869 F. 2d 1498 - United Foundry and Warehouse Employees of Esco v. Esco Corporation

MEMORANDUM*

ESCO Corporation (ESCO) appeals the district court's judgment in favor of United Foundry and Warehouse Employees of ESCO (UFWE), a labor union, which sued to recover check-off dues pursuant to a collective bargaining agreement with ESCO. At issue is the interpretation of a contractual term which provides that the Agreement will be void if the UFWE affiliates with any other organization.

UFWE and ESCO entered into a collective bargaining agreement (the Agreement) on October 7, 1982, scheduled to expire on October 14, 1985. Under its terms, ESCO was required to deduct union dues from the first pay of each month of its employees who had signed a written authorization. The Agreement also provided that:

This Contract Agreement is not assignable and shall become void in the event that UFWE ceases to be an independent organization or in any way affiliates with any other organization.

On April 30, 1985, UFWE signed a Mutual Assistance Pact with the United Steelworkers of America, AFL-CIO-CLC (Steelworkers) in which the Steelworkers promised to assist in "handling financial problems," to train local union officials, and to provide information about other collective bargaining agreements and conditions elsewhere in the industry. The Pact states twice that it "is not an affiliation" and that "UFWE continues as an independent organization in accordance with its own constitution and bylaws and its responsibilities under the collective bargaining agreement with ESCO Corporation."

In July of that year, the Steelworkers filed a petition with the NLRB, claiming to represent a majority of ESCO's employees and an election was set for August 29, 1985. On August 14, 1985, the UFWE leadership sent an open letter to its members stating that a majority of its membership had requested it to merge with the United Steelworkers and encouraged them to vote for the Steelworkers in order to accomplish the merger. The following day, UFWE withdrew from the ballot. In the remaining days before the election, it circulated several other newsletters encouraging its members to vote for the Steelworkers.

On August 8, 1985, Scott Nielson, ESCO's Personnel Manager, wrote a letter to UFWE President Harry Turner stating that

In view of your position that UFWE cannot continue as an independent union and your announced need for the assistance of the United Steelworkers, it is apparent you have invalidated the Agreement under Article XXVIII.

The letter continued, however, to give a 60 day notice of termination as required by statute and the terms of the contract. In response, Turner wrote that "the UFWE continues as an independent organization and is carrying out its duties under our collective bargaining agreement." Apparently, Nielson made no response to this letter; however, he continued to communicate with Turner concerning grievances arising under the collective bargaining agreement. Until October 14, 1985, the date the contract expired, the UFWE leadership continued to act as collective bargaining agent on behalf of its members under the contract.

ESCO complied with the contract provision requiring the deduction and payment of dues to UFWE through August 1985. On September 12, 1985, the first pay date of the month, dues were deducted, but placed in a special account, rather than turned over to UFWE. In October 1985 no deductions were made for union dues.

When ESCO failed to pay over dues in September and October, UFWE sought arbitration pursuant to the grievance procedures of the Agreement. ESCO refused arbitration and UFWE brought suit under 29 U.S.C. Sec. 185, seeking to compel arbitration or, alternatively, asking for judgment in the amount of the dues allegedly owed by ESCO. Denying that it had violated the Agreement, ESCO asserted that UFWE's actions in August 1985 amounted to an "affiliation" with the Steelworkers, thereby voiding the contract.

The district court rejected ESCO's argument, holding that UFWE had not affiliated with the Steelworkers and that the collective bargaining agreement continued in effect until October 14, 1985. The court entered judgment for the plaintiffs, ordering ESCO to pay dues for September and October of 1985,1 as well as attorney's fees to UFWE. ESCO now appeals.

The district court had jurisdiction over UFWE's claim for unpaid dues as a suit for violation of a labor contract. 29 U.S.C. Sec. 185. This court has jurisdiction over this appeal from a final judgment of the district court. 28 U.S.C. Sec. 1291.

ESCO argues that the district court erred as a matter of law in finding that UFWE had not affiliated with the Steelworkers and that the collective bargaining agreement with ESCO remained in effect until its expiration date of October 14, 1985. The district court reached this conclusion based on evidence that ESCO continued to treat UFWE as a collective bargaining agent, to check off dues, to correspond with UFWE leadership, to participate in grievance procedures and to pay UFWE's president's salary while he was on leave from his regular job in order to administer the contract.

Determining whether UFWE "affiliated" with the Steelworkers such that the Agreement was voided requires an interpretation and application of the contract, a mixed question of law and fact. This court has stated that

[w]hen the district court's decision is based on an analysis of the contractual language and an application of the principles of contract interpretation, that decision is a matter or law and reviewable de novo. When the inquiry focuses on extrinsic evidence of related facts, however, the trial court's conclusions will not be reversed unless they are clearly erroneous. Miller v. Safeco Title Ins. Co., 758 F.2d 364 (9th Cir.1985).

ESCO asserts that the district court's conclusion that UFWE had not affiliated with the Steelworkers was erroneous as a matter of law and that this court should review that finding de novo. It criticizes the district court's failure to directly address the meaning of the phrase "in any way affiliate," but it neither specifies the error in the district court's use of the term nor offers a more precise definition.

While the district court opinion does not discuss the meaning of "affiliate," there is no apparent legal error in its use of the term. In the labor context, local unions are frequently affiliated with national unions organized along either industrial or craft lines. Such an affiliation generally involves a formal agreement between the parties, where the national union issues a charter for the local union and exercises a measure of control over its activities. The district court's application of the contract term "affiliate" to the facts involved here is consistent with the common understanding of an "affiliation" between labor organizations.

Although ESCO alleges some error of law, its argument rests entirely on its description and interpretation of the events of August 1985 rather than an analysis of the contract language. As the district court opinion also focuses on an examination of "extrinsic evidence of related facts," its determination that no affiliation took place is primarily a factual one and should be reviewed under the clearly erroneous standard.

Viewing the evidence as a whole, it cannot be said that the district court's finding was clearly erroneous. The events of August 1985 are entirely consistent with UFWE's status as an independent bargaining unit, acting in its own interests. Although UFWE was clearly moving toward an affiliation with the Steelworkers, there is little or no evidence that a formal agreement had actually been executed, or that UFWE's actions or policies were in any way dictated or controlled by the national organization.

B. Jurisdiction Over October 1985 Dues Claim

ESCO asserts that the district court lacked subject matter jurisdiction over UFWE's claim for October 1985 dues. This court reviews questions of subject matter jurisdiction de novo. Peter Starr Production Co. v. Twin Continental Films, Inc., 783 F.2d 1440 (9th Cir.1986).

Under the Agreement, ESCO was required to deduct and pay over dues on the first date of payment each month. Since in October 1985 that date happened to fall on the 17th, three days after the contract expired on October 14, ESCO argues that the claim for October dues does not arise under a valid, enforceable labor contract and that therefore, the district court had no jurisdiction.

This argument is patently absurd. UFWE's claim for October 1985 dues is a claim for breach of the Agreement. Whether dues are owed depends upon an interpretation of the contract and is an issue squarely within the district court's jurisdiction created by 29 U.S.C. Sec. 185. The fact that the deduction and paying over of dues was scheduled to occur after the contract had expired would not affect ESCO's duty to perform, so long as the obligation arose under a valid and existing contract. As the district court recognized, the expiration of the contract is only relevant for determining the amount of dues owed, for it held that ESCO should have deducted and paid dues for October proportionate to the time the contract was still in existence.

Finding that ESCO acted in bad faith in refusing to pay over dues for September and October 1985, the district court awarded UFWE attorney's fees. This court reviews a finding that a party acted in bad faith under the clearly erroneous standard. Beaudry Motor Co. v. Abko Properties, Inc., 780 F.2d 751 (9th Cir.1986). Once bad faith has been found, an award of attorney's fees is within the district court's discretion and should not be overturned absent an abuse of discretion. Id.

The district court found evidence of ESCO's bad faith in the contradictory positions it took regarding the status of UFWE and the Agreement. Although ESCO knew of the Mutual Assistance Pact in May 1985, it did not raise any objection until August 1985, and did not refuse to pay over the dues until September 1985. Moreover, the district court found ESCO's argument that it was not required to make an October payment because the date of the first payment of the month happened to fall three days after the contract expired to be "overly technical" and not taken in good faith.

Considering the evidence as a whole, the district court's conclusion that ESCO acted in bad faith is not clearly erroneous, and it did not abuse its discretion in awarding attorney's fees to UFWE.

The judgment of the district court is affirmed. Each party shall bear its own costs on appeal.