Petition for Writ of Certiorari — Zady Natey, Inc. v. United Food & Commercial Workers, International Union, Local No. 27

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October Term, 1993

ZADY NATEY, INC.,

Petitioner,

Vv.

UNITED FOOD AND COMMERCIAL WORKERS

INTERNATIONAL UNION, LOCAL NO. 27,

Respondent.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Fourth Circuit

Warren M. Davison

Counsel of Record for Petitioner

John W. Kyle

LITTLER, MENDELSON, FASTIFF & TICHY

The World Trade Center, Suite 1653

Baltimore, Maryland 21202-3005

(410) 528-9545

Melvin J. Sykes

MARYLAND BAR CENTER, SUITE 310

520 West Fayette Street

Baltimore, Maryland 21201

(410) 727-3078

September 24, 1993

QUESTIONS PRESENTED FOR REVIEW

Did the Fourth Circuit err in

holding, in conflict with Harry Hoffman

inti Company v. Graphic Communications

International Union Local 261, 950 F.2d 95

(2d Cir. 1991), that a labor arbitrator's

award that exceeded the authority conferred

upon him by the collective bargaining

agreement may be affirmed by the Court on a

theory neither argued to the arbitrator nor

addressed in the arbitrator's decision?

yo May a federal court, in the name

of deference to labor arbitration awards,

affirm an award that is inconsistent with

established principles of federal labor law

and policy under the National Labor Rela-

tions Act, does violence to the settled

rights of employers under the law, and

thereby violates public policy?

LIST OF PARTIES TO PROCEEDING BELOW

Plaintiff

Zady Natey, Inc.Y

Defendant

United Food and Commercial Workers Inter-

national Union, Local 27

Y Zady Natey, Inc. has no parent or

subsidiary companies.

Itl

TABLE OF CONTENTS

Page

I QUESTIONS PRESENTED FOR REVIEW . i

Il LIST OF PARTIES TO PROCEEDING We

a a a ae ee ee 11

III TABLE OF CONTENTS ....... iii

IV TABLE OF AUTHORITIES ..... ~« Vv

V Oramauvee BELOW. 2c es ew ew ew ee 1

VI JURISDICTION OF THIS COURT... 1

VII STATEMENT OF THE CASE ..... 1

VIII REASONS FOR ALLOWANCE OF THE WRIT 9

A. The Opinion Of The Court Of

Appeals Demonstrates The Need

For This Court To Clarify An

Important And Recurring Issue

Concerning The Scope Of The

Federal Courts' Power To Review

Labor Arbitration Awards,

Because The Court Below Erred In

Creating A Conflict With The

Second Circuit By Affirming The

Arbitrator's Award On A Theory

Neither Argued To Nor Addressed

By The Arbitrator After They

Determined That The Arbitrator's

Stated Ground Of Decision Was

Without Support In The Language

Of The Collective Bargaining

ee ee ee 9

411i.

B. If Left Undisturbed, The Opinion

Of The Fourth Circuit Will

Undermine Important And Settled

Principles Of Federal Labor

Policy Promulgated By This

COUEG = © © © ew ee ee 11

IX CONCLUSION . « «© © «© © © © © © « 22

iv.

‘ IV

TABLE OF AUTHORITIES

Allis-Chalmers Corp. v. Lueck,

S47. UeS. 208 (2965) . «© «© « «© © @ o i,

ive ej Finishi Corp.

v. NLRB, 482 U.S. 27 (1987) ......

First National Maintenance Corp.

V. NLRB, 452 U.S. 666 (1981) o = e Bee

Golden State Bottling Co. v. NLRB,

S24 UG... Bee teeeal «so eee x

a H a inti Compa Vv.

Graphic Communications International

Union Local 261,

950 F.2d 95 (2d Cir. 1991) .... i,

Howard Johnson Co. v. Detroit

Local Joint Executive Board,

S57 Gems See fees. 4 ole oe «oe So RE

Int'l Ladies' Garment Workers' Union

v. NLRB, 366 U.S. 731 (1961) .....

John Wiley & Sons, Inc. v. Livingston,

FUG Wels Wee SOUS a a oe eee a ee

Metropolitan Edison Co. v. NLRB, _

460 U8. Gee Clee) sb es eas

LRB_v. Burns International Securit

Services, 406 U.S. 272 (1972) .

NLRB _ v. C&C Plywood Corp.,

30S GU.8. 631 (308T) ik cs + + ole

Riedel International d/b/a Willmette

Tug and Barge Co.,

Dee eames eee C2080) « « «oe s aw 38

Textile Workers Union of America v.

Darlington Mfg. Co.,

wae as BOD (2UO8) « 2 tc et et es RS, 12

Textile Workers Union v. Lincoln Mills,

Dems BOG taeGT) « + + + ee ee 6 eo OE

United Paperworkers International

Union v. Misco, Inc.,

484 U.S. 29 (1987) ar ae oe ee ee ee ee ee oe

United Steelworkers v. American Mfg. Co.,

363 U.S. 564 (1960) . «©. «© « «© «© «© © « « 9

United Steelworkers v. Enterprise

Wheel & Car Corp.,

363 U.S. 593 (1960) . «© «© «© © e © © « G& FI

United Steelworkers v. Warrior & Gulf

Navigation Co., 363 U.S. 574 (1960) .. 9

Statutes

28 U.S.C. § 1254(1) « «© «© © © w@ @ @ @ 1

29 U.S.C. § 151 @& seg. . - «© «© « © « e 3

29 U.S.C. § 158(a) [2 6 6 es © 6 +. sta

., 2 a a! | ee ee ee ee ee

Se Gs8.C. § 240(B) «© «© ew ewe we wo we ow oe

Other Authorities

Restatement (Second) of Contracts,

§§ 205 and 245 oeeet eo © 6 & @ 8s @& Oy 8

OPINIONS BELOW

The District Court's unreported opin-

ion, issued June 30, 1992, is reproduced at

App. A-20. The Court of Appeals opinion,

reported at 995 F.2d 496 (4th Cir. 1993),

is reproduced at App. A-1.

JURISDICTION OF THIS COURT

The final judgment of the Court of

Appeals in this matter was entered on

June 29, 1993, and this petition has been

timely filed as required by Rule 13 of the

Rules of this Court. This Court has juris-

diction pursuant to 28 U.S.c. § 1254(1)

(1991).

VII

STATEMENT OF THE CASE

This is a suit to vacate an award in

an arbitration arising out of a collective

bargaining agreement between Petitioner,

which had operated a meat processing plant

in Maryland, and the Respondent. It raises

important issues of federal labor policy

concerning the scope of a federal court's

power in regard to an arbitrator's award

where the court concludes that the arbitra-

tor's stated ground of decision exceeds the

authority conferred on him by the parties'

agreement.

On July 17, 1987, Petitioner sold all

of its assets. Toward the end of the

negotiations, the buyer announced that its

willingness to purchase was conditioned

upon the Petitioner's shutting down its

operation and sending letters of termina-

tion to its employees. Petitioner entered

into a written agreement warranting the

required promises, which were carried out

as agreed.

Respondent thereafter filed a griev-

ance pursuant to the collective bargaining

agreement, contending in relevant part:

Section 13 of our collective

bargaining agreement with Mash's

states that the agreement is to

be binding on the parties and on

their successors and assigns.

We interpret that section of the

agreement as imposing an obliga-

tion on Mash's to see to it that

any would-be purchaser of the

business, no matter in what form,

whether it be through a sale of

stock or a sale of assets, recog-

nize the collective bargaining

The Respondent Union has at all times

conceded that Petitioner was entitled

to enter into and perform this agree-

ment as a matter of federal statutory

law. No charges were filed by the

Union with the National Labor Rela-

tions Board under the unfair labor

practice provisions of the Act, 29

U.S.C. § 151 et seg.

The actual wording of the relevant

language of Section 13 is " ous

Agreement shall be binding upon the

parties hereto, their heirs, execu-

tors, administrators, successors and

assigns" (App. 60).

agreement, agree to abide by it,

and guarantee the performance of

its terms through its expiration

on December 31, 1987.

(App. A-53.)

The grievance was litigated on Octo-

ber 25, 1988 before the arbitrator. On

July 13, 1989, the arbitrator issued his

decision and award holding that Petitioner

had breached the agreement and requiring

Petitioner to place the employees in the

same position they would have been if the

agreement had run to its’ termination.

Specifically, the arbitrator concluded with

respect to Section 13:

The Successors and Assigns

clause in the Contract is clear

and unambiguous. It does not

require convoluted definitions of

the terms. Conway was a succes-

sor to Nathan Mash. There is no

need for redundant language which

would state that the Seller would

sell only to a Buyer who would

assume the Contract nor is there

any sense to the proposition that

no matter the working conditions

offered by the Buyer in this

case, the Seller is not liable

under the clause if the Buyer

does not employ a majority of the

former employees.

(App. A-101-102.)

The arbitrator also criticized Peti-

tioner for keeping the sales negotiations

secret until after the negotiations was

concluded, although the confidentiality of

the negotiations did not contravene any

provision of the agreement (App. A-106).

Petitioner sued under Section 301 of

the Labor Management Relations Act of 1947,

29 U.S.C. § 185, to vacate the arbitrator's

finding on liability. Respondent counter-

Claimed for enforcement of the award.

On June 30, 1992, the District Court

issued a - final judgment denying Peti-

tioner's motion to vacate, granting the

Respondent's motion for summary judgment

and enforcing the arbitrator's decision and

award. The District Court agreed with

Petitioner's contention that the language

of Section 13 could not sustain the arbi-

trator's construction of that section as a

promise by Petitioner to sell its assets

only to a buyer who would honor the con-

tract: "Such an obligation is an extraordi-

nary one which mere silence would not seem

to imply" (App. A-35). The imposition of

such "an extraordinary obligation," found

by the Court to be without support in the

language of the collective bargaining

agreement and thus beyond the jurisdiction

of the arbitrator, required the award to be

vacated. United Steelworkers v. Enterprise

Wheel & Car Corp., 363 U.S. 593 (1960).

However, the District Court set off in

another direction. Borrowing from the

Second) o ° act §§ 205

and 245% -- which had never been raised by

4/ The cited sections of the Restatement

(Second) of Contracts state as fol-

lows:

(continued...)

the parties or mentioned by the arbitrator

-- the Court found that by exercising its

right of silence about sales negotiations

and its right to terminate its employees at

the point of sale, Petitioner could have

been found to have acted "to make it impos-

sible for the successors and assigns clause

to be performed" (App. A-35-36).

/(...continued) ;

§ 205. Duty of Good Faith and Fair

Dealing.

Every contract imposes upon

each party a duty of good

faith and fair dealing in

its performance and its en-

forcement.

§ 245. Effect of a Breach by Non-

Performance as Excusing the Non-

Occurrence of a Condition

Where a party's breach by

non-performance contributes

materially to the - non-

occurrence of a condition of

one of his duties, the non-

occurrence is excused.

Petitioner appealed to the Fourth

Circuit, which affirmed. However, the

Court of Appeals expressed yet another view

of the merits, saying that, "at a minimun,

Zady Natey had an obligation to make a good

faith attempt to find a purchaser who would

accept the agreement with the Union (or at

least not to assist the purchaser to avoid

the agreement)." (Emphasis added.)

Petitioner timely filed a petition for

rehearing and suggestion of rehearing in

banc. On June 29, 1993, the Fourth Circuit

filed its Order (App. A-42) denying rehear-

ing.

VIII

REASONS FOR ALLOWANCE OF THE -WRIT

A. The Opinion Of The Court Of Appeals

Demonstrates The Need For This Court

To Clarify An Important And Recurring

Issue Concerning The Scope Of The

Federal Courts' Power To Review Labor

Arbitration Awards, Because The Court

Below Erred In Creating A Conflict

With The Second Circuit By Affirming

The Arbitrator's Award On A Theory

Neither Argued To Nor Addressed By

The Arbitrator After They Determined

That The Arbitrator's Stated Ground

Of Decision Was Without Support In

The Language Of The Collective

Bargaining Agreement.

In Enterprise Wheel & Car Corp.,

supra, 363 U.S. 593 (1960), and its compan-

ion cases,” this Court set forth the

standard for judicial review of a labor

arbitration award. Such an award is to be

enforced only where it "draws its essence

from the collective bargaining agreement,"

363 U.S. at 597. The arbitrator is

2/ eelw Vv .

Co., 363 U.S. 564 (1960), and United

Steelworkers v. Warrior & Gulf Navi-

ion Co., 363 U.S. 574 (1960).

"confine{[d] .. . to interpretation and

application of the collective bargaining

agreement; he does not sit to dispense his

own brand of industrial justice..."

(Id.).

It was beyond the authority of the

Courts below to create an entirely new

theory of liability after rejecting the

arbitrator's ground of decision as without

support in the language of the agreement.

Whatever deference was due the arbitrator

ended at that point, and it remained only

for the Court to vacate his award as exces-

Sive, as the Second Circuit did in Harry

Hoffman Printing Company v. Graphic Commu-

nications International Union Local 261,

950 F.2d 95, 99 (2a Cir. 1991). In

Hoffman, although some support might have

been found for arbitration panel's award in

certain sections of the agreement, the

court held that once it was concluded that

10.

es o

the expressed ground for the award exceeded

the panel's authority, the court had no

alternative but to vacate. This conclusion

follows from the agreement, which vests

jurisdiction to construe its terms in the

arbitrator and not in the courts.

B. If Left Undisturbed, The Opinion Of

The Fourth Circuit Will Undermine

Important And Settled Principles Of

Federal Labor Policy Promulgated By

This Court.

In a series of cases originating over

35 years ago, this Court has made clear

that the rights and obligations that flow

from collective bargaining agreements are

to be determined by reference to uniform

principles of federal law, fashioned from

the policy of our national labor laws.

Textile Workers Union v. Lincoln Mills, 353

U.S. 448 (1957); v. C& -

385 U.S. 421, 430 (1967); Ww son

Co. v. Detroit Local Joint Executive Board,

417 U.S. 249, 255-257 (1974); Allis-

11.

Chalmers Corp. v. Lueck, 471 U.S. 202, 210-

211 (1985). The decision below contravenes

these principles in a number of significant

respects.

First, it impairs the rights of an

employer to cease operations and sell its

assets. These rights are fundamental and

widely recognized. exti Worke Union

of America v. Darlington Mfg. Co., 380 U.S.

263, 268 (1965) ("an employer has the abso-

lute right to terminate his entire business

for any reason he pleases"); First National

Maintenance Corp. v. NLRB, 452 U.S. 666

(1981) (employer's decision to shut down a

part of its business for economic reasons

is not a negotiable subject of collective

bargaining).

Although an employer may waive these

existing management rights, "clear and

unmistakable" language is required before

such a waiver may be found. Metropolitan

12.

Edison Co. v. NLRB, 460 U.S. 693, 708-709

(1983). The Courts below correctly found

that there was no such language in the

agreement in this case.

Second, the Court found a violation of

an implied duty of good faith and fair

dealing on the basis of actions by Peti-

tioner that Petitioner was entitled to take

under existing law. One such action

consisted of agreeing to terminate its

employees. This right is conferred by

Darlington Mfg. Co., supra (recognizing

employer's right to terminate operations

with attendant termination of employees) °%;

The error of the Courts below appears

to have arisen out of their mistaken

belief that Unit

national Union v. Misco, Inc., 484

U.S. 29 (1987), compelled them to

search for a basis upon which they

might sustain the arbitrator's award

rather than to ensure that it was

faithful to the language of the

parties' agreement. This misreading

of the Court's admonition in Misco

(continued...)

13.

Golden State Bottling Co. v. NLRB, 414 U.S.

168, 182 (1973) (the policy of our federal

labor law favoring "the rightful preroga-

tive of owners independently to rearrange

their businesses" quoting John Wiley &

5 Vv ivi , 376 U.S. 543, 594

(1964)); Vv urns i cu-

rity Services, 406 U.S. 272, 287-288

(1972) (employer freedom inured to the

benefit of our national economy by encour-

aging the creative restructuring of busi-

ness enterprises and the resulting infusion

of capital).

Another such action consisted of

maintaining the secrecy of sales negotia-

tions. This right was recognized in First

National Maintenance Corp. v. NLRB, supra,

452 U.S. at 683 (decision to close for

/(...continued)

represents a further reason for this

Court to grant review.

14.

See

economic reasons found non-negotiable given

the important need for confidentiality in

an employer's pursuit of business oppor-

tunities and the likelihood that economic

damage may result to the enterprise if

disclosure to a labor organization of

negotiations were to be required) ./

Given these principles of law, the

Fourth Circuit was not free to say that by

Y See also Riedel International d/b/a

Willmette Tug and Barge Co., 300

N.L.R.B. 282 (1990) (employer not

required to disclose the existence of

sales negotiations to union as

disclosure may damage the viability of

the operation and jeopardize the pos-

sibility of sale). Petitioner notes

that although the Worker Adjustment

and Retraining Notification Act

("WARN"), 29 U.S.C. § 2101(b), now

provides for 60 days' notice to

employees of certain plant closings or

mass layoffs, employers retain the

discretion to provide 60 days' pay to

these employees rather than to dis-

close the existence of sales negotia-

tions that are deemed confidential.

WARN, incidentally, did not take

effect until long after the events in

this case occurred.

15.

its actions Petitioner had breached an

implied duty of good faith and fair deal-

ing. Petitioner's conduct was not only

within the policy of the law, it was

favored by that policy. The Fourth

Circuit's opinion thus itself violated

federal labor policy and, if not reversed

by this Court, will subvert important

rights that have been guaranteed to

employers, in the national interest.

Third, the decision below contravenes

the established policy of federal labor law

allowing a buyer of assets to choose for

himself whether to hire all, some or none

of the seller's existing work force, assum-

ing that they will work under his terms.

The Court erroneously concluded that Peti-

tioner had wrongfully "“assist{ed] the

purchaser to avoid the agreement." The

Court's conclusion is erroneous as a matter

16.

sneered

of fact and law.¥ If the buyer opts not

to hire the seller's employees as he is

entitled to do, he will not acquire the

successorship obligation to bargain with

the union. Fall River Dyeing & Finishing

Corp. v. NLRB, 482 U.S. 27, 41-42 (1987).

Indeed, because the buyer here had

opted not to hire a majority of its work

force from among the Petitioner's former

unionized employees, it was legally pre-

cluded from recognizing the Respondent

Union and adopting the collective bargain-

Petitioner's termination of employees

did not prevent the buyer from becom-

ing a successor. On the contrary, it

facilitated the possibility of suc-

cessorship as the buyer was then able

to, and did, go on to hire as many of

the individuals previously employed by

Petitioner as it wished. Although the

buyer ultimately hired fewer than a

majority of its work force from among

Petitioner's former employees, thereby

avoiding successor status under the

law, Petitioner had no control over,

Or responsibility for, the hiring

decisions made by the buyer.

17.

ing agreement, since the union did not

enjoy, and had never enjoyed, majority

status among the buyer's employees. Int'l

Ladies' Garment Workers' Union v. NLRB, 366

U.S. 731 (1961). It was, therefore, beyond

the power of either the arbitrator or the

courts to find that Petitioner had an

obligation to demand that the buyer adopt

the collective bargaining agreement and

recognize the union. Such a demand would

have been patently unlawful, and the Fourth

Circuit's suggestion that Petitioner should

have acted to impose the agreement on the

buyer violates the prior holdings of this

Court and of the National Labor Relations

Board regarding unlawful assistance to a

union in violation of Section 8(a)(2) and

(1) of the National Labor Relations Act,

29 U.S.C. § 158(a)(2) and (1).

Fourth, the practical effect of the

Fourth Circuit's opinion is to severely

18.

‘ee

restrict the market for the sale and pur-

chase of businesses. A great number of

existing collective bargaining agreements

contain some form of successorship

clause.’ Under the Fourth Circuit's view,

employer-sellers will be forced to limit

their sales of assets to purchasers who are

willing to hire the existing work force,

recognize the union and adopt the collec-

tive bargaining agreement. Such a result

contravenes the expressed policy of our

national labor law favoring the free alien-

ability of property and the right of owners

to efficiently arrange their businesses.

In addition, a buyer's freedom to decide

whether or not to be a successor and its

A recent survey has concluded that 43%

of all collective bargaining agree-

ments contain a successorship clause.

BNA, ti argaining Negotia-

tions and Contracts, Vol. 2, Basic

Patterns in Union Contracts, 36:5

(March 19, 1992).

19.

absolute right not to adopt an existing

agreement, Howard Johnson, supra, 417 U.S.

at 262, will be effectively impaired by the

substantial threat of potential liability

upon the seller and the resulting chilling

effect on business sales.

Finally, the amorphous nature of the

implied obligation imposed upon Petitioner

by the Fourth Circuit is destabilizing

because employers will be unable to discern

what sales-related conduct might be thought

to violate the court-created implied duty

of good faith and fair dealing. This

result is not only inconsistent with the

language of the parties' agreement in this

case, which precluded even the arbitrator

from modifying or adding to the terms of

the agreement (App. A-59), it is directly

contrary to the policy of federal labor law

favoring uniformity and certainty in the

interpretation of collective bargaining

20.

agreements. Allis-Chalmers v. Lueck, supra,

471 U.S. at 210-211.

For all of these reasons, the opinion

of the Fourth Circuit is inconsistent with

public policy and has great potential for

harm. It would be appropriate for this

Court, therefore, to grant review and to

vacate the award under the standards set

forth in United Paperworkers International

Union v. Misco, supra, both because of the

ultra vires nature of the arbitrator's

finding and because of the harms associated

with the Courts' subsequent disregard of

preeminent principles of federal labor

policy.

21.

CONCLUSION

For all the foregoing reasons, a writ

of certiorari should issue.

Respectfully submitted,

Bers UW Xx. ee ee

Warren M. Davison

Counsel of Record for Petitioner

John W. Kyle

LITTLER, MENDELSON, FASTIFF & TICHY

The World Trade Center, Suite 1653

Baltimore, Maryland 21202-3005

Melvin J. Sykes

MARYLAND BAR CENTER, SUITE 310

520 West Fayette Street

Baltimore, Maryland 21201

(410) 727-3078

368.203 .CM

22.

APPENDIX

ae CO Se Oe! le Um » el Sad * 7 <r > ~ 4 ‘

. RA MTIC. §6 +R ga

TABLE OF CONTENTS

Opinion of the Fourth Circuit,

dated June 1, 1993 .......

Opinion and Order of The District

Court, dated June 30, 1992 ...

Order Denying Petition for

Rehearing, dated June 29, 1993

Arbitrator's Decision ......

Arbitrator's Supplemental

oS ee eee

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Zady Natey, Incorporated,

Plaintiff-Appellant,

Vv. No. 92-1895

United Food and

Commercial Workers

International Union,

Local No. 27,

Defendant-Appellee.

— eee eee ee ee ee ee ee ee

Appeal from the United States District

Court for the District of

Maryland, at Baltimore.

J. Frederick Motz, District Judge.

(CA-91-3242-JFM)

Argued: March 1, 1993

Decided: June 1, 1993

Before PHILLIPS and MURNAGHAN, Circuit

Judges, and HILL, Senior Circuit Judge of

the United States Court of Appeals for the

Eleventh Circuit, sitting by designation.

Affirmed by published opinion. Judge

Murnaghan wrote the opinion, in which Judge

Phillips joined. Senior Judge Hill wrote a

concurring opinion.

A-1.

COUNSEL

ARGUED: Warren Malcolm Davison, LITTLER,

MENDELSON, FASTIFF & fTICHY, Baltimore,

Maryland, for Appellant. Joel Allen Smith,

KAHN, SMITH & COLLINS, P.A., Baltimore,

Maryland, for Appellee. ON BRIEF: John W.

Kyle, LITTLER, MENDELSON, FASTIFF & TICHY,

Baltimore, Maryland, for Appellant.

OPINION

MURNAGHAN, Circuit Judge:

Zady Natey, Inc. challenges an order

of the district court affirming an arbitra-

tion award in favor of the United Food and

Commercial Workers International Union,

Local 27. The arbitrator ruled that Zady

Natey, as the seller of the assets of a

business, Mash's Inc.,' was liable under an

extant "successors and assigns" clause‘* in

'Mash's Inc. thereupon changed its name

to Zady Natey, Inc., allowing the purchaser

to obtain the business' name.

-"This agreement shall be binding upon

the parties hereto, their heirs, executors,

administrators, successors and assigns."

A-2.

————~ ea

a collective bargaining agreement for

damages caused by the failure of the pur-

chaser to assume Zady Natey's obligations

to its employees for the duration of the

agreement. In granting the Union's motion

for summary judgment and entering an order

enforcing the arbitrator's award, the

district court found that Zady Natey had

certain obligations as a result of its

agreement with the Union and that it had

taken “affirmative steps, prior to the

consummation of the sale and while it was

still bound by the collective bargaining

agreement, to make it impossible for the

successors and assigns clause to be per-

formed." Zady Natey was deemed responsible

to satisfy those obligations. Zady Natey

has appealed.

Zady Natey has cast its appeal around

a decision of the Supreme Court holding

that, in the context of an issue over

obligation to bargain, a purchaser of

assets, though a successor or assign, was

not responsible for substantive provisions

of its predecessor's collective bargaining

agreement unless it also hired a majority

of its predecessors' employees. Fall River

Dyeing & Finishing Corp. v. NLRB, 482 U.S.

27 (1987). We have here in the instant

case, of course, a fact specific decision,

dependent on what the parties (a seller and

the Union) intended when the words "succes-

sors and assigns" were agreed upon and

actually used in an agreement clearly in

force. We must ask what duties attached to

the seller as a result of entering such an

agreement.

The arbitrator interpreted the succes-

sors and assigns clause as extending to the

description of, though not the obligations

of, the purchaser of Mash's Inc.'s assets.

Therefore, when the purchaser of Mash's

assets refused to be bound, the arbitrator

found the term to cause liability on the

part of Zady Natey (the changed name of

Mash's Inc.) which had by contract promised

that successors and assigns would carry out

the collective bargaining agreement terms.

The collective bargaining agreement, from

1970 forward until expiration on December

21, 1987, a date about six months after the

sale of Mash's Inc.'s assets, uniformly

contained language making it applicable to

Mash's Inc., its successors and assigns.

In the negotiations which brought

about the sale, a stock purchase was con-

sidered, but ultimately, for tax reasons,

the purchaser insisted on, and achieved, an

assets purchase agreement. The purchaser

refused to indemnify Mash's Inc. for conse-

quences of the sale concerning its employ-

ees and insisted on the secrecy of the

assets sale prior to closing. As a condi-

tion precedent to the closing of the sale,

Mash's Inc. agreed to cease operations,

fire its employees, and change its name to

Zady Natey, Inc. After closing, the new

owners later reopened the facility and

rehired a small number of Mash's previous

employees. Since not all of the terms of

the collective bargaining agreement were

adopted by or complied with by the purchas-

er of Mash's assets, including its name,

the Union representing the employees

asserted a claim against Zady Natey. An

arbitration ensued which the Union won.

The arbitrator specifically rejected

Zady Natey's view that only a successor as

described in Fall River Dyeing, supra,

could be a successor under the collective

A-6.

bargaining agreement. Zady Natey appealed

to the district court for the District of

Maryland.

Upon review of cross-motions for

summary judgment, the district judge grant-

ed summary judgment in favor of the Union

and against Zady Natey. It first deter-

mined that the arbitrator did not ignore

the language of the collective bargaining

agreement when he found that the purchaser

of assets was a _ successor. The court

further determined that Zady Natey took

affirmative steps to frustrate the perfor-

mance of the successors and assigns lan-

guage.

The district court, in granting summa-

ry judgment in favor of the Union, deter-

mined that the arbitrator did not "ignore{ ]

the plain language of the collective bar-

gaining agreement in finding that new

Mash's [the purchaser of assets] is a

‘successor' within the meaning of the

agreement even though it was not a 'succes-

sor' within the meaning of Fall River

On appeal, we review the district

court's grant of summary judgment to the

Union de novo. However, our review of the

arbitrator's decision is a very limited

one. ited eelworkers oO erica v.

eri . as 363 U.S. 564, 568

(1960); United Steelworkers of America v.

Enterprise Wheel & Car Corp., 363 U.S. 593,

596, 599 1960) ("It is the arbitrator's

construction [of the collective bargaining

agreement) which was bargained for; and so

far as the arbitrator's decision concerns

[the] construction of the contract, the

courts have no business overruling him

A-8.

because their interpretation is different

from his.").

The Supreme Court recently stressed

the narrowness of that review in United

P Int ti 1 uni v. Mi

inc., 484 U.S. 29, 38 (1987):

The arbitrator may not ignore the

plain language of the contract;

but the parties having authorized

the arbitrator to give meaning to

the language of the agreement, a

court should not reject an award

on the ground that the arbitrator

misread the contract ... .[A]s

long as the arbitrator is even

arguably construing or applying

the contract and acting within

the scope of his authority, that

a court is convinced he committed

serious error does not suffice to

overturn his decision.

While the "arbitrator's award can and

should be overturned if the arbitrator

exceeds his authority," the “award is

presumed to be legitimate as long as it

draws its essence from the collective

bargaining agreement." Roy Stone Transfer

- . eams s u s

Union No. 22, 752 F.2d 949, 951 (4th Cir.

1985) (emphasis added).

Zady Natey has contended that the

arbitrator, in interpreting the successors

and assigns clause,!

exceeded his authority

because the term "successor" has a single

meaning within labor law, as enunciated by

the Supreme Court in Fall River Dyeing,

supra, that meaning should have been

imparted to the agreement it entered with

the Union.

In Fall River Dyeing, the Supreme

Court considered when a new employer,

succeeding in another's business, has an

obligation to bargain with the union repre-

senting the predecessor's employees. The

Court offered a two-part answer to that

question: the Court first outlined the

proper approach to be taken to determine

A-10.

whether a new company was a successor to

the old, and then it explained when a

successor had an obligation to bargain.

The Court concluded that a new company is a

successor if it has "acquired substantial

assets of its predecessor and continued,

without interruption or substantial change,

the predecessor's business operations.'"

482 U.S. at 43 (quoting Golden State Bot-

tling Co. v. NLRB, 414 U.S. 168, 184

(1973)). If it is indeed the successor to

the old company, a new company has an

obligation to bargain with the union if it

employs a majority of the predecessor's

employees. 482 U.S. at 46 (citing NLRB v.

\ i S ices , 406

U.S. 272, 278-279 (1972)).

In the present case, the new company

did acquire substantial assets of its

predecessor and continued, without substan-

a-il.

tial change, its predecessor's business

canatciiasii. Thus, under Fall River Dyeing,

the purchasers of Mash's Inc. appear to be

successors to Zady Natey. But, even if

they were not successors, Zady Natey had

nevertheless contracted to provide those

things which somebody as a successor would

provide.

Whether, as a successor, the purchaser

would be bound to bargain, independently of

the substantive provisions of the predeces-

sor's agreement, is a quite distinct ques-

tion from whether the seller, who was a

party to the agreement, would be bound.

The determinative question, therefore, is

whether the failure of Zady Natey to sell

to a successor who would bind itself to

adhere to the substantive terms of the

collective bargaining agreement forced Zady

A-12.

Natey to remedy the resulting disadvantage

to its employees.

The arbitrator's answer to that ques-

tion, that Zady Natey was liable under the

agreement, drew its essence from the col-

lective bargaining agreement. First, the

literal language refers to "heirs, execu-

tors, administrators and assigns," indicat-

ing, as the district court pointed out,

"that the parties intended that the section

should be construed generically, i.e. to

apply to all persons who followed in the

footsteps of old Mash's." Second, Nathan

Mash's? attorney testified that "there was

no contemplation of any change or succes-

sors being involved unless he died" which

also suggests that the parties were using

the language in a generic sense. Third, if

sHe was the founder and owner of Mash's

Inc.

A-13.

the successors and assigns clause was read

as Zady Natey has proposed, it would be

mere surplusage. Finally, no other provi-

sion in the agreement suggests that the

parties intended to use the word successor

in the extremely limited sense urged by

Zady Natey. Lawyer usage of the term is

common and more inclusive.

In light of the foregoing, the dis-

trict court's conclusion appears sound:

Under these circumstances

the term "successor" was, at

most, ambiguous, and the arbi-

trator acted well within his

authority in interpreting it as

applying to anyone who followed

Old Mash's [(Zady Natey]...

Therefore, under section 13 (as

permissibly construed by the

arbitrator) old Mash's' agreed

that anyone who might purchase

its stock or assets or otherwise

succeed it would be bound by the

agreement whether or not he would

be bound to the agreement as a

matter of labor law. By entering

into that agreement old Mash's

could not, of course, bind the

purchaser. However, the question

presented here is not whether new

A-14.

Mash's, as purchaser, was bound

by the collective bargaining

agreement but whether Zady Natey,

as the seller, was under a con-

tractual obligation when it

breached.

Thus, at a minimum, Zady Natey had an

obligation to make a good faith attempt to

find a purchaser who would accept the

agreement with the Union (or at least not

to assist the purchaser to avoid the agree-

ment).

The Union has contended that the

collective bargaining agreement imposed an

affirmative obligation upon Zady Natey to

find a successor who was willing to assume

Zady Natey's obligations under the collec-

tive bargaining agreement. The district

court was hesitant to infer from the bare

successors and assigns clause an affirma-

tive obligation actually to succeed in

finding a purchaser who would continue the

agreement. It reasoned that "[s)juch an

obligation is an extraordinary one which

mere silence would not seem to imply."

Instead, it concluded, and we agree, that

the collective bargaining agreement at

least obliged Zady Natey to act in good

faith with respect to its employees when

selling the business. Since Zady Natey has

failed to fulfill the duty of good faith

and fair dealing, it is not necessary for

us to determine whether Zady Natey should

be held to the higher standard advanced by

the Union even if good faith efforts to

find a purchaser were made but proved

unsuccessful.

The district court effectually summa-

rized how Zady Natey failed to act in good

faith with respect to the Union:

Zady Natey did not simply fail

affirmatively to find a purchaser

who would continue its agreement

with the Union. Rather, in

order to maximize the price which

Nathan Mash received for the sale

A-16.

of its assets, Zady Natey took

affirmative steps, prior to the

consummation of the sale and

while it was still bound by the

collective bargaining agreement,

to make it impossible for the

successors and assigns clause to

be performed. Specifically, as a

condition of the sale, it dis-

charged all of its employees

before the sale was closed for

the very purpose of assuring that

new Mash's would not be bound by

the collective bargaining agree-

ment despite section 13's mandate

to the contrary. It also agreed

to keep the proposed sale secret,

thereby precluding the Union from

attempting to obtain an injunc-

tion against its consummation.

Zady Natey has challenged the district

judge's ruling on the ground that his

reasoning was not precisely that forwarded

by the arbitrator in granting the award.

The district court, however, recognized

that "the arbitrator did not articulate his

ruling in precisely that fashion," ji.e., as

a violation of the duty of good faith and

fair dealing which was part of the employ-

A-17.

er's obligation under the collective bar-

gaining agreement. "Instead, offended by

what he perceived as Zady Natey's and

Mash's bad faith, [the arbitrator] railed

against their conduct in somewhat vehement,

rather than coolly analytical, language."

But, the district judge correctly ruled

that "that fact alone... provided no

basis for overturning the arbitrator's

award." See, e.g., Enterprise Wheel, 363

U.S. at 598.

The district court's grant of summary

judgment in favor of Local 27 and against

Zady Natey is

AFFIRMED.

HILL, Senior Circuit Judge, concurring:

Because I conclude that the arbitrator

drew his conclusions from the essence of

A-18.

the agreement at issue, I concur in the

judgment enforcing the award. Whether or

not I should have reached the conclusions

reached by the arbitrator is of no moment.

A~-19.

ia aii

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

ZADY NATEY, INC.

Civil No. JFM-91-

3242

Vv.

UNITED FOOD AND

COMMERCIAL WORKERS

INTERNATIONAL

UNION LOCAL NO. 27

e*eeeeese & &

OPINION

Zady Natey, Inc. seeks to vacate an

arbitration award entered in favor of

United Food and Commercial Workers Interna-

tional Union, Local No. 27 (the “"Union")

and against it. At issue is whether Zady

Natey, as the seller of the assets of a

business, is liable under a successors and

assigns clause in a collective bargaining

agreement for damages caused by the failure

of the purchaser to assume Zady Natey's

obligations under the agreement. Zady

A-20.

Natey and the Union have each moved for

summary judgment.

Nathan Mash was the owner of Mash's,

Inc. ("old Mash's"), a Maryland corporation

engaged in the business of marketing

dressed hams, corned beef and other meat

products at sites in Baltimore and Land-

Over, Maryland. The Union represented

production workers at the Landover facility

since early 1970. Over the years, old

Mash's and the Union entered into a series

of collective bargaining agreements. The

latest of those agreements ("the Agree-

ment") became effective April 10, 1985 and

expired December 31, 1987. Section 13 of

the Agreement provided: "This Agreement

shall be binding upon the parties hereto,

their heirs, executors, administrators,

successors and assigns."

A-21.

On July 17, 1987, approximately five

months prior to the Agreement's expiration,

Nathan Mash sold the assets of old Mash's

to a group of investors headed by Terrance

Conway for approximately $10,000,000.

Approximately twelve draft agreements were

exchanged between old Mash's and Conway.

Originally, the parties contemplated a

stock purchase agreement but decided on an

assets purchase agreement for tax reasons.

Conway refused to indemnify old Mash's for

consequences of the sale concerning its

employees and insisted on the secrecy of

the assets sale prior to closing.

Under the terms of the asset purchase

agreement, old Mash's agreed that as condi-

tions precedent to the closing of sale, it

would cease operations, notify its employ-

ees that their employment with old Mash's

was terminated and change its name to Zady

Natey, Inc. At closing Conway assumed

A-22.

asia '

control of the assets of old Mash's, in-

cluding its corporate name ("new Mash's").

He immediately notified the existing

employees that the new corporation would be

reopening the Landover facility at a later

time, under new terms and conditions of

employment, and that employees were free to

apply for work under the new management.

On July 21, 1987, the Union wrote to

Zady Natey, informing it that the assets

sale violated section 13 of the Agreement

because it had failed to obtain new Mash's

agreement to continue the terms of the

Agreement through its expiration. Zady

Y In fact, only 39 of the 138 old

Mash's eligible employees on the payroll as

of July 17, 1987 were ultimately hired by

new Mash's. The Union filed two unfair

labor charges against new Mash's, alleging

that it had discriminatorily refused to

hire former production employees of old

Mash's because of their union membership.

These charges (to which Zady Natey was not

a party) were settled before the legal

issues which they raised were decided.

A-23.

Natey denied that section 13 imposed such

an obligation or that the grievance was

arbitrable. The arbitrability question was

litigated in this Court and was resolved in

favor of the Union. See United Food and

Commercial Workers Int'l Union, Local 27 v.

Zady Natey, Inc., et al, Civ. No. PN-87-

1956 (1987). On October 25, 1988, an

arbitration hearing was held, and on July

13, 1989, the arbitrator issued his award

in favor of the Union. This action fol-

lowed.

Il.

In the Steelworkers trilogy, the

Supreme Court made clear that courts play

an extremely limited role when asked to

e/ The reason for the delay in the

filing of this action was that a second

arbitration hearing on the issue of damages

was conducted, and the arbitrator issued

his award in that proceeding on October 28,

1991. No appeal has been taken from his

damages determination.

A-24.

alee

review the decision of an arbitrator.

teelwo s Oo erica v.

_ Co., 363 U.S. 564, 568 (1960); United

Ww ers oO erica v. terpri e

& Car Corp., 363 U.S. 593, 596 (1960).

More recently, in Misco, Inc., the Supreme

Court reaffirmed the narrowness of this

review:

The arbitrator may not ignore the

plain language of the contract;

but the parties having authorized

the arbitrator to give meaning to

the language of the agreement, a

court should not reject an award

on the ground that the arbitrator

misread the contract.

- - « [A]s long as the arbitra-

tor is even arguably construing

or applying the contract and

acting within the scope of his

authority, that a court is con-

vinced he committed serious error

does not suffice to overturn his

decision.

nite aperworkers Int'l Union, AFL-CIO

et al. _v. Misco, Inc., 484 U.S. 29, 38

(1987); see also Roy Stone Transfer Corp.

v. Loca 2, Teamsters, 752 F.2d 949, 951

A-25.

(4th Cir. 1985) (award affirmed because no

evidence in record that arbitrator "totally

incorrect" in interpretation and applica-

tion of the collective bargaining agree-

ment).

Nevertheless, a court's deference does

not completely insulate arbitral awards

from judicial review. While an arbitrator

is free to interpret ambiguous provisions

in a collective bargaining agreement, he

may not ignore its plain language. Ficks

Reed Co. v. Local 112 Int'l Union, Allied

Indus. Workers of America, 771 F. Supp.

208, 211, 214 (S.D. Ohio 1991); accord

Sears, Roebuck and Co. v. Teamsters Local

Union No. 243, 683 F.2d 154, 155 (6th Cir.

1982), cert. denied 460 U.S. 1023 (1983);

Inter-City Gas Corp. v. Boise Cascade

Corp., 845 F.2d 184, 187 (8th Cir. 1988)

(arbitrator amends or alters agreement if

interprets unambiguous language in way

A-26.

———<—

different from plain meaning). The test is

whether "the arbitrator's award 'draws its

essence from the collective bargaining

agreement,' and is not merely ‘his own

brand of industrial justice.'" Misco,

Inc., 484 U.S. at 36 (quoting terprise

Wheel & Car Corp., 363 U.S. at 596).

III.

In rendering his decision in favor of

the Union, the arbitrator found, in part,

that new Mash's was a successor to old

Mash's within the meaning of section 13 of

the collective bargaining agreement. Zady

Natey challenges this finding, contending

that the term "successor" has a single

meaning under labor law, and that new

Mash's was not a successor within the

meaning of the collective bargaining agree-

ment because it did not hire a majority of

old Mash's employees.»

It is true, as Zady Natey posits, that

the Supreme Court has held that for the

purpose of determining whether a purchaser

of the assets of a business may be required

to bargain under a collective bargaining

agreement entered into by the seller, he is

deemed to be a "successor" only if, in

continuing the operation of the business,

he hires a majority of the seller's employ-

ees. See Fall River Dyeing & Finishing

Corp. v. NLRB, 482 U.S. 27 (1987). Howev-

er, the Supreme Court has also stated (in

v/ Although the parties have focused

upon the question of whether new Mash's is

a successor under section 13 of the collec-

tive bargaining agreement, that question

itself is legally immaterial. Rather, what

needs to be determined, as the first step

of analysis, is the somewhat broader ques-

tion of what "successor" means within the

intendment of section 13. However, since

the two questions merge, and to answer the

former answers the latter, I will address

the issue as framed by the parties.

A-28.

——————————

language which it has not repudiated in

Fall River Dyeing or elsewhere) that

"‘tjhere is, and can be, no single defini-

tion of 'successor' which is applicable in

every legal context. A new employer, in

other words, may be a successor for some

purposes and not for others." Howard

Johnson Co. v. Detroit Local Joint Execu-

tive Board, 417 U.S. 249, 263 n.9 (1974) .¥

Thus, the initial question here pre-

sented is whether the arbitrator ignored

the plain language of the collective bar-

gaining agreement in finding that new

Mash's is a "successor" within the meaning

of the agreement even though it was not a

"successor" within the meaning of Fall

a ; Although it is not self-evident

from the quoted language itself, it is

clear from its surrounding context that

when the Court said "in every legal con-

text," it meant "every legal context"

within labor law, not labor law as a “legal

context" different from some other substan-

tive area of the law.

A-29.

ive eing. Four facts demonstrate that

he did not do so. First, Fall River Dyeing

had not even been decided when the collec-

tive bargaining agreement between old

Mash's and the Union was first negotiated.

Second, no other provision in the agreement

suggests that the parties were intending to

use the term "successor" only in the ex-

tremely limited sense by which it is de-

fined for the purpose of determining a

purchaser's obligations under a collective

bargaining agreement.2?/ Third, section 13

2/ The arbitrator found, and the

Union argues, that if the successors and

assigns clause were interpreted as refer-

ring merely to a successor within the

meaning of Fall River Dyeing, the clause

would be mere surplusage. This would be an

additional reason for upholding a broader

reading of the clause. See generally i

Bornstein & Gosline, or an m ent

Arbitration 14.02{1][{d] (1992). Zady Natey

argues that this is not so because in the

early 1970s when the collective bargaining

agreement was first negotiated, a succes-

sors clause could be held to bind a pur-

chaser to a collective bargaining agree-

(continued...)

A-30.

——————————————

also refers to "heirs, executors adminis-

trators and assigns," evidencing that the

parties intended that the section should be

construed generically, i.e. to apply to all

persons who followed in the footsteps of

Old Mash's. Fourth, Harry Adelberg, the

attorney who represented Nathan Mash when

7/(...continued)

ment. See, e.g., Burns Int'l Detective

Agency, Inc., 182 N.L.R.B. 348 (1970),

orce art, 441 F.2d 911 (2d Cir.

1971) . Ss e) j , 406 U.S. 272

(1972). Moreover, according to Zady Natey,

even after the Supreme Court reversed the

NLRB's ruling in Burns, NLRB v. Burns Int'l]

ecu ervic nc., 406 U.S. 272

(1972), and even after Howard Johnson Co.

Vv. oca op utlv anc

supra, was decided, a successors clause was

relevant in determining whether a purchaser

could be forced to go to Boracay nec See,

S.G., nders & Culi Wo S ion

v. Howard Johnson Co., 335 F.2d 1160, 1172

(9th Cir. 1976); Local 111 Joint Board

Nursing Home Employees v. B&K Investments,

Inc., 436 F. Supp. 1203 (S.D. Fla. 1977).

There seems to be merit in Zady Natey's

argument. However, I need not decide the

issue since my affirmance of the arbitra-

tor's decision does not turn upon whether

Zady Natey's reading of section 13 would

render it meaningless.

A-31.

the collective bargaining agreement was

originally negotiated, testified at the

arbitration hearing (on behalf of Zady

Natey) that the successors and assigns

clause -- which had been proposed by the

Union -- “appeared to be completely innocu-

ous as far as he [Mr. Mash] was concerned

since "there was no contemplation of any

change or successors being involved unless

he died." This too suggests that the

parties were using the "heirs, executives

administrators, successors and assigns"

language in a generic, not a restricted,

sense.

Under these circumstances the term

"successor" was, at most, ambiguous, and

the arbitrator acted well within his au-

thority in interpreting it as applying to

anyone who followed old Mash's, whether or

not he was a "successor" within the meaning

of Fall River Dyeing. Therefore, under

A-32.

section 13 (as permissibly construed by the

arbitrator) old Mash's agreed that anyone

who might purchase its stock or assets or

otherwise succeed it would be bound by the

agreement whether or not he would be bound

to the agreement as a matter of labor law.

By entering into that agreement old Mash's

could not, of course, bind the purchaser

itself. See, e.g., Howard Johnson Co. vy.

Detroit Local Joint Executive Board, 417

U.S. at 258 n.3. However, the question

presented here is not whether new Mash's,

as purchaser, was bound by the collective

bargaining agreement but whether Zady

Natey, as the seller, was under a contrac-

tual obligation which it breached.’

o/ I note that almost all of the

cases which the parties have cited both

before the arbitrator and in this court

have concerned the question of the liabili-

ty of the purported successor under the

collective bargaining agreement. Howard

Johnson itself addressed that question.

(continued...)

A-33.

The Union contends that section 13 may

be permissibly interpreted as imposing an

affirmative obligation upon Zady Natey to

find a successor who was willing to assume

Zady Natey's obligations under the collec-

tive bargaining agreement. There is some

authority to support this view. See, e.g.,

Glass, Molders, Pottery, Plastics & Allied

Workers Int'l Union, AFL-CIO v. Owens-

Illinois, Inc., 758 F. Supp. 962 (D.N.J.

1991); Boardman Co. v. United Steelworkers

of America, 91 Lab. Arb. (BNA) 489 (1988)

(Harr, Arb.); see also Association of

Flight Attendants, AFL-CIO v. Delta Air

Lines, Inc., 879 F.2d 906 (D.C. Cir. 1989);

cert. denied, 110 S. Ct. 1781 (1990) (hold-

(...continued)

However, it is also noteworthy that in

Howard Johnson the sellers "admitted that

they were required to arbitrate in accor-

dance with the terms of the collective-

bargaining agreements they had signed." 417

U.S. at 253.

A-34.

ing that the meaning of the successors and

assigns clause was arbitrable). There is,

however, other authority to the contrary.

See _e.g., Wyatt Mfg. Co., 82 Lab. Arb.

(BNA) 153 (1983) (Goodman, Arb.); National

Tea Co., 59 Lab. Arb. (BNA) 1193, 1997-98

(1972) (Joseph, Arb.). The law of the

Fourth Circuit is not entirely clear.

While in a mining operation case the Court

ruled in favor of a union bringing suit

against the seller for failure to find a

purchaser willing to continue the collec-

tive bargaining agreement, it did so only

in the face of express language in the

applicable agreement providing that the

mining operation "shall not be sold, con-

veyed, or otherwise transferred or assigned

to any successor without first securing the

agreement of the successor to assume the

Employer's obligations under this Agree-

ment." ist. 7 is

A-35.

7113, & Local Union 6023, UMWA v. Allied

Corp., 765 F.2d 412, 417 (4th Cir.), cert.

denied, 473 U.S. 905 (1985); accord, Int'l

Union UMWA v. Eastover Mining Co., 603 F.

Supp. 1038, 1040, 1044-45 (W.D. Va. 1985).

I would be hesitant to uphold an

arbitrator's interpretation of a collective

bargaining agreement inferring from a bare

successors and assigns clause an affirma-

tive obligation to find a purchaser who

will continue the collective bargaining

agreement. Such an obligation is an ex-

traordinary one which mere silence would

not seem to imply. Here, however, Zady

Natey did not simply fail affirmatively to

find a purchaser who would continue its

agreement with the Union. Rather, in order

to maximize the price which Nathan Mash

received for the sale of its assets, Zady

natey took affirmative steps, prior to the

consummation of the sale and while it was

A-36.

still bound by the collective bargaining

agreement, to make it impossible for the

successors and assigns clause to be per-

formed. Specifically, as a condition of

the sale, it discharged all of its employ-

ees before the sale was closed for the very

purpose of assuring that new Mash's would

not be bound by the collective bargaining

agreement despite section 13's mandate to

the contrary. It also agreed to keep the

proposed sale secret, thereby precluding

the Union from attempting to obtain an

injunction against its consummation.

These facts fully substantiate a

finding that Zady Natey breached a duty of

good faith and fair dealing which was part

of its obligation under the collective

bargaining agreement. See generally Re-

statement of Contracts (Second), §§ 205 &

37.

iat

245.” The arbitrator did not articulate

Y Zady Natey argues that the prin-

ciples set forth in the Restatement prohib-

iting a party from taking steps to render

impossible the performance of a provision

of a contract into which it has entered

should not be incorporated into labor law.

It has cited no authority in support of its

position, and reason certainly does not

substantiate it. Indeed, the interest of

preserving stability in labor relations

supports rather than undercuts the implica-

tion of a duty requiring a party to refrain

from acting in bad faith.

Two other arguments advanced by Zady

Natey are equally without merit. First, it

contends that old Mash's was entitled to

discharge its employees prior to the clos-

ing of the sale under Section 1B of the

collective bargaining agreement which

reserved to it the right "to relieve em-

ployees from duty because of lack of work

or other legitimate reason, subject only to

such limitations are provided in this

Agreement." The arbitrator certainly was

not obligated to conclude that discharging

employees for the purpose of avoiding the

successors and assigns clause was a "legit-

imate reason" within the meaning of this

section. Second, Zady Natey hypothesizes

that if: could have sold the assets without

first discussing with Terrance Conway any

union related matters and that Conway could

have discharged the employees immediately

after the closing of the sale without being

bound by the collective bargaining agree-

ment. That is entirely true. However, it

does not follow, as Zady Natey argues, that

(continued...)

A-38.

his ruling in precisely that fashion.

Instead, offended by what he perceived as

Zady Natey's and Mash's bad faith, he

railed against their conduct in somewhat

vehement, rather than coolly analytical,

language. That fact alone, however, pro-

vides no basis for overturning the arbitra-

tor's award. See, e.g., Enterprise Wheel &

Car Corp., 363 U.S. at 598. The gravamen

of his ruling was on the mark, and his

interpretation of the collective bargaining

agreement -- as prohibiting Zady Natey from

becoming an accomplice in the frustration

Y(...continued)

this justifies the contrary action which

Zady Natey and Nathan Mash in fact took.

They did discuss labor matters with Conway

prior to the closing (because Conway wanted

to assure that he would not inherit the

collective bargaining agreement), and they

derived the benefit of their bargain in

having done so. In short, Zady Natey and

Nathan Mash made a choice not to actualize

their own hypothetical, and it is incumbent

upon them to live with the consequences of

their decision.

A-39.

of. the performance of section 13 -- was

derived from its essence.

A separate order effecting the rulings

made in this opinion is being entered.

Date: June 30, 1992 (signed)

J. Frederick Motz

United States

District Judge

IN THE UNITED STATES DISTRICT COURT

—_—FOR THE DISTRICT OF MARYLAND

ZADY NATEY, INC. .

Vv. * Civil No. JFM-91-

* 3242

UNITED FOOD AND *

COMMERCIAL WORKERS *

INTERNATIONAL *

UNION, LOCAL NO. 27 *

xeeaze

ORDER

For the reasons stated in the opinion

entered herein, it is this 30th day of

June 1992

ORDERED

i. Plaintiff's motion for summary

judgment and motion that the arbitrator's

award be vacated are denied;

2. Defendant's motion for summary

judgment and motion for enforcement of the

arbitrator's award are granted; and

3. Judgment is entered in favor of

defendant against plaintiff.

LZs/

J. Frederick Motz

United States District

Judge

A-4la.

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

FILED

June 29, 1993

No. 92-1895

CA-91-3242-JFM

ZADY NATEY, INCORPORATED

Plaintiff-Appellant

Vv.

UNITED FOOD AND COMMERCIAL WORKERS

INTERNATIONAL UNION,

Local No. 27

Defendant-Appellee

On Petition for Rehearing with Suggestion

for Rehearing In Banc

The appellant's petition for rehearing

and suggestion for rehearing in banc were

submitted to this Court. As no member of

this Court or the panel requested a poll on

the suggestion for rehearing in banc, and

A-42.

As the panel considered the petition

for rehearing and is of the opinion that it

should be denied,

IT IS ORDERED that the petition for

rehearing and suggestion for rehearing in

banc are denied.

For the Court,

/s/ Bert M. Montague

CLERK

1025.203

In the Matter of

Arbitration between:

ZADY NATEY, INC. AAA Case No.

16 30 00188

and 88S

UNITED FOOD AND Decision

COMMERCIAL WORKERS No. F-AAA-155

LOCAL UNION NO. 27 Issued:

ee ee ee ee ee ee eee ee”

July 13, 1989

On Behalf of the Company:

Warren M. Davison, Esq., Attorney

John W. Kyle, Esq., Attorney

Harry Adelberg, Esq., Witness

Nathan Mash, Witness

On Behalf of the Union:

Joel A. Smith, Esq., Attorney

Bruce Drasal, Business Representative

Leroy Phillips, Steward

Arbitrator:

Paul J. Fasser, Jr.

Decision No. F-AAA=-155

AAA Case No. 16 30 00188 88S

THE GRIEVANCE

In this grievance the Union protests

the Company's action when it sold its

operations without prior notice and termi-

nated the Collective Bargaining Agreement

without taking into account the Successors

and Assigns clause.

GROU

For many years, Nathan Mash’, a Balti-

more businessman, conducted a business

engaged in the production of ham and pork

products. The product was mechanized under

various names, including that of Mash's

' For purposes of this Opinion, the

Company, Nathan Mash, Zady Natey, "old"

Mash's, and the Seller are synonymously

referred to as the previous owner of

Mash's, Inc.

——~se_ewrww

16 30 00188 88S

Hams. The enterprise operated under the

title of Mash's, Inc., at sites in Balti-

more and Landover, Maryland.

Early in 1987, a group of individuals

headed by Terrance Conway” offered to pur-

chase Mash's, Inc. The purchase was final-

ized through a complex arrangement whereby

Conway, et al., formed two corporations -

Landover Holdings, Inc., and Landover

Acquisition, Inc. In March, 1987, these

two corporations offered Nathan Mash a

stock purchase agreement to cover the sale

of Mash's ham and pork processing business

which was located in Landover, Maryland.

At the time of the sale, the employees of

* Similarly, Conway, "new" Mash's, and

the Buyer are used interchangeably to refer

to the new owner of Mash's, Inc. With

these denominations, it will be unnecessary

to continually confound the reader with the

effect of the Landover Holding and Landover

Acquisitions maneuver which produced the

Buyer.

A-46.

16 30 00188 88S

Mash's, Inc., were represented by United

Food and Commercial Workers Local 27.

Their wages and conditions of employment

were set out in a Collective Bargaining

Agreement that expired December 31, 1987.

Nathan Mash learned through his attor-

neys that he would save approximately

$2,000,000 in Federal income taxes if he

were to sell his entire business through an

Asset Purchase Agreement rather than a

Stock Purchase Agreement. He then aban-

doned the Stock Purchase arrangement and

sold the business via an Asset Purchase

Agreement. During the negotiations for the

sale, approximately twelve draft agreements

were exchanged. During the negotiations,

Nathan Mash insisted on indemnification for

consequences of the sale in regard to his

employees. Conway ultimately refused to

continue the Labor Agreement and insisted

A-47.

16 30 00188 88S

that this be a condition of the sale.

Conway also insisted on secrecy and, conse-

quently, the Union or individuai employees

were not told of the sale until after it

had taken place.

On July 17, 1987, the sale was consum-

mated. It represented approximately a

$10,000,000 plus transaction. At approxi-

mately 4:45 on July 17, 1987, Mash's, Inc.,

("“old" Mash's) ceased to exist. The next

day, Conway changed the name of his hold-

ings and corporations to Mash's, Inc.,

("new" Mash's) on the basis that he had

purchased the name from Nathan Mash.

Concurrently, on July 18, 1987, Nathan Mash

formed a corporation titled Zady Natey,

Inc.”, whose assets consisted of the money

> Zady, in Yiddish, is "grandfather"

and Natey is Nathan Mash.

A-48.

16 _ 30 00188 88S

paid out by Conway to Nathan Mash for "old"

Mash's, Inc., lock, stock, and barrel.

The entire business arrangement in-

cluded approximately $7,120,000 in cash.

In addition, Conway gave Nathan Mash ten,

$100,000 subordinated convertible deben-

tures in "new" Mash's. Nathan Mash was

continued as a consultant for a $50,000

annual fee. In addition, through a complex

leasing and sub-leasing arrangement, Nathan

Mash was paid rentals for the property and

some of the machinery and office equipment.

On July 17, 1987, “old" Mash's ceased

to exist as an operating enterprise and

"new" Mash's took over the operations. It

should be noted that there was ne notice to

the Union of the impending sale. As a

matter of fact, the evidence is that, as

late as the day before the sale, on July

16, “old” Mash's Management had requested

A-49.

16 30 00188 88S

that certain employees make concessions as

to the thirty-six-hour guarantee’ each work

week in order to avoid layoffs.

There are five significant documents

that were issued at approximately the time

of the sale. At the risk of burdening the

record, it seems prudent to set them out in

their entirety. The first is a letter

dated July 17, 1987, from "Old" Mash's

Counsel to the President of UFCW Local

Union 27. It reads as follows:

July 17, 1987

Mr. Thomas Russow, President

* Section 2, F., reads as follows:

F. All regular full-time

employees shall be guaranteed a

minimum of thirty-six (36) hours’

work, or pay in lieu of work, per

week, provided they have reported

for work on Monday at the usual

time, and have been available

when needed from Monday through

Friday, inclusive; ...

A-50.

16_ 30 00188 88S

United Food and Commercial

Workers Union, Local 27

6419 York Road

Baltimore, Maryland 21212

Dear Mr. Russow:

This is to inform you that

Mash's, Inc., today finalized an

agreement to sell its assets,

including the Landover, Maryland,

processing plant and equipment.

Therefore, effective imme-

diately, Mash's, Inc., will cease

operations and all employees

within the collective bargaining

unit represented by your labor

organization will be permanently

separated from employment. cCon-

current with the issuance of this

letter, notices of termination

have been sent to the employees

by Federal Express. A sample

notification letter is attached

for your information.

As labor counsel for Mash's,

Inc., I am prepared to meet with

you to negotiate matters related

to the effects of the sale upon

the employees you represent.

Sincerely,

/s/

WARREN M. DAVISON

A~Si.

16 30 00188 88S

The second letter is the hand-deliv-

ered letter from the Union directed to

"old" Mash's and "old" Mash's Counsel:

July 21, 1987

HAND DELIVERED

Warren M. Davison, Esquire

Littler, Mendelson, Fastiff & Tichy

The World Trade Center

Suite 1653

Baltimore, MD 21202-3005

Mash's, Inc., also trading as

Mash's Hams, Inc.

5801 Columbia Park Road

Landover, Maryland 20784

Gentlemen:

You have informed us that

Mash's has closed its operations

effective immediately and that

all employees within our bar-

gaining unit are to be terminat-

ed. The reason for these actions

is that the assets of Mash's have

been sold. Your letter of July

17, 1987 states: "This is to

inform you that Mash's, Inc.,

today finalized an agreement to

sell its assets, including the

Landover, Maryland Processing

Plant and equipment."

A-52.

16 30 900188 885

Apparently you believe that

Mash's has no obligation to see

to it that terms and conditions

that were promised to members of

our bargaining unit will be pre-

served in the future. Section 13

of our collective bargaining

agreement with Mash's states that

the agreement is to be binding on

the parties and on their succes-

sors and assigns. We interpret

that section of the agreement as

imposing an obligation on Mash's

to see to it that any would-be

purchaser of the business, no

matter in what form, whether it

be through a sale of stock or a

sale of assets, recognize the

collective bargaining agreement,

agree to abide by it, and guaran-

tee the performance of its terms

through its expiration on Decem-

ber 31, 1987.

It is for these reasons that

we believe that Mash's has vio-

lated Section 13 of the collec-

tive bargaining agreement. Our

claim and interpretation of the

contract are that the contemplat-

ed sale, as it has been revealed

to us thus far, violates the

contract. Indeed, we also be-

lieve that Mash's has violated

the contract by laying off the

work force, and therefore demand

back pay and benefits dating from

July 17, 1987.

A-53.

16 30 00188 88S

You are to treat this letter

as a grievance filed under Sec-

tion 11 of the collective bar-

gaining agreement. In view of

your actions to date and your

failure to advise Local 27 in

advance of the layoff, we seri-

ously doubt that any interim

steps in the grievance process

will be helpful. We are pre-

pared, instead, to proceed to

arbitration as expeditiously as

possible. We request that you

agree with us that all prelimi-

nary steps, particularly those

steps outlined in Section 11,

paragraphs A.1, 2 and 3 be by-

passed. We wish to proceed to

arbitration directly and immedi-

ately according to the voluntary

labor arbitration rules estab-

lished by the American Arbitra-

tion Association.

Very truly yours,

/s/

Al Snell

Executive Vice President

For

Thomas Russow

President

Also on July 17, Nathan Mash sent the

following notice by Federal Express to all

employees:

A-54.

16 30 00188 885

July 17, 1987

TO ALL EMPLOYEES OF MASH'S, INC.:

This is to inform you that

the assets of Mash's, Inc. have

been sold, and Mash's, Inc. has

closed its operations effective

immediately. Therefore, your

employment with Mash's, Inc. has

been terminated this date.

We are simultaneously noti-

fying the unions which represent

certain of the employees and we

plan to meet with representatives

of the unions to negotiate the

effects of the sale upon the

employees covered by collective

bargaining agreements.

tinal paychecks for all work

to date will be made available at

the Howard Johnson's Motor Lodge

located on the Baltimore-Washing-

ton Parkway at Maryland Route

202, Cheverly, Maryland, on Fri-

day, July 24, 1987, between the

hours of 10:00 a.m. and 2:00 p.m.

in Room 253 (first floor).

Sincerely,

MASH'S INC.

By: /s/

Nathan Mash, President

A-55.

16 30 00188 88S

Simultaneously, on the same day,

Conway, the President of "new" Mash's Inc.,

sent the following notice to all employees:

July 17, 1987

Dear Former MASH'S Inc. Employee:

I have recently purchased

MASH'S Inc. from its former owner

Nathan Mash. I intend to re-open

this facility at a later date

under new terms and conditions of

employment. We are assembling

the best possible workforce to

ensure a bright and profitable

future for our new company.

If you are quality-oriented

and would like to be considered

for employment, I encourage you

to make application at the Days

Inn - Capitol Center, 55 Hampton

Park Boulevard, Capitol Heights,

Maryland beginning Monday, July

20, 1987 between 9:00 AM and 3:00

PM.

Sincerely,

/s/

Terry N. Conway

President, MASH'S Inc.°

> It should be noted that July 17, 1987

fell cn a Friday.

A-56.

16 30 00188 885

There is nothing in evidence to show

how many former Mash employees appeared for

the interview on Monday, July 20, but there

is evidence that, of the 138 eligible

employees on the payroll as of July 17,

thirty-nine were given jobs with Conway's

company. It is undisputed that wage rates

under conway were substantially lower than

wage rates under Nathan Mash.

The Seller's action spawned a consid-

erable amount of litigation. Significant

here is that litigation concerned with

arbitrability.® There, the United States

District Court for the District of Maryland

found the following:

i. The motion of plain-

tiff, Local 27, to compel arbi-

tration on the part of Zady

6 Civil No. PN-87-1956, United Food and

A-57.

16 30 00188 88S

Natey, Inc. is GRANTED, and Zady

Natey, Inc. is hereby ordered to

proceed with arbitration in ac-

cordance with the Collective

Bargaining Agreement with plain-

tiff with respect to the inter-

pretation and application of

paragraph 13 of that agreement.

The Parties rely on the following

provisions of the March 7, 1983, Agreement

which are set out in pertinent part as

follows:

SECTION 1 - RECOGNITION AND UNION

SECURITY

B. The Company has the

direction of the working force,

including the right to hire,

suspend or discharge for proper

cause, or transfer; the right to

establish production schedules

and the right to relieve employ-

ees from duty because of lack of

work or other legitimate reason,

subject only to such limitations

as are provided in this Agree-

ment... .

SECTION 1] - GRIEVANCE PROCEDURE AND

A-58.

16 30 00188 88S

ARBITRATION

Should any difference arise

between the Union or employees

and the Company as to the appli-

cation and interpretation of this

Agreement, there shall be no

strike, stoppage or suspension of

work on the part of the Union or

the employees, or lockout on the

part of the Company, on account

of such conditions. The follow-

ing procedure shall be followed

in settling such differences:

A. Complaints or griev-

ances presented by the Union

and/or employees.

4. Any complaint or

grievance not satisfactorily

settled by Step 3 above,

shall upon application of

either the Company or the

Union, be referred to an

Impartial Arbitrator to be

selected by the mutual

agreement of both parties.

If the parties shall fail,

within ten (10) days after

notice from the party asking

for arbitration, to agree

upon an impartial arbitra-

tor, such arbitrator shall

be selected from a panel

supplied by the American

Arbitration Association un-

A-59.

16 30 00188 88S

der the rules of said Asso-

ciation. The decision of

the Impartial Arbitrator so

selected or appointed shall

be final and conclusive upon

the Company, the Union and

the employees. The arbitra-

tor shall have no authority

to add to, change or sub-

tract from the terms and

provisions of this Agree-

ment.

2) a=

A. This Agreement shall be

binding upon the parties hereto,

their heirs, executors, adminis-

trators, successors and assigns.

ON 24 - DU e) GR T

A. This Agreement’ shall

become effective March 7, 1983

and shall remain in full force

and effect through Dec. 31, 1987.

CONTENTIONS

The Union argues that Mash's, Inc.,

continues to operate as it did prior to the

sale. It says that it produces the same

pork and ham products and uses the same

A-60 .

16 30 00188 88S

machinery, advertisements, logo, and prod-

uct names. It says that the Union's griev-

ance is that Zady Natey, Inc., was involved

in a sale which terminated all work for its

Bargaining Unit employees and failed to

continue the existing Labor Agreement. The

Union cites Howard Johnson v. Detroit Local

Joint Executive Board, 417 US. 249, 257

(1974), where it says the Supreme Court

recognized a Union's need to "have a real-

istic remedy to enforce their contractual

obligations".

The Union says that the Seller claims

that Article 13 of the Collective Bargain-

ing Agreement, which is the Successor and

Assigns clause, has no meaning. Here, says

the Union, the Seller is wrong. Zady Natey

had obligated itself to provide work, wages

and benefits of employment to its employees

until the Contract terminated, or as long

A-61.

16 30 00188 885

as there was ham or pork processing in

either of the two Plants it owned. It says

that when the new owner, Conway, wrote to

the former employees that he intended to

operate the facility at a later date, he

accepted job applications from new and old

employees but failed to hire many Union

employees. Indeed, says the Union, manage-

ment employees of the Seller were hired in

a group as management employees of the

Buyer. Furthermore, says the Union, most

Bargaining Unit employees of the Seller

earned $9.40 an hour while the Buyer in-

tended to pay $5.50 an hour.

The Union argues that the bargaining

Agreement between Local 27 and the Seller

did not expire when the business and its

assets were sold because that Agreement

contains the Successors and Assigns provi-

sion set out in Section 13 of the Agree-

A-62.

6 30 00188 885

ment. Significant here, says the Union, is

that while the various drafts of the Asset

Purchase Agreement were being revised, it

was clear in those drafts that the Buyers

would assume the existing Labor Agreement.

In fact, it says, the obligation was writ-

ten into the Assets Purchase Agreement.

However, it says, in late June, 1987, the

Buyers changed their position and informed

the Seller that they would not accept the

Labor Agreement. It says that the Buyer

insisted that the Seller discharge his work

force and close the Plant as a condition of

sale. The Union argues that the Seller

clearly understood his risk under Section

13 of the Agreement and, during the negoti-

ations of the sale, his Attorney sought to

shift the financial risk to the Buyer by

asking for an indemnity from the Buyers.

A-63.

16 30 00188 885

Here, the Union quotes the Seller's Attor-

ney on the matter:

On behalf of the seller I re-

quested that the seller be

indemnified from any loss or

expense including the loss of

litigation which might flow if

there were any dispute over this,

and any other damages or expens-

es. It was always possible we

would sign a contract on one day,

there could be a labor dispute

and never close. So I wanted

broad indemnification for my

client.

The Union says that it is clear that

Nathan Mash actively sought and insisted on

indemnity from the Buyer in the event that

he, as Seller, was later found to have

incurred a liability based on his responsi-

bilities under the Collective Bargaining

Agreement.

The Union cites three provisions of

the final Asset Purchase Agreement which it

believes to be pertinent:

>»

64.

16_ 30 00188 88S

The Purchase Price shall not be

subject to adjustment as_ the

result of any loss or expense

incurred due to work stoppage,

Slow down or other similar job

action which occurs after the

date hereof, whether such loss or

expense is due to loss of profits

or expenses incurred in connec-

tion with such labor matters.

Seller shall have shut down its

Landover plant and terminated the

employment of all the employees

of the Business. Seller shall

dispatch from the Closing a let-

ter to all employees and a letter

by Federal Express to the unions

referred to in Schedule 3.24,

informing them of the shutting

down of the Landover plant and

the termination of the employment

of Seller's employees.

Notwithstanding any provision in

this Agreement to the contrary,

Buyer's and Holding obligation to

close hereunder shall not be

affected in any way by work

stoppage, slowdown, oor other

Similar job action which occurs

after the signing of this Agree-

ment.

The Union says that the business

activities of the Buyer are the same as

6 30 00188 88S

those of the Seller. The same formula

fluids are injected into the meats and

Conway produces Mash's hams exactly as they

had been produced prior to the sale on July

17, 1987.

Furthermore, says the Union, Nathan

Mash continued to participate in the busi-

ness. It says that he received approxi-

mately $7.2 million in cash and continues

to receive monthly lease and royalty pay-

ments from the business in substantial

amounts. In addition, it says, he received

ten, $100,000 subordinate convertible

debentures which include anti-dilution

language. The Union says in regard to Zady

Natey, which is the repository for the

money received by Nathan Mash from the

Buyer, that it has no employees nor is it

engaged in an active business.

66.

2 6 30 00 88

The Union says that Section 13 of the

Collective Bargaining Agreement was pro-

posed by the Union and written into the

Contract in the early '70's. It says that

there is no question that the Buyer and his

Attorney clearly unders: sci what the lan-

guage meant. However, says the Union, they

viewed the language as innocuous because it

would only come into play when Nathan Mash

died.

The Union argues that Section 13 is a

bona fide Successor and Assigns clause. It

says that the purpose of the clause was to

protect Mash's employees should the Company

be sold or transferred. It says that this

plain language, along with the clear lan-

guage of the duration clause, sets out the

Parties' intent that the Agreement survive

a change in ownership. The Union says that

the Company's argument that the Union

A-67.

——————

00 S

believed that the Seller was prohibited

from closing his Plant is in error. It

says that the Union's argument is not that

Nathan Mash was prohibited from closing his

Plant but that he was responsible for

seeing that the new owner would abide by

the 1983-87 Collective Bargaining Agree-

ment. Granting that Nathan Mash had the

right to sell his Plant, the Union says

that when he sold it without requiring the

Buyer to assume the Collective Bargaining

Agreement, he was at risk.

The Union cites an Arbitration Deci-

Sion in Marley-Wylain Company’. There, it

Says that the fact situation is almost

identical to that found in the case at.

hand. It says that the Arbitrator in that

case found the Successors and Assigns

’ Marley-Wylain Co., Barry Blower Co.

Civ., 88 L.A. 978 (Jacobowski, 1987)

A-68.

eis |

6 30 00188 885

clause not to be inconsequential as the

Company claims when he said:

That argument is an overly pre-

sumptive speculation, in the fact

of much evidence to the contrary.

Prominent texts on the subject

recognized that the intent and

purpose of successor language is

to have the contract continue and

be binding on a successor and

that the reference to a successor

in a contract is meaningful. See

West's 40 A.W. & p, 20 et seq. B

& A's CBNC 70:181 and CCH's con-

tract clauses 51, 803.

The Union cites a number of Supreme

Court Decisions, including Howard Johnson

and Burns International Security. It says

Burne clearly holds that where there is a

successor to the operation, the signatory

to the Collective Bargaining Agreement is

obliged to respect any Successors and

Assigns provision. It says that there is

no case in the arbitral array that holds

390 88

that a Successor and «signs clause is

meaningless or that it is not binding.

The Union also cites, among others,

the Herbert J. Capla nc. Decision® of

Arbitrator Levine in a 1983 Decision. It

points out that Arbitrator Levine stated:

In the case at bar, not only did

Caplan Buick fail to require

Baron to assume the collective

bargaining agreement, but Caplan

expressly agreed that Baron would

not be bound by the collective

bargaining agreement. That was

part of the deal.

Clearly, a business cannot avoid

an obligation it has incurred by

agreeing that a purchaser of the

business will not assume _ the

obligation. For example, had

Caplan purchased equipment for

the business, it could not avoid

payment for the equipment based

upon an agreement with a new

owner of the business that the

new owner would not be liable for

payment or the equipment. Here,

Caplan had an obligation it had

® Herbert J. Caplan, Inc., 81 L.A. 22

(Levine, 1983)

A-70.

16 30 00188 885

incurred to live up to the terms

of the collective bargaining

agreement. The fact that Caplan

agreed with Baron that Baron

would not be bound by the collec-

tive bargaining agreement does

not absolve Caplan of liability

under the collective bargaining

agreement.

I find that Section XXVI,

Assignment of Contract, requires

that where, as in the case at

bar, an employer enters into an

assignment, by a sale of assets,

transfer, change of ownership or

any other means, it has an obli-

gation to require the assign to

assume and be bound by the col-

lective bargaining agreement for

the remainder of the term of the

collective bargaining agreement.

Where, as here, an employer as-

signs its business or shop with-

out insuring that the assign be

bound by the collective bargain-

ing agreement, the original em-

ployer remains liable to the

Union and its members for losses

they may suffer as a result.

The Union says that the Company's

argument that the Buyer is not a successor

is not well-grounded. Once more, it cites

Arbitrator Levine on this issue:

A-71.

16 30 00188 88S

As noted by the _ Union, an

assignment is a general term

covering any transfer of prop-

erty, whether real or personal

property (here it was _ both),

gratuitously or for money (here,

it was a combination). An assign

(or "assignee") is simply a per-

son to whom a transfer of proper-

ty, rights or interest is made.

The very “assign” simply means,

in law, "to transfer." Assign-

ment "includes transfers of all

kinds of property," as Black's

Law Dictionary states.

- - It matters very little

whether the transfer is effected

by a bulk sale of assets, a

change of name, sale of stock, or

any combination of methods.

The Union argues that Nathan Mash

should be responsible for any loss to

employees as a result of his action when he

sold the business to Conway without requir-

ing that Conway assume the current Labor

Agreement. The Union says that Mash has a

responsibility here not only because of the

plain language of Sections 13 and 14 of the

6_ 30 00188 885

Labor Agreement but also because of the

past relationship between Mash and his

employees where he continually promised

that, if they gave wage and benefit conces-

sions, their jobs would be secure as long

as hams were being produced. The Union

cites a number of special agreements signed

by Nathan Mash which make such promises and

representations. The Union acknowledges

that there were two wildcat strikes during

the term of the Agreement, each lasting one

day. Nevertheless, it says, the employees

gave considerable concessions. These

concessions, says the Union, were made on

the basis of Nathan Mash's promise that the

Agreement would remain in effect through

December 31, 1987.

6 3 0188 88S

Here, the Union cites a Whittaker

Corporation Arbitration’ where the Arbitra-

tor found that, in similar circumstances,

"the assurances quoted above must therefore

be found to be enforceable and binding."

It says that there are other cases which

support this contention.'® The Union says

that the employees trusted Nathan Mash and

relied on his representations which were

actually to their detriment because they

accepted wage and benefit cuts. The Union

urges that Nathan Mash not be permitted to

renounce his promises to these employees in

regard to the Successors and Assigns

clause.

9 Whittaker Corporation, Columbus

Milpar Division. 70-1 ARB 48384 (1970).

0 International Harvester Co., 17 L.A.

101 (McCoy, 1951).

A-74.

16_ 30 00188 88S

The Company says that the Union does

not understand the real issue in this case.

It says that the Union characterizes the

issue as the effect of the sale on the

Parties' Collective Bargaining Agreement.

The Company says that this is incorrect and

that the proper issue is whether Zady

Natey, having the right to sell its assets,

was required by the Labor Agreement to

first secure the commitment of the purchas-

er to recognize the Union and abide by the

terms of the Labor Agreement. The Company

says that most of the Union's argument is

irrelevant because it deals with the

Union's claim of the Company's historical

mistreatment of its employees. The Company

says that it took no pleasure in terminat-

ing its employees on July 17, 1987, yet the

Company was exercising its right to sell

26 30 00188 88S

its assets and that such right was no way

limited or impaired by the Labor Contract.

The Company admonishes the Arbitrator

not to be sympathetically influen~ed by the

plight of a worker who suddenly finds

himself unemployed. It says that it is not

within the Arbitrator's jurisdiction to

reorder the existing rights of the employ-

ees. It says, also, that much of the

Union's argument is based on the hopes and

expectations of the employees that Zady

Natey would continue in business and that

their jobs would be secure based on repre-

sentations made through the course of the

bargaining history. The Company says that

if the Union were to be entitled to what it

now seeks, it should have negotiated such

language in the Agreement.

The Company argues that the concept of

successorship should be viewed in the

A-76.

6 _ 30 8

context of a corporate sale of assets. It

says that the terms of a Contract should be

interpreted in their commonly understood

sense. Consequently, says the Company,

where Contract terms have readily under-

stood meanings, the Parties' Agreement

should be viewed against those recognized

meanings. It says that the core of the

matter at issue here is the Company's

contention that the language of Section 13

of the Labor Agreement has no application

in circumstances where the purchaser is not

a successor in that the Labor Agreement did

not impose upon Nathan Mash the obligation

to obtain an agreement from the Buyer that

he would be bound by the terms of the Labor

Agreement. Therefore, says the Company,

the sale of assets without obtaining an

agreement from the Buyer that he would

continue the Agreement, did not breach the

A-77.

0 88S

terms of the Agreement with Local 27 be-

cause there is no specific language which

says that such agreement must be obtained

from the Buyer. Therefore, concludes the

Company, there is nothing here to be reme-

died by the Arbitrator.

The Company says that the kind of

transaction, whether it was a stock pur-

chase, sale, or an Asset Purchase Agree-

ment, did not matter except as to the

income tax advantages of the Asset Purchase

Agreement. The Company says that the

Buyers told the Seller that they would not

assume the Labor Contract. In addition,

the Buyers conditioned the sale on a com-

mitment from the Seller that he would

terminate the employees at the time of

closing. The Company said that "old"

Mash's attempted to secure assurances in

the form of an indemnification for expenses

A-78.

16_ 30 00188 885

flowing from disputes or litigation arising

out of the sale. It says that when the

Buyers were unwilling to agree to this

indemnification, the Seller dropped the

proposal and continued with his right to

sell his facility.

The Company says that, at the time of

the closing, Labor Counsel for "old" Mash's

was authorized to notify the Unions. This

was forthcoming and the Company says,

therefore, Local 27 received notification

of closing. The Company says that follow-

ing the sale of assets, Zady Natey had no

further connection with the Landover facil-

ity and is not in the business of marketing

or distributing ham or pork products. The

Company acknowledges that Nathan Mash,

individually, entered into an Agreement

with the Buyer for consultation services

16 30 00188 88s

and that he was given subordinated convert-

ible debentures guaranteed by "new" Mash's.

The Company says that the Union makes

a considerable argument concerning the

applicability of Section 13, the Successors

and Assigns clause. As a reminder, that

Clause reads as follows:

This Agreement shall be binding

upon the parties hereto, their

heirs, executors, administrators,

successors and assigns.

The Company says that this provision was

put into the Contract in the early '70's

and that it was not discussed in the nego-

tiations subsequent to that time. The

Company says that it is Significant that

the Union did not propose to change the

language of the clause.

The Company sees the Union's position

in this grievance as being that the Succes-

6 30 00 88S

sors and Assigns clause clearly provided

guaranteed employment to the employees if

not by "old" Mash's then by whomever suc-

ceeded it. The Company says that much of

the testimony in this arbitration was

irrelevant. It says that the only issue is

whether the Successors and Assigns clause

specifically obligated "old" Mash's to

require that a Buyer of its assets adopt

the “old" Mash's Labor Agreement. The

Company asks the Arbitrator to credit the

testimony of former Company Counsel Adel-

berg and Nathan Mash that there was no

discussion of any kind concerning the

Successors and Assigns clause at the time

the Parties negotiated the most recent

Collective Bargaining Agreement.

The Company, in its testimony and

brief, elaborately traced the history of

negotiations at the Company involving both

A-81.

16 30 00188 88S

the Dukeland Street facility in Baltimore

and the Landover, Maryland, facility. It

portrays Nathan Mash as a benevolent en-

ployer beset by cyclical business adversi-

ties who was interested in continuing in

business to provide jobs for his employees

as long as his business was profitable.

The Company also characterizes the Union

and its employees as ungrateful workers who

extorted wage increases and commitments

from the Company by virtue of two, 1-day

wildcat strikes over the bargaining histo-

ry.

The Company argues that the Successors

and Assigns clause does not set forth an

affirmative obligation of the Company

concerning its heirs, executors, adminis-

trators, successors and assigns. It says

that the clause simply stats that the

Agreement shall be binding upon such per-

A-82.

16 30 00188 885

sons or entities. The Company acknowledges

that former Counsel Adelberg told the Union

that, in the early '70's, he and Nathan

Mash knew of the meaning of the Successors

and Assigns clause in the Contract but that

they were unconcerned because there was

then no contemplation of a change in the

ownership of the business. The Company

says that even though the Successors and

Assigns clause is in the Agreement, there

is nothing to show the Parties' intent when

they negotiated the language in their early

Labor Agreement.

The Company says that the language of

the Successors and Assigns clause purports

to bind a successor or assign to the terms

of the Agreement. However, the Company

says that it understands the word "assigns"

in the Successors and Assigns clause to

mean the assignment of the Labor Agreement

A-83.

6 3 0188 88S

and not as a designated entity who receives

the assets of the corporation. In any

event, the Company says that this arbitra-

tion does not concern the obligations of a

successor or assign. It says, rather, that

it concerns the obligation of the signatory

employer, Nathan Mash. The Company says

that it does not believe that the matter is

arbitrable. It says that "new" Mash's is

not a successor and that the court erred

when it ordered arbitration in this case.

The Company says that the Union

improperly seeks relief from Nathan Mash.

It says that a Successors and Assigns

clause purports to place obligations only

the Buyer. The Company says that the Union

never told the Company that it believed

that "old" Mash's had the specific obliga-

tion which the Union now contends. The

Company says that the Union's argument that

A-84.

6 30 00188 88S

the Duration clause of the Contract is any

way related to the substantive issue in

this case is frivolous. It says that the

Termination clause does not commit the

Company to remain in business or to guaran-

tee employment for that period. The Com-

pany says that it has the right to relieve

employees from duty because lack of work or

other legitimate reasons subject only to

"such limitations as provided in this

Agreement." The Company, here, is citing

the Management clause, Section 1(b) of the

Labor Agreement.

The Company argues that because Nathan

Mash had this right to relieve employees

from duty for a legitimate reason, he has

no obligation to or liability for "old"

Mash, Inc., employees after July 17.

The Company says that Federal law and

arbitrable precedent show that a Successors

A-85.

~—>

00 88S

and Assigns clause does not impose upon the

Seller the obligation to condition the sale

of his assets upon the Buyer's consent to

be covered by the Labor Agreement. The

Company cites Wyatt Manufacturing Co.,

Inc., 82 L.A. 153 (Goodman, 1983) and

Arbitrator Goodman's emphasis on concern

for the Buyer in the following excerpt from

Goodman's Decision:

Yet, and here is the point

of departure, when we speak of

predecessor liability, we are not

just speaking about the obliga-

tions or responsibilities of the

selling company vis-a-vis its

employees and the union -- i.e.,

a normal contract interpretation

case -- but equally important,

the selling company's duties and

responsibilities vis-a-vis the

buyer. And with regard to that

relationship, the seller should

not be made to account for the

decisions of the buyer unless the

agreement identifies that respon-

sibility in no uncertain terms.

Stated differently, as shown by

those arbitration cases where

liability of the seller was found

6 30 8

to exist, there is a significant

difference between a seller who

agrees that the contract shall be

binding upon its successors and

assigns and the seller who (a)

agrees to continued liability if

the buyer does not assume the

agreement or, (b) obligates it-

self to find a buyer who will

assume the agreement as a condi-

tion of sale, or (c) covenants to

refrain from performing any act

which evades or avoids the terms

of the agreement.

The Company contends that it is not

saying that the Successors and Assigns

clause has absolutely no meaning. It

merely says that it is the successor, and

not the Seller, that the clause binds to

the terms of the Collective Bargaining

Agreement. This, it says, is the plain

meaning of the language. The Company says

that the Union is misdirected here and that

it should be pursuing the purported succes-

sor and not the Seller in order to enforce

the Labor Agreement. In this regard, the

A-87.

16 30 00188 885

Company cites Gallivan's, Inc., 79 L.A. 253

(Gallagher, 1982). The Company argues that

the Buyer was not a successor. It reasons

that when the Buyer refused to consummate

the sale if it were required to continue

the Labor Agreement, it had exercised its

right not to be a successor and, therefore,

the Successors and Assigns clause cannot be

an obligation of the Seller because the

Buyer was not a successor.

The Company says that Nathan Mash's

attempts to achieve an-indemnification for

consequences of the sale in regard to the

Labor Agreement were based on nothing more

than prudent business judgment and common

sense so that he would be protected against

post sale labor disputes. The Company says

that the reality of this possibility is

demonstrated by the Union's aggressive,

though ill-founded, post-sale attempt to

A-88.

16 30 00188 885

obtain relief against Nathan Mash through

this current arbitration. It says that

Nathan Mash's attempts to protect himself

against post-sale liabilities to his em-

ployees have nothing to do with the Union's

claim under Section 13.

The Company says that one of the

reasons that there is no successor here is

that the Supreme cCourt, in Fall River

dyeing & Finishing Corporation v. NLRB,

—_ . £8. . , 407 @. Ce. BaS8 18087)

found that a successor is a Buyer whose

employee complement is composed of a major-

ity of the predecessor's employees and who

has continued in the same business as the

Seller at the same location. Therefore,

says the Company, since this condition was

not met in the sale at hand, there is no

successor and the Union errs when it at-

A-89.

(cei

16 _ 30 00188 88S

tempts to seek relief under the Successors

and Assigns clause.

The Company cites a number of Arbitra-

tion Decisions and supreme Court Decisions,

including Howard Johnson. It concludes

that the principles of Federal Labor law

preempt contractual obligations and that

Federal Labor Law holds that a successor is

one who continues to operate the enterprise

in the same manner as the predecessor and

who hires a majority of its employees from

the predecessor's work force. It says that

the Arbitrator has no authority to substi-

tute some other definition of the term

"successor" and therefore cannot interpret

the meaning of a Successors and Assigns

Clause because the Labor Agreement provides

that the Arbitrator shall have no authority

to "add to, change, or subtract from the

terms and provisions of this Agreement."

A-90.

16_30 00188 88S

The Company says that the Union is

improperly contending that "old" Mash's

could not sell its assets to "new" Mash's

unless "new" Mash's adopted the Labor

Agreement. The Company says that the

Arbitrator has no authority to compel "old"

Mash's to sell its assets only to a pur-

chaser who agrees to assume "old" Mash's

Labor Agreement. It says that the Succes-

sors and Assigns clause simply does not

state that such conditions will be put upon

any Buyer of the Company. The Company

disputes the Union's reliance on Marley-

Wylain Company, Barry Blowér Div., 88 L.A.

978 (Jacobowski, 1987) on the basis of a

different fact situation. It says that,

here, there is dissimilar language, no

bargaining history or practice in support

of the Union's position, no prior adherence

to the Successors and Assigns clause, and

A-91.

16 30 00188 88S

no immediate assumption of the operation by

the Buyer. The Company says, also, that

the Union's reliance on Herbert J. Caplan,

Inc., 81 L.A.22 (Levine, 1983) is unsound.

It says that Arbitrator Levine erred in his

Decision and, therefore, the Decision

cannot be relied upon for guidance in this

case.

The Company says that the Union relies

on parol evidence in regard to promises

made by Nathan Mash that he would keep the

operation going as long as it was economi-

cally feasible. It says that under no

circumstances did any promises include the

condition that he would not sell the prop-

erty.

Finally, the Company says that the

Union's thrust is misplaced. It should not

be directed at Nathan Mash but at the

owners of "new" Mash's who are the individ-

A-92.

ee LU

16 30 00188 885

uals who have not continued the Collective

Bargaining Agreement and, therefore, it is

that errant employer from whom the Union

must seek relief.

FINDINGS

As indicated in the Background, the

Parties have engaged in considerable liti-

gation prior to and during the period of

this Arbitration. The evidence submitted

by the Parties in support of their posi-

tions in this grievance is considerable.

The Parties rely on testimony concerning

negotiations between the Union and Nathan

Mash and depositions concerning events

Surrounding the purchase of the "old"

Mash's by Terrance Conway. In addition,

each Party relies on a considerable number

of Court and Arbitrator Decisions concern-

ing the application of various Successors

A-93.

16_ 30 00188 885

and Assigns clauses. Except for some

comment on various Court and Arbitrator

Decisions, this Arbitrator does not feel

that an exhaustive attempt to set out or

distinguish every citation used by the

Parties is necessary.

The Parties were unable to stipulate a

precise issue and their differences in

approach to the issue contributes heavily

to their need to support their respective

positions by voluminous evidence. The

Company sees the issue as being one where

the Union believes that the Successors and

Assigns clause in the Labor Agreement

prohibited Nathan Mash from selling his

company unless he found a Buyer who was

willing to continue Nathan mash's employees

in employment and continue the Labor Agree-

ment that was in effect at the time of the

sale.

A-

94.

16 30 00188 88S

The Union sees the issue as Nathan

Mash's being bound to the Successors and

Assigns clause in the 1983 Agreement which

he signed. The Union does not contend that

he was prohibited from selling to a Buyer

who was unwilling to assume the employees

and the Labor Agreement. However it does

contend that he was responsible for the

continuation of the labor Agreement and the

employment of those employees on the pay-

roll as of July 17, 1987, whatever form

that took.

Certainly, the Successors and Assigns

clause does not state that Nathan Mash was

required to find a Buyer who was willing to

continue the employees and the Agreement.

It says simply:

This Agreement shall be binding

upon the parties hereto, their

heirs, executors, administrators,

successors and assigns.

16 _ 30 00188 88S

The Company's view of the issue comes then

from outside the Labor Agreement. Here,

the Company discusses several Supreme Court

and Arbitration Decisions where the lan-

guage of the Successors and Assigns clause

was couched differently or combined with

other provisions of the Contract. But, in

any event, the Company chose those cases

where the Court or the Arbitrator found

that the language in those Agreements was

insufficient to bind a successor or an

assign. The Company asserts that the term

"assign" in this Agreement as set out above

somehow means assignment of the Labor

Agreement and not assigns of the Parties.

This Arbitrator believes that the Company's

definition of “assigns" is blatantly erro-

neous and is rejected out of hand.

In regard to the definition of "suc-

cessor," the Company says there was no

A-96.

6 30 0 8 88S

successor here because Mash's had closed

the Plant and the employees were terminat-

ed. It says that "new" Mash's opened up

the business on its own with different

employees and here the Company believes

that the Supreme Court has decided that a

successor is a company that has employed a

majority of the former employees nd has

continued those employees in the same work

place in the same business.

Whatever the facts were in Fall River

"that required such an elaborate

Dyeing

bill of particulars, they are not in this

case. On July 17, 1987, Nathan Mash, after

his employees had left the Plant and,

without their knowledge, terminated them.

Even though it was not until the eleventh

" Pall River Dyeing & Finishing Corp.

Vv. NLRB Vebe »5 £2407 8S. CS. Baan

(1987) ——s

97.

16 30 00188 885

hour that Nathan Mash agreed to terminate

his employees after they left work on July

17, 1987, he did, in fact, agree to termi-

nate them as a condition of sale.

Simultaneously, using the same letter-

head and logo, Conway announced to Nathan

Mash's employees that they could apply for

jobs in the Plant producing the identical

product with the identical equipment using

the identical Company name under Conway's

ownership. The letters were sent out on

that Friday and employees were invited to

apply between certain hours on the follow-

ing Monday. Of course, any employee who

did not receive the letter from Conway

would not know to apply on Monday. Fur-

thermore, Conway intended to run the opera-

tion with employees who were willing to

work at approximately half of what Nathan

Mash paid his employees. It is obvious

A-98.

16 30 00188 885

from these facts that the cases using the

retention of a majority of the prior

owner's employees as the criterion to

determine successorship is not applicable

here. Using that standard, a Buyer and

Seller could effectively defeat any Succes-

sors and Assigns clause by making work at

the continued operation under the new

ownership unpalatable or unavailable to the

former employees and, therefore, discourage

their reemployment. Here, Conway hired

selectively and offered little more than

half of the old wage rate. He controlled

the number of "old" Mash's employees that

would continue with the operation and

effectively determined that the majority of

"old" Mash's employees would not be em-

ployed in the continuing operation.

Whether Conway, the Buyer, was an

assign is of no consequence because there

A-99.

16 30 00188 88S

is no escaping the fact that he is the

successor. It should be noted that the

Company relied heavily on a Decision by

Arbitrator Goodman in Wyatt here. Some

discussion of the applicability of the

guidelines in that case is necessary.

Goodman was faced with a situation where an

individual sold himself part of one of his

divisions and, while he had language in the

Labor Agreement which could reasonably be

considered to be a Successors and Assigns

clause, he apparently could not persuade

himself to continue the. Labor Contract.’

Goodman thoroughly reviewed all outstanding

’* It should be noted that, in Wyatt,

the Union was not notified of the sale in

spite of the fact that the Agreement spe-

cifically provided for such notice. Good-

man approved on the basis that there were

sound business reasons for such action. In

the case at hand, Nathan Mash engaged in

secret sale negotiations specifically to

keep the Union from discovering that the

transaction was taking place.

A-100.

6 30 8 8S

Federal and Arbitral Law in that case.

Having at issue Contract language that

seemed to have the essential elements of a

Successors and Assigns clause, he decided

that the language was meaningless unless it

included an additional codicil specifically

stating that the employer must require the

Buyer to assume the Labor Agreement. On

that basis, he denied the grievance and

found that the Seller who was also the

Buyer was not obliged to continue the

Agreement. Goodman accepted the notion

that the Successors and Assigns language

included an implied requirement that the

Seller sell only to a Buyer who was willing

to accept the employees and the Contract.

He also decided that because the Successors

and Assigns language was first negotiated

in 1955, it was stale and did not have

modern application. For those and other

A-101.

fe] 88S

reasons, Wyatt is not useful for purposes

of the case at hand.

The Union cites, as certainly can be

expected, those Supreme Court Decisions,

particularly Howard Johnson, and Arbitrator

Decisions which support its view. It

particularly relies on a Decision by Arbi-

trator Levine in Caplan where Levine ex-

plicitly decided that the Seller, having a

Successors and Assigns clause in his Labor

Agreement, had a responsibility to the

employees even though he did not require

the Buyer to continue the employees in

employment and the Labor Agreement in

effect. In the situation at hand, Nathan

Mash recognized his obligation to his

employees in the Contract during the Asset

Purchase Agreement negotiations. Until the

eleventh hour on July 17, 1987, he held out

for an indemnification of his responsibili-

A-102.

16 30 00188 88S

ty to his employees. The Buyer, having

initially considered continuing the employ-

ees and the Labor Agreement, apparently

changed his position and demanded that

Nathan Mash terminate his employees at the

point of sale. This language was inserted

into the final Asset Purchase Agreement

which mash and Conway signed. Mash knew of

his obligation. He knew that he could

possibly be held to a liability to his

employees in regard to the sale of the

business. At the point that he decided to

sell, the decision to assume that liability

without indemnification from Conway was

his.

The Successors and Assigns clause in

the Contract is clear and unambiguous. It

does not require convoluted definitions of

the terms. Conway waS a successor to

Nathan mash. There is no need for redun-

A-103.

16 30 00188 885

dant language which would state that the

Seller would sell only to a Buyer who would

assume the Contract nor is there any sense

to the proposition that no matter the

working conditions offered by the Buyer in

this case, the Seller is not liable under

the clause if the Buyer does not employ a

majority of the former employees.

The Company urges that it is the Buyer

that is liable here and not the S~ller.

This Arbitrator is not charged with deter-

mining the Buyer liability. The issue here

is whether Nathan Mash was at risk and

assumed the obligation under the Successors

and Assigns clause when he knowingly sold

to a Buyer who would not purchase the

business from him unless he agreed to

terminate the employees at the point of

sale. Contrary to the finding in Wyatt,

this Arbitrator believes that the Parties

A-104.

16 30 00188 88S

do not write meaningless language. The

Company's argument that the language has

some other meaning than that which was

initially intended when the clause was

first negotiated is without merit. The

language of Section 13 means precisely what

it meant in the early '70's. The evidence

is that when the Successors and Assigns

clause was put into the Labor Agreement in

the early '70's, Company Counsel and Nathan

Mash felt that it was an innocuous clause

because Nathan Mash did not intend to sell

his Plant or to die and, therefore, the

clause would not be operative.

Certainly, the protective Labor Agree-

ment language such as that in Successors

and Assigns clauses are not welcomed by

employers. However, they are negotiable

matters and are a benefit to the Union.

Usually a Union concession is made in order

A-195.

16 _ 30 00188 88S

to achieve the language. There is no

evidence here as to what may have been

conceded, if anything, by the Union in

order to gain this clause. But, neverthe-

less, it is a plus and all pluses in nego-

tiations have some tradeoffs. However,

whatever the facts were surrounding the

negotiations of that language, it became a

part of the Agreement.

The fact that the Union did not dis-

cuss Section 13 during succeeding negotia-

tions is not surprising and certainly does

not detract from its efficacy or validity.

Why should the Union seek to disturb a

clause which it considers to be beneficial

and which it and the Company believe to be

operative on a continuing basis? What

could the Union do to improve the plain

language of this clause? To accept the

Company's argument that Section 13 has no

A-106.

16 30 00188 88S

force and effect on the Seller would be

tantamount to stating that when Nathan Mash

signed the 1983 Agreement, he did not

intend to provide the protections of Sec-

tion 13 even though it was plainly written

in that Agreement. It is rockbound Arbi-

tral Law that the Parties do not write

meaningless language in their Collective

Bargaining Agreements. Whatever is there

has intend and meaning and shall be so

construed here.

The plain hard fact is that, Nathan

Mash, during the negotiations for the

purchase of his business by Conway, at-

tempted to indemnify himself against lia-

bility arising out of his obligations to

his employees under the Labor Contract.

When he could not persuade the Buyers to

indemnify him, he nevertheless proceeded to

conclude the sale of his company. However,

A-107.

16 _ 30 00188 88S

the liability against which he sought to be

protected did not disappear. The liability

continued as set out in the Labor Agreement

which he had signed. However, when he sold

the Company, knowing that the employees

would not be continued (and they did not

know this until after the sale) he made the

sale without the indemnification and took

on the risk of being required to live up to

his obligation under Section 13. In ef-

fect, failing to gain the indemnification

from Conway, he gambled that somehow this

failure could be construed as a basis on

which to thwart the purpose and intent of

the Successors and Assigns clause.

It is noted that the sale was kept

secret from the Union until it was a fait

accompli. The Union had no opportunity to

excise its right to seek a temporary re-

straining order in order to enforce Section

A-108.

0 8 8

13 nor did it have the opportunity to

discuss the transition with Nathan Mash and

Conway. Certainly, this element alone goes

far to set this fact situation apart from

others cited by the Company for support of

its position."

There is no escaping the fact that

Nathan Mash signed the Successors and

Assigns clause which guaranteed that the

terms and conditions of the 1983 Agreement

would have continued until December 31,

'3 In this regard, note is taken of the

following language of the Preamble to the

Labor Agreement:

WITNESSETH: That for the

purpose of mutual understanding

and in order that a harmonious

relationship may exist between

the Company and the Union to the

end that continuous and efficient

service will be rendered to and

by both parties for the benefit

of both, it is hereby agreed

that: (The body of the Agreement,

including Section 13, follows.)

A-109.

——EEEEEE————————

16_ 30 00188 88S

1987. He was responsible for continuing

the terms of that Agreement through Decem-

ber 31, 1987, whether the hams were pro-

cessed under his ownership or that of his

successor. It must, therefore, be found

that Nathan Mash (Zady Natey) is responsi-

ble for the application of the 1983 Agree-

ment to those employees who had seniority

with the Company before they were terminat-

ed on July 17, 1987." His responsibility

continues to the termination of the Labor

Agreement which is December 31, 1987.

Therefore, Nathan Mash is liable to con-

tinue, until December 31, 1987, the bene-

% It is somewhat ironic that even

though the Labor Agreement was negotiated

to be effective in 1983, it was not signed

until 1985. The reason for the delay was

that the Union believed that it had negoti-

ated a September, 1987 termination date and

the Company insisted that it has negotiated

a December 31, 1987 termination date. The

Company prevailed.

A-110.

6 30 8 88S

fits and terms of the Labor Agreement which

was in effect immediately -prior to the

point of sale on July 17, 1987.

1016.203.tk

A-1lll.

Paul J. Fasser, Jr.

P. O. Box 909

Vienna, Virginia 22183

Arbitrator Office: (703) 938-0390

Residence: (703)938-08483

October 28, 1991

John W. Kyle, Esq.

Littler, Mendelson, Fastiff & Tichy

Suite 1653, World Trade Center

401 E. Pratt Street

Baltimore, MD 21202

Joel A. Smith, Esq.

Abato, Rubenstein & Abato

2360 W. Joppa Road

Suite 308

Lutherville, MD 21093

RE: AAA Case No. 16 30 00188 88S

Zady Natey, Inc. and

United Food and Commercial

Workers, Local 27

Gentlemen:

I have carefully reviewed the numerous

documents, letters, exhibits, and forms

supplied to me by the Parties in regard to

my holding jurisdiction in the above-refer-

enced matter. I believe that, at this

point in time, I have sufficient argument

A-112.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 2

and information from the Parties to decide

the outstanding legal issues and, in addi-

tion, to provide the Parties with clear

guidelines to reach a proper settlement in

regard to making the affected employees

whole.

It seems proper to deal first with the

legal issues, then with an appropriate back

pay formula and, finally, an application of

that formula to the situations of the

employees who are properly in the griev-

ance. Essentially, then, the determina-

tions to be made are who is to be paid and

in what amount.

Computation of Back Pay: Each of the

Parties has proposed a formula for back

pay. The Union proposes to use a formula

which yields a greater amount of earnings

than would be calculated if a simple pro-

A-113.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 3

jection of 1987 earnings prior to the sale

were used. Furthermore, the Union uses

gross earnings as the base. The formula

advanced by the Company uses only the

contract guarantee of thirty-six hours of

work for a scheduled employee. This

formula has no relationship to employees'

prior earnings.

Obviously, there is a considerable

difference between the Parties on this

point. However, there is a reasonable

middle ground. Earnings data are available

only for the first 142 work days of 1987.

For purposes here, such data are sufficient

to make an equitable determination. There-

fore, a proper formula based on the 142-

work day period to be applied to the 119-

work day post-sale period can be devised.

A-114.

John W. Kyle, Esq. 7

Joel A. Smith, Esq.

October 28, 1991

Page 4

In developing a formula, it is neces-

sary to make the basic assumption that had

the sale included the protections provided

for in the Basic Agreement, the employees

would have been paid in the 119-day period

essentially on the same basis that they

were paid in the 142-day period. This is

particularly true since Thanksgiving and

Christmas periods are said to be full

employment periods for the Ham Processing

Industry. Both holidays fell in the 119-

day post-sale period. Therefore, a simple

formula can be developed that relates the

119 post-sale work days to the 142 pre-sale

work days. Since pre-sale gross earnings

are known, a daily pay factor of the

employees' gross earnings divided by 142

may be determined. This approach has the

advantage of reflecting the 142-day work

A-115.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 5

experience for all employees including any

premium hours and hours for which shift

differential was paid. This daily pay

factor would then be multiplied by 119,

yielding the gross amount due each eligible

employee. This gross amount would be

adjusted according to the guidelines set

out as follows.

Offsets Against The Gross Amount Due:

A. Under a reasonable make whole

formula, Unemployment Insurance paid to

eligible employees should be deducted on

the basis that such amounts would not have

been forthcoming had the employee continued

to work. Therefore, Unemployment Insurance

paid to or due an employee in the 119 post-

sale period shall be deducted from the

gross amount due.

A-116.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 6

B. Other earnings reported by em-

ployees will be offset.

Amounts Not Offset Against The Amount

Due:

A. Damages awarded under other

litigation such as those resulting from the

NLRB Award against the successor employer

are not offset. |

B. Workers' Compensation and Dis-

ability payments are not offset on the

basis that these employees are covered only

for that portion of the period that they

would otherwise have been available and

able to work.

Additions:

A. Interest. Employees are entitled

to interest. This should not prove to be

an additional hardship on Zady Natey inas-

A-117.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 7

much as Zady Natey received interest over

the period on the amounts due the employ-

ees. Such interest shall be computed on a

quarterly basis at the regular interest

rate published for such purposes by the

National Labor Relations Board. It should

be noted that the Company states that

interest should not be paid unless an

egregious impropriety was committed. Zady

Natey precipitously closed the Plant with-

out notice to the Union and in violation of

the Labor Agreement. This was an egregious

act. Such interest shall be compounded

quarterly and it shall cover the period

from initial eligibility for payment to the

date of the actual payment of the amount

due.

B. Vacation Pay. There is little

evidence concerning the manner in which

A-118.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 8

vacations were paid to employees during

1987. The Company states that vacations

were paid. The Union claims that vacations

would have been earned by employees for the

succeeding year and 1988 vacations should

be paid.

From an Exhibit provided by the Com-

pany, it appears that slightly over half of

the employees were paid 1987 vacations.

There is no question that 1987 vacations

should be paid. In this regard, if there

is any employee who has not been paid a

vacation that would otherwise have come due

in the 119-day period, that employee shall

be paid the vacation pay which was due or

would have been due had the Plant not been

sold. The manner in which employees become

eligible for vacations in succeeding years

is not dependent on work in a calendar year

A-119.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 9

but, rather, is dependent upon 185 days'

work following-the last vacation. Conse-

quently, if any employee would have earned

a 1988 vacation in 1987 under the Collec-

tive Bargaining Agreement, such vacation

will be paid.

Neither Party raised the matter of the

inclusion of vacation pay in the data shown

as gross earnings for the individual enm-

ployees. It seems necessary to deal with

this matter lest it become the subject of

time-consuming and expensive litigation.

Vacation pay is not hourly or daily earn-

ings. If vacation pay were paid in the

pre-sale period, it would not have been

duplicated in the post-sale period. There-

fore, if vacation pay is included in the

gross earnings base used in the computation

set out above, such amount shall be backed

A-120.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 10 7

out of the gross earnings figure for pur-

poses of the daily pay factor.

ec, Medical Payments. All medical

bills which otherwise would have been paid

under Section 10. B. of the Collective

Bargaining Agreement will be paid whether

or not the employee is entitled to back pay

under the formula.

Mitigating The Employer's Liability.

It is true that an employee has some obli-

gation to make a reasonable effort to

mitigate the employer's liability. How-

ever, this obligation is tempered by the

circumstances which caused the employees to

be out of work in the first place. JZady

Natey engaged in sale negotiations over a

protracted period. One of the conditions

on which the buyer insisted upon that

notice of the impending sale not be given

A-121.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 11

the Union. Another condition set by the

buyer was that he would not be required to

continue the Collective Bargaining Agree-

ment which was in full force and effect at

the time. Zady Natey conceded on the

notice issue and resisted for a time on the

Agreement issue. However, at the point of

sale, Zady Natey sold on the buyer's terms.

Employees were informed at the end of the

last pre-sale shift on Friday that they no

longer held jobs with Zady Natey.

Significantly, Zady Natey provided no

employment outreach for the employees.

Instead, Zady Natey relied on the State

Unemployment Insurance system to find work

for the employees under these traumatic

conditions. Zady Natey was, at all times,

at risk when he decided to sell the Plant

under conditions adverse to the employees.

A-122.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 12

In the main, then, mitigation for

these employees may be accomplished by

applying for Unemployment Insurance. An

employee who is eligible for Unemployment

Insurance is represented as being available

and willing to work. If the employee is

not in that posture, an Unemployment Insur-

ance benefit is not forthcoming.

For these reasons, Zady Natey employ-

ees who, at any time during the 119-day

post-sale period, applied for or received

Unemployment Insurance will be paid back

pay under the formula. Employees who were

not eligible for Unemployment Insurance for

some reason, and would not otherwise be

disqualified as covered, shall have their

Situation reviewed on the basis of the

eligibility principles set out herein.

Employees who claim receipt of Unemployment

A-123.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 13

Insurance benefits but estimated those

benefits on the Union Questionnaire shall

be given the opportunity to prove the

amounts claimed.

Any employee who found work in the

post-sale period is covered notwithstanding

his status in regard to Unemployment Insur-

ance.

Former established Zady Natey employ-

ees are not skilled job seekers nor are

they expected to have expertise in regard

to the completion of complex forms.

Because of these circumstances, the employ-

ee must be given the benefit of the doubt

in applying these guidelines.

arc or a Job. Where an employee

did not apply for Unemployment Insurance

but shows evidence that he made an effort

to find a job, he shall be eligible to have

A-124.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 14

the formula applied to him. As noted

earlier, where an employee found a job in

the 119-day period, that employee is a

covered employee. Where an employee refused

a job, but continued to receive or subse-

quently received Unemployment Insurance,

that employee is covered. Inasmuch as a job

offer made by the successor employer was at

considerably reduced hourly rates’ and

without the protection and benefits of a

Labor Agreement, a refusal of a job offer

by the successor employer will not be

considered a disqualifier under any circum-

stances.

The record shows that two employees

offered no proof of job search, did not

apply for Unemployment Insurance, and did

not find work. These employees are not

covered unless they can provide proof of a

A-125.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 15

search or application for Unemployment

Insurance.

Laid-off Employees. Certain employees

were on layoff as of the date of sale.

There is no reasonable way to determine

when or if these employees would have been

recalled. Consequently, these employees

are not covered employees.

Terminated Employees. Three employees

were considered to be terminated. These

employees are not covered.

Disabled Employee. There is evidence

that one employee was released by his

doctor from his temporary disability on

September 23, 1987. On the basis that this

employee would have been returned to full

employment on that date had his job exist-

ed, he shall be paid an amount equal to his

straight-time hourly rate for all work days

A-126

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 16

from September 23, 1987, through December

31, 1987.

Workman's Compensation. Two employees

were on Workman's Compensation. The evi-

dence is that these employees were paid

Workman's Compensation benefits during the

entire 119-day post-sale period. Under

these circumstances, they have no addi-

tional entitlement. If either or both

employees recovered and were able and

available to work during the post-sale

period, they shall be paid on the same

basis as the recovered Disabled Employee.

ationa uard. One employee is said

to have been on National Guard Duty at the

point of the sale. He shall be considered

covered for the period that he was avail-

able to work.

A-127.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 17

Deceased Employee. There is evidence

that one employee died one month after the

sale. The estate of that employee shall be

made whole for the month involved notwith-

standing any other circumstances.

Attached is a summary of the various

employee circumstances and the status of

those employees under the guidelines set

out in this letter. I trust that the above

will be responsive to the issues raised by

the Parties in an attempt to determine a

proper and fair settlement of the outstand-

ing issues. It is possible that certain

inconsistencies in the evidence may work to

the disadvantage of one or two employees.

Here, the employees will be given the

benefit of the doubt in regard to the

application of the guidelines. This Arbi-

trator has no intention of reopening the

A-128.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 18

matter for further argument and/or debate.

The determinations, in my judgment, are

fair and equitable and suit arbitral stan-

dards for a make whole determination. The

intent here was to be fair and equitable so

as to provide neither a windfall for the

employees nor a windfall for Zady Natey.

It is intended that the Parties will pro-

ceed on a reasonable basis without spending

time searching out loopholes or minor

disqualifying or limiting technicalities in

these guidelines. The overriding consider-

ation should, in every case, be that the

employees should be compensated for their

real loss to the extent possible. In all

cases, individual employees shall be per-

mitted to bring forth additional proof to

support their claims. The Parties will

work out a method which is reasonable in

A-129.

John W. Kyle, Esq.

Joel A. Smith, Esq.

October 28, 1991

Page 19

terms of time and effort to achieve this

end.

I trust that this final determination

resolves all outstanding matters and that

the record may stand closed pending only

the calculation and payment of monies due

the employees. You have my most abundant

thanks for your patience and your competent

and kind assistance in dealing with this

very complex matter.

Sincerely,

Paul J. Fasser, Jr.

Arbitrator

PJFJr/agf

Enclosure

1019. 203. tk A-130.

SUMMARY OF EMPLOYEE STATUS

SITUATION STATUS

Found work in post-sale

period Covered

Paid Unemployment Insurance

in post-sale period Covered

Estimated Unemployment

Insurance benefit* Covered

Disabled and recovered

(Including Worker's

Compensation)

Disabled and not recovered

Terminated prior to sale

Laid off prior to sale

Deceased

National Guard Leave

Not eligible for Unemploy-

Covered as

set out in

narrative

Not covered

but no loss

of benefits

which would

otherwise be

due

Not covered

Covered

Covered if

otherwise

eligible for

back pay

Covered if

A-1)

ment Insurance otherwise

eligible for

back pay

*An employee who estimated an Unemployment

Insurance benefit will be given an opportu-

nity to provide the exact amount of the

benefit. If such exact amount cannot be

determined, an amount equal to that which

would have been paid to that employee for

the period involved shall be deducted.

A-132

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.