Opposition Brief — Rupert v. United States

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No. 94-0053 A} . 7 a 1094

: Eupreme Court, U.S.

In The | OFFic iE Ci f |

SUPREME COURT OF THE UNITED STATES

October Term, 1994

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ROAD SPRINKLER FITTERS LOCAL UNION NO. 669,

affiliated with the United Association of Journeymen &

Apprentices of the Plumbing & Pipefitting Industry of the

United States and Canada, AFL-CIO,

Petitioner,

INDEPENDENT SPRINKLER CORP.,

Respondent.

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On Petition For A Writ Of Certiorari To The United

States Court of Appeals For The Eleventh Circuit

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RESPONDENT’S BRIEF IN OPPOSITION

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CHANLEY T. HOWELL

Counsel of Record

STEVEN A. WERBER

FOLEY & LARDNER

The Greenleat Building

200 Laura Street

Jacksonville, Florida 32202

(904) 359-2000

Counsel for Respondent

i

QUESTIONS PRESENTED

Does the Eleventh Circuit’s decision conflict with

decisions of other circuits regarding a successor

employer’s duty to arbitrate under an agreement with

the predecessor’s union?

Is the Eleventh Circuit’s decision contrary to a

majority of the circuit courts with respect to the

interpretation and scope of section 301?

Does the Eleventh Circuit’s decision conflict with the

precedent of the Court regarding the method for

determining work-force continuity in successorship

cases?

il

PARTIES BELOW

The Plaintiff and Appellee in the proceedings below

was:

ROAD SPRINKLER FITTERS LOCAL UNION

NO. 669, affiliated with the United Association of

Journeymen & Apprentices of the Plumbing &

Pipefitting Industry of the United States and Canada,

AFL-CIO.

The Defendant and Appellant in the proceedings

below was:

Independent Sprinkler Corp.

The following companies were Defendants in the

proceedings before the District Court and appealed from the

District Court Order, but withdrew their appeals and did not

participate in the proceedings in the Court of Appeals:

Moore Pipe & Sprinkler Co.

Independent Sprinkler and Fire Protection Co.

iii

TABLE OF CONTENTS

Ce I 6 bs 85 cc ce tee eee i

l. Does the Eleventh Circuit’s decision conflict with

existing law regarding a successor employer’s duty to

arbitrate under an agreement with the predecessor’s

SE ao ess os eee eee es i

y Fi Is the Eleventh Circuit’s decision contrary to a

majority of the circuit courts with respect to the

interpretation and scope of section 301? ...... i

a Does the Eleventh Circuit’s decision conflict with the

precedent of the Court regarding the method for

determining work-force continuity in successorship

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REASONS FOR DENYING THE WRIT......... 6

I. The Eleventh Circuit’s Decision Does Not Create a

Conflict With Respect to a Successor’s Duty to

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iv

II. The Eleventh Circuit’s Characterization of the

Underlying Agreement Was Correct and Does Not

Conflict with Other Circuits ............ 11

III. | The Decision Below is Consistent with the Precedent

of the Court with Respect to the Method for

Determining Workforce Continuity ........ 13

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v

TABLE OF AUTHORITIES

CASES

EPE, Inc. v. NLRB, 845 F.2d 483 (4th Cir. 1988) .. 7

Esmark, Inc. v. NLRB, 887 F.2d 739

ee a: SI en re su a as 8

Fall River Dyeing & Finishing Corp. v. NLRB,

eS Bs ee rr ‘ 7, = 3

Graduate Plastics Co. v. Automobile Workers, District 65,

See Cae eee Ge ee ek ee ee le we 6, 9

Howard Johnson Co. v. Hotel & Restaurant Employees,

er Se ee on 6 ak ae io ees li

John Wiley & Sons, Inc. v. Livingston,

Pe EE ak re kee ek ek ee 7

NLRB v. Burns International Security Services. Inc. , 406

i Ee Pe nc ke hee kee eee 7

NLRB v. Rockwood Energy & Mineral Corp. , 942 F.2d 169

COR PE So ok 0 EO Ee 7

New England Mechanical, Investment v. Laborers Local

Union 294, 909 F.2d 1339 (9th Cir. 1990) ...... 7

Operating Engineers Local 150 v. Centor Contractors, Inc..,

ee Bt fe, Beet) are 6, 10

Southward v. South Central Ready Mix Supply Corp., 7 F.3d

er a a Ces eee ee hd ES eR eS 7

Steelworkers v. United States Gypsum Co., 492

F.2d 713 (Sth Cir. 1974), cert. denied, 419 U.S.

gb ee on aa a kd oe 6 6 be 0 w 6

Sullivan Industries v. NLRB, 957 F.2d 890

RE EE a ae. eee ee 7

Teamsters Local 249 v. Bill’s Trucking, Inc., 493 F.2d 956

I a eae ee a a ca 6, ll

U.S. Can Co. v. NLRB, 984 F.2d 864

I ee eae 7

STATUTES

aan O CEE 6-60 6 8h 0.86 sO Oe eee 2

No. 94-0053

*

In The

SUPREME COURT OF THE UNITED STATES

October Term, 1994

ROAD SPRINKLER FITTERS LOCAL UNION NC. 669,

affiliated with the United Association of Journeymen &

Apprentices of the Plumbing & Pipefitting Industry of the

United States and Canada, AFL-CIO,

Petitioner,

v.

INDEPENDENT SPRINKLER CORP.,

Respondent.

4

On Petition For A Writ Of Certiorari To The United

States Court of Appeals For The Eleventh Circuit

*

RESPONDENT’S BRIEF IN OPPOSITION

a

The petition should be denied because the Judgment

of the United States Court of Appeals for the Eleventh

Circuit does not conflict with decisions of other circuits or

the Court, and does not otherwise provide a basis for this

Court to review the decision below.

2

OPINIONS BELOW

The decision of the United States Court of Appeals

for the Eleventh Circuit is reported at 10 F.3d 1563 and is

reproduced in the appendix to the Petition for Writ of

Certiorari beginning at page 21a. The decision of the United

States District Court for the Middle District of Florida is

reported at 136 L.R.R.M. 2693 and is reproduced at page la

of the appendix.

STATUTE INVOLVED

29 U.S.C. § 185(a):

(a) Venue, amount, and citizenship. Suits for violation

of contracts between an employer and a labor organization

representing employees im an industry affecting commerce as

defined in this Act, or between any such labor organizations,

may be brought in any district court of the United States

having jurisdiction of the parties, without respect to the

amount in controversy or without regard to the citizenship of

the parties.

STATEMENT OF THE CASE

In its complaint, the Petitioner (the "Union") alleged

that Independent Sprinkler and Fire Protection Co.

("Independent I"), Moore Pipe & Sprinkler Co. ("Moore

Pipe") and Respondent, Independent Sprinkler Corp.

("Independent II") violated certain terms of the Settlement

Agreement entered into between the Union, Moore and

Independent I.' [App. 35a]. While Independent II is not a

' In its brief to the Eleventh Circuit, Respondent referred to

Independent Sprinkler and Fire Protection Co. as "ISFP" and to itself as

"Independent." In this Brief in Opposition, Respondent will refer to such

3

party to the Settlement Agreement, the Union alleges that

Independent II is liable to the Union under the Settlement

Agreement as a "Successor corporation."

Moore Pipe is a Florida corporation which was

incorporated in 1926 engaged in the fire protection business,

and has been a union contractor for many years. [App. 36a].

Independent I was a Florida corporation in the business of

fire pretection contractor with its principle place of business

in Jacksonville, Florida operating on a non-union basis.

[App. 36a]. Independent II was incorporated in Florida in

August, 1987, and like Independent I, is a non-union fire

Protection contractor. [App. 38a]. Moore Pipe and

Independent I were owned by Williamson Feed Mills, Inc.

("Williamson"), which in turn was owned by Mack Evans,

Jr (25%), Jerry B. Evans (25%), Randy T. Evans (25%) and

the Evans Family Trust (25%). [App. 36a]. In April, 1987,

the Officers and Directors of Independent I were as follows:

Directors Mack Evans (Chairman of the Board)

Randy Evans

Robert Matthews

Officers

President/Treasurer Randy Evans

Vice President Robert Matthews

Secretary Mack Evans

parties as Independent I and Independent II, respectively, although

Respondent believes that such nomenclature could be misleading in light

of the issues involved in this case. As the Eleventh Circuit used

Independent I and II in its decision, as the Union has in its Petition,

Respondent will do the same for the sake of consistency and to minimize

confusion.

4

In the summer of 1987, Mack Evans, who was

Chairman of the Board of Williamson, decided to shut down

the operations of Independent I for economic reasons. [App.

37a]. Shortly thereafter, Randy Evans and the other

shareholders of Williamson decided to sever their business

relationship, and Randy Evans sold his stock in Williamson

to the company for approximately $250,000. [App. 37a].

In late August of 1987, Randy Evans formed

Independent II, which began active operations in early

November, 1987. [App. 384]. When it commenced

operations, Independent II hired 32 former employees of

Independent I. [App. 39aj. In 1987 Independent I had 142

employees. [App. 39a]. From its inception and during all

times relevant to this case, Independent II was owned by the

following persons:

Randy Evans 19%

Robert Matthews 18%

Tucker Evans 9%

The remaining 54% of Independent II was owned by

the following employees or former employees:

Robert Bollo Jimmy Grey

Norman LaRochelle David Overman

Jimmy Roberts John Swanson

James Sweat Louis Sweat

Bill Taylor Don Thomas

Albert Turner Danny Wilkinson

Randy Evans was the only owner of Independent II (19%)

who previously had an ownership interest in Independent I

(25%). Also during this time, the Officers and Directors of

Independent II were as follows:

Directors

Randy Evans Robert Matthews

Tucker Evans Danny Wilkinson

David Overman Jimmy Grey

Bill Taylor Norman LaRochelle

Officers

President Randy Evans

Vice President Robert Matthews

Vice President Tucker Evans

Subsequent to its commencement of operations,

Independent II was awarded contracts for projects in Florida,

Georgia and South Carolina, which were performed on a

non-union basis. [App. 44a]. The Union alleged that the

Settlement Agreement was breached by Moore Pipe,

Independent I and Independent II as a result of Independent

II’s work in Georgia and South Carolina, and asked the

lower court to order the parties to binding arbitration. [App.

35a].

The District Court granted the Union’s motion for

summary judgment and ordered all parties to binding

arbitration. Independent II appealed and the Eleventh Circuit

reversed, ordering the District Court to enter judgment in

favor of Independent II.

6

REASONS FOR DENYING THE PETITION

I. The Eleventh Circuit’s Decision Does Not

Create a Conflict With Respect to a

Successor’s Duty to Arbitrate.

In its petition, the Union first asserts that the

Eleventh Circuit’s decision creates a conflict with the

Second, Third, Fifth and Seventh Circuits with respect to a

successor employer’s duty to arbitrate. Graduate Plastics

Co. v. Auto Workers, Dist. 65, 991 F.2d 997 (2d Cir. 1993);

Operating Engrs. Local 150 v. Centor Contractors, Inc. , 831

F.2d 1309 (7th Ci.. 1987); Steelworkers v. United States

Gypsum Co., 492 F.2d 713, 725-27 (Sth Cir. 1974), cert.

denied, 419 U.S. 998 (1974); Teamsters Local 249 v. Bill’s

Trucking, Inc., 493 F.2d 956 (3d Cir. 1974). To the

contrary, a review of these decisions reveals that what the

Union asserts as a conflict among the circuits is merely a

recognition that under certain facts, it can be appropriate to

require a successor to arbitrate.

In finding that Independent II should not have been

required to arbitrate, the Eleventh Circuit properly held

Ordinarily the successor is not bound by

substantive provisions of a preexisting

collective bargaining agreement between the

union and the predecessor. ... The "rightful

prerogative of owners independently to

rearrange their businesses" is preserved.

[App. 25a; citing, Fall River Dyeing & Finishing Corp. v.

NLRB, 482 U.S. 27, 36-39 (1987)]. The Eleventh Circuit

properly followed the precedent of this Court, namely, Fall

River and NLRB v. Burns International Security Services,

7

Inc., 406 U.S. 272 (1972). As the Court explained in Fall

River

We observed in Burns that, although the

successor has an obligation to bargain with

the union, it "is ordinarily free to set initial

terms on which it will hire the employees of

a predecessor . . . and it is not bound by the

substantive provisions of the predecessor’s

collective-bargaining agreement.

107 S. Ct. at 2234 (emphasis added); accord, Southward v.

South Cent. Ready Mix Supply Corp., 7 F.3d 487, 493-95

(6th Cir. 1993); Sullivan Industries v. NLRB, 957 F.2d 890,

895 (D.C. Cir. 1992); U.S. Can Co. v. NLRB, 984 F.2d

864, 869 (7th Cir. 1993); NLRB v. Rockwood Energy &

Mineral Corp., 942 F.2d 169 (3d Cir. 1991); EPE, Inc. v.

NLRB, 845 F.2d 483 (4th Cir. 1988); and New England

Mechanical, Inv. v. Laborers Local Union 294, 909 F.2d

1339 (9th Cir. 1990). Thus, combining the two fundamental

principals that (a) the duty to arbitrate is created by contract

and (b) a successor ordinarily is not bound by the substantive

provisions of the predecessor’s contracts, results in the

general rule followed by the Eleventh Circuit that a

successor will not be obligated to arbitrate disputes arising

out of the predecessor’s agreements.

The Eleventh Circuit correctly noted, however, that

under certain facts and circumstances, a successor may be

required to honor the substantive provisions of a

predecessor’s collective bargaining agreement, including an

arbitration provision. This may be the result, for example,

when the successorship relationship results from a merger in

which the predecessor disappears and the successor hires all

of the predecessor’s employees. [App 28a]. John Wiley &

8

Sons, Inc. v. Livingston, 376 U.S. 543 (1964); Esmark, Inc.

v. NLRB, 887 F.2d 739, 750-51 (7th Cir. 1989). The

Eleventh Circuit in this case held "[t]his is not a Wiley

case," finding essentially two fundamental distinctions

between this case and Wiley. [App. 28a].

First, this case did not involve a merger and

"wholesale transfer" of all employees from the predecessor

to the successor, as was the case in Wiley. In this case,

Mack Evans, the Chairman of the Board of the parent

corporation of Independent I (and who has never had any

direct or indirect interest in Independent II) made the

decision to shut down Independent I. [App. 37a]. Randy

Evans, Tucker Evans, Robert Matthews and some of the

other former Independent I employees, all of whom were

essentially unemployed after the closure of Independent I,

subsequently started up and began doing business through

Independent II, which hired just 32 of Independent I’s 142

employees (22%). [App. 39a]. In addition, the only

similarity in ownership between Independent I and

Independent II was Randy Evans’ minority ownership in both

companies -- 25% and 19%, respectively. [App. 36a, 41a].

The second critical distinction that the Eleventh

Circuit drew between this case and Wiley and its progeny

was the fact that this case does not involve an alleged

successor to a union-employer. The rationale and policy

underlying the successorship doctrine, as most recently

enunciated by this Court in Fall River, is not present in this

case. A review of the successorship decisions cited by both

parties in this case reveals that the purpose of the doctrine is

to protect employees represented by a union from being

automatically and summarily disenfranchised by a corporate

restructuring, sale, merger or reorganization. See e.g., Fall

River, 107 S. Ct. at 2233.

cvew weeded

9

Thus, a successor has an obligation to bargain in

good faith with the union that represented the predecessor’s

employees. Fall River, 482 U.S. at 38-39. Clearly, this

concept has no application to the facts of this case involving

an alleged successor (Independent II) to a non-union

employer (Independent I) that had no collective bargaining

relationship with the union. Moore Pipe was the only

employer who had a collective bargaining relationship and

there is no allegation that Independent II is a successor to

Moore Pipe. Rather, as noted by the Eleventh Circuit, the

Union’s collective bargaining relationship with and remedies

against Moore Pipe remain intact. [App. 28a].

Each of the four decisions cited by the Union as

being in conflict with the decision below is a case where the

circuit court found, based on the facts and circumstances

presented, that the case was more similar to Wiley, thereby

justifying the requirement that the successor arbitrate with

the union. Moreover, each decision involved a union’s

allegation that the employer was the successor to an

employer which had a collective bargaining relationship with

the union. Thus, the labor law policy of "promot[ing]

stability in collective-bargaining relationships," was present

and further supported requiring the successor to arbitrate.

Fall River, 107 S. Ct. at 2233 (emphasis added).

In Graduate Plastics, the Second Circuit held that,

similar to Wiley, all of the predecessor’s employees were

retained by the successor, the same plant was operated

making the same products, the business retained the same

name as the predecessor and employee benefits were

calculated based on service time with both the successor and

the predecessor. Graduate Plastics, 991 F.2d at 1001.

Furthermore, the successor actively participated in the

arbitration proceeding and knew of the union’s claim at the

10

time of the sale. The facts of Graduate Plastics are

admittedly similar to the facts of Wiley, however readily

distinguishable from the facts of this case, Burns and others

finding that a successor could not be required to arbitrate

pursuant to the predecessor’s agreement.

The Union places substantial reliance on Centor

Contractors as being a case with which the decision below

conflicts. [Pet. 10]. Such reliance is misplaced for the

following reasons. First, Centor Contractors was an action

to enforce an arbitration award obtained against the

predecessor and subsequently sought to be enforced against

the successor. 831 F.2d at 1310. Thus, the case did not

address the issue of whether the successor should be required

to arbitrate.

Second, the circuit court in Centor Contractors

affirmed the district court’s decision of liability under the

successorship and alter ego doctrines. In this case, the

Eleventh Circuit properly found that the Union abandoned its

alter ego theory and that the district court expressly declined

to address the alter ego theory. And third, the facts in

Centor Contractors supported the district court’s findings

that the predecessor and successor were so intertwined as to

justify the enforcement of the arbitration award against the

successor. The Eleventh Circuit’s decision accordingly does

not conflict with Centor Contractors.

Bill’s Trucking likewise does not evidence a conflict

created by the Eleventh Circuit’s decision. The Third

Circuit in Bill’s Trucking held that an issue of fact remained

as to whether the alleged successor could be bound by the

predecessor’s collective bargaining agreement, thereby

reversing the district court’s grant of summary judgment in

favor of the successor. The court recognized

11

[t]his is not to suggest, of course, that in

every Case a successor employer may properly

be held to the provisions of his predecessor’s

labor contract.

Bill’s Trucking, 493 F.2d at 963. That case involved "a

simple purchase of stock, followed only by a change in

corporate name and some minor changes in business

operations." /d. In addition, the circuit court in Bill’s

Trucking distinguished Burns on the ground that Burns was

an unfair labor practice and not a suit under § 301 -- a

distinction that was expressly dismissed as inappropriate in

Howard Johnson Co. v. Hotel & Restaurant Employees, 417

U.S. 249 (1974). Thus, neither Bill’s Trucking nor the other

cases cited by the Union evidence a conflict in the circuits as

a result of the Eleventh Circuit’s decision.’

Il. The Eleventh Circuit’s Characterization of the

Underlying Agreement Was Correct and Does Not

Conflict with Other Circuits

Beginning at page 14 of its Petition, the Union asserts -

that the Eleventh Circuit’s decision regarding the scope of §

301 “is contrary to a majority of the Circuit Courts and

degrades § 301 as a forum for resolving labor disputes."

The Union asserts that the Eleventh Circuit incorrectly

limited § 301 contracts to collective bargaining agreements,

*The fourth case cited by the Union, U.S. Gypsum, is not specifically

discussed in the Petition. That case, a 1974 decision prior to numerous

cases clarifying the limits of a successor’s obligations, is simply another

example of a decision finding that based on the particular facts of the

case -- the facts being more similar to Wiley than Burns -- the successor

could be required to arbitrate.

od

12

rather than using a more expansive interpretation as utilized

by the circuits in the cases cited in the Petition.

The Union’s argument is erroneous, however,

because the Eleventh Circuit did not hold that § 301 applies

only to collective bargaining agreement. Rather, the court

held there was no collective bargaining relationship between

the Union and Independent I (which is not disputed) and

therefore, there could be no collective bargaining

relationship to be “passed on" to Independent II.

With respect to the language of the decision quoted

by the Union, when read in context it is clear that the

Eleventh Circuit was discussing the concept that the duty of

a successor under Fail River to "bargain in good faith with

the union” clearly cannot apply to a successor of a non-union

employer. Common sense alone tells us that a successor to

a non-union predecessor cannot have the duty to bargain with

the union because there was no collective bargaining

relationship between the union and the predecessor -- the

predecessor had no duty to bargain with union to begin with.

Thus, the Eleventh Circuit properly concluded that

the successorship doctrine may not be utilized

to force an alleged successor employer,

Independent II, into a collective bargaining

relationship in which its alleged predecessor,

Independent I, was not a participant.

[App. 26a]. This aspect of the decision simply holds that the

Fall River successorship doctrine cannot be utilized to

impose a duty to bargain on a successor where the

predecessor had no such duty. The doctrine and rationale

underlying it, as evidenced by the numerous decisions

invoking it, applies to situations involving the duties of a

13

successor to a union employer. Thus, the Eleventh Circuit

did not hold, as urged by the Union, that § 301 applies only

to collective bargaining agreements, nor does the decision

interject "the precondition of a ’collective bargaining

relationship’ between the parties upon enforcement of a

grievance settlement agreement under § 301.

Ill. The Decision Below is Consistent with the

Precedent of the Court with Respect to the Method

for Determining Workforce Continuity

As its third reason for granting the petition, the

Union contends that the decision below is contrary to the

precedent of the Court and recreates a conflict among the

circuits regarding the method for determining workforce

continuity for successorship cases. Again, upon reading the

language quoted by the Union in context, it is clear that in

this regard the Eleventh Circuit merely held that the facts of

this case did not fall into the exception to the general rule

that "a successor is only bound to collectively bargain and is

not bound to any extent by an existing contract between the

union aad the predecessor." [App. 28a].

The Eleventh Circuit noted

In some narrow circumstances, however,

there may be an exception to the rule that the

successor inherits only a duty to bargain and

does not inherit a preexisting collective

bargaining contract.

The court then discussed two situations as a guide in

explaining the exception. If the successor employer is a

result of a

14

merger in which the original employer has

disappeared and the new employer has hired

all of the old employe:’s workers, the

successor may by required to honor an

arbitration provision of the preexisting

collective bargaining agreement.

(Emphasis added; citing, Wiley and Esmark as illustrative

cases). On the other hand (and other end of the spectrum),

"if there is a mere sale of assets and the predecessor

employer remains in business as a viable entity, the

successor may not be required to honor the preexisting

agreement to arbitrate". The Eleventh Circuit then properly

concludes “[t]his is not a Wiley case," which supports the

finding that this case falls into the exception to the general

rule that "a successor is only bound to collectively bargain

and is not bound to any extent by an existing contract

between the union and the predecessor.”

The Eleventh Circuit did not hold (as would be

necessary for the Union’s argument to be correct) that in

order to be a "Successor" with the obligation to bargain in

good faith the alleged successor must have hired all of the

predecessor’s employees. Such wholesale hiring may

support the additional imposition of the substantive terms of

the predecessor’s agreements, but is not the exclusive factor

to be considered. To the contrary, the Eleventh Circuit

recognized the seven factors that should be considered in

determining the successorship issue. [App 26a].

Thus, contrary to the Union’s assertion, the decision

below does not alter or purport to alter the standard for

determining workforce continuity in successorship cases.

The language of the decision cited by the Union

("Independent II has hired some but not all of Independent

15

I’s employees") has to do with the Eleventh Circuit’s finding

that even assuming Independent II is a "Fall River successor"

(as opposed to a successor under state contract or corporate

law, or an alter ego successor) the facts giving rise to the

successorship does not render Independent II liable for the

substantive terms of Independent I’s agreements (such as the

provision in the Settlement Agreement requiring arbitration)

as an exception to the general rule that a successor is not so

liable.

CONCLUSION

The Petition should denied as the Eleventh Circuit’s

decision does not create a conflict among the circuits and is

consistent with prior decisions of this Court.

Respectfully Submitted,

CHANLEY T. HOWELL

Counsel of Record

Steven A. Werber

FOLEY & LARDNER

The Greenleaf Building

200 Laura Street

Jacksonville, Florida 32202

(904) 359-2000

Counsel for the Respondent

Date: August 10, 1994