract against Sears under the successor

clause in the agreement. For example, Thomas Roach, a for-

mer DAS employee, testified that he attempted to file a grievance

4 Appellants also claim that Local 688 a ted in the depri-

vation of their pension and seniority benefits. inquiry in this

section 301 suit, however, necessarily focuses upon the conduct of

Local 610 and Sears. Local 688 was not the bargaining representa-

tive for appellants when DAS ended its business.

om ft? —

but that the Local 610 representative. Harland Horn, would not

accept any grievances.

The record reveals substantial evidence which supports the

trial court's finding that Local 610'’s conduct in failing to de-

mand collective bargaining with Sears when DAS went out of

business and in failing to rely upon the successor clause was not

arbitrary, discriminatory or in bad faith. Harland Horn, secre-

tary-treasurer of Local 610, testified that he did not recall any

discussion with Local 610 members concerning the successor

clause and that he did not refuse to accept grievances. Horn

also stated that he believed Local 688 had jurisdiction over the

service employees after discontinuation of business by DAS and

employment by Sears of the former DAS employees.”

Furthermore, Sears was not a signatory to the DAS-Local 610

collective bargaining agreement. A successor employer is not

bound by the substantive provisions of a collective bargaining

agreement negotiated by its predecessor but not agreed to or

assumed by the successor. See NLRB v. Burns International

Security Services, Inc., 406 U.S. 273, 281-91 (1972). Cf. John

Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546-51 (1964).

The record supports the trial court’s finding that Sears was not

bound to the provisions of the contract entered into by DAS

and Local 610. See part II infra. Even assuming Sears were to

some extent bound under the collective bargaining agreement,

Local 610s failure to euiorce the contract would not constitute

ipso facto a breach of the duty of fair representation. Mere er-

rors in judgment are insufficient to support a claim of breach of

the duty of fair representation. See Hines v. Anchor Motor

Freight, Inc., 424 U.S. 554, 570-71 (1976).

* A majority of the DAS employees signed Local 688 authoriza-

tion cards after they accepted employment with Sears.

% The district court concluded that Local 610s failure to request

arbitration with Sears arguably constituted an unfair labor practice

— A-18 —

Il

Appellants also contend the trial court’s finding, that Sears

was not bound under the DAS-Local 610 contract, is clearly

erroneous. Emphasizing the interrelationship between the busi-

ness of Sears and DAS, appellants assert that Sears is liable under

the agreement as a co-employer. According to appellants, all

DAS functions were effectively controlled by Sears.?

Unquestionably, the business relationship between Sears and

DAS was close and to some extent interconnected. For ex-

ample, there is an indication that DAS may have been formed

because of labor relations problems experienced by Sears. Mr.

Baumler, the owner of DAS, had been employed previously by

Sears for over 16 years. Substantially all of the DAS business

was conducted with Sears. The initial employees of DAS were

trained by Sears, and additional training was provided by Sears

without charge. On service calls DAS employees wore Sears

patches on their uniforms and drove trucks bearing a Sears logo.

DAS employees received a 10% discount at Sears and par-

ticipated in numerous contests for Sears employees. Most re-

cently, DAS and Sears operated under a cost-plus arrangement;

but that such a claim was preempted by the National Labor Relations

Act, 29 U.S.C. §§ 157 and 158. We agree. Local 610 may have

refused to bargain collectively with an employer, which is violative of

section 8(b)(3), but the proper forum to litigate such a claim is a

proceeding before the National Labor Relations Board.

* The doctrine of co-employer status was developed by the Na-

tional Labor Relations Board to determine the existence of an em-

ployer-employee relationship. Sears asserted at trial that the juris-

diction of the NLRB preempts any determination of co-employer

Status in a section 301 suit. The district court stated that “jurisdic-

tion may exist to determine whether or not Sears and DAS were co-

employers” and proceeded to determine that there was no co-

employer relationship. 415 F. Supp. at 796. Because Sears was not

a Signatory to the DAS-Local 610 contract, we are concerned about

the viability of the section 301 claim brought in the instant case.

See Baker v. Fleet Maintenance, Inc., 409 F.2d 551, 554 (7th Cir.

1969). Nonetheless, in light of the close relationship between Sears

and DAS, we believe the district court did not act improperly in de-

ciding whether a co-employer relationship existed.

—_ ipl) —

Sears would reimburse DAS for its costs and ensure a profit

margin. Both the management and employees of Sears and DAS

maintained an interrelated working relationship.

The record contains substantial evidence, however, which

supports the district court's finding that Sears and DAS were

not co-employers. Neither company owned any stock in the

other. There were not any interlocking officers or directors. DAS

was in total control of the wages, hours, working conditions and

fringe benefits of its employees. DAS hired and fired its owe

employees and maintained its own personal personnel records.

DAS paid its own liability and workmen’s compensation insur-

ance and owned and operated its own trucks and equipment. Al-

though Sears may have made some suggestions concerning op-

eration of DAS, the DAS management made its own decisions.

Because DAS serviced appliances for Sears’ customers, coopera-

tion between the two companies was obviously necessary. Most

significantly, the record reflects that Sears did not sign any con-

tract between DAS and Local 610 and that Sears did not par-

ticipate in any labor negotiations which preceded formation of

such a contract. The evidence supports the trial court's finding

that Sears was not bound under the DAS-Local 610 collective

bargaining agreement as a co-employer.*

Affirmed.

A true copy.

Attest:

Clerk, U. S. Court of Appeals, Eighth Circuit

‘ Appellants also contend the trial court committed certain pro-

ee. errors including the denial of their motion for a class action,

denial of their request for a transcript prior to submission of Dayo

trial briefs, and restriction on the scope of testimony (particularly by

limiting testimony to matters not covered in depositions). If not en-

tirely proper, the trial court’s rulings on these matters either were not

an abuse of its discretion or were not inconsistent with substantial

justice.

— A-20 —

APPENDIX E

United States District Court

Eastern District of Missouri

Eastern Division

Alfred Russom, et al., )

Plaintiffs,

ais: | No. 75-524 C (4)

Sears, Roebuck & Company, et al.,

Defendants. |

Order

(Filed June 25, 1976)

Pursuant to the memorandum filed this date,

IT IS HEREBY ORDERED, ADJUDGED, and DECREED

that defendants shall have judgment against plaintiffs at plaintiffs’

costs.

/s/ John P. Nangle

United States District Judge

Dated: June 25, 1976.

ee

APPENDIX F

United States District Court

Eastern District of Missouri

Eastern Division

Alfred Russom, et al., .

Plaintiffs,

- | No. 75-524 C (4)

Sears, Roebuck & Company, et al.,

Defendants.

Memorandum

(Filed June 25, 1976).

Plaintiffs brought suit. pursuant to § 301 of the Labor Man-

agement Relations Act, 29 U.S.C. § 185, alleging that defendant

Sears, Roebuck & Company breached a collective bargaining

agreement; that defendant Local 610 refused to accept griev-

ances; and that all three defendants conspired to deprive plain-

tiffs of certain rights.

The case was tried before the Court without a jury. The Court

having considered the pleadings. the testimony of the witnesses.

the documents in evidence, the stipulations of the parties, and

being otherwise fully advised in the premises, hereby makes the

following findings of fact and conclusions of law as required by

Rule 52, Federal Rules of Civil Procedure:

Findings of Fact

1. Plaintiffs are all presently service employees of defendant

Sears, Roebuck & Company. Prior to October 1, 1974 plain-

— A-22 —

tiffs were all employees of Dependable Appliance Service, Inc.

[DAS].

2. Defendant Sears, Roebuck & Company is a corporation

engaged in a retail sales business which includes in part the sale

and service of home appliances.

3. Defendant Local 688, International Brotherhood of

Teamsters, Chauffeurs, Warehousemen and Helpers of America

is a labor organization within the meaning of the Labor Man-

agement Relations Act, 29 U.S.C. § 151 ef seq. and is the ex-

clusive bargaining agent of service employees of Sears, Roebuck

& Company.

4. Defendant Local 610, International Brotherhood of Team-

sters, Chauffeurs, Warehousemen and Helpers of America is a

labor organization within the meaning of the Labor Manage-

ment Relations Act, 29 U.S.C. § 151 ef seq. and was the ex-

clusive bargaining agent of the employees of DAS.

5. In 1956 DAS was formed for the purpose of providing

service work for existing companies. DAS was organized before

any service work was secured. Throughout its existence, DAS

did substantially all of its business with Sears, Roebuck & Com-

pany. Sears trained DAS’s initial workforce and from time to

time throughout DAS's existence, its employees received addi-

tional training from Sears. There was no charge to DAS for

this training.

6. Originally there was an hourly billing rate in existence be-

tween DAS and Sears. This changed, however, to a cost-plus

system in which all cost items were passed on to Sears.

7. DAS employees were not paid by a check from Sears.

Credible evidence established that Sears did not participate in

labor negotiations between DAS and Local 610, nor did Sears

ever sign any contract entered into by Local 610 and DAS.

The evidence fails to establish that any employee of Sears was

a

— A-23 —

an officer or director of DAS or that any employee of DAS was

an officer or director of Sears. Sears did not own stock in DAS,

nor did DAS own stock in Sears. DAS maintained its employee

records, which were never shown to Sears. DAS was in charge

of the wages, hours and fringe benefits of its employees. DAS

provided its employees liability and workmen’s compensation

insurance. DAS had control over the hiring and firing of its

employees.

8. DAS employees did receive a 10% discount at Sears and

in addition, were included in certain employee contests. DAS

employees, in response to service calls, went to the homes of

persons who had Sears appliances in need of repair. DAS em-

ployees greeted customers with “Sears Calling” and, if the cus-

tomers were not home, left a Sears “Not-Home” tag.

9. DAS employees wore a Sears “Authorized Service” patch

on their uniforms. DAS trucks bore a Sears Logo and slogan

and were painted in Sears “fleet colors”. The trucks also bore

the name of DAS.

10. In late 1970, Sears desired to hire two service employees

itself, to be assigned to in-house repairs. An agreement was

reached permitting Sears to hire the two employees, who were

represented by Local 688 and were covered by a supplemental

addendum to the collective bargaining agreement between Local

688 and Sears. After the two men were hired and the collective

bargaining agreement was supplemented, in early 1971, DAS

employees objected to Local 688 representing any service or

repair men. After the President of the Joint Council of Team-

sters No. 13 was contacted, it was determined that rightful

jurisdiction belonged to Local 610. Accordingly, Sears agreed

to terminate the employment of the two individuals. These two

individuals were subsequently hired by DAS. The addendum,

covering service employees, however, remained in effect.

11. On September 9, 1974 a meeting was held at which it

was announced that DAS would be going out of business. The

| aii il aia eal

—*

decision was reached solely by John O. Baumler, the president

of DAS, because of Mr. Baumler’s age and health. It was indi-

cated that Sears would offer employment to the DAS employees.

There is some evidence that the successor clause in the DAS-

Local 610 collective bargaining agreement was discussed, with

the union indicating that the addendum clause in the Sears-Local

688 agreement precluded application of the successor clause in

the DAS-Local 610 agreement. There was also evidence that

some DAS employees, specifically plaintiff Roach, tried to file

a grievance. Local 610, however, indicated that it could accept

no grievances.

12. At a subsequent meeting on September 23, 1974, repre-

sentatives from Local 688 were present. Local 688 informed the

DAS employees that they would have to join Local 688 if they

wanted to be represented by a union while employed at Sears.

A majority of the DAS employees signed Local 688 authoriza-

tion cards.

13. On October 1, 1974, Sears offered employment to sub-

stantially all of the ex-DAS employees. These offers were ac-

cepted nearly unanimously.

14. Sears purchased some, but not all, of DAS’s assets.

15. When DAS went out of business, the employees received

severance checks. None of the plaintiffs have offered to return

the same to Sears.

16. While DAS was in existence, and in accordance with the

DAS-Local 610 collective bargaining agreement, DAS made

payments on behalf of its employees to the Teamsters Pension

Fund. The DAS employees’ rights in said fund were not to vest

until 1978. Accordingly, when DAS terminated its business, the

DAS employees, and plaintiffs, lost their rights in said pension.

17. Local 688 and Sears had a number of bargaining sessions

concerning the newly hired DAS employees from October 3,

—i- ~~

1974 through February 13, 1975. The proposed contract was

presented to the service employees (ex-DAS employees) at a

meeting on February 13, 1975. The entire proposed contract

was read to the employees. A majority voted by secret ballot to

accept the contract, although there was testimony that some em-

ployees felt pressured into accepting the proposed contract. The

contract, which was approved, did not provide for continued

contributions by Sears to the Teamsters Pension Funds, (Sears

has never contributed to such a pension fund), nor were the ex-

DAS employees given seniority status from the date of their

employment with DAS for benefit purposes.

Conclusions of Law

This Court has serious reservations concerning its alleged

jurisdiction herein. Plaintiffs are proceeding on the basis of

§ 301 of the Labor Management Relations Act, 29 U.S.C. § 185.

In view of these concerns, the Court will analyze its jurisdiction

in relation to each of the theories on which plaintiffs have pro-

ceeded herein.

As to plaintiffs’ allegations of conspiracy, the Court concludes

the jurisdiction is clearly lacking. Abrams v. Carrier Corpora-

tion, 434 F.2d 1234 (2nd Cir. 1970), cert. denied, 401 U.S.

1009 (1971); Woody v. Sterling Aluminum Products, Incorpo-

rated, 365 F.2d 448, 456 (8th Cir. 1966), cert. denied, 386

U.S. 957 (1967). |

The Court, however concludes that jurisdiction may exist to

determine whether or not Sears and DAS were co-employees,

the theory upon which plaintiffs have proceeded. Cf., Baker v.

Fleet Maintenance, Incorporated, 409 F.2d 551 (7th Cir.

1969). But see, Morris, The Developing Labor Law 767

(1971) (“The Board has the duty of determining whether the

relationship between certain parties constitutes an employer-em-

ployee relationship . . .”); Motor Coach Employees v. Lock-

—_Y

ridge, 403 U.S. 274 (§ 301 jurisdiction exists as to claimed

breaches of the duty of fair representation and other breaches

grounded in the collective bargaining agreement itself). It is

plaintiffs’ contention that Sears, as a co-employer, should be

bound by the substantive terms of the DAS-Local 610 collective

bargaining agreement once DAS ceased doing business. The

evidence establishes, however, that Sears can not be considered

a co-employer with DAS.

The doctrine of co-employer originated with the National

Labor Relations Board in the context of determining whether

the Board would exercise jurisdiction over the particular dis-

pute. See Radio & Television Broadcast Technicians Local

Union 1264, International Brotherhood of Electrical Workers,

AFL-CIO v. Broadcast Service of Mobile, Inc., 380 U.S. 255,

256 (1965); Sakrete of Northern California, Inc. v. National

Labor Relations Board, 332 F.2d 902 (9th Cir. 1964), cert.

denied, 379 U.S. 961 (1965). The criteria employed to deter-

mine if two employers are in fact to be considered as co-em-

ployers include the following:

1. Interrelation of operations;

2. Centralized control of labor relations;

3. Common management; and

4. Common ownership or financial control.

No one of these factors has been held to be controlling

but the Board opinions have stressed the first three factors,

which go to show ‘operation integration’, particularly cen-

tralized control of labor relations. Sakrete of Northern

California, supra at 905, fn.4.

See also Radio & Television Broadcast Technicians, supra at

256; Local No. 627, International Union of Operating Engin-

eers, AFL-CIO v. National Labor Relations Board, 518 F.2d

1040 (D.C.App. 1975), app. filed, 44 U.S.L.W. 3502 (1976);

—

—_<

Cowles Communicatiens, Inc., 170 N.L.R.B. 1956 (1968);

National Labor Relations Board v. Greyhound Corporation,

368 F.2d 778 (Sth Cir. 1966); Miami Newspaper Pressmen's

Local No. 46 v. National Labor Relations Board, 322 F.2d 405

(D.C.App. 1963); Bachman Machine Company v. National

Labor Relations Board, 266 F.2d 599 (8th Cir. 1959).

The evidence was clear that there was no centralized control

of labor relations. DAS handled its own labor relations, entered

into negotiations and concluded its own agreements, without

the involvement of Sears. Furthermore there was no common

ownership or financial control. See Hychem Constructors, Inc.,

169 N.L.R.B. 274 (1968); Space Services International Cor-

poration, 156 N.L.R.B. 1227 (1966); Westinghouse Electric

Corporation, 163 N.L.R.B. 914 (1967) (all indicating that the

existence of a cost-plus pricing arrangement does not indicate a

co-employer status). The Court further concludes that the evi-

dence fails to establish common management and interrelation of

operations. The fact that DAS employees wore Sears patches,

greeted customers with “Sears Calling” and left Sears “Not-

Home” tags is not persuasive. The customers had called Sears

seeking repairs for their appliances. These customers could

not possibly know of the arrangements between Sears and DAS,

nor would the customers be likely to open their doors to DAS

servicemen after calling Sears. Accordingly, the Court con-

cludes that Sears and DAS were not co-employers of plaintiffs

herein.

Plaintiffs have failed to argue that Sears was a successor

employer. In John Wiley & Sons v. Livingston, 376 U.S. 542

(1964), the Court held that under certain circumstances a suc-

cessor employer might be required to arbitrate with the union

under the agreement entered into by the employer's predecessor.

Crucial to the determination of whether the duty to arbitrate

survives is whether there is “any substantial continuity of iden-

tity in the business enterprise before and after a change . .

— A-28 —

Id. at 551. See also National Labor Relations Board v. Wayne

Convalescent Center, Inc., 465 F.2d 1039 (6th Cir. 1972)

(“. . . the hiring of a large portion of the predecessor's em-

ployees is persuasive in finding a successor status”.) National

Labor Relations Board v. Interstate 65 Corporation, 453 F.2d

269 (6th Cir. 1971) (court “. . . must look to all the circum-

stances accompanying the transfer to determine whether the

nature of the employing industry has undergone such a basic

change that the collective bargaining unit . . . is no longer

appropriate”). The factors to be considered in reaching such

a determination include:

(1) whether there has been a substantial continuity of the

same business operations;

(2) whether the new employer uses the same plant;

(3) whether he has the same or substantially the same work

force;

(4) whether the same jobs exist under the same working

conditions;

(5) whether he employs the same supervisors:

(6) whether he uses the same machinery, equipment, and

methods of production; and

(7) whether he manufactures the same product or offers

the same services. Morrtris, supra at 368-69.

The evidence establishes that Sears was in fact a successor em-

ployer. When viewed from the employees’ position, General

Teamsters, Chauffeurs and Helpers, Local Union No. 249 vy.

Bill's Trucking, Inc., 493 F.2d 956 (3rd Cir. 1974), there was

substantial continuity of operations. The services rendered, the

work force, and the equipment used remained substantially the

same. While there were necessarily some changes, the Court

concludes that these were insufficient to overcome the conclusion

that Sears was a successor employer.

— A-29 —

Nonetheless, this status does not mean that Sears was bound

to the substantive provisions of the collective bargaining agree-

ment entered into by DAS and Local 610. The duty imposed

upon the successor employer is the duty to bargain or to arbitrate

with the existing union. National Labor Relations Board v.

Burns International Security Services, Inc., 406 U.S. 272

(1972); John Wiley & Sons, Inc., supra.

In John Wiley & Sons, Inc., supra, the Court noted that “a

union might abandon its right to arbitration [with the suc-

cessor] by failing to make its claims known . . .”. Accordingly,

the Court concludes that Sears can not be held at fault for fail-

ing to arbitrate with Local 610, absent a demand for the same

by the union. The evidence established herein indicates that

Local 610 did not request that Sears arbitrate under the DAS-

Local 610 agreement. The Court must therefore conclude

that the right to insist on arbitration has been abandoned. Plain-

tiffs, as members of the union, can not insist that this action

be taken. See Brown v. Sterling Aluminum Products Corpora-

tion, 365 F.2d 651 (8th Cir. 1966), cert. denied, 386 U.S. 957

(1967), holding that

. whenever the right sought to be enforced is not

uniquely personal to the individual but is a right possessed

by the bargaining unit as a whole, only the Union as the

sole representative of that unit would normally have the

standing to enforce the right. Thus the individual would

have no standing to compel discussion of broad collective

bargaining principles such as the re-negotiation of a new

contract. . . Id. at 657.

Were plaintiffs to urge that they have suffered damages as

a result of Local 610's failure to request arbitration, thus “aban-

doning” them to Local 688, the Court would be compelled to

conclude that § 301 jurisdiction would be lacking. In Amalga-

mated Association of Street, Electric Railway & Motor Coach

— A-30 —

Employees of America v. Lockridge, 403 U.S. 274 (1971); the

Court noted that jurisdiction existed under § 301 to determine

alleged “union interference with rights conferred on individual

employees by the employer's promises in the collective-bargain-

ing agreement, where it is proved that such interference consti-

tuted a breach of the duty of fair representation.” /d. at 298-99.

The Court further noted that a breach of the duty of fair repre-

sentation must be supported by proof of arbitrary or bad-faith

conduct, evidence of fraud, deceitful action or dishonest con-

duct.

In Gainey v. Brotherhood of Railway and Steamship Clerks,

Freight Handlers, Express and Station Employees, 313 F.2d 318

(3rd Cir. 1963), the court categorized unfair representation

suits as follows:

(1) racial discrimination . . .; (2) involving the arbi-

trary sacrifice of a group of employees’ rights in favor of

another stronger or more politically favored group, often

in direct violation of established union practice . . . and

(3) discriminatory measures taken against an individual

which sacrificed his rights for hostile and improper reasons.

Id. at 324.

Clearly, the facts presented in this suit fail to fall within one of

these categories. Evidence of bad faith, deceit, dishonesty,

fraud or arbitrary conduct is completely lacking herein. At best

it could be said that Local 610 acted erroneously in concluding

that there was nothing to arbitrate once DAS closed its business.

See Hines v. Anchor Motor Freight, Inc., 44 U.S.L.W. 4299

(March 3, 1976) holding that “mere errors in judgment” are

insufficient to support a claim of breach of the duty of fair repre-

sentation. Obviously Local 688 could not have breached its

duty of fair representation, since it was not plaintiffs’ bargaining

representative when DAS ended its business.

In Lockridge, supra, the Court noted that

— A-31 —

The legislative determination that courts are fully competent

to resolve labor relations disputes through focusing on the

terms of a collective-bargaining agreement cannot be said

to sweep within it the same conclusion with regard to the

terms of union-employee contracts that are said to be im-

plied in law. That is why the principle of Smith v. Evening

News [371 U.S. 195 (1962)] is applicable only to those

disputes that are governed by the terms of the collective-

bargaining agreement itself.

The Court's conclusion therein was that where the conduct

involved was arguably protected by § 7, or prohibited by § 8,

of the National Labor Relations Act, 29 U.S.C. $$ 157 and

158, the doctrine of pre-emption precluded § 301 jurisdiction.

Section 7 provides that

Employees shall have the right to self-organization, to form,

join, or assist labor organizations, to bargain collectively

through representatives of their own choosing, and to en-

gage in other concerted activities for the purpose of collec-

tive bargaining or other mutual aid or protection . . .

Section 8(b) of the Act provides, in part, that

It shall be an unfair labor practice for a labor organization

or its agents—

(1) to restrain or coerce (A) employees in the exercise of

the rights guaranteed in Section 157 [section 7 above] of

this title . .

(3) to refuse to bargain collectively with an employer, pro-

vided it is the representative of his employees . . .

Local 610’s failure to request arbitration with Sears in accord-

ance with John Wiley & Sons, supra, was arguably a refusal to

— A-32 —

bargain collectively with an employer. Plaintiffs’ claims that

Local 610 abandoned them in favor of Local 688 are arguably

an attempt to coerce. Accordingly, the Court lacks jurisdiction

over such ciaims.

The Court has concluded that while jurisdiction may con-

ceivably exist over plaintiffs’ claims that DAS and Sears were

co-employers, the evidence presented failed to establish the ex-

istence of a co-employer status. The Court has further con-

cluded that jurisdiction is lacking to determine the allegations of

conspiracy. Although not argued by plaintiffs, the Court has

considered the question of Sears’ status as a successor employer.

While finding that the facts established that Sears was a successor

employer, the Court has concluded that Local 610’s failure to

assert the right to arbitration waived that right. The Court has

further concluded that plaintiffs, as union members, can not

compel this arbitration, a request which plaintiffs have not made

herein, and that jurisdiction is lacking to determine whether

plaintiffs have suffered any damages as a result of Local 610’s

failure to request arbitration. Accordingly, judgment will be

entered for defendants.

/s/ JOHN F. NANGLE

United States District Judge

Dated: June 25, 1976.