Appendix — Pratt-Farnsworth, Inc. v. Carpenters Local Union No. 1846 of the United Brotherhood of Carpenters & Joiners

| 8 2 ” 1414 eg “ ( 3.

NO.

- sae Perc}

—— |

In the eee

Supreme Court of the United States

OCTOBER TERM, 1982

PRATT-FARNSWORTH, INC.,

HALMAR, INC., NEW ORLEANS

DISTRICT, ASSOCIATED GENERAL

CONTRACTORS OF LA., INC.,

AT-LARGE DISTRICT, ASSOCIATED

GENERAL CONTRACTORS OF LA., INC.,

Petitioner,

Vv.

CARPENTERS LOCAL UNION NO.

1846 OF THE UNITED BROTHERHOOD

OF CARPENTERS AND JOINERS OF

AMERICA, AFL-CIO, ET AL,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

VOLUME II—APPENDIX “A”’

JAMES BURTON FREDERICK S. KULLMAN

H. BRUCE SHREVES (COUNSEL OF RECORD)

Simon, Peragine, Smith MICHAEL S. MITCHELL

& Redfern Kullman, Lang, Inman & Bee

4300 One Shell Square A Professional Corporation

New Orleans, Louisiana 70139 Post Office Box 60118

Telephone: (504) 522-3030 New Orleans, Louisiana 70160

COUNSEL FOR PETITIONER _ Telephone: (504) 524-4162

PRATT-FARNSWORTH, INC. COUNSEL FOR

AND HALMAR, INC, PETITIONER

A B Letter Service, Inc, 327 Chartres St., New Orleans, La. (504) 581-5555

A-l

APPENDIX “A”

CARPENTERS LOCAL UNION NO. 1846

OF the UNITED BROTHERHOOD OF

CARPENTERS AND JOINERS OF

AMERICA, AFL-CIO, et al., Plaintiffs-Appellants,

Vv.

PRATT-FARNSWORTH, INC.; Halmar,

Inc.; Associated General Contractors of

Louisiana, Inc., At-Large District; and

Associated General Contractors of Louisiana, Inc.,

New Orleans District, Defendants-Appellees.

No. 81-3222.

United States Court of Appeals,

Fifth Circuit.

Nov. 4, 1982.

Unions and employee benefit funds brought action

against contractors and contractors’ associations alleging

violations of Labor Management Relations Act, of Em-

ployee Retirement Income Security Act and of antitrust

statutes. The United States District Court for the Eastern

District of Louisiana, Jack M. Gordon, J., 511 F.Supp. 509,

dismissed complaint and plaintiffs appealed. The Court of

Appeals, Randall, Circuit Judge, held that: (1) absence of

contractual relationship required dismissal of claimed

violations by associations of collective bargaining agree-

ment; (2) unions and funds should have been given oppor-

tunity to prove that one of contractors refused to pay con-

tributions on behalf of its own employees; (3) breach of con-

tract claim could be stated against contractors under

either alter ego theory or under single employer theory,

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and in latter case, District Court would have jurisdiction

to address issue of appropriateness of bargaining unit; (4)

ERISA cause of action was stated; (5) summary disposi-

tion of case was inappropriate; and (6) cause of action ex-

isted under antitrust laws.

Affirmed in part, reversed in part.

Jerry L. Gardner, Jr., Marie Healey, New Orleans,

La., for plaintiffs-appellants.

Frederick A. Kullman, Michael S. Mitchell,

Frederick S. Kullman, New Orleans, La., for defendants-

appellees.

James Burton, H. Bruce Shreves, New Orleans, La..,

for Pratt-Farnsworth and Halmar, Inc.

Appeal from the United States District Court for the

Eastern District of Louisiana.

Before WISDOM, RANDALL and TATE, Circuit

Judges.

RANDALL, Circuit Judge:

This appeal essentially involves an all-out assault by

two unions and other related parties on the so-called ‘‘dou-

ble breasted’! system of conducting business utilized by

1 4 “double breasted” or “open shop-closed shop’’ operation is one

in which an employer is able to compete for both union and non-union

work. For example, a subcontractor may operate one corporation hiring

strictly union employees; this corporation will bid on jobs from general

contractors who let contracts only to unionized subcontractors. At the

same time, the subcontractor will operate another corporation that hires

only non-union employees; this corporation will bid on work from general

A:3

contractor employers in the construction business in the

New Orleans area. Hotly contested causes of action are

alleged under several legal theories, primarily pursuant to

the federal labor and antitrust laws; the district court

dismissed all claims against the many defendants involved

in this action. As explained more fully infra, we affirm the

dismissal of certain claims, reverse the dismissal of others,

and remand to the district court for further proceedings

and development of a more complete factual record.

I. FACTUAL AND PROCEDURAL BACKGROUND.

This lawsuit was brought by Carpenters Local Union

No. 1846 and Piledrivers Local Union No. 2436 of the

United Brotherhood of Carpenters and Joiners of America,

AFL-CIO (hereinafter ‘‘Unions’’), both unincorporated

labor organizations engaged in representing construction

employees within the jurisdiction of the United States

District Court for the Eastern District of Louisiana. Also

party plaintiffs in the suit are three employee benefit funds

established on the basis of various collective bargaining

agreements between the Unions and signatory employers

in the construction industry: the Carpenters District Coun-

cil of New Orleans and Vicinity Pension Trust, the

Carpenters District Council of New Orleans and Vicinity

Health and Welfare Plan, and the Carpenters District

Council of New Orleans and Vicinity Apprenticeship,

Educational and Training Program (hereinafter ‘‘Funds’’).

Additionally, the suit was brought as a class action on

behalf of proposed classes of all members of and all persons

(Footnote 1 continued)

contractors who use non-union workers. Florida Marble Polishers Health

& Welfare Trust Fund v. Edwin M. Green, Inc., 653 F.2d 972, 976 n.7

(5th Cir. 1981), cert. denied, _. U.S. _., 102 S.Ct. 2235, 72 L.Ed.2d 846

(1982).

A-4

seeking employment through the Unions and all par-

ticipants and beneficiaries of the named Funds. No class

has at present been certified by the district court.

Four defendants were named: Pratt-Farnsworth,

Inc. (‘‘Farnsworth’’); Halmar, Inc. (‘‘Halmar’’); Associated

General Contractors of Louisiana, Inc., New Orleans

District (‘‘AGC-New Orleans’’); and Associated General

Contractors of Louisiana, Inc., At Large District (“‘AGC-

At Large’’). The Associated General Contractors, Inc. is a

trade organization consisting of various construction com-

panies throughout Louisiana. It is divided administrative-

ly into several geographic districts. AGC-New Orleans is

one of those districts. AGC-At Large is not limited to any

geographical area. Farnsworth is a construction company

in the New Orleans area and a member of AGC-New

Orleans. Halmar is also a construction company in New

Orleans and a member of AGC-At Large.

One of AGC-New Orleans’ activities is the negotia-

tion, on behalf of certain of its members, of collective

bargaining agreements with local trade unions. AGC-New

Orleans is not itself a signatory to these bargaining

agreements; rather, the agreements are signed only by the

member and non-member contractors who wish to be

bound. In the instant case, AGC-New Orleans negotiated a

collective bargaining agreement between a multiemployer

bargaining unit and the Unions covering the period from

May 1, 1977 to April 30, 1980. This agreement constitutes

the controverted subject matter of this suit.

Defendant Farnsworth affiliated itself with the AGC

organizations, and authorized AGC-New Orleans to

bargain on its behalf with the Unions over wages, terms,

and conditions of employment. Farnsworth is a signatory

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to the collective bargaining agreement negotiated by AGC-

New Orleans and the Unions. AGC-New Orleans, AGC-At

Large, and Halmar are not signatories to the collective

bargaining agreement.

In their complaint, plaintiffs have alleged causes of

action under three different sets of federal statutes, name-

ly, (1) section 301(a) of the Labor Management Relations

Act, 28 U.S.C. § 185(a) (hereinafter ‘‘LMRA"’); (2) the

Employee Retirement Income Security Act, 29 U.S.C. §&§

1001-1461 (hereinafter ‘‘ERISA’’); and (3) the Sherman and

Clayton Antitrust Acts, 15 U.S.C. §§ 1-7, 12-27.

Multiple allegations were made by the plaintiffs

under each of these statutory causes of action. First, the

plaintiffs alleged violations of the antitrust laws. The

gravamen of their antitrust complaint is that the four

defendants have conspired to restrain competition in the

contractor services market in the New Orleans area by car-

ving out an enclave of non-union carpentry work, access to

which is denied union contractors in the industry. They

contend that the effect of this alleged conspiracy is to

nullify the multiemployer bargaining agreement between

the Unions and the signatory contractors, and to coerce

third parties in the construction industry to hire non-union

contractors and subcontractors.

The plaintiffs’ claims under section 301 of the

LMRA echo their antitrust allegations. They allege that a

“double breasted’’ operation exists between defendants

Farnsworth and Halmar and is being used to channel con-

struction work into Halmar, the non-union part of the

operation, while operations of Farnsworth are being phas-

ed out slowly to the point of nonexistence. The plaintiffs

argue that Farnsworth and Halmar should be treated as a

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single employer or as alter egos with the result that Hal-

mar would be bound by the collective bargaining agree-

ment that Farnsworth executed with the Unions.

The ERISA cause of action is likewise interrelated

with the section 301 labor action. The plaintiffs argue that

Farnsworth and Halmar have breached the collective

bargaining agreement by failing to submit fringe benefit

contributions on behalf of their employees to the Funds as

required by the agreement.

Defendants moved for dismissal for failure to state a

claim and in the alternative for dismissal for lack of subject

matter jurisdiction and for summary judgment. Affidavits

were attached to these motions. Plaintiffs thereafter filed

a set of interrogatories addressed to the defendants.?

Before the defendants had filed any answers to the

* Attached to these motions were two affidavits. The first af-

fidavit was executed by Robert Farnsworth as President of Halmar

stating that Halmar had never signed a collective bargaining agreement

with the Unions.

The second affidavit by H. Pratt Farnsworth, Jr., Vice-President

of Farnsworth, admitted that Farnsworth was a signatory to the collec-

tive bargaining agreement with the Unions. It stated, however, that

none of the plaintiffs had ever attempted to file a grievance with Farn-

sworth pursuant to the contractual dispute mechanism contained in the

agreement. Attached to this second affidavit were selected portions of

the bargaining agreement in question.

3 Plaintiffs also filed a statement in opposition to the defendants’

pending motions. Attached to this statement were two affidavits. The

first was a sworn statement from the organizer of one of the Unions,

Michael A. Laborde, attesting to the relationshp between Farnsworth

and Halmar. The second was a sworn statement from Simon Paulino, Jr.,

also an organizer for the same Union, similarly describing the

Farnsworth-Halmar relationship and explaining the role of the two AGC

defendants in the Louisiana construction industry.

A-7

plaintiffs’ interrogatories, the district court granted the

defendants’ motions to dismiss. Carpenters Local Union

No. 1846 v. Pratt-Farnsworth, Inc., 511 F Supp. 509

(E.D.La.1981). The district court held that AGC-New

Orleans and AGC-At Large were not proper defendants to

the section 301 labor claims and the ERISA claims because

they had never signed the collective bargaining agreement

with the Unions. Jd. at 511-12, 514-15. The court dismissed

the section 301 and ERISA claims against Farnsworth on

the ground that the plaintiffs had never alleged any breach

of the collective bargaining agreement on the part of Farn-

sworth in regard to its own employees. Jd. at 512-15.

As to Halmar, the court dismissed the section 301

and ERISA claims on the basis that it had no authority to

determine that Farnsworth and Halmar were a single

employer or alter egos without also determining the ap-

propriate bargaining unit of their employees, which, it

held, would be an impermissible invasion of the jurisdiction

of the National Labor Relations Board (hereinafter

“NLRB” or ‘“‘the Board’’). Jd. at 512-13. Additionally, the

court held that dismissal of the section 301 and ERISA

claims as to all defendants was required because of the

plaintiffs’ failure to exhaust the contractual grievance pro-

cedures provided in the collective bargaining agreement.

Id. at 513-15.

Finally, the district court dismissed the antitrust

allegations because it decided that the bargaining agree-

ment fell within certain nonstatutory exemptions to the an-

titrust laws, and that the plaintiffs’ causes of action were

in reality labor law issues parading as antitrust claims. Jd.

at 512-22. The plaintiffs have appealed to this court, con-

testing the district court's dismissal on all claims as to all

defendants.

A-8

Our task now is to determine whether the dis-

trict court acted properly in dismissing the plaintiffs’

claims. Except with respect to the question of exhaustion

of contractual grievance procedures, we treat the district

court's actions as dismissals under Rule 12(b)(6).4 In our

review of those claims dismissed under Rule 12(b)(6), we

may not go outside the pleadings; we must accept all well

pleaded facts as true and view them in the light most

favorable to the plaintiffs. Dike v. School Board, 650 F.2d

783, 784 (5th Cir. 1981); Brett v. First Federal Savings &

Loan Association, 461 F.2d 1155 (5th Cir. 1972). We cannot

sustain the district court’s dismissal for failure to state a

claim ‘‘unless it appears beyond doubt that the plaintiff

can prove no set of facts in support of his claim which

would entitle him to relief.’’ Conley v. Gibson, 355 U.S. 41,

45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). The

district court did go beyond the pleadings in addressing

the question of exhaustion of contractual grievance pro-

ceedings, and thus we will review its dismissal on that

ground as a grant of summary judgment. Our review in

that case involves the questions (1) whether there are any

issues of material fact in dispute, and if not (2) whether the

moving party is entitled to judgment as a matter of law.

Daly v. Sprague, 675 F.2d 716 (5th Cir. 1982); Impossible

Electronics Techniques, Inc. v. Wackenhut Protective

Systems, Inc., 669 F.2d 1026, 1030-31 (5th Cir. 1982).

4 The district court granted dismissals of several claims on several

different grounds. In some cases it was clear that the dismissals rested

on the lack of a cause of action. In others, the district court dismissed

claims because it believed that it lacked subject matter jurisdiction.

Where the existence of a cause of action is inextricably bound up with

the question of this court’s subject matter jurisdiction, we treat the

dismissal as one on the merits under Rule 12(b)(6) or as a grant of sum-

mary judgment under Rule 56. Williamson v. Tucker, 645 F.2d 404 (5th

Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981).

A-9

II]. THE SECTION 301 ALLEGATIONS.

A. Section 301 Claims Against AGC-New Orleans

and AGC-At Large.

Pursuant to section 30l(a) of the LMRA, 29

U.S.C. § 185(a), federal courts have jurisdiction to examine

alleged violations of collective bargaining agreements:

Suite 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 having jurisdiction of

the parties, without respect to the amount in con-

troversy or without regard to the citizenship of

the parties.

29 U.S.C. § 185(a). A section 301 claim must satisfy three

requirements: (1) a claim of violation of (2) a contract (3)

between an employer and a labor organization. E.G.,

Alvares v. Erickson, 514 F.2d 156, 161 (9th Cir.), cert.

denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975).

The plaintiffs concede that the two AGC defendants

did not sign the collective bargaining agreement at issue in

this case and therefore are not contractually bound by it.

Nonetheless, the plaintiffs argue that a section 301 claim

properly lies against the two AGC defendants because

Farnsworth and Halmar breached the bargaining agree-

ment, and the two AGC defendants conspired to effect that

breach and actively encouraged it. The district court held

that ‘‘[t]he absence of [a] contractual relationship between

AGC, New Orleans or AGC, At Large and Carpenters

District Council mandates dismissal as to them of the Sec-

A-10

tion 301 claim under settled authority in this jurisdiction.”’

511 F.Supp. at 512 (emphasis in original).

The plaintiffs contend that the absence of a contrac-

tual relationship between the two AGC defendants and

themselves should not be regarded as fatal to the section

301 claims; rather, the plaintiffs argue that section 301

jurisdiction exists to assert a cause of action against a

defendant whenever the object of the suit is the enforce-

ment of rights guaranteed by a collective bargaining agree-

ment in effect between an employer and a labor organiza-

tion. In support of this contention, the plaintiffs cite three

cases: Smith v. Evening News Association, 371 U.S. 195,

83 S.Ct. 267, 9 L.Ed.2d 246 (1962); Rehmar v. Smith, 555

F.2d 1362 (9th Cir. 1977); Alvares v. Erickson, supra. These

three cases are imapposite. In all of these cases, the issue

was whether section 301 causes of action encompassed

suits by individual union employees for the enforcement of

rights guaranteed by a collective bargaining agreement

entered into by their unions.

We note, however, that support for the plaintiffs’

contention may be found in a recent decision by the Third

Circuit. In Wilkes-Barre Publishing Co. v. Newspaper

Guild Local 120, 647 F.2d 372 (3d Cir. 1981), ert. denied, __

U.S. _, 102 S.Ct. 1003, 71 L.Ed.2d 295 (1982), the court

stated that ‘‘so long as the obligation sought to be enforced

has its source in the provisions of a collective bargaining

agreement, remedies for its enforcement may be available

under section 301(a) in suits other than on the contract

itself.’ Jd. at 380. Thus, the court determined that a

federal court has jurisdiction over a section 301 suit

brought against a non-party to a collective bargaining

agreement who allegedly induces a party to breach the

agreement. Jd. at 376-81.

A-11

In making this determination, the court stated that

‘what emerges as the law of [this] circuit as to the meaning

of section 301(a) is that it reaches not only suits on labor

contracts, but suits seeking remedies for violation of such

contracts.’’ Jd. at 380 (emphasis in original). The court

reasoned that protection against tortious interference with

a collective bargaining agreement involves protection of a

property interest which has its source in the federal com-

mon law of labor contracts. Jd. at 381. In addition, the

court reasoned that the issue in such cases is not the

nature of the remedy sought for an alleged violation of a

collective bargaining agreement, but whether the remedy

requires that the court from which it is sought interpret

the agreement. Jd. at 380.

Notwithstanding the Third Circuit’s decision in

Wilkes-Barre, courts have almost unanimously held that a

section 301 suit may be brought for violation of a labor con-

tract only against those who are parties to the contract at

issue. Aacon Contracting Co. v. Association of Catholic

Trade Unionists, 276 F.2d 958 (2d Cir. 1960), aff'g and

adopting 178 F.Supp. 129, 130 (E.D.N.Y. 1959); Haspel v.

Bonnaz, Singer & Hand Embroiderers Local 66, 216 F.2d

192 (2d Cir. 1954), aff'g and adopting 112 F.Supp. 944, 945

(S.D.N.Y.1953); Fabian v. Freight Drivers Local 557, 448

F.Supp. 835, 838 (D.Md. 1978); Cate v. Blue Cross & Blue

Shield, 434 F.Supp. 1187, 1189 (E.D.Tenn.1977); Beausoleil

v. United Furniture Workers, Local 136-B, 244 F.Supp.

719, 720 (D.N.H. 1965).

Indeed, this latter view has also been followed by a

district court in our own circuit in a decision cited as con-

trolling by the district court in the instant case. In Dixie

Machine Welding & Metal Works, Inc. v. Marine Engi-

neers Beneficial Association, 243 F.Supp. 489 (E.D.La.-

A-12

1965), a plaintiff employer brought suit in state court to

enjoin the defendant union’s picketing. The union obtained

removal to federal district court on the ground that the

proceeding was a section 301 action; it had argued that

because the suit was based in part on the alleged breach of

a collective bargaining agreement between the plaintiff

employer and various labor organizations, it arose under

section 301. Writing the opinion in Dixie Machine Welding,

our late colleague and then-district court judge, Robert A.

Ainsworth, Jr., held that the plaintiff's case was im-

providently removed to federal court and that the district

court had no jurisdiction to hear the case.

Judge Ainsworth noted that although a collective

bargaining agreement existed between the plaintiff

employer and its employees, no such agreement existed

between the plaintiff employer and the Marine Engineers

Beneficial Association, the defendant in the case. As a

result, he concluded that this was not a suit for violation of

a contract between an employer and a labor organization as

required by section 301:

While it is alleged by plaintiff that the activity of

its employees (resulting from their refusal to

cross the picket line of defendant) is being carried

on in violation of the collective bargaining

agreements between plaintiff and its employees,

this suit is not against plaintiff's employees but

against Marine Engineers Beneficial Association

with which plaintiff has no agreement of any

kind. Between the parties to this action,

therefore, there is no collective bargaining agree-

ment and this is not a ‘‘suit for violation of con-

tracts between an employer and a labor organiza-

tion’’ or between labor organizations which under

Section 301 of the Labor Management Relations

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Act would confer jurisdiction in this court.

243 F.Supp. at 491 (emphasis in original).°

The Unions attempt to circumvent the logic of the

Dixie Machine Welding case, supra, by arguing that while

no agreement exists between the two AGC defendants and

themselves on which to base jurisdiction, the AGC defen-

dants have nevertheless conspired to breach the agreement

in effect between Farnsworth and the Unions. We must

reject this argument. A conspiracy to violate a collective

bargaining agreement does not, without more, state

° According to our research, apparently only one Fifth Circuit

decision has addressed (and it did so in a different context than we face

here) the question whether a section 301 claim may be asserted against a

nonsignatory party to a collective bargaining agreement. /nternational

Union of Operating Engineers, Local 653 v. Bay City Erection Co., 300

F.2d 270 (5th Cir. 1962). In Bay City, an employer brought a section 301

suit against a local union for the breach of a no-strike clause in a collec:

tive bargaining agreement. The agreement had been executed between

the employer and a trade council in behalf of its constituent local unions.

The employer recovered $50,000 in damages in a jury trial before the

district court, after proving that the union had blacklisted him in a man-

ner making it difficult for him to obtain needed labor and materials. /d.

at 270-71.

On appeal, one of the arguments raised by the defendant union

was that because only the trade council had signed the bargaining agree-

ment with the employer, the local union itself could not be held liable for

breach of contract. The court held that the union, although not an actual

signatory to the agreement, could nevertheless be held liable for its

breach. /d. at 271-72. The court based its decision in large part on the

fact that the trade council had explicitly signed the agreement as the

authorized representative of its constituent locals, a circumstance not

present here. /d In this case, Farnsworth did not sign the collective

bargaining agreement as the agent of either AGC-New Orleans or AGC-

At Large intending that they be bound by the contract. The agreement

provided that only the signatory constituent members of the

AGC organizations were bound. Thus, it was the AGC organizations

who in essence acted as the representative of Farnsworth in negotiating

the agreement. As a result, the situation in Bay City has no application

to the particular facts here.

A-14

a cause of action under section 301 sufficient to confer

jurisdiction on a federal court. Kaylor v. Crown Zellerbach,

Inc., 643 F.2d 1362, 1368 (9th Cir. 1981); Russom v. Sears,

Roebuck & Co., 558 F.2d 439, 441 n.3 (8th Cir.), cert.

denied, 434 U.S. 955, 98 S.Ct. 481, 54 L.Ed.2d 313 (1977);

Abrams v. Carrier Corp., 434 F.2d 1234, 1253-54 (2d Cir.

1970), cert. denied sub nom. United Steelworkers v.

Abrams, 401 U.S. 1009, 91 S.Ct. 1253, 28 L.Ed.2d 545

(1971); Aacon Contracting Co. v. Association of Catholic

Trade Unionists, supra; Berard v. General Motors Corp.,

493 F.Supp. 1035, 1042 (D.Mass.), aff'd mem., 657 F,2d 261

(1st Cir. 1980), cert. denied, 451 U.S. 987, 101 S.Ct. 2322, 68

L.Ed.2d 845 (1981).

In conclusion, we must agree with the district

court that the absence of a contractual relationship bet-

ween AGC-New Orleans or AGC-At Large and the Unions

requires dismissal of the section 301 claim against the two

AGC defendants.

B. Section 301 Claims Against Farnsworth.

As stated before, a section 301 claim must satisfy

three requirements before it may be asserted in federal

court: (1) a claim of violation of (2) a contract (3) between an

employer and a labor organization. 29 U.S.C. § 185(a). All

three of these requirements appear to be met with respect

to defendant Farnsworth. Both the plaintiffs and the

defendants in this action concede that Farnsworth signed

the collective bargaining agreement with the Unions and

that Farnsworth is an employer of the Unions’ member-

ship; moreover, the original complaint filed by the plain-

tiffs alleged that Farnsworth had violated the collective

bargaining agreement.

A-15

The district court apparently never considered the

plaintiffs’ section 301 claims against Farnsworth separate-

ly and apart from their section 301 claims against Halmar,

presumably because of the allegation that Farnsworth and

Halmar were alter egos who were both liable for violation

of the collective bargaining agreement. However, the

pleadings offered by both the Unions and the Funds allege

simply that ‘‘defendants’’ have obligated themselves to

make employee contributions, and this implies that not on-

ly Farnsworth qua Halmar but Farnsworth qua Farn-

sworth may be in breach of its obligations. Having stated

such a claim for relief, we think that the plaintiff Unions

and Funds should have at least been given an opportunity

to prove that Farnsworth refused to pay contributions on

behalf of those employees who no one contests are Farn-

sworth’s own. Thus we cannot sustain a 12(b)(6) dismissal

with respect to Farnsworth and must remand for con-

sideration on the merits of this breach of contract claim.

C. Section 301 Claims Against Halmar.

The Unions’ and Funds’ section 301 claims against

Halmar present a much more difficult problem. The plain-

tiffs are suing Halmar for its alleged violation of the collec-

tive bargaining agreement executed between the Unions

and Farnsworth Unlike Farnsworth, however, Halmar

never signed the collective bargaining agreement; there-

fore, unless the plaintiffs can establish an alternative

ground for holding Halmar to the agreement, Halmar must

be treated the same as the nonsignatory AGC defendants,

and we must affirm the district court's dismissal of the sec-

tion 301 claims against Halmar.®

© Consultation of the legislative history of § 301 affords virtually

no guidance here. The Congress appears to have been primarily

motivated by two concerns: that the difficulty of suing unincorporated

A-16

The relevant portions of the plaintiffs’ com-

(Footnote 6 continued)

associations under then-current law enabled unions to escape respon-

sibility for their breaches of collective bargaining agreements; and that

any money judgment that was obtained against a union might be enforc-

ed as a personal liability of each member. See generally H.Rep.No. 245,

80th Cong., lst Sess. 6, 45-46, reprinted in 1 NLRB, Legislative History

of the Labor Management Relations Act, 1947 at 297, 336-37 (1948);

H.Min.Rep.No. 245, 80th Cong., 1st Sess. 108-10, reprinted in 1 NLRB,

Legislative History of the Labor Management Relations Act, 1947 at

399-401 (1948); S.Rep.No. 105, 80th Cong., 1st Sess. 15-18, reprinted in 1

NLRB, Legislative History of the Labor Management Relations Act,

1947 at 421-24 (1948); S.Min.Rep.No. 105, 80th Cong., 1st Sess, 13-15,

reprinted in 1 NLRB, Legislative History of the Labor Management

Relations Act, 1947 at 475-77 (1948); H.Conf.Rep.No. 510, 80th Cong.,

lst Sess., reprinted in 1947 U.S.Code Cong. & Ad.News, 1135, 1172-73;

93 Cong.Rec. H6438 (daily ed. June 3, 1947) (statement of Rep Case),

reprinted in 1 NLRB, Legislative History of the Labor Management

Relations Act, 1947 at 873 (1948); 93 Cong.Rec. $3955 (daily ed. April

23, 1947) (statement of Sen. Taft), reprinted in 2 NLRB, “Legislative

History of the Labor Management Relations Act, 1947 at 1014 (1948); 93

Cong. Rec. $4265 (daily ed. April 28, 1947) (statement of Sen. Taft),

reprinted in 2 NLRB, Legislative History of the Labor Management

Relations Act, 1947 at 1074 (1948); 93 Cong.Rec. S4410-11 (daily ed.

April 30, 1947) (remarks of Sen. Smith), reprinted in 2 NLRB,

Legislative History of the Labor Management Relations Act, 1947 at

1145-46 (1948); 93 Cong.Rec. S5146-47 (daily ed. May 12, 1947) (state-

ment of Sen. Ball), reprinted in 2 NLRB, Legislative History of the

Labor Management Relations Act, 1947 at 1497 (1948); 93 Cong. Rec.

SA2377 (daily ed. May 13, 1947) (statement of Sen Ball), reprinted in 2

NLRB, Legislative History of the Labor Management Relations Act,

1947 at 1524 (1948); 93 Cong.Rec. SA3232 (daily ed. June 21, 1947)

(statement of Sen. Taft), reprinted in 2 NLRB, Legislative History of the

Labor Management Relations Act, 1947 at 1626 (1948); 93 Cong. Rec.

$7690 (daily ed. June 23, 1947) (statement of Sen. Taft), reprinted in 2

NLRB, Legislative History of the Labor Management Relations Act,

1947 at 1654 (1948),

Nothing in the legislative history of § 301 bears on the question of

holding a nonsignatory to a collective bargaining agreement. Only two

cormments in the history seem at all relevant to this case. The Senate

Report (on the Senate Committee version of the bill) stated that

‘breaches of collective agreement [sic] have become so numerous that it

is not sufficient to allow the parties to invoke the processes of the Na-

tional Labor Relations Board when such breaches occur ... [;] the aggriev-

ed party should also have a right of action in the Federal courts.’’

A-17

plaint allege first, that Farnsworth and Halmar ‘‘are and at

all times material herein have been affiliated business

enterprises, with common ownership and management,

centralized controi of labor relations. sharing of equipment

and other assets, and employees and they constitute a

single integrated business enterprise, doing business

within the geographic jurisdiction of the Court, and con-

stituting a single employer for all purposes relevant

thereto;’’ and second, that ‘‘[djuring the terms of the collec-

tive bargaining agreement between the AGC and Carpen-

ters District Council, described as the ‘Craft Agreement’,

defendant employer Pratt-Farnsworth conspired with the

knowledge and assent of the AGC and unknown labor per-

suaders (29 U.S.C. § 433(b)) to establish and operate

Halmar in order to circumvent and evade the Craft Agree-

ment provisions and create a union-free environment.” 1

Rec. 3, 5. As will be developed later, the first of these two

theories, when applied by the Board in the context of an

unfair practice charge under the National Labor Relations

Act, 29 U.S.C. §§ 151-168 (hereinafter ‘‘NLRB’’), is known

as the single employer doctrine, and the second, when so

applied by the Board, is known as the alter ego doctrine.

The plaintiffs, therefore, urge this court to hold that they

have stated a claim, under section 301 of the LMRA, for

(Footnote 6 continued)

S.Rep.No. 105, 80th Cong., lst Sess. 15, reprinted in 1 NLRB,

Legislative History of the Labor Management Relations Act, 1947 at

421 (1948). The House Conference Report (on the bill as it became law)

asserted that ‘‘[o}nce parties have made a collective bargaining contract

[,] the enforcement of that contract should be left to the usual processes

of the law and not to the National Labor Relations Board.”

H.Conf.Rep.No. 510, 80th Cong., 1st Sess. 42, U.S.Code Cong.Serv.

1947, 1135, reprinted in 1 NLRB, Legislative History of the Labor

Management Relations Act, 1947 at 546 (1948). Both of these comments

seem to support the exercise of federal jurisdiction in doubtful cases, and

hence support a liberal reading of the plaintiffs’ claims in the context of

a 12(bX6) motion.

A-18

breach of the terms of a collective bargaining agreement by

Halmar. a non-signatory to that agreement, on the basis of

the single employer theory or the alter ego theory

developed by the Board in unfair labor practice cases under

the NLRA. Before progressing any further with the

arguments advanced by the plaintiffs in support of their

position that they have stated a claim under section 301, or

the arguments advanced by the defendants against that

position, it would be helpful to describe the origins and con-

tent of these two theories.

1. Single Employer Doctrine.

The single employer doctrine is a creation of

the Board which allows it to treat two or more related

enterprises as one employer within the meaning of section

2(2) of the NLRA, 28 U.S.C. § 152(2). Often the doctrine is

invoked to combine the amount of business of two or more

employers so that the whole will exceed the Board's self-

imposed jurisdictional minimum. E.G., Radio & Television

Broadcast Technicians Local Union 1264 v. Broadcast Ser

vice of Mobile, Inc. (Radio Union), 380 U.S. 255, 256, 85

S.Ct. 876, 877, 13 L.Ed.2d 78 (1965) (per curiam), quoted

with approval in South Prairie Construction Co. v. Local

No. 627, International Union of Operating Engineers (Peter

Kiewit), 425 U.S. 800, 802 n.3, 96 S.Ct. 1842, 1843 n.3, 48

L.Ed.2d 382 (1976). The doctrine is not however, limited to

use only as a jurisdictional tool. The finding that two en-

tities are a single employer may have the consequence of

treating them as one for purposes of considering the ex-

istence of an unfair labor practice in a proceeding before

the Board. E.g., Hageman Underground Construction, 253

N.L.R.B. 60 (1980) (certain respondents constituted a

single employer for purposes of NLRA; backhoe operators

employed by such respondents constituted a single ap-

A-19

propriate unit; such respondents violated sections 8(a)(5)

and (1) of the NLRA, 29 U.S.C. §§ 158(a)(5), (1), by refusing

to recognize and bargain with the union as the exclusive

representative of the employees in such unit and by failing

to abide by the terms of the collective bargaining agree-

ment covering such employees). The factors which the

Board uses to determine the existence of single employer

status are (1) interrelation of operations, (2) common

management, (3) centralized control of labor relations, and

(4) common ownership. Radio Union, supra, 380 U.S. at

256, 85 S.Ct. at 877; NLRB v. Don Burgess Construction

Corp., 596 F.2d 378, 384 (9th Cir.), cert. denied, 444 U.S.

940, 100 S.Ct. 293, 62 L.Ed.2d 306 (1979); Sakrete, Inc. v.

NLRB, 332 F.2d 902, 905 (9th Cir. 1964), cert. denied, 379

U.S. 961, 85 S.Ct. 649, 13 L.Ed.2d 556 (1965). As the court

noted in Don Burgess, supra:

The Board has stressed the first three of these

factors, as well as the presence of control of labor

relations. [Sakrete, Inc., supra] at 905 n.4

(quoting with approval from NLRB Twenty-First

Annual Report at 14-15). However, no one of the

factors is controlling, NLRB v. Welcome-

American Fertilizer Co., 443 F.2d 19, 21 (9th Cir.

1971), nor need all criteria be present. Single

employer status ultimately depends on ‘“‘all the

circumstances of the case’’ and is characterized

as an absence of an ‘“‘arm’s length relationship

found among unintegrated companies.’’ Local

627, International Union of Operating Engineers

v. NLRB, 171 U.S.App.D.C. 102, 107-108, 518

F.2d 1040, 1045-46 (1975), aff'd on this issue sub

nom. South Prairie Construction Co. v. Local 627,

International Union of Operating Engineers, 425

U.S. 800, 96 S.Ct. 1842, 48 L.Ed.2d 382 (1976).

596 F.2d at 384.

A-20

A finding of single employer status does not

by itself mean that all the subentities comprising the single

employer will be held bound by a contract signed only by

one. Instead, having found that two employers constitute a

single employer for purposes of the NLRA, the Board then

goes on to make a further determination whether the

employees of both constitute an appropriate bargaining

unit. As the Ninth Circuit stated in Don Burgess, 596 F.2d

at 386, even if two firms are a single employer, a union con-

tract signed by one would not bind both unless the

employees of both constituted a single bargaining unit.

The Ninth Circuit then explained the difference between an

inquiry into single employer status and an inquiry into the

appropriateness of the bargaining unit:

In determining the appropriateness of a

bargaining unit the focus differs from that

employed in deciding whether there is a single

employer. “In determining whether a single

employer exists we are concerned with the com-

mon ownership, structure, and integrated control

of the separate corporations; in determining the

scope of the unit, we are concerned with the com-

munity of interests of the employees involved.’

Peter Kiewit Sons’ Co., 231 N.L.R.B. 76, 77

(1977).

596 F.2d at 386. See Soule Glass and Glazing Co. v. NLRB,

652 F.2d 1055, 1075 n.8 (1st Cir. 1981). Under the single

employer doctrine, the focus is the interrelatedness of the

employers, while in assessing an appropriate bargaining

unit, the focus is on the similarity of concerns between

employees. See NLRB v. J. C. Penney CO., 559 F.2d 373,

375 (5th Cir. 1977) (‘To [create a viable bargaining unit],

the Board looks to such factors as bargaining history,

operational integration, geographic proximity, common

A-21

supervision, similarity in job function, and degree of em-

ployee interchange.’’); NLRB v. Belcher Towing Co., 284

F.2d 118, 121 (5th Cir. 1960) (the test which the Board ap-

plies in determining whether a bargaining unit is ap-

propriate is ‘‘community of interests’’).

To view it another way, we have stated in Local

Union No. 59, International Brotherhood of Electrical

Workers v. Namco Electric, Inc., 653 F.2d 143, 147 (5th Cir.

1981), that ‘‘[w]hether two firms are a single employer for

collective bargaining purposes and whether a single con-

tract is binding on two separate corporations are not only

different questions, but they may have different answers.’

653 F.2d at 147. Whether they have different answers is a

function of the appropriateness of the bargaining unit com-

prising the employees of both firms.

The Board has often applied or sought to apply the

single employer-appropriate bargaining unit inquiries to

double breasted contractors. Indeed, the case that receives

the most attention in the briefs of the plaintiffs and defen-

dants in this litigation—Peter Kiewit—is a case which

began when a union filed a complaint with the Board alleg-

ing that two double breasted contractors had violated sec-

tions 8(a)(5) and (1) of the NLRA, 29 U.S.C. §§ 158(a)(5), (1)

by their continuing refusal to apply to the employees of the

non-union contractor the collective bargaining agreement

in effect with the union contractor. We explore the case in

some detail not only because it is an example of how the

single employer doctrine functions in an unfair labor prac-

tice context, but also because, as we shall see later, a deter-

mination as to what the case holds—or does not hold—is

important to a resolution of the problems before us. The

union's allegations in Peter Kiewit were that (1) the union

contractor and the non-union contractor were in reality a

=

A-22

“single employer’’ and should be treated as such for the

purpose of enforcing a collective bargaining agreement

signed by the union contractor, and (2) because the two

contractors were a single employer, the non-union contrac-

tor was obligated to recognize the union as the represen-

tative of a bargaining unit drawn to include both the non-

union and the union contractors’ employees. 425 U.S. at

801, 96 S.Ct. at 1842.

The NLRB found that the two contractors were

separate employers and dismissed the complaint. Peter

Kiewit Sons’ Co., 206 N.L.R.B. 562 (1973). On review, the

District of Columbia Circuit held that the two contractors

were in fact a single employer, finding ‘‘evidence [of] a

substantial qualitative degree of interrelation of operations

and common management”’ between the two companies.

Local 627, International Union of Operating Engineers v.

NLRB, 518 F.2d 1040, 1047 (D.C.Cir.1975). The circuit

court then went on to decide the second issue presented by

the union's complaint, although the NLRB had not passed

upon the bargaining unit question. The court held that the

employees of the two contractors together constituted an

appropriate unit for purposes of collective bargaining. Jd.

at 1047-50. On the basis of this conclusion, the court deter-

mined that the two contractors had committed an unfair

labor practice by refusing to recognize the union as the

bargaining representative of the non-union contractor's

employees or to extend to them the terms of the collective

bargaining agreement. Jd. at 1050.

On appeal, the Supreme Court affirmed the court of

appeals’ determination on the single employer issue but

vacated its holding that the employees of the two com-

panies constituted an appropriate bargaining unit. 425

U.S. at 806, 96 S.Ct. at 1845. The Supreme Court held that

A-23

the circuit court had invaded the statutory province of the

NLRB by proceeding to decide the unit question before the

NLRB had passed upon the issue:

Since the selection of an appropriate bargaining

unit lies largely within the discretion of the

Board, whose decision, ‘‘if not final, is rarely to be

disturbed,’’ we think the function of the Court of

Appeals ended when the Board's error on the

“employer” issue was ‘‘laid baare’’.

Id. at 805-06, 96 S.Ct. at 1844-1845 (citations omitted). The

Court then remanded the case to the NLRB for a deter-

mination of the bargaining unit issue. On remand, the

NLRB decided that even though the two companies involv-

ed were a single employer, their employees together did not

constitute an appropriate bargaining unit. Peter Kiewit

Sons’ Co., 231 N.L.R.B. 76 (1977).

The Board made clear in Peter Kiewit that the ex-

istence of union and non-union construction firms

historically operated side by side by a single employer is

not, without more, a violation of a collective bargaining

agreement with the signatory construction firm. As the

Board stated in its original Peter Kiewit decision, 206

N.L.R.B. 562 (1973):

It is not uncommon in the construction in-

dustry for the same interests to have two

separate organizations, one to handle contracts

performed under union conditions and the other

under nonunion conditions. The Board has

recognized this fact by refusing to include the

employees of a nonunion company in the same

bargaining unit with those of a union company

controlled by the same interests, and by refusing

to require the nonunion company to recognize the

A-24

bargaining representative of the union com-

pany’s employees or to apply the collective

bargaining contract with the latter to its own

employees.

(footnotes omitted). The Board gave as examples of this

policy its decisions in Frank N. Smith Associates, Inc., 194

N.L.R.B. 212 (1971); Gerace Construction, Inc., 193

N.L.R.B. 645 (1971); and Central New Mexico Chapter, Na-

tional Electrical Contractors Association, Inc., 152

N.L.R.B. 1604 (1965). See also A-1 Fire Protection Inc., 233

N.L.R.B. 38 (1977), enforced in part remanded sub nom.

Road Sprinkler Fitters Local Union No. 669 v. NLRB, 600

F.2d 918 (D.C.Cir.1979), on remand, 250 N.L.R.B. 217

(1980), remanded, 676 F.2d 826 (D.C.Cir.1982). The

Supreme Court, remanding the case to the Board in its

Peter Kiewit decision, did not purport to challenge this

policy, noting only that a finding of single employer status

does indeed require the additional determination that both

the signatory’s and nonsignatory’s employees belong to

the same bargaining unit before both entities will be bound

by one agreement. See 425 U.S. at 805, 916 S.Ct. at 1844.

It is clear that the primary motivation of the

Board in making an independent unit determination in a

single employer case is to protect the rights under section 7

of the NLRA, 29 U.S.C. § 157, of the employees of each of

the subentities constituting the single employer to bargain

collectively with representatives of their own choosing.

Section 9b) of the NLRA, 29 U.S.C. § 159%b), directs the

Boardd to ‘‘decide in each case whether, in order to assure

to employees the fullest freedom in exercising rights

guaranteed by [the NLRA\J, the unit appropriate for the

purposes of collective bargaining shall be the employer

unit, craft unit, plant unit, or subdivision thereof...’ As

A-25

the Supreme Court recognized in Peter Kiewit, supra, at

1843-1844, and as we have set forth above, the factors

leading to a single employer finding will not necessarily

provide the assurance required by section 9(b) that the sec-

tion 7 rights of the employees of the subentities involved

will be adequately protected. That assurance is provided in

an unfair labor practice case by the inquiry as to the ap-

propriateness of the unit. Further, as will be shown in part

I1.C.8 of this opinion, even the fact that the union

employer and the union have stipulated in the agreement

as to the appropriate unit will not preclude an inquiry by

the Board into the appropriateness of the unit comprising

the employees of both the union and nonunion employers.

2. Alter Ego Doctrine.

As indicated above, the plaintiffs’ pleadings

allege (in addition to interrelation of operations, common

management, centralized control of labor relations and

common ownership between Farnsworth and Halmar) that

Halmar is being operated to circumvent and evade the

obligations of Farnsworth under the collective bargaining

agrewtaent between Farnsworth and the Unions. This ra-

tione «, broadly read, echoes another Board-created doc-

trine, that of the alter ego employer. Alter ego issues com-

monly arise in successorship situations, when ownership of

a signatory company changes hands. Although a bona fide

successor is not in general bound by a prior collective

bargaining agreement, an alter ego will be so bound. NLRB

v. Tricor Products, Inc., 636 F.2d 266, 269-70 (10th Cir.

1980). This is because an employer will not be permitted to

evade its obligations under the NLRA by setting up what

appears to be a new company, but is in reality a ‘disguised

continuance”’ of the old one. Southport Petroleum Co. v.

NLRB, 315 U.S. 100, 106, 62 S.Ct. 452, 455, 86 L.Ed. 718

A-26

(1942). See also Howard Johnson Co. v. Detroit Local Joint

Executive Board, 417 U.S. 249, 259 n.5, 94 S.Ct. 2236, 2242

n.5, 41 L.Ed.2d 46 (1974) (when ‘‘a mere technical change

[is made] in the structure or identity of the employing enti-

ty, frequently to avoid the effect of the labor laws ... the

courts have had little difficulty holding that the successor

is in reality the same employer and is subject to all the

legal and contractual obligations of the predecessor.”’).

In deciding whether a company is an alter ego,

the Board will often look to factors which bear some

similarity to those involved in a single employer question;

in particular, whether the two enterprises have substan-

tially identical management, business purpose, operation,

equipment, customers, supervision and ownership.

Hageman Underground Construction, 253 N.L.R.B. 60

(1980); Crawford Door Sales Co., 226 N.L.R.B. 1144

(1976).” However, the focus of the alter ego doctrine, unlike

that of the single employer doctrine, is on the existence of a

disguised continuance or an attempt to avoid the obliga-

tions of a collective bargaining agreement through a sham

transaction or technical change in operations. E.g.,

Amalgamated Meat Cutters v. NRLB, 663 F.2d 223, 277

(D.C.Cir.1980) (sale of supermarket was not sham or

‘The Ninth Circuit has, in several cases, seemed to state that the

factors listed in Don Burgess Construction, supra, apply with equal

validity to single employer and alter ego cases. J. M. Tanaka Construc-

tion, Inc. v. NLRB, 675 F.2d 1029 (9th Cir. 1982); NLRB v. Big Bear

Supermarkets No. 3, 640 F.2d 924 (9th Cir.), cert. denied, 449 U.S. 919,

101 S.Ct. 318, 66 L.Ed.2d 147 (1980). However, we think that the

Board's decisions have made it clear that the doctrines are conceptually

distinct. Hageman Underground Construction, 253 N.L.R.B. 60, 60 n.2

(1980) (Board found that two entities constituted single employer and

that their employees were members of the same bargaining unit and

thus would not reach alter ego determination); Naccarato Construction

Co., 233 N.L.R.B. 1394, 1398 (1977) (more must be shown for alter ego

finding than single employer finding, since former and not latter binds

nonsignatory to a collective bargaining agreement).

A-27

“paper” transaction); NLRB v. Tricor Products, Inc.

supra, at 270 (motivation by anti-union sentiment a rele-

vant factor in alter ego analysis); NLRB v. Herman

Brothers Pet Supply, Inc., 325 F.2d 68, 70-71 (6th Cir.

1963) (sale of store immediately after representation elec-

tion was ‘‘a fictitious transaction to avoid dealing with the

union and to discharge those employees who supported the

union’’); NLRB v. Ozark Hardwood Co., 282 F.2d 1, 5-7 (8th

Cir. 1960) (Board was entitled to find that identity of struc-

ture and continuance of operations existed to support alter

ego finding or could find successor to be an instrument of

“evasion as to the labor-wrongs situation”’).8 Further, an

alter ego case frequently contains specific findings on the

substantial continuity of the work force from the union to

the non-union employer. E.g., Hageman Underground Con-

struction, 253 N.L.R.B. 60, 68 (decision of Shapiro, A.L.J.

1980) (‘All of the construction workers on the payroll of

[signatory employer] were transferred to the payroll of

[non-signatory employer], where they performed the same

work which they had done while working for [signatory

employer], using the same skills, and under the same

© The history of a ‘‘double breasted" operation in existence prior

to and during the time a union enters into a collective bargaining agree-

ment with one half of the operation may be relevant evidence as to

whether the nonsignatory is a sham created merely for the purpose of

evading contractual obligations or is a bona fide enterprise of which the

union was aware at the time it first negotiated an agreement with the

signatory. Of course, the prior existence of the nonsignatory is not

necessarily dispositive, since it may always be argued that although the

nonsignatory existed as a bona fide operation prior to the agreement, a

disgruntled management later sought to use the company as a means to

avoid its obligations by deliberately shifting all the signatory's work

away to the nonsignatory and leaving the signatory as an empty shell.

For a running colloquy on the related question whether a union who

enters into a collective bargaining agreement knowing a ‘‘double

breasted’’ operation is in existence is thereby prevented from complain-

ing about the non-union branch, see A-] Fire Protection Inc., 233

N.L.R.B. 38 (1977), remanded, 600 F.2d 918 (D.C.Cir.1979), on remand

250 N.L.R.B. 217 (1980), remanded, 676 F.2d 826 (D.C.Cir.1982).

A-28

immediate supervision.’’); Crawford Door Sales Co., 226

N.L.R.B. 1144, 1150 (decision of Dyer, A.L.J. 1976) (‘‘The

number of employees was reduced by [signatory em-

ployer’s]) unfair labor practices prior to the time [non-

signatory employer] commenced business, but [non-

signatory employer] continued the operations and the same

employees with no discernible break.’’).

We have seen that the Board, in applying the

single employer doctrine, makes an independent, careful in-

vestigation into whether the employees of two firms held

to constitute a single employer constitute an appropriate

bargaining unit. Only where the employees do constitute

an appropriate unit will the non-signatory firm be bound to

the collective bargaining agreement entered into between

the signatory firm and the union. However, when the

Board makes a finding that a non-signatory employer is

the alter ego of a signatory employer which has voluntarily

agreed to recognize the union’s representative status in a

unit stipulated in the collective bargaining agreement, the

Board generally will not reconsider the unit under the com-

munity of interests test, but will simply make a far more

limited determination whether the stipulated unit is repug-

nant to any policy embodied in the NLRA. See Hageman

Underground Construction, 253 N.L.R.B. 60, 70 (decision

of Shapiro, A.L.J. 1980); Pioneer Inn Associates, 228

N.L.R.B. 1263, 1272 (decision of Shapiro, A.L.J. 1976)

(‘The salutary purpose of such agreement [as to the boun-

daries of an appropriate unit] would be frustrated if the

parties were free to repudiate them at will and, thus, ab-

sent extraordinary circumstances or a clear denial of

employees’ rights, the Board will not permit such repudia-

tion, even where it would not have found the unit ap-

propriate if the matter had been brought before it

initially.”’), enforced, 578 F.2d 835 (9th Cir. 1978). The

A-29

Board's reluctance to reexamine a stipulated unit in an

alter ego case clearly stems from the fact that the conclu-

sion tht one employer is the alter ego of another is based on

a holding that the two are in reality the same employer.

3. The Distrit Court's Decision.

Having described the single employer and alter ego

theories developed and applied by the Board, generally in

the context of determining whether sections 8(a)(5) and (1)

of the NLRA, 29 U.S.C. §§ 158(a)(5), (1), have been violated

by the refusal of a nonsignatory employer to abide by the

terms of a collective bargaining agreement between a

related signatory employer and the union, we turn to the

Cistrict court’s decision in this case. The district court

assumed that Peter Kiewit meant that a federal court was

powerless to make an initial bargaining unit determination

even in a section 301 suit, for it concluded that

adoption of plaintiffs’ assertion that Farnsworth

and Halmar are a single employer so as to make

the instant labor contract binding upon Halmar

necessarily would require a determination of the

appropriate bargaining unit, and that such deter-

mination would be an invasion of the exclusive

province of the N.L.R.B. not distinguishable from

that condemned by the Supreme Court in the

Peter Kiewit case. Hence, the motions to dismiss

the Section 301 claims brought by Farnsworth

and Halmar must be granted.

511 F.Supp. at 513 (emphasis in original).9 As a preliminary

9 We note that another district court, on facts strikingly similar to

this case, reached the same conclusion as the district court here.

Couchigian v. Rick, 489 F.Supp. 54 (D.Minn.1980). While in Couchigian

the union (which was not a plaintiff in the § 301 action; only the pension

A-30

matter, we note that behind the district court’s reasoning

lies the assumption that the pleadings allege only the

single employer theory. But, as we have seen, the pleadings

also allege the alter ego theory as a basis for the Unions’

breach of contract action. Were we to accept the plaintiffs’

argument that they have stated a claim under section 301

employing the alter ego theory, and were we to hold that

the district court should apply that theory in the same

manner as the Board applies it in the unfair labor practice

context, then, as described in part II.C.2 above, a de novo

determination of the appropriate bargaining unit might

well not be necessary. Depending upon the proof, the

district court might be able to limit itself to a consideration

of whether the resulting unit is repugnant to the purposes

of the NLRA, a far more limited inquiry. For the time be-

ing, we note only that the pleadings cannot be construed to

allege only a single employer theory.

4. The Substantive Law to be Applied under Sec-

tion 301.

The district court's determination is significant

as much for its unstated premise as for its ultimate conclu-

sion. That premise is that a district court, in an action for

breach of contract under section 301 in which single

employer status is alleged as a basis of recovery, would ap-

ply the single employer theory in the same fashion as it is

employed by the Board in the unfair labor practice context.

(Footnote 9 continued)

funds were) had sought a single employer determination by the Board,

which the Board refused on procedural grounds, the court's language in-

dicates it did not consider that a critical factor. While a prior attempt to

have the Board rule on the claim might affect our view of such a case (see

part I1.C.5, infra), we reject the reasoning of the Couchigian court in this

case. See part I1.C.5, infra.

A-31

Under this approach, if the district court were to find that

Farnsworth and Halmar were a single employer, a

favorable determination as to the appropriateness of the

bargaining unit consisting of the employees of both com-

panies would be necessary before Halmar would be bound

by the collective bargaining agreement entered into bet-

ween the Unions and Farnsworth. Upon examination, we

think that the district court's premise was correct, and we

would broaden it to include suits under section 301 based

upon allegations of alter ego status as well, 10

19 This analysis is by no means unprecedented. We were faced

with a related problem recently in Local Union No. 59, International

Brotherhood of Electrical Workers v. Namco Electric, Inc., 653 F.2d 143

(Sth Cir, 1981),

In Namco, a union sought to bind a non-signatory employer, Nam-

co Electric, to a collective bargaining agreement entered into with

Frauman Electric Co, The union's theory was that Namco was an alter

ego corporation of Frauman or merely a ‘fictitious identity’ assumed by

Frauman, The district court granted summary judgment for the defen-

dant corporations, holding that a representational issue would necessari-

ly have to be decided and that Peter Kiewit prohibited such a determina:

tion, A panel of this circuit, in an opinion written by Judge Rubin, af-

firmed, but on a different ground. The panel held that the union had not

come up with sufficient evidence to contest the factual evidence in the

record that Namco and Frauman were not the same corporation but were

in fact two distinct business entities. However, in the course of reaching

this conclusion the court stated in dicta:

Without at this time attempting to explore the full reach of

the [Peter Kiewit] decision, we assume, without deciding,

that it does not foreclose jurisdiction of a claim for contract

breach based on proof that the defendant, while not express-

ly bound by a collective bargaining agreement, is the alter

ego of a signatory to the agreement. Relying on this proposi-

tion, the union contends that the district court incorrectly

held that it lacked jurisdiction.

That Namco is but Frauman in another garb, is a possible

interpretation of the allegations in the complaint, Because

the Frauman employees had already been certified as an ap-

propriate bargaining unit, such a circumstance would not

present a question of the propriety of the bargaining unit.

A-32

As the Supreme Court held in Textile Workers

(Footnote 10 continued)

The motion for summary judgment and supporting

materials have demonstrated, however, that the contention

in the complaint is not a permissible version of the facts. Our

affirmance, therefore, is based, not on lack of jurisdiction to

consider the complaint, but on its absence of merit,

The union's reliance on Bugher v. Frash, 98 LRRM 3010

(S.D.Ind.1977), is misplaced, for in that case the question,

raised on a motion to dismiss for failure to state a claim for

which relief could be granted, was solely whether a corpora:

tion ‘could conceivably be found to be bound to the labor

contracts entered into by its alleged alter ego.’ Jd. at 3011

(emphasis supplied). The record before us establishes beyond

genuine dispute that Namco and Frauman were separate en-

tities and that Namco was not the alter ego of Frauman.

Therefore, the hypothetical posed by the procedural posture

in Frash is not here relevant.

653 F.2d at 145-46. That hypothetical problem, a claim raised in the con-

text of a 12(b)(6) motion, is squarely before us today.

Bugher v. Frash, 98 L.R.R.M. 3010 (S.D, Ind. 1978), as mentioned

in Nameo, did involve circumstances very similar to the ones we are

presented with here. In Frash, trustees of certain union pension plans

brought suit in federal district court under * 301 of the LMRA and §

502(a3NBNii) of ERISA, 29 U.S.C. §§ 185, 1132(a3)\B)ii), seeking to

hold Frash, Inc. to the terms of a bargaining agreement executed bet-

ween two unions covered by the plans and the defendant Frash Earth

Works, The plaintiff trustees alleged that Frash, Inc, and Frash Earth

Works were alter ego corporations and that Frash, Inc. should therefore

be bound to the agreement. /d. at 3011.

The two defendant corporations moved to dismiss for lack of sub-

ject matter jurisdiction, contending that the district court could not

decide the alter ego issue without also determining the appropriate

bargaining unit and thereby usurping the NLRB's jurisdiction over the

latter issue, The court rejected the defendants’ argument.

Although the Court is in agreement with defendant Frash,

Inc.'s argument regarding the exclusivity of NLRB jurisdic-

tion to determine appropriate bargaining units and its

arguments concerning singleemployer and/or multi-

employer bargaining units, dismissal of plaintiffs’ claim

against said defendant is unwarranted. As the Court inter

A:33

Union v, Lincoln Mills, 353 U.S, 448, 456, 77 S.Ct, 912, 917,

(Footnote 10 continued)

prets plaintiffs’ complaint in regard to defendant Frash, Inc.,

the plaintiffs seek to hold said defendant liable on a type of

alter ego theory. The complaint contains no allegations that

Frash, Inc, is directly bound to any collective bargaining

agreement with the labor organizations represented, in ef-

fect, by plaintiffs, and the record of the case at its present

juncture reflects that Frash, Inc. was not bound by any labor

agreements, Going no further, as a matter of federal labor

law dismissal of the claim would be called for, but plaintiffs

inject a theory having its roots in corporate law under which

defendant Frash, Inc. could conceivably be found to be

bound to the labor contracts entered into by its alleged alter

ego Robert Ellis Frash d/b/a Frash Earth Works,

Depending upon the proof, the two defendants could be

found to be one and the same entity, and the incorporation of

Frash, Inc, could be found to be a sham or could be disregard-

ed for certain particular purposes, In such circumstances,

the labor agreements entered into by Frash Earth Works

could be found to be binding on the corporate defendant.

When thus viewed as a corporate liability case in

substance, South Prairie Construction Co, v. Local No, 627,

International Union of Operating Engineers, 425 U.S, 800,

92 LARM 2507 (1976), and its statements about the

deference which must be accorded by the courts to the

NLRB's exclusive jurisdiction are insufficient to mandate

dismissal, An avenue for relief, albeit a narrow one entirely

dependent upon proof that Frash, Inc, and Frash Earth

Works are one and the same, exists under which plaintiffs

could recover, Thus, although defendant Frash, Inc.'s

arguments are, in the most part, convincing and although

they narrowly circumscribe the path which plaintiffs must

follow to recover plaintiffs’ complaint against said defendant

states a claim upon which relief can be granted.

Td. at 3011-12, The opinion in Frash views the requisite showing of iden:

tity as grounded in more or less standard doctrines of corporate law,

However, because we deal with the special area of labor agreements, we

think an alter ego theory must be specifically attuned to the policies and

concerns of the federal labor laws it it is to form the basis of a cause of ac-

tion under section 301,

A-34

1 L.Ed.2d 972 (1957), the substantive law to be applied in

suits under section 301 is federal law, ‘which the courts

must fashion from the policy of our national labor laws."’ It

was Congress’ stated goal in adopting section 301 to treat

collective bargaining agreements as contracts fully en-

forceable in federal courts, in order to encourage the mak-

ing of such agreements and to promote industrial peace

through faithful performance of such agreements. Jd. at

453-54, 77 S.Ct. at 916. The NLRA similarly has as one of

its goals the promotion of industrial peace through faithful

performance of collective bargaining agreements. 29

U.S.C, § 151. We have seen that the Board has developed

the single employer and alter ego theories in the context of

unfair labor practice proceedings in which it is alleged that

related employers have violated sections 8(a)(5) and (1) of

the NLRA by failing to abide by the terms of a collective

bargaining agreement entered into by one of them. Both of

those theories are clearly designed to promote the faithful

performance of a collective bargaining agreement not only

by the signatory employer but also by a non-signatory

employer with the requisite high degree of consanguinity

to the signatory employer. Assuming that we can suc-

cessfully negotiate the shoals of Peter Kiewit and its off-

spring, we see no reason why the law developed by the

Board and by federal appellate courts in that context

should not be the substantive law applied in a suit under

section 301 against related employers for breach of a collec-

tive bargaining agreement entered into by one of them, at

(Footnote 10 continued)

See also Forrest Bugher v. Cleveland X-Ray Inspection and

Cleveland Indus. Testing, Inc., No. 77-186-B (N.D.Okla. Nov. 22, 197°)

(unpublished opinion); /nternational Union v. Cardwell Mfg. Co., Inc.,

416 F.Supp. 1267 (D.Kan.1976); Plumbers Local Union No. 519 v. Ser

vice Plumbing Co., Inc, 401 F.Supp. 1008 (S.D.Fla.1975), which also

held that alter ego type theories may be used to bind a non-signatory toa

collective bargaining agreement.

A-35

least for the purpose of deciding whether the plaintiffs

have failed to state a claim under section 301. Indeed, in

view of the common goals of the LMRA and the NLRA and

the existence of a substantial body of case law developed

by the agency possessing special expertise in the area,

there is every reason why the substantive law should be

the same.

We recognize that the Board, in an unfair labor

practice proceeding involving, e.g., single employer status,

is operating under a statutory mandate (in section 9(b) of

the NLRA) to determine whether the resulting unit is an

appropriate unit and thereby to protect the section 7 rights

of the employees involved. But we agree with the district

judge that a district court in a section 301 case, although

not operating under a specific statutory mandate such as

section 9(b), should be similarly concerned about the sec-

tion 7 rights of the employees. One of the principal policies

of the national labor laws—that embodied in section 7—is

the protection of the exercise by workers of full freedom of

association, self-organization, and designation of represen-

tatives of their own choosing for the purpose of negotiating

the terms and conditions of their employment. 29 U.S.C. §

151. If, as the Supreme Court said in Lincoln Mills, 353

U.S. at 456, 77 S.Ct. at 917, we are to fashion the law under

section 301 from the policy of our national labor laws, we

cannot fail to honor and effectuate a policy so basic to

those laws as the policy of protecting workers’ rights of

free association.

The defendants urge that the Unions have failed to

state a claim under section 301 against Halmar simply

because Halmar did not sign the collective bargaining

agreement between Farnsworth and the Unions. But in

order to accept this conclusion we wou!d have to disregard

A-36

the fundamental policies deveioped by the Board and by

federal appellate courts in the unfair labor practice cases

described in Parts II.C.1 and 2 of this opinion. The rights

of the Unions and the obligations of Farnsworth and

Halmar would then depend upon the forum in which the

claims were asserted.

The Supreme Court addressed a similar problem in

Howard Johnson Co. v. Detroit Local Joint Executive

Board, 417 U.S. 249, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974), a

suit brought by a union under section 301 to compel

Howard Johnson to submit to arbitration to determine the

extent of its obligations to the employees of a company

whose assets Howard Johnson had purchased. Howard

Johnson had specifically refused to assume the selling com-

pany’s collective bargaining agreement, which contained

an arbitration clause. The district court nevertheless

ordered Howard Johnson to arbitrate. The district court

relied on the Supreme Court’s decision in John Wiley &

Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11

L.Ed.2d 898 (1964), also a case under section 301 to compel

arbitration; the court of appeals affirmed. Both the district

court and the court of appeals recognized that the reason-

ing of Wiley was to some extent inconsistent with the

Supreme Court's later decision in NLRB v. Burns Interna-

tional Security Services, Inc., 406 U.S. 272, 92 S.Ct. 1571,

32 L.Ed.2d 61 (1972), but held that Wiley rather than

Burns controlled. The two courts reasoned that Burns in-

volved an NLRB order holding the successor employer

bound by the substantive terms of the collective bargain-

ing agreement with its predecessor (an order which the

Supreme Court declined to enforce), whereas Howard

Johnson, like Wiley, involved a section 301 suit to compel

arbitration.

~

A-37

The Supreme Court rejected the lower courts’ rea-

soning on this point. In its discussion of the issue, the

Court said:

Although this distinction was in fact suggested

by the Court's opinion in Burns, see [406 U.S.] at

285-286 [92 S.Ct. at 1581], we do not believe that

the fundamental policies outlined in Burns can be

so lightly disregarded. In Textile Workers v. Lin-

coln Mills, 353 U.S. 448 [77 S.Ct. 912, 1 L.Ed.2d

972] (1957), this Court held that § 301 of the

Labor Management Relations Act authorized the

federal courts to develop a federal common law

regarding enforcement of collective-bargaining

agreements. But Lincoln Mills did not envision

any freewheeling inquiry into what the federal

courts might find to be the most desirable rule, ir-

respective of congressional pronouncements.

Rather, Lincoln Mills makes clear that this

federal common law must be ‘‘fashion{ed] from

the policy of our national labor laws.”’ Jd., at 456

(77 S.Ct. at 917). MR. JUSTICE DOUGLAS

described the process of analysis to be employed:

“The Labor Management Relations Act ex-

pressly furnishes some substantive law. It

points out what the parties may or may not

do in certain situations. Other problems will

lie in the penumbra of express statutory

mandates. Some will lack express statutory

sanction but will be solved by looking at the

policy of the legislation and fashioning a

remedy that will effectuate that policy.” /d.,

at 457 [77 S.Ct. at 918].

It would be plainly inconsistent with this view to

say that the basic policies found controlling in an

unfair labor practice context may be disregarded

by the courts in a suit under § 301, and thus to

A-38

permit the rights enjoyed by the new employer in

a successorship context to depend upon the

forum in which the union presses its claims.

Clearly the reasoning of Burns must be taken into

account here.

417 U.S. at 255-56, 94 S.Ct. at 2239-2240 (footnote omit-

ted). Similarly, we think that it would be inconsistent with

the congressional mandate to fashion the law under section

301 from the policy of our national labor laws to say that

the policies found controlling in the unfair labor practice

context described supra may be disregarded by the district

court in the present suit under section 301 and thus to per-

mit the rights and obligations of the parties to vary with

the forum.

The Court in Howard Johnson emphasized that

[in our development of the federal common law

under § 301, we must necessarily proceed

cautiously, in the traditional case-by-case ap-

proach of the common law. Particularly in light of

the difficulty of the successorship question, the

myriad factual circumstances and legal contexts

in which it can arise, and the absence of congres-

sional guidance as to its resolution, emphasis on

the facts of each case as it arises is especially ap-

propriate.

Id. at 256, 94 S.Ct. at 2240. The same can obviously be said

for the single employer-alter ego questions presented by

this case. At this preliminary stage of the litigation, and

for the purpose of deciding whether the plaintiffs have fail-

ed to state a claim, we see no reason why the substantive

law to be applied by the district court should differ from

that applied by the Board in the unfair labor practice con-

)

A-39

text described supra.

This brings us squarely to the question whether, as

the district court held, a determination of the ap-

propriateness of the bargaining unit by the district court

would be an invasion of the exclusive province of the

NLRB “not distinguishable from that condemned by the

Supreme Court in the Peter Kiewit case.’’ 511 F.Supp. at

513.

5. The Relevance of Peter Kiewit.

The defendants’ position is that the plaintiffs’ claims

against Halmar must fail because the plaintiffs’ claim

under the single employer theory would require the district

court to make a determination of the relevant bargaining

unit before the NLRB has done so, and such a premature

determination is forbidden by the Supreme Court's deci-

sion in Peter Kiewit. To hold Halmar (as a single employer

with Farnsworth) to the 1977 collective bargaining agree-

ment, say the defendants, it must be determined that

Halmar’s employees belong to the relevant bargaining unit

represented by the Unions. This in turn requires that a

determination of the appropriateness of that bargaining

unit be made, and according to defendants, Peter Kiewit

does not allow the federal courts to make de novo bargain-

ing unit determinations. The plaintiffs argue in response

that Peter Kiewit does not forbid such unit determinations

in the present section 301 action for breach of contract.

We are in substantial agreement with the plaintiffs’

position. As described above, in Peter Kiewit the union fil-

ed an unfair labor practice charge before the NLRB against

a union contractor and a non-union contractor, alleging

that they were a single employer and that the contract

A-40

entered into by the union contractor was binding on the

non-union contractor. The NLRB found that the two con-

tractors were separate employers, thereby obviating the

need to inquire into the appropriateness of the bargaining

unit, and dismissed the complaint. The Court of Appeals

for the District of Columbia Circuit reversed, holding that

the two contractors were a single employer. Rather than

remanding for a determination by the Board on the ap-

propriateness of the bargaining unit, the court went on to

hold that the unit was appfopriate and that the two con-

tractors had committed gn unfair labor practice by refus-

ing to recognize the union as the bargaining representative

of the non-union contractor's employees or to extend to

them the terms of the collective bargaining agreement.

The Supreme Court affirmed the circuit court's

determination on the single employer issue but vacated its

holding that the employees of the two companies con-

stituted an appropriate bargaining unit. The Court held

that the circuit court had invaded the statutory province of

the NLRB under section 9(b) of the NLRA by proceeding

to decide the unit question before the NLRB had passed

upon the issue:

Whether or not the Court of Appeals was correct

in this reasoning, we think that for it to take upon

itself the initial determination of this issue was

“incompatible with the orderly function of the

process of judicial review."" NLRB v. Metropoli-

tan Ins. Co., 380 U.S. 438, 444 [85 S.Ct. 1061,

1064, 13 L.Ed.2d 951] (1965). Since the selection

of an appropriate bargaining unit lies largely

within the discretion of the Board, whose deci-

sion, “if not final, is rarely to be disturbed,”’

Packard Motor Co. v. NLRB, 330 U.S. 485, 491

[67 S.Ct. 789, 793, 91 L.Ed. 1040) (1947), we think

A-41

the function of the Court of Appeals ended when

the Board's error on the ‘employer’ issue was

“laid bare.’’ FPC v. Idaho Power Co., 344 U.S. 17,

20 (73 S.Ct. 85, 86, 97 L.Ed. 15] (1952).

As this Court stated in NLRB v. Food Store

Employees, 417 U.S. 1, 9 [94 S.Ct. 2074, 2079, 40

L.Ed.2d 612] (1974):

“It is a guiding principle of administrative

law, long recognized by this Court, that ‘an

administrative determination in which is im-

bedded a legal question open to judicial

review does not impliedly foreclose the ad-

ministrative agency, after its error has been

corrected, from enforcing the legislative

policy committed to its charge.’ FCC v. Pott-

sville Broadcasting Co., 309 U.S. 134, 145 [60

S.Ct. 437, 442, 84 L.Ed. 656] (1940).”

In foreclosing the Board from the opportunity to

determine the appropriate bargaining unit under

§ 9, the Court of Appeals did not give ‘‘due obser-

vance [to] the distribution of authority made by

Congress as between its power to regulate com-

merce and the reviewing power which it has con-

ferred upon the courts under Article III of the

Constitution."’ FCC v. Pottsville Broadcasting

Co., 309 U.S. 134, 141 [60 S.Ct. 437, 440, 84 L.Ed.

656] (1940).

Peter Kiewit, 425 U.S. at 805-06, 96 S.Ct. at 1844-1845.

We do not think that the second sentence in the

portion of the opinion quoted above—a sentence which is

often quoted out of context—stands for the proposition for

which it and Peter Kiewit are cited by the defendants—

that the Board has exclusive jurisdiction to decide ap-

A-42

propriateness of the bargaining unit issues. We think in-

stead that the Court in Peter Kiewit was applying a time-

honored principle relating to appellate review of an agency

determination. When an agency, in order to grant relief in

the case before it, must as a matter of statute find that

both factual or legal conclusion A (e.g., single employer

status) and factual or legal conclusion B (e.g., ap-

propriateness of the bargaining unit) have been establish-

ed, but concludes that A has not been established and

therefore declines to consider whether B has been

established, a reviewing court that reverses the conclusion

that A has not been established must remand to the agen-

cy to permit it to consider in the first instance whether B

has been established.

Section 9(b), which is the source of the Board's

responsibility in an unfair labor practice context to make a

determination of the appropriateness of the bargaining

unit in a single employer case such as Peter Kiewit, and

which is set forth in the Supreme Court’s opinion in Peter

Kiewit, directs the Board to ‘‘decide in each case whether,

in order to assure to employees the fullest freedom in exer-

cising the rights guaranteed by [the NLRA], the unit ap-

propriate for the purposes of collective bargaining shall be

the employer unit, craft unit, plant unit or subdivision

thereof...’ 29 U.S.C. § 159(b) (emphasis added). Clearly sec-

tion 9(b) refers only to cases pending before the Board

under the NLRA. Neither section 9(b) nor the Supreme

Court’s decision in Peter Kiewit stands for the proposition

that a federal court with jurisdiction under section 301 of

the LMRA to decide cases alleging a breach of a collective

bargaining agreement by related employers does not have

jurisdiction to determine whether a bargaining unit com-

prising the employees of such employers is appropriate

where such a determination is necessary to a resolution of

A-43

the breach of contract issue that is consistent with national

labor policy.

We note that in the present case there is no in-

dication that either party has been before the Board seek-

ing a certification or clarification of the relevant bargain-

ing unit, nor to our knowledge is any such proceeding

presently pending. Were such a circumstance present, our

view of the proper role of the federal district court in that

case might be very different. We do not deny that

deference to the expertise of the Board in unit determina-

tions should be encouraged whenever possible, and upon

the initiation of clarification proceedings or the filing of an

unfair labor practice by one of the parties to this action,

depending upon how far these proceedings had progressed,

the wisest course for the district court might well be to

stay the action pending the Board's resolution of the unit

issue.!1 Nor is this a case in which a unit determi-

1) We note that no party has raised the issue whether the tradi-

tional administrative law theory of primary jurisdiction mmay fruitfully

be applied in a case where a bargaining unit issue arises before a district

court in a § 301 action. By ‘‘primary jurisdiction’’, we do not mean the

pre-emption doctrine developed in San Diego Building Trades Council v.

Garmon, 359 U.S. 236 (79 S.Ct. 773, 3 L.Ed.2d 775) (1959), which is ap-

plied solely in a labor context; rather, we are speaking of the practice of

referring questions within an administrative agency's expertise to that

agency while the federal court stays or dismisses the main action pen-

ding the agency's determination. The Supreme Court has explained the

difference between the two concepts by noting that in the labor law

context

the term ‘primary jurisdiction” is used to refer to the

various considerations articulated in Garmon and its pro

geny that militate in favor of preempting state-court

jurisdiction over activity which is subject to the unfair labor

practice jurisdiction of the federal Board. This use of the

term should not be confused with the doctrine of primary

jurisdiction, which has been described by Professor Davis as

follows:

A-44

nation has been made by the Board and a disgruntled party

(Footnote 11 continued)

“The precise function of the doctrine of primary

jurisdiction is to guide a court in determining whether

the court should refrain from exercising its jurisdiction

until after an administrative agency has determined

some question or some aspect of some question arising

in the proceeding before the court.

“The doctrine of primary jurisdiction does not

necessarily allocate power between courts and agen-

cies, for it governs only the question whether court or

agency will initially decide a particular issue, not the

question whether court or agency will finally decide the

issue."’ 3 K. Davis, Administrative Law Treatise §

19.01, p. 3 (1958) (emphasis in original).

While the considerations underlying Garmon are similar to

those underlying the primary-jurisdiction doctrine, the con-

sequences of the two doctrines are therefore different. Where

applicable, the Garmon doctrine completely pre-empts state-

court jurisdiction unless the Board determines that the

disputed conduct is neither protected nor prohibited by the

federal Act.

Sears, Roebuck & Co. v. San Diego County District Council of

Carpenters, 436 U.S. 180, 199 n.29 [98 S.Ct. 1745, 1758 n.29, 56 L.Ed.2d

209] (1978). The Court has also stated:

The doctrine of primary jurisdiction ‘is concerned with

promoting proper relationships between the courts and ad-

ministrative agencies charged with particular regulatory

duties.'’ United States v. Western Pacific R. Co., 352 U.S. 59,

63 [77 S.Ct. 161, 164, 1 L.Ed.2d 126} (1956). Even when

common-law rights and remedies survive and the agency in

question lacks the power to confer immunity from common-

law liability, it may be appropriate to refer specific issues to

an agency for initial determination where that procedure

would secure ‘‘[u}niformity and consistency in the regulation

of business entrusted to a particular agency"’ or where

“the limited functions of review by the judiciary

{would be] more rationally exercised, by preliminary

resort for ascertaining and interpreting the cir-

cumstances underlying legal issues to agencies that are

better equipped than courts by specialization, by in-

A-45

seeks to circumvent it through a de novo determination by

(Footnote 11 continued)

sight gained through experience, and by more flexible

procedure,’ |Far East Conference v. United States, 342

U.S, 570, 674-75, 72 S.Ct. 492, 494, 96 L.Ed. 576

(1961).]

Nader v, Allegheny Airlines, Inc, 426 U.S, 290, 303-04, 96 S.Ct. 1978,

1986-1987, 48 L.Ed.2d 643 (1976), See also American Trucking Associa

tions, Ine. v. ICC, 682 F.2d 487, 491 n.6 (6th Cir, 1982) (collecting cases

applying doctrine in varying contexts); Columbia Gas Transmission

Corp. v. Allied Chemical Corp,, 652 F.2d 603, 619-20 nn.14-15 (5th Cir,

1981); Mississippi Power & Light Co, v. United Gas Pipe Line Co., 5632

F.2d 412, 417 (6th Cir, 1976), cert. denied, 429 U.S, 1094, 97 S.Ct. 1109,

51 L.Ed.2d 641 (1977), The question here is whether the district court

should require the plaintiffs to seek an initial Board determination of

some of their claims before the court hears the case.

We express no opinion on the primary jurisdiction issue, because

none of the parties raised or briefed it. We strongly recommend that the

issue be briefed, not only by the parties but also by the Board, We will,

however, discuss some of the concerns which we believe are relevant to

the application of the doctrine to this case.

We note that the House conference report on § 301 states that

‘[o)nce parties have made a collective bargaining contract [,| the enforce

ment of that contract should be left to the usual processes of the law and

not to the National Labor Relations Board,’’ H.Conf.Rep.No, 610, 80th

Cong, lst Sess. 42, U.S.Code Cong.Serv, 1947, 1135, reprinted in 1

NLRB, Legislative History of the Labor Management Relations Act,

1947 at 546 (1948), The Senate committee report states that "breaches of

collective agreement [sic] have become so numerous that it is not suffi-

cient to allow the parties to invoke the processes of the National Labor

Relations Bord when such breaches occur .... We feel that the aggrieved

party should also have a right of action in the Federal courts.’ 8. Rep. No.

106, 80th Cong., 1st Sess. 15, reprinted in | NLRB, History

of the Labor Management Relations Act, 1947 at 421 (1048). These

statements may or may not be relevant in a case such as this, where ono

of the issues is whether one party is bound by the contract.

en ee ee ee

A-46

a federal court under the guise of a section 301 action, 2 In

(Footnote 11 continued)

practice charges. 29 U.S.C. § 160(b) 20 C.F.R. § 102.0) Wi) NLAB v. In

diana & Michigan Electric Co, 318 US. 9, 63 S.C 87 L.Ed. 579

(1043); NLAB v. W. L. Rives Co, 328 F.2d 464, 468 «10 oth Cir, 1964),

Clearly the Board will decide single employer, unit determination, and

alter ego questions in such a proceeding: it was in this context that the

Board developed the single employer and alter ego theories. See, ¢.¢.,

Hageman Underground Construction, 263 N.L.R.B. 60 (1980) (single

employer); Crawford Door Sales Co., 226 N.L.R.B. 1144 (1976) (alter ego).

Thus, requiring an unfair labor practice proceeding raises no special issues

for consideration other than whether it is desirable to require the exercise

of primary jurisdiction via a procedure with such pejorative overtones.

The unit clarification procedure is a neutral one, in which the Board

will also decide single employer and unit determination issues, See, ¢.g.,

Valmae Indus, Ine, 225 N.L.R.B, 1296 (1976); General Envelope Co,, 222

N.L.R.B. 10 (1976); Miami Indus, Trucks, Ine, 221 N.L.R.B, 209 (1975),

Obviously, the Board will not make an alter ego finding in a unit clarifica-

tion proceeding, since the alter ego theory does not raise a unit determina:

tion issue (except for the limited determination of whether the unit is

repugnant to the policies of the NLRA),

It appears, however, that the Funds would not have standing to

seek unit clarification, although the Unions would. 20 U.S.C. §§ 159%),

162(2); 20 C.F.R. @§ 102.60(b), 102.1 (1981), The Supreme Court has stated

that the doctrine of primary jurisdiction has no application where the

plaintiffs could not invoke administrative action. Rosado v. Wyman, 397

U.S. 397, 406, 90 S.Ct. 1207, 1214, 26 L.Ed.2d 442 (1970). Rosado,

however, did not present a case where some plaintiffs had standing before

the agency and others did not, a situation which raises competing con

cerns of judicial and administrative economy and potential collusion to

prevent invocation of primary jurisdiction,

Further, in the event the district court does require prior resort to

the NLRB, we note that the court must decide not only which issues

should be submitted to the Board, but also whether to dismiss the case or

merely stay it. If the court reaches that point, we direct its attention to 3

K. Davis, Administrative Law Treatise § 19.07 (1968, Supp. 1970 & Supp.

1976) and the cases cited therein, particularly United States v. Michigan

Nat'l Corp, 419 U.S. 1, 06 S.Ct. 10, 42 L.Bd.2d 1 (1974),

* See page A-04 for corrected Footnote |).

12 In Local Union 204, IBEW v lowa Blectric Light & Power Co,

668 Fad 415 (th Cir. ae

employer over accretion of Qualii Contro' Inspectors (QCI's)

i

AAT

that case, as well, the outcome might be very different, We

(Footnote 12 continued)

contractually defined bargaining unit, The employer contended QCI's

were managearial or supervisory personnel not includible within the

bargaining unit for ‘employees,’’ The union filed a petition before the

Board of accretion, the Board upheld the union's position, and the union

was eventually certified as the bargaining representative for the QCI's.

The employer then refused to bargain with the union, and the union

brought a § 301 action in federal court. The Eighth Circuit dismissed,

declaring that the § 301 action was a disguised attempt to obtain review

of the Board's bargaining unit determination in a federal district court

and holding generally that representational issues were beyond the

jurisdiction of federal courts in § 301 actions,

This result may seem surprising, since the union who brought the

suit would be the last party who would want a redetermination of the

bargaining issue, which had been decided in its favor, Indeed, the

union's position in that case would be more likely to be that the Board's

determination was conclusive on the parties and the district court

should enforce it without review in a § 301 action, Then no bargaining

unit determination would have been necessary,

The Eighth Circuit may have based its decision on the idea that

the employer was seeking review by litigating the unit issue in the

federal courts directly instead of in the normal context of review of an

unfair labor practice charge for refusal to bargain. See generally

Magnesium Casting Co, v. NLRB, 401 U.S, 137, 91 S.Ct, 699, 27 L.Ed.2d

736 (1971), This may explain the court's remark that the case presented

‘a suit to obtain review of an NLRB factual finding on a representa:

tional issue despite the fact that Congress has established an orderly

review procedure under section 10 of the Act.” 668 F.2d at 419,

Nevertheless, we confess puzziement at the Eighth Circuit's deci:

sion here, since nothing in the opinion indicates that it was the employer

rather than the union who sought to invoke § 301 jurisdiction, Moreover,

if a unit determination by the Board is directly reviewable in the federal

courts outside of the context of an unfair labor pra@tice charge, then the

with the Eighth Cireuit that the district

for review of section 9 issues already

upon by the Board, we are not in agreement with its broader

that federal district courts never have the authority to engage in

g

z

rs

ij

;

A-48

have before us a narrow set of circumstances in which

neither side has sought to invoke the Board’s powers to

determine an appropriate bargaining unit, and a federal

court is called upon to remedy an alleged breach of con-

tract. We think that in this situation the district court may

decide the.appropriateness of the bargaining unit, where a

decision on that issue is essential to a4 resolution of a breach

of contract claim,

6. Other Relevant Cases.

So great is the congressional commitment to

judicial enforcement of contractual rights embodied in sec-

tion 301 that the Supreme Court has upheld the jurisdic-

tion of the federal courts under section 301 even in the face

of the NLRB's exclusive jurisdiction to consider actions

alleging unfair labor practices. Thus, pursuant to section

301, federal courts have independent jurisdiction to decide

cases alleging breaches of collective bargaining agree-

ments, even though a breach may also constitute an unfair

labor practice:

The strong policy favoring judicial enforcement

of collective-bargaining contracts [is] sufficiently

powerful to sustain the jurisdiction of the district

courts over enforcement suits even though the

conduct involved [is] arguably or would amount

to an unfair labor practice within the jurisdiction

of the National Labor Relations Board.

(Footnote 12 continued)

unit determinations in § 301 actions. In any event, the case we are

presented with here is factually dissimilar, as there is no prior or pending

unit determination by the Board, and thus we think does not raise the

probleme of review of Board determinations which concerned the Eighth

Cireuit.

A-49

Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 562, 96

S.Ct. 1048, 1055, 47 L.Ed.2d 231 (1976). Accord, William E.

Arnold Co. v. Carpenters District Council, 417 U.S. 12, 94

S.Ct. 2069, 40 L.Ed.2d 620 (1974); Smith v. Evening News

Association, 371 U.S. 195, 83 S.Ct. 267, 9 L.Ed.2d 246

(1962); International Union v. E-Systems, Inc., 632 F.2d

487, 490 (5th Cir. 1980), cert. denied, 451 U.S. 910, 101

S.Ct. 1979, 68 L.Ed.2d 298 (1981); NLRB v. George E.

Light Boat Co., 373 F.2d 762, 767 (5th Cir. 1967). ‘Indeed,

so severely is the Board limited to the adjudication of

statutory rights that it has no power to adjudicate contrac-

tual disputes.”’ United Steelworkers v. American Interna-

tional Aluminum Corp., 334 F.2d 147, 152 (5th Cir. 1964),

cert. denied, 379 U.S. 991. 85 S.Ct. 702, 13 L.Ed.2d 611

(1965).

We have seen that in deciding whether a col-

lective bargaining argeement has been breached, the

federal courts have been directed by Congress to create a

federal common law of contract, fashioned from the policy

of our national labor laws, applicable to collective bargain-

ing agreements. Lincoln Mills, supra 353 U.S. at 456-57, 77

S.Ct. at 917-918. We are faced here with one of the most

fundamental questions that can arise in a contract suit,

namely: who is bound by this contract? To say that the

courts and not the Board are solely entitled to pass upon

contractual disputes and at the same time to deny the

courts the power to determine in a fashion consistent with

the policy of our national labor laws the identity of the per-

sons or entities obligated by the contract is self-

contradictory. If s®ything, the power to enforce a contract

must necessarily include the ability to decide who is bound

by the contract. No question is more basic to the existence

of contractual rights. Thus to the extent that the identity

of the obligees is bound up in representational issues, the

A-50

federal courts must be empowered to decide those issues

for the purpose of determining contractual rights and

obligations.

The language of the Supreme Court’s opinions has

been quite consistent with this reasoning. In Connell Con-

struction Co. v. Plumbers Local Union No. 100, 421 U.S.

616, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975), a general con-

tractor sued under the antitrust laws to void an agreement

it had entered into with a union whereby the contractor

would only hire subcontractors who had collective bargain-

ing agreements with the union. The union defended the

agreement on the grounds that sch agreements were ex-

plicitly made not unfair labor practices by a proviso to sec-

tion 8(e) of the NLRA and therefore that antitrust policy

should defer to labor policy. This circuit held that it could

not address the issue since it would first require a decision

whether there was an unfair labor practice under section

8(e), and such matters were within the exclusive province

of the NLRB. The Supreme Court disagreed, and decided

the issue, stating that ‘‘[t]his Court has held ... that the

federal courts may decide labor. law questions that emerge

as collateral issues in suits brought under independent

federal remedies, including the antitrust laws.’ 421 U.S. at

626, 95 S.Ct. at 1836 (footnote omitted) (citing

Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.S. 676,

684-688, 85 S.Ct. 1596, 1599-1601, 14 L.Ed.2d 640 (1965)

(opinion of White, J.); id. at 710 n.18, 85 S.Ct. at 1614 n.18

(opinion of Goldberg, J.); Vaca v. Sipes, 386 U.S. 171,

176-188, 87 S.Ct. 903, 909-915, 17 L.Ed.2d 842 (1967);

Smith v. Evening News Association, 371 U.S. 195, 83 S.Ct.

267, 9 L.Ed.2d 246 (1962)).

The Court reiterated its Connell holding in

Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 102 S.Ct. 851,

sl

A-51

70 L.Ed.2d 833 (1982). There a coal producer sought to

avoid payment of special contributions to employee health

and retirement funds on the grounds that the clause in the

collective bargaining agreement which required the con-

tributions violated the “hot cargo’ provisions of section

8(e) of the NLRA, as well as sections 1 and 2 of the Sher-

man Act. The trustees of the funds brought an action

under section 301 and ERISA seeking to enforce the clause

of the collective bargaining agreement. Both the district

court and the District of Columbia Circuit refused to pass

upon the labor issues presented. The Supreme Court held

that the federal courts had jurisdiction to pass on the ‘“‘hot

cargo’’ claim as well as the antitrust claim, since they had

‘‘a duty to determine whether a contract violate({d] federal

law before enforcing it.’’ 455 U.S. at __, 102 S.Ct. at 859. In

a similar vein, we think that a district court has a duty, in

deciding under section 301 whether to enforce a collective

bargaining agreement, to make that decision in a fashion

consistent with the policies embodied in our federal labor

laws.

Although Connell involved a suit under the an-

titrust laws, we think its reasoning is applicable to the sec-

tion 301 claim in this case. Moreover, Kaiser was a suit

brought under both section 301 and ERISA. Our earlier

discussion has adverted to Congress’ intent that section

301 provide a contractual remedy independent of those

available before the Board. Following Connell, we hold that

where collateral issues of labor law, such as the determina-

tion of the appropriateness of a bargaining unit, become

essential to the determination of the existence of a breach

of contract under the independent federal remedy Con-

gress created in section 301, a federal court may pass upon

the issues under its congressional grant of jurisdiction not-

withstanding the fact that a unit determination by the

A-52

Board might be available if one of the parties filed an un-

fair labor practice charge or sought unit clarification. }3

Moreover, the analysis suggested by Connell

is even stronger when claims are brought under ERISA.

There can be no doubt that ERISA provides a remedial

scheme independent of the NLRA. To the extent that col-

19 Additional support for the proposition that unit determinations

may be made by federal district courts in § 301 actions may be found in

dicta in Carey v. Westinghouse Electric Corp., 375 U.S. 261, 84 S.Ct.

401, 11 L.Ed.2d 320 (1964). In Carey a dispute arose between two unions

over which was the appropriate bargaining representative for a certain

group of employees. The collective bargaining agreement between the

petitioner union and the employer, Westinghouse, included a grievance

procedure for the use of arbitration in the case of unresolved disputes

concerning the “interpretation, application or claimed violation” of the

agreement. Jd. at 262, 84 S.Ct. at 404. The union sued the employer to

compel arbitration on the question of work assignments as between the

two unions. The employer refused arbitration, claiming that the issue

was in reality a representational issue within the exclusive province of

the Board. The Supreme Court held that the district court had jurisdic-

tion to enforce the arbitration clause even though the resulting arbitra-

tion might touch upon representational matters, and stated in addition:

If this is truly a representation case, either IUE or

Westinghouse can move to have the certificate clarified. But

the existence of a remedy before the Board for an unfair labor

practice does not bar individual employees from seeking

damages for breach of a collective bargaining agreement in a

state court, as we held in Smith v. Evening News Assn., 371

U.S. 195 [83 S.Ct. 267, 9 L.Ed.2d 246]. We think the same

policy considerations are applicable here; and that a suit

either in the federal courts, as provided by § 301(a) of the

Labor Management Relations Act of 1947 (61 Stat. 156, 29

U.S.C. § 185(a); Textile Workers v. Lincoln Mills, 353 U.S.

448 (77 S.Ct. 912, 1 L.Ed.2d 972), or before such state

tribunals as are authorized to act (Charles Dowd Box Co. v.

Courtney, 368 U.S. 502 (82 S.Ct. 519, 7 L.Ed.2d 483};

Teamsters Local v. Lucas Flour Co., 369 U.S. 95 [82 S.Ct.

571, 7 L.Ed.2d 593) is proper, even though an alternative

before the Board is available, which, if invoked by

the employer, will protect him.

375 U.S. at 268, 84 S.Ct. at 407.

A-53

lateral labor law issues arise in the course of an ERISA

claim, the federal courts should be empowered to decide

them. This is especially so since it is not necessarily the

case that the plaintiffs in an ERISA action will always be

proper parties to a unit clarification petition before the

Board.!4

The leading case taking a position contrary to ours is

Local No. 3-193, International Woodworkers v. Ketchikan

Pulp Co., 611 F.2d 1295 (9th Cir. 1980). In Ketchikan, a

union and employer had signed a collective bargaining

agreement; article I of this agreement recognized the union

as the exclusive bargaining representative for all

employees of various classifications at the employer's logg-

ing operations in southeastern Alaska. At the time the

agreement was entered into the employer had one such log-

ging operation; during the term of the agreement, the

employer acquired several other logging operations in

southeastern Alaska, but refused to recognize the union as

the representative of the employees at those operations.

Neither party sought relief from the NLRB. Instead the

union filed an action, eventually transferred to federal

court, under section 301, alleging a breach of the collective

bargaining agreement.

The Ninth Circuit, while recognizing that Carey v.

Westinghouse Electric Corp., 375 U.S. 261, 84 S.Ct. 401, 11

L.Ed.2d 320 (1964), permitted arbitration as “an ap-

propriate alternative process for the resolution of represen-

tation issues,” nevertheless found that ‘‘there is a very,

very strong policy of self-determination using the pro

cedures vested in the NLRB ....’’ 611 F.2d at 1298-99. The

|4 See note 11 supra for a discussion of standing in unit clarifica-

tion proceedings.

A-54

court characterized the plaintiff union’s suit as an accre-

tion case in disguise, in which

the Union is attempting an end run around Sec-

tion 9 of the Act and under the guise of contract

interpretation wants to avoid self-determination

of a bargaining agent by a substantial number of

employees and determination of an appropriate

bargaining unit by the NLRB, which has primary

authority in this area. This cannot be countenanc-

ed.

Id. at 1299-1300. The court in Ketchikan saw the union's

suit as an attempt to enforce an accretion clause, as is clear

from it reliance on cases such as Sheraton-Kauai Corp. v.

NLRB, 429 F.2d 1352 (9th Cir. 1970), and Boire v. Interna-

tional Brotherhood of Teamsters, 479 F.2d 778 (5th Cir.

1973). The concern of the court is clearly stated in its opi-

nion: accretion of the employees in the newer logging

camps without an election to determine majority status

would threaten a usurpation of section 7 rights. The deci-

sion in Ketchikan is interesting because, after its broad

language stating its conclusion that ‘‘Congress did not in-

tend by enacting Section 301 to vest in the courts initial

authority to consider and pass upon questions of represen-

tation and determination of appropriate bargaining units,”

611 F.2d at 1301, the court did not simply dismiss the ac-

tion. Instead, it stated:

The court does have jurisdiction to interpret Arti-

cle I of the labor agreement between these par-

ties. If it was the intention of the parties that said

agreement be determinative of the appropriate

bargaining area and unit, as applied to the in-

dependent logging camps (employees) outside

Thorne Bay, Alaska, it is illegal and unen-

forceable. If it was the intention of the parties

A-55

that said agreement be authority for the plaintiff

to act as the collective bargaining agent for

employees in logging camps outside Thorne Bay,

Alaska, it is illegal and unenforceable. The sole

operative effect, outside Thorne Bay, Alaska, of

Article I of the agreement is to waive Ketchikan's

right to demand an election as a method of prov-

ing majority support.

Id. The court then reversed the district court's dismissal of

the section 301 action and remanded for further pro-

ceedings. Our view is that if the court decided that the con-

tract did not make members of all the logging camps

members of the same bargaining unit, it had already pass-

ed on an issue with representational overtones. If the court

had no jurisdiction over representational matters and

foresaw that its decision of the section 301 claims would re-

quire passing on such matters, its proper course would

have been to dismiss without deciding anything. It did not

do so, however, and we believe this fact belies its broad

language about section 301 jurisdiction. In one sense the

court’s action here is reminiscent of the Supreme Court's

decision in Kaiser Steel v. Mullins, discussed above, in

which the Court felt compelled to decide the legality of a

contractual provision notwithstanding the fact that this

required determination of whether the provision authoriz-

ed an unfair labor practice. To the extent that Ketchikan

may be so viewed, it is actually consistent with the views

we have expressed above.

In any case, the single employer theory we have

discussed in this opinion does not rely on enforcement of

any accretion clause in a collective bargaining agreement.

The theory first requires a showing that the two suben-

tities are a single employer and then requires a further

A-56

independent determination that their employees constitute

an appropriate bargaining unit. In fact, the presence of any

contractually stipulated bargaining unit in the collective

bargaining agreement of the union company is wholly ir-

relevant to the finding of single employer status. Once a

finding of single employer status is made, the Board (or the

district court in a section 301 context) must then consider

the existence of a community of interests between the

employees in both subentities. This is absolutely necessary

in order to preserve the employees’ section 7 rights—rights

which are firmly embedded in the national labor policy. The

fact that an accretion clause might be present cannot settle

the matter, and the Board and the courts have given little

deference to such clauses. See note 17, infra. The decision

that the employees of the two subentities constitute an ap-

propriate unit is thus crucial to liability under the single

employer theory we have outlined above. We agree with

Ketchikan that this determination cannot be disguised in

contractual garb but must be encountered head-on as a

bona fide representational issue. But we also think that

where such an issue is essential to the disposition of con-

tractual rights in a section 301 action in a fashion consis-

tent with the policy of our national labor laws, a district

court has the power to decide it, at least in the absence of a

previous or pending determination by the Board.

We do not think our own cases are contrary to this

result. Florida Marble Polishers Health and Welfare Trust

Fund v. Edwin M. Green, Inc., 653 F.2d 972 (5th Cir. 1981),

cert. denied, _. U.S. __, 102 S.Ct. 2235, 72 L.Ed.2d 846

(1982), discussed at note 17, infra, also invalidated a

recognitional clause which a union sought to use to achieve

an accretion without the need for a representational elec-

tion. The court rejected use of the recognitional clause by

itself to usurp section 7 rights, and also took pains to point

A-57

out that neither a single employer or alter ego situation

existed between the enterprises involved. 653 F.2d at

975-77. Thus we think its result entirely consistent with

the views we express today.

In West Point-Pepperell, Inc. v. Textile Workers

Union, 559 F.2d 304 (5th Cir. 1977), the employer, West

Point, brought an action for declaratory and injunctive

relief under section 301 after the union who was a party to

its collective bargaining agreement, TWUA, merged into

another union, ACTWU. West Point refused to bargain

with ACTWU or pay dues to it, and sought a declaration

that it was not bound under the contract to do so, since

only TWUA could be the exclusive bargaining agent of its

employees. After suit was filed, the surviving union (ACT-

WU) filed a petition with the NLRB for amendment of cer-

tification to reflect the merger and asked that the section

301 suit be dismissed or stayed pending disposition of the

proceedings before the Board. On appeal, this court

dismissed, stating that the question of who was the proper

representative of West Point's employees under the con-

tract was a matter for the Board's exclusive authority.

Two factors are inportant in understanding the

result in West Point-Pepperell. First, during the district

court's consideration of the section 301 claim, the controll-

ing representational issue was simultaneously pending

before the Board, a circumstance which is not present in

this case.!5 Thus the decision in West Point-Pepperell is

thoroughly consistent with our views and our disposition;

the latter, as we have said before, only purports to deal

with the situation where no action by the Board has taken

|) By the time the case was decided by tie court of appeals, the

Regional Director of the NLRB had granted ACTWU's petition for

amendment of certification. 559 F.2d at 307 n.1.

A-58

or is taking place at all. Moreover, the decision in West

Point-Pepperell sought to limit its holding to issues of

union identity, as opposed to employer identity, which is

the concern of this case:

In arguing that the district court has concur-

rent jurisdiction over these questions, the plain-

tiff relies on cases in which the district courts

decided contests concerning successor employers

under collective bargaining agreements. How-

ever, the determination of the successorship of

unions differs significantly from that of

employers. Federal labor laws are designed to

assure and protect the fair representation of

employees in labor disputes, and the selection of

the employees’ exclusive bargaining agent is a

fundamental step in that process. Under Section

159 of the Act, Congress vested the NLRB with

the exclusive authority to make the factual fin-

ding regarding the representative status of labor

organizations. It is clear that wherever there is a

change in the representation of a union, the

board, and not the courts, is the proper body to

reassess the change.

Id. at 307.

In conclusion, we hold that a section 301 claim for

breach of contract may be stated either under an alter ego

theory or under a single employer theory, and that in the

latter case, a district court has jurisdiction to address the

issue of the appropriateness of the bargaining unit, which

is essential to success on that theory.

7. Majority Status.

The defendants argue that even if Peter Kiewit poses

A-59

no problems for the plaintiffs, there is still a major obstacle

to the latter’s ability to state a claim for relief under sec-

tion 301 using either the single employer or alter ego

theories. That obstacle is the fact that, according to defen-

dants, the 1977 collective bargaining agreement is totally

unenforceable until the Unions demonstrate majority

status in the relevant bargaining unit. Understanding this

problem, however, requires a brief explanatio: of the

nature of prehire agreements such as the one involved in

the present litigation.

Section 8(f) of the NLRA, 29 U.S.C. § 158/f),

permits an employer engaged in the building and construc-

tion industry to enter into a prehire agreement with a labor

organization before the majority status of the organization

has been established. Ordinarily, an agreement recognizing

a union as the exclusive bargaining representative of an

employer's work force when in fact only a minority of

employees have authorized the union to represent their in-

terests would constitute an unfair labor practice. NLRB v.

Local Union 103, International Association of Bridge

Workers (Higdon Construction Co.), 434 U.S. 335, 344, 98

S.Ct. 651, 657, 54 L.Ed.2d 586 (1978); International Ladies’

Garment Workers’ Union v. NLRB, 366 U.S. 731, 737, 81

S.Ct. 1603, 1607, 6 L.Ed.2d 762 (1961). This is because such

an agreement would violate the guarantee of section 7 of

the NLRA, 29 U.S.C. § 157, that employees shall have the

right to bargain collectively with representatives of their

own choosing. Section 9a), 29 U.S.C. § 159(a), requires that

the bargaining agent for all employees in the appropriate

bargaining unit must be the representative ‘“‘designated or

selected for the purposes of collective bargaining by the

majority of the employees ....’’ Section 8(f) is an exception

to the general rule. It was designed

A-60

to meet specific problems which had arisen in

the construction industry under the prior law

because of the transitory nature of the employer-

employee relationship in that industry.... [P]re-

hire agreements which would otherwise be invalid

were authorized in the construction industry

because of the dual necessities (1) that construc-

tion bidders know in advance of bid what their

labor costs would be, and (2) that construction

employers have access to an available pool of

skilled craftsmen for quick reference.

NLRB v. Irvin, 475 F.2d 1265, 1267 (3d Cir. 1973). A panel

of this circuit has noted however, that ‘‘[t]he exception is

limited ... by a concern for protecting the employees’ sec-

tion 7 rights: the prehire agreement attains the status of a

collective bargaining agreement ... only upon a showing

that the union enjoys majority support in the relevant

bargaining units.’’ Baton Rouge Building & Construction

Trades Council v. E. C. Schafer Construction Co., 657 F.2d

806 (5th Cir. 1981). Moreover, the existence of a prehire

agreement in no way bars either the employer or the union

from calling for a bargaining representative election at any

time. Higdon, 434 U.S. at 345, 98 S.Ct. at 657; 29 U.S.C. §

158(f) (proviso that no prehire agreement shall bar a peti-

tion filed pursuant to 29 U.S.C. §§ 159(c) and (e)).

The foregoing discussion of prehire agreements

noted that such agreements ripen into fully enforceable col-

lective bargaining agreements upon demonstration of a

union majority. A question of some controversy is what

force and effect the agreements have prior to that time. On

the one hand, enforcement of provisions in an agreement

with a minority union may potentially undercut the

employees’ section 7 rights of self-determination; on the

other hand, holding the agreements totally unenforceable

A-61

may permit employers to reap the benefits of a prehire

agreement while avoiding any concomitant obligations.

In Higdon Construction Co., supra, the Supreme

Court held that a prehire agreement between a union and

employer did not protect the former from section 8(b)(7)(C)

of the NLRA, 29 U.S.C. § 158(b)(7)(C), which prohibits

picketing by a union that is not the authorized bargaining

representative unless the union petitions the Board for a

representation election within 30 days. The Supreme Court

held that a section 8(f) prehire agreement is only a

preliminary step in the creation of a collective bargaining

relationship, and the agreement is voidable until majority

status is reached. 434 U.S. at 341, 98 S.Ct. at 655. Hence

the union could not treat the contract in the same fashion

as a fully operational collective bargaining agreement and

engage in recognitional picketing with impunity.

Higdon arose in the context of an unfair labor prac-

tice charge filed by the employer; it thus did not directly

address the purely contractual obligations of the parties.

Lower courts have divided on the questions of when and to

what extent a prehire agreement may be enforced in a

breach of contract action before the attainment of majority

status. See generally Todd v. Jim McNeff, Inc., 667 F.2d

800 (9th Cir.), cert. granted, __ U.S. _,, 102 S.Ct. 3508, 73

L.Ed.2d 1382 (1982) (analyzing the various theories and

collecting cases). In Baton Rouge Building and Construc-

tion Trades Council v. E. C. Schafer Construction Co., 657

F.2d 806 (5th Cir. 1981), we held that a prehire agreement

to contribute fringe benefits was totally unenforceable un-

til the date majority status was obtained. On the other

hand, the Ninth Circuit has held in Todd, supra, that the

fact that a prehire agreement is ‘‘voidable”’ under Higdon,

434 U.S. at 431, 98 S.Ct. at 655, means that it is enforce-

A-62

able until the employer specifically repudiates jt (assum-

ing, of course, that majority status still has not been reach-

ed by that point).

As certiorari has recently been granted in Todd to

resolve the conflict in the circuits, it is fortunate that we

need not pass on the enforceability questions presented

here. We are concerned only with the question whether

there is some set of facts, which, if proved, would entitle

the plaintiffs to the relief requested, and the pleadings do

not allege either majority status or its absence. If, upon

factual development of the case, the plaintiffs can

demonstrate that appropriate majority support exists or

has existed, we do not think our holding in Schafer would

per se bar the claims. Majority status issues may of course

assume considerable importance later on in the course of

this litigation, but at present we are unable to say that

there is no set of facts with regard to majority status

which, if proved, would entitle the plaintiffs to relief.

8. The Relevance of a Unit Stipulation.

Since we have held that a district court deciding

a section 301 case may determine whether a bargaining

unit is appropriate where a decision of that issue is essen-

tial to a resolution of a breach of contract claim, the plain-

tiffs’ alternative argument that such a determination may

not be necessary in this case loses its urgency. However,

since the district court on remand will be applying, as the

substantive law under section 301, the law developed by

the Board in a similar context, it may be worthwhile to

note briefly some of the circumstances under which no unit

determination by the district court may be necessary. We

have seen that prehire agreements become fully enforce-

able upon a demonstration of majority status in the appro-

A-63

priate bargaining unit. A natural question, then, arises as

to how that bargaining unit is to be determined. One siiua-

tion that often obtains is that the prehire agreement itself

contains a description of the relevant unit agreed to by the

union and the employer (or employers in the case of a multi-

employer agreement). To give an example, the excerpts

from the three collective bargaining agreements submitted

by defendants to accompany their motion to dismiss!

contain the following provisions:

ARTICLE I—RECOGNITION

Section 1. The Contractors, during the life of

this Agreement, recognize the Unions as the ex-

clusive bargaining representatives for all

employees coming under the jurisdiction of the

Unions for the purpose of collective bargaining in

respect to rates of pay, wages, hours of employ-

ment and other conditions of employment.

ARTICLE II—SCOPE OF AGREEMENT

Section 1. The geographical scope of this Agree-

ment shall be that part of the territory of the

Carpenters District Council of New Orleans and

Vicinity covered by the signatory Local Unions

affiliated with the Carpenters District Council of

New Orleans and Vicinity, as outlined on a map

marked Appendix ‘‘D’’, attached hereto.

1 Rec. 50, 90.

*© We emphasize that since we deal with a Rule 12(b\6) dismissal,

these provisions, which appear outside the pleadings, cannot be used to

prove a matter of fact, and we list them only as examples of how a con-

tractually agreed bargaining unit is arrived at. The pleadings are silent

about the existence or nonexistence of a predetermined bargaining unit.

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Such an informal stipulation is by no means un-

common and is, in the context of a prehire agreement, a

perfectly natural occurrence. After all, the employer or

employers seek a stable source of employees within a given

geographical area; the union seeks eventual responsibility

for representing a certain class of employees. Moreover,

such agreements are not confined to situations involving

prehire agreements. As one commentator has expressed it:

[A] determination of the appropriate bargaining

unit by the National Labor Relations Board is not

a prerequisite to bargaining; an employer and a

union are in most instances free to agree informal-

ly upon an appropriate unit and upon the com-

mencement of bargaining for the employees in

that unit.

R. Gorman, Basic Text on Labor Law 66 (1976).

The Board will of course become involved in

representation questions when it is requested to do so by

the parties because there is a dispute over the proper

bargaining unit. Our point, however, is that often there is

no dispute, and in such cases a bargaining unit determina-

tion by the Board is totally unnecessary.!7

17 indeed, not only is a bargaining unit determination often made

unnecessary by a stipulation, but in addition, the existence of a stipula-

tion may restrict the Board's authority to make a de novo bargaining

unit determination. For example, when a union or employer files a peti-

tion requesting a representation election, and the parties have stipulated

beforehand as to the relevant bargaining unit, the Board's powers are

greatly circumscribed: ‘‘it’s function is limited to construing the agree-

ment under contract principles, and its discretion to fix the appropriate

bargaining unit is gone."’ Tidewater Oil Co. v. NLRB, 358 F.2d 363, 365

(2d Cir. 1966). The Board is not free to use its expertise to create a

bargaining unit acording to its standard method of determining the com-

munity of interests. Rather, the stipulation must be accepted unless it

would violate applicable statutes or settled Board policy. NLRB v.

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In the present case, the plaintiffs argue that the

(Footnote 17 continued)

Mercy Hospitals, Inc., 589 F.2d 968 (9th Cir. 1978), cert. denied, 440 U.S.

910, 99 S.Ct. 1221, 59 L.Ed.2d 458 (1979). Accord, NLRB v. Onritz

Funeral Home Corp., 651 F.2d 136 (2d Cir. 1981), cert. denied, _ U.S. _,

102 S.Ct. 1445, 71 L.Ed.2d 659 (1982); Methodist Home v. NLRB, 596

F.2d 1173 (4th Cir. 1979); NLRB v. Tennessee Packers, Inc., 379 F.2d

172 (6th Cir.), cert. denied, 389 U.S. 958, 88 S.Ct. 338, 19 L.Ed.2d 364

(1967); cf Knapp-Sherrill Company v. NLRB, 488 F.2d 655, 659 (5th

Cir.), cert. denied, 419 U.S. 829, 95 S.Ct. 50, 42 L.Ed.2d 53 (1974)

(stipulation controls unless its provisions are repugnant to the NLRA or

its policies, but where stipulation contains an ambiguity, and absent

clear evidence of parties’ intention to apply some other test, resolution of

ambiguity could be made by application of community of interests test

and Board's ‘‘wide discretion’’ is restored for the purposes of such

resolution). Our point in giving these examples is to emphasize that

although some cases have spoken in broad language about the primary

and exclusive jurisdiction of the Board in representational matters, such

language does not militate against the powers of the parties to agree

among themselves on an appropriate bargaining unit; the question of the

exclusivity of the Board's jurisdiction in these matters arises only in

cases where there is a dispute between the parties.

We do not think that our decision in Florida Marble Polishers

Health and Welfare Trust Fund v. Edwin M. Green, Inc., 653 F.2d 972

(5th Cir. 1981), cert. denied, _ U.S. _, 102 S.Ct. 2235, 72 L.Ed.2d 846

(1982), contradicts our decision in Knapp-Sherrill, supra. In Florida Mar

ble Polishers we were faced with two separate businesses, one which had

been a union shop since 1950, and another non-union company formed in

1965. The president of the union company also was president and majori-

ty owner of the non-union company. The plaintiff unions in that case

sought to bind the non-union company to a 1971 collective bargaining

agreement entered into with the union company, based upon what was,

in effect, an accretion clause. This court held that enforcing such a clause

would be a usurpation of the non-union employees’ § 7 rights and the

NLRB's exclusive jurisdiction to determine the appropriate bargaining

unit. 653 F.2d at 976.

The decision is consistent with previous cases recognizing that

‘(t]he Board has taken an extremely narrow view of permissible contrac-

tual accretions,”’ e.g., Boire v. International Brotherhood of Teamsters,

479 F.2d 778, 796 (5th Cir. 1973), and with the fact that the federal

courts have shown great deference to the Board's decision to refuse ac-

cretion even in the face of an accretion clause in an otherwise valid collec-

tive bargaining agreement. Jd. at 797. Compare Sheraton— Kauai Corp.

v. NLRB, 429 F.2d 1352, 1356-57 (9th Cir. 1970) with NLRB v. Appleton

A-66

appropriate bargaining unit is not contested by either

party and has been contractually determined by the collec-

tive bargaining agreement. Based on the pleadings, we can-

not tell whether this is or is not in fact the case. But if,

upon further factual development, it turns out to be the

case that Farnsworth and the Unions have stipulated as to

the appropriate bargaining unit in the collective bargain-

ing agreement between them, then the role of the district

court will be more limited. As noted in Part I1.C.2 of this

opinion, if the district court finds that the plaintiffs have

met the extremely stiff burden of proving that Halmar is

the alter ego of Farnsworth, the district court will not be

required to reconsider the unit under the community of in-

terests test, but will simply make the far more limited

determination whether the stipulated unit is repugnant to

any policy embodied in the NLRA. If, on the other hand,

the plaintiffs fail to establish that Halmar is the alter ego

of Farnsworth but do succeed in establishing that Farn-

sworth and Halmar are a single employer, then the district

court’s function with respect to the appropriateness of the

unit as regards Farnsworth’s employees is limited in the

(Footnote 17 continued)

Electric Co., 296 F.2d 202 (7th Cir. 1961) (disagreeing over Board's

authority to disregard accretion clauses). All we need point out is that

Tidewater, Knapp-Sherrill, and other related cases involved stipulations

made prior to representation elections which would ultimately vindicate

the employees’ § 7 rights. In contrast, the situation usually posed in the

accretion clause cases is a union majority already established in one area

which seeks to swallow up another separate group of employees without

the need for an election. This strongly implicates basic principles of na-

tional labor policy; a cautious concern for § 7 rights becomes essential

and the Board's role is appropriately enlarged. See generally Kaynard v.

Mego Corp., 484 F.Supp. 167, 172 (E.D.N.Y.), modified, 633 F.2d 1026

(2d Cir. 1980). Where, as here, it is postulated that the union and

employer have entered into a prehire agreement which will flower into

full enforceability upon a showing of majority status in the stipulated

bargaining unit, the problems of accretion are not, for the present, at

issue.

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same way as the Board's function is limited. However, be-

cause the section 7 rights of the employees of both Farn-

sworth and Halmar are potentially threatened if the

recognition clause in the Farnsworth-Union agreement is

applied to a unit comprising the employees of both, an in-

dependent determination into the appropriateness of that

unit must be made by the district court before Halmar will

be bound to that agreement.

III. THE ERISA CLAIMS

Both the Unions and the Funds bring claims under

ERISA, 29 U.S.C. §§ 1001-1461; they claim that ‘‘the

defendants” have failed to make proper contributions to

the pension, health, and welfare benefit funds on behalf of

their employees which were required by the collective

bargaining agreement between Farnsworth and the

Unions. The statute states that:

(a) A civil action may be brought—

(1) by a participant or beneficiary—

* * * * *

(B) to recover benefits due to him under the

terms of his plan, to enforce his rights under the

terms of the plan, or to clarify his rights to future

benefits under the terms of the plan;

* a * * *

(3) by a participant, beneficiary, or fiduciary (A)

to enjoin any act or practice which violates any

provision of this subchapter or the terms of the

plan, or (B) to obtain other appropriate equitable

relief (i) to redress such violations or (ii) to enforce

any provisions of this subchapter or the terms of

the plan....

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29 U.S.C. §§ 1132(a)(1)(B), (3).

Defendants have not contested the standing of the

Unions or the Funds under section 1132 and we assume

without deciding that they are participants, beneficiaries,

or fiduciaries within the meaning of that section. Cf. Inter-

national Association of Bridge Workers, Local No. 111 v.

Douglas, 646 F.2d 1211, 1214 (7th Cir.), cert. denied, 454

U.S. 866, 102 S.Ct. 328, 70 L.Ed.2d 166 (1981).

The district court held that the ERISA claims failed

as to AGC-New Orleans and AGC-At Large because they

were not signatories to the collective bargaining agree-

ment, and the plaintiffs have not contested the dismissal

as to these two defendants. Because the claims have been

abandoned as to these two defendants, we express no opi-

nion on the correctness of the district court’s holding.

However, the district court also dismissed the ERISA

claims against Halmar and Farnsworth, and the plaintiffs

do contest these dismissals.

The district court apparently dismissed the ERISA

claims against Farnsworth because it assumed that the

pleadings only complained of failure to contribute on

behalf of Halmar’s employees. 511 F.Supp. at 514. As we

have pointed out above, this is too narrow a reading of the

claim that the defendants have not made required con-

tributions. Dismissal on this ground was premature and we

think that the plaintiffs should be given a chance to prove

that Farnsworth did not contribute benefits on behalf of

those employees who everyone agrees are Farnsworth’s

own.

As to Halmar, the court applied the same type of

analysis it had employed in dismissing the section 301

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claim against Halmar:

The Court’s analysis of the Section 301 allega-

tions is equally applicable in the ERISA context.

Accordingly, the alleged ERISA liability could

only arise if Farnsworth and Halmar are not only

a ‘single employer”’ but, in addition, const tute a

single bargaining unit. As this status decision is

relegated to the N.L.R.B., plaintiffs cannot have

it decided by the Court in the first instance.

511 F.Supp. at 514-15 (emphasis in original). The court

then dismissed the ERISA claims against Halmar. 1d.18

We agree that the analysis of the section 301 allegations in-

volved here will be generally applicable to the ERISA ac-

tion based on the same circumstances. Howevei, since our

analysis of the section 301 allegations differs from that of

the district court, naturally so does our view of the ERISA

claims.

We are here concerned with the question

whether there has been a breach of a contractual duty to

provide benefits to Farnsworth’'s employees. In our view, if

the plaintiffs can show that Halmar is a sham, a disguised

continuance used by Farnsworth to escape its obligations

under the collective bargaining agreement and ERISA,

they can succeed in their claims against Halmar. Because

the pleadings, liberally construed, allege this theory, the

plaintiffs state a cause of action under ERISA as well as

section 301. Moreover, since we are of the opinion that a

finding that Halmar and Farnsworth are a single employer

and that their employees constitute an appropriate

bargaining unit would make contractual obligations to

18 The district court also dismissed these claims for failure to ex-

haust contractually mandated grievance procedures; we deal with this

question in the next section infra.

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contribute benefits on behalf of employees binding on Hal-

mar, an ERISA cause of action is also stated based on this

theory as well,19

IV. EXHAUSTION OF CONTRACTUALLY MAN:

DATED GRIEVANCE PROCEDURES.

The district court gave as an alternative ground for

dismissal of the plaintiffs’ complaint the failure by the

Unions and the Funds to exhaust grievance procedures

outlined in the collective bargaining agreement covering

the period May 1, 1977 to April 30, 1980. The defendants

submitted selected pages from this agreement along with

their motions for dismissal and summary judgment.29

19 As we remand this case to the district court for factual develop-

ment of the ERISA claims, we add a few words about the relevance of

Higdon Construction Co., supra. We have explained earlier that this case

involves a prehire agreement whose enforceability may turn upon the ex-

istence of majority status. The district court should carefully consider

whether lack of majority status is a defense against the third party

beneficiary of a prehire agreement (the Funds) as well as against the

Unions, or whether the doctrine of Lewis v. Benedict Coal Corp., 361

U.S, 459, 80 S.Ct. 489, 4 L.Ed.2d 442 (1960), applies to this defense.

Compare Washington Area Carpenters’ Welfare Fund v. Overhead Door

Co., 488 F.Supp. 816 (D.D.C. 1980), rev'd, 681 F.2d 1, (D.C.Cir, 1982)

(trust fund cannot sue employer pursuant to prehire agreement to

recover delinquent contributions absent proof of the union's majority

status) with Trustees v. Southern Stress Vire Corp., 509 F.Supp. 1097

(N.D.Ga.1981) (holding that Benedict Coal doctrine prevents employer

from asserting defense against fringe benefit funds and citing legislative

history critical of result in Washington Area Carpenter's Welfare Fund,

supra). But cf. Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 102 S.Ct. 851,

70 L.Ed.2d 833 (1982) (defense of illegality of a collective bargaining

agreement is a defense against a union trust fund). Our decision in

Schafer, supra, holding that Higdon makes prehire agreements unen-

forceable until majority status is reached, does not speak directly to the

Benedict Coal question, since Schafer involved a suit brought only by

the union signatories and not by trustees of pension funds.

20 The portions of the submitted materials dealing with grievance

procedures are reproduced below:

A-71

Accompanying the portions of the agreement was an

(Footnote 20 continued)

ARTICLE XXIII—DISPUTES AND GRIEVANCE PRO-

CEDURE

Section 1. Whenever a dispute involving an alleged claim

of a violation of a particular provision of this Agreement,

other than an alleged violation of Article III occurs, serious

efforts shall be made by the parties in dispute to arrive at a

settlement.

Section 2. If the parties to such dispute cannot reach a set-

tlement, either party may refer the dispute to the New

Orleans District, Associated General Contractors of Loui-

siana, Inc. and the Union, whose representatives shall meet

within forty-eight (48) hours after the referral of a dispute to

them and attempt to settle same.

Section 3. If the Union and the Associated General Con-

tractors’ representatives are unable to settle the dispute,

either party may refer the matter to arbitration.

Section 4. The arbitrator's decision shall be final and bin-

ding upon all parties.

Section 5. The panel of arbitrators from which the ar-

bitrator for a particular dispute will be chosen is as follows:

(1) John F. Caraway

(2) F. Jay Taylor

(3) Harold R. Ainsworth

(4) Samuel J. Nicholas, Jr.

The arbitrator for a given dispute will be selected accor-

ding to the order in which the arbitrators are listed above.

The panel will rotate each time it is exhausted. Rotation of

the panel will occur only for arbitrations involving the

signatory Contractors.

Section 6. The arbitrator shall have no authority to add to,

subtract from, to [sic] modify any of the terms or conditions

of this Agreement.

Section 7. An employee who believes he has a grievance

against his employer must file in writing with the Union

which represents the employee a statement setting forth the

basis for his complaint. Such statement must be filed within

A-72

affidavit from t!. Pratt Farnsworth, Jr., president of Pratt-

Farnsworth, Inc. In this affidavit, Farnsworth stated that

‘{a]t no time did any of the Plaintiffs in the instant lawsuit

bring or attempt to bring a grievance on the matters which

are the subject of this lawsuit.”

It is clear from the district court's opinion

that these matters, which were outside of the original

pleadings, were considered by the court and were a basis

for its decision. Hence we must view the district court's

disposition of these claims as the grant of a motion for

summary judgment. Such a motion is proper only where

there are no matters open to factual dispute. In the present

case we think such a holding was premature.

We first note that by the terms of the agreement

the grievance procedures are applicable with respect to

alleged claims of violation of a particular provision of the

(Footnote 20 continued) .

five working days of the occurrence of the event which gave

rise to his grievance; otherwise, his grievance or dispute shall

be considered finally settled and waived.

Section 8 In the event a dispute should not be referred to

arbitration within thirty (30) days after the occurrence of the

event which gave rise thereto, the dispute or grievance shall

be considered finally settled and waived. A dispute shall be

considered referred to arbitration at the time the grieving

party notifies the appropriate arbitrator of the dispute and

the fact that the parties are unable to settle the disputed

issues without resorting to arbitration. This notification

shall be in writing and a copy thereof sent to the other party

to the dispute, the Union and the New Orleans District,

Associated General Contractors of Louisiana, Inc. The time

limits imposed under this section may be extended for any

particular dispute upon mutual agreement of the parties

thereto.

1 Rec. 57-8, 97-8.

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agreement, other than article III. Unfortunately, defend-

arts did not provide us with a copy of article III, so we are

unable to discover what subjects are in fact excluded from

the arbitration provisions of the agreement. Second, we

find that the language of sections 2, 7 and 8 of the agree-

ment raises questions of interpretation and possible waiver

which we do not think were adequately addressed by the

district court. Section 7 states that an employee with a

grievance must file it in writing with the union within five

working days of the occurrence of the event giving rise to

the grievance or risk waiver. Section 2 says that any party

(including, it is presumed, the Unions themselves) may

resort to arbitration and the other party is then required to

arbitrate the matter. However, section 8 provides that

failure to refer a grievance to arbitration within thirty days

after it occurs results in waiver of the grievance. The

record does not show an invocation of grievance

mechanisms by any of the parties to this litigation. The

district court's opinion does not appear to have considered

the effect of the seemingly non-mandatory language of the

arbitration provisions as they relate to parties who are not

employees coupled with the language of section 8 »rar-

ding waiver. We think the failure to address these issues

together with the incomplete nature of the record before us

and before the district court made summary disposition in-

appropriate.

We express no opinion on the outcome of these

issues. We do think that on remand the district court

should closely examine the language of the entire contract.

We also think that the district court should separate for

purposes of analysis (1) the Unions’ claims against Farn-

sworth, (2) the Unions’ claims against Halmar, and (3) the

Funds’ claims against both defendants. As to the distinc-

tion between (1) and (2), we note that the arbitrability of a

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claim that contributions are not being made on behalf of

employees who no one contests belong to Farnsworth may

involve very different issues from the question of ar-

bitrability of a claim of non-payment on behalf of

employees where it is disputed in the first place whether

the employees are in fact employed by a party who is

bound by the terms of the agreement. In this regard a

significant problem is raised by Halmar's denial that it can

in fact be bound by arbitration provisions in a collective

bargaining agreement it claims it never signed. Compare

International Union of Operating Engineers, Local 279 v.

Sid Richardson Carbon Co., 471 F.2d 1175, 1177-78 (5th

Cir. 1973) (even standard of ‘arguable arbitrability’’ which

favors arbitration in the doubtful case does not justify con-

struing arbitration clause of limited scope into one which

permits arbitration of representation questions, especially

where history of bargaining relationship refutes an intent

to arbitrate such questions), with Local No. 6, Bricklayers

International Union v. Boyd G. Heminger, Inc., 483 F.2d

129 (6th Cir. 1973) and Jron Workers, Local 790 v. Bostrom:

Bergen, 105 L.R.R.M. 2633 (N.D. Cal.1980) (ordering ar-

bitration where unions sought to compel arbitration with

non-signatory alter ego employer because it was identical

with signatory employer). On the one hand, the Unions’

claim that Halmar and Farnsworth are one might, on the

logic of the last two cases, seem to preclude the Unions

from claiming that they need not attempt to arbitrate with

what they claim is one party fully bound by the agreement.

On the other hand, these last two cases involved situations

in which the unions sought arbitration with non-

signatories because they claimed the non-signatories were

none other than the signatory employers, while the instant

case involves a non-signatory demanding that a union seek

arbitration while at the same time denying that it (the non-

signatory) could be bound by such arbitration, as it was

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not a party to the collective bargaining agreement. see

Teamsters Local Unions v. Braswell Motor Freight Lines,

Inc., 395 F.2d 655, 656 (5th Cir. 1968). Our point is that the

question of arbitrability of the Unions’ claims against

Halmar involves issues not present in the arbitrability

question with respect to contributions made by Farn-

sworth on behalf of what everyone acknowledges are Farn-

sworth’s employees. Although the respective answers to

the two questions may or may not be the same (an issue we

specifically do not decide), the paths of those answers must

be very different.

A further distinction in analysis must also be

observed in the question whether the Funds must exhaust

contractually mandated grievance procedures with respect

to the section 301 claims, the ERISA claims, or both. The

Funds, after all, were not signatories to the collective

bargaining agreement under anyone's view of the matter.

The district court believed that if the Unions were required

to exhaust contractual grievance remedies, the Funds

would be equally obligated to do so. As we remand the

questions of the Unions’ obligation back to the district

court, we do likewise with the question of the obligation of

the Funds. The district court may then examine afresh

whether the Unions and the Funds must be dumped into

the same hopper for exhaustion purposes.?!

“I This question is presently being considered by a panel of this

court. Forrest Bugher v. Consolidated X-Ray Service Corp., 515 F.Supp.

1180 (N.D. Tex. 1981) (appeal pending as No. 81-1349). Assuming that the

Funds are required to exhaust, the court still must consider whether,

because the Funds may not be in the same position as the Unions to in-

voke the contractually mandated grievance procedures, the waiver pro

visions contained in the agreement would be equally applicable to the

Funds.

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V. THE ANTITRUST CLAIMS.

The plaintiffs have made numerous allegations in

their original complaint to the effect that the four named

defendants in this case have engaged in an unlawful com-

bination and conspiracy in restraint of interstate com-

merce and trade in violation of the Clayton and Sherman

Antitrust Acts. The chief theme running throughout these

allegations is that the defendants have entered into

agreements among themselves and with construction

employers in the New Orleans area to hire only non-union

contractors and subcontractors. The plaintiffs complain

that the defendants’ actions have undermined the collec-

tive bargaining agreements in effect between the Unions

and construction employers, resulting in reduced work op-

portunities, lower wages, less favorable working condi-

tions, and a diminution in fringe benefits for the Unions’

members.

The district court dismissed the plaintiffs’ antitrust

claims for two reasons. First, it concluded that the defen-

dants’ conduct fell within the nonstatutory labor exemp-

tion to the antitrust laws. 511 F.Supp. at 515-18. Second,

the court expressed doubt whether the alleged acts of the

defendants even constituted the type of conduct that the

antitrust laws were enacted to proscribe. /d. at 518-22.

We will address each of these holdings in turn,

considering whether or not the plaintiffs have stated a

valid cause of action under the antitrust laws. In determin-

ing whether the district court acted properly in dismissing

the plaintiffs’ claims, we are reminded that we are bound to

view their allegations in a liberal fashion: ‘We believe that

summary procedures should be used sparingly in complex

antitrust litigation where motive and intent play leading

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roles, the proof is largely in the hands of the alleged con-

spirators, and hostile witnesses thicken the plot."’ Poller v.

Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82

S.Ct. 486, 491, 7 L.Ed.2d 458 (1962) (footnote omitted), In-

deed, this court has noted repeatedly that ‘‘[ajlthough

plaintiffs may be unable to allege facts proving actual acts

of [an antitrust] agreement or conspiracy, the pleadings are

sufficient [to withstand a motion to dismiss] if they set

forth facts from which an inference of unlawful agreement

can be drawn."’ Brett v. First Federal Savings & Loan

Association, 461 F.2d 1155, 1158 (5th Cir. 1972).

A. The Labor Exemptions to the Antitrust Laws

The district court dismissed the plaintiffs’ antitrust

claims primarily on its belief that, even if the allegations

were taken as true, the defendants’ conduct was protected

by the nonstatutory labor exemption to the antitrust laws.

511 F.Supp. at 515-19. In their brief on this appeal, the

defendants rely on both the statutory and nonstatutory

labor exemptions to the antitrust laws as a defense.

In Connell Construction Co. v. Plumbers Local Union

No. 100, 421 U.S. 616, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975),

the Supreme Court explained the two categories of organiz-

ed labor's exemption from federal antitrust laws. The

Court noted that the statutory exemption derives from

three federal statutes: section 6 of the Clayton Act, 15

U.S.C. § 17; section 20 of the Clayton Act, 29 U.S.C. § 52;

and section 4 of the Norris-LaGuardia Act, 29 U.S.C. § 104.

‘These statutes declare that labor unions are not combina-

tions or conspiracies in restraint of trade, and exempt

specific union activities, including secondary picketing and

boycotts, from the operation of the anti-trust laws.’’ Con-

nell Construction Co., 421 U.S. at 622, 95 S.Ct. at 1835.

A-78

The Court went on to state that a proper accommodation

between the congressional policies favoring collective

bargaining under federal labor statutes and favoring free

competition in the business market required that certain

union-employer agreements be accorded a _ limited

nonstatutory exemption from the antitrust laws:

The nonstatutory exemption has its source in

the strong labor policy favoring the association of

employees to eliminate competition over wages

and working conditions. Union success in

organizing workers and standardizing wages

ultimately will affect price competition among

employers, but the goals of federal labor law

never could be achieved if this effect on business

competition were held a violation of the antitrust

laws.

Id.

We cannot agree that the defendants’ alleged

conduct is protected by either the statutory or

nonstatutory labor exemption to the antitrust laws. These

exemptions are for the benefit of employees and their

unions, and offer no shelter for the acts of employers, ex-

cept perhaps only incidentally.

The nonstatutory labor exemption, as recognized

by the Supreme Court, has only been invoked in situations

where a union has made some sort of agreement with an

employer that has a deleterious antitrust effect on other

unions or employers. As noted earlier and emphasized

again, Connell Construction Co. teaches that ‘‘a proper ac-

commodation between the congressional policy favoring

collective bargaining under the NLRA and the congres-

sional policy favoring free competition in business markets

A-79

requires that some union-employer agreements be accorded

a limited nonstatutory exemption from antitrust sanc-

tions.’’ Jd. (emphasis added). This concept that the

nonstatutory labor exemption applies only to union

agreements with nonlabor groups was recently reiterated

by the Supreme Court in H. A. Artists & Associates, Inc. v.

Actors’ Equity Association, 451 U.S. 704, 716-17 n. 19, 101

S.Ct. 2102, 2110 n. 19, 68 L.Ed.2d 558 (1981).

In the present case, the only alleged agree-

ment or conspiracy is one between employers and the

multiemployer bargaining organizations of which they are

members. The antitrust claims do not allege that any of

these defendants have entered into agreements with any

unions; thus, the nonstatutory exemption should not come

into play under these facts. Berman Enterprises, Inc. v.

Local 333, United Marine Division, 644 F.2d 930, 935 n. 6

(2d Cir.), cert. denied, 454 U.S. 965, 102 S.Ct. 506, 70

L.Ed.2d 381 (1981); Mackey v. National Football League,

543 F.2d 606, 613-14 & n. 12 (8th Cir. 1976), cert. dismissed,

434 U.S. 801, 98 S.Ct. 28, 54 L.Ed.2d 59 (1977). The

“benefits to organized labor cannot be utilized as a

cat's-paw to pull employers’ chestnuts out of the antitrust

fires.'’ United States v. Women's Sportswear Manufac-

turers Association, 336 U.S. 460, 464, 69 S.Ct. 714, 716, 93

L.Ed. 805 (1949).

Likewise, the statutory labor exemption affords no

haven for the defendants. It is well settled that the

statutory exemption does not apply when a union com-

bines with a non-labor group to restrain trade. H. A. Ar

tists & Associates, Inc. v. Actor's Equity Association,

supra; Allen Bradley Co. v. International Brotherhood of

Electrical Workers, 325 U.S. 797, 65 S.Ct. 1533, 89 L.Ed.

1939 (1945); United States v. Hutcheson, 312 U.S. 219, 61

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S.Ct. 463, 85 L.Ed. 788 (1941). ‘‘A fortiori, if the statutory

exemption is inapplicable to business group conspiracies

involving unions, the exemption cannot be read to im-

munize anti-competitive conduct on the part of employers

acting alone."’ California State Council of Carpenters v.

Associated General Contractors, Inc., 648 F.2d 527, 534

(9th Cir. 1980), cert. granted, _ U.S. _, 102 S.Ct. 998, 71

L.Ed.2d 292 (1982).22

B. Do the Plaintiffs State a Valid Antitrust Claim?

Next we must consider whether, questions of anti-

“4 This is so even assuming, as the defendants argue, that this

case arises out of a ‘‘labor dispute’ within the meaning of the Norris-

LaGuardia Act, 29 U.S.C. § 113ic), ana that the employer's conduct fell

squarely within the specified acts declared by the Clayton and Norris-

LaGuardia Acts not to be violations of federal law. That was precisely

the situation which obtained in Allen Bradley. 325 U.S. at 807, 65 S.Ct.

at 1538. There the Supreme Court held that a union and an employer

group which conspired to erect a sheltered local business market in order

to exclude other businessmen from the market and charge prices above

the competitive level had violated the antitrust laws, even though the

conspiracy developed from a labor dispute between the union and the

employer group. The Court conceded that the union's activities fell

squarely within the language of the Norris-LaGuardia Act. Never-

theless, the Court stated that the purpose of the antitrust laws was to

outlaw business monopolies, and that ‘‘{a] business monopoly is no less

such because a union participates...."’ 325 U.S. at 811, 65 S.Ct. at 1540.

To this we may add that it is no less such because a union does not par-

ticipate.

The plaintiffs allege, as we discuss infra, that defendants

have conspired to restrict competition among contractors

competing for construction jobs in the New Orleans area. We

are skeptical of the defendants’ ability to show that this con-

duct does indeed fall within the activities explicitly pro

tected by the Norris-LaGuardia Act, 29 U.S.C. § 104. See

California State Council, supra, at 534-36 & n. 12. However,

we need not decide this issue, as the reasoning of Allen

Bradley makes it clear that these anticompetitive activities

are not entitled to statutory protection regardless of the

language of the Act.

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trust exemption aside, the plaintiffs have stated a cause of

action under the antitrust laws. The plaintiffs’ antitrust

claims consist of allegations that the four named defen-

dants have conspired to restrain interstate commerce and

trade in violation of the Clayton and Sherman Acts:

| eee

Such acts, conspiracies and monopolies were

between the named defendants and consist of:

(a) To help and control and monopolize con-

struction jobs in New Orleans and vicinity.

(b) To eliminate the Plaintiff-Union from

the building and construction industry in

New Orleans and vicinity by entering into

agreements with owners and builders,

whereby such owners and builders utilize

contractors who do not have agreements

with the Plaintiff-Union.

(i) The defendants jointly and in concert

have conspired and schemed effectively to

have other union contractor-members of the

AGC to [sic] engage in a pattern and practice

of creating so called ‘‘double-breasted’’ con-

tractors for the purpose of evading obliga-

tions under the Craft Agreement.

| ao

Plaintiffs show further to the Court that defen-

dants and each of them are guilty of the viola-

tions of the Anti-Trust laws as hereinabove set

out, and that said Employers-Defendants are

engaged in the construction industry and have

maintained membership in various open-shop

associations purportedly representing the

building construction industry with the main

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purpose of eliminating membership in or the use

of members of the Plaintiff Unions, secure

favored economic conditions and gain market

domination.

12. Such associations and its [sic] employer

members are not immu

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