Opinion
No. 1:04-CV-358-TS.
November 2, 2004
MEMORANDUM OF DECISION AND ORDER
This matter is before the Court on the Plaintiffs' Motion for Preliminary Injunction [DE 4] to maintain the status quo and enjoin the Defendants from selling stock or transferring ownership or control of Cooper-Standard Automotive, Inc., pending arbitration on whether the proposed sale violates successorship language of collective bargaining agreements. The parties have completed briefing and waived an evidentiary hearing as unnecessary for the proper disposition of the matter.
BACKGROUND
A. The PartiesCooper-Standard Automotive Group (Cooper-Standard), a division of Cooper Tire Rubber Company (Cooper Tire), that specializes in the manufacture of automotive parts, owns or operates forty-seven facilities worldwide. Cooper-Standard is a wholly owned stock subsidiary of Cooper Tire.
The four Defendants are part of Cooper-Standard: Cooper-Standard Automotive of Bowling Green, Ohio (Hose Plant); Cooper-Standard Automotive Group for its plant in Bowling Green, Ohio (Seal Plant); The Cooper Tire Rubber Company, Cooper-Standard Automotive Division, for its plant in El Dorado, Arkansas; and Cooper-Standard Automotive for its plant located in Auburn, Indiana. The employees at these four plants are represented by the Plaintiffs, United Steel Workers of America, AFL-CIO-CLC, and Locals 634, 1152, 1042L and 769L (the Unions). Each Defendant has a collective bargaining agreement (CBA) with a different Local.
B. The Agreements
Two provisions of the CBAs are relevant to this suit: a grievance and arbitration clause and a successorship memorandum.
The CBA at the Auburn plant requires binding arbitration to resolve any controversy "involv[ing] either (1) a dispute as to facts involved, (2) a question concerning the meaning, interpretation, scope, or application of the Agreement, or both." (Cplt., Ex. A, at Art. IVa.) The other agreements have substantially similar grievance-arbitration clauses.
Successorship memoranda, which were made a part of each CBA, provide that the Defendants will not to sell, convey, assign, or otherwise transfer the plant covered by the CBA, or a significant part of the plant that has not been permanently shutdown, unless, before the closing date of the sale:
(a) the Buyer shall have entered into an Agreement with the Union recognizing it as the bargaining representative for the employees within the existing bargaining unit.
(b) the Buyer shall have entered into an Agreement with the Union establishing the terms and conditions of employment to be effective as of the closing date.
(Cplt., Ex. A.) The memoranda provided additional language regarding the transactions it was intended to cover:
This Agreement is not intended to apply to any transaction solely between the Company and any of its subsidiaries or affiliates or its parent company, including any of its subsidiaries or its parent company, including any of its subsidiaries or affiliates; nor is it intended to apply to transactions involving the sale of stock, except if the plant or significant part thereof, which is covered by this Agreement is sold to a third party pursuant to a transaction involving the sale of stock or a transaction or series of transactions that result in a change of control.
Although this language is quoted from the Auburn plant memorandum, each CBA contains nearly identical language.
C. The Sale
On September 17, 2004, an entity formed by The Cypress Group and Goldman Sachs Capital Partners (Cypress) entered into an agreement with Cooper Tire to purchase all stock in Cooper-Standard. The sale is not expected to close before November 5, 2004. The stock sale covers Cooper-Standard's forty-seven facilities worldwide.
The purchase agreement provides that Cypress "at the earliest time permitted by applicable law," will recognize the Steelworkers at the facilities where they have contracts and will honor all existing labor contracts.
D. The Union's Grievance
In June, 2004, after learning that Cooper Tire intended to sell its automotive group, Leo Gerard, International President of the Steelworkers, wrote Cooper Tire to request compliance with the successorship memoranda. Gerard asked that the union be placed in contact with any potential buyer in advance of the planned sale date so that the buyer and the union could reach an agreement before the sale date.
Thomas Dattilo, Chairman of the Board, President, and CEO of Cooper Tire responded that the sale involved stock and that any buyer would be considered a successor employer. Dattilo opined that the conditions of the successorship memoranda would be met because the buyer would recognize the Unions and agree to be bound by any existing agreements.
In Gerard's next letter to Cooper Tire, he pointed out that the language of the successorship memoranda covered any "change of control" effected through a stock transaction and required negotiation of a new CBA, not just assumption of an existing contract.
On July 19, 2004, James E. Kline, Vice President, General Counsel, and Secretary of Cooper Tire, submitted in a letter to Gerard that the successorship agreements were not intended to, and did not, apply to stock sales.
The union again contacted Cooper Tire officials, this time through a letter from its General Counsel, Paul Whitehead, informing them that the stock sale was exactly the kind of situation addressed by the successorship memoranda and providing a point-by-point response to Kline's letter. Whitehead requested expedited arbitration to interpret the contract language before the projected sale date. Cooper Tire's outside counsel responded by letters dated August 27 and September 7. Cooper Tire refused arbitration on the grounds that the successorship memoranda prescribed unlawful pre-sale hiring and bargaining in violation of the National Labor Relations Act.
On September 2 and 3, the Unions filed grievances at each of the four Defendant plants. In the grievances, the Unions requested that the arbitrator order the company to refrain from selling or transferring the facilities at issue until the Unions negotiate agreements with the proposed buyer.
E. The Lawsuit
On September 27, 2004, the Steelworkers union and Local 634 from the Auburn, Indiana, plant filed their Verified Complaint for Declaratory and Injunctive Relief against Cooper Tire. The Plaintiffs also moved for a preliminary injunction. On September 30, 2004, the Court set a briefing schedule, which the parties modified by stipulation on October 8, 2004. The parties submitted that the stock sale was not expected to close before November 5, 2004.
On October 8, 2004, Cooper Tire moved to substitute the proper defendants, the employer entities of the four plants where the Steelworkers had collective bargaining agreements, and to join the local unions that were parties to the collective bargaining agreements as additional plaintiffs. On October 25, 2004, the Court granted this unopposed motion. On October 25, the parties requested that the Court allow additional briefing and rule on the Motion for Preliminary Injunction without an evidentiary hearing.
DISCUSSION
The Unions bring this action pursuant to § 301 of the Labor-Management Relations Act of 1947, 29 U.S.C. § 185(a) (§ 301). Although federal labor law broadly prohibits federal courts from issuing injunctions in labor disputes, 29 U.S.C. §§ 101-15, the Supreme Court has created a narrow exception to this general prohibition where the court's involvement is necessary to encourage and facilitate the voluntary resolution of labor disputes through arbitration. Boys Markets, Inc. v. Retail Clerks Local 770, 398 U.S. 235 (1970) (upholding an order enjoining a strike pending resolution of an arbitrable dispute through the contractual arbitration process). This exception does not apply to remedy a breach of the collective bargaining agreement, but only to enforce the promise to arbitrate. Buffalo Forge Co. v. United Steelworkers, 428 U.S. 397 (1976).To establish that enjoining an employer's conduct is necessary to ensure that the arbitral process will not be frustrated, the party seeking the injunction must first prove that the underlying dispute is arbitrable. Second, it must prove that the traditional requirements of injunctive relief support the award, Boys Markets, 398 U.S. at 254: (1) the likelihood of success on the merits, (2) whether irreparable injury is present or threatened, and (3) balancing the respective hardships on the parties if the injunction is granted, id. See also Int'l Ass'n of Machinists and Aerospace Workers v. Panoramic Corp., 668 F.2d 276 (7th Cir. 1981) (finding that these injunction criteria were met and granted the union's request for a status quo injunction to prevent the employer from closing on the sale of its assets pending arbitration on whether the buyer was required to adopt the existing bargaining agreement).
A. Arbitrability
The threshold issue under the Boys Markets analysis is whether the dispute is arbitrable under the CBA. Panoramic, 668 F.2d at 283; Local 715, United Rubber, Cork, Linoleum and Plastic Workers of Am. v. Michelin Am. Small Tire, 840 F. Supp. 598, 602 (N.D. Ind. 1993). The Union argues that the dispute involves an interpretation of the CBA and is arbitrable. The Defendants insist that the dispute is not arbitrable because it is based on an unlawful contract provision. The Defendants submit that because the CBA's successorship language requires a potential buyer to negotiate a contract with the Union before the sale, and before it actually has any employees, it violates black letter labor law that prohibits "pre-hire" agreements and prohibits buyers from recognizing unions or executing labor contracts, unless the buyer has a "substantial and representative complement" of employees.
The Defendants' argument that the successorship requirements are illegal is their only argument against the arbitrability of the dispute. Therefore, the Court will address the lawfulness of the provision before making a determination regarding arbitrability.
1. Lawfulness of Successorship Language
The Defendants argue that because labor law forbids pre-sale agreements to recognize a union and pre-sale negotiations of a contract, the successorship memoranda are unlawful. The Defendants' arguments do not apply here, where the Defendants have contractual successorship obligations. See Local No. 381, Int'l Union of Operating Engineers v. Tosco Corp., 823 F.2d 265, 267 (8th Cir. 1987) (noting that Fall River successor rule was not at issue where application of successor language in preamble of collective bargaining agreement was at issue). The Defendants arguments are derived from the law that developed to define when a buyer becomes a legal "successor" and when it has a duty to recognize and bargain with the incumbent union, where there is no successorship clause and no agreement by the buyer to recognize the union or assume its contract. See, e.g., Fall River Dyeing Finishing Corp. v. NLRB, 482 U.S. 27, 47-48 (1987). The buyers in these successorship cases did not necessarily intend to hire the seller's employees and continue the seller's operations. Thus, the Supreme Court fashioned a doctrine to determine when the purchaser would be obligated to recognize the union.
Successorship clauses, on the other hand, focus on the seller's obligations. Compliance with successorship clauses is premised on the seller's insistence that the buyer hire the seller's employees and honor the seller's union contract. For these clauses to have any effect, the seller must be made to require the purchaser to recognize the union and be bound by the collective bargaining agreement before the sale; after the sale, a buyer cannot be forced to adopt the seller's contract on the force of the predecessor's collective bargaining agreement. Here, contrary to the Defendants' arguments, the Unions are not attempting to bind the third party buyer. Rather, they desire arbitration on whether the Defendant employers are bound by the successorship memoranda. Although the enforceability of these clauses on buyers has been the source of much debate, enforcement must not be confused with legality. Moreover, the issue of enforcement is for the arbitrator to decide, not the Court.
An employer is not prevented from assuming obligations greater than those required by law. See Golden State Transit Corp. v. City of Los Angeles, 475 U.S. 608, 616 (1986) (NLRA leaves bargaining process largely to the parties). An employer can contractually obligate itself to predicate the sale of its business on securing the buyer's agreement to recognize the union and assume its contract. See, e.g., Panoramic, 668 F.2d 276 (7th Cir. 1981) (containing successor language in preamble). The Defendants attempt to distinguish the contractual language here because it requires the buyer, not simply to assume an existing contract but, to negotiate a new contract. The Defendants, however, do not clarify how requiring a buyer to recognize a union before the closing, which it has done, differs from requiring the buyer to bargain with the recognized union before the sale. In both cases the buyer's commitments occur before the sale takes place, but are ultimately conditioned on the sale taking place and are effective on the date of the closing.
The Defendants argue that Cypress, because it is not yet an "employer" under the NLRA, would not be required to bargain in "good faith" or comply with other requirements applicable to an employer and that the union would not be able to strike or engage in a work stoppage. (Defs.' Supp. Mem. at 7, n. 11.) The practical application of this provision, i.e., how the Unions would negotiate with the buyer, is not before this Court.
The Defendants do not cite a single case striking down bargained for successorship clauses of any kind as illegal — this simply is not a case of illegal "premature" union recognition and contract negotiation.
2. Arbitrability of Dispute
In light of the broad arbitration clause and the parties disagreement over the interpretation and application of the successorship memoranda, the Court finds that the dispute is arbitrable. The Unions contend that the stock sale is covered by the successorship memoranda, but Cooper Tire disagrees. The parties' actions and their correspondence leading up to the Unions' grievances and this lawsuit create "a question concerning the meaning, interpretation, scope, or application of the Agreement."
B. Likelihood of Success
To show likelihood of success, the plaintiff "need only establish that the position he will espouse in arbitration is sufficiently sound to prevent the arbitration from being a futile endeavor. If there is a genuine dispute with respect to an arbitrable issue," the requirement is met. Panoramic, 668 F.2d at 284-85; Nursing Home Hosp. Union No. 434 v. Sky Vue Terrace, Inc., 759 F.2d 1094, 1098 n. 3 (3d Cir. 1985). When applying this standard, the court should keep in mind that contract interpretation is for the arbitrator. Panoramic, 668 F.2d at 285.
The Court finds that the Unions have presented a genuine dispute as to whether Cooper Tire's stock sale falls under the provisions of the successorship memoranda. The memoranda refer to "sale of stock" and "change of control." In addition, cases support the Unions' position that successor clauses are arbitrable and enforceable against the employer. See Nursing Home Hosp. Union No. 434 v. Sky Vue Terrace, Inc., 759 F.2d 1094 (3d Cir. 1985) (upholding injunction enjoining employer from dissolving assets until arbitrator determined whether employer breached successors and assigns clause of collective bargaining agreement); Panoramic, 668 F.2d at 285 (upholding status quo injunction pending arbitration on whether "successors" language in preamble bound seller to require buyer to accept union contract); Local No. 381, Int'l Union of Operating Engineers v. Tosco Corp., 823 F.2d 265, 266-67 (8th Cir. 1987) (holding that union's grievance to force employer to condition sale of business upon successor's acceptance of terms of collective bargaining agreement was arbitrable).
The Defendants argue that the successorship memoranda do not apply to the stock sale because Cooper-Standard will remain intact after the sale. The Court finds that resolving this issue would amount to contract interpretation and intrude significantly on the arbitrator's function and result in the type of judicial preemption of the arbitral process condemned by the Supreme Court in Buffalo Forge, 428 U.S. at 410-11. See also Panoramic, 668 F.2d at 285 ("We decline Panoramic's invitation to parse the language of the `successors' clause, which Panoramic contends cannot support the Union's interpretation."). There is sufficient dispute as to the applicability of the successorship memoranda to issue an injunction.
C. Irreparable Harm/Inadequate Remedy at Law
The existence of actual or threatened irreparable injury is a prerequisite to an award of injunctive relief from an employer's breach of a collective bargaining agreement. Panoramic, 668 F.2d at 285 (citing Boys Markets, 398 U.S. at 254). In Panoramic, the court stated that irreparable injury is injury so irreparable that an arbitrator's decision in the union's favor would be but an empty victory. Id. at 285-86 (citing Brotherhood of Locomotive Engineers v. Missouri-Kansas-Texas RR, 363 U.S. 528, 534 (1960)). Thus, a status quo injunction is appropriate only when "the actual or threatened harm to the aggrieved party amounts to frustration or vitiation of arbitration." Id. at 286 (focusing in a single concept the twin ideas of irreparable harm and frustration of arbitration).
In Panoramic, the court held that the union met this standard:
Consummation of the sale before an arbitrator had an opportunity to rule on the Union's contention that the sale violated the labor agreement would have presented the arbitrator with fait accompli, leaving him without any real power to award an adequate remedy in the event that the Union's claim was sustained.Id. The court stated that this conclusion found support in a wide range of cases holding that similar employer actions threatened irreparable injury or resulted in a frustration of arbitration. Id. (citing cases involving partial liquidation of business, relocation of plant, subcontracting of union work, termination of business, sale of business, and relocation of corporate headquarters). The irreparable injury in these cases was permanent job loss. See Teamsters Local 71 v. Akers Motor Lines, Inc., 582 F.2d 1336 (4th Cir. 1978); Lever Bros. Co. v. Int'l Chem. Workers Local, 217, 554 F.2d 115 (4th Cir. 1976); Bakery Drivers Local 802 v. S.B. Thomas, Inc., 99 L.R.R.M. 2253 (E.D.N.Y. 1978); Columbia Typographical Union No. 101 v. Evening Star Newspaper Co., 100 L.R.R.M. 2394 (D.D.C. 1978); Food Employees Local 590 v. Nat'l Tea Co., 346 F. Supp. 875 (W.D. Pa.), remanded without opinion, 474 F.2d 1338 (3d Cir. 1972); Technical, Office Prof'l Workers Local 757 v. Budd Co., 345 F. Supp. 42 (E.D. Pa. 1972). In Panoramic, the employees were faced with immediate loss of employment and the purchaser had no duty or intention to rehire them. 668 F.2d at 286. An arbitrator's award after the sale would have been inadequate because the buyer, and new owner, could not be forced to recognize the union or adopt its contract, and the arbitrator would have had no power to rescind the sale after it was consummated.
Here, the Defendants argue that the Unions will not suffer this particular harm because Cypress has already agreed to assume the obligations under the existing contracts and the represented employees will not lose jobs or receive lower wages. The Defendants submit that if an arbitrator later determines that the successorship memoranda applied to the stock sale, the Unions would have an adequate post-sale remedy: the arbitrator could order Cypress to negotiate a new contract with the Unions, albeit not "prior to the closing date of [the] sale," as anticipated by the successorship memoranda. The Court agrees that, if the sale goes forward without arbitration on the successorship issue, the harm to be suffered is not the same as the harm from loss of jobs the employees faced in Panoramic. Here, however, the successorship clause provides the Unions with a unique bargaining position — the right to negotiate a new contract with a potential buyer before consummation of any sale. The Court will analyze the irreparable injury prong in light of this right.
The Unions argue that allowing the sale to proceed, before the arbitrator has an opportunity to rule on the Defendants' obligations under the sale, would frustrate arbitration. The agreements between the parties prohibit the Defendants from selling their plants to a buyer, unless that buyer has first recognized the Unions and entered into a contract with them. The Unions argue that the memoranda provide them an opportunity to attempt to bargain a better contract with the buyer. This unique bargaining position that the Unions contracted for in the CBAs would be lost after the sale to Cypress is complete.
The Court agrees that, if the sale proceeds before arbitration of the Unions' grievances, the arbitrator would have no real power to enforce an adequate remedy against the Defendants, who will have already transferred control and operation of the plant to Cypress. There is no guarantee that the pre-sale bargaining environment can be duplicated in any post-sale bargaining with Cypress. In addition, the Unions will have lost the right to condition the sale of the facility on the buyer entering into a new contract with the Unions. In fact, the Unions cannot even be assured that, once the sale is complete, the arbitrator could order Cypress to negotiate a new contract before the existing CBAs that it assumed expired. It is questionable whether the arbitrator could bind Cypress, who was not a party to the original successorship memoranda, at all. Denying an injunction in this case would constrain the ability of the arbitrator to fashion a remedy that would effectuate the intent of the parties.
The Defendants' argument that the Union will have a better bargaining position after the sale is speculative.
D. Balance of Hardships
"The final equitable prerequisite to the issuance of a status quo injunction is a finding that the union will suffer more from the denial of an injunction than will the employer from its issuance." Panoramic, 668 F.2d at 288. Here, the proposed sale threatens the Unions' bargaining position, which cannot be duplicated after the sale, and the Unions' ability to stop any sale where the buyer does not negotiate a new contract. The Defendants argue that a business deal involving more than one billion dollars and forty-seven different plants is in jeopardy. However, the actual amount of the Defendants' potential loss from an abandoned sale to Cypress is not Cypress's agreed purchase price. Unless Cooper Tire's stocks in Cooper-Standard are valueless, the potential injury is not Cypress's purchase price. See id. at 288-89 (defendant's argument that missed opportunity to sell company equaled purchase price rested on faulty premise that the assets in question are valueless). Moreover, only four of the forty-seven facilities would be affected by any preliminary injunction and arbitration order. Finally, there is no evidence that the loss of Cypress as a proposed purchaser would force Cooper Tire to operate at a loss or to go out of business. Balanced against the hardship that would be suffered by the Unions and the frustration of arbitration that would result if the injunction is denied, the purported hardships that the Defendants will suffer as a result of the injunction being issued are not so great as to deny the injunction.
The Court recognizes the strong federal policy against federal court involvement in labor disputes. The injunction in this case, however, furthers the federal policy favoring voluntary resolution of labor disputes, and prevents the Defendants from escaping their promise to arbitrate and from frustrating the arbitral process through sale of its stock. To prevent arbitration from becoming a meaningless ritual, the Court grants the Unions' Motion for Preliminary Injunction. E. Amount of Bond
Neither party submits argument regarding the amount of bond that the Unions should post.
Federal Rule of Civil Procedure 65(c) prescribes the security an applicant in whose favor an injunction is issued must give.
No . . . preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained.
A similar provision directed to labor disputes provides:
No . . . temporary injunction shall be issued except on condition that complainant shall first file an undertaking with adequate security in an amount to be fixed by the court sufficient to recompense those enjoined for any loss, expense, or damage caused by the improvident or erroneous issuance of such order or injunction, including all reasonable costs (together with a reasonable attorney's fee) and expense of defense against the order or against the granting of any injunctive relief sought in the same proceeding and subsequently denied by the court.29 U.S.C. § 107.
The security is intended to protect the Defendants if the Court has made "an improvident or erroneous issuance" of the injunction. The Defendants' potential expense in determining whether this Court has erred in deciding that the dispute is arbitrable and that the conditions for the issuance of an injunction exist, is limited to the cost of pursuing further legal proceedings. Therefore, the amount of bond that the Court will require the Unions to provide as a condition to the issuance of the injunction is $20,000.
CONCLUSION
For the foregoing reasons, the Plaintiffs' Motion for Preliminary Injunction [DE 4] is GRANTED. Cooper-Standard Automotive of Bowling Green, Ohio; Cooper-Standard Automotive Group for its plant in Bowling Green, Ohio; The Cooper Tire Rubber Company, Cooper-Standard Automotive Division, for its plant in El Dorado, Arkansas; and Cooper-Standard Automotive for its plant located in Auburn, Indiana, are ORDERED to participate in expedited arbitration of the Plaintiffs' grievances and are ENJOINED from closing on the sale of their plants until resolution of the Unions' grievances through arbitration. IT IS FURTHER ORDERED that issuance of this injunction is made conditional upon the Plaintiffs furnishing of a bond in the amount of $20,000 by 5:00 p.m., November 4, 2004.SO ORDERED.