Court Opinion

ID: 9492441
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:41:20.000444+00
Date Added: 2024-06-11T17:55:18.451815
License: Public Domain

RIPPLE, Circuit Judge,
dissenting.
Contempo Design, Inc. (“Contempo”) brought this action against the Chicago and Northeast Illinois District Council of Carpenters (“the Union”) under § 301 of the National Labor Management Relations Act, 29 U.S.C. § 185,1 for a declaratory judgment and damages. The Union had struck Contempo in March of 1996 despite a “no strike” clause in the collective bargaining agreement (“the WAC CBA”). Contempo asked the district court to declare the Union bound by the WAC CBA and, further, to assess $451,013.98 in damages against the Union' — profits lost during the strike plus the difference between what Contempo would have paid its Union *574employees under the WAC CBA and what it actually paid them under a new collective bargaining agreement (“the Contempo CBA”) signed a day after the strike began. On Contempo’s motion for summary judgment, the district court concluded that the WAC CBA operated at the time of the strike and, consequently, that the Union had violated its nostrike provision. At a subsequent bench trial, the district court went on to find that, although Contempo did not sign the Contempo CBA under economic duress, the agreement was nevertheless void ab initio. Contempo ultimately received all the relief it had requested, and the Union appealed. The majority now agrees that the WAC CBA operated at the time of the strike, that the Union breached its no-strike clause, and that the Contempo CBA was not signed under duress. However, it reverses the determination that the Contempo CBA was void ab initio and holds instead that the Contempo CBA replaced and discharged the WAC CBA. On this basis, the court now reduces Contempo’s damages to $11,574.48 — profits Contempo lost during the two-day strike. It deprives Contempo of the costs it incurred in operating under the Contempo CBA (rather than the WAC CBA) from the time of the strike forward.
The majority proceeds on the assumption that the award of damages to Contem-po can be justified only by declaring the superseding Contempo CBA void and permitting the WAC CBA to function as the governing agreement. I do not believe that it is necessary or appropriate to address the question of the validity of the superseding' Contempo CBA. As the district court recognized, Contempo’s agreement to that second CBA was a legitimate attempt on its part to mitigate its damages. Faced with a strike and a very significant loss of business, Contempo agreed to a less favorable agreement than the one to which it claimed to be a party. It incurred higher wage costs, for which it now claims recompense, but it stayed in business and suffered lower damages than those it would have incurred had it continued to resist the Union at the price of a prolonged strike.
It is well settled that an employer may seek lost profits from a union that strikes in violation of a no-strike provision in its collective bargaining agreement. See Drake Bakeries, Inc. v. Local 50, Am. Bakery & Confectionery Workers Int’l, 370 U.S. 254, 266, 82 S.Ct. 1346, 8 L.Ed.2d 474 (1962); John Morrell & Co. v. Local Union 304A of United Food & Commercial Workers, 913 F.2d 544, 558 (8th Cir.1990). Generally, such damages aim to place the aggrieved party in the place it would have been had the breach not occurred. See Chicago Painters & Decorators Funds v. Karr Bros., Inc., 755 F.2d 1285, 1290 (7th Cir.1985). Damages must be foreseeable, certain, and may not include any losses that the injured party reasonably might have been able to avoid or failed to mitigate. See Restatement (Second) of Contracts §§ 347, 350 to 353 (1981). The Restatement illustrates well the doctrine of mitigation:
A contracts to supervise the production of B’s crop for $10,000, but breaks his contract and leaves at the beginning of the season. By appropriate efforts, B could obtain an equally good supervisor for $11,000, but he does not do so and the crop is lost. B’s damages for A’s breach of contract do not include the loss of his crop, but he can recover $1,000 from A.
Restatements (Second) of Contracts § 350 Illus. 6.
Here, Contempo simply heeded the Restatement’s basic teaching, and the district court determined that $433,139.39 of Con-tempo’s damages could be viewed as profits lost in mitigating the harmful effects of the illegal Union strike. As the district court noted, Contempo had financial difficulties in March 1996, when the strike against it began. Compounding the financial pressures associated with its indebtedness, the Union’s illegal strike threatened to destroy Contempo’s opportunity for a multi-year, multimillion, dollar contract building mini-banks inside grocery stores for Bank of America. Faced with the possibility of losing $433,139.39 or the possibility of losing considerably more in lost *575business, Contempo chose to minimize its damages and to sign a new contract with the Union. In terms of the Restatement’s example, lest its “crop” wither, Contempo chose to spend the extra $433,139.89 that the Union demanded to mind the “farm.”
Contempo’s situation and the Restatement’s example differ in that the example involves mitigation through a new contract with a third party, whereas Contempo’s case involves mitigation through a new contract with the old breaching party (the Union). However, in the context of a labor contract, this distinction is hardly relevant. Contempo, the non-breaching party, had little choice but to make arrangements with the Union that represented its workers.
In Frito-Lay, Inc. v. Local Union No. 137, Int’l Bhd. of Teamsters, 623 F.2d 1354 (9th Cir.1980), a snack-food manufacturer paid bonuses to some of its employees and retained others on the payroll to assure a capacity to operate if the strike should end. The Union disputed its responsibility for these payments. Then-Judge Kennedy, writing for the court, held that the expenditures were “recoverable as justifiable expenses to minimize the damage caused by the strike. Payment of the bonuses was designed to retain experienced management personnel who would be likely to leave if their salaries were decreased because of the strike.” Id. at 1364. Retaining the secretarial and clerical staff was reasonable because Frito-Lay was entitled to maintain “a standby posture for resuming full operations as soon as the strike halted, thus to minimize business losses.” Id. Contempo found itself in a situation in which the practicalities it faced were similar to those of Frito-Lay. Both companies had to pay increased wage costs to weather illegal union activity that jeopardized its business. Frito-Lay paid extra sums to nonstriking employees to keep them from leaving; Contempo Design paid extra sums to striking employees to get them to come back.
It is well-established that damages in a breach of contract action under § 301 of the Labor Management Relations Act “should place the aggrieved party in the place [it] would have been in had the breach not occurred.” Karr Bros., 755 F.2d at 1290. Here, the district court found that the increased wage costs were attributable to the illegal strike and were a foreseeable consequence of the Union’s illegal activity. The majority does not challenge the principle of law; nor does it challenge the district court’s factual determination that the damages at issue are attributable to the Union’s illegal activity. In the majority’s view, although the law required Contempo Design to help itself by mitigating the damages attributable to the Union’s breach, it would have been better off to have done nothing but sit out the strike, incur huge losses, and then have sued for their recovery. Contempo attempted to mitigate damages; the majority now penalizes it for recognizing its obligation to do so.
The result the majority reaches today is not consistent with national -labor policy as expressed in the National Labor Relations Act; it deprives Contempo Design of its right to be compensated for the harm it suffered from the Union’s illegal breach. Accordingly, I respectfully dissent.
ORDER
Nov. 4, 1999
A petition for rehearing and a petition for rehearing en banc was filed in this case on September 14, 1999. An answer to the petitions was filed on September 29, 1999. A majority of judges in active service have voted to rehear the case en banc. Accordingly, the panel opinion is VACATED. The case will be scheduled for reargument before the en banc court at a date and time to be established in a subsequent order.

. 29 U.S.C. § 185 creates a federal cause of action for breach of a labor agreement. It provides in part:
Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.
29 U.S.C. § 185(a) (1998).