Opinion ID: 721304
Heading Depth: 2
Heading Rank: 2

Heading: Successor Clause

Text: 22 As noted, much of our analysis so far relies on the assumption that the arbitrator permissibly interpreted the successor clause as requiring EOS to assure that OMI would assume the CBA. While we acknowledge that the district court ruled favorably to the Union on this point, we are not bound by its holding and may independently review the arbitrator's decision on this issue. See Carreiro, 68 F.3d at 1446. Because the issue strikes us as quite close, we now turn to consider it, using de novo review. See Labor Relations, 29 F.3d at 745. In so doing, we consider first whether the arbitrator's interpretation is consistent with the plain language of the CBA, and, second whether, on the facts of this case, the arbitrator's interpretation is one for which the parties could possibly have bargained. As we have stated, our ultimate task is limited to determining only whether the arbitrator's interpretation of the successor clause draws its essence from the collective bargaining agreement and does not merely reflect the arbitrator's own notions of industrial justice. Misco, 484 U.S. at 36, 108 S.Ct. at 370 (internal quotations omitted).
23 We begin with the text. In relevant part, the successor clause provides: 24 In the event the operation of the plant, in whole or in part, is assumed by any other entity, public or private, the successor organization ... shall agree to all terms and conditions of this Agreement. 25 We agree with the district court that the arbitrator's interpretation is not inconsistent with the plain language of the successor clause. First, following its successful bid, OMI clearly became an entity that had assumed the operation of the plant. Next, while one could arguably read the phrase successor organization as importing a further restriction on the type of entities covered by the clause (e.g., only those entities in privity with the predecessor), we do not think the text compels that interpretation. To the contrary, we think one could permissibly read the text any other entity that has assumed the operation of the plant as defining the scope of the phrase successor organization. Thus, because OMI is an entity that has assumed the operation of the plant, the arbitrator's conclusion that OMI is a successor is consistent with the language of the clause. Cf. Howard Johnson Co. v. Detroit Local Joint Executive Bd., Hotel & Restaurant Employees Int'l Union, 417 U.S. 249, 262 n. 9, 94 S.Ct. 2236, 2243 n. 9, 41 L.Ed.2d 46 (1974) (There is, and can be, no single definition of 'successor' which is applicable in every legal context.). 26 Furthermore, as the district court noted, this reading gathers at least some support from the Supreme Court's decision in Burns. In Burns, the Court effectively held that an entity like OMI--a prevailing competitive bidder that had hired a substantial complement of its predecessor's employees--was a successor employer, see Burns, 406 U.S. at 296, 92 S.Ct. at 1586 (Rehnquist, Burger, Brennan, Powell, JJ., dissenting, describing majority opinion as implicitly premised on the successorship doctrine), and required it to recognize and bargain collectively with the union representing those employees, id. at 277-81, 92 S.Ct. at 1576-79. Thus, the application of the term successor to an entity that has no direct connection or link to the original employer, i.e., no privity, has some precedent in labor case law. See also NLRB v. Houston Bldg. Serv., Inc., 936 F.2d 178, 180-81 (5th Cir.1991) (subsequent employer who successfully bids for a contract is a successor employer with a duty to bargain with union), cert. denied, 502 U.S. 1090, 112 S.Ct. 1159, 117 L.Ed.2d 407 (1992); Systems Mgmt. v. NLRB, 901 F.2d 297, 301-05 (3d Cir.1990) (similar); cf. Howard Johnson, 417 U.S. at 262 n. 9, 94 S.Ct. at 2243 n. 9 (A new employer ... may be a successor for some purposes and not for others.). 27 Notably in Burns, however, the Court did not require the successor employer in that case to assume the obligations of the collective bargaining agreement between its predecessor and the union. 406 U.S. at 286, 92 S.Ct. at 1581. Indeed, the Court declined to do so principally because a complete lack of privity existed between the successor employer and its predecessor. Id. Arguably, such reasoning supports EOS's position that the successor clause in this case should be read narrowly as obligating EOS to require only those successors with which it has privity to assume the CBA. Nevertheless, we do not think the reasoning compels such a reading. In Burns, the Court analyzed only the obligations of a successor employer arising generally from the National Labor Relations Act. The Court did not, however, focus on the issue addressed here: whether the parties to a collective bargaining agreement could agree to bind a predecessor employer to obligate even a successor with which it lacks privity to assume the terms and conditions of the agreement. 28 In sum, we agree that the arbitrator's conclusion that OMI is a successor employer is not inconsistent with the plain language of the CBA. 29
30 Notwithstanding our conclusion that the arbitrator's interpretation fits within the text of the successor clause, we decline to end our analysis at this juncture. Instead, we proceed to consider whether, in the context of this case, the arbitrator's interpretation does not merely reflect the arbitrator's own notions of industrial justice. In other words, we consider whether, on the facts presented here, the parties could possibly have agreed that the successor clause obligated EOS to assure that even privity-less successors, like OMI, would assume the CBA. See Stop & Shop, 776 F.2d at 21 (a court should uphold the arbitrator's interpretation unless it can be shown that the arbitrator acted in a way for which neither party could [possibly] have bargained). 31 In so doing, we agree that it is arguably doubtful that EOS and the Union could possibly have intended the successor clause to apply in this case, if to have done so necessarily required the parties to read the clause as imposing an obligation on EOS that would both (1) be impossible to perform and (2) expose EOS to a risk of substantial loss for nonperformance. Therefore, we will now consider whether acceptance of the arbitrator's interpretation necessarily requires us to conclude, as EOS contends we must conclude, that the parties read the clause as imposing an impossible obligation on EOS that exposed it to a risk of substantial loss. 32
33 If we accept the arbitrator's interpretation, EOS contends that the parties would have understood the successor clause as burdening EOS with an impossible obligation because they would have recognized that EOS lacked the ability to gain leverage over the City or any successor with which it was not in privity. Thus, EOS would not be able to compel such a successor (or compel the City to require such a successor) to assume the CBA. While the Union concedes this is true with respect to a successor like OMI, it argues that, with respect to the City, the facts before the arbitrator belie the assertion. First, the Union notes that, as part of the City's initial contract with EOS, the City required EOS to assume its collective bargaining agreement with the Union. This suggests, the Union contends, that the City (or at least EOS might have perceived that the City) would have viewed sympathetically a request to impose a similar condition on any future successors. The Union further points out that, when EOS amended and renegotiated its contract with the City, it could have bargained with the City to include in future bid solicitations a requirement that all bidders agree to assume any then existing bargaining agreement between EOS and the Union. The Union also argues that the fact the City has agreed to pay Union members their lost wages following OMI's failure to assume the CBA further suggests that the City would have recognized that it had some obligation to consider the welfare of its former employees. 34 Though not overly persuasive, these arguments do indeed tend to support the Union's position. EOS responds by pointing out that, in fact, it was unable to persuade the City to require OMI to assume the CBA. However, nothing in the record suggests that EOS ever attempted to persuade the City to impose such a condition before the June 30, 1992, council meeting, which occurred after the City had awarded the contract to OMI. EOS's inability to persuade the City to impose the condition on OMI in 1992 does not foreclose the inference that EOS may have believed that it could convince the City to impose the condition when EOS originally agreed with the Union to include the successor clause. Moreover, even if EOS perceived that it might not be able to persuade the City to obligate its successor to assume the CBA, EOS could well have assumed the risk of having to pay damages in that situation. 35 In sum, we do not think that, in accepting the arbitrator's interpretation, we must conclude that the parties necessarily intended to impose an impossible condition on EOS. 36
37 Nor do we believe that the parties necessarily perceived the clause as exposing EOS to a risk of substantial loss. While the arbitrator's interpretation of the clause does effectively make EOS the guarantor of its employees' salaries and fringe benefits in the event it loses its contract with the City, we do not agree that EOS must have viewed the risk associated with that guarantee as so substantial that it never would have agreed to bear it. First, the risk was temporally limited. EOS knew that the clause posed a significant risk only for the period of time that the CBA survived EOS's contract with the City, i.e., eleven months. Second, EOS also knew that, under Burns, any successor employer that assumed the operation of the plant and hired a substantial complement of EOS's employees would likely be required to recognize the Union and engage in collective bargaining. Hence, if that occurred, EOS's potential liability was limited to the extent that any future agreement between the Union and EOS's successor would be less favorable to the Union than the current CBA. Arguably, if EOS believed it had achieved the best deal possible under the current CBA, it would not have believed that a successor, required to bargain with the Union, would be able to reach a significantly better deal. Finally, EOS would have perceived the risk as substantial only to the extent that it believed that the City would not require a successor employer to assume the CBA or that an arbitrator would enforce the obligation against it. 38 In sum, as with the argument that the parties must have perceived the successor clause as imposing an impossible obligation, we do not think that, in accepting the arbitrator's interpretation, we must conclude that the parties perceived the clause as exposing EOS to a significant risk of substantial loss. Though as a matter of first impression we might well have decided this case otherwise, given our standard of deference and the ambiguity of contractual language, we cannot say the arbitrator's reading of the successor clause merely reflects the arbitrator's own notions of industrial justice. It is neither inconsistent with the text, nor so improbable that we are convinced that the arbitrator acted in a way for which neither party could [possibly] have bargained. Stop & Shop, 776 F.2d at 21. 3