Opposition Brief — Sun Carriers, Inc. v. Milne Employees Ass'n

No. 92-65

!

i

In The

Suprenwe Court of the United Stites Se TSS GUERI

—o-

October Term, 1992

SUN CARRIERS, INC.; ALBERT L. LABINGER; DONALD

k. MAYORAS; MILNE TRUCK LINES; ELLIOTT

BURNSIDE; CHARLES N. PASS; THOMAS MORTON;

JAMES BRADFORD, ST. JOHNSBURY TRUCKING,

JONES TRUCK LINES; RIORDAN FREEMAN & SPOGLI;

RICHARD J. RIORDAN; BRADFORD M. FREEMAN,

RONALD P. SPOGLI,

Petitioners

VS.

MILNE EMPLOYEES ASSOCIATION, a non-profit Mutual

Benefit Corporation, or in the alternative STEVEN BISHOP.

CHARLES E. THARP, DEBRA BISHOP and ELLA THARP

as representatives of the class of afffected former employees o!

MILNE TRUCK LINES, INC., andi their spouses,

Respondents

On Petition for Writ of Certiorari ito the United States Court

of Appeals for the Ninth Circuit

RESPONDENTS’ BRIEF IN OPPOSITION

RICHARI) E. SCHWARTZ

Counsel of Record

JAMES E. PARROT

RICHARI)D SCHWARTZ &

ASSOCIATES, LTD.

Attorney's for Respondents

614 North 11th Street

300 Lucas Plaza

St. Lowis, Missouri 63101-1220

(314) 231-2110

255]

ulz ;

prgelat (800) 3 APPEAL * (800)) 5 APPEAL « (800) BRIEF 21

ervices, inc

i232

QUESTIONS PRESENTED FOR REVIEW

I. Should federal labor laws be interpreted to alter radically

the constitutional! balance enshrined in the concepts of federalism

by supplanting any and all state law regulation of matters

peripheral to the labor-management bargaining relationship —

such as laws providing causes of action for fraudulent

misrepresentations and concealments arising outside of any

collective bargaining?

IT. Can an employer Properly conduct a successful defense

before the NLRB against unfair labor practice charges and later

claim Garmon preemption against a state-law suit arising from the

same factual setting as that which gave rise to the NLRB

complaint?

ul

TABLE OF CONTENTS

Page

Questions. Presemted . c. 6. 6 5a ee eee

Tame Of COmemts oo. ck sk ii ine ee ee il

Fapee Of CHOON: oa 6k eee -

statement of ihe Cale... 325 ee l

Reasons for Denying the Writ... 0... .¢sc04045es0145555 4

I. The Ninth Circuit correctly applied the § 301

preemption analysis required by precedents of the

court in refusing to find preempted four of

respondents’ causes of action................... 4

Il. The decision below presents no issue of national

WRBOVIONOE. (hes tae ee eee 9

III. The Ninth Circuit’s,decision that respondents’ state-

law claims for fraudulent conduct including emotional

distress damages were not preempted under the

Garmon doctrine because those claims arose out of

conduct outside of collective bargaining is consistent

with the court’s jurisprudence and rulings of the other

CCUM. ook ace ce eae ea eee eee 12

A. The NLRB Specifically Rejected Unfair Labor

Practice Charges By The Representative Unions

Before The State-Law Complaint Was Filed.

Therefore The State Court May Exercise

Jurisdiction Over The Conduct Alleged In The

Complaint That Is Not Covered By Federal

RGN CE ok 6 ee ne Re 13

ae

ll

Contents

Page

B. These State-Law Claims Are Not Identical To

The Untair Labor Practice Charges Presented

To The NLRB. Hence Respondents’ State-Law

Claims Arising From Conduct Outside Collective

Bargaining Are Not Preempted By Garmon.. 15

om

~. The Ninth Circuit’s Decision In No Way

Contlicts With Cases Cited By Petitioners From

Other Circuits Since Those Cases Are Factually

Distinguishable From The Matters Sub Judice:

The Decision At Bar Is A Logically Sound

Application Of Garmon And Its Progeny.... 20

D. Petitioners Propose A Radical Restructuring Of

Federal Labor Law, Arguing That Nearly Every

State-Law Tort Claim Is Preempted Under

Garmon. They Would Upset The Delicate

Balance Between State Regulation Of

Traditionally Tortious Activities And Federal

Regulation Of Unfair Labor Practice. ...... 21

Conclusion ......... 0 a ee A a 23

TABLE OF CITATIONS

Cases Cited:

Belknap Inc. v. Hale, 463 U.S. 491 (1983) ..12, 14. 1S, 16, 18

Contents

Page

Caterpillar v. Williams, 482 U.S. 386, 107 S. Ct. 2425 (1987)

ORIN Sees aE a ae eae ee Eee nde 10

Dowd Box Co. v. Courtney, 368 U.S. 502 (1962) ...... a

Farmer v. Carpenters, 430 U.S. 290 (1977)............12, 15

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

4) ) Se LOPE TST EE TOOT ee Teer e rT ee 17

Foley v. Interactive Data Corp., 47 Cal. 3d 654 (1988)

nie hi ee a aon wae Ok ane a ee eee 8

Int’! Longshoreman’s Ass’n v. Davis, 476 U.S. 380 (1986)

LEN nee MEU eK ewe mean ea 18

J.1. Case Co. v. NLRB, 321 U.S. 332 (1944) ... 19

Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399 (1988)

PE AS AA EEN Ee 4, 5, 6, 7, 8, 9, 10, 12, 23

Linn v. United Plant Guard Workers, 383 U.S. 53 (1966)

Ried te wld PKS oe a bbe eae ate en a eerite 13, 15

MEA v. Sun Carriers, 714 F. Supp. 1028 (N.D. Cal. 1989)

ee ene re Oe re area 3. 8

Contents

Page

Metropolitan Life Ins. Co. v. Mass, 471 U.S. 724 (1985)

Ge 1 : 21, >”

Milne Employees Ass’n v. Sun Carriers, 960 F.2d 140] (9th

te | eee rn nmnR a oe Fe as ue F 14, 17

NLRB v. Pratt & Whitney Air Craft Div., 789 F.2d 12] (2d

ies OME oe sae ee cee ee he 18

NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342

(ROOME i ocnee se ke eo etna nies wid eh Cad 17

Parker v. Conners Steel Co., 855 F.2d 1510 (11th Cir. 1988),

cert. denied, 490 U.S. 1066...................... 20, 21

Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965)

ee ee ral Goa, 3, FN 10

San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236

(2959) v4.45, i, J, & 02, 13, 4, US, 16, 17, 1&. 2.

Sears, Roebuck & Co. v. Carpenters, 436 U.S. 180 (1978)

CAR ee Ree Te Nika am oie eee koae Cn ae eee Bb

Serrano v. Jones & Laughlin Steel Co., 790 F.2d 1279 (6th

es PN Sen rs ee ne ee 21

Teamsters v. Lucas Flour, 369 U.S. 95 (1962) .......... Oe

Contents

Page

Wells v. General Motors Corp., 881 F.2d 166 (Sth Cir. 1989),

ROOTS Kb eh KEEN G ODO bb OKO RO EO bYeS Ocak ene 16, 18

Statutes Cited:

Labor Management Relations Act:

i, Sa cody & 5, G, 7, 8, Oo WO, 2, 23

29 US.C.§ 185 20 3

29 U.S.C. § 185(a).. 2.0. 5

National Labor Relations Act:

ibe e ee aed va cer aks un elec eee dekeccnns 13

DO bods casiexawhac Gu aneonss .18, 21

| ee) 13

Rules Cited:

oo ae has RR TT ALR ES aaa ts abe 8

si Ne a |; a Ra 9

Other Authotities Cited:

Cal. Civ. Code §§ 1708, et Ey NP ee ear ee Ee 10

Vil

Contents

‘Cal. Civ. Code § 1709, et seq.

Cal. Civ. Code $§ 1708-1711

H. Rep. No. 245, 80th Cong., Ist Sess................

S. Rep. No. 105, 80th Cong., Ist Ses

ERA ee peeps Alte

Taft-Hartley Act .........

§. at 15-17 (1947) (Sen.

ws

l

STATEMENT OF THE CASE

Respondents present this Statement of the Case for the

purpose of correcting petitioners’ mischaracterization of their

case and the allegations appearing in their state-law complaint.

Respondents are Milne Employees Association (herein

“MEA” ) and, alternatively its officers and directors as proposed

class representatives. MEA was formed for the purpose of

conducting this litigation on behalf of its members, 614 former

employees of petitioner Milne Truck Lines, Inc. (“Milne” or

“Milne Truck” hereinafter) and 480 spouses of those employees

who assert claims for spousal injury or loss of consortium. Forty-

eight of the former employees were in managerial or other

nonunion positions not covered by a collective bargaining

agreement (“CBA” herein) (App. 2a-3a). MEA originally filed its

claims in the California Superior Court. Defendants removed the

case to federal court claiming complete immunity from suit under

federal labor law preemption (App. 4a).

This writ proceeding involves only the state-law tort claims of

the former union employees (and their spouses) of petitioner

Milne. The claims of the nonunion former employees of petitioner

Milne were severed by the district court, remanded to state court

(App. 4a) and there are proceeding.

Milne Truck is the only petitioner which signed or was

covered by any CBA with the unions representing members of

MEA. In the 50 years before 1980, Milne Truck was an

independent trucking company operating in the Western United

States (App. 3a). In 1980, petitioner Sun Carriers, Inc. (“Sun”)

acquired petitioner Milne in a leveraged buy-out, and Milne

became a subsidiary of petitioner Sun (App. 3a). On September 29,

1986 all of the stock of petitioner Sun was sold to the officers of

petitioner Sun and petitioners Riordan, Freeman, and Spogli. /d.

to

Respondents’ well-pleaded complaint alleges that after the

LBO and up until September 1987 all of the petitioners conspired

in a secret plan to liquidate the assets of Milne Truck in order to

assist Sun and the Riordan partnerships to pay down their massive

debt assumed in the buy-out of Sun. /d.

Respondents complain that all petitioners engaged in a

protracted campaign of deception and fraud to effectuate their

secret plan to liquidate Milne Truck. The complaint asserts that in

January 1987 Milne Truck began a massive reduction of its sales

force which was falsely announced as a “refocus” of sales

activities. /d@. Such reductions produced widespread rumors in the

trucking industry and throughout Milne Truck’s workforce of its

imminent closing. /d.

In response to those rumors, petitioners visited Milne Truck’s

various terminals in an effort to calm the workforce and to put such

rumors to rest. /d. In those meetings,petitioners made and

presented videotapes (shown to all members of MEA) promising

job security, asking the respondents not to seek other work, and

asking the respondents to have faith in the group controlling Sun

Carriers. /d.

On August |, 1987 Milne Truck announced the sale of its

Wyoming terminal. In response to increased apprehensions by it

employees, petitioners falsely claimed that sale was “only a

revamping” of operations and that Milne Truck would continue

there. On August 21, 1987 Milne Truck sold another terminal.

again representing that its operations would continue as normal but

“blended” with other Milne Truck terminals in Northern

Califorma. /d.

Finally petitioners revealed their hidden cards. In a letter

dated September 8, 1987 Petitioners demanded that the Teamsters

3

(which represented most MEA members) grant major concessions

on wages and benefits. /d. Petitioners required that those

concessions be agreed to within three days or all Milne Truck’s

operations would be closed. /d. On or about September 11, 1987,

Petitioners completed _ their conspiracy of fraud and

misrepresentation by closing down Milne Truck and liquidating its

assets. /d.

On September 8, 1988 respondent MEA and the alternative

representatives of the proposed class filed their complaint in the

Superior Court of the State of California. They asserted seven

state-law tort actions, including fraud by _ intentional

misrepresentation of facts, fraud by suppression of facts, negligent

misrepresentation of facts, and intentional infliction of emotional

distress; respondents also sought the equitable remedy of

imposition of constructive trust (App. 3a-4a).

The complaint specifically disclaimed any reliance on any

portion of any CBA. No CBA even addressed the eventuality of a

total plant closure. The suggestions of petitioners that the CBAs

“address the rights and duties attendant to plant closure” (Petition

at 3) or thata CBA might be so interpreted (id.) are without factual

foundation and contrary to the factual analysis engaged in by the

Ninth Circuit. See Milne Employees Ass'n v. Sun Carriers, 960

F.2d 1401, 1409-10 (9th Cir. 1991),

On removal, the district court held all claims by the union

employees preempted by § 301 of the Labor Management

Relations Act, (LMRA), 29 U.S.C. § 185. The district court denied

the § 301 preemption claim as to the non-union employees’ state-

law causes. The district court denied, as to all employees,

petiuoners’ claim that the Garmon doctrine preempted the state-

law causes. See MEA v. Sun Carriers, 714 F. Supp. 1028 (N.D. Cal.

1989).

4

The Ninth Circuit reversed the § 301 preemption rulings on

the union employees’ claims for fraud and intentional infliction of

emotional distress; it remanded these claims to the district court for

a determination whether remand to state court was required. Milne

Employees Ass'n v. Sun Carriers, 960 F.2d at 1418. The Circuit

upheld the district court's rulings in all other respects. /d.

Specifically, the appeals court found after additional requested

briefing that the claims for fraud and intentional infliction of

emotional distress arising out of the fraudulent conduct were not

preempted by the Garmon doctrine. Id. Contrary to petitioners’

contention (Petition at 7)respondents have abandoned on appeal

neither their spousal claims nor their request for imposition of a

constructive trust. Milne Employees Ass'n, 960 F.2d at 1405, n.3.

Rather, those purely derivative claims were not germane to the

appeal.

One particular distortion merits special mention. Petitioners

claim that Milne Truck’s Operations “lost several million dollars”

after their leveraged buy-out (Petition at 6). This is unsupported in

the record; petitioners first alleged such losses Only after

respondents filed their complaint. This concealment of heavy

losses — if indeed such occurred — lies at the heart of

respondents’ complaint (App. 3a).

REASONS FOR DENYING THE WRIT

I.

THE NINTH CIRCUIT CORRECTLY APPLIED THE

§ 301 PREEMPTION ANALYSIS REQUIRED BY

PRECEDENTS OF THE COURT IN REFUSING TO FIND

PREEMPTED FOUR OF RESPONDENTS’ CAUSES OF

ACTION.

The Court in Lingle v, Norge Div. of Magic Chef. Inc., 486 U.S.

5

399 (1988) enunciated a clear, bright-line test for resolution of

federal labor law defenses based upon alleged preemption under

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

“To determine whether a state law claim is completely preempted

under section 301, the relevant inquiry is whether resolution of the

claim requires interpretation of a collective bargaining

agreement.” See Milne Employees Ass'n, 960 F.2d at 1408. This

correctly reflects the test enunciated by this Court in Lingle, supra,

and is a faithful expression of the congressional intent in enacting

this statute. The legislative history of the Taft-Hartley Act leaves

unmistakable the inference that Congress never intended to

supplant all state regulation in the labor field done under the

exercise of the states’ police powers. See H.R. Rep. No. 245, 80th

Cong., Ist Sess. for the report of Congressman Hartley (“makes

labor organizations equally responsible with employers for

contract violations and provides for suit by either against the other.

..."). Accord S. Rep. No. 105, 80th Cong., Ist Sess. at 15-17

(1947) (Sen. Taft), cited in Dowd Box Co. v. Courtney, 368 U.S.

502, 511-13 (1962).

Beyond creating a federal jurisdictional vehicle for suing

unions in federal court for CBA breaches, the Court has identified

two other intents of the Congress in enacting § 301. The second

intent was to promote collective bargaining that ends with

agreements not to strike by authorizing federal courts to fashion a

body of federal law for enforcement of CBAs. See Textile Workers

v. Lincoln Mills, 353 U.S. 448, 451, 454-55 (1957). The third

congressional intent discerned in the jurisprudence of this Court

was to promote uniformity of interpretation and to avoid

unpredictability in the interpretation of phrases and clauses in

CBAs. Teamsters v. Lucas Flour, 369 U.S. 95, 102-04 (1962).

None of these legislative purposes is implicated or affected to the

slightest degree by allowing California and other states to regulate

frauds and deceits practiced by employers upon unionized

employees. Respondents recognize that other federal labor law

principles may preempt state law even though § 301 preemption is

not applicable. See Lingle, 486 U.S. at 408 and n.8. Petitioners

6

make no claim of Machinists preemption or of ERISA preemption.

Their contentions regarding Garmon preemption were the subject

of lengthy and careful analysis by the Ninth Circuit. Respondents

address same at III, infra.

While this Court in Allis-Chalmers Corp. v. Lueck, 471 U.S.

202 (1985), found preemption of a contract-based state-law tort

(bad faith handling of an insurance claim), the Court has been

careful in its jurisprudence to limit the scope of Lueck to that

necessary to promote the interests of “interpretative uniformity

and predictability”. /d. at210-11. Congress has never exercised its

authority to occupy the entire field of labor legislation. /d. at 208-

09. The Lueck Court carefully bore in mind that the courts are

cautioned not to extend the preemptive effect of 301 beyond suits

for breach of contract because any such extension would be

inconsistent with the congressional intent. /d. at 212. It is

instructive that the Court found preemption in Lueck, not because

it was a “bad-faith” tort, but rather because the right underlying

that remedy and the duty whose breach gave rise to the state-law

claim existed only by implication from the express terms of the

union contract. /d. at 213-218.

What the Ninth Circuit has done here was to follow the

dictates of Lueck and Lingle by engaging in a careful analysis of

each element of each of the four state-law causes of action which it

found not preempted. Milne Employees, 960 F.2d at 1407-10. The

Ninth Circuit concluded:

In sum, none of the elements of the fraud,

misrepresentation, or suppression claims

requires interpretation of the collective

bargaining agreements.

Id. at 1409. Contrary to the misconceived argument of petitioners

(Petition at 13) the duty to disclose which underlies Count II of

5

respondents’ complaint has its source entirely in California state

law, not in any of the CBAs between Milne Truck and its unions.

Milne Employees, 960 F.2d at 1408 (citing to California

jurisprudence). Respondents request that the Court note that the

Ninth Circuit found that 301 preempted their claims for intentional

infliction of emotional distress, except insofar as those claims were

based upon fraud and suppression of facts. /d. at 1412-13.

In performing the element-by-element analysis of

Respondents’ seven pleaded tort claims, the Ninth Circuit

exercised scrupulous care to preempt all claims for which any

element even arguably was not completely “independent” of the

CBAs. Lingle, 486 U.S. at 410, n. 10.

As a matter of fact, petitioners were given the benefit of every

doubt by the Ninth Circuit concerning whether any element of

respondents’ claims might not have been truly “independent”

within the meaning of Lingle. As in Lingle, each element of all of

the state-law tort actions held not preempted presented “purely

factual questions” which pertained to the conduct of the employee

and the conduct and motivation of the employer. None of the

elements of the California substantive law presented by these four

causes of action requires a court to interpret any term of aCBA.

Thus, the state-law remedy in this case is

“independent” of the collective-bargaining

agreement in the sense of “independent” that

matters for § 301 pre-emption purposes:

resolution of the state-law claim does not

require construing the collective-bargaining

agreement.

Lingle, 486 U.S. at 407.

Respondents note that the Court in Lingle held that

“parallelism” in state-law analysis did not render the state-law

dependent upon the CBA. Nevertheless the Ninth Circuit held that

all three of Respondents’ California tort claims which the Circuit

Court characterized as “contract-based” were preempted by § 301.

Milne Employees, 960 F.2d at 1410-12. Respondents would submit

that in these aspects the Ninth Circuit opinion gave undue

deference to its own precedents and to certain fragments of the

literal language of Lueck by finding preempted the claims for

interference with contractual relations, interference with

prospective economic advantage, intentional infliction of

emotional distress by the terminations, and breach of the implied

covenant of good faith and fair dealing. The Circuit Court likewise

did not give full application to the bright-line test of Lingle in

finding that respondents’ claims for intentional infliction of

emotional distress were preempted insofar as they were based

upon termination of the employment relationships. /d. at 1412-13.

Intellectually rigorous application of the Lingle test for preemption

would have required a contrary result as to these latter claims. But

they turn principally upon precise definitions of California state-

law elements. Since the decision of the California Supreme Court

in Foley v. Interactive Data Corp., 47 Cal. 3d 654 (1988), at least

one of these preempted causes of action has been rendered moot as

to MEA’s unionized members. Therefore the Ninth Circuit’s

decision presents no special and important reasons for granting the

Petition for Writ of Certiorari. Nothing has occurred in the Ninth

Circuit’s handling of this cause which calls for an exercise of this

Court’s power of supervision. See S.Ct. R. 10.1.

The questions of federal law about which petitioners purport

to raise good-faith questions have been fully settled by recent

decisions of the Court. Given what the Ninth Circuit referred to as

“the unique facts alleged in this case”, Milne Employees, 960 F.2d

at 1410, there is no reason for the Court to revisit its recent

decisions under § 301 of the LMRA.

9

IT.

THE DECISION BELOW PRESENTS NO ISSUE OF

NATIONALIMPORTANCE.

The Ninth Circuit decision here decides no question of federal

law which has not been already settled by this Court. The portions

of the decision below which petitioners cite as grounds for

issuance of a writ of certiorari do not conflict with any applicable

decision of this Court. Thus it is difficult to comprehend the true

intention underlying petitioners’ second argument. See S. Ct. R.

10.1(c). Respondents have no quarrel with the policies embodied

in such decisions as Lucas Flour, Lincoln Mills, or Dowd Box Co.

Respondents do, however, take strenuous exception to the actions

of petitioners in attempting to blur the distinction between the

older line of § 301 cases, which dealt with uniformity of

interpretation of CBAs and their enforcement, and the Court’s later

cases which guided the Ninth Circuit. Petitioners would blithely

disregard the clear policy of this Court expressed in such decisions

as Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987), Lueck and

Lingle that unionized employees are not to be deprived of their

independent state-law rights merely because they happen to work

under a CBA. In finding free from § 301 preemption certain of

respondents’ tort claims, the Ninth Circuit has done nothing of

national importance. To the contrary, it has demonstrated its

fidelity to the principle of § 301 preemption developed in Lucas

Flour, Lueck, and Lingle. State laws whose application might lead

to inconsistent results are preempted because of the necessity for

national uniform interpretation and application of federal labor

law principles. Lingle, 486 U.S. at 406.

Here the Ninth Circuit determined that all of the elements of

the tort claims on which it has permitted respondents to go forward

present purely factual questions relating to conduct and motivation

which require no interpretation of any term of aCBA. /d. at 407.

10

Petitioners imply that somehow the respondents’ claims could

have been the subject of grievance and arbitration. The record is

devoid of any substance for that claim. But, even if petitioners’

conduct toward respondents had been arbitrable, i.e., assuming

arguendo that some hypothetical clause of the CBAs might have

implicated the same analysis of the facts as would an inquiry under

petitioners’ fraud claims, the California tort claims would still be

“independent” for § 301 preemption purposes since they can be

resolved without interpreting any CBA. 7d. at 408-10. It is

doubtful at best whether a union could contract to waive its

members independent state-law rights when they are of such

fundamental importance as those embodied in Cal. Civ. Code

$§ 1708, et seq. It is abundantly clear that there is no evidence of

any such waiver in this case. Respondents note that the plaintiff in

Lingle enjoyed explicit rights under the CBA signed by her union

which closely paralleled her right under [Illinois tort law which this

Court found not to be preempted. 486 U.S. at 401, 407-10.

Petitioners’ repeated invocation of Republic Steel Corp. v.

Maddox, 379 U.S. 650 (1965) is somewhat mystifying in this

context. Republic Steel dealt with the application of state law to

collect severance pay provided for under a CBA. The Ninth Circuit

in applying the proper § 301 analysis to find these fraud claims not

preempted has done nothing to “sidestep” any CBA. Nor have

respondents. Petitioners’ claim here that a writ of certiorari should

issue implicitly rests on their studied avoidance of the truly

“independent” nature of the state-law rights which the Circuit

Court has ruled respondents may seek to vindicate in court.

Under the rulings of the Court it would appear that

respondents are entitled to a presumption against permitting § 301

to preempt the State of California’s police power regulations

expressed in §§ 1708-1711 of its Civil Code. See Cipollone v.

Liggett Group Inc., 112 S. Ct. 2608, 2617-18, 2620-21 (1992).

Petitioners can show no evidence at all, much less clear and

acm aa aa

11

unambiguous evidence that Congress intended the California

common-law damages actions at issue here to be preempted by

§ 301. Indeed, only by resort to the principles of implied

preemption have the prior decisions of the Court found a

congressional intent in § 301 to preempt this field even partially.

112 S. Ct. at 2625-26, 2629 (concurring opinion of Justice

Blackmun). While the precise contours of this presumption remain

to be defined precisely, and its existence subject to some debate, /d.

at 2632-34 (dissenting opinion of Justice Scalia), it would appear

beyond question that respondents are entitled to the benefit of such

a presumption in light of the specific language of § 301 which

completely lacks any express preemption language. Id. at 2624.

In their labors to contrive preemption where the precedents of

this Court permit none, Petitioners have lost sight of the

“interstitial” nature of federal labor law. See Metropolitan Life Ins.

Co. v. Mass, 471 U.S. 724, 756 (1985). The independent rights on

which respondents have sued have existed in California since

1872: there can be no reasonable doubt that the regulation of deceit

and fraudulent conduct is deeply rooted in local tradition. The

positions urged upon the Court by petitioners call to mind the

philosophy expressed by the Court regarding interpretation of

federal labor laws:

It would turn the policy that animated the

Wagner Act on its head to understand it to have

penalized workers who have chosen to joina

union by preventing them from benefiting

from state labor regulations imposing minimal

standards on nonunion employers.

[d. (emphasis supplied). It is apparent that petitioners’ true motive

12

in seeking the Writ of Certiorari is to persuade the Court to effect a

major re-working of federal labor law. Their contentions, in reality,

are aimed not at the Ninth Circuit opinion here, but rather at

numerous precedents of this Court and the Circuit Court’s

application of those cases, especially Lingle.

ITI.

.s THE NINTH CIRCUIT’S DECISION THAT

RESPONDENTS’ STATE-LAW CLAIMS FOR

FRAUDULENT CONDUCT INCLUDING EMOTIONAL

DISTRESS DAMAGES WERE NOT PREEMPTED UNDER

THE GARMON DOCTRINE BECAUSE THOSE CLAIMS

AROSE OUT OF CONDUCT OUTSIDE OF COLLECTIVE

BARGAINING IS CONSISTENT WITH THE COURT’S

JURISPRUDENCE AND RULINGS OF THE OTHER

CIRCUITS.

Both the district court and the Ninth Circuit, on original

appeal and after additional briefing, rejected the same arguments

repeated by petitioners to this Court on the question whether

respondents’ state-law claims are preempted under the doctrine of

San Diego Bldg Trades Council v. Garmon, 359 U.S. 236 (1959).

As a preliminary matter, respondents note that, although

petitioners assert the Ninth Circuit’s decision conflicts with

precedents of this Court, petitioners fail to point out even one

departure from the Court’s Garmon rulings. Indeed, the Ninth

Circuit’s decision rejecting Garmon preemption effortlessly flows

from the progeny of Garmon in this Court. See, for example,

Belknap Inc. v. Hale, 463 U.S. 491 (1983) (holding a state-law

fraud claim not preempted by Garmon); Farmer v. Carpenters, 430

U.S. 290 (1977) (rejecting Garmon preemption of a claim for

intentional infliction of emotional distress under California law);

Sears, Roebuck & Co. v. Carpenters, 436 U.S. 180 (1978) (holding

Garmon did not preempt a state-law trespass claim against a

13

union); and Linn v. United Plant Guard Workers, 383 U.S. 53

(1966) (rejecting a claim of Garmon preemption against a state-

law defamation claim alleging false statements).

There is no conflict between the Circuits as to application of

the Garmon doctrine to state-law fraud. The cases endlessly cited

by Petitioners from various Circuits are clearly distinguishable on

their salient facts from the state-law claims asserted by

respondents. All respondents’ claims involve conduct occurring

outside of any collective bargaining. The Ninth Circuit and the

district court correctly rejected the “direct-bargaining” and other

inapposite cases cited by petitioners.

It is critical one remain cognizant that the Ninth Circuit’s

ruling here on Garmon preemption sets forth no new, bright-line

test or rule to be employed in every fraud case. Rather, the opinion

below is a proper application of this Court’s Garmon jurisprudence

to this unique factual scenario. This decision of the Ninth Circuit is

easily reconciled with Garmon rulings from the other Circuits.

A. The NLRB Specifically Rejected Unfair Labor Practice

Charges By The Representative Unions Before The State-Law

Complaint Was Filed. Therefore The State Court May Exercise

Jurisdiction Over The Conduct Alleged In The Complaint

That Is Not Covered By Federal Labor Laws.

Garmon gave clear guidelines to resolve a preemption defense

where the NLRB has heard charges and found no unfair labor

practice. The Court held that, if the Board finds the conduct

charged not to be prohibited by § 8(a) of the NLRA, 29 U.S.C. §§

157-158, then the states may exercise jurisdiction over the

employer's conduct. 359 U.S. 245-46. See also, id. at 253 (Justice

Harlan concurring) (“Henceforth the States must withhold access

to their courts until the [NLRB] has determined that such

unprotected conduct is not an unfair labor practice. ..”’) .

14

In Garmon the Court held the state-law claims preempted

because the NLRB had not adjudicated the status of the union’s

conduct to determine whether the picketing was a protected,

concerted activity. /d. at 246. Here, in contrast, the NLRB has

spoken and found no unfair labor practice.

In late September and October 1987, three unions

representing respondents filed separate unfair labor practice

charges with the Board alleging Milne Truck failed to bargain

(“bad faith” bargaining) about petitioners’ intent to close

Operations and about Milne Truck’s deadline proposal for wage

and benefit reductions.

After investigation the NLRB Regional Director rejected

allegations of unfair labor practices because of insufficient

evidence Milne Truck had repudiated its CBA or engaged in

unlawful direct bargaining with its employees. Put another way,

the Board has already found that petitioners “satisfied” their

“duty” under the federal labor laws “to bargain in good faith” about

the closure of its operations. See Milne Employees, 960 F.2d at

1415.

California therefore is not precluded from adjudicating

violations of Petitioners’ duties arising solely under its law, where

those duties do not present a controversy identical to that ruled by

the NLRB. Matters not identical to those ruled by the Labor Board

(and thus not “arguably” unfair labor practices) are subject to state-

law regulation. Belknap v. Hale, 463 U.S. at 510. California’s anti-

fraud statutory scheme, in existence long before the federal labor

laws, is a permissible regulation of fraudulent conduct occurring

outside any collective bargaining. See Cal. Civ. Code §§1708, er

seq.

15

B. These State-Law Claims Are Not Identical To The Unfair Labor

Practice Charges Presented To The NLRB. Hence Respondents’

State-Law Claims Arising From Conduct Qutside Collective

Bargaining Are Not Preempted By Garmon.

Garmon preemption exists to protect the primary jurisdiction

of the NLRB to determine in the first instance what conduct is

prohibited or protected by the NLRA. See Allis-Chalmers Corp. v.

Lueck, 471 U.S. at 213 n.9. Thus, The “critical inquiry in applying

the Garmon tules...is whether the controversy presented to the

state court is identical with that which could be presented to the

Board”. Belknap, Inc. v. Hale, 463 U.S. at 510 (emphasis added),

citing Sears, Roebuck, 436 U.S. at 197. If the controversy

presented to the state court is different from that which was

presented to the Board, the state-law claim is not preempted under

Garmon. Id.

There need be only subtle differences between the causes of

action presented to the state court and the charges before the NLRB

to avoid Garmon preemption. The Court in Sears, Roebuck noted:

“Although the arguable federal violation and the state tort arose in

the same factual setting, the respective controversies presented to

the state and federal forums would not have been the same”. 436

U.S. at 196-97 (emphasis added). Respondents direct the Court’s

attention to its careful delineations between the state-law claims

and unfair labor practice charges set forth in Sears Roebuck, 436

U.S. at 197-98, Farmer, 430 U.S. at 305, and Linn, 383 U.S. at 61-

63.

Here, the NLRB was presented with an entirely different

controversy for Garmon purposes than MEA alleged in iis state

complaint. The charges to the Board alleged unfair labor practices

in the refusal of Milne Truck to bargain about its decision to close

all its 33 terminals unless its proposal for immediate wage and

benefit concessions was accepted. In short, the issue before the

16

Board was whether Milne’s actions were indicative of an anti-

union animus.

By contrast, respondents’ complaint principally alleges

violations of California statutory law of general applicability

proscribing fraud and deceit. It directly implicates California

interests in protecting its citizens from fraud. The factual issue to

be decided in MEA’s state suit is whether petitioners made oral,

written and video misrepresentations of job security to quell the

rumors of imminent plant closing and to prevent a mass exodus of

employees (through false inducements or suppression) when

petitioners knew or had reason to know such were false. No

collective bargaining about the plant closing was underway when

petitioners’ wrongful conduct occurred. MEA’s suit does not

question whether the defendants should have collectively

bargained about their secret plan to close. The Ninth Circuit thus

properly found that Garmon does not preempt here because the

complaint raises issues not identical to the controversy the NLRB

decided. See Belknap, 463 U.S. 510 (fraud claim not preempted by

Garmon), Windfield v. Groen Div., 890 F.2d 764, 770 (Sth Cir.

1989) (fraud claim by a “union organizer” not preempted by

Garmon); and Wells v. General Motors Corp., 881 F.2d 166, 171

(Sth Cir. 1989), cert. denied, 495 U.S. 923 (fraud claims not arising

out of collective bargaining not preempted).

1. Petitioners Had No Duty Under Federal Labor Law

To Bargain About The Decision To Close Their Operations

So It Could Not Arguably Be An Unfair Labor Practice For

Them To Fail To Bargain About Their Secret Plan To Close

And Intentionally Deceive Respondents. But Such

Fraudulent Conduct May Violate State Duties Existing

Independently Of The Employer-Employee Relationship.

At 19-20 of their Petition, petitioners would now content they

arguably committed an unfair labor practice by failing to bargain

about their decisions to close Milne Truck and to conceal that

decision from the employees through fraudulent mis-

17

representations. That claim fails to create Garmon preemption for

two reasons.

First, the NLRB already rejected unfair labor practice charges

arising out of the closure and petitioners’ alleged failure to bargain

about that decision. Second, employers have no duty to

collectively bargain over a decision to close plant operations. First

National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981). Ipso

facto, an employer does not have a duty to bargain about having

misrepresented its decision to close down operations - e.g.,

promising employees their jobs are secure and the business will not

close. An employer’s failure or refusal to bargain over a non-

mandatory subject is not an unfair labor practice. NLRB v. Wooster

Div. of Borg-Warner Corp., 356 U.S. 342, 349 (1958). Thus, not

even arguably could petitioners have committed an unfair labor

practice by not bargaining about their misrepresentations of their

decision to close. Nor could they have done so by not bargaining

about their secret plan itself. It smacks of the crudest form of

sophistry for petitioners to attempt to hide behind the labor laws to

avoid claims for violations of independent state-law rights when

their reprehensible conduct flaunted all legal norms.

This is not to say petitioners’ conduct is immunized from

sanction. The Ninth Circuit cogently set forth the applicable

California statutory and common law proscribing petitioners’

pattern of intentional, deceitful acts. See Milne Employees, 960

F.2d at 1408, 1412. That state law imposes independent duties on

all persons generally.

2. Respondents’ State-Law Claims Do Not Implicate

Direct Bargaining” With Employees, Nor Do They Involve

Promises To Induce The Employees To Circumvent Their

Representative Unions. Rather, These Fraudulent

Misrepresentations Made To Dispel Rumors Of Closing

Had No Relationship To Collective Bargaining.

Petitioners claim at page 21 of the Petition that their

aca

18

misrepresentations to MEA members were unfair labor practices

as “direct bargaining” with the plaintiff class. But the law is clear

that not all employer communications to employees are

impermissible direct bargaining.§ 8(c) of the NLRA permits an

employer to communicate to employees “any views, argument, or

opinion” so long as the “expression contains no threat of reprisal or

force or promise of benefit”, such as forcing the employees to

reject the union as their representative or presenting them with a

Hobson's choice for an anti-union motive. NLRB v. Pratt &

Whitney Air Craft Div., 789 F.2d 121, 133 (2d Cir. 1986).

An unfair labor practice arises only when the employer's

communication “attempts to coerce the employees, or to portray

the employer rather than the union as the workers’ true

protector...”. /d. at 134. Thus, no “direct bargaining” occurs where

the employer “never directly said - nor even implied that the

workers would be better off without the union”. /d. at 135.

No provision of the NLRA was intended by Congress to

privilege an employer's voluntary misrepresentations to

employees of job security that are tortious under state law. See

Belknap, Inc. v. Hale, 463 U.S. at 512; Windfieid v. Groen Div., 890

F.2d at 770 (applying to aunion employee's fraud case the Belknap

holding that fraud claims are not preempted by Garmon).

Here respondents alleged no anti-union motive behind

petitioners’ intentional misrepresentations of future job security.

Petitioners have come forward with no evidence of their intent to

coerce the employees to abandon the unions as even part of their

reason for their intentional frauds. Petitioners thus failed in their

burden to prove a basis for Garmon preemption. See /nt’l

Longshoreman's Ass'n v. Davis, 476 U.S. 380, 395 (1986).

Most significantly, the NLRB already has rejected that same

claim and found Milne Truck did not engage in unlawful direct

19

bargaining (App. 25a-26a). Petitioners’ chameleon-like efforts to

contradict the Board’s finding in their favor and to foist their

switch as a shield against petitioners’ claims is disingenuous. The

doctrine of judicial estoppel prevents them from doing that.

Petitioners’ argument that any employer communication with

employees about future job security is impermissible direct

bargaining falls flat on its face. In J.J. Case Co, v. NLRB, 321 U.S.

332, 339-40 (1944) the Court held that employers may enter into

individual contracts of employment directly with employees

without committing an unfair labor practice so long as the

employer does not refuse to bargain with the representative union

because of the individual contracts. Accord Caterpillar v.

Williams, 482 U.S. at 395-96 (1987). Here, MEA made no

allegation and petitioners offered no proof that Milne Truck ever

refused to negotiate with the Teamsters or Machinists unions

representing respondents because of.or in conjunction with

petitioners’ fraudulent promises of secure employment.

With the inapposite case of Medo Photo Supply Corp. v.

NLRB, 321 U.S. 678 (1944), heavily relied on by petitioners, the

Ninth Circuit dealt easily. See 960 F.2d at 1417. In Medo Photo, the

employer directly bargained with the employees while at the same

time negotiating with their union intending to coerce the

employees into rejecting the union as their representative. 321 U.S.

at 684. Here, by contrast, no negotiations were underway when

petitioners made their misrepresentations, and the NLRB flatly

rejected the unions’ contention that they were ignored by finding

no duty of Milne Truck to bargain with them. Respondent MEA has

not aHeged, nor have petitioners proven that a motivation for the

misrepresentations was to coerce the employees into rejecting the

unions as their representatives. Petitioners allege that the Ninth

Circuit’s ruling will “permit piecemeal agreements with

employees”. See Petition at 23. That claim is disingenuous. This

20

case is not about separate, bargained-for agreements between

employees and their employer without the union for the purpose of

cutting the union out of negotiations. Rather, this conduct involves

lies made directly to employees to keep them working on their jobs

until petitioners could complete their scheme to loot Milne Truck’s

assets. There occurred no give-and-take between Milne and the

respondents without the unions to reach an “agreement” contrary

to the applicable labor contracts. —

C. The Ninth Circuit’s Decision In No Way Conflicts With Cases

Cited By Petitioners From Other Circuits Since Those Cases Are

Factually Distinguishable From The Matters Sub Judice; The

Decision At Bar Is A Logically Sound Application Of Garmon And

Its Progeny.

Petitioners principally rely on Parker v. Conners Steel Co.,

855 F.2d 1510 (11th Cir. 1988), cert. denied, 490 U.S. 1066. That

case was properly distinguished by the Ninth Circuit as not

controlling here. See 960 F.2d at 1415-16. In Parker, the former

employees alleged that the company and their union committed

fraud during negotiations regarding the employer’s decision to

close the plant. That fraud arose out of two employee concession

agreements and a third negotiating session between the company

and the union also seeking further wage and benefit concessions.

Id. at 1514. Additionally, the employees in Parker filed charges

with the NLRB alleging that the same conduct in their state-law

complaint constituted unfair labor practices. Id. at 1517.

The key facts here are diametrically opposite. MEA's

complaint alleges no fraud or misrepresentation arising out of any

collective bargaining or negotiating. There were never any labor

negotiations about the decision of Milne Truck to close all of its

operations (none were required). Unlike Parker, the NLRB here

reached the merits of the unions’ unfair labor practice charges and

found them baseless. For the same reasons, petitioners’ reliance

upon Serrano v. Jones & Laughiin Steel Co., 790 F.2d 1279 (6th

Cir. 1986) #s misplaced. That case, too, properly was found

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inapposite by the Ninth Circwit. See 900 F.2d at 1416.

The salient facts here are incongruent with those of Serrano or

Parker. Respondent MEA alleged that petitioners made

affirmative, fraudulent statements directly to the employees. These

frauds and misrepresentations occurred outside of any collective

bargaining. Therefore, defendants’ conduct could not constitute

unfair labor practices. As the Court noted in Garmon, every case

involving a question of Garmon preemption must be decided upon

its own facts. 359 U.S. at 241. The Ninth Circuit properly found the

unique facts here provided no basis for Garmon preemption.

D. Petitioners Propose A Radical Restructuring Of Federal Labor

Law, Arguing That Nearly Every State-Law Tort Claim Is

Preempted Under Garmon .They Would Upset The Delicate Balance

Between State Regulation Of Traditionally Tortious Activities

And Federal Regulation Of Unfair Labor Practices.

Petitioners spuriously accuse the Ninth Circuit of fashioning a

new test for Garmon preemption. In fact, it is Petitioners who

propose to fashion a radically new approach to Garmon

preemption, if this Court were to grant the writ. Petitioners’ novel

idea that employers cannot communicate with employees outside

of collective bargaining with the union is contrary to congressional

intent. See NLRA § 8(c). The corollary to petitioners’ proposal is

that all employer communications with employees except through

their unions are unfair labor practices. That broad departure has no °

basis in the labor laws.

In Metropolitan Life, 471 U.S. at 755 the Court found that

Congress had no intent to interfere with minimum state labor

standards which “affect union and nonunion employees equally,

6

oe

and neither encourage nor discourage the collective bargaining

processes. . .”. See also, id. at 757 (“the Court has recognized that

it ‘cannot declare preempted all local regulation that touches or

concerns in any way the complex interrelationships between

employees, employers, and unions; obviously, much of this is left

to the States”).

The California anti-fraud statute is such a minimum standard

of behavior that does not interfere with the collective bargaining

scheme. Indeed, the applicable statutes under which respondents

sue are titled under “Obligations Imposed By Law”, “Without

Contract. . .”. Cal. Civ. Cod > §§ 1708-1711. These California laws

have been in effect since 1872. If this Court now were to grant

certiorari and adopt petitioners’ proposed expansion of Garmon,

the states’ jurisdiction over matters traditionally re gulated would

be eliminated. That result would grossly distort the principles of

federalism underlying the labor laws.

23

CONCLUSION

No principle of law relating to federal preemption of state-law

claims under either § 301 of the LMRA or the Garmon doctrine

would be clarified by granting a writ of certiorari in this case. To

the contrary, granting certiorari here would provoke widespread

uncertainty, if not anxiety among the lower courts in their

application of the clear mandates of Lingle to claims of § 301

preemption. Petitioner’ claims of conflict among the Circuit

Courts of Appeal in application of Garmon preemption is specious.

Consideration of this case would add nothing of substance to this

Court’s jurisprudence. Denial of the Petition for Writ of Certiorari

is the only viable option before the Court, unless the Court should

wish to revisit all the basic principles of this field. Thus,

respondents respectfully request such denial.

Respectfully submitted,

RICHARD SCHWARTZ

Counsel of Record

JAMES E. PARROT

RICHARD SCHWARTZ &

ASSOCIATES, LTD.

Attorneys for Respondents

300 Lucas Plaza

614 North 1 1th Street

St. Louis, MO 63101-1230

(314) 231-2110