Court Opinion

ID: 2960445
Source: CourtListenerOpinion
Date Created: 2015-09-17 17:49:35.882952+00
Date Added: 2024-06-11T12:46:13.188269
License: Public Domain

07-2424-ag(L), 07-2696-ag(XAP)
     Local 917 of the Int’l Bhd. of Teamsters v. NLRB

 1                      UNITED STATES COURT OF APPEALS
 2
 3                           FOR THE SECOND CIRCUIT
 4
 5
 6                               August Term, 2008
 7
 8
 9   (Argued: December 3, 2008                    Decided: August 11, 2009)
10
11               Docket No. 07-2424-ag(L), 07-2696-ag(XAP)
12
13
14   - - - - - - - - - - - - - - - - - - - -X
15
16
17   LOCAL 917, INTERNATIONAL BROTHERHOOD
18   OF TEAMSTERS,
19            Petitioner-Cross-Respondent,
20
21
22                           -v.-                       07-2424-ag(L)
23                                                      07-2696-ag(XAP)
24
25   NATIONAL LABOR RELATIONS BOARD,
26            Respondent-Cross-Petitioner. *
27
28
29   - - - - - - - - - - - - - - - - - - - -X
30
31
32   Before:           JACOBS, Chief Judge, McLAUGHLIN, and PARKER,
33                     Circuit Judges.
34
35
36         This petition for review of a Supplemental Decision and

37   Order issued by a divided National Labor Relations Board

           *
            The Clerk of Court is directed to amend the official
     caption to conform to the list of parties above.
1    (“NLRB”) arises from a contractually permitted, unilateral

2    change in the delivery terms under an exclusive

3    distributorship agreement, as a result of which the

4    employer’s drivers lost work.       The drivers’ union (the

5    “Union”) now petitions for review of the NLRB ruling that

6    its effort to enforce the work preservation clause amounted

7    to a boycott in violation of Section 8(e) of the National

8    Labor Relations Act, 29 U.S.C. § 158(e) (“Section 8(e)”).

9    The Union challenges the finding that it violated § 8(e) and

10   the imposition of attorneys’ fees.       The NLRB cross-petitions

11   for enforcement.

12       We conclude that the Union violated Section 8(e), but

13   we reverse the award of attorneys’ fees.

14

15                              GENE M. J. SZUFLITA, Belson &
16                              Szuflita, Brooklyn, New York,
17                              for Petitioner-Cross-Respondent.
18
19
20                              JILL A. GRIFFIN, Supervisory
21                              Attorney, Amy H. Ginn, Attorney,
22                              National Labor Relations Board,
23                              Washington, D.C., for
24                              Respondent-Cross-Petitioner.
25
26                              ALLEN B. ROBERTS, Donald S.
27                              Kruger, Epstein Becker & Green,
28                              P.C., New York, New York, for
29                              Intervenor Empire Merchants,
30                              LLC.
31

                                     2
1    DENNIS JACOBS, Chief Judge:

2        This petition for review of a Supplemental Decision and

3    Order issued by a divided National Labor Relations Board

4    (“NLRB”) arises from an exclusive distributorship agreement

5    that the employer, Peerless Importers Inc. (“Peerless”),

6    entered into with Diageo North America, Inc. (“Diageo”), a

7    supplier of wines and spirits.    Six months after the

8    agreement went into effect, Diageo altered its sales terms

9    to include delivery in the price of goods.    As a result,

10   Peerless’s drivers lost work, and Petitioner Local 917 of

11   the International Brotherhood of Teamsters (the “Union”)

12   sought to enforce the work preservation clause of the

13   collective bargaining agreement between Peerless and the

14   Union.

15       A divided NLRB concluded that the Union’s effort to

16   enforce the work preservation clause amounted to a boycott

17   in violation of Section 8(e) of the National Labor Relations

18   Act (“NLRA”), 29 U.S.C. § 158(e) (“Section 8(e)”).       The

19   Union now petitions for review of that decision, challenging

20   the finding that it violated Section 8(e) and the imposition

21   of attorneys’ fees.   The NLRB cross-petitions for

22   enforcement.

                                   3
1        We conclude that the Union violated the NLRA, but we

2    reverse the award of attorney’s fees.

3

4                                    I

5        Peerless distributes alcoholic beverages wholesale to

6    retail liquor stores, hotels, and restaurants in the New

7    York metropolitan area.   For a dozen years, a collective

8    bargaining agreement provided that the movement of freight

9    to and from Peerless’s warehouse in Greenpoint, Brooklyn,

10   would be performed exclusively by the Union’s drivers

11   (subject to inapplicable exceptions).

12       On July 25, 2002, Peerless entered into a “Distribution

13   Agreement” with Diageo by which Peerless became the

14   exclusive distributor of Diageo products in the New York

15   City area, including Smirnoff Vodka, Cuervo Tequila, Captain

16   Morgan Rum, Goldschlager, Bailey’s Irish Cream, Seagram’s

17   Canadian Whiskey, and a host of other brand-name spirits.

18   The contract did not expressly allocate responsibility for

19   the delivery of freight; according to the President of

20   Peerless Imports, the issue of delivery was not discussed

21   during contract negotiations.       The contract did, however,

22   allow Diageo to fix the sales terms:

                                     4
1               Prices and the terms and conditions of
2               sale (“Sales Terms”) shall be in
3               accordance with Diageo’s then in effect
4               Sales Terms as may be modified from time
5               to time by Diageo without the consent of
6               [Peerless] . . . .
7
8    § 4(A)(i) (emphasis added).   Diageo thus had unilateral

9    power to change the sales terms.    In common understanding,

10   the phrase “sales terms” references a bundle of arrangements

11   and provisions, including (among other things) price,

12   quantity, and the means by which the product is delivered.

13   See, e.g., Dictionary of International Business Terms 482

14   (3d ed. 2004) (defining sales terms generally as “delivery

15   and payment terms in a sales agreement”); see also 17A Am.

16   Jur. 2d Contracts § 190 (2004) (material terms can include

17   “subject matter, price, payment terms, quantity, duration,

18   compensation, and the dates of delivery and production”).

19       The Diageo agreement became effective in October 2002.

20   For the next six months, Peerless’s Union drivers continued

21   to pick up and deliver all freight, including Diageo’s

22   product.   In March 2003, Diageo announced a new national

23   pricing plan called “Delivered Pricing.”    Diageo

24   representatives scheduled a meeting with officers of

25   Peerless, at which Diageo provided an “operational preview”

26   of the new national pricing plan.    Under the new plan--which

                                    5
1    Diageo was in the process of rolling out to all of its

2    distributors across the nation--the price of goods would

3    increase, but the new price would include the price of

4    delivery to the distributor’s warehouse.   The Delivered

5    Pricing plan effectively displaced the Peerless drivers

6    (although Peerless’s drivers would still deliver products

7    from the warehouse and pick up from other suppliers, and

8    might still make pick-ups from Diageo when Diageo could not

9    make the delivery).   The Union was not notified in advance.

10       In November 2003, soon after the Delivered Pricing plan

11   became effective, a Union grievance charged Peerless with

12   breach of the collective bargaining agreement.    Peerless did

13   not respond to the grievance, and the Union filed a demand

14   for arbitration.

15       The Arbitrator held a hearing on June 28, 2004, and, on

16   September 28, 2004, ruled that Peerless had violated the

17   collective bargaining agreement “by permitting merchandise

18   from Diageo . . . to be delivered to the Company’s warehouse

19   by non-bargaining unit personnel.”   The Arbitrator retained

20   jurisdiction to fashion a remedy “pending a determination by

21   the NLRB.”

22       On October 6, 2004 (shortly after losing in

                                   6
1    arbitration), Peerless filed an unfair labor practice charge

2    with the NLRB claiming that the Union had “attempted to

3    coerce and restrain Peerless . . . with an object of forcing

4    or requiring Peerless to assign work that Peerless does not

5    control to its employees by resorting to arbitration to

6    enforce an unlawful ‘work preservation’ clause contained in

7    a collective bargaining agreement.”

8        An Administrative Law Judge (“ALJ”) was assigned to the

9    matter and a hearing date set.   Prior to the hearing, the

10   Union subpoenaed all documents relating to Peerless’s use of

11   non-Union personnel to move freight, including agreements

12   with Diageo, and any documents relating to meetings or

13   discussion with Diageo concerning the movement of freight.

14   Peerless petitioned to revoke the subpoena, but offered to

15   produce a redacted version of the Distribution Agreement.

16   After reviewing (ex parte) the full, unredacted version of

17   the Distribution Agreement, the ALJ directed Peerless to

18   turn over the unredacted version to the Union because “it

19   was arguably relevant to the Union’s defense and . . . it

20   might lead to other information that could be useful.”

21       Peerless did not comply with the ALJ’s directive.     On

22   March 30, 2005, the ALJ closed the hearing and dismissed

                                  7
1    Peerless’s complaint because “[Peerless’s] attorneys decided

2    [not to] turn over information that could possibly be used

3    by the Union in support of its defense.”

4        Upon initial review by the NLRB, the Board found that

5    the ALJ “abused his discretion by imposing the harsh

6    sanction of dismissal against [Peerless for] refusal to

7    fully comply with the subpoena.”       Instead of the “unusual,

8    and perhaps unprecedented, step of dismissing the

9    complaint,” the Board suggested (among other things) that

10   the ALJ draw an adverse inference against Peerless for its

11   refusal to comply and then reach the complaint on the

12   merits.   The NLRB ordered the complaint reinstated and the

13   case remanded for a decision on the merits.

14       On remand, the ALJ dismissed the Peerless complaint on

15   the merits.   He concluded that because Peerless was the

16   economic beneficiary of the delivery change and failed to

17   demonstrate that Diageo alone made the decision to assume

18   delivery responsibilities, Peerless could not be considered

19   a neutral, unoffending party and could not be said to lack

20   control of the decision.

21       Peerless filed exceptions, and the decision went back

22   to the NLRB for final review.       On May 11, 2007, a divided

                                     8
1    Board reversed the ALJ and ruled that the Union violated

2    Section 8(e) by seeking to enforce its collective bargaining

3    agreement with the object of forcing Peerless to cease doing

4    business with Diageo.   The majority concluded that “Diageo’s

5    contractual authority included the right to insist that it

6    deliver the beverages to Peerless as a condition of sale and

7    Peerless, by agreeing to those terms, lost the right to

8    control the disputed work.”   The NLRB ordered the Union to:

9    (1) cease and desist from attempting to enforce the

10   collecting bargaining agreement as against Peerless and

11   Diageo; (2) withdraw its grievance; and (3) “[r]eimburse

12   Peerless . . . for all reasonable expenses and legal fees,

13   with interest, incurred in defending against the grievance

14   and arbitration demand.”

15       The dissenter opined that Peerless, by entering the

16   Distribution Agreement with Diageo, “contracted away its

17   right to control [freight movement] work.”   In her view:

18   “Diageo did not insist, as a condition of continuing to do

19   business with Peerless, that Diageo employees make

20   deliveries formerly handled by [the Union]”; Peerless

21   therefore should have attempted to discuss or negotiate an

22   arrangement with Diageo whereby Peerless’s Union employees

                                   9
1    would continue to move the freight, and its failure to do so

2    rendered Peerless an offending employer.     This appeal timely

3    followed.

4

5                                   II

6        Section 8(e) provides that “[i]t shall be an unfair

7    labor practice for any labor organization and any employer

8    to enter into any contract or agreement . . . whereby such

9    employer . . . agrees . . . to cease doing business with any

10   other person.”    29 U.S.C. § 158(e).   The provision controls

11   anti-competitive activity in the labor context by barring

12   so-called “secondary boycotts,” i.e., “union pressure

13   directed at a neutral employer the object of which [is] to

14   induce or coerce him to cease doing business with an

15   employer with whom the union [is] engaged in a labor

16   dispute.”    Nat’l Woodwork Mfrs. Ass’n v. NLRB, 386 U.S. 612,

17   621-22 (1967).

18       To decide whether an agreement is illegal under Section

19   8(e), the Supreme Court classifies agreements as primary or

20   secondary.    NLRB v. Int’l Longshoremen’s Ass’n, AFL-CIO, 473

21   U.S. 61, 78-79 (1985); see also Bermuda Container Line Ltd.

22   v. Int’l Longshoremen’s Ass’n, AFL-CIO, 192 F.3d 250, 256

                                    10
1    (2d Cir. 1999).     Under Section 8(e), primary agreements are

2    generally lawful; secondary agreements, categorically, are

3    not.    See Int’l Longshoremen’s, 473 U.S. at 78-79; Bermuda

4    Container Line, 192 F.3d at 256.     “The touchstone is whether

5    the agreement or its maintenance is addressed to the labor

6    relations of the contracting employer vis-à-vis his own

7    employees.”     Nat’l Woodwork, 386 U.S. at 645.   “‘[I]f the

8    object of the agreement is to benefit the employees of the

9    bargaining unit represented by the union, it is “primary”

10   and . . . does not fall within the proscription of § 8(e) .

11   . . .’”     Bermuda Container Line, 192 F.3d at 256 (quoting A.

12   Duie Pyle, Inc. v. NLRB, 383 F.2d 772, 776 (3d Cir. 1967)

13   (footnote omitted)).     If, however, “‘the object [of the

14   agreement] is the application of pressure on an outside

15   employer in order to require [it] to accede to union

16   objectives[,] it is “secondary” [in nature]’” and prohibited

17   by Section 8(e).     Id. (quoting A. Duie Pyle, 383 F.2d at

18   776).

19          One type of primary agreement (permissible under

20   Section 8(e) if it meets certain criteria) is a “work

21   preservation agreement.”     See Int’l Longshoremen’s, 473 U.S.

22   at 78-79.     Such an agreement reserves to a union’s members

                                     11
1    the jobs that they have performed historically.   To

2    determine whether a work preservation agreement is lawful

3    under Section 8(e), courts consider whether an agreement:

4    (1) is “aimed at preserving work that union-represented

5    employees in the bargaining unit traditionally perform,” and

6    (2) is “directed at work over which the contracting employer

7    has [a right of] control.”   Bermuda Container Line, 192 F.3d

8    at 256 (citing NLRB v. ILA, 447 U.S. 490, 504-05 (1980)).

9    Equity has bearing upon the second consideration; only an

10   unoffending, neutral employer can effectively disclaim

11   control.   An employer may not engage in affirmative conduct

12   that it “reasonably conclude[s] would conflict with [its]

13   collective-bargaining obligations.”   Int’l Bhd. of Elec.

14   Workers, Local Union No. 501, AFL-CIO, 216 N.L.R.B. 417, 417

15   (Jan. 31, 1975), enforced, 566 F.2d 348, 353 (D.C. Cir.

16   1977)).

17

18                                III

19       Here, it is clear enough that the Union seeks to

20   preserve work that its members have traditionally performed.

21   So the question is whether Peerless had a “right of control”

22   over the disputed work.   The Union argues that substantial

                                   12
1    evidence is lacking to support the NLRB’s determination

2    that: (1) Peerless “lost” its right of control over the

3    movement of freight; (2) Peerless is an unoffending

4    employer; and (3) the Union is attempting to force Peerless

5    to cease doing business with Diageo.

6        “[W]e uphold the NLRB’s finding of fact if supported by

7    substantial evidence . . . and the NLRB’s legal

8    determinations if not ‘arbitrary and capricious.’”     Long

9    Island Head Start Child Dev. Servs. v. NLRB, 460 F.3d 254,

10   257 (2d Cir. 2006) (citing Universal Camera Corp. V. NLRB,

11   340 U.S. 474, 477 (1951) and quoting Laborers’ Int’l Union

12   of N. Am., AFL-CIO, Local 104 v. NLRB, 945 F.2d 55, 58 (2d

13   Cir. 2001)).   Even if we disagree with the Board’s factual

14   conclusions, we may reverse on this basis only if,

15   considering the record as a whole, “no rational trier of

16   fact could reach the conclusion drawn by the Board.”     NLRB

17   v. Albany Steel, Inc., 17 F.3d 564, 568 (2d Cir. 1994)

18   (internal quotation marks omitted).    We cannot “displace the

19   Board’s choice between two fairly conflicting views, even

20   though [we] would justifiably have made a different choice

21   had the matter been before [us] de novo.”    NLRB v. G & T

22   Terminal Packaging, Co., 246 F.3d 103, 114 (2d Cir. 2001)

                                   13
1    (alterations in original) (quoting Universal Camera Corp.,

2    340 U.S. at 488).     “This court reviews the Board’s legal

3    conclusions to ensure that they have a reasonable basis in

4    law.    In so doing, we afford the Board ‘a degree of legal

5    leeway.’”    NLRB v. Caval Tool Div., Chromalloy Gas Turbine

6    Corp., 262 F.3d 184, 188 (2d Cir. 2001) (quoting NLRB v.

7    Town & Country Elec., Inc., 516 U.S. 85, 89-90 (1995)).

8    (A) Right of Control

9           As the NLRB majority found, there is no evidence that

10   Peerless initiated the change in Sales Terms: “The most that

11   can be said is that Peerless did not actively resist it.”

12   Peerless was already bound by contract to accept Diageo’s

13   unilateral changes; so once the Delivered Pricing change was

14   announced, Peerless’s only options were to accept the change

15   (thereby offending the Union), or to refuse to continue

16   doing business with Diageo (thereby exposing itself to suit

17   for breach of contract).     The Union therefore cannot

18   demonstrate that Peerless was in a position to control the

19   allocation of work.

20    (B) Unoffending Employer

21          The Union argues that Peerless was an “offending

22   employer” because: (1) it bargained away the right to make

                                     14
1    delivery decisions; and (2) it refused to comply with a

2    subpoena for documents concerning the negotiations.

3             1. Delivery Decisions.   The Agreement (which was

4    reviewed ex parte by the ALJ) contains no express provision

5    allocating the work of delivery, and the Union continued to

6    deliver for six months following the Agreement.     As the NLRB

7    majority therefore ruled, Peerless could not “‘reasonably

8    conclude’ that its acceptance of [the Distribution

9    Agreement] conflicted with its obligation [to the Union]

10   under its collective-bargaining agreement.”

11       Moreover, there is no indication that Peerless

12   affirmatively sought a provision yielding to Diageo

13   unilateral authority to change the terms of sale.     The

14   Union’s argument that Peerless initiated the change is

15   wholly speculative and implausible; it assumes that Diageo

16   rolled out a national pricing program in response to

17   Peerless’s desire to idle its own drivers.

18       Substantial evidence--including the testimony of

19   witnesses and the text of the Distribution Agreement--

20   supports the findings that Peerless and Diageo did not

21   discuss delivery, that Peerless bargained away its right of

22   control over a bundle of rights--designated the “sales

                                  15
1    terms”--without foreseeing a change in delivery terms that

2    might be adverse to the Union, and that Peerless was,

3    therefore, an unoffending employer. 1

4        At best, the Union asserts that Peerless did not

5    negotiate with sufficient effort, foresight and

6    resourcefulness to preserve the Union’s work.     However, this

7    line of argument has been rejected by courts and the NLRB.

8    See Int’l Bhd. of Elec. Workers, 216 N.L.R.B. at 418 (“[T]o

9    define the parameters of ‘unoffending employer’ based solely

10   on an expenditure of effort on the part of the employer

11   seeking the Act’s protection seems realistically futile, as

12   well as administratively unmanageable.”).

13       Under these circumstances, Peerless was not an

14   “offending employer” and was therefore entitled to the Act’s

15   protections.

16            2. Subpoena Compliance.   The Union attacks the

17   root of the NLRB’s findings by citing the refusal by

18   Peerless to produce evidence as to whether Peerless actively

19   bargained away the Union drivers’ rights.   The subpoena at

         1
            We express no view as to whether Peerless would have
     offended the collective bargaining agreement if it foresaw
     the issue of control and sought to preserve it in
     negotiation, but failed.

                                   16
1    issue required Peerless to produce the Agreement and/or

2    other documents related to the negotiation.     As to the

3    Agreement itself, the NLRB evidently decided on a basis as

4    to which the known terms were sufficient.     As to the

5    supposed failure of Peerless to produce documents reflecting

6    negotiations on the movement of freight, Peerless’s

7    witnesses testified that the movement of freight was never

8    discussed or negotiated, and it is not specifically

9    addressed in the Distribution Agreement.

10   (C) Union Objectives

11       The Union also argues that its actions were permissible

12   under Section 8(e) because it was not the Union’s object to

13   effectuate a secondary boycott against Diageo by enforcement

14   of its bargaining agreement with Peerless.

15       Insofar as the Union complains that Peerless failed to

16   protect its drivers’ right to move freight, the Union’s

17   grievance would seem to be with Peerless, not Diageo.       But

18   it is also true that the enforcement of the collective

19   bargaining agreement that the Union sought in this

20   particular case would have effected a secondary boycott of

21   Diageo.   The Union’s position would likely either preclude

22   Peerless from doing business with Diageo entirely, or

                                   17
1    obligate Peerless to breach its contract with Diageo.     Both

2    scenarios violate Section 8(e)’s bar on agreements that

3    effect the cessation of business, and both are in tension

4    with Section 8(e)’s aim of eliminating anti-competitive

5    conduct.   See Nat’l Woodwork Mfrs., 386 U.S. at 620 (noting

6    that Section 8(e)’s “history begins with judicial

7    application of the Sherman Act to labor activities”)

8    (citation omitted).

9        This Court must defer to the findings of the NLRB as

10   long as they are supported by substantial evidence and the

11   legal conclusions are not arbitrary or capricious.     Long

12   Island Head Start, 460 F.3d at 257.   All of the majority’s

13   findings here are supported by substantial evidence because,

14   based on the record, they are not without foundation, while

15   the arguments of the Union and the NLRB dissent are

16   speculative and unsupported by the record.   Accordingly, we

17   affirm the NLRB’s decision with respect to Section 8(e).

18

19                                 IV

20       The Union appeals the NLRB’s decision to award Peerless

21   reimbursement for expenses and legal fees incurred while

22   defending the Union’s grievance and arbitration demand.

                                   18
1           In fashioning a remedy, the NLRB is authorized “to take

2    such affirmative action . . . as will effectuate the

3    policies of [the NLRA].”    29 U.S.C. § 160(c).   “[A] remedial

4    order of the Board ‘will not be disturbed unless it can be

5    shown that the order is a patent attempt to achieve ends

6    other than those which can fairly be said to effectuate the

7    policies of the [NLRA].’”    TNT USA Inc. v. NLRB, 208 F.3d

8    362, 367 (2d Cir. 2000) (quoting Fireboard Paper Prods.

9    Corp. v. NLRB, 379 U.S. 203, 216 (1964)).

10          Peerless withheld a copy of its Distribution Agreement

11   from the Union in defiance of a subpoena and an order of the

12   ALJ.    By so doing, it called into question whether it was

13   forthcoming in producing other documents.    It may be that

14   Peerless had its reasons: an employer may wish to shield its

15   business contracts from a union.    But the effect was to

16   withhold a document containing information without which the

17   Union could not independently assess its grievance or

18   consider whether the arbitration was moot.    The award of

19   attorneys’ fees in this case casts upon the Union the costs

20   and expenses of proceedings that were (at least) prolonged

21   by the employer’s defiance of a discovery order.     It is

22   difficult to see how the award in this case, which affords

                                    19
1    an incentive to disregard discovery mandates, can “fairly be

2    said to effectuate the policies of the NLRA.”   Id.   The

3    remedy fashioned also has the effect of discouraging the

4    filing of grievances that may be meritorious, an end which

5    is squarely at odds with the policies of the NLRA.

6    Accordingly, the NLRB’s decision to award fees to Peerless

7    is reversed.

8

9                              CONCLUSION

10       For the foregoing reasons, the Union’s petition for

11   review is granted with respect to attorneys’ fees and the

12   award reversed; in all other respects, the Union’s petition

13   for review is denied and the NLRB’s cross-petition for

14   enforcement is granted.

                                   20