Opinion ID: 450730
Heading Depth: 2
Heading Rank: 2

Heading: The Order Enjoining Distribution of Assets

Text: 13 By broadly prohibiting federal court injunctions in labor disputes, the Norris-LaGuardia Act, 29 U.S.C. Secs. 101-15 (1982), seeks to prevent the federal courts, inter alia, from interfering with economic struggles between employees and their employers. The Supreme Court created a narrow exception to this general prohibition, however, where the involvement of the federal courts is necessary to further another fundamental federal labor policy--that of encouraging and promoting the voluntary resolution of labor disputes through arbitration. Boys Markets, Inc. v. Retail Clerks Union, Local 770, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970) (upholding an order enjoining a strike pending resolution of an arbitrable dispute through the contractual arbitration process). The Court emphasized the narrow application of this exception in Buffalo Forge Co. v. United Steelworkers of America, 428 U.S. 397, 96 S.Ct. 3141, 49 L.Ed.2d 1022 (1976), where it stated that the justification for a Boys Markets injunction is not to remedy a breach of the collective bargaining agreement, but instead solely to enforce the promise to arbitrate. Thus, a Boys Markets injunction is appropriate only where necessary to prevent conduct that threatens or frustrates the arbitral process agreed to by the parties. See, e.g., United Steelworkers of America v. Fort Pitt Steel Casting, 598 F.2d 1273, 1282 (3d Cir.1979). 14 Although both Boys Markets and Buffalo Forge arose in the context of objectionable union conduct, numerous courts have found that the rationale of those cases is equally applicable to cases where a union seeks to enjoin employer conduct. See, e.g., Local Lodge No. 1266 v. Panoramic Corp., 668 F.2d 276 (7th Cir.1981); United Steelworkers of America v. Fort Pitt Steel Casting, 598 F.2d 1273 (3d Cir.1979); Drivers, Chauffeurs, Etc. v. Akers Motor Lines, 582 F.2d 1336 (4th Cir.1978); Lever Bros. Co. v. International Chemical Workers Local 217, 554 F.2d 115 (4th Cir.1976). To establish that an order enjoining employer conduct is necessary to ensure that the arbitral process will not be frustrated, the party seeking the injunction must prove not only that the underlying disputes are arbitrable, but that the traditional requirements of injunctive relief--probability of success on the merits, irreparable injury, and a balance of hardships--support the award. See e.g., Local Lodge No. 1266 v. Panoramic Corp., 668 F.2d 276 (7th Cir.1981). 15 In the instant case, the district court, after examining the requirements for a Boys Markets injunction, properly found that an injunction prohibiting the further distribution of Sky Vue's assets was necessary to ensure that an arbitral award in the union's favor was more than a hollow formality. United Steelworkers of America v. Fort Pitt Steel Casting, 598 F.2d 1273, 1282 (3d Cir.1979). First, and as discussed above, the underlying dispute--whether Sky Vue breached the successors and assigns clause of the collective bargaining agreement--is clearly arbitrable under the grievance and arbitration clause of the agreement. Second, Local 434 has shown a probability of success on the merits of its claim against Sky Vue sufficient to support the injunction in this case. 3 If the union is successful in demonstrating that Health Group is a successor to Sky Vue as that term is defined in the collective bargaining agreement, then the union's claim that the agreement obligated Sky Vue to force Health Group to adopt the collective bargaining agreement may have merit. 16 Third, the union has satisfied its burden of showing irreparable harm if the court were to deny the injunction. Sky Vue no longer controls the nursing home, nor can it at this time legally force Health Group to rehire the discharged employees or to adopt the collective bargaining agreement. Thus, even if the union succeeds at arbitration against Sky Vue, it is likely to receive only an award of money damages to compensate the employees for Sky Vue's breach of the collective bargaining agreement. A complete dissolution and distribution of Sky Vue's assets prior to the arbitration, however, would render such an award meaningless, essentially frustrate the arbitration process, and effectively allow Sky Vue to escape its contractual promise to arbitrate disputes over interpretation of the collective bargaining agreement. Finally, the balance of hardships on both sides favors the issuance of the injunction. The injunction allows Sky Vue to pay its ordinary debts, but prohibits it from completely dissipating, through payments to shareholders or otherwise, the corporate assets. When balanced against the possible harm to the former Sky Vue employees, the freezing of Sky Vue's assets does not constitute undue hardship. We will affirm, therefore, the second part of the district court's order.