Court Opinion

ID: 3050667
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:32:10.867317+00
Date Added: 2024-06-11T12:04:59.217272
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

DISTRICT COUNCIL NO. 16 OF THE             No. 05-16258
INTERNATIONAL UNION OF PAINTERS
& ALLIED TRADES, GLAZIERS,                    D.C. No.
ARCHITECTURAL METAL & GLASS               CV-04-01219-VRW
WORKERS, LOCAL 1621,
               Plaintiff-Appellant,
                                             ORDER
                                            AMENDING
                v.                         OPINION AND
                                             AMENDED
B & B GLASS, INC.,
                                              OPINION
              Defendant-Appellee.
                                      
       Appeal from the United States District Court
         for the Northern District of California
       Vaughn R. Walker, District Judge, Presiding

                  Argued and Submitted
         June 13, 2007—San Francisco, California

                 Filed August 16, 2007
               Amended December 11, 2007

   Before: Mary M. Schroeder, William C. Canby, Jr. and
          M. Margaret McKeown, Circuit Judges.

                Opinion by Judge Schroeder

                           16261
16264      DISTRICT COUNCIL NO. 16 v. B & B GLASS

                        COUNSEL

David A. Rosenfeld and Emily P. Rich, Weinberg, Roger &
Rosenfeld, Alameda, California, for the plaintiff-appellant.

Charles S. Birenbuam, Joan B. Tucker Fife, and Robert Spa-
gat, Winston & Strawn, LLP, San Francisco, California, for
the defendant-appellee.

                          ORDER

  The opinion filed on August 16, 2007 is hereby amended
as follows. On page 9950, the first full paragraph is deleted
and the following paragraph is substituted:

   Section 8(e) of the NLRA “generally prohibits those
collective-bargaining agreements which require employers to
cease doing business with any other person.” Manganaro, 321
N.L.R.B. at 163. The Supreme Court has held that certain
agreements between employers and labor organizations whose
aim is to preserve the jobs of covered employees are not
within the prohibitions of § 8(e). Nat’l Woodwork Mf’rs Ass’n
v. NLRB, 386 U.S. 612, 646 (1967). Only where a work pres-
ervation provision is “ ‘tactically calculated’ ” to further
union objectives other than preservation of bargaining unit
           DISTRICT COUNCIL NO. 16 v. B & B GLASS          16265
work is § 8(e) violated. NLRB v. Int’l Longshoremen’s Ass’n
AFL-CIO, 447 U.S. 490, 504-05 (1980) (quoting Nat’l Wood-
work, 386 U.S. at 644) (provisions designed to achieve objec-
tives other than preservation of bargaining unit work
constitute “secondary” activity and, therefore, are unlawful).

  On page 9952, in the first paragraph, the following lan-
guage is deleted:

   Because the only employees covered by the Texas CBA are
members of Local 53, the district court determined that only
the employees of Local 53 are protected by the clause.

  Substitute the following language:

   Because the only employees covered by the Texas CBA are
employees represented by Local 53, the district court deter-
mined that only employees represented by Local 53 are pro-
tected by the clause.

  The mandate shall issue forthwith. No petitions shall be
entertained.

                          OPINION

SCHROEDER, Circuit Judge:

   This construction industry labor litigation involves the
interplay between the use of standard “work preservation” and
“out-of-area” clauses in collective bargaining agreements and
the strong federal policy favoring arbitration. The clauses at
issue in this litigation appear in a collective bargaining agree-
ment signed by a Texas corporation, but a different company
in California performed the challenged work. The California
union seeking arbitration did not sign an agreement with the
company doing the work. We conclude, as did the district
16266      DISTRICT COUNCIL NO. 16 v. B & B GLASS
court, that because the plaintiff union has no agreement with
the employer that it seeks to take to arbitration, and it cannot
show that the employer against whom it filed its claim con-
trols the company doing the work in California, the employer
is entitled to judgment. We therefore affirm.

                         Background

   Plaintiff-Appellant is District Council No. 16 of the Inter-
national Union of Painters and Allied Trades, Glaziers, Archi-
tectural Metal and Glass Workers, Local 1621 (“Local 1621”
or the “union”). It is located in Northern California and is sig-
natory to a collective bargaining agreement (“CBA”) with
contractors in Santa Clara County. The union filed this action
in the Northern District of California in 2004 against
Defendant-Appellee B&B Glass, Inc., a Texas corporation
(“BBTX”). The union seeks to compel BBTX to arbitrate the
union’s claim that another corporation, B&B Glass, Incorpo-
rated, an Arizona company (“BBAZ”), violated the Texas
agreement BBTX signed with Local 1621’s Texas counter-
part, Painters and Glaziers Local Union No. 53 (“Local 53”).
The California dispute concerned work BBAZ was doing at
San Jose State University in Santa Clara County.

   BBTX appeared specially to contest the district court’s per-
sonal jurisdiction over it, asserting that it was not doing the
work in California and therefore was not present in the state.
In support of its assertion, BBTX provided declarations that
the persons controlling BBTX had no control over BBAZ’s
business decisions. Without producing additional evidence,
Local 1621 countered that, because BBTX and BBAZ had a
majority of shareholders in common, BBTX exercised suffi-
cient management control over BBAZ that the court should
compel arbitration of the dispute between Local 1621 and
BBTX.

   In granting BBTX’s motion to dismiss, the district court
relied on the following undisputed facts. BBAZ was formed
           DISTRICT COUNCIL NO. 16 v. B & B GLASS       16267
in 1973 as an Arizona corporation by Robert and Barbara
Buckholz. Their son, Bryan Buckholz, purchased the com-
pany in 1983. He now owns a 25% interest in BBAZ, with the
other 75% being owned by Rick Churchill, Bernie Hagerman,
and John Collier, equally. BBAZ conducts most of its busi-
ness in Arizona, with some in California, Utah and New Mex-
ico. It does not hire employees who are unionized. Bryan
Buckholz incorporated BBTX under the laws of Texas in
1998, and he subsequently sold his entire interest in BBTX to
Rick Churchill, Bernie Hagerman, and John Collier. BBTX is
a union shop.

   BBAZ and BBTX do not compete for projects, contracts,
subcontracts or bids. The companies do not share business
offices, phone numbers, mailing addresses, business licenses,
employees, supervisors, managers, payrolls, workers compen-
sation policies, tax identification numbers, state unemploy-
ment numbers, tax records, corporate records or bank
accounts. Importantly, each company has a different “Opera-
tion Manager”—the person responsible for bidding on and
negotiating work contracts for the company.

   In March 2002, Rick Churchill, the Operation Manager of
BBTX, signed the Texas CBA. In July 2002, Plaintiff Local
1621 entered into a CBA with various employers in fourteen
Northern California counties, including Santa Clara County,
in which San Jose State University is located. BBAZ began
its work at San Jose State in July 2003.

   In March 2004, this dispute arose between BBTX and
Local 1621. Local 1621 claimed that BBAZ’s work in Cali-
fornia violated the Texas CBA. The terms of the Texas CBA,
if applicable to the California work, would bind BBAZ,
through BBTX, to adhere to the terms of the California CBA.
The California CBA provides that any dispute between the
parties is to be resolved through a grievance procedure, the
final step of which is binding arbitration. On March 26, 2004,
Local 1621 filed its petition to compel arbitration with BBTX
16268      DISTRICT COUNCIL NO. 16 v. B & B GLASS
in the Northern District of California. Local 1621 contends
that the California CBA applies to BBAZ’s California work
through the Texas CBA, because BBTX’s three owners also
own a majority of shares of BBAZ. Therefore, Local 1621
contends, BBAZ’s work is the out-of-area work of BBTX.

  The out-of-area clause in the Texas CBA requires BBTX,
when engaged in work outside the area covered by the agree-
ment, to abide by the terms of the agreement in effect in that
other area. It states the employer must

    comply with all the lawful clauses of the Collective
    Bargaining Agreement in effect in said other geo-
    graphic jurisdiction and executed by the employers
    of the industry and affiliated Local Unions in that
    jurisdiction[.] This provision is enforceable by the
    Local Union or District Council in whose jurisdic-
    tion the work is being performed, both through the
    procedure for settlement of grievances set forth in its
    applicable Collective Bargaining Agreement and
    through the courts, and is also enforceable by the
    Union party to this agreement[.]

   Local 1621 first argued to the district court that this clause
required BBAZ to comply with the California CBA. The dis-
trict court properly rejected this argument. As the district
court pointed out, “If BBTX physically engages in work out-
side of the Dallas metropolitan area (i.e., in San Jose, Califor-
nia), BBTX must comply with all of the clauses of the CBA
in effect in San Jose . . . . [¶] But BBTX engaged in no work
at San Jose State; only BBAZ did so.” Therefore, the district
court determined that the out-of-area clause was not sufficient
to support compelling arbitration.

   Local 1621 then invoked the Texas CBA’s “Manganaro”
clause. A Manganaro clause, also known as a work preserva-
tion provision, is common practice in the construction indus-
try. Painters & Allied Trades Dist. Council No. 51 of the Int’l
           DISTRICT COUNCIL NO. 16 v. B & B GLASS         16269
Brotherhood of Painters and Allied Trades, AFL-CIO, 321
N.L.R.B. 158, 158 (1996) (“Manganaro”). It is designed to
prevent union contractors from acting directly or indirectly as
non-union contractors. The Texas CBA’s Manganaro clause
reads:

    To protect and preserve, for the employees covered
    by this Agreement, all work they [i.e., 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
    performs on-site construction work . . . under its own
    name or the name of another corporation . . . where
    in the Employer, through its officers, directors, own-
    ers or stockholders, exercises directly or indirectly
    . . . [m]anagement control or majority ownership, the
    terms and conditions of this Agreement shall be
    applicable to all such work.

   Local 1621 argued that the Texas CBA bound BBAZ to the
terms of the California CBA because BBTX consented to the
jurisdiction of the district court when it signed the collective
bargaining agreement with Texas Local 53. Local 1621 con-
tended that BBTX “exercised . . . majority ownership” of, and
thus controlled, BBAZ’s business decisions. Because of the
Manganaro clause in the Texas CBA, BBAZ was bound by
the Texas CBA. Therefore, Local 1621 contended, because
BBAZ’s work at San Jose State constituted “on-site construc-
tion work . . . under the name of another corporation” con-
trolled by BBTX, the out-of-area clause in the Texas CBA
covered BBAZ’s work in California, subjecting it to the Cali-
fornia CBA’s arbitration provision.

   On June 1, 2005, the district court granted BBTX’s motion
to dismiss the petition to compel arbitration, finding that the
court lacked personal jurisdiction over BBTX. Applying Man-
ganaro, the court held that BBTX was not present in San
Jose; it had successfully demonstrated that it did not exercise
16270      DISTRICT COUNCIL NO. 16 v. B & B GLASS
active control over BBAZ. See Manganaro, 321 N.L.R.B. at
164 (requiring that the signatory to one CBA must exercise
“actual or active control of the work” of the non-signatory for
work preservation provision to apply). The district court
found that, although Local 1621 initially presented evidence
of the substantial overlap of ownership between the compa-
nies, the union did not follow up with additional evidence
demonstrating that BBTX had any hand in BBAZ’s business
decisions. Nor did Local 1621 contradict the companies’
showing that different individuals controlled the management
of each company.

  This timely appeal followed.

                          Discussion

   Local 1621 contends that the district court improperly held
that it was required to establish by a preponderance of the evi-
dence the existence of personal jurisdiction. It asserts that it
was required only to make a prima facie showing, and that it
did so by virtue of its allegations, in the Petition to Compel
Arbitration, that the three owners of BBTX owned a majority
of BBAZ, thus giving rise to a presumption that BBTX con-
trolled BBAZ’s work.

   [1] Where, as here, the existence of personal jurisdiction is
challenged and the defendant appears specially to contest its
presence in the jurisdiction, the plaintiff has the burden to
come forward with some evidence to establish jurisdiction.
Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800
(9th Cir. 2004) (“where a defendant moves to dismiss . . . for
lack of personal jurisdiction, the plaintiff bears the burden of
demonstrating that jurisdiction is appropriate.”). Because the
district court ruled on the issue relying only on affidavits and
discovery materials without holding an evidentiary hearing,
“dismissal is appropriate only if the plaintiff has not made a
prima facie showing of personal jurisdiction.” Am. Tel. & Tel.
Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th
           DISTRICT COUNCIL NO. 16 v. B & B GLASS        16271
Cir. 1996) (internal quotation marks omitted). However,
Local 1621 came forward with no evidence that BBTX exer-
cised any control over the work BBAZ was doing in Califor-
nia so as to bring BBTX within the jurisdiction of a California
court. The district court properly held that Local 1621 had not
borne its burden.

   Local 1621, however, argues that the district court’s dis-
missal was improper. It claims that BBTX consented to juris-
diction in California because it is a party to the Texas CBA
and the CBA applies to BBAZ’s work in California. If the
union were correct, the Texas CBA would require that BBAZ
adhere to the CBA in effect in Santa Clara County between
Local 1621 and various Northern California companies. The
out-of-area clause in the Texas CBA does not apply on its
face to work done by a company other than BBTX. The union
urges, however, that the out-of-area clause, when read in con-
junction with the work preservation clause, brings BBAZ’s
California work within the Texas CBA, because the CBA
covers the out-of-area work not only of BBTX but of entities
over which BBTX “exercises Management Control, or major-
ity ownership[.]” To demonstrate the requisite control, Local
1621 relied only on the common ownership of BBTX and
BBAZ. The district court found this overlap of ownership was
not sufficient in the face of the evidence in the record. We
agree.

   [2] The Texas CBA binds the “Employer party” to “comply
with all lawful clauses of” any CBA in effect in any other
“geographic jurisdiction” in which it does work. Out-of-area
clauses such as the one at issue here are enforceable in the
Ninth Circuit. See McKinstry Co. v. Sheet Metal Workers’
Int’l Ass’n, Local Union No. 16, 859 F.2d 1382, 1389 (9th
Cir. 1988) (approving out-of-area clause because such clauses
are common in construction industry and were contemplated
by the drafters of § 8(e) of the NLRA). As the district court
observed, had BBTX been doing the California work, it cer-
tainly would have been required to “comply with all of the
16272       DISTRICT COUNCIL NO. 16 v. B & B GLASS
clauses of the CBA in effect in San Jose between San Jose
employers and the affiliated local union, (e.g. Local 1621).”
But BBTX did not do the work in California. Therefore, the
out-of-area clause in the Texas CBA is insufficient, in and of
itself, to establish personal jurisdiction over BBAZ.

   [3] The out-of-area clause also fails to establish jurisdiction
when read in tandem with the work preservation clause. The
work preservation, or Manganaro, clause is prevalent in con-
struction industry CBAs. The clause takes its name from the
NLRB case that first analyzed an agreement clause containing
materially the same language used in the Texas CBA here.
See 321 N.L.R.B. 158 (1996).

   [4] In Manganaro, a proposed CBA between Manganaro
Corporation and a local union contained a work preservation
clause identical in all material aspects to the clause in the
Texas CBA. Manganaro filed an unfair labor practice claim,
charging that the clause violated, inter alia, § 8(e) of the
NLRA. Id. at 159. The NLRB found the clause “not unlawful
on its face[,]” id. at 163-68, and also held that application of
the clause was “not triggered merely by the fact of an affilia-
tion, subsidiary and parent relationship, or ownership interest
short of majority ownership,” id. at 164-65. It went on to
interpret “majority ownership” as applying only where the
shareholders of the signatory through the non-signatory com-
pany, “perform[ ] and exercise[ ] control over the work” in
question. Id. at 165 (emphasis omitted).

   [5] Local 1621 urges that BBAZ’s work in California pres-
ents “exactly the scenario” the language the Board approved
in Manganaro was designed to prevent. It contends BBTX is
effectively subcontracting work to BBAZ in order to circum-
vent the strictures of the Texas CBA. But, as the district court
found, this case does not present the scenario the Manganaro
language sought to prevent. Local 1621 presented the district
court with no evidence that BBTX exercises any control over
BBAZ’s decisions. Indeed, undermining Local 1621’s argu-
           DISTRICT COUNCIL NO. 16 v. B & B GLASS          16273
ment, BBTX offered significant evidence that there is no
overlap between the management and operations of the two
companies. The companies do not operate in the same market
and they do not bid on the same projects. They do not share
offices, employees, records, or any other business nexus.
They are not managed by the same individuals. Because Local
1621 failed to present any evidence of actual control, the dis-
trict court properly determined that application of the Texas
CBA’s work preservation clause to BBAZ’s California work
would have a secondary effect unlawful under § 8(e) of the
NLRA.

   [6] Section 8(e) of the NLRA “generally prohibits those
collective-bargaining agreements which require employers to
cease doing business with any other person.” Manganaro, 321
N.L.R.B. at 163. The Supreme Court has held that certain
agreements between employers and labor organizations whose
aim is to preserve the jobs of covered employees are not
within the prohibitions of § 8(e). Nat’l Woodwork Mf’rs Ass’n
v. NLRB, 386 U.S. 612, 646 (1967). Only where a work pres-
ervation provision is “ ‘tactically calculated’ ” to further
union objectives other than preservation of bargaining unit
work is § 8(e) violated. NLRB v. Int’l Longshoremen’s Ass’n
AFL-CIO, 447 U.S. 490, 504-05 (1980) (quoting Nat’l Wood-
work, 386 U.S. st 644) (provisions designed to achieve objec-
tives other than preservation of bargaining unit work
constitute “secondary” activity and, therefore, are unlawful).

   [7] The Court in International Longshoremen’s Association
went on to articulate a two-part test for determining whether
a CBA provision constitutes a lawful work preservation
agreement. First, it said, the clause “must have as its objective
the preservation of work traditionally performed by employ-
ees represented by the union. Second, the contracting
employer must have the power to give the employees the
work in question.” Id. at 504. This test is known as the “right
of control” test. Id. The Court’s rationale for adopting the sec-
ond prong of the test was to prevent “contracting employer[s]
16274         DISTRICT COUNCIL NO. 16 v. B & B GLASS
[with] no power to assign [or control] the work” from
attempting to “influence whoever does have such power over
the work.” Id. at 504-5 (citing NLRB v. Pipefitters, 429 U.S.
507, 517 (1977)).

   [8] In Manganaro, the NLRB laid out its assessment of the
minimum evidence necessary to meet the “right of control”
test. It said that, in order to establish the right of control, and
thus shelter a work preservation clause from § 8(e)’s prohibi-
tions, the signatory company must both possess “the right of
control over the work in question . . . and exercise[ ] [that]
control.” Id. at 164-65. The Board rejected the Manganaro
Corporation’s argument that the clause in that case could not
pass the “right of control” test because on its face “it could
and would apply to separate, though commonly owned, com-
panies over which [Manganaro] ha[d] no power to assign
work.” Id. at 164. The NLRB said:

    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.

Id. at 164.

   In this case, the district court began its analysis of the work
preservation clause in the Texas CBA by determining that the
clause applies only when BBTX is doing work under the
name of another company in the Dallas metropolitan area.
The provision states that its purpose is to “protect and pre-
serve, for the employees covered by [the Texas CBA], all
work they have performed.” Because the only employees cov-
ered by the Texas CBA are employees represented by Local
           DISTRICT COUNCIL NO. 16 v. B & B GLASS          16275
53, the district court determined that only employees repre-
sented by Local 53 are protected by the clause. Furthermore,
the district court said, disputes regarding the work preserva-
tion clause are governed by Section 2 of Article XVIII of the
Texas CBA. That provision states that “[a]ll charges of viola-
tions 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.” Hence, the
district court concluded that “any disputes concerning § 1 are
governed by the grievance procedures of the Texas CBA, not
a foreign CBA.”

   On appeal, Local 1621 contends, as it must, that the Texas
CBA’s work preservation clause does apply extraterritorially
and that BBTX is violating it in California by virtue of the
work BBAZ is doing. The essence of this argument is that the
degree of common ownership between BBTX and BBAZ sat-
isfies the “right of control” test laid down by the Supreme
Court. Here, however, the union runs up against the Manga-
naro decision itself, in which the majority clearly rejected that
view.

   [9] Manganaro is settled law. The NLRB itself recently
described it as “current Board law.” In re Cent. Pa. Reg’l
Council of Carpenters of the United Brotherhood of Carpen-
ters and Joiners of Am., AFL-CIO, 337 N.L.R.B. 1030, 1031
n.1 (2002). Our sister circuits have cited it as well and have
not had occasion to criticize it. See NLRB v. Cent. Pa. Reg’l
Council of Carpenters, 352 F.3d 831, 835 n.1 (3d Cir. 2003);
Int’l Union of Painters & Allied Trades, Local Unions No.
970 & 1144 AFL-CIO-CLC v. NLRB, 309 F.3d 1, 6 (D.C. Cir.
2002). The district court correctly determined that in order to
carry its burden of showing that BBTX was subject to the
court’s jurisdiction, Local 1621 was required to demonstrate
that BBTX exercised actual management control over the
work being done by BBAZ. Local 1621 failed to meet that
burden.

  AFFIRMED.