Appendix — National Steel Corp. v. White

Supreme Court brief1991

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In the DEFIGE OF THE CLERK

Supreme Court of the United States

October Term, 1991 )

NATIONAL STEEL CORPORATION,

Petitioner,

VS.

Arthur Dale White, James Anderson, James H. Baker, Thomas

A. Balon, Richard S. Barber, Larry G. Bell, David S. Bickler,

Robert L. Billick, Edward Bittner, Todd A. Blair, Richard

Blancato, Robert A. Bray, Jr., Harry V. Brown, Jr., James

H. Browning, James William Bullock, Charles A. Clark, Edward

Dhayer, Ralph Anthony DiBacco, William R. Duncan, Jr.,

Domenic F. Frio, Dorsey R. Garrett, William F. Garrison,

James A. Gracie, III, Thomas M. Grishkevich, David

R. Harbin, James W. Hazlett, Rena Hess, Phillip E. Johnson,

Jerry G. Jones, Robert L. Jones, Joseph P. Karas, Bartley

Robert Kirkbride, Lloyd A. Klages, David J. Kondik, Frank

W. Kruger, Jr., Charles L. Lacey, Timothy C. Lawson, Ernest

H. McCormick, Joseph W. Mayernick, Boley Dale Mermon,

Patricia Mlodzik, Charles D. Murray, Dale E. Poole, Charles

Prince, Larry C. Riggle, William B. Riggs, Robert J. Ryan, Jr.,

John S. Sciance, Kenneth M. Seiple, John R. Selmon, Jr..

Dennis D. Shirer, Ronald L. Spring, Robert L. Sutton, Frederick

C. Tate, Stephen F. Tucker, Hoy L. Van Horn, Frederick

R. Welshans, Charles F. West, Donald L. White, John

W. Cominsky, Walter F. Mrozek, Dominic A. Tedeschi, Jr.,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI TO THE

United STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI

Cart H. HELLERSTEDT, JR. Three Gateway Center

(Counsel of Record) 15th Floor East

Cart N. FRANKOVITCH Pittsburgh, PA 15222

JOHN A. McCreary, Jr. (412) 392-2300

VOLK, FRANKOVITCH, ANETAKIS,

Counsel for Petitioner

RECHT, ROBERTSON & HELLERSTEDT

APPENDIX TABLE OF CONTENTS

Page

APPENDIX A

Opinion of the United States District

Court for the Northern District of

West Virginia, August 30, 1989............. la

APPENDIX B

Order of the United States District

Court for the Northern District of

West Virginia, February 12, 1990 ........... 70a

APPENDIX C

Opinion of the United States Court of

Appeals for the Fourth Circuit,

ED Sie c & aad cok edbseueueenecenes 83a

Appendix A

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT

OF WEST VIRGINIA

ARTHUR DALE WHITE, ET AL.

NATIONAL STEEL CORPORATION

CIVIL NO.

83-0059-W

Filed: August 30, 1989

Henry C. Berns, William P. Bresnahan, Stanley J. Wolow-

ski and Rothman, Gordon, Foreman and Goudine, P.A.,

of Pittsburgh, Pennsylvania, for Plaintiffs.

Carl N. Frankovitch, Carl H. Hellerstedt, Jr., John A.

McCreary, Jr. and Volk, Frankovitch, Anetakis, Recht,

Robertson & Hellerstedt, of Pittsburgh, Pennsylvania, for

Defendant.

Kaufman, Senior District Judge.*

Plaintiffs are sixty-two former employees of the Weir-

ton Division of National Steel Corporation (“‘National’’)

who have brought suit against National for breach of con-

tract, fraud, and intentional infliction of emotional dis-

tress.! Each employee claims that he was offered the oppor-

tunity by National to move from a union position to a

non-union management position, exempt under the Fair

*Frank A. Kaufman, Senior U.S. District Judge for the District of

Maryland, sitting by designation.

'On January 11, 1984, after the initiation of this suit, National sold

substantially all of its assets in the Weirton plant to the employee-

owned Weirton Steel Corporation. The implications of that sale are

discussed infra.

Labor Standards Act,? and accepted the promotion only

after National representatives made certain express or

implied promises. Plaintiffs contend they were each told

that in the event of a management layoff or in the event

one of them could not handle the management position, or

did not like it, that employee could return to his prior

hourly or nonexempt position. In addition, plaintiffs allege

that each of them was promised that management layoffs

would be based on an employee’s company date seniority

(i.e., his date of hire) as applied company-wide, rather than

upon the “exempt” seniority date (i.e., the date of promo-

tion to the management position).

At various times in 1982, each plaintiff was laid off

based upon his management seniority date, and no plain-

tiff was permitted to return to his formerly-held union

position. Plaintiffs assert that had they been permitted to

return they would not have been laid off from the union

positions based upon their company date seniority. Aiter-

natively, they state that their layoffs would have been for

shorter periods of time than occurred after their layoffs

from exempt positions.

In addition to their breach of contract claims, plain-

tiffs assert that National’s actions add up to fraudulent

misrepresentations, and/or concealments designed to

induce employees to accept management positions, and

that, at the least, National committed a constructive fraud

when it failed to notify plaintiffs that it was negotiating in

1980 with the bargaining units to prohibit the transfer of

foremen and other employees promoted to management

positions to their former union positions on the occasion

of layoffs from management positions.

229 U.S.C. §§201-19.

Plaintiffs have filed a partial motion for summary

judgment with regard to liability in connection with their

breach of contract and fraud claims. Defendants have also

filed a full motion for summary judgment. Both parties

also filed supplemental motions for summary judgment

relating to certain plaintiffs who were unintentionally

omitted from certain counts in the complaint. This Court

held several hearings with counsel—in Baltimore, Pitts-

burgh, and over the telephone—during which it requested

and subsequently received extensive supplemental brief-

ing. This opinion finalizes and clarifies this Court’s tenta-

tive holdings and findings during those hearings.

The extensive allegations of the Second Amended

Complaint, most of which are wide-ranging and detailed,

are set forth in thirteen separate counts, each involving a

different set of plaintiffs and distinct claims. The first four

counts allege various breach of contract claims with

respect to different groups of plaintiffs. In Count One cer-

tain plaintiffs assert:

70. In order to induce each of the aforesaid Plaintiffs

to accept Defendant’s offer to leave his hourly position

and become employed as a salaried employee, Defen-

dant, through its authorized agents, servants, or

employees, made the following express and/or implied

promises to each of the aforesaid Plaintiffs:

a. Future layoffs, terminations, and recalls spe-

cifically affecting each Plaintiff and pertaining to

reduction and/or increase in the Defendant's work

force would be determined upon the presently

*The first hearing was held in Baltimore on July 5, 1988. References

to that transcript will hereafter be noted as “Tr.1.” A telephone confer-

ence was held the following day, July 6, 1988. (Tr. 2”). Another hearing

was held in Pittsburgh, Pa. on August 12, 1988 (“‘Tr. 3”), and telephone

conferences were held on August 19, 24, 26, and 31, 1988. (“Tr.4-7”).

existing seniority rights acknowledged by Plaintiffs

and Defendants, including “ccompany-date senior-

ity,” which date was agreed upon as the date such

Piaintiff commenced his initial hourly, rather than

subsequent salaried employment with the

Defendant;

b. Defendant would effectuate, apply, enforce,

and maintain its promise to each plaintiff that his

“company date seniority” would be utilized as com-

pany-wide seniority; rather than departmental or

job seniority;

c. Each Plaintiff would also have the option of

returning to an hourly position in the event of

future reductions in the Defendant’s salaried work

force based upon company date and company-wide

seniority;

d. Defendant would ensure that each Plaintiff's

acceptance of its offer of a salaried position would

not result in any loss of company-wide seniority or

otherwise jeopardize such plaintiff's continued com-

pany-wide employment with Defendant,

e. Each plaintiff would be laid off, terminated,

and/or recalled in accordance with his seniority on a

company date and compai.y-wide seniority basis;

f. Defendant would deal fairly and act in good

faith regarding all aspects of Plaintiffs employment,

g. Defendant would continue to employ Plain-

tiffs until mandatory retirement age unless Defen-

dant had specific, just, and lawful cause to terminate

Plaintiffs.

The actions giving rise to the alleged breaches are

listed in Count One at paragraph 73:

73. On or about August 1, 1980, and thereafter

Defendant breached its promise to Plaintiffs by

unilaterally:

a. Amending each Plaintiff's existing seniority

rights:

b. Reducing each Plaintiff's company date and

company-wide seniority to salary date and salaried

exempt seniority;

c. Failing to effectuate, apply, enforce, and

maintain each Plaintiff's ““company-date seniority”

as Company-wide seniority;

d. Rescinding each Plaintiff's right of option to

return to an hourly position in the event of reduc-

tion in Defendant’s salaried work force:

e. Jeopardizing each Plaintiff's continued com-

pany-wide employment;

f. Rescinding each Plaintiff's right to be laid off.

terminated, and/or recalled in accordance with

seniority On a company date and company-wide

seniority basis;

g. Acting unfairly and in bad faith regarding

aspects of each Plaintiffs employment, including

but not limited to failing to provide various Plain-

tiffs reasonable prior or subsequent notice and

opportunity to return to an hourly position;

h. Rescinding each Plaintiff's right to continued

employment until retirement by reason of Defen-

66,99

dant’s aforementioned acts and conduct in “a

through “g.”

Count One does not refer to any rights or obligations

stemming from any collective bargaining agreement

(“CBA”). However, as discussed infra, plaintiffs allege that

their right to return to the hourly work force was obtained

as an express or implied promise from National when each

Count One plaintiff accepted a management position.

In Count Two, certain plaintiffs essentially reassert the

same type of claims alleged in Count One by other plain-

tiffs, except that Count Two does not state allegations that

National promised the Count Two plaintiffs that they had

an option to return to an hourly position.

Count Three restates the Count One allegations

regarding promises made to the Count Three plaintiffs,

including the promise of a return option to the nonexempt

salaried ranks.

Count Four reasserts essentially the allegations in

Count One regarding the Count Four plaintiffs, and also

asserts that National promised that hourly employees

would not replace any Count Four plaintiff while any such

plaintiff was laid off. There is no allegation in Count Four

of a promise to return a Count Four plaintiff to the nonex-

empt salaried ranks in the event of a management layoff,

since no Count Four plaintiff was ever employed as nonex-

empt personnel.

Count Five alleges fraudulent misrepresentations by

National to most but not all of the plaintiffs. Count Five

plaintiffs assert that National agents told them that they

could always return to the bargaining units when, in fact,

National’s policy at the time of such statements was that

plaintiffs had no right under any circumstances to return to

the bargaining unit.

The Count Six plaintiffs also allege fraud on the part

of National for its alleged failure to disclose that National’s

layoff policy did not list company time as the seniority

determinant for management layoffs.

The plaintiffs in Counts Seven and Eight allege con-

structive fraud, specifically that National allegedly failed to

notify these plaintiffs that it intended to negotiate a provi-

sion in the CBAs which would prohibit plaintiffs from

returning to the bargaining units in the event of lavoffs.

Count Nine alleges a breach of National’s alleged

promise that all management layoffs would be governed by

company time.

Count Ten realleges the breach of contract claims in

Counts One through Nine as independent torts.

Count Eleven alleges the tort of Outrageous conduct

and intentional, wanton infliction of harm.

Count Twelve alleges a claim of intentional infliction

of emotional distress.

Count Thirteen alleges a claim for violation of a sub-

stantial public policy of West Virginia.

In this opinion, this Court addresses each of the legal

issues present in this case in the context of the summary

judgment motions filed by the parties and the teachings of

Anderson vy. Liberty Lobby, 477 U.S. 242 (1986) and Celo-

tex Corp. v. Catrett, 477 U.S. 317 (1986). A summary of

the legal holdings and the disposition of the claims by each

plaintiff in each count are set forth in an Order of even

date with this opinion.

CONTRACT CLAIMS

National raises two affirmative defenses against plain-

tiffs’ contract claims—that is, the claims stated in Counts

1-4 of the Second Amended Complaint. First, National

asserts that certain claims require interpretation of existing

CBAs and therefore are preempted by federal labor law.

Second, National contends that the West Virginia statute

of frauds bars the enforcement of the contractual rights

asserted by plaintiffs in those four counts.‘ As to the first

such contention, National, if its prevails in that connec-

tion, is entitled to summary judgment with respect to all

preempted claims because plaintiffs asserting any such

claims in this case did not institute this case before the

running of the applicable six months’ limitations period.*

Preemption under Federal Labor Law

National argues that a number of the counts in the

Second Amended Complaint which assert the existence of

employment contracts rely in fact upon the right of plain-

tiffs to return to the bargaining units and exercise full

seniority rights in those units. National maintains that res-

olution of those claims will require an interpretation and

application of the terms of the CBAs relating to the units to

which each plaintiff sought—or would have sought—to

return, since the ultimate source of any right to return to a

unit is a CBA. Because plaintiffs’ claims are so deeply

‘Under West Virginia conflict of laws principles, “[t}he law of the

state in which it was made and to be performed governs a contract's

construction when it is involved in litigation in this state’s courts.”

Michigan National Bank v. Mattingly, 212 S.E.2d 754, 756 (W. Va.

1975). This case was filed in the Circuit Court of Hancock County, West

Virginia on April 29, 1983, and was removed by National to the U.S.

District Court for the Northern District of West Virginia on May 23,

1983, pursuant to 28 U.S.C. §1441(c). Defendant filed a Motion to

Dismiss on May 31, 1983. The complaint was amended in 1984, both

parties conducted discovery in 1985 and 1986, and plaintiff filed a

second amended complaint in 1987.

Although a number of parties are citizens of states other than West

Virginia, there is no dispute that the alleged contracts were entered into

and allegedly breached in West Virginia, whose law therefore governs

the contract claims. See generally Klaxon Co. v. Stentor Electric Manu-

facturing Co., Inc., 313 U.S. 487 (1941).

‘See the discussion infra at pp. 32-33.

intertwined with the CBAs, National contends that any

contract or tort claim brought under state law which

asserts a right to return to a collective bargaining unit is

preempted by federal labor law.*®

29 U.S.C. §185(a), better known as section 301 of the

Labor-Management Relations Act (“LMRA”), provides in

relevant part:

Suits for violation of contracts between an employer

and a labor organization representing employees in an

industry affecting commerce as defined in this chapter,

or between any such labor organizations, may be

brought in any district court of the United States hav-

ing jurisdiction of the parties, without respect of the

amount in controversy or without regard to the citi-

zenship of the parties.

The Supreme Court has noted that “[s]tate law does

not exist as an independent source of private rights to

enforce collective bargaining contracts,” quoting Avco

Corp. v. Machinists, 376 F.2d 337, 340 (6th Cir. 1967),

aff'd, 390 U.S. 557 (1968), and has concluded that when

“(t]he heart of the [state law] complaint [is] a. . . clause in

the collective bargaining agreement,” the complaint arises

under federal law. 390 U.S. at 558. Further, the Court

emphasized that “Section 301 governs claims founded

*The plaintiffs alleging contract breaches appear to divide into three

groups: (1) former members of the plant and maintenance workers unit

(“P&M unit”) (41 plaintiffs); (2) former members of the salaried-nonex-

empt workers unit (“SNE unit”) (16 plaintiffs); and (3) employees who

were hired directly into management without having been promoted

from either the P&N [sic] or SNE bargaining units (2 plaintiffs).

Apparently, the P&M workers had been represented by the Inde-

pendent Steelworkers Union (“ISU”’) since the late 1940's. In Septem-

ber of 1978, that union was also certified as the representative for the

SNE workers. Members of the SNE unit were first covered by a CBA

when the ISU negotiated an agreement effective August 30, 1979.

10a

directly on rights created by collective-bargaining agree-

ments, and also claims ‘substantially dependent on analy-

sis of a collective-bargaining agreement.’” Caterpillar, Inc.

v. Williams, 482 U.S. 386, 394 (1987), quoting Electrical

Workers v. Hechler, 481 U.S. 851, 859 n.3 (1987).

In Caterpillar, the employees claimed that oral

promises “created ‘a total employment agreement wholly

independent of the collective bargaining agreement per-

taining to hourly employees.’” 482 U.S. at 389 (quoting

the complaint). Justice Brennan wrote that: “Section 301

says nothing about the content or validity of individual

employment contracts,” and concluded that “a plaintiff

covered by a collective-bargaining agreement is permitted

to assert legal rights independent of that agreement, includ-

ing state-law contract rights, so long as the contract relied

upon is not a collective-bargaining agreement.” /d. at 394-

96 (emphasis in original). With regard to the company’s

contention that “the state court will have to examine the

collective bargaining agreement as part of its evaluation of

the ‘totality of the parties’ relationship,” Justice Brennan

stated that the employees relied “on contractual agree-

ments made while they were in managerial or weekly sala-

ried positions—agreements in which the collective-

bargaining agreement played no part.” Jd. at 395 n.9.

Therefore, since their complaint was “not substantially

dependent upon interpretation of the collective-bargaining

agreement{, nor did it] rely upon the collective agreement

indirectly, nor [did] it address the relationship between the

individual contracts and the collective agreement,” id., the

employees’ claims were not preempted.

In contrast, Electrical Workers v. Hechler, 481 U.S.

851 (1987), quoted in Caterpillar, does present a situation

in which the CBA played a critical role in the resolution of

lla

a claim. In Hechler, an electrical apprentice alleged a

breach of duty against her union in a case originally

brought in a state court and later removed to federal court.

Justice Blackmun, noting that “a tort claim ‘inextricably

intertwined with consideration of the terms of the labor

contract’ is pre-empted under Sect. 301,” 481 U.S. at 858

(quoting A/llis-Chalmers Corp. v. Lueck, 471 U.S. 202, 213

(1985)), concluded that the source of the union’s duty to

the employee would be found in the CBA, since common

law imposed such a duty only on the employer. Since,

therefore, “[i]n order to determine the Union’s tort liabil-

ity... .a court would have to ascertain... whether the col-

lective-bargaining agreement in fact placed an implied

duty of care on the Union... and [determine] the nature

and scope of that duty,” id. at 862, “‘questions of contract

interpretation ... underlie any finding of tort liability.”

Id. (quoting Allis-Chalmers, 471 U.S. at 218). The plaintiff

in Hechler was accordingly held to be “precluded from

evading the preemptive force of Sect. 301 by casting her

claim as a state-law tort action.” /d.

In situations in which employees bring suit under con-

tracts allegedly formed separate from existing CBAs, case

law suggests that preemption is appropriate when: (1) the

facts demonstrate the employees relied upon the provi-

sions of a CBA at the time the contract with the employer

was made, and (2) the terms of the alleged contractual

claim relate to the terms of employment in a union posi-

tion, and the matter at issue is addressed in a CBA.’

’The possible unfairness to litigants, such as plaintiffs here, who

assert oral contract made in ignorance of collective bargaining con-

straints, runs headlong into the strong federal interest in the peaceful

conduct of relationships between labor and management, an interest

anchored by federal support for the collective bargaining process. in

(Continued on next page)

12a

In Holland v. National Steel Corp., 791 F.2d 1132 (4th

Cir. 1986), plaintiff, a former National employee,

appealed, inter alia, from a grant of summary judgment as

(Continued)

Allis-Chalmers, the Supreme Court outlined as follows the philosophy

behind the preemptive reach of section 301:

Were state law allowed to determine the meaning intended by the

parties in adopting a particular contract phrase or term,... [t]he

parties would be uncertain as to what they were binding themselves

to when they agreed to create a right to collect benefits under

certain circumstances. As a result, it would be more difficult to

reach agreement, and disputes as to the nature of the agreement

would proliferate. Exclusion of such claims “from the ambit of

Sect. 301 would stultify the congressional policy of having the

administration of collective bargaining contracts accomplished

under a uniform body of federal substantive law.’ Smith v. Evening

News Assn., 371 U.S. 195, 200 (1962).

471 U.S. at 211. In Kern v. United Steelworkers of America. Local 1688,

669 F. Supp. 701, 704 (M.D. Pa. 1987), the district judge summed up

the policy reasons behind preemption in cases in which independent

contracts implicate terms of a CBA:

Our conclusion that the seniority term of the oral contract cannot

be enforced under state law even though it is not, according to

plaintiff, inconsistent with the terms of the collective bargaining

agreement is supported by our concern for enforcing federal

requirements such as exhaustion of grievance or arbitration reme-

dies, and for enforcing a uniform and balanced six-month statute of

limitations. If employees were free to negotiate and enforce sepa-

rate oral agreements identical to the collective bargaining agree-

ments under which they labored, and then if they were permitted to

enforce these oral agreements under state law, much of the federal

concern for swift resolution of disputes through grievance and arbi-

tration procedures, or through immediate court intervention, and

for consistent interpretation of contract terms would be under-

mined. Plaintiffs would be free to rely on longer state statutes of

limitations, and they would be free to ignore grievance/arbitration

procedures. The uniform federal common law growing out of the

Labor Management Relations Act that courts have been so careful

to protect would be circumvented and ineffectual.

(Citations omitted).

13a

to her claim that, when she was promoted out of the bar-

gaining unit to management, she and National had entered

into an employment contract that guaranteed her the right

to return. Judge Sprouse summed up her contract

allegations:

The gravamen of Holland’s claim is that she and

National entered into an employment contract which

provided her the right to return to hourly employment

and that National’s subsequent collective bargaining

agreement with the [Union] did not alter her personal

contract. The district court found, however, that the

basis of her previous right to return to hourly employ-

ment was the 1977 collective bargaining agreement

between ...[the Union] and National, and that the

1980 agreement subsequently eliminated that nght.

We agree with the district court... that National was

entitled to summary judgment on the claim.

791 F.2d at 1134. The plaintiff in Holland, however, appar-

ently relied upon her understanding of the return rights

contained in the CBA as the basis for her right to return.

There is no indication that Holland had entered into an

oral or written contract with National which was wholly

separate from the union agreement.

Likewise, supervisory personnel in Cooper v. General

Motors Corp., 651 F.2d 249 (5th Cir. 1981), had relied on

provisions of a CBA that permitted them to continue to

use their seniority dates in the bargaining unit after being

promoted to a non-unit position. The supervisors sued the

union (for breach of the union’s duty of fair representa-

tion) and General Motors for agreeing to a new contract

which eliminated those positions. Plaintiffs asserted no

contract claim separate and apart from the union agree-

ment regarding the seniority issue. In response to plaintiffs’

l4a

argument that their seniority rights had become vested

under the earlier CBA, Judge Rubin noted that since

“seniority rights are the creature of collective bargaining,

we hold that what the contract confers, a later contract,

validly made, may take away.” 651 F.2d at 249.

The employees who sued in Bale v. General Telephone

Co. of California, 795 F.2d 775 (9th Cir. 1986), alleged that

they had been led to believe that the period of “tempo-

rary” employment which they were offered was effectively

a probationary period, at the end of which they would

become regular union employees. The union’s CBA with

General Telephone provided for a hiring preference to be

given to regular workers on leaves of absence over “tempo-

rary” employees. Since plaintiffs were members of the

union bargaining for a union job, the terms of any inde-

pendent contract could not be inconsistent with the CBA.

Furthermore, plaintiffs would be required to show that

“the terms of the collective bargaining agreement differed

significantly from the individual employment contracts

they believed they had made.” Bale, 795 F.2d at 780. Thus,

a court would have to interpret the CBA in order to resolve

the dispute, and preemption was appropriate. Plaintiffs in

this case, unlike those in Holland and Cooper, however,

rely not on a CBA, but rather on alleged contracts made

separately from any union agreement. Moreover, plaintiffs’

alleged contracts relate to management, not bargaining

unil, positions and the provisions of the CBAs do not

reach the former. However, despite the fact that the

employees in the instant case were negotiating for terms

and conditions of management positions which are not

covered by CBAs, a problem of conflict with provisions of

the union contracts still exists.

15a

In Malia v. RCA Corp., 794 F.2d 909 (3d Cir. 1986),

the president of a local union accepted a promotion from

his union position to a management job on the basis of

oral representations which included, inter alia, the option

to return to the bargaining unit if plaintiff was not satisfied

with his new position. His request to return three weeks

later was denied. The district court concluded that Malia’s

contract and tort claims were preempted by section 301

The Third Circuit disagreed. The district court apparently

determined that resolution of Malia’s claims would require

interpretation of a CBA provision. On appeal, Judge Gib-

bons, noting that the provision in question governed the

issue of seniority if an employee returned to the unit, not

the right of an employee to return in the first place, wrote

that Malia’s

oral contract is a completely separate agreement from

the collective bargaining agreement. In addition this

oral contract is not preempted by the rule prohibiting

members of a collective bargaining unit from negotiat-

ing inconsistent individual contracts. Although Malia

was a member of Local 178 when he negotiated the

alleged oral contract, the oral contract relates to the

job of inventory supervisor—a management position

outside the Local 178 bargaining unit. Nothing in the

LMRA prevents an individual—whether that individ-

ual is to be newly hired or promoted from a bargaining

unit—from negotiating an employment contract for a

management position. Nor does LMRA prevent an

individual—whether an applicant for new employ-

ment or a current employee in a supervisory posi-

tion—from negotiating for a job in a bargaining unit

so long as that employment will be on the terms and

conditions set forth in the collective bargaining

agreement.

l6a

794 F.2d at 913 (footnote omitted).

In the instant case, as in Malia, plaintiffs’ alleged oral

contracts are completely separate agreements from the

CBAs; plaintiffs were negotiating employment contracts

for management positions; and the record suggests that at

the time the alleged oral contracts were made, one CBA did

not address the issue of whether an employee could return

to the unit or, if such employee could so return, whether

his seniority status upon such return would give him the

benefit of all employment time both in the unit and in the

management position.* However, whether the “terms” of

the alleged oral accords were or were not inconsistent with

the CBAs at the time the oral contracts were made, the

CBAs were later amended on August 1, 1980 (for employ-

ees in the P&M unit) and on August 25, 1982 (for employ-

ees in the SNE unit). Those amendments permitted an

employee to return to a bargaining unit only if: (1) no

bargaining unit employees were on layoff and (2) the rea-

son for the return was other than a reduction in the man-

agement position occupied by the employee prior to his

desired return. The amendment also limited an employee’s

seniority upon return to that held by the employee before

he transferred out of the unit. Those amendments effec-

tively prohibited a management employee from returning

to a bargaining unit when unit employees were laid off.

In Kern vy. United Steelworkers, 669 F. Supp. 701

(M.D. Pa. 1987), the plaintiff sued the union and his

employer for breach of an employment contract and the

8The SNE unit CBA apparently did not address the right-to-return

issue although that CBA did contain provisions relating to seniority in

the unit if an employee returned. Those provisions, and the same or

similar provisions in the P&M CBA, are discussed in greater detail

infra.

17a

union for breach of the latter’s duty of fair representation

under section 301 and section 9(a) of the LMRA. Kern

alleged that he was offered a promotion to a management

job and was promised that he could be reinstated in his old

bargaining unit job should something go wrong with his

management position. The CBA governing Kern’s old job

contained the same language regarding return and senior-

ity status which was present in Malia—i.e., the agreement

was silent as to any right to return and only spoke to

seniority status if an employee returned. Kern was

returned to his bargaining unit position after he was laid

off from his management position. Kern argued—as do

plaintiffs in the instant case—that the company’s promise

implied a guarantee that he would be reinstated to the

bargaining unit with full company seniority rights. The

company did not, however, treat Kern as if he had accu-

mulated any seniority rights after his return to the unit.

Judge Herman held the seniority promise to be unenforce-

able, noting that the Third Circuit in Malia

expressly stated that the Labor Management Relations

Act does not prevent an employee from negotiating an

agreement for a job in the bargaining unit separate

from the collective bargaining agreement, but that the

agreed-upon-employment must “be on the terms and

conditions set forth the collective bargaining agree-

ment.” Seniority and its accumulation is an express

term of the collective bargaining agreement in the

instant case. Plaintiff's reinstatement, therefore, could

only be governed by the terms of that agreement, nci

by the terms of the oral contract, even if the seniority

terms are identical. Plaintiff cannot, therefore, sue to

enforce the seniority term of the oral contract, even

though he could have enforced the reinstatement

terms, had that term been breached.

18a

669 F. Supp. at 704 (citation to Malia omitted).

The rationale stated in Kern would appear applicable

in the instant case. Regardless of whether plaintiffs were

aware of the terms of the CBAs which covered them as

employees in the bargaining unit, and which would cover

them again if they returned to that unit after work in a

management job, Judge Gibbons’ approach in Malia,

which requires that any independent oral contract between

an employee and management not be inconsistent with the

terms of a CBA, also stresses that nothing in the LMRA

prevents employees from negotiating an employment con-

tract for a management position. Malia, 794 F.2d at 913.9

Plaintiffs in this case allege that each of them entered

into an oral employment contract with National regarding

the terms and conditions of the management position each

was offered. To the extent, however, that these terms and

conditions address issues covered by the CBA in the bar-

gaining unit to which each plaintiff would return in the

event of management layoffs, plaintiffs were “negotiating

for a job in a bargaining unit.” Malia, 794 F.2d at 913.

Such negotiations are proper “so long as that employment

will be on the terms and conditions set forth in the collec-

tive-bargaining agreement.” /d. Thus, if a CBA which cov-

ered a plaintiff's bargaining unit spoke to the right of such

plaintiff to return and to his seniority status after return,

the terms of the CBA control, even if the seniority terms in

that agreement and the oral contract are identical. Kern,

669 F. Supp. at 704. Since the court would look to the

terms of the CBA to interpret the right to return and the

9See Caterpillar, 482 U.S. at 396 (“[A] plaintiff covered by a collec-

tive-bargaining agreeme:t is permitted to assert legal rights independent

of that agreement, inciuding state-law contract rights, so long as the

contract relied upon is not a collective-bargaining agreement.’’).

19a

seniority status, any claim based upon a breach of those

promises is preempted by section 301.!°

In Lingle v. Norge Division of Magic Chef. Inc.,

U.S. , 108 S. Ct. 1877 (1988), Justice Stevens reaffirmed

the principle that “if the resolution of a state-law claim

depends upon the meaning of a collective-bargaining

agreement, the application of state law...is pre-

empted...” 108 S. Ct. at 1881. In Lingle the petitioner

was discharged for filing an allegedly false worker’s com-

pensation claim. Her union instituted a grievance pursuant

to a CBA which provided that employees could not be

discharged except for “just” cause and for arbitration of

disputes between the employer and any employee concern-

ing the effect or interpretation of the agreement. While

arbitration was proceeding, the petitioner filed a retaliatory

discharge action in state court, alleging that she had been

discharged for exercising her rights under the state’s

worker’s compensation laws. The district court concluded,

and the Seventh Circuit agreed, that the retaliatory-

discharge claim was “inextricably intertwined” with the

collective bargaining provision prohibiting discharge with-

out cause and that allowing the state-law action to proceed

would undermine arbitration held pursuant to the CBA.

Disagreeing, Justice Stevens, on behalf of a unanimous

Supreme Court, rejected the reasoning of the lower courts

and noted that “even if dispute resolution pursuant to a

collective-bargaining agreement, on the one hand, and

'°In Malia, the oral contract covered an issue not addressed by the

CBA—the right to return to a unit—and so a court could address the

contents of that promise without looking to the CBA. In Kern, the

plaintiff alleged a promise regarding a right to return and a promise to

have full seniority restored. The CBA addressed the latter issue but not

the former—and the court permitted the promise regarding return to go

forward if it had been breached, but held any claim regarding seniority

to be preempted.

20a

state law, on the other, would require addressing precisely

the same set of facts, as long as the state law claim can be

resolved without interpreting the agreement itself, the

claim is ‘independent’ of the agreement for Sect. 301 pre-

emption purposes.” Jd. at 1883."!

Lingle is not directly applicable to the instant case

because the former P&M unit plaintiffs and former SNE

unit plaintiffs allege oral contracts whose terms may be

controlled by the P&M CBA or the SNE CBA. Both sets of

plaintiffs contend that National representatives promised

them that they could always return to their old bargaining

units with full seniority for time spent out of the bargain-

ing units restored. As Malia and Kern teach, plaintiffs in

the instant case were free to negotiate for management

positions not covered by a CBA. However, to the extent

that a plaintiff was negotiating for a right to return to his

old job, he was negotiating for a job in a bargaining unit.

Such negotiation is proper, “so long as that employment

will be on the terms and conditions set forth in the collec-

tive bargaining agreement.” Malia, 794 F.2d at 913. There-

fore, if the CBA which covered a plaintiffs former union

position addressed the right of return and seniority status

upon return, the terms of the CBA control and claims

based upon the CBA provisions are preempted by section

301.

\1Justice Stevens did note that “[a] collective-bargaining agreement

may, of course, contain information such as rate of pay and other

economic benefits that might be helpful in determining the damages to

which a worker prevailing in a state law suit is entitled. . . . Although

federal law would govern the interpretation of the agreement to deter-

mine the proper damages, the underlying state law claim, not otherwise

pre-empted, would stand.” /d. at 1883 n.12 (citation omitted).

2la

Application of the Preemption Principles

The application of these principles to this case is com-

plicated by three factors: (1) the plaintiffs are divided into

groups covered by two separate CBAs; (2) each agreement

was modified subsequent to each plaintiff's alleged oral

contract and the modifications affected returns to the bar-

gaining units and seniority status after return; and (3) not

all plaintiffs allege the same promises regarding return and

seniority.

The P&M Unit CBA

Prior to 1980, the P&M CBA contained a provision

addressing the unit seniority which an employee would

hold after a transfer out of the unit and a later return.'2 In

1980, the P&M CBA was changed effectively to prohibit

the return of management personnel to the unit during

periods of management or P&M layoffs.'? The new lan-

guage expressly stated that former unit members could

return to the unit under certain circumstances and

addressed the amount of seniority a new returnee would

hold.'4

"Article VIII (b)(3) stated that the employee who returned would

have full company time seniority restored—i.e., he would be credited

for time out of the unit as a management employee.

'513 Article VIII (D\(2)(f) and (g).

'4It is not clear whether the pre-1980 P&M CBA contained express

language authorizing the return to the unit of members who were pro-

moted out to management positions. The fact that the CBA may not

have addressed those issues prior to the 1980 changes does not affect the

fact that the presence of those issues in the agreement after 1980 means

that those post-1980 CBA terms control, even if the terms are identical

to those in the alleged oral contracts. Rights of return and seniority do

not permanently vest at any stage; rather they can be modified by

subsequent bargaining. Cooper v. Genera! Motors, 651 F.2d at 249.

22a

The 1980 P&M CBA spoke to both the right of a

former bargaining unit member to return to the unit and to

seniority upon such a return.'* Plaintiffs argue that the

language relates only to persons who were promoted or

transferred after October 1, 1980, and that since all P&M

plaintiffs were promoted prior to that date the provision

does not apply to them. As the P&M agreement prior to

1980 did not speak to a right to return, plaintiffs. contend

that their claims based upon a promise to return should

not be preempted.

'’The relevant language is as follows:

b Continuous service upon which Company seniority is based shall

be broken in the manner set forth in c. below, and by:

(3) Permanent transfer to a position with the Company excluded

from the bargaining unit except as provided in Section f.,

below ...

f. Effective October 1, 1980, an employee who is transferred or

promoted to a position outside of the bargaining unit many return

to the bargaining with full Company seniority accumulated at the

time of promotion or transfer outside of the bargaining unit

restored whenever:

(1) No bargaining unit employees are on Company layoff, and

(2) The reason for such return is other than a reduction in forces

on the excluded job occupied by the former employee immediately

prior to his or her return.

g. In the event an employee is returned to the bargaining unit under

the provisions of Section D.2.f., above, he or she may return te the

Department in which he or she held Department seniority immedi-

ately prior to leaving the bargaining unit whenever:

(1) No bargaining unit employees are on Departmental layoff,

and

(2) Such assignment is made immediately upon the initial return

to the bargaining unit.

In such event, the Department seniority accumulated by the former

employee at the time of leaving the bargaining unit will also be

restored.

Stipulations of Plaintiffs and Defendant No. | and Exhidit A, App. A at

pp. 946, 950.

23a

There does not appear to be any case law addressing

the question of whether the existence of a later CBA provi-

sion which addressed the contract term at issue in an ear-

lier separate oral contract is enough to trigger the preemp-

tive effect of section 301. In this case, this Court faces the

further task of determining whether the language in para-

graph (b\(3\(f), supra, which reads “Effective October 1,

1980 an employee who is transferred or promoted...”

clearly and unambiguously does not reach and cover the

P&M plaintiffs. National contends that this CBA language

is ambiguous and that therefore in this case in this Court,

the meaning of that language must be determined. That

very act of interpretation, defendant argues, triggers the

preemptive effect of section 301.

The phrase can be interpreted to mean that “an

employee who is transferred or promoted to a position

outside of the bargaining unit after October |, 1980 may

return. ..” Indeed, upon a reading of the involved words,

in isolation, that interpretation seems to be the most plau-

sible meaning.

However, defencant argues that the verb “is trans-

ferred” refers to the status of a promoted employee after

October 1, 1980. While defendant’s view may not appear

to be the most natural interpretation, it is a plausible one.

Accordingly, this Court cannot conclude that plaintiffs’

view is the only reasonable meaning which can be assigned

to the provision. While “is transferred” is a verb in the

present tense, it could refer to the “status” of an employee

after October 1, 1980.

As extensively discussed on the record during the

August 12, 1988 hearing, evidence in the record does not

tend clearly to support one interpretation; indeed the

record reflects the ambiguity which this Court concludes

24a

exists in the language of the return-seniority provision.

Since that language is somewhat ambiguous, the meaning

of the 1980 P&M CBA must be determined in this case.

Plaintiffs’ claims regarding the right to return and the

seniority which follows such return directly conflicts with

the terms of the CBA if those terms are applicable to these

plaintiffs. Since resolution of that issue first requires that

construction of the CBA provisions implicated by plain-

tiffs’ claim be determined in this case, preemption is

required. This is not a case in which interpretation of the

CBA is merely “tangential” to the plaintiffs’ state law

claim as in Lingle, supra. The focus of the instant inquiry

is whether the CBA provisions in question apply and pre-

empt the state law claim—an inquiry to be conducted pur-

suant to federal labor law, not state contract law—and an

inquiry whose outcome will be decisive as to whether

plaintiffs’ claims can continue at all.

This Court is not aware of any decision which distin-

guishes between cases in which the plaintiffs’ claims impli-

cated the provision of a CBA and in which the claims were

clearly covered by provisions in a CBA. If the ability of the

plaintiffs in either case to maintain their claims depends

upon the interpretation of a CBA, the preemptive force of

section 301 equally applies. Thus, this Court concludes

that the P&M plaintiffs’ claims based on a promise of a

return to the unit with seniority restored are preempted.

As far as the former P&M unit plaintiffs are con-

cerned, then, the P&M CBA addressed both the issue of

whether a former P&M unit member could return as a

result of a management layoff and such employee’s senior-

ity status upon return at the time he, as a former P&M

member, was iaid off. Thus, whether the language of the

25a

pre-1980 P&M CBA addressed those issues does not mat-

ter. To have permitted plaintiffs to return after 1980 during

a time of management layoffs with full seniority would

have violated the direct provisions of the modified P&M

agreement—and it is that type of conflict between the pro-

visions of independent employment contracts and the

terms of a CBA which the preemption doctrine aims to

avoid. The right to return to the bargaining unit and

seniority upon such a return were governed by the P&M

agreement after 1980. Since all plaintiffs in this group were

let go after 1980, the terms of the CBA and not the terms of

the alleged oral contracts control. Therefore, all contract

and tort claims brought by former P&M bargaining unit

workers related to promises to return to the bargaining

unit at full seniority are preempted by section 301.

The SNE Unit CBA

When the ISU reached an agreement with National

covering the SNE workers effective August 30, 1979, the

CBA expressly stated that the seniority provisions con-

tained in National’s Standard Practice Manual (containing

employment policies for non-union personnel) would con-

tinue to govern the SNE members until another agreement

modifying that seniority language was worked out.'® The

same provision was contained in the August |, 1980 SNE

CBA.'’ National and the ISU adopted the seniority lan-

guage contained in the P&M contract regarding return to

the unit and seniority status thereafter in a SNE CBA effec-

tive September 25, 1983.

'6See Exhibit D to Stipulations of Plaintiffs and Defendant filed 6/

8/88.

"See Exhibit E, id.

26a

However, on August 17, 1982, the union issued a

“Position Paper on Labor-Management Relations,” indi-

cating a large number of union concerns which the union

wanted management to address. The union requested,

inter alia, that management

Execute a seniority Agreement with the Salary Divi-

sion prohibiting the reduction of non-bargaining unit

employees into the salary bargaining unit; and, fur-

ther, removing those thirty (30) management employ-

ees already reduced and given full seniority heels.

App. A (Vol. 4) at 1028.

James Redline, President of Weirton, wrote a letter to

union President Walter Bish, responding to each of the

union’s demands. In regard to the seniority and return

issues, Mr. Redline wrote:

Mr. John Madigan has assured me the Industrial Rela-

tions Department is ready to resume discussions

[regarding a seniority agreement] August 25, 1982.

Please advise them of when you wish to begin the

discussions. I also agree to put a hold on further

reductions in the SNE Union until an appropriate

agreement or impasse is reached.

Id. at 1031. That letter was dated August 24, 1982, after

which no transfers occurred from management back to the

SNE unit.

National has not provided any evidence which con-

vinces this Court that Mr. Redline’s letter constituted an

amendment of the i980 CBA. First, the language in the

exchange of petition and letter seems to be the language of

two parties bargaining towards an agreement. Indeed, the

Redline letter sets a date when discussions on a seniority

agreement were to begin. The “hold” on further reductions

27a

appears to have been a unilateral good faith move on

National’s part—one which National could have, if it had

desired, rescinded if an impasse had been reached. There is

no indication that Bish acknowledged Redline’s letter or

“offer” in any formal manner. Second, when shown the

August 24, 1982 letter, Redline could not recall having

seen it (see App. C at 59-68), although he did confirm that

the ability of a salaried exempt employee to return ended

on August 25, 1982. /d. at 64. And third, while William

Doepken, Weirton’s Divisional Counsel and General Man-

ager of Labor Relations, stated that he viewed the “‘agree-

ment” to hold returns as an enforceable obligation under

the CBA, App. C at 75, another Labor Relations official.

Robert Korbel, suggested that it was the language negoti-

ated in the 1983 SNE CBA which contractually prohibited

returns. App. B at 726-27.

There is no dispute that a CBA can be modified

through post-execution negotiations, see Ekas y. Carling

National Breweries, 602 F.2d 664 (4th Cir. 1979), cert.

denied, 444 U.S. 1017 (1980), that such negotiated amend-

ments are fully binding, and that a party may compel arbi-

tration in response to alleged violations of such an amend-

ment. See e.g., Adkins v. Times-World Corp., 77\ F.2d 829,

831 (4th Cir. 1985), cert. denied, 474 U.S. 1109 (1986). But

in every such case cited by defendant, the parties had nego-

tiated and signed a formal addendum to the CBA or mem-

orandum of understanding. The evidence in this case does

not reflect the basic elements of contract formation in offer

and acceptance—the letter in the record from Redline is

not even signed and, as noted above, there is no evidence

of any response from the union.

Thus, at the time that the SNE plaintiffs were laid off

in 1982, the seniority provisions contained in the Standard

28a

Practices Manual governed any right to return and senior-

ity status upon a return to the unit. The Standard Practices

Manual speaks to the seniority an SNE employee would

hold upon return to the unit; however, the Manual does

not appear to contain any express language regarding the

right of an SNE employee who transfers out of the unit to

return in the first place.'*

In sum, while the members of a union are not barred

by federal labor law from entering into independent

employment contracts with management for a non-union

job, union employees cannot bargain for rights which are

addressed by a CBA without having any suit filed regard-

ing those rights preempted by action 301 of the LMRA.

Thus, the P&M and SNE plaintiffs, who allege that they

entered into an oral contract with National which included

promises permitting return to the union job and/or the

retention of company seniority upon such a return, face

the preemption of those claims to the extent they are

addressed in the relevant CBA. All such preempted claims

must be brought under the LMRA which contains a six-

month statute of limitation for filing such actions. Del

Costello v. IBT, 462 U.S. 151, 163 (1983). All the claims in

this case arise from events which occurred prior to 1983.

That six-month time limitation has long passed. Thus,

each contract claim asserted in this case which is pre-

empted by federal law cannot now be asserted under the

LMRA. Summary judgment will, accordingly, be entered

'8The parties provided to this Court a copy of section 6.5 of the

Manual, which relates to SNE seniority. Other provisions of the Manual

may perhaps relate to the right to return, but they do not appear in the

record in this case, if they in fact exist at all.

29a

in favor of the defendant on all preempted contract

claims.'?

Application of Preemption to Individual Contract Counts

The forty-one plaintiffs in Count One are former

members of the P&M unit who were promoted to manage-

ment positions prior to August 1, 1980. They allege that

they relied upon a number of oral representations by

National agents when they accepted their promotions.

Count One appears to allege a number of breaches; only

the alleged breach relating to return to the bargaining unit

and any “implied” full restoration of seniority upon return

are preempted. (Second Amended Complaint 470(c) ). The

claims relating to use of company date seniority to man-

agement layoffs do not implicate any bargaining unit agree-

ment and are thus not preempted.

The three plaintiffs in Count Two were P&M unit

employees who accepted management positions after

August |, 1980. None of those plaintiffs alleges a promise

on the part of National that such employee could return to

the unit in the event of a management layoff. Conse-

quently, no ciaim in this count is preempted.

The fifteen plaintifis in Count Three are former mem-

bers of the SNE unit who were promoted to supervisory

positions and later laid off. Those plaintiffs allege essen-

tially that: (1) each was promised he could return to the

SNE unit in the event of layoffs and could so return with

full company seniority; (2) National would use company

date seniority for layoffs and recalls; and (3) each such

'*National contends that all fraud clairns growing out of the con-

tract claims should also be preempted, but the fraud claims require

separate analysis—an analysis to which this Court addresses itself infra

after examination of the Statute of Frauds defense.

30a

plaintiff would keep a job until retirement unless termi-

nated for just cause. As already discussed, the SNE

employees first obtained a CBA in 1979, and the 1979 and

1980 CBAs included by reference Section 6.5 of the Stan-

dard Practice Manual regarding seniority positions. Since

Section 6.5 did not expressly address the right of former

SNE members to return, and since no such provision was

incorporated into the CBA prior to the layoffs, the claim in

paragraph 98(c) of the Second Amended Complaint for a

contractual promise to return is not preempted.

The Statute of Frauds Defense

National also asserts that the West Virginia Statute of

Frauds bars plaintiffs’ alleged state law contract claims.

That West Virginia statute states in relevant part:

No action shall be brought in any one of the following

cases: ...

(f) Upon any agreement that is not to be performed

within a year;

Unless the promise, contract, agreement, repre-

sentation, assurance or ratification, or some memo-

randum or note thereof, be in writing and signed by

the party to be charged thereby or his agent.

W. Va. Code §55-I-1.

The Supreme Court of Appeals of West Virginia, in

interpreting that statutory provision, has written:

The established law in this State... is that the terms

of a verbal contract must expressly or by necessary

implication provide for performance beyond a year or

contain nothing consistent with complete perfor-

mance within a year, in order to come within the

statute of frauds.

3la

Thompson v. Stuckey, 300 S.E.2d 295, 297 (W. Va. 1983)

(citations omitted). However, “if an oral contract may, in

any possible event, be fully performed according to its

terms within a year, it is not within...the statute of

frauds...and it is only necessary that the contract be

capable, by reasonable construction, of full performance by

one side within a year in order to remove it from the

statute of frauds.” Jd. at 298.

Defendant argues that each plaintiff asserting an oral

contract alleges in the complaint that National promised to

employ the plaintiff until mandatory retirement age, and

also contends that the contracts therefore couid not be

performed within one year. However, the complaint also

alleges that National’s employment of plaintiffs was not

unconditional; National could terminate a plaintiff if

National “had specific, just, and lawful cause” to do so.

(See Second Amended Complaint, 9970(g), 85(f), 98(g),

|i 1(g)). Since it is possible that each contract could have

been terminated by National for such cause, or for other

reasons, within one year of the date each plaintiff accepted

a managment position, the alleged oral contracts could

have been performed within one year.”° Accordingly, the

Statute of Frauds does not bar plaintiffs’ claims which are

based upon the alleged existence of oral contracts.?!

2°Courts in other jurisdictions have noted that oral employment

contracts for long-term employment do not fall within the Statute of

Frauds if the contracts permit termination for cause. See e.g., Ohanian

v. Avis. Inc., 779 F.2d 101 (2d Cir. 1985).

21In the course of the hearings, National pressed the Statute of

Frauds issue only with regard to plaintiffs Blair and Mrozek. (Tr. 3 at

192-94). Ultimately, this Court granted summary judgment to National

with respect to those plaintiffs upon grounds entirely unconnected with

the statute, without ever reaching that issue. (Tr. 7 at 4-25).

32a

Breach of Employment Contracts—The Legal Standard

Since at least some of plaintiffs’ contract claims, at this

juncture, survive National’s motion for summary judg-

ment based upon preemption, it is incumbent upon this

Court next to address the legal standards in West Virginia

for adjudicating claims of breach of employment contracts.

West Virginia adheres to the doctrine of “at will”

employment which, “when unaffected by contractual or

statutory provisions to the contrary, may be terminated,

with or without cause, at the will of either party.” Bell v.

South Penn Natural Gas Co., 62 S.E.2d 285, 288 (W. Va.

1950). Those employed under oral agreements in which

the expected duration of employment and potential rea-

sons for termination were never specified, are generally

considered “‘at will” employees. Cordle v. General High

Mercer Corp., 325 S.E.2d 111, 112 (W. Va. 1984). Never-

theless, the Supreme Court of Appeals of West Virginia has

recognized that “contractual provisions relating to dis-

charge or job security may alter the at will status of a

particular employee.” Cook v. Heck’s, Inc., 342 §.E.2d 453,

457 (W. Va. 1986).

Heck’s is the leading West Virginia case relating to

employer modifications to the at will status of employees.

In Heck’s, the appellant contended that the employee

handbook modified her contract of employment so that it

would not be terminable at the will of her employer. The

handbook contained evidence of a promise by the

employer not to discharge those employees explicitly cov-

ered by the handbook, except for the offenses set forth in

the handbook. The Court concluded:

The inclusion in the handbook of specified discipline

for violations of particular rules accompanied by a

33a

statement that the disciplinary rules constitute a com-

plete list is prima facie evidence of an offer for a uni-

lateral contract of employment modifying the right of

the employer to discharge without cause. We agree

that “[nJo unilateral contract arises merely by the fact

that [the employer] has alerted its employees that cer-

tain conduct may form the basis of a discharge”. How-

ever, it should be remembered that, by its own terms,

the list of rules, the violation of which would be

grounds for discharge, was described as a complete

list.

342 S.E.2d at 459 (citations omitted). After summarizing

“the traditional elements of contract formation,” the Court

noted its agreement

with those courts that have found valuable considera-

tion in the continued labor of workers who have in the

past foregone their right to quit at any time. We con-

clude that a promise of job security contained in an

employee handbook distributed by an employer to its

employees constitutes an offer for a unilateral con-

tract; and an employee’s continuing to work, while

under no obligation to do so, constitutes an accept-

ance and sufficient consideration to make the

employer’s promise binding and enforceable.

Id. at 458-59. While Heck’s involved an alleged contract

based on an employee handbook, its principles are applica-

ble to a case involving oral promises, since the traditional

elements of contract formation govern both situations.

The parties disagree regarding the sweep of Heck’s.

National seems to assert that any ora! promise must be

very clear and definite in order to be enforceable. In con-

trast, the plaintiffs at times seem to argue for what might

be characterized as a “contract in the air,” and would find

34a

an employment contract implied by past practices and pol-

icies of National alone.?

Heck’s does not support the view that an employment

contract can be implied solely from past practices, in the

absence of affirmative acts, promises, or written represen-

tations. Indeed, Heck’s emphasized that, at least in the

handbook area, “the offer must be definite in form and

must be communicated to the offeree.”’ 342 S.E.2d at 459

(citation omitted).??

2The Supreme Court of Appeals has discussed the differences

between express and implied contracts:

“({BJoth express contracts and contracts implied in fact are founded

on the mutual agreement of the parties and require a meeting of the

minds. The former . . . is one in which the terms are stated in parol

or in writing, while the latter is a matter of inference or deduction;

in other words, the one must be proved by an actual agreement,

while in the case of the other it will be implied that the party did

make such an agreement as, under the circumstances disclosed, he

ought in fairness to have made.”

Case v. Shepherd, 84 §.E.2d 140, 143 (W. Va. 1954) (quoting 17 C.J.S.,

Contracts, §3).

23Once an offer has been made and terms discussed, or at least set

forth, “{iJn case of doubt and ambiguity in the terms of a contract, a

cour: will follow the interpretation placed thereon by the parties them-

selve _ Although this principle is predicated upon the assumption

that a valid contract exists, certainly the principle is equally applicable

to the construction placed upon the proposals and counterproposals in

the negotiations between the parties prior to effectuating the actual

agreement.” McGinnis v. Enslow, 82 S.E.2d 437, 441-42 (W. Va. 1954).

Moreover, a contract is not void or unenforceable because some of its

terms are uncertain or vague. See Scraggs v. Hill, 17 S.E. 185 (1893);

McGinnis, supra. In cases where the words of a contract are not of

certain and definite import, consideration will be given to the situation

of the parties, the subject matter of the contract, the acts of the parties,

the purpose sought to be accomplished and the surrounding circum-

stances. Scrages, supra; Wetterwald v. Woodall, 98 S.E. 890 (W. Va.

1919).

35a

In Conaway v. Eastern Associated Coal Corp., 358

S.E.2d 423 (W. Va. 1986), Conaway apparently claimed

that a statement of general policies applicable to all sala-

ried employees served as an employment contract which

ended his at wili status. While avoiding the question of

whether this statement of policies did arise to a contract,

the Court stated:

Mr. Conaway also argues that his employment was

not “at-will,” but was governed by a contract. In

[Heck’s], we held that an employee handbook may

form the basis for a unilateral contract. This rule has

some application in this case. Although Mr. Conaway

was not covered under the formal National Bitumi-

nous Coal Wage Agreement of 1978 because he was a

foreman, he was covered by a statement of general

policies which applied to all salaried employees.

This document, however, merely set out an

appeal procedure for discharged employees: [appeal

procedure omitted]. Mr. Conaway was given his

appeal and he lost. The labor policy did not guarantee

an outcome, just an appeal. Therefore, even if the

labor policy is construed as a contract, Mr. Conaway

alleged no facts which would show a violation of it.

358 S.E.2d at 427.

Most recently, in Collins v. Elkay Mining Co., 37\

S.E.2d 46 (1988), the Supreme Court of Appeals addressed

the breach of contract claim brought by plaintiff, who con-

tended that he was induced by defendant to move from his

union job to management by representations assuring him

continued employment until reaching retirement age. He

also stated he had been induced by various publications of

the company which promised him financial security until

retirement. The trial court rejected the implied contract

36a

theory just a few days before Heck’s was decided. Appar-

ently based upon the fact that an employer “handbook”

existed, the majority of the Supreme Court of Appeals, in a

split decision, remanded the case for proceedings in the

light of Heck’s. The Supreme Court did not address the

question of the oral representations which, assumedly,

were analyzed as a possible express oral contract.

The above-discussed West Virginia cases represent the

existing law of that state with regard to implied employ-

ment contracts in derogation of an employee’s “at will”

status. Those cases go no further than ‘to state that repre-

sentations contained in an employee handbook which are

clear and definite and are intended by the employer to be

used by employees, can meet the normal requirements for

formation of an implied contract. while language in these

cases may refer to “policies” and “practices” generally,

there is no indication that the principles of Heck’s are

intended to apply in any situation other than in one

involving a handbook or comparable writing.”

4A review of “at will” legal principles in other jurisdictions does

not appear to establish a decisive trend which would help this Court

determine the scope of implied employment contracts in West Virginia.

See Barger v. General Electric Co., 599 F. Supp. 1154, 1158 (W.D. Va.

1984) (and cases there cited). While many states have adopted “public

policy” exceptions to the at-will doctrine, the states are generally split as

to whether the terms of an employee handbook can abrogate the at-will

status of employees and require termination only for cause. See Thomp-

son v. American Motor Inns, Inc., 623 F. Supp. 409, 414-16 (W.D. Va.

1985) (and cases there cited). The few cases which have directly

addressed allegations of past practices as the basis for an implied con-

tract also reveal different approaches. See Bruno v. Plateau Mining Co.,

747 P.2d 1055 (Utah App. 1987) (employer's de facto policy of not

terminating for fighting insufficient to abrogate at will employment

terms); Darlington v. General Electric, 504 A.2d 308 (Pa. Super. 1986)

(possible, if plaintiff's proffer specific enough, to find contract terms and

conditions in “totality of circumstances” surrounding his hire); Pugh v.

(Continued on next page)

37a

Seemingly, therefore, West Virginia law requires some

solid evidence that a promise consisting of ascertainable

terms has been expressly made. Thus, if the terms are

vague or ambiguous, evidence of the parties’ understand-

ing and the surrounding circumstances may help deter-

mine the meaning of the terms. “[{G]enerally, the existence

of a contract is a question of fact for the jury... [however]

the trial court is justified in removing the issue from the

jury’s consideration where a prima facie case is lacking.”

Heck’s, 342 S.E.2d at 457.5

The latest statement of West Virginia law in this area

remains Heck’s, a case in which the Court focussed on

written policies in an employee handbook and concluded

that finding a “definite promise” in the handbook to dis-

charge only for just cause merely required application of

common principles of contract law. In two decisions since

(Continued)

See's Candies, Inc., 171 Cal. Rpir. 917 (App. 1981) (appropriate to

consider “total of the parties’ relationship” to determine whether termi-

nation proper only for just cause).

Finally, in California, the courts have suggested that all employ-

ment at will contracts contain a duty of good faith and fair dealing, see

Tameny v. Atlantic Richfield Co., 164 Cal. Rptr. 839 (1980); Cleary v.

American Airlines. Inc., 168 Cal. Rptr. 722 (1980), but the application of

that principle has been narrow. Oklahoma rejects the imposition of a

good faith duty, Hinson v. Cameron, 742 P.2d 549, 554 (Okla. 1987), as

have most other jurisdictions which have considered it. See é.2.,

Brockmeyer v. Dun & Bradstreet, 335 N.W.2d 834 (Wis. 1983); Parnar v.

Americana Hotels. Inc., 652 P.2d 625, 629 (Haw. 1982).

*SIn this case, many plaintiffs have stated that they were promised

that their “company seniority” would “continue”; what it means for

company seniority to continue is vague. If there is evidence that one or

both parties understood that to mean that seniority would be used for

layoffs, then a plaintiff could perhaps survive summary judgment con-

cerning the alleged promise that management layoffs would be con-

ducted on the basis of company time seniority. However, in the absence

of any reference to seniority, no such promise can be “implied.”

38a

Heck’s, the Supreme Court of Appeals has not chosen to

expand or to elaborate those principles. A written manual

can meet traditional contract requirements because it can

be viewed as an offer seeking continued work in compli-

ance with the policies there set forth; acceptance is mani-

fested by the employees’ continued work; and considera-

tion is provided by the fact that the employees continue to

work when they have no obligation to do so. The language

is written by the employer, who can be assumed to have

intended the policies set forth to be accepted by the

employees, and written policies addressing important

terms of work—such as reasons for discharge—can reason-

ably be viewed by employees as legally binding, making

reliance on the policies justifiable.

Past practices, by themselves, are different from writ-

ten employee manuals. In the latter situation, the tradi-

tional elements of contact formation are present. There is

the problem of whether the existence of a past practice—

never referred to by the parties when discussing a promo-

tion or terms of employment—can serve as an “offer.” Nor

are the “contents” of a past practice usually definable to

the same extent of definiteness and specificity as are the

promises in a manual. While the fact that employees have

continued to work could provide acceptance and consider-

ation regarding the “past practices,” the lack of evidence of

an offer and the terms of an offer clearly distinguish, to

some extent, past practices per se from employee hand-

books. Given the limitation of Heck’s to handbooks, the

contractual analysis of the Supreme Court of Appeals with

respect to what amounts to an exception to the # will

. doctrine, no further explana“ on or expansion of the Heck’s

doctrine in West Virginia, and no clear trend in other

jurisdictions, this Court concludes that the past practices

Sea Bk LSS

39a

alleged in this case by plaintiffs cannot, in and of them-

selves, give rise to a contractual change in at will status.

Such past practices can, however, serve to aid the Court in

the interpretation of contract terms established by express

promises, oral or written, of those terms which are vague

or ambiguous. Thus, in cases in which a contract term such

as “seniority” is established through an express promise,

past practices or policies may be utilized to help clarify

ambiguities with respect to the parties’ agreements. How-

ever, in the absence of an express promise, a past practice

or policy not enshrined in a policy manual or writing of

some sort intended for use by employees cannot serve in

and of itself to establish a contractual obligation on the

part of the employer.”¢

Evidence in the Record of Past Practices

Even if this Court were to conclude that past practices

could establish an implied employment contract, it is not

at all clear that the voluminous record before this Court

establishes the scope and definiteness of those practices

necessary to equal the specificity and definiteness of the

promises in the handbook in Heck’s.

The alleged “backgound” facts include the following:

(1) in the past, National had allowed exempt employees to

transfer to their former positions in the hourly or salaried

nonexempt ranks with full seniority restored; (2) during

In the course of the hearings in this matter, court and counsel

discussed the possibility of certification, pursuant to W. Va. Code §51-

1A-1, et seq., to the Supreme Court of Appeals of the question of

whether West Virginia law recognizes an implied contract based upon

an employer’s past practices and policies. However, the involved and

varied fact patterns in the instant case make it quite difficult for counsel

to agree upon the underlying facts; consequently, counsel on both sides

asked that the certification effort be abandoned. This Court reluctantly

agreed.

40a

work slowdowns in one department, National transferred

foremen to management positions in other departments;

(3) the management layoffs which did occur were based on

an employee’s company time; (4) since union employees

were not being promoted into significantly higher paying

jobs and were losing job protection, they seemingly would

have been very concerned about job seniority and would

“likely” have sought answers to questions regarding

seniority and layoff procedures.

There does not seem to be a dispute that prior to 1980,

management employees could transfer back to the P&M or

SNE ranks. The plaintiffs themselves generally relied upon

hearsay and alleged “common knowledge,” although mest

plaintiffs were personally familiar with very few employees

who transferred back. For example, plaintiffs Anderson,

Baker, Kruger, and Kondik each knew of one individual

personally; plaintiff Dhayer himself had transferred back

and knew of one other; plaintiff Barber knew of a “few

people” but did not name any; plaintiff Gracie had “heard

of several’’; a large number of plaintiffs mentioned knowl-

edge of employees Barkhurst and Michaux transferring

back; and a large number of plaintiffs knew of no employee

personally who had done so. From each individual plain-

tiffs perspective, then, the knowledge of a past practice

concerning returns was based on little personal knowledge

and a lot of alleged common knowledge.

While it is not precisely clear how many employees

were returned since 1975, it seems clear that, for whatever

reason, employees were returned and no employee who

sought to go back was denied the opportunity.’ The record

27National has acknowledged that it transferred management

employees back to the hourly ranks on and off since the 1950’s and

(Continued on next page)

4la

is far less clear as to the source of that right, however.

National has steadfastly maintained that it determined in

each case if and when an employee could return. On the

other hand, plaintiffs contend that National’s policy was,

in fact, as stated and that National guaranteed plaintiffs it

would return them to the hourly ranks. Thus, plaintiffs

claim that the promise is specific—that an employee could

return at such employee’s option for any reason.”* The

record contains little indication of that right in the evi-

dence of the past practices out of which the implied con-

tract allegedly arose. The definite and specific promise that

plaintiffs had the absolute right to return is missing from

the record (except for a reference by National’s McCreary

during the 1980 collective bargaining negotiations that

employees had the “unlimited” right to go back. See App.

B at 673). It must be remembered that the specificity and

completeness of the promises in the Heck’s handbook is an

important reason why the Supreme Court of Appeals of

West Virginia permitted an implied contract action to go

forward in that case.

The evidence as to a past practice that management

layoffs would be conducted by company time is inconsis-

tent. National states that former salaried nonexempt

(Continued)

1960's. See App. A at 701-03; id. at 761. No one could recall an

employee who had been denied the right to return. See App. B. at 728;

id. at 704-05; id. at 711. There is evidence that 15 employees returned

between 1977-79, see App. B at 729; and that 44 employees went back to

nonexempt positions between 1978 and 1982, see App. B at 730-33. On

the other hand, there is evidence that only 2 hourly employees returned

to the P&M unit between 1975 and 1980. See App. A at 785.

28With regard to plaintiffs’ fraud claims, plaintiffs may not succeed

if National controlled the right to return since National may well have

intended to return each plaintiff if requested at the time the oral repre-

sentation was made but reserved the right to change its mind in each

given instance of a request by an employee to return.

42a

employees were returned with full company seniority pur-

suant to the provisions of the Standard Practices Manual,

“with the approval of, and at the discretion of, manage-

ment.” App. A at 685. That provision was adopted in the

1980 SNE CBA and was later changed materially to restrict

returns in 1983. But that latter provision relates only to

SNE employees and speaks only to seniority after a return

to the SNE, not seniority as a condition of layoffs in the

management ranks.

Charles Lafferty, a National management employee,

suggested that company seniority was “probably” the

determining factor in the layoffs in 1977 and 1978,

although he indicated that performance was always a fac-

tor. App. A at 529-32. Lafferty said that there was disagree-

ment in 1978 in management about the criteria to use in

layoffs that year; and that those who asked about layoffs

after 1978 would probably have been told that the basis

was company time. /d. at 534.

But the practice does not seem ever to have been

uniform, based on the record evidence. For example,

Clyde Gast, who was Manager of Management Develop-

ment and Training, testified that he laid off employees in

1979 or 1980 on the basis of departmental, not company,

seniority; he knew there was a policy but did not remem-

ber what it was. App. C at 44-46. William Johnson laid off

plaintiff White in 1980 on the basis of performance. App.

C at 37-40. Plaintiff Joseph Mayernick stated in reference

to management policies regarding layoffs in the exempt

ranks: “To my recollection, I think there were two or three

that I had seen over the years with changes each time.”

App. C at 43. He also stated that an exempt employee in

his department was laid off in 1979 on the basis of perfor-

mance. /d. at 76-77.

43a

The evidence pointed to by plaintiffs indicates that

company time was probably the major factor in determin-

ing layoffs since 1977, but there seems to have been disa-

greement within management about that criteria, and per-

formance generally seems to have been a factor. Regardless

of National’s policy view, however, there does not seem to

be evidence that company time was recognized as the uni-

form practice by plaintiffs; there is an absence of the long-

standing practice evidenced by personal knowledge that

characterized the “return to the hourly ranks” past prac-

tice. Even if company date was the clear and unambiguous

layoff ‘policy of National, no implied contract could arise

unless there is a long and consistent use of that policy of

which plaintiffs were clearly aware. Only in such a case,

under the principles articulated in Heck’s and other cases,

could plaintiffs reasonably rely on the practice and

National be held to have recognized such reliance. That

kind of evidence is lacking in this case as to the use of

company time for management layoffs.

In sum, even if Heck’s is construed broadly in favor of

plaintiffs, the record in this case does not provide evidence

to support the existence of past practices whose terms are

definite and specific enough to give rise to an implied

contract conferring upon an employee the option to return

to the bargaining unit and to have company seniority in

the event of management layoffs.”

29Plaintiffs additionally admit that no plaintiff was promised that he

could work until retirement age and would only be fired for just cause.

See Plaintiffs’ Brief in Opposition at 47. Since no past practices or

policies support that contention and there is thus no basis for this Court

to find that promise implied in any contract, plaintiffs have stated they

are dropping that contention from Counts 1-3. Thus, plaintiffs allega-

tions in paragraphs 70(g), 85(f), and 98(g) of the Second Amended

Complaint will be dismissed.

44a

FRAUD CLAIMS

Preemption C_sims

In Counts Five-Nine, plaintiffs allege actual fraud and

constructive fraud growing out of the same facts which

gave rise to plaintiffs’ contract claims. National argues that

those claims are preempted.

The Supreme Court of the United States has noted

that questions relating to labor agreements must be

resolved by reference to uniform federal law, whether such

questions arise in the context of a suit for breach of con-

tract or in a suit alleging liability in tort. “Any other result

would elevate form over substance and allow parties to

evade the requirements of Sect. 301 by relabeling their

contract claims as claims for tortious breach of contract.”

Allis-Chalmers, 471 U.S. at 211.

In Allis-Chalmers, plaintiff brought a tort claim

against his union for the alleged bad faith handling of an

insurance claim; since the CBA contained an insurance

grievance procedure which plaintiff did not use, the source

of the state law claim was, in fact, the CBA, and resolution

of the claim required an interpretation of that agreement in

order to determine whether the union had not acted in

good faith regarding its contractual insurance grievance

obligations. Similarly, plaintiffs tort claim in Hechler,

supra, alleging the duty of the union to ascertain that plain-

tiff was properly trained, had its source in the IBEW’s

CBA, if one existed, since only an employer was recog-

nized as having such a duty under the applicable state law.

Consequently the tort claims in Allis-Chalmers and Hech-

ler were deemed preempted.

Two circuit courts have taken somewhat different

views with respect to preemption in two state tort cases in

45a

which similar facts were involved. In Bale, supra, plaintiffs

sued for fraud and negligent misrepresentation in connec-

tion with an alleged breach of an oral contract that plain-

tiffs would obtain the rights of regular employees after their

period of “temporary” employment ended. Instead, plain-

tiffs were discharged pursuant to a CBA provision which

gave regular employees returning from a leave preference

over “temporaries’” when jobs opened up. Plaintiffs

acknowledged that their contract claims were preempted

since their employment contracts could “be effective only

insofar as they were consistent with the collective agree-

ment.” Bale, 795 F.2d at 779. Since the alleged contractual

promises would have to be consistent with the terms of the

CBA, the court noted that to prove fraud or misrepresenta-

tion the plaintiffs would have to show that the terms which

they were promised differed from the CBA, requiring the

court to interpret the CBA. Thus, the fraud and misrepre-

sentation claims were deemed preempted.

The Eighth Circuit reached the opposite conclusion on

rather similar facts. In Anderson v. Ford Motor Co., 803

F.2d 953 (8th Cir. 1986), plaintiffs were former Ford

employees whose recall rights had expired. They were

brought on as new hires and subsequently “bumped” from

their jobs by employees with active recall mghts who were

entitled to preferential hiring under the governing CBA.

The Eighth Circuit noted that plaintiffs claim of fraudulent

misrepresentation (plaintiffs alleged that they were told

that they were being hired as permanent employees) did

not derive from nor depend upon an underlying contract,

and apparently concluded that since the standards for

judging fraud did not derive from any contractually-estab-

lished expectations of the parties, preemption was inappli-

cable. Anderson, 803 F.2d at 957. In dissent, Judge Bright

46a

asserted that to determine whether Ford’s actions were

fraudulent, the Court would have to address Ford’s claim

that it was relying on a CBA which also covered plaintiffs.

Since, Judge Bright concluded, “there is no way to measure

the misrepresentations alleged without examining that

which has been misrepresented[,] the collective bargaining

agreement[,]...[t]here is simply no way around the inex-

tricable meshing of the collective bargaining agreement

and appellants’ claims.” /d. at 960.

This Court adopts Judge Bright’s analysis in Anderson,

in that the fact that a plaintiff's fraud claim is not directly

grounded in a CBA (e.g., the duty to exercise good faith in

connection with grievance procedures, as in Allis-Chal-

mers, or the duty to ensure proper job training, as in Hech-

ler) does not mean that the claim is not preempted. If

resolution of the tort allegations requires a court to inter-

pret the provisions of a CBA (e.g., to determine whether,

in fact, those provisions were misrepresented by a defen-

dant), then the claim is preempted as “substantially depen-

dent upon interpretation of the collective-bargaining agree-

ment.” Caterpillar, 482 U.S. at 394. Thus, in sum, if a

fraud claim has its source in a duty generated by a CBA, or

if a court would have to analyze the provisions of a CBA to

determine the existence of an element of a fraud claim,

then the preemption doctrine applies.

Application of the Preemption Analysis

In Count Five, plaintiffs argue that National repre-

sentatives offered them management positions by promis-

ing plaintiffs that each could always return to the hourly

bargaining unit or to the salaried ranks, nonexempt under

the Fair Labor Standards Act, in the event there was a

layoff or in the event the plaintiffs chose to do so for any

47a

reason whatsoever. Plaintiffs argue that those statements

were false and material representations because at the time

the statements were made, it was the defendant’s policy

that it had the sole right to transfer plaintiffs back to the

hourly bargaining unit or salaried nonexempt ranks and

that National would consult first with the union prior to a

transfer. In order to determine whether such misrepresen-

tation occurred, this Court would not have to review the

terms of any CBA; rather, this Court would have to deter-

mine whether National’s return policy was as plaintiffs

state, and whether, in fact, National agents misrepresented

that policy to each plaintiff, or failed to disclose the policy

in response to a question regarding the procedures for lay-

offs. Since that inquiry does not require this Court to

review or to interpret the provisions of a CBA, the fraud

allegation in Count Five is not preempted by federal labor

law.

In Count Six, plaintiffs allege that National told the

eighteen employees named in Count Six that exempt

employee layoffs would be based on company time when,

in fact, since 1979, Nationa! had developed layoff policies

that listed criteria, such as exempt time, as determinants of

layoff status. That material misrepresentation concerns

only management layoffs and does not address representa-

tions concerning any matter governed by employees under

a CBA. Preemption, therefore, is not appropriate.

In Count Seven, plaintiffs allege that National agreed

in the P&M CBA to prohibit exempt employees from

returning to the P&M Unit and that National failed to take

proper steps to notify each plaintiff of the CBA changes

which prohibited them from returning. The alleged duty

on National’s part to notify each plaintiff is said to grow

out of the fact that National negotiated certain provisions

48a

in the 1980 P&M CBA which were adverse to plaintiffs. In

order to evaluate the existence of that alleged duty, a court

must review the CBA and the particular provisions to

which plaintiffs object. While plaintiffs urge that the focus

in this Court is the obligation to plaintiffs growing out of

the alleged promise that they could return to the collective

bargaining unit, that fraud claim cannot be resolved with-

out consideration of the 1980 negotiations and the provi-

sions adopted by National and the union in the CBA

prohibiting returns. A fraud claim so intertwined with the

provisions of a CBA is preempted.

Count Eight faces preemption for similar reasons. The

plaintiffs who bring that count claim that National had a

duty to notify them that it was negotiating with the SNE

unit, and later that it entered into an agreement concerning

the SNE unit on August 25, 1982, to prohibit such returns.

In order to determine whether that alleged duty of notifica-

tion exists, this Court would need to review the 1982 SNE

CBA negotiations and interpret the final CBA provisions

concerning the ability of the former SNE employees to

return to the SNE ranks. Since this Court would have to

look to the negotiations and to the CBA provision regard-

ing return to determine whether the allegations are correct,

and whether a duty to notify was generated, that count is

preempted.»

Plaintiffs suggest that Lingle, supra, stands for the proposition

that a state law claim need not be preempted simply because the court

must also interpret the provisions of a CBA in order to resolve the state

law claim. However, plaintiffs read too much into Lingle. The Supreme

Court did note in Lingle in an explanatory footnote at the end of the

opinion that a state law claim could survive preemption when it may

require interpretation of a CBA provision “tangentially” connected to

the state-law claim; the Court cited as an example using the CBA to help

determine the amount of damages in a state-law action. /d. at n.12. Such

(Continued on next page)

49a

Count 9 restates as a fraudulent misrepresentation the

claims by those plaintiffs that they were promised that

their seniority as management employee was based on

company time, and that exempt layoffs would be based on

company date seniority. Since that fraud count only con-

cerns promises allegedly made by National regarding

plaintiffs’ employment in management positions, and does

not concern a promise to return to the bargaining units or

seniority upon return, no CBA is implicated in the resolu-

tion of this claim. It is therefore not preempted.

Having reviewed National’s preemption Claims as to

each fraud count, this Court now turns to a review of the

individual fraud claims in the counts whic survive

preemption.

Analysis of Counts Five and Six

Generally, the essential elements in an action for fraud

are that (1) the act of fraud was committed by the defen-

dant; (2) it was material and false; (3) plaintiff relied upon

the misrepresentation and was justified in relying upon it;

and (4) plaintiff was damaged because he relied upon it.

Horton v. Tyree, 139 S.E. 737 (W. Va. 1927). A defendant

can be held guilty of, a misrepresentation when he makes a

statement “without knowledge as to its truth or falsity, or

makes it under circumstances such that he should have

know [sic] of its faisity.” Lengyel v. Lint, 280 S.E.2d 66, 69

(W. Va. 1981). Constructive fraud, on the other hand, “is a

breach of a legal or equitable duty, which, irrespective of

moral guilt of the fraud feasor, the law declared fraudulent,

(Continued)

is not the case in Counts Seven and Eight—if a duty to notify exists, it

has its source in the P&M and SNC CBAs and this Court would have to

look to the negotiations of and the language in those CBAs in order to

decide plaintiffs’ claims. Preemption is therefore appropriate.

50a

because of its tendency to deceive others, to violate public

or private confidence, or to injure public interests.”” Stan-

ley v. Sewell Coal Co., 285 S.E.2d 679, 682-83 (W. Va.

1982).

National claims that under West Virginia law, a party

suing for breach of contract cannot also sue and recover for

fraud in the inducement of the contract. National is correct

with respect to a party who has discovered fraud prior to

any breach of the contract; that party must elect either

(1) to rescind the contract on the basis of the fraud or

(2) affirm the contract and thereby waive any subsequent

action for fraud. A party has but one election to affirm or

repudiate the contract. See Hutton v. Dewing, 42 W. Va.

691 (1896).

But there is no principle of West Virginia law which

prohibits a party from seeking damages under both breach

of contract and fraud theories when the fraud is discovered

after the breach has occurred, and rescission or affirmation

is no longer possible. However, the fact that a party can

sue under two theories does not affect the remedies princi-

ple that “there can be only one recovery of damages for

one wrong or injury...A plaintiff: may not recover dam-

ages twice for the same injury simply because he has two

legal theories.” Harless v. First-National Bank in Fair-

mount, 289 S.E.2d 692 (W. Va. 1982). Each plaintiff's dam-

ages under the fraud claim begin at the point when he was

laid off, and includes the monetary value of the wages and

other benefits associated with employment which were lost

as a result of the layoff, and any damages for emotional

distress. Recovery of lost wages and benefits is also the

measure of recovery of damages under plaintiffs’ breach of

contract theory. Thus, plaintiffs may seek to establish lia-

bility under contract or fraud theories but they cannot

Sla

recover duplicative damages under both—they can only

recover under one theory.

(A) Constructive Fraud in Count Five

Plaintiffs concede that no express representations

upon which a claim of actual fraud can be based were

made to the eighteen plaintiffs in Count Five. Plaintiffs

argue, however, that this Court should impose a construc-

tive fraud upon National based upon the latter’s failure to

disciose to those plaintiffs that National had the unilateral

right to determine whether a plaintiff could return to the

bargaining unit. Apparently, plaintiffs also argue that con-

structive fraud theory as an alternative theory of liability

even for those plaintiffs who claim express fraud.

Plaintiffs argue that fraud can be based upon nondis-

closure of a material fact, citing Chamberlaine & Flowers

Inc. v. McRee, 356 S.E.2d 626 (W. Va. 1987), and Thacker

v. Tyree, 297 S.E.2d 885 (W. Va. 1982). Those cases set

forth the principle that ““where a vendor is aware of defects

or conditions which substantially affect the value or habit-

ability of [property or goods] which are unknown to the

purchaser and would not be disclosed by a reasonably dili-

gent inspection, then the vendor has a duty to disclose the

same to the purchaser. His failure to disclose will give rise

to a cause of action in favor of the purchaser.” Thacker,

297 S.E.2d at 885; Chamberlaine & Flowers, 356 §.E.2d at

629. Both of those cases involved purchases of homes by

the respective plaintiffs, and plaintiffs here cite no cases

extending that principle of a duty to disclose into the area

of employment contracts. It would appear that, in an “at

will” state, a holding that the employer had an affirmative

duty to disclose to prospective at will employees terms and

conditions under which the employee was to be laid off,

52a

would deprive the employer of his “at will” rights. The

employer’s actions would, in effect, eliminate the at will

nature of the employment and substitute an oral contract

consisting of the terms outlined by the employer. Thus,

while an affirmztive misrepresentation is actionable in this

context, the employer’s “concealment” of layoff policies in

the absence of an inquiry about them is not. See Broussard

v. CACI, Inc.-Federal, 780 F.2d 162, 164 (Ist Cir. 1986)

(employer’s failure to reveal details of its discharge at will

policy not actionable either as a half-truth or as a fraudu-

lent concealment); Sabet v. Eastern Virginia Medical

Authority, 775 F.2d 1266, 1270 (4th Cir. 1985) (school not

liable to associate professor for failure to inform the latter

that the school’s tenure policy differed from that of tenure

policy prevalent at other institutions); Restatement (Sec-

ond) of Torts §551 (1977) (silence cannot give rise to liabil-

ity for fraud in the absence of a duty to disclose).

The Supreme Court of Appeals of West Virginia has

noted the general principles of law in this area:

Constructive fraud is a breach of a legal or equitable

duty, which, irrespective of moral guilt of the fraud

feasor, the law declares fraudulent, because of its ten-

dency to deceive other, to violate public or private

confidence, or to injure public interests. .. .

Perhaps the best definition of constructive fraud is

that it exists in cases in which conduct, although not

actually fraudulent, ought to be so treated, that is, in

which conduct is a constructive or quasi fraud, which

has all the actual consequences and legal effects of

actual fraud. ... The law indulges in an assumption of

fraud for the protection of valuable social interests

based upon an enforced concept of confidence, both

public and private.

53a

Stanley v. Sewell Coal Co., 285 S.E.2d 679, 682-83 (W. Va.

1982). The Court noted that “in this respect, constructive

fraud closely parallels the wrongful discharge in Harless /v.

First National Bank, 246 S.E.2d 270 (W. Va. 1978)], which

contravened a substantial public policy principle [i.e.,

employees should not be fired for reporting safety viola-

tions which could harm others].”

Constructive fraud is usually imposed in cases where

“a fiduciary or confidential relation [exists] between the

parties,” but is aiso meant, as noted above, “to include

violations of public policy or public rights or transactions

affected by illegal conduct of any kind.” Miller v. Hunting-

ton & Ohio Bridge Co., 15 S.E.2d 687, 695 (W. Va. 1941).

As the Supreme Court of Appeals noted in

Chamberlaine & Flowers, Inc., 356 S.E.2d at 629, a “duty

to disclose” on the part of the alleged fraud feasor arises

when the fraud feasor “is aware of... conditions which

substantially affect” the plaintiff's decision, and those con-

ditions are unknown to the plaintiff and “would not be

disclosed by a reasonably diligent inspection.”

No fiduciary or other confidential relationship existed

between plaintiff and National. Nor is there a public pol-

icy, such as safety, implicated in National’s alleged actions

regarding the promotion and layoff of the plaintiffs. Plain-

tiffs have not asserted that National has done something

illegal.

Absent such justifications for imposing constructive

fraud, plaintiffs seem to argue that, since National knew

that job security was important to each plaintiff, and that a

unilateral right to return was an important element of

employment security, National owed plaintiffs a duty to

54a

disclose its policy that National had the nght to return or

not to return plaintiffs after consultation with the union.

The record in this case does not reveal an “extreme

situation” in which National’s actions constituted “arbi-

trary and irresponsible behavior so egregious that failure to

disclose [its return policy] would constitute fraudulent

concealment.” Broussard, 780 F.2d at 164. National’s pol-

icy was that it had the right to return foremen to the

bargaining units and its past practice seemed to be to

return foremen who so requested or who could not handle

the foreman position, at least until that right of National’s

was removed by the CBAs. While National perhaps should

have fully disclosed the parameters of the right to return,

this Court cannot conclude that this record permits impo-

sition of a constructive fraud in the absence of the conduct

at issue in cases such as Wildes v. Pens Unlimited Co., 389

A.2d 837 (Me. 1978), where an employer was held liable

for concealing from a salesman being hired the fact that a

reorganization was then underway which would eliminate

the salesman’s job. That National had a policy of returning

foremen does not justify the assumption on plaintiffs’ part

that the foremen had the unilateral right to return and that

National should reasonably have informed plaintiffs of the

limitations National placed upon the policy. If plaintiffs

were concerned about the details of the right to return,

they could have asked whether National had any say in

whether they could return. Apparently, that explicit ques-

tion was never asked. While National’s return policy does

not appear to have been accessible to plaintiffs in any

manual, there is no indication in the record that plaintiffs

could not have ascertained the policy, with reasonable

investigation—such as asking a National agent. Under

those conditions, this Court concludes that the Count Five

55a

plaintiffs may not prevail on the basis of constructive

fraud.

(B) Actual Fraud in Count Five

Plaintiffs contend that thirty-eight plaintiffs in Count

Five were promised they could always return to the hourly

bargaining unit (or the salaried nonexempt ranks) in the

event there was a layoff or the plaintiffs chose to do so for

any reason whatsoever. Second Amended Complaint at

4123. There is no doubt that all of the alleged misrepresen-

tations were made by National’s agents, so the first require-

ment—that the alleged fraud be made or induced by the

defendant—is met for each plaintiff. Plaintiffs run into a

snag, however, with the requirement that the statements

allegedly made by each National agent were actually false

when made.

Plaintiffs contend that while National represented to

each plaintiff that he had the unilateral right to return to

the bargaining unit at any time for any reason, the policy at

the time each such representation was made was that

National—and not the employee—had the right, in collab-

Oration with the union, to determine whether a plaintiff

could return. National does not deny the existence of the

return policy as it is characterized by plaintiffs. The prob-

lem arises with the vagueness and generality of many of

the promises as set forth in the depositions and affidavits

of the plaintiffs. The plaintiffs’ inquiries and National’s

responses were rarely framed in the manner alleged by

plaintiffs (e.g., did each plaintiff have a unilateral right to

56a

return at the plaintiff's sole cption?). Usually the questions

were general (e.g., could I go back if I didn’t like the job?).>!

Fraud requires proof “by clear and convincing evi-

dence that a representation of the defendant was false

when made.” Lissmank vy. Hartford Fire Ins. Co., 848 F.2d

50, 52 (4th Cir. 1988). The burden of proof is on the party

alleging fraud and “‘‘if the fraud is not strictly and clearly

proved as it is alleged, relief cannot be granted.’” A/le-

gheny Development Corp., Inc. v. Barati, 273 S.E.2d 384,

387 (W. Va. 1980) (quoting Board of Trustees v. Blair, 32

S.E. 203 (1899)). In order that there be actionable fraud,

the representation

must ordinarily relate to a past or existing fact, or to a

past or existing fact that is alleged, and not to future

occurrences. So the general rule... is that fraud can-

not be predicated on statements which are promissory

in their nature, or constitute expressions of intention,

and an actionable representation cannct consist of

mere broken promises, unfulfilled predictions or

expectations, or erroneous conjectures as to future

events, cven if there is no excuse for failure to keep the

promise, and even though a party acted in reliance on

such a promise; nor... is the mere nonperformance of

a promise evidence establishing fraud or lack of intent

3!Plaintiffs have steadfastly argued that National had a past practice

at the time each representation was made of always returning former

P&M and SNE unit members. In fact, there does not appear to be any

evidence in the voluminous record before this Court of any former

bargaining unit member who was not permitied to return prior to the

layoffs giving rise to the claims in this litigation. Thus, in a de facto

sense, the representation that a plaintiff could go back was generally

true—National had always sent former unit members back, although

the record does not seem to reveal whether most of the past cases

involved returns at the request of the employees or of National.

57a

to perform. Predictions as to future events are ordi-

narily regarded as nonactionable expressions of opin-

ion on which there is no right to rely, and obviously

cannot constitute fraud where made in the honest

belief that they will prove correct.

Janssen v. California Lumber Co., 73 S.E.2d 12, 17 (W. Va.

1952).

The burden is on each plaintiff to demonstrate by

clear and convincing evidence that he was promised that

he had the unilateral right to return. If the alleged promise

is vague, reflects an opinion of the National agent, or can

equally be viewed as a promissory statement that National

would return the plaintiff if the plaintiff desired, then the

claim of fraud must fail. Plaintiffs have neither argued nor

supplied evidence that National agents intentionally mis-

led plaintiffs. Thus, each plaintiff's claims turn on the pres-

ence or the absence of clear evidence that the plaintiff was

promised that he could return at his option.

Each plaintiff must also demonstrate that he relied

upon the alleged misrepresentations, that his reliance was

justified, and that plaintiff was damaged because he relied

upon it.

National argues that the fraud alleged regarding a

return to the units did not cause plaintiffs’ injuries—that

the reason each plaintiff was not returned is because the

union and National negotiated away the right to return in

the 1980 P&M CBA and in August 1982 for the SNE CBA;

but for the changes in the CBAs, National would have

agreed to return each plaintiff had he requested to be

returned.

Plaintiffs claim that they were damaged because they

left the bargaining units, not because National failed to

58a

return them to their former positions in the bargaining

units. But for the fraudulent statements, plaintiffs assert,

they would not have left the bargaining units and would

not have been laid off, or would have been recalled sooner.

Each plaintiff, in order to support that theory, must pro-

vide evidence to show that he would have remained in the

union ranks had he known of National’s official policy

regarding returns. Therefore, as with their contentions con-

cerning National’s representations, plaintiffs are entitled to

pursue their theory of the case as long as it can be sup-

ported by the facts in the record.

The heavy substantive burden which a plaintiff carries

in order to demonstrate actual fraud was noted in Steele v.

Steele, 295 F. Supp. 1266, 1269 (S.D. W. Va. 1969):

When a plaintiff contends that a party has practiced

actual fraud with respect to a particular transaction,

the bur’en is upon the plaintiff to establish the exis-

tence of fraud, and the existence of such fraud is not

deducible from facts and circumstances which-would

be equally consistent with honest intentions. In sum, a

presumption always exists in favor of innocence and

honesty in a given transaction and the burden is upon

one who alleges fraud to prove it by clear and distinct

evidence.

(Citations omitted).

That formulation is important in this case because, as

this Court has noted again and again in reviewing the

plaintiffs’ claims, the simple representation by National to

a plaintiff that he could go back to the bargaining unit is

“equally consistent” with a representation by National that

National would transfer him back; such a representation,

without more, will not prove fraud “by clear and distinct

evidence” and will not permit the claim to go to the jury.

59a

The Count Six Fraud Claims

The plaintiffs in Count Six are former salaried nonex-

empt and hourly employees who were promoted by

National to exempt positions. They raise a number of

claims of actual and constructive fraud in this count,

claiming both actual misrepresentations (that exempt sala-

ried employees would be transferred, not laid off, during a

slowdown, and any layoffs would be by company time),

The count reads:

146. When each of the aforesaid plaintiffs met with the Defen-

dant’s agents and representative regarding the acceptance of a sala-

ried exempt position, the Defendant failed to disclose the following

material facts to them:

(a) That the Defendant was actively planning layoffs of exempt

workers;

(b) That the Defendant had established policies and guidelines

with regard to a layoff of exempt workers;

company time as the determinant for exempt layoffs;

(d) At least one policy listed exempt seniority date as one of the

criteria;

(e) That the policies listed length of service as a criteria; and

(f) That the company’s position remains unclear whether

length of service meant exempt seniority date.

147. When each of the aforesaid Plaintiffs met with the Defen-

dant’s agents and representatives regarding a salaried exempt posi-

tion, each of the aforesaid Plaintiffs were told that the company

would not lay off its exempt salaried employees if there was a

slowdown; rather, the Defendant would transfer its exempt employ-

ees to other exempt positions throughout the mill.

148. When each of the aforesaid Plaintiffs met with the Defen-

dant’s agents and representatives regarding a salaried position, each

of the aforesaid Plaintiffs were told that in the unlikely event there

would be layoffs of exempt employees, such layoffs would be based

on an exempt employee’s company time.

149. Each of the aforesaid Plaintiffs relied upon the statements of

the Defendant that a layoff of exempt employees would be based on

company time and/or that there would not be a layoff of exempt

employees.

60a

and constructive fraud (that ‘National owed plaintiffs a

duty to disclose its pians for imminent reductions and its

guidelines for layoffs).

(A) Constructive Fraud in Count Six

This Court has already addressed the requirements for

constructive fraud. As with Count Five, National had no

duty to disclose its general layoff policies to at will employ-

ees—such a requirement would automatically end the at

will status of employees who could then plausibly claim

under the authority of Heck’s that Nationail’s layoff poli-

cies gave rise to an implied contract. However, National

could be found to have had a duty to disclose to one or

more of those plaintiffs that it was planning an imminent

reduction of employees in the positions for which the par-

ticular plaintiff was to be hired. An employee could not be

expected to know, or to discover, management’s plans to

eliminate jobs in the department for which the plaintiff

was interviewing. In a situation in which management

offered a position to a plaintiff with knowledge (or imputed

knowledge) that it was highly probable that the plaintiff

would be laid off, the imposition of a constructive fraud

might well be required. The application of such a principle

in a given situation is, however, heavily fact-dependent.

National, as noted above, did not have a general duty to

disclose to its at will employees its guidelines for layoffs,

regardless of whether those guidelines were developed

before or after each plaintiff was offered a management

position. All of the plaintiffs in Count Six were promoted

between 1979 and 1981. Those plaintiffs assert that

National began making preparations for major manage-

ment layoffs in the summer of 1979. Each Count Six plain-

tiff was laid off in 1982. The fact that National recognized

in 1979 that a contingency existed which might involve

6la

layoffs in the future would not, in and of itself, trigger a

duty to disclose. This Court can take judicial notice that

the turmoil in the United States steel industry was widely

known in the late 1970s and general preparations in those

years for the possibility of layoffs should hardly have come

as a surprise to employees at a steel plant. Plaintiffs must

demonstrate more—i.e., that layoffs were planned and, in

National’s view, were highly likely in the management

positions for which each plaintiff was to be hired.

Plaintiffs have offered evidence that National had, or

began developing, layoff guidelines for exempt salaried

employees in 1979. However, as far as this Court can

determine, plaintiffs have not supplied or proffered any

evidence in this voluminous record to indicate what

National’s specific plans for layoffs were in the years 1979-

81. Without further evidence beyond the existence of cop-

ies of guidelines, this Court does not believe that there is

enough evidence in the record to allow a constructive

fraud claim to go to the jury. Consequently, National will

be granted summary judgment with regard to the construc-

tive fraud claims in Count Six.

(B) Actual Fraud in Count Six

The plaintiffs also allege express misrepresentations as

to the following alleged promises: (1) that National would

transfer rather than lay off exempt employees in the event

of a “slowdown”; (2) that in the event of “layoffs” of

exempt employees, they would be based on company time;

and (3) that there would not be a layoff of exempt employ-

ees. A representation of a future event—the promise that

exempt employees would not be laid off—is an “opinion

on which there is no right to rely, and obviously cannot

constitute fraud where made in the honest belief that they

62a

will prove correct.” Janssen, 73 S.E.2d at 17. Thus, in

order to prove that this representation was fraudulent, the

plaintiff must show that the National agent who made it

did so knowing that layoffs were going to occur or were at

least highly likely to occur.

Count Nine

The gist of Count Nine seems to be plaintiffs’ claim

that this Court should impose a constructive fraud upon

National either because National did not disclose to them

that its layoff policy was not based on company time or

because National laid off each plaintiff without regard to

company, time.*} In connection with Count Six, this Court

3The Count reads:

177. When each of the aforesaid plaintiffs were offered an exempt

position by the Defendant, they asked Defendant’s agents and rep-

resentatives about their seniority.

178. Each of the aforesaid plaintiffs asked Defendant's agents and

representatives if they would lose their seniority if they accepted a

salaried exempt position.

179. Each of the aforesaid Plaintiffs were promised that they

would keep their company time, they would not lose any of their

company time and that they would not start off as a new employee.

180. Each of the aforesaid Plaintiffs relinquished their hourly or

non-exempt position and accepted the salaried exempt position in

reliance upon the promises made by Defendant’s agents and

representatives.

181. Each of the aforesaid Plaintiffs’ vacation time was based

upon his company seniority date.

182. The monthly paycheck of each of the aforesaid Plaintiffs

listed his seniority as the date that such Plaintiff began working for

the Defendant.

183. Each of the aforesaid Plaintiffs were led to believe by Defen-

dant’s statements, representations and conduct that their seniority

as an exempt employee was their company seniority.

184. Each of the aforesaid Plaintiffs were led to believe by Defen-

dant’s statements, representations and conduct that exempt layoffs

wouid be conducted based on company date seniority.

(Continued on next page)

63a

has refused to impose a duty upon National to disclose its

layoff policies to at will employees, who could have specifi-

cally asked National’s agents whether company time gov-

erned management layoffs. If such a question had been

asked and a misrepresentation made, plaintiffs could have

sued for actual fraud—as did many of the plaintiffs in

Count Six. The record reveals that most, if not all, plain-

tiffs were aware that they were moving from the relative

security of the union ranks to an unprotected, at will, posi-

tion. West Virginia law does not establish any special rela-

tionship between employers and at will employees and, in

the absence of egregious facts, this Court cannot impose a

duty upon National to disclose policies which, by its very

definition, the at will status does not require. The issue of

company time for layoffs is the sort of policy an employee

would seemingly think to inquire about, in contrast with,

for example, an employer’s plans to lay off employees.

When plaintiffs were concerned about specific policies—

ée.g., return to the units—a number of them asked ques-

tions. That plaintiffs may have not asked about seniority

status for layoffs, even if vacation was based on company

time and even if the company date was listed on the

paycheck, is not reason for this Court to impose a con-

structive fraud upon National for not disclosing its layoff

policy. Accordingly, National is entitled to summary judg-

ment with regard to this claim.

(Continued)

185. Each of the aforesaid Plaintiffs were laid off based on their

exempt date seniority.

186. As a result of the above described acts of the defendant, the

Defendant breached an equitable duty, trust or confidence which

resulted in damage to each of the aforesaid Plaintiffs and injured

the public interest.

64a

OTHER CLAIMS

Plaintiffs’ Claims for Outrageous Conduct and

Intentional, Wanton Infliction of Harm

Counts Ten through Twelve of the Second Amended

Complaint allege that National’s conduct in laying off

plaintiffs “intentionally or recklessly subjected plaintiffs to

extreme and outrageous conduct, which caused severe

emotional distress in each plaintiff.” (q195). The Supreme

Court of Appeals of West Virginia described the tort of

outrageous conduct in Harless v. First National Bank in

Fairmount, 289 S.E.2d 692, 703 (W. Va. 1982), as follows:

The tort of outrageous conduct or intentional inflic-

tion of emotional distress permits the recovery of

damages for emotional distress arising out of extreme

and outrageous conduct intentionally or recklessly

caused by the defendant as indicated in Section 46 of

the Restatement (Second) of Torts:

“One who by extreme and outrageous conduct

intentionally or recklessly causes severe emotional

distress to another is subject to liability for such

emotional distress, and if bodily harm to the other

results from it, for such bodily harm.”

The Court went on to note that “the Restatement further

defines the essential elements of this tort as follows:

d. Extreme and outrageous conduct . . . It has not been

enough that the defendant has acted with an intent

which is tortious or even criminal, or that he has

intended to inflict emotional distress, or even that his

conduct has been characterized by “malice,” or a

degree of aggravation which would entitle the plaintiff

to punitive damages for another tort. Liability has

65a

been found only where the conduct has been so outra-

geous in character, and so extreme in degree, as to go

beyond all possible bounds of decency, and to

regarded as atrocious, and utterly intolerable in a civi-

lized community.

Id., at 703-04 n.20.

To state the definition of the tort of outrageous con-

duct is to recognize that the behavior of National as

revealed by the record in this case comes nowhere near to

meeting the requirement that “the conduct was outrageous

and intolerable in that it offends against the generally

accepted standards of decency and morality.” Jd. Layoffs

and contract beaches are not unusual events and do not

automatically reveal outrageous conduct. There is no evi-

dence of malice in this case, or even of a deliberate attempt

on the part of National management employees to mislead

plaintiffs into accepting the promotions from which they

were later laid off. Rather, extensive and detailed review of

the several hundred pages of depositions, affidavits and

answers to interrogatories reveals that the evidence against

National on the contract and fraud claims is not over-

whelming; indeed, National is entitled to summary judg-

ment on a large number of those claims. Even if, as plain-

tiffs imply, the reduction in production at Weirton was the

result of a corporate decision to shift production resources

elsewhere, rather than the direct result of a recession in the

steel industry, such business decisions do not reflect con-

duct “so outrageous in character, and so extreme in degree,

as to go beyond all possible bounds of decency, and to be

regarded as atrocious, and utterly intolerable in a civilized

community.” And, while certainly not a substitute for the

positions at Weirton, the layoffs were cushioned to some

extent by National’s Income Protection Program, which

66a

provided payments that, when coupled with unemploy-

ment compensation, totalled 75% of one’s base salary for a

year.*4

For these reasons, plaintiffs’ claim in Counts Ten

through Twelve for outrageous conduct will be dismissed.

Count Thirteen-Plaintiffs’ Claim for a Violation

of Public Policy

Plaintiffs allege in Count Thirteen that National's

“layoff and/or failure to recall” each of the plaintiffs “con-

travenes a substantial public policy of the State of West

Virginia.” 9262. Plaintiffs identify that policy as the

requirement that “employers and employees must deal

with each other on the basis of good faith, and in such

manner as to protect the legitimate nghts of both employ-

ers and employees in their relations.” Jd. at 202.

Plaintiffs do not identify the source of this “public

policy.” In fact, plaintiffs apparently do not address this

issue at all in their briefs. No case in West Virginia has

been found identifying that policy or indicating that a

party can bring a cause of action for its alleged violation.

Since “the existence of public policy is a question of law,”

Cordle v. General Hugh Mercer Corp., 325 S.E.2d 111, 114

(W. Va. 1983), this Court concludes that National’s con-

duct has far from risen to the level of a violation. Cf

It should be noted that plaintiffs, if successful, can recover com-

pensatory and punitive damages under the fraud claims in Counts Five

and Six. Harless involved a claim for wrongful discharge, a form of

constructive fraud; the court stated that “the damages are essentially the

same under both claims [retaliatory discharge and outrageous conduct}

since we recognize that if the employer's conduct is outrageous, punitive

damages can be recovered in a retaliatory discharge suit as well as

compensatory damages including an award for emotional distress.”

Harless, 289 S.E.2d at 692. The same is true in this case regarding the

claims for fraud.

67a

Harless v. First National Bank in Fairmount, 246 S.E.2d

270 (W. Va. 1978) (violation of public policy when

employee was allegedly discharged because of his attempt

to comply with the West Virginia Consumer Protection

law); Stanley v. Sewell Coal Co., 285 S.E.2d 679 (W. Va.

1981) (violation of public policy when employee was alleg-

edly discharged for refusing to falsify reports).

The Effect of the Sale of the Weirton Division

National sold substantially all of the assets of Weirton

Steel to the employee-owned Weirton Steel Corporation,

effective January 11, 1984. At that point, twenty-one of the

plaintiffs who had been laid off by National had not been

recalled. Subsequent to January 11, 1984, twelve of these

plaintiffs had been recalled by Weirton Steel Corporation.

Apparently, nine plaintiffs were never recalled. National

argues that any damages it might owe to those plaintiffs

who were not recalled by the date it sold Weirton end as of

the date of the sale.

Under contract law principles, a party who is the vic-

tim of breach is entitled to the benefit of the bargain as

damages for the breach. That “benefit” extends to the life

of the contract which was breached. The alleged employ-

ment contracts which serve as the basis for the contract

and tort claims in the instant suit do not include any term

defining the length of the contract, and the record does not

reveal the intentions of either party as to the duration of

the alleged contracts. “When the parties to a bargain suffi-

ciently defined to be a contract have not agreed with

respect to a term which is essential to a determination of

their rights and duties, a term which is reasonable in the

circumstances is supplied by the Court.” Restatement of

Contract (Second) §204. Although plaintiffs have stated

68a

that they were promised work until retirement unless ter-

‘ninated for just cause, plaintiffs admitted, and this Court

has previously determined, that no express promise

regarding the life of the alleged promises was ever made.

Were such contracts as alleged actually found to exist by a

factfinder, this Court would be called upon to supply the

term of duration.

Numerous other courts have stated that such employ-

ment contracts “last only as long as the employee is able

and willing to do satisfactory work, and as long as the

employer remains in business and has work available for

the employee.” McDole v. Duquesne Brewing Co., 421

A.2d 1155, 1159 (Pa. Super. 1980) (and cases there cited).

Since National did not maintain its steel business at Weir-

ton after the sale, National’s obligations under the alleged

oral contracts, had they not allegedly been breached, would

have ended the day of the sale. While the West Virginia

courts apparently have not addressed this issue, West Vir-

ginia appears to follow the general rule that employment

agreements with no specific duration term are terminable

at the will of either party unless the employee provides

some consideration beyond his employment services

which would support a claim for “permanent” employ-

ment. See Wright v. Standard Ultramarine And Labor Co.,

90 S.E.2d 459 (W. Va. 1955); PEMCO Corp. v. Rose, 257

S.E.2d 885 (W. Va. 1979). The view of other courts that

even contracts for “permanent” employment, by defini-

tion, end when the employer no longer has work available

is a consistent extension of this view and a reasonable

assumption as to what the parties would have agreed to

had they thought to bargain with regard thereto.

69a

It follows that if the contractual obligation of National

ended when it sold the Weirton division, its liabilities for

breach—both in contract and in compensatory tort—also

ended on the date of the sale.

8 &@ @.2°¢-¢ @ 2 @

Senior United States District Judge

70a

Appendix B

U.S. DISTRICT COURT

FILED AT WHEELING, WV

FEB 12 1990

NORTHERN DISTRICT OF WV

OFFICE OF THE CLERK

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF

WEST VIRGINIA

ARTHUR DALE WHITE, et al.

Vv. >

NATIONAL STEEL CORPORATION

Civil No.

83-0059-W

ORDER

Count One

(a) The claims of the plaintiffs as set forth in para-

graph 70(c) of the Second Amended Complaint are pre-

empted by section 301 of the Labor Management Rela-

tions Act. Those claims are dismissed.

(b) Summary Judgmeni for defendant is granted as to

the claims of the following plaintiffs relating to the use of

company date seniority for management layoffs, as set

forth in paragraphs 70(a), (b), (d) and (e) of the Second

Amended Complaint:

James Baker

James Browning

James Bullock

Edward Dhayer

William Duncan

Dorsey Garrett

Tla

David Kondik

William Garrison

James Hazlett

Phillip Johnson

Jerry Jones

Robert Jones

Joseph Karas

Bartley Kirkbride

Frank Kruger

Charles Lacey

Ernest Mc ormick

Charles Prince

John Selman

Dominic Tedeschi

Rena Hess

the claims of the following plaintiffs set forth in paragraphs

70(a), (b), (d) and (e) of the Second Amended Complaint is

denied:

Arthur White

James Anderson

Harry Brown

Ralph DiBacco

Dominic Frio

James Gracie

David Harbin

Dale Poole

Ronald Spring

Stephen Tucker

Charles West

Donald White

Robert Billick

72a

Larry Riggle!

- Frederick Tate

(d) Plaintiffs have withdrawn the claims of all plain-

tiffs in this count concerning the alleged promise that the

defendant would continue to employ plaintiffs until

mandatory retirement age unless the defendant had just

cause to terminate plaintiffs, as set forth in paragraph 70(g)

of the Second Amended Complaint. Those claims are

therefore dismissed.

(e) This Court concludes that past and continuing pol-

icles and practices cannot give rise to an employment con-

tract under the facts as alleged in this case. Therefore,

summary judgment is granted in favor of National as to all

of the claims of plaintiffs based upon an implied contract

theory.

Count Two

(a) Plaintiffs have withdrawn the claims regarding life-

time employment set forth in paragraph 85(f) of the Sec-

ond Amended Complaint. That claim is therefore

dismissed.

(b) Defendant is granted summary judgment as to all

of the contract claims set forth by plaintiff John Cominsky

in paragraph 85 of the Second Amended Complaint.

claim of Robert Sutton regarding the use of company date

‘In Plaintiffs’ Comments on the Court’s Tentative Order Dated

September 15, 1988, plaintiffs requested this Court to reconsider its

tentatively Proposed grant of summary judgment to National with

respect to this plaintiff. After so reconsidering, and for the reasons stated

on page 4 of Plaintiffs Comments, this Court concludes summary judg-

ment should be denied.

73a

seniority set forth in paragraphs 85(a)-(d) of the Second

Amended Complaint.

(d) As to plaintiffs’ allegations of an implied employ-

ment contract based upon past and continuing practices

set forth in paragraph 85 of the Second Amended Com-

piaint, this Court adopts the view set forth in paragraph

l(e), supra.

Count Three

(a) Plaintiffs’ claims asserting a right to return to for-

mer nonexempt salaried positions in the event of a reduc-

tion set forth in paragraph 98(c) of the Second Amended

Complaint are not preempted by section 301 of the Labor

Management Relations Act.

(b) Plaintiffs have withdrawn the claim relating to life-

time employment set forth in paragraph 98(g) of the Sec-

ond Amended Complaint.

ing all of the contract claims set forth by the following

plaintiffs in paragraph 98 of the Second Amended

Complaint:

Joseph Mayernick

Patricia Mlodzik

William Riggs

(d) Defendant is denied summary judgment concern-

ing the following express coniract claims set forth in

paragraphs 98(a)-(e) of the Second Amended Complaint:

Thomas Balon

Robert Bray

Charles Clark

John Sciance

Richard Blancato

74a

Dennis Shirer?

Hoy Van Horn?

(e) Defen@ant is granted summary judgment with

respect to the claim by plaintiff Kenneth Seiple of a right to

return to his former nonexempt position, set forth in para-

graph 98(c) of the Second Amended Complaint.

(f) Defendant is granted summary judgment concern-

ing the claims of plaintiffs Larry Bell and David Bickler set

forth in paragraph 98(c) of the Second Amended Com-

plaint, but is denied summary judgment as to plaintiffs’

claims set forth in paragraphs 98(a), (b), (d) and (e) of the

Second Amended Complaint.

(g) As to plaintiffs’ allegations of an implied employ-

ment contract based upon past and continuing practices

set forth in paragraph 98 of the Second Amended Com-

plaint, this Court adopts the view set forth in paragraph

l(e), supra.

Count Four

(a) Defendant is granted summary judgment as to the

express contract claims of plaintiffs Walter Mrozek and

Todd Blair set forth in paragraph 111 of the Second

Amended Complaint. As to plaintiff Mrozek’s claim of an

implied employment contract, this Court adopts the views

set forth in paragraph lI(e), supra.

2For the reasons stated on page 9 of Plaintiffs’ Comments, National

is denied summary judgment with regard to the claims of this plaintiff.

3For the reasons stated on page 3 of Plaintiffs’ Response to Defen-

dant’s Comments on this Court’s Tentative Order Dated September 15,

1988, National’s motion for summary judgment is denied.

ae!

75a

Count Five

(a) The allegations in this count are not preempted by

section 301 of the Labor Management Relations Act.

(b) The following plaintiffs alleged only constructive

fraud, which cannot be imposed on an employer under the

facts as alleged in paragraph 132 of the Second Amended

Complaint; therefore, the claims in this count of the fol-

lowing plaintiffs are dismissed:

Robert Billick

James Bullock

William Garrison

Rena Hess

Jerry Jones

Robert Jones

Bartley Kirkbride

David Kondik

Frank Kruger

Ernest McCormick

Ronald Spring

Stephen Tucker

Charles West

Larry Bell

Patricia Mlodzik

William Riggs

Robert Ryan

Kenneth Seiple

ing the claims of express fraud set forth in paragraphs 123-

31 of the Second Amended Complaint by the following

plaintiffs:

Phillip Johnson

Larry Riggle

ell

76a

Timothy Lawson

Joseph Mayernick

(d) Defendant is denied summary judgment concern-

ing the claims of express fraud set forth in paragraphs 1! 23-

31 of the Second Amended Complaint by the following

plaintiffs:

Arthur White

James Baker

David Bickler

Robert Bray

Thomas Balon

Robert Karas

Dale Poole

James Anderson

Richard Barber

Edward Bittner

Richard Blancato

Harry Brown

James Browning

Charles Clark

Edward Dhayer

Ralph DiBacco

William Duncan

Dorsey Garrett

James Gracie

David Harbin

Charles Lacey

Charles Murray

Charles Prince

John Sciance

John Selman

Dennis Shirer

Fred Tate

Hoy Van Horn —

Dominic Tedeschi

77a

Count Six

(a) The allegations in this Count are not preempted by

section 301 of the Labor Management Relations Act.

(b) Defendant is granted summary judgment concern-

ing the constructive fraud claims set forth in paragraph 146

of the Second Amended Complaint by the following

plaintiffs:

Phillip Johnson

John Cominsky

Patricia Mlodzik

claims of express fraud set forth in paragraphs 147-49 of

the Second Amended Complaint by the following

plaintiffs:

Walter Mrozek

William Riggs

(d) Defendant is denied summary judgment concern-

ing the claims of express fraud set forth in paragraphs 147-

49 of the Second Amended Complaint by the following

plaintiffs:

Robert Billick

Robert Bray

Harry Brown

Charles Clark

Ralph DiBacco

David Harbin

John Sciance

Kenneth Seiple

Robert Spring

Stephen Tucker

Robert Sutton

EE ————

78a

Counts Seven and Eight

The claims in these counts are preempted by section

301 of the Labor Management Relations Act. Those counts

are therefore dismissed.

Count Nine

Because constructive fraud cannot be imposed upon

an employer under the facts as alleged in this count, the

claims in this count are dismissed.

Counts Ten—Thirteen

For the reasons set forth in this Court’s opinion filed

August 30, 1989, these claims are dismissed.

Damages

For the reasons set forth in this Court’s opinion filed

August 30, 1989, defendant’s motion for summary judg-

ment is granted as to plaintiffs’ claims for damages beyond

January 11, 1984; accordingly, plaintiffs are entitled to no

damages beyond that said date.

This Court recognizes the controlling nature of the

judgments and rulings set forth above as to further pro-

ceedings in this litigation and the Court has determined to

enter final judgments pursuant to Rule 54(b) and also cer-

tify certain rulings in this Order for appeal pursuant to 28

U.S.C. §1292(b).

The Court hereby expressly directs the entry of final

judgments pursuant to Rule 54(b) upon the express that

there is no just cause for delay as to the following plaintiffs

whose entire clams have been dismissed in this Order:

Todd Blair

James Bullock

79a

William Garrison

Rena Hess

Phillip Johnson

Robert Jones

Jerry Jones

Bartley Kirkbride

David Kondik

Frank Kruger

Ernest McCormick

Joseph Mayernick

Patricia Mlodzik

William Riggs

John Cominsky

Walter Mrozek

Also, this Court hereby expressly directs the entry of

final judgments pursuant to Rule 54(b) of the following

claims which have been dismissed in this case, all of which

this Court has determined to be claims rather than issues

and upon the express finding that there is no just cause for

delay.

1. The finding that the state law claims for breach

of contract (express or implied) of the plaintiffs as set

forth in paragraph 70(c) of the Second Amended Com-

plaint are pre-empted by section 301. Summary judg-

ment is granted on these claims.

2. The finding that the State law claims of con-

structive fraud of the plaintiffs’ as set forth in Counts

Seven and Eight of the Second Amended Complaint

are pre-empted by section 301. Summary judgment is

granted on these claims.

3. The finding that West Virginia law does not

recognize an employment contract implied in fact

under the record in this case as set forth by the plain-

tiffs identified in paragraphs Count One (b) & (e),

80a

Count Two (b) & (d), Count Three (c), (e), (f), & (g)

and Count Four (a) of this Order. Summary judgment

is granted on these claims.

4. The finding that West Virginia law does not

recognize fraud based upon non-disclosure or conceal-

ment in an employer-employee context as set forth by

the plaintiffs identified in paragraphs Count Five (b)

- and Count Six (b) & (c) of this Order. Summary judg-

ment is granted on these claims.

5. The finding that under West Virginia law the

contractual and tort liability of defendant ended when

it sold the assets of the Weirton Steel Division on

January 11, 1984. Summary judgment is granted as to

plaintiffs’ claims for damages beyond this date.

6. The finding that Counts Nine through Thirteen

are dismissed.

In addition to the entry of final judgments pursuant to

Rule 54(b), the Court, pursuant to 28 U.S.C. §1292(b),

hereby certifies the below described specific rulings and

finds that such specific rulings in the Order involve con-

trolling questions of law as to which there is substantial

“ground for difference of opinion and that an immediate

appeal may materially advance the ultimate termination of

the litigation.

The intent of certification pursuant to §1292(b) is to

provide a basis for appeal of certain portions of this Order

granting or denying summary judgment or adjudicating

issues which would otherwise be interlocutory in nature

and which are not final judgments within the meaning of

Rule 54(b).

8la

The following issues adjudicated in this Order are

identified below as issues to which the §1292(b) certifica-

tion applies:

1. The finding that the state law claims for breach

of contract (express or implied) of the plaintiffs and set

forth in paragraph 98(c) of the Second Amended Com-

plaint are not preempted under section 301. Summary

judgment is denied on these claims.

2. The finding that the state law claims for fraud

(express or constructive) of the plaintiffs as set forth in

Counts Five and Six of the Second Amended Com-

plaint are not preempted under section 301. Summary

judgment is denied on these claims.

3. The finding that West Virginia law would rec-

ognize alleged oral promises as sufficient and definite

enough to support a claim for breach of said promise

under the record in this case as set forth by the plain-

tiffs identified in paragraphs Count One (c), Count

Two (c), and Count Three (d) and (f) of this Order.

Summary judgment is denied on these claims.

4. The finding that the alleged express oral con-

tracts or implied contracts promising: (a) return to the

P & M or SNE bargaining units with restoration of

seniority upon return; and (b) the use of company date

seniority in determining layoffs among management

positions, does not fall within the application of the

Statute of Frauds.

5. The finding that West Virginia law would rec-

ognize a claim of fraud in the inducement based upon

alleged fraudulent statements as set forth by the plain-

tiffs identified in paragraphs Count Five (d) and Count

Six (d) of this Order. Summary judgment is denied on

these claims.

j :

82a

6. The finding that West Virginia law does not

require plaintiffs to make an election between either

pursuing their fraud in the inducement claims or pur-

suing their breach of contract claims if the fraud is

discovered after the breach occurred and rescission or

affirmation is no longer possible.

IT IS SO ORDERED, this q™* aay of

, 1990.

Senior United States District Judge

| hereby certify thai the annexed Instrument

is a true and correct copy of the original filed

in my office.

ATTEST: Dr. Wally Edgell

Clerk, U.S. District Court

Northern District of West Virginia

Deputy Clerk

83a

PUBLISHED

Appendix C

United States Court of Appeals

For THE FourtTH CIRCUIT

ARTHUR DALE WHITE, JAMES ANDERSON,

James H. BAKER, THOMAS A. BALON,

RICHARD S. BARBER, LARRY G. BELL,

Davip S. BICKLER, RoBERT L. BILLICK,

EDWARD BITTNER, TODD A. BLAIR,

RICHARD BLANCATO, ROBERT A. BRAY, JR.,

Harry V. Brown, Jr., JAMES H.

BROWNING, JAMES WILLIAM BULLOCK,

CHARLES A. CLARK, EDWARD DHAYER,

RALPH ANTHONY DiBacco, WILLIAM R.

DUNCAN, JR., DOMENIC F. Frio, Dorsey R.

GARRETT, WILLIAM F. GARRISON, JAMES A.

Gracie, II], THoMAS M. GRISHKEVICH,

Davip R. HARBIN, JAMES W. HAZLETT,

RENA HEss, PHILLIP E. JOHNSON, JERRY G.

JONES, ROBERT L. JONES, JOSEPH P. Karas,

BARTLEY ROBERT KIRKBRIDE, LLOYD A.

KLaAGES, DaviD J. KONDIK, FRANK W.

KRUGER, JR., CHARLES L. Lacey, TIMOTHY

C. Lawson, ERNEST H. McCormick,

JOSEPH W. MAYERNICK, BOLEY DALE

MERMON, PATRICIA MLODZIK, CHARLES D.

Murray, DAaLe E. PooLe, CHARLES

PRINCE, LARRY C. RIGGLE, WILLIAM B.

RiGGs, ROBERT J. RYAN, JR., JOHN S.

SCIANCE, KENNETH M. SEIPLE, JOHN R.

SELMON, JR., DENNIS D. SHIRER, RONALD

L. SPRING, ROBERT L. SUTTON, FREDERICK

C. TaTE, STEPHEN F. Tucker, Hoy L. VAN

> No. 90-3036

84a

Horn, FREDERICK R. WELSHANS, CHARLES

F. West, DONALD L. WHITE, JOHN W.

COMINSKY, WALTER F. MroOZEK, DOMINIC

A. TEDESCHI, JR.,

Plaintiffs - Appellants,

¥.

NATIONAL STEEL CORPORATION,

Defendant - Appellee.

ARTHUR DALE WHITE, JAMES ANDERSON,

JaMeES H. BAKER, THOMAS A. BALON,

RICHARD S. BARBER, LARRY G. BELL,

Davip S. BICKLER, ROBERT L. BILLICK,

EDWARD BITTNER, TODD A. BLAIR,

RICHARD BLANCATO, ROBERT A. BRAY, JR.,

Harry V. Brown, JR., JAMES H.

BROWNING, JAMES WILLIAM BULLOCK,

CHARLES A. CLARK, EDWARD DHAYER,

RALPH ANTHONY D1BACCO, WILLIAM R.

DuNCAN, JR., DOMENIC F. Frio, Dorsey R.

GARRETT, WILLIAM F. GARRISON, JAMES A.

Gracie, III, THoMAS M. GRISHKEVICH,

Davip R. HARBIN, JAMES W. HAZLETT,

RENA Hess, PHILLIP E. JOHNSON, JERRY G.

JONES, ROBERT L. JONES, JOSEPH P. KARAS,

BARTLEY ROBERT KIRKBRIDE, LLOYD A.

KLaAGes, DAvip J. KONDIK, FRANK W.

KRUGER, JR., CHARLES L. Lacey, TIMOTHY

C. Lawson, Ernest H. McCormick,

JosEPpH W. MAYERNICK, BOLEY DALE

MERMON, PATRICIA MLODZIK, CHARLES D.

Murray, DALE E. POOLE, CHARLES

PRINCE, LARRY C. RIGGLE, WILLIAM B.

RicGs, RoBeRT J. RYAN, JR., JOHN S.

SCIANCE, KENNETH M. SEIPLe, JOHN R.

> No. 90-3053

85a

SELMON, JR., DENNIS D. SHIRER, RONALD

L. SPRING, RoBERT L. SUTTON, FREDERICK

C. TaTe, STEPHEN F. Tucker, Hoy L. VAN

Horn, FREDERICK R. V ELSHANS, CHARLES

F. West, DONALD L. WuiTE, JOHN W.

COMINSKY, WALTER F. MroOZEK, Dominic

A. TEDESCHI, JR.,

Plaintiffs - Appellees,

NATIONAL STEEL CORPORATION,

Defendant - Appellant.

Appeals from the United States District Court

for the Northern District of West Virginia, at Wheeling.

Frank A. Kaufman, Senior District Judge.

(CA-83-59-W)

Argued: January 9, 1991

Decided: July 3, 1991

Before SPROUSE and WILKINSON, Circuit Judges,

and ELLIS, United States District Judge for the Eastern

District of Virginia, sitting by designation.

Affirmed in part; reversed and remanded in part by pub-

lished opinion. Judge Wilkinson wrote the opinion, in

which Judge Sprouse and Judge Ellis joined.

COUNSEL

ARGUED: Carl H. Hellerstedt, Jr.. VOLK,

FRANKOVITCH, ANETAKIS, RECHT, ROBERTSON

86a

& HELLERSTEDT, Pittsburgh, Pennsylvania, for Appel-

lant Ronald George Backer, ROTHMAN, GORDON,

FOREMAN & GROUDINE, P.C., Pittsburgh, Pennsylva-

nia, for Appellees. ON BRIEF: Carl Nicholas Frankovitch,

John Archer McCreary, Jr.,. VOLK, FRANKOVITCH,

ANETAKIS, RECHT, ROBERTSON & HELLERSTEDT,

Pittsburgh, Pennsylvania, for Appellant. William P. Bres-

nahan, Henry C. Berns, ROTHMAN, GORDON, FORE-

MAN & GROUDINE, P.C, Pittsburgh, Pennsylvania, for

Appellees.

WILKINSON, Circuit Judge:

This case concerns the proper scope of federal and

State regulation of employment relationships. The issues

arise from layoffs of steel workers which occurred in 1982

at the Weirton Division of the National Steel Corporation

in West Virginia. The plaintiffs are former union members

who accepted management positions after National Steel

allegedly made them promises of job security, including

the right to return to their former positions in bargaining

units. They maintain that their layoffs from salaried man-

agement positions constituted breaches of their individual

employment contracts which are actionable under state

law and that National Steel fraudulently induced them into

accepting management positions.

National Steel responds that plaintiffs’ claims are actu-

ally for breaches of collective bargaining agreements and

must be pursued under §301 of the Labor-Management

Relations Act, 29 U.S.C. §185 or dismissed as preempted.

Furthermore, National argues that subsequent changes in

the governing collective bargaining agreements prohibited

plaintiffs’ returning to their former bargaining units and

87a

that the individual contracts must yield as preempted. We

hold that plaintiffs’ claims are primarily grounded in indi-

vidual employment contracts and not in collective bar-

gaining agreements. Although a subsequent collective bar-

gaining agreement does preempt any specific performance

of individual contracts that plaintiffs might seek, damages

are still available under state law theories. We additionally

hold that summary judgment should have been granted to

National Steel on plaintiffs’ state law claims for fraud, and

remand for application of the proper evidentiary standard

to plaintiffs’ breach of contract claims.

Plaintiffs in this case are sixty-two employees of the

Weirton Division of the National Steel Corporation who

were laid off from their salaried management positions in

1982. Virtually every plaintiff was promoted to manage-

ment from a job that was covered by a collective bargain-

ing agreement. While the employees had accumulated

seniority and thus some degree of job security in their

former bargaining units, the management positions they

accepted were not covered by collective bargaining agree-

ments (i.e., were “exempt” positions) and did not generally

provide for any job security.

The employees assert that they entered into oral

employment contracts with National Steel which allowed

them to retain their earned seniority in their new positions

and provided them with the nght to return to their former

bargaining unit positions with their accumulated seniority

intact should their management positions be terminated or

should they otherwise wish to return. They claim that

National Steel breached those contracts by failing to

accord them promised seniority and by refusing to return

88a

them to their former positions. They also allege that

National Steel fraudulently induced them to enter into

their employment contracts and committed several other

torts in discharging them.

The plaintiffs’ claims can be divided into three general

types: breach of contract, fraud, and other various torts.

Only the contract and fraud claims are before us on appeal.

We shall summarize in turn the specific claims in each

type.

Plaintiffs’ first four counts allege breach of contract.

Counts One and Two contain the claims of forty-five for-

mer hourly rate workers who had all been members of the

Production and Maintenance (P&M) bargaining unit of the

Independent Steelworkers Union (union). As such, their

terms of employment had been covered by a collective

bargaining agreement which was periodically renegotiated

between the union and National. Under the collective bar-

gaining agreements that had been in effect until 1980, lay-

offs of hourly workers were determined primarily by “com-

pany seniority,” or the length of time an employee had

been with National Steel in any capacity. This provided

workers who had uninterrupted company seniority some

degree of job security. Exempt employees, however, were

not covered by any collective agreement and thus enjoyed

no such security.

National Steel had often promoted hourly rate

employees to exempt management positions at times of

increased business when it needed more foremen and man-

agers. Because the company sometimes found it difficult to

persuade hourly employees with seniority to accept often

temporary management positions with no job security, it

developed a flexible approach. When the workload

89a

declined, National often would return the recently pro-

moted workers to their former positions in the bargaining

unit with their accumulated senority restored. Although

the practice of returning management employees to the

P&M bargaining unit was not prohibited by the collective

bargaining agreement, it nevertheless caused unrest within

the unit. Often when these employees returned, they dis-

placed receatly hired hourly employees who then would

have to be laid off. As a result of the dissatisfaction engen-

dered by this practice, the collective bargaining agreement

that was installed on August 1, 1980 prohibited the return

of a management employee to hourly employment if the

return would result in hourly employees being laid off or if

the reason for the supervisor’s return was the elimination

of the supervisory position. In addition, a returning

employee would no longer be granted any company senior-

ity credit for the time he spent outside the unit.

Count One contains the contract claims of forty-two

former P&M employees who accepted management posi-

tions before the new collective agreement took effect on

August 1, 1980. Count Two contains the contract claims of

three plaintiffs who left the P&M unit after August 1, 1980.

All forty-five assert that National Steel promised to use

company seniority as the basis to determine layoffs from

management and then breached its contracts by instead

using “exempt seniority” or the tenure in only a manage-

ment position, to calculate layoffs. The plaintiffs in Count

One also assert that their management employment con-

tracts with National Steel included the term that they

would be able to return to their former P&M unit with full

accumulated company seniority in the event they were laid

off from management. Plaintiffs in Count Two, who left

the P&M unit after the collective bargaining agreement

90a

placed limits on their ability to return, do not assert that

National gave them such promises.

The second major group of plaintiffs, listed in Count

Three, consists of fifteen employees who were promoted to

exempt management jobs from salaried non-exempt (SNE)

positions. Many of these positions were clerical. Prior to

1976, these employees had no written job protection. In

1976, National Steel published a Standard Practice Man-

ual, which enumerated terms of employment for SNE posi-

tions. By 1979, these employees had designated the Inde-

pendent Steelworkers Union as their bargaining

representative and had negotiated a collective bargaining

agreement that governed their employment. The collective

agreements in both 1979 and 1980 provided that the

seniority terms in the Standard Practice Manual would be

in effect until a modifying agreement was adopted.

Although the formal collective agreement was not modi-

fied until September 1983, National responded to union

concerns in August 1982 by placing a hold on the return of

supervisors to the SNE unit. Such returns had not been

addressed in the earlier collective agreements.

Like the hourly rate employees in Count One, the

former SNE employees claim in Count Three that

National Steel promised them that they could return to

their former unit positions with their seniority intact. They

also assert that company seniority, and not exempt senior-

ity, was to have been used to determine layoffs from man-

agement positions.

Finally, two plaintiffs began working in management

positions directly rather than being hired from a bargain-

ing unit. Their contract claims were brought in Count

Four.

9la

In the second major group of claims, plaintiffs main-

tain that National fraudulently induced them to leave their

protected jobs by misrepresenting the terms of employ-

ment in exempt positions as well as its policies concerning

employees’ rights to return to their former units. Count

Five contains allegations of fraud brought by both former

P&M and former SNE employees. They maintain that

although National assured them that they had the right to

return to their units simply upon request, National’s actual

policy was that employees had no right to return but were

transferred oniy with National’s approval. Plaintiffs assert

that because of that misrepresentation, they relinquished

their protected positions. Had they instead remained in

their units, they either would not have been laid off or they

would have been recalled sooner. In addition to that asser-

tion of actual fraud by misrepresentation, plaintiffs con-

tend that National committed constructive fraud by failing

to inform them of pertinent conditions of their

employment.

Further fraud is alleged with respect to National’s rep-

resentation of how seniority would be used to determine

management layoffs. Plaintiffs in Count Six allege that

National stated that its policy was to use company time for

calculating management layoffs, when in reality National’s

actual policy was te use criteria such as length of tenure in

a Management position, physical fitness, and importance

of the job. Again, this misrepresentation purportedly led to

plaintiffs’ leaving their secure jobs in the bargaining units.

Count Six, as well, encompasses claims of both actual and

constructive fraud.

Counts Seven and Eight contain charges that National

had a duty to notify former P&M employees of the change

in the P&M collective agreement in 1980 that prohibited

92a

management returns to the unit, and to notify former SNE

employees of the 1982 action prohibiting returns to the

SNE unit. These failures to inform employees allegedly fall

within the category of constructive fraud.

The remaining counts are not before us on appeal.

The district court conducted extensive hearings on the

above claims before ruling on the parties’ motions for

summary judgment. A critical issue was whether §301 of

the Labor-Management Relations Act (LMRA), 29 U.S.C.

§185, which governs suits for breaches of collective bar-

gaining agreements, preempted the state law contract and

fraud claims. With regard to the Count One plaintiffs (for-

mer P&M hourly rate workers), the court held that §301

preempted their claimed rights to return to the P&M unit

with accumulated seniority because the collective agree-

ment in effect at the time of the layoffs prohibited their

returns. The Count Three (former SNE workers) plaintiffs’

similar claims of a right to return to the SNE unit were not

preempted, however, because the collective agreement in

effect at the time of the layoffs did not speak to their right

to return. In reaching that conclusion, the court held that

the actions in August 1982 did not amend the SNE collec-

tive agreement. None cf the claims concerning National’s

policies for laying off exempt management employees were

held preempted.

On the merits, the court held that the West Virginia

statute of frauds did not foreclose plaintiffs’ contract

claims. Further, a plaintiffs individual claim survived

National’s motion for summary judgment if the plaintiff

had produced sufficient proof that an oral contract of

employment had been formed.

93a

Turning to the fraud claims, the court concluded that

“if a fraud claim has its source in a duty generated by a

CBA [collective bargaining agreement], or if a court would

have to analyze the provisions of a CBA to determine the

existence of an element of a fraud claim, then the preemp-

tion doctrine applies.” White v. National Steel Corp., 742

F. Supp. 312, 335 (N.D.W. Va. 1989). The court then held

that only Counts Seven and Eight—those based on an

alleged duty to notify plaintiffs of a change in the collective

agreements—were preempted. As for Counts Five and Six,

plaintiffs’ constructive fraud claims were dismissed based

on both West Virginia law and a lack of evidence, but

many of the actual fraud claims survived summary

judgment.

The court entered judgment and certified its order for

interlocutory appeal pursuant to 28 U.S.C. §1292(b).

National Steel timely petitioned this court for appeal,

which we granted.

II.

National asserts that most of plaintiffs’ claims must be

dismissed because they are preempted by §301 of the

Labor-Management Relations Act of 1947 and because any

claim arising under §301

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