Appendix — Chicago & Northeast Illinois District Council of Carpenters v. Contempo Design, Inc.
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APPENDIX A — OPINION OF THE UNITED STATES
COURT OF APPEALS FOR THE SEVENTH CIRCUIT
DATED AND DECIDED AUGUST 15, 2000
IN THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
No. 98-3206
CONTEMPO DESIGN, INCORPORATED,
Plaintiff-Appellee,
Vv.
CHICAGO AND NorTHEAST ILLINOIS
District COUNCIL OF CARPENTERS,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 96 C 4513 — James F. Holderman, Judge.
ARGUED MarCH 30, 1999 — REARGUED EN BANC
DECEMBER 14 1999 — Decipep Aucust 15, 2000
Before FLaumM, Chief Judge, and Posner, CorFey,
EASTERBROOK, RIPPLE, MANION, KANNE, ROVNER, DIANE P.
- Woop, Evans and WILLiaMs, Circuit Judges.
RippLe, Circuit Judge. Contempo Design, Inc.
(“Contempo”) filed an action under § 301 of the Labor
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Appendix A
Management Relations Act (“LMRA”), 29 U.S.C. § 185,
against the Chicago and Northeast Illinois District Council
of Carpenters (“the Union’) for striking in violation of their
collective bargaining agreement. The Union, believing it was
not bound by the collective bargaining agreement, had
instituted a strike against Contempo to force it to agree to a
new collective bargaining agreement. Contempo acquiesced
due to its own economic situation.
The district court granted partial summary judgment to
Contempo. It first held that the Union was bound to the
original collective bargaining agreement and then concluded
that the Union had breached that collective bargaining
agreement by violating its no-strike provision. The remaining
issues proceeded to trial before the court. After the trial, the
district court awarded Contempo damages for (1) Contempo’s
“catch-up” costs and (2) the difference in costs to Contempo
between the original collective bargaining agreement and
the second collective bargaining agreement. The Union
appeals both the grant of summary judgment and the award
of damages. For the reasons set forth in the following
opinion, we affirm the judgment of the district court.
I
BACKGROUND
A. Facts
Contempo is in the business of constructing, storing,
setting up, and taking down exhibits and displays at
conventions and trade shows and therefore employs
carpenters who are represented by the Union. However, the
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Appendix A
Union does not bargain with Contempo to reach a collective
bargaining agreement. Instead, the Union bargains with the
Woodworkers Association of Chicago, Inc. (“the Woodworkers
Association”), a multiemployer bargaining unit, to form a
collective bargaining agreement. Although Contempo is not
a member of the Woodworkers Association, the collective
bargaining agreement between the Union and the
Woodworkers Association (“the WAC CBA”) provides the
basis for Contempo’s own agreement with the Union.
Specifically, Contempo agreed to adopt and be bound by
the WAC CBA and by any successive agreements between
the Woodworkers Association and the Union by what is
known as a “hard card agreement.”
Contempo’s agreement with the Union provides as
follows:
The EMPLOYER and the UNION do hereby
agree as follows:
1. The EMPLOYER recognizes the UNION as
the sole and exclusive bargaining representative
for and on behalf of the employees of the
EMPLOYER within the territorial and
occupational jurisdiction of the UNION.
2. The parties adopt, and the EMPLOYER agrees
to be bound by the terms and conditions of a
Collective Bargaining Agreement dated June
1, 1979, between the UNION and Woodworkers
Association of Chicago Inc. as bargaining
agent for their members... .
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Appendix A
4. This agreement, and the agreement adopted
by reference as aforesaid, shall be in effect as i
of June 1, 1979, and remain in effect to and i
including the expiration date of the agreement
adopted by reference. This agreement shall
continue in effect from year to year thereafter
and the parties specifically adopt any
agreement entered into between the UNION
and Woodworkers Association of Chicago
Inc., bargaining agent for their members,
subsequent to the expiration date of the
agreement adopted by reference as aforesaid,
unless notice of termination or amendment is
given in the manner provided herein. i
BATS ITN AD pi AeA TITREYERT DS SINS A te MP NBR re gr a
5. Either party desiring to amend or terminate
this agreement must notify the other with an
acknowledgment in writing, at least three
calendar months prior to the expiration of the
then agreement adopted by reference.
R.1-1, Ex.A at 1.
Contempo entered into this hard card agreement with 4
the Union in 1980. The parties continued to be bound by :
successive WAC CBAs through the automatic renewal
provision of the hard card agreement. In 1993, the
Woodworkers Association and the Union entered into a CBA
to be effective through May 31, 1995, (“the 1993 WAC
CBA”). Pursuant to Contempo’s hard card agreement,
Contempo and the Union automatically adopted and became
bound by this 1993 WAC CBA.
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Appendix A
On February 27, 1995, the attorney for the Woodworkers
Association, Karl W. Grabemann, sent a letter to the Union,
which stated that the employer-members of the Woodworkers
Association desired to terminate their respective agreements
with the Union. In a subsequent letter, Grabemann informed
the Union that the employer-members of the Woodworkers
Association had extricated themselves from their
multiemployer bargaining unit in order to bargain on an
individual basis with the Union. Contempo was not a member
of the Woodworkers Association, nor was it listed on either
letter as a participating employer.
Despite the intentions manifested in the above
correspondence, the Union and the Woodworkers Association
reached an agreement for a successor to the 1993 WAC CBA.
This successor agreement, the 1995 WAC CBA, became
effective June 1, 1995, and was to remain in effect until May
31, 2000.
From 1980, when Contempo entered into its hard card
agreement with the Union, until June 1, 1995, Contempo
and the Union never engaged in any collective bargaining
negotiations. Also, the Union never requested or required
Contempo to bargain with the Union, nor did Contempo
request that the Union bargain with Contempo. The Union
admits that it did not provide written notice to Contempo of
a desire to amend or terminate their hard card agreement at
least three months prior to the May 31, 1995, expiration date
of the 1993 WAC CBA. Usually, after the Union and the
Woodworkers Association entered into a new collective
bargaining agreement, the Union mailed a copy to Contempo;
after the 1995 negotiations, however, the Union did not
provide Contempo with a copy of the new agreement.
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Appendix A
On June | or 2, 1995, the Union’s business agent visited
Contempo and gave Contempo’s president, Robert Shaw, a
copy of a written proposal for anew CBA between Contempo
and the Union. The agent informed Shaw that he wanted the
contract signed by June 9 and that, if Shaw did not sign by
. that date, a “work action” might be called.
In a letter dated June 14, Grabemann, now also
representing the hard card agreement employers, including
Contempo, initiated collective bargaining negotiations with
the Union.' Grabemann negotiated with the Union on July
12, July 14, and July 17. Following the negotiations on July
17, Contempo claims that Grabemann first discovered that —
Contempo, as well as the other employers, had entered into
hard card agreements with the Union and that these
agreements never had been terminated. In a letter dated July
18, Grabemann ended the negotiations with the Union. In
his letter, he stated, in pertinent part, as follows:
The employers that I represent have
determined that they are contractually and
lawfully entitled to adopt by reference the new
or successor Collective Bargaining Agreement
between your Union and Woodworkers
Association of Chicago, the term of which is from
1. The present lawsuit originally was filed by Contempo, |
Design Agency, Inc., Howard Displays, Inc., M.G. Design
Associates Corp., Osgood Displays, Inc., and Stevens Exhibits &
Displays, Inc. After the district court granted summary judgment,
all employers except Contempo settled with the Union, and, thus,
those employers are not parties to this appeal. In this opinion,
therefore, we-make reference only to Contempo.
;
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Appendix A
June 1, 1995 to May 31, 2000. Of course, these
employers need not elect to be so bound — they
are so bound contractually and by operation of
law.
Each of the employers that I represent are
party to a so-called “hard card” Agreement with
your Union, copies of which are in your files.
Inasmuch as your Union has failed to provide
proper and timely notice of the termination of this
Agreement, the parties to it are and remain bound
to the Agreement and, as a consequence, the
employers that I represent are-eontractually bound
by reference to the new or successor Collective
Bargaining Agreement between your Union and
Woodworkers Association of Chicago.
R.10, Ex.1 at 1. No additional bargaining occurred after
July 17.
The 1995 WAC CBA contains the following “no-strike”
provision:
5.5 There shall be no Strikes, lockouts or
stoppage [sic] of work for any causes not covered
by this Agreement. The parties will, by lawful
means, compel their members to comply with this
Agreement.
R.1-1, Ex.G at 4. Nevertheless, on March 4, 1996, the Union
engaged in a strike of Contempo, of which Contempo did
not have advance notice. At this time, Contempo was
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Appendix A
pursuing a multimillion dollar contract with Bank of America
to construct minibanks in shopping malls. It already had
expended significant amounts of time and money to help it
secure the contract. According to Contempo, it feared that,
in its time-sensitive industry, the strike would cause it to
lose Bank of America as a potential client. At the same time,
Contempo also had other pressing financial obligations,
including a significant bank loan from the purchase of the
company several years earlier. This loan had been
restructured several times, and, for the year preceding the
strike, Contempo had been able to make only interest, and
not principal, payments.
Due to its financial situation, the same day the strike
began, Contempo entered into negotiations with the Union
to settle it. As part of that process, Contempo agreed to a
new CBA (“the Contempo CBA”). Pursuant to the settlement
between Contempo and the Union, Contempo was required
to pay the striking employees’ wages for the two days of the
strike.’
The 1995 WAC CBA and the Contempo CBA differ in
the wage rates and in the cost of fringe benefits that
2. The settlement is set forth in a letter from Contempo to the
Union and is dated March 5, 1996 — the day the parties completed
their negotiations. The letter states that, per the negotiations,
(1) Contempo will pay two-days wages to all carpenters that reported
to work on March 4, 1996, (2) Contempo will not take disciplinary
action against any of its employees as a result of the strike, and
(3) Contempo is in agreement with the industry contract upon review
and signing. See R.40, Jt. Ex.13.
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Appendix A
Contempo pays its employees.’ Also, Contempo must pay a
greater rate of contribution to the Chicago District Council
of Carpenters Welfare Fund under the Contempo CBA.‘
Finally, the agreements differ in their duration: The 1995
WAC CBA covers June 1, 1995, to May 31, 2000, and the
Contempo CBA covers June 1, 1995, to May 31, 1998.
During the negotiations with the Union, Contempo
reserved its right to sue. Later, on J uly 23, 1996, it filed this
action against the Union.
B. Proceedings in the District Court
The district court granted partial summary judgment to
Contempo because it held that the parties were bound by the
1995 WAC CBA at the time of the Union’s strike. First, it
determined that neither party had terminated the hard card
agreement according to the agreement’s terms. Next, it held
that Contempo had not waived timely notification of the
Union’s intent to terminate the agreement. Finally, the court
Stated that the Union had not shown that it relied to its
detriment on the termination of the hard card agreement in
its negotiations with the Woodworkers Association or in its
3. The annual wage increase for Carpenter-employees under
the 1995 WAC CBA was $.40 the first year, $.40 the second year,
$.45 the third year, $.50 the fourth year, and $.50 the fifth year.
Under the Contempo CBA, the wage increase is $.70 the first year,
$.75 the second year, and $.80 the third year.
4. Under the 1995 WAC CBA, Contempo was to pay $3.60
per hour effective June 1, 1996: however, under the Contempo CBA,
Contempo is to pay $3.98 per hour.
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Appendix A
negotiations with Contempo. Thus, the court concluded that
the Union and Contempo were bound by their hard card
agreement and by the 1995 WAC CBA at the time of the
Union’s strike. Therefore, the court held that the Union’s
strike was in violation of the no-sirike provision of the 1995
WAC CBA.
Two issues then proceeded to trial before the court. First,
the court asked whether the Contempo CBA had been signed
under economic duress. The court stated that, when entering
into the Contempo CBA to end the strike, Contempo was
not bereft of the quality of mind necessary to make a contract.
Thus, the court held that the Contempo CBA was not entered
into under economic duress.
Second, the court calculated the amount of damages
owed to Contempo as a result of the Union’s breach of the
no-strike provision in the 1995 WAC CBA. The court sought
to make Contempo whole and, thus, focused upon what the
situation would have been if the strike had not occurred. The
court first determined that Contempo was entitled to the costs
necessary to catch up on work missed due to the two days of
the strike. The cost of catching up, as stipulated by the parties,
was $11,574.48. The court therefore awarded Contempo
$11,574.48 in damages.
The court next determined that Contempo had assumed
costs under the Contempo CBA which it would not have
incurred but for the Union’s illegal strike. According to the
court, at the time of the strike, Contempo was perched to
obtain a multiyear, multimillion dollar contract with Bank
of America to construct minibanks in shopping malls, but
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Appendix A
the strike placed this opportunity in jeopardy. As the court
discussed, Contempo decided to sign the Contempo CBA to
end the strike rather than hold out and possibly lose the Bank
of America contract. Contempo reasonably had to minimize
the damages from the Union’s breach of the 1995 WAC CBA
and to achieve that goal, the court explained, Contempo
agreed to sign the Contempo CBA. But for the illegal strike,
the court concluded, Contempo would not have entered into
the Contempo CBA and, therefore, would not have incurred
additional expenses over the costs in the 1995 WAC CBA.
Thus, the court determined, Contempo’s compensatory
damages included the difference in costs between the 1995
WAC CBA and the Contempo CBA, or $433,139.39.
II
DISCUSSION
A. Standard of Review
We review the district court’s grant of summary
judgment de novo. See Brooklyn Bagel Boys, Inc. vy.
Earthgrains Refrigerated Dough Prods., Inc., 212 F.3d 373,
377 (7th Cir. 2000). The findings of fact made by the district
court at the trial are reviewed under the clearly erroneous
standard. See Fed. R. Civ. P. 52(a); see also Cullom v. Brown,
209 F.3d 1035, 1041 (7th Cir. 2000). Questions of law are
reviewed de novo. See Cooper v. Carl A. Nelson & Co., 211
F.3d 1008, 1015 (7th Cir. 2000); Chemtool, Inc. vy.
Lubrication Techs., Inc., 148 F.3d 742, 744-45 (7th Cir.
1998).
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Appendix A
B. Applicable Law
Contempo filed suit under § 301 of the LMRA, which
states: “Suits for violation of contracts between an employer
and a labor organization representing employees. . . may be
brought in any district court of the United States having
jurisdiction of the parties.” 29 U.S.C. § 185. At the time
§ 301 was enacted, no restrictions existed on unions. The
preceding labor statute, the Wagner Act of 1935, had
prevented only employers from engaging in unfair labor
practices. See 1 P. Hardin, The Developing Labor Law 957
(3d ed. 1992). In many states, unions could not be sued
directly and, thus, there was no remedy against them.
See id. With the new statute, Congress intended to make
collective bargaining agreements enforceable against both
employers and unions. See id. In § 301, Congress sought to
add stability to labor relations and to make collective
bargaining agreements valid, binding, and enforceable.
See id. at 959. Doing this, Congress hoped, would allocate
responsibility among parties and promote industrial peace.
See id. The primary goals of the statute were to protect the
rights of workers, to promote industrial peace, and to preserve
the free flow of commerce. See Labor Management Relations
Act of 1947, Pub. L. No. 80-101, ch. 120, sec. 101, § 1,
61 Stat. 135, 135-36 (1947).
The Supreme Court’s watershed opinion in Textile
Workers Union v. Lincoln Mills, 353 U.S. 448 (1957),
reflected the congressional concern about ensuring industrial
peace. It stated that Congress had “indicate[d] a primary
concern that unions as well as employees should be bound
to collective bargaining contracts” and that “Congress was
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also interested in promoting collective bargaining that ended
with agreements not to strike.” /d. at 453. Due to its concern
for enforcing collective bargaining agreements and
promoting industrial peace, the Court held that Congress had
expressed “a federal policy that federal courts should enforce
these agreements on behalf of or against labor organizations.”
Id. at 455. Thus, the Court concluded, Congress had created
substantive law by enacting § 301. See id. at 451, 456.
According to the Court, the substantive law of § 301 is
federal law, “which the courts must fashion from the policy
of our national labor laws.” Jd. at 456. It explained that the
Act expressly furnished some substantive law and for those
areas in which the statute did not expressly speak, courts
should fill the gaps
by looking at the policy of the legislation and
fashioning a remedy that will effectuate that
policy. The range of judicial inventiveness will
be determined by the nature of the problem.
Federal interpretation of the federal law will
govern, not state law. But state law, if compatible
with the purpose of § 301, may be resorted to in
order to find the rule that will best effectuate the
federal policy.
Id. at 457 (citations omitted).
The Supreme Court reiterated the importance of the
collective bargaining process in resolving industrial disputes
in the Steelworkers trilogy: United Steelworkers v. American
Manufacturing Co., 363 U.S. 564 (1960), United Steelworkers
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Appendix A
v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960),
and United Steelworkers v. Enterprise Wheel & Car Corp.,
363 U.S. 593 (1960). The Court continued to stress the
significance of the collective bargaining process and the need
to enforce the terms of collective bargaining agreements in
Charles Dowd Box Co. v. Courtney, 368 U.S. 502 (1962),
and Local 174, Teamsters v. Lucas Flour Co., 369 U.S. 95
(1962).°
When the LMRA does not expressly provide the
substantive law to be applied, federal courts have the
authority to create a federal common law for the enforcement
5. In Charles Dowd Box Co., the Court held that federal court
jurisdiction under the LMRA did not divest state courts of
jurisdiction because Congress had intended, by § 301, to expand
and not limit the availability of forums for the enforcement of
collective bargaining agreements. See 368 U.S. at 508. Then, in
Lucas Flour, the Court clarified that, although state courts had
jurisdiction to hear § 301 claims, the law to be applied was federal
law. See 369 U.S. at 102-03. As the Court stated,
the subject matter of § 301(a) “is peculiarly one that
calls for uniform law.” The possibility that individual
contract terms might have different meanings under state
and federal law would inevitably exert a disruptive
influence upon both the negotiation and administration
of collective agreements.
Id. at 103 (citations omitted); see also International Union; United
Auto., Aerospace & Agric. Implement Workers v. Hoosier Cardinal
Corp., 383 U.S. 696, 701 (1966); Crider v. Spectrulite Consortiam,
Inc., 130 F.3d 1238, 1242 (7th Cir. 1997). (“The substantive law in
a section 301 suit for breach of the collective bargaining agreement
is federal common law rather than state law.”).
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of collective bargaining agreements. See Textile Workers,
353 U.S. at 457; see also Litton Fin. Printing Div., A Diy. of
Litton Bus. Sys. y. NLRB, 501 U.S. 190, 202-03 (1991);
Complete Auto Transit, Inc. v. Reis, 451 U.S. 401, 405-06
(1981). Therefore, this court has the authority to fashion the
appropriate common law in this area of the law. See United
States v. Palumbo Bros., 145 F.3d 850, 863-64 (7th Cir.)
(“To adjudicate and resolve disputes involving breaches of
collective bargaining agreements, § 301 of the LMRA
‘authorizes federal courts to fashion a body of federal law’
to enforce those agreements.” (quoting 7extile Workers, 353
U.S. at 451)), cert. denied, 525 U.S. 949 (1998).
C. Breach of the 1995 WAC CBA
i.
The parties dispute whether the automatic renewal
Provision of the hard card agreement bound the parties to
the 1995 WAC CBA. We believe that the district court
correctly decided this issue.
We cannot accept the Union’s submission that the
Suggested transformation of the Woodworkers Association
into single-employer bargaining units made the automatic
renewal provision impracticable. According to the Union,
the basic assumption of the hard card agreement was that
the Woodworkers Association would negotiate one
agreement between the employer-members of that
Association and the Union; however, the splintering of the
Woodworkers Association would create the possibility of
multiple, conflicting agreements. As the district court noted,
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Appendix A
the Woodworkers Association and the Union, despite
preliminary overtures to the contrary, did agree to the 1995
WAC CBA. There was, therefore, simply an insufficient
basis to justify finding that the automatic renewal provision
was impracticable.
The Restatement (Second) of Contracts explains the test
for impracticability of a contract as follows:
Where, after a contract is made, a party-s
performance is made impracticable without his
fault by the occurrence of an event the
nonoccurrence of which was a basic assumption
on which the contract was made, his duty to render
that performance is discharged, unless the
language or the circumstances indicate the
contrary.
Restatement (Second) of Contracts § 261 (1981). Here, the
record discloses nothing more than an initial possibility that
a basic assumption underlying the hard card agreement —
the existence of a single agreement between the Union and
the Woodworkers Association — might change. This mere
possibility did not entitle the Union to proceed as if the hard
card agreement had been invalidated. Moreover, a letter from
the Woodworkers Association to the Union, correspondence
to which Contempo was not a party, could not operate to
alter unilaterally the contractual obligation between
Contempo and the Union when the potential source of
confusion — multiple CBAs between the Woodworkers
Association and the Union — never came to be.
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Appendix A
As the district court explained, the hard card agreement
detailed explicitly the procedure a party must follow to
provide notice of termination of the agreement. The Union
admits that it did not follow such procedure. The terms of a
collective bargaining agreement are to be enforced strictly
when the terms are unambiguous. See Young v. North Drury
Lane Prods., 80 F.3d 203, 205 (7th Cir. 1996) (“We must
enforce the terms of a collective bargaining agreement when
those terms are unambiguous.”); Central States, Southeast
& Southwest Areas Pension Fund vy. Hartlage Truck Serv.,
Inc., 991 F.2d 1357, 1361 (7th Cir. 1993) (“We must enforce
the terms of the CBAs when those terms are unambiguous.”’);
accord Irwin v. Carpenters Health & Welfare Trust Fund,
745 F.2d 553, 556 (9th Cir. 1984). The district court therefore
correctly concluded that, because neither the Union nor
Contempo provided written notice to the other party at least
three months prior to the expiration of the 1993 WAC CBA,
the automatic renewal provision went into effect, and the
parties became bound to the 1995 WAC CBA. It is
undisputed that neither party provided timely notice of a
desire to amend or terminate the hard card agreement.
Therefore, by its strict terms, the hard card agreement
remained in effect and operated automatically to bind the
parties to the 1995 WAC CBA.
2.
In a closely related argument, the Union argues that the
conduct of the parties manifested an intent to waive the lack
of timely notice of termination of the master agreement.
According to the Union, such a waiver occurred through one
of two sequences of events: (1) the letters from the
oy Oy iid ag
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Woodworkers Association to the Union stating that the
employer-members wished to bargain individually, and/or
(2) the conduct of Contempo and the other hard card
agreement employers subsequent to the automatic renewal
of the hard card agreement.
With respect to the alleged waiver by the Woodworkers
Association, we agree with the district court that the letter
from Attorney Grabemann to the Union, in which the
employer-members of the Woodworkers Association
indicated that they would no longer be parties to a
multiemployer bargaining unit, did not act as a waiver from
Contempo. As the district court pointed out, Contempo was
not a member of the Woodworkers Association and was not
listed in the letter. Thus, the Woodworkers Association could
not waive timely notice for Contempo.
The Union argues also that Contempo waived the
Union’s untimely notification of termination by negotiating
with the Union soon after the 1995 WAC CBA went into
effect.° The district court noted that, in the cases relied upon
by the Union, the parties waived the untimely notification
of termination prior to the automatic renewal of the successor
agreement. By contrast, the district court explained, the
conduct that allegedly gave rise to a waiver here occurred
after the automatic adoption of the 1995 WAC CBA.
Therefore, the district court concluded that Contempo did
not waive the Union’s untimely notification of termination.
6. The Union relies upon (1) two letters from Grabemann to
the Union attempting to initiate negotiations and (2) the three
unsuccessful negotiation sessions between the Union and the hard
card agreement employers.
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A ppendix A
We believe that the district court correctly analyzed the
Union’s waiver claim. None of the actions that the Union
relies upon as evidence of waiver took place before the 1995
WAC CBA was signed. Indeed, the record establishes that
neither the Union nor Contempo ever attempted to terminate
the ongoing contractual relationship before the effective date
of the new master CBA, June 1, 1995. Therefore, at the time
the events relied upon by the Union took place, both parties
already were bound by the new agreement. This situation is
indeed very different from the one found in the cases relied
upon by the Union to establish waiver. In those cases, one
party had attempted to terminate an agreement and the other
party waived noncompliance with the termination
requirements necessary to prevent the new agreement from
taking effect.’ Conduct occurring after the new agreement
7. In Allied Industrial Workers, Local Union No. 7 70 (Hutco
Equipment Co.), 285 N.L.R.B. 651 (1987), the NLRB found that a
union had waived any objection to an employer’s untimely notice.
The employer notified the union that it was opting out of the
collective bargaining agreement’s automatic renewal after the
notification date. The union agreed to negotiate a new agreement
and actually began negotiations. Only after the negotiations soured
did the union raise its timeliness objection in an attempt to bind the
employer to the automatic renewal Provision in the previous
agreement. In that case, the employer’s notice, as well as the
negotiations, occurred prior to the automatic adoption of the
successor agreement.
Similarly, in Hassett Maintenance Corp. (Service Employees
International Union), 260 N.L.R.B. 121] (1982), the untimely notice
was served before the automatic renewal of the original collective
bargaining agreement, and the NLRB held that both parties acted as
(Cont'd)
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Appendix A
has taken effect cannot “waive” a timely notice provision
because, even in the absence of that conduct, the other party
could not have done anything differently to prevent the
agreement from taking effect; the agreement was already in
force.
3.
The Union next submits that it had relied to its detriment
on the termination of Contempo’s hard card agreement when
it negotiated the 1995 WAC CBA with the Woodworkers
Association and when it negotiated the Contempo CBA with
Contempo. Because Grabemann demanded to bargain on
behalf of several hard card agreement employers, the Union
claims that it detrimentally abandoned its individual
negotiations with other hard card agreement employers. The
district court explained that the Union did not provide any
authority to support its argument, but that Contempo had
(Cont'd)
though the notice was effective and the contract had not been
renewed. See id. at 1211 n.3.
The remaining two cases cited by the Union pertain to the
requirements necessary for an employer’s timely notice to withdraw
from a multi-employer bargaining unit. An employer is entitled to
withdraw from the bargaining unit for any reason prior to the date
set for renegotiation of the existing contract or prior to the date on
which negotiations actually commence. See NLRB v. Hayden Elec.,
Inc., 693 F.2d 1358, 1363 (11th Cir. 1982); NLRB v. Callier, 630
F.2d 595, 598 (8th Cir. 1980). The union, however, may impliedly
consent to or acquiesce in the employer’s untimely notice of
withdrawal by negotiating with the employer on an individual basis.
See Hayden Elec., 693 F.2d at 1365; Caillier, 630 F.2d at 598-99.
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posited two possible sources of law for the Union’s argument:
estoppel and unilateral mistake. On appeal, the Union argues
both theories. We shall examine each.
To find estoppel, one party must have made a misleading
representation on which the other party reasonably relied to
its detriment. Here, as the district court Stated, the Union
has not alleged that Contempo made any misleading
representations or that the Union reasonably relied on any
such misrepresentations. Therefore, the Union could not
make out a claim for estoppel.
In a variation on this same theme, the Union also submits
that it made a unilateral mistake that ought to excuse it from
its obligations to Contempo under the 1995 WAC CBA.
According to the Restatement (Second) of Contracts § 153,
a contract is voidable due to the mistake of one party when
the mistake is about a basic assumption on which the party
made the contract. Additionally, the mistake must have a
material effect on the agreed exchange of performances, and
the mistaken party must not bear the risk of mistake. See id.
Finally, the court must determine that (1) to enforce the
contract would be unconscionable, or (2) the other party has
reason to know of the mistake or his fault caused the mistake.
See id.
We agree with the district court that the Union has not
shown that enforcement of the 1995 WAC CBA would be
unconscionable. Nor has the Union shown that the
Woodworkers Association or Contempo caused the mistake.
The Union relies on the affidavit of the Union’s business
representative and chief negotiator, T. Richard Day, to show
22a
Appendix A
that it was mistaken about the hard card agreement employers
being bound to the 1995 WAC CBA. In his affidavit, Day
states that the Union’s negotiations were based on the
premise that the ultimate agreement would be binding only
on the members of the Woodworkers Association and not
on the hard card agreement employers. He claims that, had
the mistake not been made, the Union would have fought
for better terms in the 1995 WAC CBA. First, he points out
that the economic items in the 1995 WAC CBA would have
been different: The Union would have increased its demands
for higher wages, benefits, and holidays. Also, he asserts,
the Union would have asked for stricter guidelines for work
performed outside the shop. Moreover, he claims, the Union
would not have agreed to the creation of a committee of
Union and Woodworkers Association representatives
designed to protect health and welfare costs and benefits.
Although some of these items may have changed, the Union
has not demonstrated that the difference was so drastic as to
be unconscionable. Also, the Union has not shown that the
Woodworkers Association or Contempo were at fault for the
Union’s mistaken belief. Although the Woodworkers
Association initially proposed to disband and bargain on an
individual basis, it nevertheless ultimately decided to bargain
for the new CBA on behalf of all its members. More
importantly, Contempo had no role in the Woodworkers
Association’s decision, and, thus, Contempo clearly was not
at fault for the Union’s mistaken belief.
4.
As discussed above, the hard card agreement, which
automatically bound the Union and Contempo to the 1995
em s
23a
Appendix A
WAC CBA, was enforceable between those two parties.
Thus, beth the Union and Contempo were bound by the terms
of the 1995 WAC CBA. As we have noted previously, the
1995 WAC CBA contained the following no-strike provision:
5.5 There shall be no strikes, lockouts or
stoppage [sic] of work for any causes not covered
by this Agreement. The parties will, by lawful
means, compel their members to comply with this
Agreement.
R.1-1, Ex.G at 4. The Union’s strike of Contempo clearly
violated the terms of this provision. Thus, the Union is liable
to Contempo for any damages resulting from its breach.
D. Superseding Contract
In the preceding section, we held that the district court
correctly determined that the 1995 WAC CBA was a valid
obligation of both the Union and Contempo, an obligation
which the Union breached. We now address the Union’s
alternative contention that the Contempo CBA, although the
product of the Union’s breach, constituted a valid
superseding agreement.
The district court determined that, by ent. ring into the
Contempo CBA, Contempo did not waive any rights under
the 1995 WAC CBA. Nor did it waive any damages
stemming from the breach of that contract. In the district
court’s view, the Contempo CBA did not supersede the 1995
WAC CBA because the Contempo CBA was the direct and
proximate result of the breach of the 1995 WAC CBA.
24a
Appendix A
Contempo had a choice of damages, and it chose to minimize
its damages by entering into a new CBA. See Eazor Express,
Inc. v. International Bhd. of Teamsters, 520 F.2d 951, 969-71
(3d Cir. 1975) (holding that an employer is under no duty to
minimize its damages by entering into a new collective
bargaining agreement when the union has struck in violation
of a no-strike provision in the original collective bargaining
agreement), rejected on other grounds by Max's Seafood
Cafe v. Quinteros, 176 F.3d 669 (3d Cir. 1999).
We believe that the district court was on solid ground in
its determination that the Contempo CBA did not supersede
the 1995 WAC CBA. There was simply no new consideration
for the Contempo CBA because the matter at issue between
the parties was already governed by the earlier CBA. This
concept, basic to all contract law, was employed in a most
graphic way in the labor relations context in Alaska Packers’
Ass'n v. Domenico, 117 F. 99 (9th Cir. 1902). In Alaska
Packers, the owner of a salmon cannery contracted with a
group of men to work as sailors and fishermen. The men
were expected to travel from San Francisco to Alaska and
return. In exchange, the owner would pay them, depending
on when they contracted, $50 or $60. However, once they
reached the port in Alaska, “they stopped work in a body”
and demanded $100 for their services while threatening to
stop work entirely and return to San Francisco if they were
not paid the higher sum. /d. at 101. At that time, it was
impossible for the owner to find replacement workers
because the port was remote and the season was short. After
three days, the superintendent of the ship yielded to the
workers’ demand and agreed to pay the $100. The workers
finished their job, but on return to San Francisco, the owner
25a
Appendix A
of the ship refused to pay them more than stated in their
original contracts. See id. at 100-01.
The Court of Appeals for the Ninth Circuit held that
consent to the workers’ demand, while in remote waters
during a short season and with a large sum of money invested
in the venture, was without consideration because the new
agreement was based solely on the workers’ rendering the
services they were already under contract to provide. See id.
at 102. They breached their obligation and were liable to the
owner in damages; the owner did not voluntarily waive the
breach of the original contract by entering into the new
contract when the workers took unjustifiable advantage of
the necessity of the ship owner in order to gain greater
compensation for themselves. See id. In the course of its
decision, the court relied upon several cases in which one
party breached a contract by stopping work at a time when
the other party had a need for immediate completion of the
work or for the particular services for which he had contracted.*
In those cases, the breachor was liable for damages stemming
from his breach, and, according to the court, if the non-
breaching party had entered into a new contract with the
breachor, he could still show that the new contract was made
without consideration and was thus a “nudum pactum.””
8. See Alaska Packers, 117 F. at 102-04 (citing King v. Duluth,
M. & N. Ry., 63 N.W. 1105 (Minn. 1895); Lingenfelder v.
Wainwright Brewery Co., 15 S.W. 844 (Mo. 1891); and Cobb v.
Cowdery, 40 Vt. 25 (1867)).
9. Although the exact scenario in Alaska Packers has not been
presented to this circuit, the principles announced in it have been
(Cont'd)
26a
Appendix A
Indeed, the basic requirement that a contract needs
consideration to be enforceable has a distinct function in this
area of contract modification, a function very important in a
case such as this one: to prevent coercive modifications.
See United States v. Stump Home Specialties Mfg., Inc.,
905 F.2d 1117, 1121 (7th Cir. 1990).
We must focus then on whether there was any new
consideration for the Contempo CBA. In our search for such
consideration, the pre-existing duty rule must govern our
inquiry. The pre-existing duty rule states that promising to
perform a duty that already is owed under an existing contract
is not consideration, and, thus, a modification to the contract
(Cont'd) _
confirmed by us. For example, in Herremans v. Carrera Designs,
Inc., 157 F.3d 1118 (7th Cir. 1998), we discussed how, if an
employee is bound contractually to remain in the employ of his
employer and the employer promises a bonus to induce the employee
to remain, then the modification of the contract is unsupported by
consideration and thus unenforceable. See id. at 1122. Similarly, in
Selmer Co. v. Blakeslee-Midwest Co., 704 F.2d 924 (7th Cir. 1983),
we stated that when one party refuses to honor a contract in order to
force the other party to surrender his rights, even though nothing
has happened to require the modification, it undermines the
institution of contract and is unenforceable. See id. at 927.
See generally Rissman v. Rissman, 213 F.3d 381, 387 (7th Cir. 2000)
(referring to Alaska Packers as the classic case of a contract
modification procured under duress); Oxxford Clothes XX, Inc. v.
Expeditors Int'l of Washington, Inc., 127 F.3d 574, 579 (7th Cir.
1997) (citing Alaska Packers with approval to support the use of
the concept of duress); United States v. Stump Home Specialties
Mfg., Inc., 905 F.2d 1117, 1121-22 (7th Cir. 1990) (using Alaska
Packers to support the concept that a contract modification without
additional consideration is not valid).
27a
Appendix A
is unenforceable. See 1 E. Allan Farnsworth, Farnsworth on
Contracts § 4.21, at 497 (2d ed. 1998). Two exceptions to
the preexisting duty rule are recognized. The first is for the
promisee to undertake to do something in addition to what
he already is obliged to do under his preexisting duty.
See id. at 500. If additional consideration is given then the
modification is valid.
The second is for the parties to agree to rescind the
original contract, which allows them to create a different
contract on entirely new terms, without providing additional
consideration. See id. at 501. “In theory, this must leave both
parties with at least an instant of freedom, during which they
are no longer bound by the old contract and are under no
duty to make a new one.” /d. This exception needs to be
approached with great caution. In McCallum Highlands, Ltd.
v. Washington Capital Dus, Inc., 66 F.3d 89 (Sth Cir. 1995),
the court, in nullifying a modification, distinguished between
the modification of a contract and the rescission of an old
contract with entry into a new contract. See id. at 93.
Although recognizing that the latter concept does not require
consideration, the court stated that, “where an alleged
rescission is coupled with a simultaneous re-entry into a new
contract and the terms of that new contract are more favorable
to only one of the parties, doubt is created as to the mutuality
of the agreement to rescind the original contract.” /d. at 94."
10. The following cases are examples of how courts have
approached these exceptions to the preexisting duty rule. This court
in American Hospital Supply Corp. v. Hospital Products Ltd., 780
F.2d 589 (7th Cir. 1986), determined that conditioning an additional
benefit on a contract modification was sufficient consideration to
(Cont’d)
28a
Appendix A
(Cont'd) P
support the contract modification. In that case, American Hospital
Supply conditioned additional loans to Hospital Products, which
was financially distressed, on Hospital Products’ agreement to
modify the contract in American Hospital Supply’s favor. See id. at
599. As the court concluded, “There is nothing unlawful about
offering a benefit to a promisee in exchange for a modification of
the contract; the problematic modifications are those not supported
by consideration.” Jd.
In Awe v. Gadd, 161 N.W. 671 (Iowa 1917), the parties entered
into a written contract but the plaintiff claimed that they had agreed
subsequently, in an oral contract, to different terms, which benefitted
unly the plaintiff. The court asked first whether the parties had
rescinded, by mutual agreement, the wnitten contract but determined
that the record did not support such an action. See id. at 673. The
court inquired next whether the plaintiff had promised additional
consideration to the defendant for the benefit he was to receive by
the modification. See id. Finding that the plaintiff did not undertake
any new obligation under the contract, the court held that the plaintiff
had provided no new consideration,.and the modification therefore
was invalid. See id. at 673-74.
Similarly, in Recker v. Gustafson, 279 N.W.2d 744, 753 (Iowa
1979), the parties reached an oral agreement wherein the Gustafsons
agreed to sell 155 acres of their land to the Reckers at a set price.
The agreement included the right of the Reckers to buy, at a fixed
price, an adjoining tract of land containing a house and several
buildings. After receiving the Reckers’ down payment, the
Gustafsons elicited — second oral agreement from the Reckers to
pay an additional /,000 for the 155 acre tract and, although
retaining the right of first refusal, the price for the adjacent land
was no longer fixed. To induce the Reckers to agree to the additional
terms, the Gustafsons stated that they were willing to go to court to
(Cont'd)
29a
Appendix A
In this case, there clearly was no new undertaking by
the Union in return for the new CBA. Nor can it be said that
there was mutual rescission of the 1995 WAC CBA by
Contempo and the Union. Viewed in its starkest terms, the
Union simply repudiated that agreement and left Contempo
with no framework upon which to conduct its future dealings
with the Union. There is no doubt in those circumstances
that Contempo did not voluntarily agree to rescind the 1995
WAC CBA. Even if we characterize more charitably the
Union’s conduct in striking Contempo, the record simply
will not support the conclusion that the parties entered freely
an agreement to rescind the earlier contract; the Union’s
strike gave Contempo no choice but to acquiesce in the
replacement of the 1995 WAC CBA with the new CBA
as the framework for its ongoing labor relations.
See 1 Farnsworth on Contracts § 4.24, at 478. As the district
court noted, the strike breached the original agreement and
placed Contempo in a perilous financial situation. Under
these circumstances, it cannot be said that Contempo’s
agreement to enter into a new contract in order to end the
(Cont’d)
extricate themselves from the original agreement and that litigation
was costly.
Given that no new circumstances had prompted the Gustafsons’
demand for mor money, the court held that the lack of additional
consideration from the Gustafsons prevented the second agreement
from being valid. See id. at 759. The court rejected the use of
rescission, when the result was effectively a modification of the
existing contract, to allow new terms to be added to the contract
with no additional consideration provided by the promisee. See id.
at 758.
EEE eer e_— e—eSEoECO Rk e_e_ananvVncO3VT_—_ET,hec——eEeEeEeEe—eeeeee
30a
Appendix A
strike operated as a free and voluntary rescission of the 1995
WAC CBA." Given this lack of mutuality, the 1995 WAC
CBA cannot be characterized as having been freely rescinded.'*
Respecting the district court’s finding that the Contempo
CBA was the product of the Union’s illegal strike, which
violated the 1995 WAC CBA, we must conclude, on this
record, that the Contempo CBA was without consideration
because the Union undertook no new obligations. Nor can it
be said that the parties freely rescinded their existing
11. As the Restatement (Second) of Contracts § 175 states, “If
a party’s manifestation of assent is induced by an improper threat
by the other party that leaves the victim no reasonable alternative,
the contract is voidable by the victim.” The commentary to this
section rejects requiring that the threat “arouse such fear as precludes
a party from exercising free will and judgment or that it must be
such as would induce assent on the part of a brave man or a man of
ordinary firmness.” Jd. at § 175 cmt. b. Such a foundation was
omitted, continues the commentary, because of its “vagueness and
impracticability.” Jd. The threat must, however, leave the victim
with no reasonable alternative. See id. See also 1 Farnsworth on
Contracts § 4.16, at 478.
12. The dissent’s reliance on Richards Construction Co. v.
Air Conditioning Company of Hawaii, 318 F.2d 410 (9th Cir. 1963),
is therefore misplaced. As the court in that case emphasized, there
was a dispute between the parties that was settled, by mutual
agreement, in a new contractual undertaking. The court found that
the contractor, by giving up the position that there was already a
binding contract, gave new consideration. The subcontractor gave
up its position that it was under no duty to the contractor. Jd. at 414.
Here, Contempo never gave up its rights under the 1995 WAC CBA
and, in fact, explicitly preserved during the negotiations its right to
sue.
3la
Appendix A
obligations before entering into the new agreement. The new
contract was induced by the Union’s decision not to honor
the preexisting legal obligation of the 1995 WAC CBA at a
time when, according to the district court, Contempo had no
reasonable alternative but to acquiesce to the Union’s
demands. Therefore, we hold that the Contempo CBA did
not supersede the 1995 WAC CBA.
E. Damages
1.
In determining the amount of damages to which
Contempo is entitled for the Union’s breach of the “no-strike”
provision in the 1995 WAC CBA, the district court correctly
took as its guiding principle that the appropriate measure of
damages was the “actual loss sustained by the plaintiff as a
direct result of the breach and which may reasonably be
supposed to have been in the contemplation of the parties as
the probable result of such a breach at the time the agreement
was made.” R.72 at 290. The court explained that, because
the parties contemplated only compensatory damages as a
consequence of a breach of the no-strike provision,
Contempo may recover oniy compensatory damages.
Because the goal was to make Contempo whole, the court
focused upon what the situation would have been if the strike
had not occurred. The court first determined that Contempo’s
employees would have worked for two days and produced
two-days worth of product. Because they did not work for
two days and did not produce the product, they needed to
work over-time to “catch up.” The cost of catching up, as
aatentane
32a
Appendix A
stipulated by the parties, was $11,574.48.'° The court
therefore awarded Contempo $11,574.48 in damages. This
amount is not disputed by the parties.
The court next determined that Contempo had sustained
costs stemming from the Contempo CBA which it would
not have incurred but for the Union’s illegal strike. The court
found that, because of the illegal strike, Contempo was placed
in financial peril. The industry, according to the court, is
time sensitive. At the time of the strike, Contempo was in a
situation in which it potentially could obtain a multiyear,
multimillion dollar contract with Bank of America to
construct minibanks in shopping malls; the strike placed this
opportunity in jeopardy. Contempo’s options, when faced
with the strike, were to allow the strike to continue and
possibly to lose the Bank of America contract with a potential
loss of millions, or to sign the Contempo CBA to end the
strike with a loss that turned out to be less than half of a
miliion. According to the court, Contempo reasonably
decided to minimize the damages from the Union’s breach
of the 1995 WAC CBA and, to achieve that goal, Contempo
agreed to the Contempo CBA. But for the illegal strike, the
court concluded, Contempo would not have entered into the
13. Included in the $11,574.48 is the expense of two days wages
which Contempo would have had to pay its employees even if no
strike had occurred. The court therefore deducted $7,602.40 as the
cost of two regular days of wages; however, because the Union
required Contempo to pay its employees their wages for the two
days of the strike, the court added back in the amount of wages for
two days — $7,602.40. Thus, the court determined that $11,574.48
was the proper amount of damages due to Contempo for it to catch
up for the days lost due to the strike.
33a
Appendix A
Contempo CBA and, therefore, would not have incurred
additional expenses over the costs in the 1995 WAC CBA.
Thus, the court determined, Contempo’s compensatory
damages included its additional costs due to the Contempo
CBA.
In a breach of contract action under § 301 of the LMRA,
damages should place the aggrieved party in the position it
would have been in had the breach, i.e., the strike, not
occurred. See Chicago Painters & Decorators Pension,
Health & Welfare, & Deferred Sav. Plan Trust Funds v. Karr
Bros., 755 F.2d 1285, 1290 (7th Cir. 1985). The Union
submits that the district court should have awarded only the
expenses incurred by Contempo in catching up on work
missed during the strike. It was error, the Union argues, to
award damages for the wage and benefit differential between
what Contempo had to pay under the Contempo CBA and
what it would have paid under the 1995 WAC CBA. It asserts
that the wage and benefit differentials were not a direct result
of the breach of the no-strike provision in the governing 1995
WAC CBA.
Contempo responds that the Contempo CBA was a direct
and proximate result of the illegal strike; Contempo would
not have entered into the Contempo CBA had the strike not
occurred. Therefore, submits Contempo, the wage and benefit
differentials are recoverable. Such an award is necessary,
Contempo claims, to put it back in the position in which it
would have been if the strike had not occurred. Given that
the Union has not challenged the district court’s factual
finding that, but for the illegal strike, Contempo would not
have entered into the Contempo CBA, let alone demonstrated
34a
Appendix A
that the finding was clearly erroneous, see Eirhart v.
Libbey-Owens-Ford Co., 996 F.2d 837, 842 (7th Cir. 1993),
Contempo asserts that the district court’s damages award
should not be disturbed.
2.
According to the Restatement (Second) of Contracts
§ 347, an injured party is to be placed in as good a position
as he would have been had the contract been performed."*
This is a well-established principle in the field of contract
damages. See, e.g., 3 Farnsworth on Contracts § 12.8, at
188-89 (“One is entitled to recover an amount that will put
one in as good a position as one would have been in had the
contract been performed.”); 5 Arthur Linton Corbin, Corbin
on Contracts § 992, at 6 (1st ed. 1964) (“The effort is made
to put the injured party in as good a position as he would
have been put by full performance of the contract, at the
least cost to the defendant and without charging him with
harms that he had no sufficient reason to foresee when he
made the contract.”).
This rule on damages applies in the labor context. If one
party breaches a collective bargaining agreement, the injured
party may recover damages; if the union strikes “in violation
14. An injured party is allowed to recover compensatory
damages for a breach of a contract. The amount of compensatory
damages is generally equal to (1) the net amount of losses caused
by the breach plus (2) the gains prevented because of the breach
minus (3) the savings made due to the breach. See 5 Arthur Linton
Corbin, Corbin on Contracts § 992, at 6 (lst ed. 1964). Thus,
damages = losses caused + gains prevented minus savings made.
35a
Appendix A
of the contract, the company is entitled to its damages.” Drake
Bakeries, Inc. v. Local 50, Am. Bakery & Confectionary
Workers Int'l, 370 U.S. 254, 266 (1962). Under § 301 of the
LMRA, “breach of contract damages should place the
aggrieved party in the place he would have been in had the
breach not occurred.” Chicago Painters, 755 F.2d at 1290.
Before recovering damages, an injured party must
demonstrate that the damages are foreseeable, certain, and
nonavoidable. Only foreseeable damages are recoverable for
a breach of contract, see Evra Corp. v. Swiss Bank Corp.,
673 F.2d 951, 958 (7th Cir. 1982), and the foreseeability of
damages is considered at the time the parties entered into
the contract, see Restatement (Second) of Contracts § 351.
The question asked is whether a reasonably prudent person
in the position of the breaching party, at the time the parties
entered into the contract, would have considered these
damages to be the natural consequence of this type of breach.
See id.; see also W.L. Mead, Inc. v. International Bhd. of
Teamsters, 129 F. Supp. 313, 317 (D. Mass. 1955) (stating
that business loss is a natural and foreseeable consequence
of an illegal strike to anyone acquainted with the business).
Thus, in the context of this case, we must ask whether a
reasonably prudent person in the position of the Union, at
the time it entered into the 1995 WAC CBA, would have
contemplated as a natural consequence cf violating the 1995
WAC CBA’s no-strike provision, that an employer would
yield to the pressure of the illegal strike and enter into a new
collective bargaining agreement. Considering that the
purpose of a strike is to force an employer into acceding to
the demands of the Union, it certainly ‘is reasonable to
AY Ry ON
36a
Appendix A
conclude that the Union-would have foreseen, when it entered
into the 1995 WAC CBA, that an unlawful strike could coerce
an employer into entering into a new CBA. Thus, damages
related to anew CBA as a result of an unlawful strike were
foreseeable to the Union at the time it entered into the 1995
WAC CBA.
Next, we consider whether the damages are certain.
Under § 301, the measure of damages recoverable for a
breach of contract is the actual loss sustained as the direct
result of the breach. United Elec., Radio & Mach. Workers
v. Oliver Corp., 205 F.2d 376, 388 (8th Cir. 1953); cf. Gulf
Coast Bldg. & Supply Co. v. International Bhd. of Elec.
Workers, Local No. 480, 428 F.2d 121, 125 (Sth Cir. 1970)
(stating that damages under § 303 of the LMRA may be
recovered only for actual losses sustained as a result of the
breach); Sheet Metai Workers Int'l Ass'n, Local Union No.
223 v. Atlas Sheet Metal Co., 384 F.2d 101, 109 (Sth Cir.
1967) (same). Contempo therefore must prove the fact of
damages before recovering. See George E. Hoffman & Sons,
Inc. v. International Bhd. of Teamsters, 617 F.2d 1234, 1247
(7th Cir. 1980). “ ‘The general rule is, that all damages
resulting necessarily and immediately and directly from the
breach are recoverable, and not those that are contingent and
uncertain.” ” Story Parchment Co. v. Paterson Parchment
Paper Co., 282 U.S. 555, 563 (1931) (quoting Taylor v.
Bradley, 39 N.Y. 129 (1868)). Performance by the Union
under the 1995 WAC CBA would have meant that the strike
would not have occurred. But for the illegal strike, Contempo
would not have incurred losses for the days its employees
were not working and Contempo would not have entered
into the new CBA. See W.L. Mead, Inc., 129 F. Supp. at 317
37a
Appendix A
(using “but for” test to calculate losses due to an illegal
strike). Thus, as the district court held and the parties do not
dispute, Contempo is entitled to its catch-up costs.
Additionally, as the district court held, but for the strike, the
1995 WAC CBA would have remained the operative contract
between Contempo and the Union. Thus, whatever would
put Contempo in the position it would have been under the
1995 WAC CBA before the strike is the appropriate measure
of damages Contempo is entitled to receive. Because
Contempo would not have entered into the Contempo CBA
but for the illegal strike, these damages related to the
Contempo CBA are the certain and direct result of the
Union’s breach.
Finally, we ask whether these costs incurred by
Contempo were avoidable. At the time of the Union’s illegal
strike, Contempo was faced with two options: (1) to not sign
the new CBA, which would cause it to accumulate losses
for each additional day of the strike and which could cause
it to lose the multimillion dollar contract with Bank of
America; or (2) to enter into the new CBA.
An employer is under no duty to minimize its damages
by entering into a new collective bargaining agreement when
the union has struck in violation of a no-strike provision in
the original collective bargaining agreement. See Eazor
Express, Inc. v. International Bhd. of Teamsters, 520 F.2d
951, 969-71 (3d Cir. 1975)."5 As Eazor Express explains,
15. If the employer waits out the Strike, it may recover any
reasonably justified expenses expended to minimize the damages
(Cont'd)
38a
Appendix A
‘One is not obligated to exalt the interests of the defaulter
to his own probable detriment.’ ” Jd. at 971 (quoting Jn re
Kellett Aircraft Corp., 186 F.2d 197, 199 (3d Cir. 1950)).
By entering into the new CBA, however, Contempo limited
its damages to the difference in contract prices and to costs
for each day in which the strike already had occurred. Thus,
Contempo made a reasonable effort to limit its damages by
entering into the new CBA.
Whether an available alternative transaction
is an appropriate substitute depends on many
factors, including the similarity of the performance
that the injured party will receive and the times
and places at which they would be rendered. . . .
If the party in breach itself offers to perform the
contract on terms less favorable to the injured
party, this may nevertheless be an offer of an
appropriate substitute.
3 Farnsworth on Contracts § 12.12, at 240-41. This concept
applies in the labor context. When a union strikes illegally,
the employer usually has no alternative source for a substitute
other than the breaching union. Thus, the employer either
may wait out the unlawful strike and then recover damages
(Cont'd)
due to the strike. See Frito-Lay, Inc. v. Local Union No. 137, Int'l
Bhd. of Teamsters, 623 F.2d 1354, 1364 (9th Cir. 1980) (allowing
the injured employer to recover salaries, which it paid to clerical
workers who were maintained as standbys for the resumption of
normal operations, and bonuses, which it paid to management to
induce them to stay, as a justifiable expense incurred in order to
minimize the damages caused by the strike).
39a
Appendix A
or may enter into a new contract with the striking union.
Here, as the district court found, Contempo, faced with
financial difficulties, had no choice but to enter into the new
CBA.
The difference in costs to Contempo between the 1995
WAC CBA and the Contempo CBA is the amount that would
put Contempo in the same position as it would have been if
the 1995 WAC CBA was still the operative contract. We
can calculate exactly the amount of harm caused by the
Union’s illegal strike by comparing the costs to Contempo
under the 1995 WAC CBA and the costs to Contempo under
the Contempo CBA. The difference in costs to Contempo is
$433,139.39. Therefore, Contempo is entitled to recover
$11,574.48, which is the amount Contempo expended to
catch up after the illegal strike, and $433,139.39, which is
the difference in costs to Contempo between the 1995 WAC
CBA and the Contempo CBA.
Conclusion
For the foregoing reasons, the judgment of the district
court is affirmed.
AFFIRMED
40a
Appendix A
Evans, Circuit Judge, with whom Circuit Judges
Rovner, DiANE P. Woop, and WILLIAMS join, dissenting.
There are a few flaws in the formation of a contract that
make it void from the get-go, including duress, lack of
consideration, mutual mistake, misrepresentation, and the
mental incompetence of a party. The majority jumbles this
list by disguising what really is a finding of duress in lack-of-
consideration’s clothing.
Duress, where one side acts in bad faith to gain an unfair
advantage over the other, is the most likely contract-killing
doctrine to apply to the new CBA that Contempo and the
Union reached on March 6, 1996, ending the Union’s 2-day
strike. The Union did not hold a gun to the heads of
Contempo’s negotiators or twist their arms, so we are here
talking only about economic duress. In Illinois,
[ejconomic duress is present where one is induced
by a wrongful act of another to make a contract
under circumstances which deprive him of the
exercise of free will, and a contract executed under
duress is voidable .... To establish duress, one
must demonstrate that the threat has left the
individual “bereft of the quality of mind essential
to the making of a contract.”
Resolution Trust Corp. v. Ruggiero, 977 F.2d 309, 313 (7th
Cir. 1992) (quoting Alexander v. Standard Oil Co., 423
N.E.2d 578, 582 (Ill. App. 3d 1981)). The critical issue in
duress is not so much whether the decision was rational or
voluntary given the immediate circumstances, but rather
4la
Appendix A
“whether the statement that induced the promise is the kind
of offer to deal that we want to discourage, and hence that
we call a ‘threat.’ ” Selmer Co. v. Blakeslee-Midwest Co.,
704 F.2d 924, 927 (7th Cir. 1983). See also United States vy.
Stump Home Specialties Mfg., Inc., 905 F.2d 1117, 1122 (7th
Cir. 1990) (“The sensible course would be to enforce contract
modifications (at least if written) regardless of consideration
and rely on the defense of duress to prevent abuse. All
coercive modifications would then be unenforceable, and
there would be no need to worry about consideration, an
inadequate safeguard against duress.” (citations omitted)).
There is no question here that the Union had Contempo
over a barrel. The exhibit/display business is time-sensitive,
and the Union struck just as Contempo was negotiating a
multiyear, multimillion-dollar contract to build minibanks
inside Chicagoland grocery stores for Bank of America. But
striking at an inopportune time for the employer is a familiar
and hard-nosed union tactic, not an unfair one. The parties
and the district court agreed that a major issue at trial would
be whether the-new CBA was void ab initio because
Contempo signed it under duress. After considering all of
the evidence, the district judge decided that Contempo did
not act under duress because it was not “bereft of the quality
of mind essential to making the contract” with the Union in
March 1996. I see no reason to quarrel with this
determination, a finding of fact that deserves deference.
“Duress is not shown by the fact that one was subjected to
...adifficult bargaining position or the pressure of financial
circumstances.” Ruggiero, 977 F.2d at 313. Contempo’s
officials were between a rock and a hard place, and they
made a rational, calculated economic decision not to fight
42a
Appendix A
the Union. Instead, they entered into a new collective
bargaining agreement that would ensure their ability to
pursue the Bank of America contract.
In allowing Contempo to back out of that decision, the
majority relies on Alaska Packers’ Ass'n v. Domenico, 117
F. 99 (9th Cir. 1902). In that classic case of duress, the
workers “willfully and arbitrarily” broke a clear obligation
to work for a certain wage and coerced a better deal out of
their employer, who at the time had no alternative but to
accede to their demands. /d. at 102-03. In Alaska Packers
there was no doubt that a valid contract was in place and
there was no doubt that the employees acted in bad faith.
Things were not so clear in this situation in our case.
There is little evidence that the Union acted in bad faith when
it struck Contempo in March 1996. The issue of whether the
June 1995 Woodworkers Association CBA, including its
no-strike clause, applied to Contempo was hotly contested
at the time of the strike. Indeed, the state of affairs was so
convoluted that Contempo itself initially thought that the
latest CBA between the Woodworkers Association and the
Union did not govern the company’s relationship with the
Union. Contempo and the other hard card employers began
negotiating anew CBA with the Union on June 14, two weeks
after the latest CBA between the Woodworkers Association
and the Union had gone into effect on June 1. Those
negotiations continued for a month, until it dawned on
Contempo on July 17 that anew CBA might not be necessary
because the hard card agreements binding the Union and
Contempo to the latest CBA still were in place.
43a
Appendix A
' Though I agree with the majority that Contempo ard
the Union were bound by the CBA that went into effect on
June 1, this hardly was crystal clear at the time. The space
the en banc majority (as well as the original panel) devotes
to establishing that the June 1 CBA was binding on
Contempo and the Union indicates that the Union’s position
that it was not bound was far from frivolous. At the time the
strike occurred and the new CBA was reached in March 1996,
there was significant uncertainty as to whether the J une 1995
CBA was binding. The Union’s decision to strike at a
moment of extreme vulnerability for Contempo constitutes
tough bargaining, not bad faith.
Those factors make this case less like Alaska Packers
and more like Richards Construction Co. v. Air Conditioning
Co. of Hawaii, 318 F.2d 410 (9th Cir. 1963). This more
contemporaneous Ninth Circuit decision distinguished
Alaska Packers from a situation where the two parties have
a genuine dispute over whether a preexisting contract is in
place. Much as in our case, the Richards court noted,
[A]lthough it is now established, after a trial in
which the court had to sift much conflicting
testimony, that appellee’s bid did ripen into a
contract, it was by no means as clear, at the time,
that there was such a contract. Appellant
maintained that there was, appellee maintained,
just as firmly, that there was not.
The subsequent negotiations ... are consistent
with the idea that appellant was not at all sure
44a
Appendix A
that it had a binding contract, however firmly it
asserted that position.
Id. at 413.
Likewise, the uncertainty as to whether a contract already
existed means that there was consideration for the new
contract negotiated between Contempo and the Union in
March 1996. Richards again is instructive:
[W]hat happened, in substance, was a mutual
surrender, by the parties, of their antithetical
positions, in exchange for a new, formally
executed, complete and binding contract.
We need not, and do not, apply the rule
applied in certain cases cited by the trial court, to
the effect that a party to a contract has a choice,
when confronted by a naked demand for more
money, between rejecting the demand and suing
for his damages, or assenting to the demand, in
which case he will be bound. We rejected this idea
in Alaska Packers. The differentiating factor here
is that there was a dispute as to whether appellee
was bound. A settlement of that dispute involves
the giving of new considerations by both
parties. . . . Generally speaking, a contract to settle
a genuine dispute is binding; the law favors such
contracts; this was such a contract.
Id. at 414. In the new pact, both sides got something — the
Union gained modest wage and benefit increases for its
45a
Appendix A
members and Contempo won an end to the strike and to the
uncertainty over whether a contract was in place. That’s
consideration.
This case swings on whether the Union improperly
coerced Contempo into signing the second contract under
economic duress. If there was duress, then that contract is
void and Contempo is entitled to the $433,139.39 difference
between the first and second contracts. Without duress, the
second contract is legally valid and the company’s damages
should be limited to the $11,574.48 in costs for the illegal
2-day strike. The district court did not find duress and neither
does the majority — yet today’s opinion wipes out the second
contract anyway. Extinguishing the second contract on the
ground of lack of consideration is a mistaken and roundabout
way to let Contempo out of its agreement even though it did
not act under duress. Erasing the second contract as a remedy
for the breach of the first contract is a confusing, novel, and
open-ended reason for voiding a contract. It is also unfair.
We respectfully dissent. 7
A true Copy:
Teste:
Clerk of the United States Court of
Appeals for the Seventh Circuit
46a
APPENDIX B — TRANSCRIPT OF VOLUME III OF
TRIAL OF THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS,
EASTERN DIVISION DATED AUGUST 7, 1998
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
No. 96 C 4513
CONTEMPO DESIGN, INC.,
Plaintiff,
Vv.
CHICAGO AND NORTHEAST ILLINOIS
DISTRICT COUNCIL OF CARPENTERS,
Defendant.
Chicago, Illinois
August 7, 1998
1:34 p.m.
Trial
VOLUME III
TRANSCRIPT OF PROCEEDINGS ~~
BEFORE THE HONORABLE JAMES F. HOLDERMAN
* * *
47a
Appendix B
[2] THE CLERK: 96 C 4513, Contempo Designs v.
Chicago and Northeast Illinois.
THE COURT: Good afternoon. Let me ask counsel to
identify themselves for the record.
MR. STEINMEYER: Good morning (sic), your Honor.
Peter Steinmeyer and Karl Grabemann on behalf of the
plaintiff, Contempo Design.
THE COURT: Good afternoon.
MR. GRABEMANN: I’1l add to that by saying “Good
afternoon,” your Honor.
THE COURT: Thank you.
MR. WHITFIELD: Good afternoon, your Honor.
Collins Whitfield and Travis Ketterman on behalf of the
defendant.
THE COURT: Yes, good afternoon.
All right, you may be seated.
As I stated to counsel at the conclusion of the
proceedings earlier this week, I reviewed the evidence and
the arguments set forth by counsel and am now prepared to
rule in this trial without a jury that has been presented by
counsel.
{ first want to thank counsel for excellent presentations
in the case. You crystalized the issues and you presented
48a
Appendix B
them in an understandable way so that I could make a fair
and just determination, or what I believe is a [3] fair and just
determination, in this case.
The first thing I want to do is to state for the record —
I’m sure it’s clear without me stating it — that I adopt the
amended agreed statement of uncontested facts, which was
filed on August 4, 1998. There was one minor change that
_ was necessary, however, — or one minor change is
necessary. In paragraph 14 there’s a typographical error in
the date set forth in that paragraph, and that paragraph in
whole should state as follows:
“Beginning on the morning of Monday, March 4, 1996”
— not “1994” as stated in the uncontested fact as presented
— “the union began a strike against plaintiff Contempo that
was accompanied by picketing at both entrances to
Contempo’s plant (hereafter the ‘Contempo strike’).
That and the other uncontested facts, 1 have adopted,
and considering those uncontested facts, I will now move to
the issues, the agreed statement of issues and fact that counsel
presented.
The first issue presented by counsel in the Final Pretrial
Order was, what was the duration of the Contempo strike,
and what damages, if any, were caused by the Contempo
strike?
The second aspect of that issue is, of course, the primary
issue, or one of the primary issues in this case.
——Ee
49a
Appendix B
[4] First of all, with regard to the duration of the
Contempo strike, based upon the evidence presented, the
strike effectively encompassed two days of work that
Contempo was deprived of by the strike, work that should
have been performed by the union laborers employed by
Contempo but was not.
In addition to the testimony of the witnesses caliled by
Contempo on this point, I looked to Joint Exhibit 14, which
is the only record indicating that any money was paid to
those union employees for those two days. There was no
presentation of any other payment to those union employees
for any other work performed other than the Joint Exhibit
14 and the testimony presented. So that’s the additional
evidence that I relied upon in addition to the testimony, which
I found credible, from the Contempo witnesses, as to the
duration of the strike.
Now, as I had ruled in my ruling on plaintiff's motion
for summary judgment, that ruling being on May 20th, 1998,
I determined that the plaintiff — the plaintiffs in the case at
that point — are covered by the 1995 WAC CBA. In fact,
I find that, of course, both parties to this lawsuit, who remain
in the lawsuit, are covered by the 1995 WAC CBA for the
reasons | set forth in my May 20th ruling.
The strike, which we have referred to as the [5] Contempo
strike, which began on March 4, 1996 violated the no-strike
clause of the 1995 WAC CBA, which is Joint Exhibit 3,
specifically Section 5.5 of that agreement. Having violated
that no-strike clause, the strike that occurred at the Contempo
plant on those two days was illegal. 7
50a
Appendix B
Pursuant to Section 301 of the Labor-Management
Relations Act, the measure of damages recoverable when a
labor organization engages in the type of conduct engaged
in by the union here is measured by the actual loss sustained
by the plaintiff as a direct result of the breach and which
may reasonably be supposed to have been in the
contemplation of the parties as the probable result of such a
breach at the time the agreement was made.
The parties contemplated when they entered into and
then subsequently adopted and continued to be bound by
Section 5.5 of the WAC CBA 1995 compensatory damages
for breaches of that contract and specifically compensatory
damages for breaches of the no-strike clause. And so only
compensatory damages may be recovered.
Now, here in determining what the appropriate amount
of compensatory damages is that result to the plaintiff as a
result of the defendant’s breach of the no-strike clause,
I had to consider, and do consider, what would make the
plaintiff whole. In determining what would [6] make the
plaintiff whole, I must evaluate what the facts would have
_been had the strike not occurred? What would the
circumstances have been had the strike not occurred in the
plaintiff's business?
Well, first of all, in the plaintiff's business, the two days
of strike in which the employees did not work did not produce
any product for the plaintiff. Those two days would have
been worked by the employees and the employees would
have worked on those two days and produced the display
products that were appropriate for those two days of work.
iii aac taillla
Sla
Appendix B
Likewise, during those two days, or for those two days,
the employees would earn the regular wages that they earned
without overtime on those two days, a Monday and Tuesday
in March of 1996.
And so, since the plaintiff received no product, since
there was no work by those employees on those two days,
the plaintiff had to incur the catch-up cost that the lawyers
referred to in the uncontested facts, the catch-up cost to
produce the product that was not produced during the strike,
and that catch-up cost equals $11,574.48. That’s the costs
that the plaintiff would have incurred — or that’s the costs
that the plaintiff did incur as a result of the strike and would
not have incurred had the strike not occurred.
[7] However, that catch-up cost, to produce that product,
is not entirely recoverable, because what the plaintiff is
entitled to, to be made whole, is to have the product made at
the regular cost that the plaintiff would have incurred to have
that product made, and so, consequently, to obtain the
appropriate compensatory damages, one must deduct from
the $11,574.48, the catch-up costs, the cost of two days
regular time that would have been expended by the plaintiff
to produce the same product had the strike not occurred.
And, as the evidence has shown, as reflected detailed in
Joint Exhibit 14, the evidence has shown that two days wages
is equal to $7,602.40. That’s the amount I am determining ~
from the evidence that the plaintiff would have had to expend
to produce the product had the employees not struck.
And so, since it cost plaintiff $11,574.48 to produce the
product because the employees struck, the amount that it
|
52a
Appendix B
would have tncurred had the employees not struck, the
amount of cost it would have incurred, has to be deducted.
However, in this case, we really can substitute that
deduction for the two days wages that the plaintiff did,
in fact, pay as a result of a further agreement, which is
reflected in Joint Exhibit 13, which was [8] for compensation
of those striking employees for the two days that they struck,
two days wages, and not for the Saturday compensation, as
argued by the defense, and because the plaintiff already paid
that money, and because the plaintiff now has received the
product, the determination that I must make is what money
did the plaintiff actually expend for the production of that
product over and above the amount of money it would have
spent had the strike not occurred.
And so, consequently, the compensatory damages with
regard to the payment of employees to produce the product
during — or for the purpose of catching up for the strike,
totals out to $11,574.48. To put on top of that a recovery by
the plaintiff of the $7,602.40 would be to accord the plaintiff
more than the plaintiff is entitled to as compensatory
damages, because the plaintiff not only got the product, the
plaintiff would recover the catch-up cost for the product,
and the plaintiff would recover the costs that it would have
incurred had the strike not occurred, which would be an extra
benefit to the plaintiff, which is not allowable, and so,
consequently, for that purpose, the monetary damages for
the two days catch-up cost equals $11,574.48, without an
additional recovery of the $7,602,40.
That, however, doesn’t finalize the issue with regard to _
what damages the plaintiff incurred as a [9] result of the
Bie
53a
Appendix B
breach of the no-strike clause by the defendant, because what
happened on the morning of March 4, 1996 was that the
plaintiff, because of the illegal strike of the union, the
plaintiff was put in financial peril. As the parties agreed in
the uncontested facts, and as Ms. Robertson of Design
Agency testified without substantial cross examination, this
industry is a time-sensitive industry, and timing is essential,
compliance with time requirements is essential.
Mr. Shaw testified about the financial difficulties that
the plaintiff was incurring, how the plaintiff at that time,
on March 4, 1996, had the opportunity to obtain a multiyear,
multimillion dollar contract in a new facet of the plaintiff's
business, which is the mini — building the minibank inside
of grocery stores for Bank of America, and that the strike
placed in jeopardy the obtaining of that contract. There was
no other evidence that any specific deadline was placed in
jeopardy, just the potential of obtaining that contract.
At that point, Mr. Shaw, Mr. Korth, and the others at
Contempo had to make a decision, and primarily Mr. Shaw
was the decision-maker, with input from Mr. Korth and
others, Mr. Shaw had to decide between the financial perils
he was facing as a result of the strike. One option was to not
succumb to the requests of the union, to allow the [10] strike
to continue, and possibly, perhaps probably, lose the
multiyear, multimillion dollar contract with Bank of
America.
Another option that Mr. Shaw had, which he weighed,
I’m sure, against the multiyear, multimillion dollar contract,
was the signing of the 1996 contract, which we’re calling
54a
Appendix B
the Contempo contract, which is Joint Exhibit 2, with what
has now turned out to be a less than half a million dollar
loss.
So as any plaintiff who has suffered a breach of contract
must do, Mr. Shaw, as a reasonable person, and Contempo,
the Contempo executives, had to minimize the damages
_resulting from the defendant’s breach.
To minimize those damages, plaintiff Contempo,
Mr. Shaw, Mr. Korth, and others, decided to agree to the
Contempo CBA in 1996 and thereby suffer — potentially
suffer any loss resulting from having to pay the additional
amounts required under that contract versus the amounts
that would have had to be paid under the WAC CBA, that
1995 CBA, which ran, and still runs, through May 31,
year 2000.
There is no doubt that these were heavy economic
pressures, that that decision that was made by Mr. Shaw,
Mr. Korth, and others at Contempo was one that was made
while those persons were upset, were outraged, were [11]
feeling the financial pressure imposed by the financial burden
such as the debt that Contempo had with the bank that were
not caused by the defendant, but also the pressure caused by
the defendant, which aggravated and made more severe the
financial pressure placed upon Contempo by the defendants
— or by the defendant union calling the strike on March 4,
which continued, as I found, on to March 5.
As was shown by the evidence, but for the Contempo
strike, which I’ve determined was illegal, Contempo would
ee
55a
Appendix B
not have entered into the 1996 contract and would not have
incurred those additional expenses over and above the
1995 CBA.
And so, consequently, it is my determination that the
compensatory damages which are due and Owing to
Contempo as a result of the illegal strike are those additional
costs that were incurred as a result of the 1996 contract.
Entering into that contract did not waive those damages,
nor did that contract supersede the 1995 WAC CBA, because
it was agreed upon as a direct and proximate cause of the
breach of the 1995 WAC CBA by the defendant. And, as
I statéd, it was a choice of damages, and, as plaintiffs are
required, the plaintiff here chose to minimize the damages
by entering into the 1996 collective bargaining agreement.
[12] Consequently, adding the $11,574.48 which I found
resulted from the Contempo strike with the agreed upon
amount that the parties have stipulated to of $433,139.39,
the compensatory damages incurred as a result of the
Contempo strike engaged in by the defendant equal
$444,713.87.
I make this determination of the damages that resulted
from that strike to the plaintiff as a result and as a direct and
proximate cause of defendant’s illegal strike separate and
apart from any determination that I will make and will
announce with regard to the economic duress argument made
by the plaintiff, because the second issue presented by the
parties in the agreed statement of contested issues of fact
and law was, and I quote:
2 8. ee een
56a
Appendix B
“2. Was the Contempo CBA void and unenforceable
ab initio because it was signed under duress?”
The answer to that question is that the Contempo CBA
is void and unenforceable ab initio because it was a result
of the wrongful conduct of the defendant, but I do not believe
that the evidence showed that the plaintiff or any of the
officers of the plaintiff were under such economic duress as
to allow a defense to the enforcement of that-contract
resulting from economic duress, and the reason why I say
that is primarily because of the manner in which the
negotiations occurred.
[13] Although the plaintiff was wronged by the wrongful
conduct of the defendant, the strike, which was a breach of
contract and therefore wrongful conduct, and although that
strike-caused, as do all strikes, that strike caused financial
distress, ine plaintiff did not show the requisite loss of will
essential to making the contract. The plaintiff did not show
that Contempo was bereft of the quality of mind essential to
making the contract.
And although there was substantial testimony, especially
by Mr. Shaw, regarding his state of mind and his feelings
that he was over a barrel and that the survival of the company
was at risk, and that he felt that he had no legal options, and
he took this personally, and he found it very traumatic,
he made a very calculated decision, one which minimized
the damages to his company.
But in addition to that, when the union proposed as an
additional term of the agreement to settle the Contempo strike
57a
Appendix B
that the plaintiff would forego any litigation and the
opportunity to pursue any litigation, Mr. Shaw and Contempo
drew the line, and, in fact, it seemed to me, from listening to
the evidence and the drawing of that line, that what Mr. Shaw
— what I infer Mr. Shaw was thinking was, we’ll sign the
contract, we’ll settle the strike, we’ll get the Bank of America
contract, and we’ll fight it out in court later. That’s precisely
the scenario [14] that came about. :
I believe, too, that when the union said it was not
essential that the nonlitigation clause be a part of their
agreement, the union certainly was aware that Mr. Shaw and
Contempo wanted to continue to hold the litigation card in
their hand to be played at the prerogative of Contempo, and,
as I stated, that’s precisely what Contempo did.
A shrewd business decision like that is not made by
someone who is bereft of the quality of mind essential to the
making of a contract. And so, consequently, plaintiff's
argument regarding economic duress falls short.
The third issue in the agreed statement of contested
issues of fact and law is inapplicable at this point because it
only contemplated if I were to have determined that the
Contempo CBA was signed under duress.
: I find that the collective bargaining agreement signed
by the plaintiff Contempo and by the union, dated March -
1996, was not signed under duress, but is null and void
ab initio, and never was enforceable, and that the 1995 WAC
CBA, which continues now and will continue until it expires
on May 31, year 2000, is the applicable collective bargaining
58a
Appendix B
agreement between Contempo and the union. I recommend
to all parties that you adhere to that binding contract.
[15] Regarding the next issue, is Contempo entitled to
an award of prejudgment interest at the prime rate as of June
1, 1998 on any damages it has suffered, since the amounts
of damage that I have determined appropriately should be
ordered to be paid by the defendant to the plaintiff as
compensatory damages in this case are so specifically
determinable, and, in fact, I have determined them to be
$444,713.87, it appears that the request for prejudgment
interest is appropriate, as requested by the plaintiff from June
1, 1998. That amount, if I’ve calculated it correctly, at
8.5 percent, the prime interest rate requested to be utilized
by the plaintiff, not contested by the defense — what the
prime rate was was not contested — certainly, the defense
contested that any prejudgment interest was appropriate, the
defendant contested that issue, the defendant’s position is
no prejudgment interest is appropriate — but I calculated
that amount for the two months, approximately two months,
from June 1 until today — actually through August 1. That
interest, prejudgment interest, amount totals $6,3000.11.
So, consequently, including the prejudgment interest, the
damages due and owing as a result of the breach of the 1995
WAC CBA by the defendant union is $451,013.98.
The last issue presented by the parties in [16] the agreed
statement of contested issues of fact and law is, is Contempo
entitled to an award of attorneys’ fees and costs. I can answer
that question with one word: No.
59a
Appendix B
And the reason the answer is no is because to award
Contempo attorneys’ fees, I would have to determine that
there was no merit to the defendant’s position, and that the
defendant’s position was frivolous and the defendant’s
position was presented in bad faith.
I do not believe that any of those things occurred.
I believe that the union and the union members had a good
faith argument to be made, although legally wrong, and they
should not be punished by requiring them to pay Contempo’s
attorneys’ fees as a result of their assertions. They must,
however, pay the compensatory damages that I have
determined are due and owing as a result and proximate cause
of the breach of the contract, the 1995 WAC CBA.
And because both sides, I believe, have fully and fairly
with one another litigated this matter, and that both sides
certainly have equal financial resources, I am not going to
impose or award costs of this litigation, even though
primarily — primarily — the plaintiff is the prevailing party
on most of the issues presented and most of the arguments
presented. I believe that the burdens resulting from the
judgment here today on the union are [17] sufficient to
compensate the plaintiff, and that the parties back in 1996,
in the conference room at Contempo, when the agreement
was reached that there would be litigation, that litigation
would not be precluded, I believe both sides contemplated
this very day, when a judgment would be made with regard
to the conduct, and compensatory damages would be
determined, if any. And so for all those reasons each side
shall bear their own costs.
60a
Appendix B
I must point out, since I asked plaintiff's counsel about
any cases involving the economic duress issue, I must point
out, and I know that the parties have utilized my opinion in
the Ficke case, which, of course, was on a motion to dismiss
a complaint where the Court has to accept all the allegations
of the plaintiff as true in the complaint and must basically
attempt to visualize any facts that are consistent with the
complaint that would allow for the recovery requested and
the claim presented, I — my clerk actually — located another
case in the economic duress context where the Court of
Appeals of the 2nd District of Illinois, on December 22nd of
1993, did affirm a circuit judge in the Circuit Court of Kane
County when that circuit judge in a bench trial made a
determination that economic duress had been imposed by
the defendant bank upon the plaintiffs. The facts, of course,
were different than those here, but perhaps it’s an example
of the type of [18] economic duress that I believe the 7th
Circuit in the Ruggerio case was considering when it did
not uphold the economic duress in the Ruggerio case but in
fact found that Mr. Ruggiero was not so bereft of the quality
of mind essential to the making of a contract that economic
duress would be upheld.
The 2nd District case in the Illinois Appellate Court,
Arians v. Larkin Bank — I’! just summarize basically the
facts — the makers of the note were told by the bank that
their son, who allegedly had engaged in a check-kiting
scheme, would, in fact, be prosecuted and go to jail if those
two elderly parents, even though the son was an adult, elderly
parents did not sign a bank note basically mortgaging their
farm out in Kane County, and then to collect on the note, the
bank again threatened prosecution and jail and imprisonment
of the son.
e 6la
Appendix B
Those individuals obviously were under a great deal of
economic pressure, but it’s the type of pressure that would
rob an individual of the ability to fairly consider the potential
options available.
With regard to the economic duress issue, which of
course I found in favor of the defendant on, I believe because
of the time-sensitive nature, immediate litigation to end the
strike would not have been a good option, might have been
a counterproductive option, might [19] have raised the level
of the dispute to the point that it could not be resolved as
quickly as it was, and might have resulted in the loss of the
Bank of America contract. Not pursuing, or not attempting
to pursue those options, I believe, was a wise decision on
the part of the Contempo people to basically agree to what
they did to minimize the damages and to hold the ability to
sue later in their pocket.
All right, I don’t believe there are additional subsidiary
findings. I believe I’ve covered the essentials. If counsel
believe that further findings are necessary on any particular
point, I will allow counsel to address me to obtain those
further findings.
Anything from the plaintiff?
MR. STEINMEYER: Nothing from the plaintiffs, your
Honor.
THE COURT: Anything from the defense? ;
MR. WHITFIELD: Nothing from the defense, your _
Honor.
62a
Appendix B
THE COURT: All nght.
All right, again, I want to compliment counsel for the
preparation of this case. This was a difficult case. I will
confess that it took me a substantial amount of time and
effort, including at least one sleepless nig it. This morning
when I woke up in the wee [20] hours of the morning, I was
attempting to resolve this case. This was not a easy issue.
And I can now understand more than I could understand
before when I was constantly urging you to settle why you
could not settle. And so I appreciate all of your efforts on this.
Is there anything else we need io address today?
MR. STEINMEYER: Nothing from the plaintiff, your
Honor. ~i
MR. WHITFIELD: Nothing from the defense, your
Honor.
THE COURT: All right, judgment will be entered. I will
now encourage you, however, one last time, because you
now have a decision and a judgment, I would hope that you
can work out some compromise solution that would allow
these parties to continue to work with one another in a
cooperative way so that everyone can benefit from future
successes in the marketplace, which is where I’m sure your
respective parties would prefer to have the competition as
opposed to here in federal district court. So I encourage you
one last time.
\ We’ll stand in recess. Thank you.
* * je *
63a
APPENDIX C — MINUTE ORDER AND JUDGMENT
OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS
DATED AUGUST 7, 1998
UNITED STATES DISTRICT COURT,
NORTHERN DISTRICT OF ILLINOIS
Name of Assigned Judge James F. Holderman
or Magistrate Judge
x * & :
CASE NUMBER 96C 4513
DATE 8/7/1998
CASE TITLE Contempo Design vs. Chicago
and Northeast
* * x
DOCKET ENTRY:
* * &
(10) @ [Other docket entry] The court, after considering
the evidence and the arguments of counsel and based
upon the findings of fact and conclusions of law stated
in open court on Aug. 7, 1998, hereby orders that
judgment be entered in favor of the plaintiff and against
the defendant in the amount of $451,013.98 with each
side to bear its own costs and attorneys’ fees.
Bd * * *
64a
Appendix C
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Case Number 96 C 4513
Contempo Designs
v.
Chicago and Nestea
JUDGMENT IN A CIVIL CASE
* * *
@ Decision by Court. This action came to trial before the
Court. The issues have been tried and a decision has been
rendered.
IT IS HEREBY ORDERED AND ADJUDGED that plaintiff,
Contempo Design, Inc., recover of defendant, Chicago and
Northeast Illinois District Council of Carpenters, the sum of
$451,013.98. Each side to bear its own costs and attorney’s
fees.
There being no just reason for delay, this is a final and
appealable order.
Michael W. Dobbins, Clerk of Court
Date: 8/7/1998 s/ Kathleen Branch
Kathleen Branch, Deputy Clerk
65a
APPENDIX D — MEMORANDUM OPINION AND
ORDER OF THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS,
EASTERN DIVISION DATED MAY 20, 1998
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
No. 96 C 4513
CONTEMPO DESIGN, INC.; DESIGN AGENCY, INC.;
HOWARD DISPLAYS, INC.; M.G. DESIGN, INC.;
and STEVENS EXHIBITS & DISPLAYS, INC.,
Plaintiffs,
v.
CHICAGO AND NORTHEAST ILLINOIS
DISTRICT COUNCIL OF CARPENTERS,
Defendant.
MEMORANDUM OPINION AND ORDER
JAMES F. HOLDERMAN, District Judge:
On July 23, 1996, plaintiffs Contempo Design, Inc.
(Contempo); Design Agency, Inc. (Design Agency); Howard
Displays, Inc. (Howard); M.G. Design Associates Corp.
(M.G.); Osgood Displays, Inc. (Osgood); and Stevens
Exhibits & Displays, Inc. (Stevens) filed a three count
complaint against defendant Chicago and Northeast Illinois
District Council of Carpenters (the Union). This court has
66a
Appendix D
jurisdiction pursuant to § 301(a) of the Labor Management
Relations Act, 29 U.S.C. 185(a). Count I, made on behalf of
all plaintiffs, seeks as relief a declaratory judgment regarding
the applicability of the 1995 Woodworkers Association of
Chicago Collective Bargaining Agreement (1995 WAC
CBA) to plaintiffs. Counts II and III each allege breach of
contract against defendant and are made on behalf of
plaintiffs Contempo and Design Agency, respectively.
Plaintiffs have filed for summary judgment on all counts.
For the following reasons, the motion for summary judgment
is granted as to the issue of the applicability of the 1995
WAC CBA to plaintiffs and is denied as to the issue of the
enforceability of the subsequent CBAs signed by plaintiffs
Contempo and Design Agency.
STATEMENT OF FACTS'
Each of the plaintiffs is an employer whose business
primarily involves the construction and storage of exhibits
and displays and/or setting up and taking down exhibits at
conventions and trade shows. Defendant is a union which
has been the bargaining representative for the employees of
the plaintiffs. During the period between June 1, 1975 and ~
April 12, 1989, inclusive, each of the plaintiffs on different
dates entered into a standardized contract with the defendant.
In each of these contracts, commonly known as “hard card
agreements,” defendant and each plaintiff individually agreed
to adopt and be bound by the then-current collective
bargaining agreement (CBA) between defendant and the
1. The following statement of facts comes from the parties’
Local Rule 12(M) and (N) statements of material facts and
accompanying exhibits.
Woodworkers Association of Chicago, Inc. (Woodworkers
Association) as well as to any successive CBA unless certain
specified termination procedures were complied with.
Although each plaintiff entered into a separate, individual
hard card agreement with defendant, each hard card
agreement is substantively identical. In pertinent part, the
67a
Appendix D
hard card agreements provide as follows:
The EMPLOYER and the UNION do hereby
agree as follows:
l.
The EMPLOYER recognizes the UNION as
the sole and exclusive bargaining representative
for and on behalf of the employees of the
EMPLOYER within the territorial and
occupational jurisdiction of the UNION.
The parties adopt, and the EMPLOYER agrees
to be bound by the terms and conditions of
[the current] Collective Bargaining Agreement
..; between the UNION and Woodworkers
Association of Chicago ... as bargaining
agent for their members. . . .
This [A]greement, and the agreement adopted
by reference as aforesaid, shall be in effect as
of [date], and remain in effect to and including
the expiration date of the agreement adopted
by reference. This [A]greement shall continue
in effect from year to year thereafter and the
parties specifically adopt any agreement
entered into between the UNION and
68a
Appendix D
Woodworkers Association of Chicago... ,
bargaining agent for their members, subsequent
to the expiration date of the agreement adopted
by reference as aforesaid, unless notice of
termination or amendment is given in the
manner provided herein.
5. Either party desiring to amend or terminate
this [A]greement must notify the other with
an acknowledgment in writing, at least three
calendar months prior to the expiration of the
then agreement adopted by reference. ~
Effective as of June 1, 1993, the Woodworkers
Association and defendant entered into a collective
bargaining agreement for the period of June 1, 1993 through
May 31, 1995 (1993 WAC CBA). Pursuant to the hard card
agreements, each plaintiff adopted and became bound by the
1993 WAC CBA. Defendant admits that it did not provide
written notice at least three months prior to the May 31, 1995
expiration of the 1993 WAC CBA to any of the plaintiffs of
a desire to amend or terminate any of the plaintiffs’ respective
hard card agreements. Defendant argues that a February 27,
1995 letter to Union President Earl Oliver from attorney Karl
W. Grabemann was written notice from the plaintiffs of the
plaintiffs desire to amend or terminate their respective hard
card agreements. The February 27, 1995 letter was written
notice to defendant that the current employer-members of
the Woodworkers Association had decided to terminate their
respective hard card agreements with defendant. None of the
plaintiffs, however, is listed in the February 27, 1995 letter.
Moreover, as of February 27, 1995, none of the plaintiffs
N
69a
Appendix D
was a member of the Woodworkers Association, and, from
January 1, 1990 to the present, none of the plaintiffs had
been a member of the Woodworkers Association. On March
29, 1995, Grabemann informed the defendant’s president that
the “employer-members have each extricated themselves
from the multiemployer bargaining unit of which they have
been a part in order that they may each bargain on a single
employer basis with your Union.”
On May 31, 1995, defendant and the Woodworkers
Association reached an agreement on a successor agreement
to the 1993 WAC CBA, pending final clarification on the
contract language. The clarifications on the final language
were completed on June 5, 1995. There were no additional
bargaining sessions between.the Woodworkers Association
and defendant after May 31, 1995. The successor agreement
to the 1993 WAC CBA became effective as of June 1, 1995,
and it will remain in effect until May 31, 2000.(1995 WAC
CBA).
From the time that plaintiffs executed their respective
hard card agreements until June 1, 1995, plaintiffs and
defendant had never engaged in any collective bargaining
negotiations. Furthermore, prior to the expiration of the 1993
WAC CBA on May 31, 1995, defendant had never requested
or required any of the plaintiffs to bargain collectively with
defendant. Similarly, from the time plaintiffs became parties
to the 1993 WAC CBA until its expiration on May 31, 1995,
none of the plaintiffs had ever requested that the defendant
bargain collectively with them. Historically, sometime after
defendant and the Woodworkers Association had entered into
a new collective bargaining agreement, defendant would
70a
Appendix D
provide each of the plaintiffs a copy of the new collective
bargaining agreement between it and the Woodworkers
Association, and the plaintiffs and defendant would adhere
to it. Following the negotiation of the 1995 WAC CBA,
defendant deviated from this prior practice and did not
provide any of the plaintiffs with either a copy of the 1995
WAC CBA or any summary of its terms.
Instead, in early June 1995, defendant began notifying
plaintiffs and other employers in the Chicago exhibit and
display industry that the defendant wanted to meet with them
to discuss the terms of anew collective bargaining agreement
with them. On June 1, 1995 or June 2, 1995, Gary Brown,
defendant’s business agent, went to plaintiff Contempo and
gave Robert Shaw, Contempo’s president, a copy of the
written proposal for a new contract. Brown said that he
wanted Shaw to sign the contract by June 9, 1995, and, that
if he did not, it was possible that a “work action” might be
called. Similarly, in early June 1995, Brown called Bruce
Robertson, then the president of plaintiff Design Agency,
and Brown told Robertson that Brown wanted to meet with
him to discuss the terms of a new contract with defendant.
A group of exhibit and display employers, including all
of the plaintiffs, through their attorney Karl Grabemann,
initiated collective bargaining negotiations by a letter to
defendant dated June 14, 1995. Prior to the June 14, 1995
letter, none of the plaintiffs had ever requested or engaged
in any collective bargaining negotiations with defendant.
Plaintiffs, through Grabemann, negotiated with defendant
on July 12, 1995; July 14, 1995; and July 17, 1995. Plaintiffs
claim that, following the July 17, 1995 negotiations,
7la
Appendix D
Grabemann discovered that each of the plaintiffs had entered
into hard card agreements with defendant and that these hard
card agreements had never been terminated.
By way ofa letter dated July 18, 1995 from Grabemann
to defendant, Grabemann broke off plaintiffs’ collective
bargaining negotiations with defendant. In pertinent part, the
July 18, 1995 stated the following:
The employers that I represent have determined
that they are contractually and lawfully entitled
to adopt by reference the new or successor
Collective Bargaining Agreement between your
Union and Woodworkers Association of Chicago,
the term of which is from June 1, 1995 to May
31, 2000. Of course, these employers need
not elect to be so bound — they are so bound
contractually and by operation of law.
(emphasis in original). No additional bargaining occurred
after the July 17, 1995 collective bargaining session.
On July 28, 1995, plaintiffs and certain other employers
in the Chicago-area exhibit / display industry filed an unfair
labor practice charge against defendant in which they alleged,
among other things, that defendant had violated the National
Labor Relations Act by refusing to recognize that the
plaintiffs and the other charging parties were parties to the
1995 WAC CBA. On November 30, 1995, the Regional
Director of Region 13 of the National Labor Relations Board
(NLRB) notified plaintiffs that she was refusing to issue a
complaint on their unfair labor practice charge. In her letter
72a
Appendix D
notifying plaintiffs of this decision, the Regional Director
indicated that, in her opinion, whether plaintiffs were parties
to the 1995 WAC CBA was irrelevant to their unfair labor
practice charge. Accordingly, she issued her ruling without
addressing the issue of whether plaintiffs were parties to the
1995 WAC CBA. Subsequently, plaintiffs and the other
charging parties appealed the Regional Director’s decision
to the Office of the General Counsel of the NLRB. On June
14, 1996, however, the Office of the Genera! Counsel notified
plaintiffs that it was affirming the decision of the Regional
Director not to issue a complaint on the foregoing charge.
This was done, again, without addressing the issue of whether
plaintiffs were bound by the 1995 WAC CBA.
The 1995 WAC CBA contains the following “no-strike”
provision:
5.5 There shall be no strikes, lockouts or
stoppage [sic] of work for any causes not
covered by this Agreement. The parties will,
by lawful means, compel their members to
comply with this Agreement.
Beginning on March 4, 1995, defendant engaged in a strike
of plaintiff Contempo that was accompanied by picketing at
both entrances to Contempo’s plant. The parties dispute
whether the strike lasted for one day or two days. Plaintiff
Contempo had no prior notice of when the strike would occur.
When Contempo’s Executive Vice President Richard Korth
arrived at Contempo’s plant on March 4, 1995, he talked to
the defendant’s representative Gary Brown. Brown
confirmed that there was a strike and advised Korth to contact
Contempo’s attorney.
73a
Appendix D
Defendant and Contempo began negotiations in the
afternoon on March 4, 1996. Contempo claims that it
informed defendant at these negotiations that Contempo was
bound by the 1995 WAC CBA; defendant denies this claim.
Contempo also claims that defendant told it that Contempo
had to sign the Contempo CBA; defendant also denies this.
Contempo agreed to sign the Contempo CBA and Korth
indicated to Brown and the Union’s Steward that Contempo
would do so only because of the Union’s coercion in striking
and picketing Contempo. Defendant demanded that
Contempo’s employees be paid for the two days that they
were on strike and Contempo agreed to this. The Union’s
members voted unanimously to adopt and ratify the
Contempo CBA and then plaintiff Contempo signed it. The
parties dispute whether the Contempo CBA was ratified on
March 5, 1996 or March 6, 1996.
There are differences between the wage rates and the
cost of fringe benefits that Contempo paid its Carpenter
employees before the Contempo strike under the 1995 WAC
CBA compared to the wage rates and fringe benefits that
Contempo is obligated to pay under the Contempo CBA.
The annual wage increase for carpenter employees under the
1995 WAC CBA over a term of five years was $.40 the first
year, $.40 the second year, $.45 the third year, $.50 the fourth
year, and $.50 the fifth year. The annual wage increase for
such employees under the Contempo CBA is $.70 the first
year, $.75 the second year, and $.80 the third year.
There are also differences in the rate of contribution that
Contempo must pay to the Chicago District Council of
Carpenters Welfare Fund. Under the 1995 WAC CBA,
74a
Appendix D
Contempo was required to pay $3.60 per hour effective June
1, 1996. The rate that Contempo has to pay under the
Contempo CBA is $3.98 per hour.
Another difference between the two agreements is the
time period that each covers. The 1995 WAC CBA covers
the period from June 1, 1995 through May 31, 2000. The
Contempo CBA covers the period from June 1, 1995 through
May 31, 1998.
Defendant then attempted to negotiate with plaintiff
Design Agency. The parties dispute whether this was in early
March 1996 or on April 1, 1996. Plaintiff Design Agency
claims that defendant threatened a strike against Design
Agency; defendant denies this. On or about April 11, 1996,
plaintiff Design Agency entered into a new CBA with
defendant. The Design Agency CBA, like the Contempo
CBA, covers the period from June 1, 1995 through May 31,
1998. The wage and fringe benefits under the Design Agency
CBA are identical to those in the Contempo CBA. The rate
of contribution that Design Agency must pay to the Chicago
District Council of Carpenters Welfare Fund is also identical
to the rate required in the Contempo CBA.
In mid-July 1996, attorney Karl Grabemann met with
Gary Brown, a business representative of defendant, and
Terrance McGann, one of defendant’s attorneys, on the lower
level of the defendant’s office at 12 East Erie Street in
Chicago. During this meeting, McGann asked Grabemann
how soon to would take plaintiffs Howard, M.G., Osgood,
and Stevens to enter into a CBA with defendant. Plaintiffs
claim that McGann stated that if plaintiffs failed to enter
75a
Appendix D
into a CBA, defendant intended to hold strikes against these
plaintiffs. Defendant denies that there was a threat to strike.
To date, plaintiffs Howard, M.G., Osgood, and Stevens have
refused to sign a new CBA with defendant on the grounds
that they are already parties to the 1995 WAC CBA.
Defendant denies that any of the plaintiffs are, or were,
parties to the 1995 WAC CBA.
STANDARD OF REVIEW
Under Rule 56(c), summary judgment is proper “if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of
law.” Fed. R. Civ. P. 56(c). In ruling on a motion for summary
judgment, the evidence of the nonmovant must be believed
and all justifiable inferences must be drawn in the
nonmovant’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255 (1986). This court’s function is not to weigh the
evidence and determine the truth of the matter, but to
determine whether there is a genuine issue for trial. There is
no issue for trial “unless there is sufficient evidence favoring
the nonmoving party for a jury to return a verdict for that
party.” Anderson, 477 U.S. at 249.
76a
Appendix D
ANALYSIS
1. Plaintiffs’ Hard Card Agreements
A. The Automatic Renewal Provision was not
Terminated
The parties dispute whether the automatic renewal
provision of the Hard Card Agreements bound plaintiffs to
the 1995 WAC CBA. Defendant first argues that the
automatic renewal provision in the Hard Card Agreements
was made impracticable by the transformation of the WAC
into a representative of single employer bargaining units.
The only authority to which defendant cites for this argument
are §§ 261 and 263 of the Restatement (Second) of Contracts.
Comment d to § 261 of the Restatement defines the meaning
of “impracticable”:
Performance may be impracticable because
extreme and unreasonable difficulty, expense,
injury, or loss to one of the parties wili be
involved. A severe shortage of raw materials or
of supplies due to war, embargo, local crop failure,
unforeseen shutdown of major sources of supply,
or the like, which either causes a marked increase
in cost or prevents performance altogether may
bring the case within the rule stated in this
Section. ... However, “impracticability” means
more than “impracticality.” A mere change in the
degree of difficulty or expense due to such causes
as increased wages, prices of raw materials, or
costs of construction, unless well beyond the
77a
Appendix D
normal range, does not amount to impracticability
since it is this sort of risk that a fixed-price
contract is intended to cover.
Defendant argues that a basic assumption of the Hard
Card Agreements was that the WAC would negotiate one
agreement between its members and the Union and that it
was now possible for multiple, conflicting agreements to be
reached between the WAC and the Union. Nevertheless,
defendant admits that the successor agreement to the 1993
WAC CBA, known as the 1995 WAC CBA, became effective
as of June 1, 1995 and will remain in effect until May 31,
2000. (Def.’s Rule 12(N) Statement § 29.) Defendant has
not produced sufficient evidence for a jury to return a verdict
in its favor on the issue of whether the transformation of
WAC into a representative of single employer bargaining
units made performance of the automatic renewal provision
“impracticable.”
Defendant next argues that the conduct of the parties
indicated an intent to waive the untimely termination of the
Hard Card Agreements. The Hard Card Agreements
provided, in pertinent part, the following:
4. This [A]greement, and the agreement adopted
by reference as aforesaid, shall be in effect as of
[date], and remain in effect to and including the
expiration date of the agreement adopted by
reference. This [A]greement shall continue in
effect from year to year thereafter and the parties
specifically adopt any agreement entered into
between the UNION and Woodworkers Association
78a
Appendix D
of Chicago ... , bargaining agent for their
members, subsequent to the expiration date of the
agreement adopted by reference as aforesaid,
unless notice of termination of amendment is
given in the manner provided herein.
5. Either party desiring to amend or terminate this
[A]greement must notify the other with an
acknowledgment in writing, at least three calendar
months prior to the expiration of the then
agreement adopted by reference.
(Pls.” Rule 12(M) Statement 4 14.)
This court must “enforce the terms of a collective
bargaining agreement when those terms are unambiguous.”
Young v. North Drury Lane Productions, Inc., 80 F.3d 203,
205 (7th Cir. 1996) (citing Central States Pension Fund vy.
Hartlage Truck Serv., 991 F.2d 1357, 1361 (7th Cir. 1993)).
At issue in this case is a narrowly tailored clause that
specifically states that written notice preventing automatic
renewal must be served at least three months prior to the
expiration of the current agreement. “When such clear and
specific language in a labor agreement 1s at issue, federal
courts are uniform in their strict interpretation of such
language.” /rwin v. Carpenters Health and Welfare Trust
Fund for California, 745 F.2d 553, 556 (9th Cir. 1984).
Moreover, a notice of termination of a collective bargaining
agreement is not effective unless it is clear and unambiguous.
Central States, Southeast and Southwest Areas Pension Fund
v. McLain Trucking, Inc., No. 89 C 0206, 1990 WL 141426,
*3 (N.D.IIL. Sept. 21, 1990) (citing Office & Professional
79a
Appendix D
Employees International Union, Local 42 v. UAW, 524 F.2d
1316, 1317 (6th Cir. 1975) (per curiam); /nternational
Union of Operating Engineers, Local No. 181 v. Dahlem
Construction Co., 193 F.2d 470, 475 (6th Cir. 1951)).
In this case, defendant admits that it did not provide
written notice to any of the plaintiffs of defendant’s desire
to amend or terminate the plaintiffs’ Hard Card Agreements
at least three months prior to the May 31, 1995 expiration of
the 1993 WAC CBA. (Def.’s Rule 12(N) Statement § 17.)
Also, none of the plaintiffs provided written notice of a desire
to amend or terminate the Hard Card Agreements at least
three months prior to the May 31, 1995 expiration of the
1993 WAC CBA. (Pls.’ Rule 12(M) Statement 4 18.)
Defendant attempts to refute this by citing to a March 29,
1995 letter from Attorney Grabemann to Earl Oliver.
defendant's president, in which the employer-members of
the WAC gave notice to defendant that the employer-
members would no longer be part of a multiemployer
bargaining unit. (Def.’s Rule 12(N) Statement 4 18, Ex. G.)
As exhibited by the attachment to this letter, this letter was
not sent on the behalf of the plaintiffs. Moreover, the
February 27, 1995 letter in which the employer-members of
the WAC terminated their Hard Card Agreements cannot be
attributed to the plaintiffs because, as defendant admits, the
plaintiffs are not employer-members of the WAC and none
of the plaintiffs were listed in that letter. (Def.’s Rule 12(N)
Statement 4§ 21-23.)
B. The Automatic Renewal Provision was not Waived
Defendant argues that plaintiffs waived the untimely
notice requirement for termination of the Hard Card
80a
Appendix D
Agreements when plaintiffs began negotiations for successor
agreements to the 1993 WAC CBA. In support of this
argument, defendant cites to Allied /ndustrial Workers, Local
Union 770 (Hutco Equip. Co.), 285 NLRB 651 (1987),
and Hassett Maintenance Corp. (Service Employees
International Union, Local 200), 260 NLRB 1211 (1982).
Both Hutco and Hassett involved provisions similar to the
one in this case on how to terminate the automatic renewal
provision in the collective bargaining agreements at issue.
In Hutco and Hassett, the notice given to prevent the
automatic renewal was untimely but the untimely notice was
waived because of the conduct of the parties. In Hutco and
Hassett, the conduct that gave rise to the waiver took place
before the automatic adoption of a successor agreement had
occurred.
In this case, the actions that defendant argues gave rise
to a waiver of the notice provision include the following:
(1) a June 14, 1995 letter from Attorney Grabemann to
defendant's General Counsel; (2) a June 28,1995 letter from
Attorney Grabemann to defendant’s General Counsel;
(3) a July 12, 1995 negotiation session between the display/
exhibit employers, including plaintiffs, and defendant; and
(4) meetings between the parties on July 14, 1995 and July
17, 1995. Unlike the conduct in Hutco and Hassett, the
conduct that defendant argues gave rise to a waiver took place
after the automatic adoption of the successor agreement to
the 1993 WAC CBA had occurred. Consequently, Hutco and
Hassett are inapplicable to this case and defendant’s
argument that plaintiffs’ post-renewal conduct resulted in a
waiver of the notice requirement must fail.
8la
Appendix D
C. As a Matter of Law, Defendant's “Detrimental
Reliance” Argument Must Fail
Defendant argues that it detrimentally relied on the
termination of the plaintiffs’ Hard Card Agreements when
defendant negotiated an agreement with the WAC. Defendant
also argues that it detrimentally relied on the conduct of the
plaintiffs when defendant attempted to negotiate a new
agreement with the plaintiffs in 1995. Defendant has not cited
to any authority to support these arguments.
Plaintiffs point to two possible sources of law for
defendant's argument. The first is estoppel and the second
is the concept of unilateral mistake. “Estoppel is an equitable
doctrine invoked to avoid injustice in particular cases.”
Heckler v. Community Health Services of Crawford Count,
Inc., 467 U.S. 51, 59 (1984). “An estoppel arises when one
party has made a misleading representation to another party
and the other has reasonably relied to his detriment on that
representation.” Black v. TIC Investment Corp., 900 F.2d
112, 115 (7th Cir. 1990). “Thus, the party claiming the
estoppel must have relied on its adversary’s conduct ‘in such
a manner as to change his position for the worse.” [sic] and
that reliance must have been reasonable in that the party
claiming the estoppel did not know that its adversary’s
conduct was misleading.” Heckler, 467 U.S. at 59. In this
case, defendant has not alleged that plaintiffs or the WAC
made misleading misrepresentations to it during the
negotiations of the 1995 WAC CBA, nor has defendant
alleged any reasonable reliance on any misrepresentation.
Consequently, the concept of estoppel does not apply.
82a
Appendix D
Section 153 of the Restatement (Second) of Contracts
describes when the mistake of one party makes a contract
voidable:
Where a mistake of one party at the time a contract
was made as to a basic assumption on which he
made the contract has a material effect on the
agreed exchange of performances that is adverse
to him, the contract is voidable by him if he does
not bear the risk of the mistake under the rule
stated in § 154, and (a) the effect of the mistake
is such that enforcement of the contract would be
unconscionable, or (b) the other party had reason
to know of the mistake or his fault caused the
mistake.
In this case, defendant has not shown that enforcement of
the 1995 WAC CBA between defendant and plaintiffs would
be unconscionable or that plaintiffs had reason to know of
defendant’s mistake or that defendant’s fault caused the
mistake. Consequently, the concept of unilateral mistake does
not apply.
Accordingly, for the above stated reasons, plaintiffs are
covered by the 1995 WAC CBA and plaintiffs’ motion for
summary judgment is granted as to this issue.
Il. Economic Duress
Plaintiffs Contempo and Design Agency each claim that
the CBAs that each signed in 1996 are invalid and
unenforceable because each of the respective CBAs was
signed because of economic duress. Economic duress is a
ene Qe reen te: earner 3 4
83a
Appendix D
recognized affirmative defense to an action on a contract.
Resolution Trust Corp. v. Ruggiero, 977 F.2d 309, 313 (7th
Cir. 1992). In Illinois,
Economic duress is present where one is induced
by a wrongful act of another to make a contract
under circumstances which deprive him of the
exercise of free will, and a contract executed under
duress is voidable. ... To establish duress, one
must demonstrate that the threat has left the
individual “bereft of the quality of mind essential
to the making of a contract.”
Id. (quoting Alexander v. Standard Oil Co., 423 N.E.2d 578,
582 (Ill. App. Ct. 1981) (citations omitted)). “Duress is not
shown by the fact that one was subjected to ... a difficult
bargaining position or the pressure of financial
circumstances.” /d. (citations omitted). Moreover, “the
pressure applied must have been wrongful or unlawful; mere
hard bargaining is not enough.” /d. at 314 (citation omitted).
The wrongful acts sufficient to constitute duress include not
only those that are criminal, tortious, or violate a contractual
duty, but also those that are wrongful in the moral sense.
Ficke v. Johns, No. 95 C 939, 1996 WL 99424, at *4
(N.D. Ill. March 4, 1996).
As explained supra, the 1995 WAC CBA applies to
plaintiffs. As a result, defendant violated the “no-strike”
provision of the 1995 WAC CBA when the Union organized
a strike against plaintiff Contempo. Contempo claims that it
signed a separate CBA with defendant in 1996 as a result of
defendant’s strike against it. Plaintiff Design Agency claims
a
84a
Appendix D
that it signed a separate CBA with defendant in 1996 after
the Contempo strike because, according to Design Agency,
defendant threatened to hold a strike against Design Agency
just as it did against Contempo. The violation of a contractual
duty, however, is not enough to establish the claim of
economic duress as a matter of law. In order for plaintiffs
Contempo and Design Agency to prevail on their claims of
economic duress, they must each show that the strike or the
threat of a strike left them “bereft of the quality of mind
essential to the making of a contract.” See Ruggiero, 977
F.2d at 313. This presents a genuine issue of material fact
which, of course, cannot be resolved 1n a motion for summary
judgment. Accordingly, plaintiffs’ motion for summary
judgment as to whether the CBAs signed by plaintiffs
Contempo and Design Agency are enforceable is denied.
CONCLUSION
For these reasons, plaintiffs’ Motion for Summary
Judgment is GRANTED on Count I. Declaratory judgment
is entered that the 1995 WAC CBA applies to plaintiffs.
Plaintiffs’ Motion for Summary Judgment is DENIED as to
Counts II and III. The parties are strongly urged to discuss
the settlement of this case and report on the status thereof
on June 10, 1998 at 10:00 a.m.
ENTER:
s/ James F. Holderman
JAMES F. HOLDERMAN
United States District Judge
DATED: May 20, 1998
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