Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-01219/USCOURTS-cand-3_04-cv-01219-0/pdf.json

Nature of Suit Code: 720
Nature of Suit: Labor Management Relations Act
Cause of Action: 29:185 Labor/Mgt. Relations (Contracts)

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DISTRICT COUNCIL NO 16 OF THE

INTERNATIONAL UNION OF PAINTERS

AND ALLIED TRADES, GLAZIERS,

ARCHITECTURAL METAL & GLASS

WORKERS, LOCAL 1621 

Petitioner

v

B & B GLASS, INC

Respondent. /

No C-04-1219 VRW

ORDER

Petitioner (Union 1621) has filed a petition to compel

arbitration pursuant to 9 USC § 4. Doc #1 (Petition). Respondent,

appearing specially, moves the court to dismiss the petition for

lack of personal jurisdiction pursuant to FRCP 12(b)(2). Doc #22. 

The court heard oral argument on the issue on May 19, 2005. Based

upon the parties’ arguments and the applicable federal law, the

court GRANTS respondent’s motion. 

//

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 1 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

I

The following facts are not in dispute. B&B Glass,

Incorporated (BBAZ), an Arizona corporation, was formed in 1978 and

performs glass and glazing work for construction projects. 

Although the majority of BBAZ’s business has been conducted in

Arizona, the company has taken projects in New Mexico, Utah and

California. In 1995, Bryan Buckholz was the sole shareholder in

BBAZ after purchasing the stock from his parents and siblings. In

late 1995, BBAZ began work on three small projects in Texas.

In 1998, Buckholz formed another corporation, B&B Glass,

Inc, as a separate entity incorporated under the laws of Texas

(BBTX). BBTX is the respondent in this case. Although Buckholz

was the sole shareholder in BBTX, he hired Rick Churchill (a Texas

resident) as the full-time project manager. Buckholz devoted all

of his time to BBAZ and Churchill to BBTX. 

In 1999, John Collier bought a 21% interest in both BBAZ

and BBTX with Buckholz retaining the balance. By April 2003,

Buckholz sold his entire interest in BBTX to Collier, Churchill and

Bernie Hageman, each holding a 1/3 interest. At the same time,

Hageman and Churchill became shareholders of BBAZ and, along with

Churchill and Buckholz, each of the four held a 25% interest in

BBAZ. In December 2004, Churchill became the sole shareholder of

BBTX, selling his shares in BBAZ.

In March 2002, Churchill, on behalf of BBTX, entered into

a collective bargaining agreement (Texas CBA) with the Painters and

Glaziers Local Union No 53 (Union 53) of the International Union of

Painters and Allied Trades in the Dallas, Texas metropolitan area. 

The CBA was enforceable through February 28, 2004. 

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 2 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

Also important to the current motion, in July 2002, Union

1621 entered in to a CBA (California CBA) with various employers in

fourteen northern California counties, including Santa Clara. The

California CBA is enforceable through June 30, 2005. In July 2003,

BBAZ began work at the San Jose State University Housing Project in

California. 

In March 2004, a dispute arose between Union 1621 and

BBAZ regarding the applicability of the California CBA to BBAZ’s

work with San Jose State. Under the terms of the California CBA,

any dispute between parties to the agreement is to be resolved

through a grievance procedure, the final step of which is binding

arbitration.

On March 26, 2004, Union 1621 filed a petition to compel

arbitration of the dispute in the Northern District of California. 

Doc #1. Union 1621 seeks to compel BBTX (not BBAZ) to arbitrate

the dispute whether the California CBA applies to BBAZ’s work in

San Jose. The record does not reflect whether BBAZ is a signatory

to the California CBA, but it is clear that BBTX is not a

signatory.

In response, BBTX filed a motion to dismiss the petition

pursuant to FRCP 12(b)(2), arguing that this court lacks personal

jurisdiction over BBTX. Doc #22. BBTX’s memorandum in support of

its motion argues (in depth) that (1) the court does not have

general jurisdiction over BBTX, (2) the court does not have

specific jurisdiction over BBTX, (3) there is no parent/subsidiary

relationship between BBTX and BBAZ sufficient to establish personal

jurisdiction and (4) BBAZ is not the alter ego of BBTX so as to

confer personal jurisdiction over BBTX.

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 3 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

In its opposition, Union 1621 begins by stating that BBTX

“has presented this Court with 25 pages of legal irrelevancies. 

The simple truth is that [BBTX] consented to the jurisdiction of

this Court when it signed the [Texas CBA] with [Union 53].” Doc #

37 at 1 (emphasis in original). Hence, Union 1621 does not argue

that (1) BBTX has the requisite minimum contacts with California or

that (2) BBTX is the alter ego of BBAZ. Union 1621 bases its

argument for this court’s jurisdiction on BBTX’s purported

“consent,” which it manifested by signing the Texas CBA and

agreeing to submit disputes to arbitration “wherever it [BBTX] does

covered work.” Doc #37 at 1. Moreover, according to Union 1621,

as BBTX’s shareholders jointly owned 75% of BBAZ when BBAZ began

the San Jose State project, the Texas CBA applied to BBAZ’s work at

San Jose State. Id. 

II

A

“The question of arbitrability -- whether the parties are

to be compelled to arbitrate -- is ultimately decided by the court,

not the arbitrator, on the basis of the contract entered into by

the parties.” McKinstry Co v Sheet Metal Worker’s Int’l

Association, Local Union No 16, 859 F2d 1382, 1385 (9th Cir 1988)

(citing AT&T Technologies v Communications Workers, 475 US 643, 649

(1986)). “The district court should independently review the

agreement. * * * [The court must] exercise plenary review to

determine whether the matter is arbitrable.” Id. 

Before determining arbitrability, the court must “first

determine whether it has personal jurisdiction over the parties.” 

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 4 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

Washington Square Securities v Sowers, 218 F Supp 2d 1108, 1111 (D

Minn 2002) (citing Wessels, Arnold & Henderson v Nat’l Medical

Waste, Inc, 65 F3d 1427, 1431 (8th Cir 1995)). “[T]he party

asserting [personal] jurisdiction has the burden of establishing

its existence when challenged.” Amba Marketing Systems, Inc v

Jobar Int’l, Inc, 551 F2d 784, 787 (9th Cir 1977) (citation

omitted). “When a court’s personal jurisdiction is properly

challenged by motion under [FRCP] 12(b)(2), the jurisdictional

question thereby raised is one for the judge, with the burden on

the plaintiff ultimately to prove grounds for jurisdiction by a

preponderance of the evidence.” Mylan Laboratories, Inc v Akzo, 2

F3d 56, 59-60 (1st Cir 1993).

The present case, however, presents a situation in which

the issues of personal jurisdiction and arbitrability are

inseparable. As mentioned above, Union 1621’s sole argument for

personal jurisdiction over BBTX is BBTX’s consent to arbitrate the

present dispute in this forum. Accordingly, to determine whether

this court has personal jurisdiction over BBTX, the court will

necessarily have to determine the question of arbitrability (i e,

whether BBTX consented to arbitration). 

III

BBTX entered into the Texas CBA with Union 53 regarding

work done in the Dallas metropolitan area. Union 1621 first

directs the court to Article XVIII, § 5 of the Texas CBA. Section

5 provides, in relevant part, that:

The Employer party [BBTX] shall, when engaged in

work outside the geographic jurisdiction [Dallas, Texas]

of the Union party to this agreement [Union 53], comply

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 5 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

with all of the lawful clauses of the [CBA] in effect in

said other geographic jurisdiction and executed by the

employers of the industry and affiliated Local Unions in

that jurisdiction, including but not limited to, the

wages, hours, working conditions, fringe benefits and

procedure for settlement of grievances set forth therein.

This provision is enforceable by the Local Union or

District Council in whose jurisdiction the work is being

performed, both through the procedure for settlement of

grievances set forth in its applicable [CBA] and through

the courts.

 Doc #38 (Davis Decl), Ex 3 at 24 (emphasis added).

The language of § 5 appears to be straightforward and the

parties do not seem to disagree about its meaning: If BBTX

physically engages in work outside of the Dallas metropolitan area

(e g, San Jose, California), BBTX must comply with all of the

clauses of the CBA in effect in San Jose between San Jose glass and

glazing employers and the affiliated local union (e g, Union 1612). 

Moreover, if BBTX failed to comply with the local union’s CBA, the

union could enforce the provisions of the CBA (including binding

arbitration) in California and need not bring an action in Texas. 

CBA provisions like § 5, commonly referred to as “out of area”

clauses, are enforceable in the Ninth Circuit. McKinstry, 859 F2d

at 1385-87.

But BBTX engaged in no work at San Jose State; only BBAZ

did so. Section 5 alone is, therefore, insufficient to establish

personal jurisdiction in California over BBTX. Union 1621 relies

on § 1 of Article XVIII.

Section 1, provides, in pertinent part, that:

To protect and preserve, for the employees covered by

this Agreement [Texas CBA], all work they [Union 53

members] have performed, and to prevent any device or

subterfuge to avoid protection and preservation of

such work, it is agreed as follows: If the Employer

[BBTX] performs on-site construction work * * * under

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 6 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

its own name or the name of another corporation * *

* wherein the Employer [BBTX], through its officers,

directors, owners or stockholders, exercises directly

or indirectly * * * Management Control or majority

ownership, the terms and conditions of this Agreement

shall be applicable to all such work. 

Doc #38, Ex 3 at 22 (emphasis added).

Section 1 is commonly referred to as a “anti-dual-shop

clause.” See Northeast Ohio District Council of the United

Brotherhood of Carpenters and Joiners of America, 310 NLRB 1023

(1993). Union 1621 reads § 1 in tandem with § 5 to provide that §

5 applies not only to BBTX’s out-of-area work, but also to the outof-area work of entities over which BBTX exercises management

control or majority ownership. See Doc #37 at 6 (stating that

without § 1, BBTX would “be permitted to avoid its responsibilities

* * * by creating new business entities to do its projects outside

the Dallas, Texas area –- although this is exactly the scenario [§

1] was designed * * * to prevent.”) (emphasis in original). Under

this interpretation, BBTX is prevented from escaping its

contractual obligations under § 5 by forming a sham corporation

that BBTX directly or indirectly owns, to do out-of-area work. 

According to Union 1621, because the shareholders of BBTX owned 75%

of BBAZ stock, the shareholders of BBTX exercise majority ownership

over BBAZ within the meaning of § 1, and thus the Texas CBA

(including § 5) is binding on BBAZ. This argument fails to

persuade; the present situation is not “exactly the scenario § 1

was designed to prevent.” 

First, the language of § 1 demonstrates that this

provision is only applicable if BBTX is doing work under the name

of another entity within the Dallas metropolitan area. Section 1

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 7 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

states that the purpose of the provision is to “protect and

preserve, for the employees covered by this Agreement, all work

they have performed.” Doc #38, Ex 3 at 22 (emphasis added). The

only employees that are covered by the Texas CBA are the union

members of Union 53, the union signatory to the Texas CBA. 

Interpreting § 1 as limited only to work done by BBTX in the Dallas

area finds support in the case law: 

An anti dual-shop-clause is a clause that seeks to

protect the employees in a bargaining unit from the

effects of “double-breasting,” a phenomenon that is

common in the construction industry. “Doublebreasting” generally refers to a union employer’s

acquisition, formation or maintenance of a separate

nonunion company to perform the same type of work

in the same geographic area as covered by its union

agreement.

 Painters and Allied Traders District Council No 51 and

Manganaro Corp, 321 NLRB 158, 158 (1996) (emphasis added).

Additionally, the language of § 2 of Article XVIII supports this

limited interpretation of § 1. Section 2, the provision through

which § 1 is enforced, reads, in pertinent part:

All charges of violations of Section 1 of this

Article shall be considered a dispute and shall be

processed in accordance with the provisions of this

Agreement on the handling of grievances. Doc #38, Ex 3 at 22 (emphasis added).

Hence, any disputes concerning § 1 are governed by the grievance

procedures of the Texas CBA, not a foreign CBA. This language

belies Union 1621’s assertion that it can enforce § 1 against BBAZ

under the grievance procedures of the California CBA. Accordingly,

the court concludes that § 1 does not apply extraterritorially. 

Next, even assuming § 1 applies extraterritorially, the

court concludes that § 1 is not applicable to BBAZ’s work done at

San Jose State. As the parties informed the court at oral

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 8 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

argument, § 1 is referred to as “Manganaro language” based upon the

National Labor Relations Board (NLRB) case that first analyzed an

anti-dual-shop clause containing the language used in § 1. See

Manganaro, 321 NLRB 158. In Manganaro, a proposed CBA between

Manganaro Corporation and Union 51 contained an anti-dual-shop

clause which, for all practical purposes, was identical to § 1 of

the Texas CBA. Id at 161-62. Manganaro Corporation brought suit

alleging that the clause violated (among other things) § 8(e) of

the National Labor Relations Act (NLRA), 29 USC § 158(e). Id. 

“Section 8(e) of the [NLRA] generally prohibits those

collective-bargaining agreements which require employers to cease

doing business with any other person.” Id at 163 (emphasis added). 

Section 8(e) is qualified, however, because the NLRA does not

prohibit a CBA provision, no matter how “severe the impact * * * on

neutral employers,” so long as the primary objective of the

provision is the “preservation of work for [] employees” covered

under the agreement. Nat’l Woodwork Manufacturers Ass’n v NLRB,

386 US 612, 626, 644 (1967). 

Thus, a CBA provision will not be unenforceable if its

“primary objective” is the preservation of work for union members. 

If, however, a CBA provision requires employers to cease doing

business with other employers and the provision is “tactically

calculated to satisfy union objectives” other than work

preservation, § 8(e) is violated. Id at 644. Such a provision is

deemed to have only the “secondary objective” of preserving work

for union members, and “Congress intended [the NLRA] to reach only

agreements with secondary objectives.” NLRB v Int’l Longshoremen’s

Ass’n, 447 US 490, 504 (1980) (hereinafter ILA).

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 9 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

In ILA, the Court announced a two-prong test to determine

whether a CBA provision constitutes a lawful work preservation

agreement: “First, it must have as its objective the preservation

of work traditionally performed by employees represented by the

union. Second, the contracting employer must have the power to

give the employees the work in question -- the so-called ‘right of

control’ test.” Id at 504. “The rationale of the second test is

that if the contracting employer has no power to assign [or

control] the work, it is reasonable to infer that the agreement has

a secondary objective, that is, to influence whoever does have such

power over the work.” Id at 505 (citing NLRB v Pipefitters, 429 US

507, 517 (1977)). 

Applying the ILA test, the NLRB concluded that the antidual-shop clause at issue in Manganaro was a valid work

preservation provision. Manganaro, 321 NLRB at 164. The only

portion of Manganaro that is relevant to the current motion is the

NLRB’s analysis of the anti-dual-shop clause under the “right of

control” test. Manganaro argued that the clause did not pass the

right of control test because “it could and would apply to

separate, though commonly owned, companies over which the signatory

has no power to assign work.” Id. The NLRB, however, did not

interpret the clause this broadly: 

We [hold] that the requirement that the

signatory contractor exercise ‘management, control

or majority ownership’ over another entity

presumptively means the contractor has the right or

the power to control the assignment of work of that

entity’s employees. In addition, the clause by its

terms states that it applies only if the signatory

‘exercises’ such control. This is more than

potential authority; it refers to the actual or

active control of the work. * * *. Thus, we

disagree with [Maganaro] and find that the language

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 10 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

of the clause applies only when the signatory

contractor has the right of control over the work in

question. * * *.

[The] clause applies to the signatory

contractor who performs and exercises control over

the work, not to tangential ownership or management.

Id at 164-65 (second emphases in original).

The court finds the reasoning of Manganaro persuasive. 

Accordingly, assuming § 1 has extraterritorial effect, it only

applies when BBTX (1) actually performs the on-site construction

work or (2) exercises actual control over the entity which is

performing the work. 

Interpreting § 1 as applying simply because BBTX and BBAZ

have common shareholders, as Union 1621 urges the court to do,

would render § 1 a unenforceable secondary obligation provision

under Supreme Court precedent interpreting the NLRA. Rather, Union

1621 was required to come forward with evidence to demonstrate, by

a preponderance of the evidence, that BBTX exercises actual control

over BBAZ’s work at San Jose State. The Union has introduced no

evidence on this point, much less evidence sufficient to meet a

preponderance standard. Nor could Union 1621 present such

evidence; it is clear that, in April 2003, BBTX and its

shareholders exercised no control over the work conducted by BBAZ. 

BBAZ’s work was controlled entirely by Buckholz.

III

In sum, the court concludes that § 1 is geographically

limited to the Dallas metropolitan area. Moreover, assuming § 1

applies extraterritorially, the provision is not applicable merely

because BBTX and BBAZ have common shareholders; the NLRA requires

more before anti-dual-shop provisions such as § 1 can be invoked. 

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 11 of 12
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

Union 1621 has failed to demonstrate the required “control”

necessary to invoke § 1. 

Without § 1 providing the necessary “extra layer” (as

Union 1621 counsel called it at oral argument) between BBAZ and

BBTX, § 5 is insufficient to grant this court personal jurisdiction

over BBTX. BBTX’s motion to dismiss is GRANTED (Doc #22). The

clerk is directed to CLOSE the file and TERMINATE all motions. 

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 3:04-cv-01219-VRW Document 42 Filed 06/01/05 Page 12 of 12