Court Opinion

ID: 9666949
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:30:54.410329+00
Date Added: 2024-06-11T18:15:33.733383
License: Public Domain

LOUIS J. CECI, J.
(dissenting). I dissent. I would find that the unions' cause of action under the Uniform Fraudulent Conveyance Act, ch. 242, Stats. 1985-86, is preempted by sec. 301 of the Labor Management Rela*504tions Act (LMRA), 29 U.S.C. sec. 185, .because resolution of the unions' cause of action before this court will require substantial interpretation of the collective bargaining agreement between the unions and Continental Can Company (Continental). I am at a loss to understand how the majority could conclude otherwise.
Section 301(a) of the LMRA, 29 U.S.C. sec. 185(a), provides:
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.
In Textile Workers v. Lincoln Mills, 353 U.S. 448, 451 (1957), the United States Supreme Court held that sec. 301 not only provides federal court jurisdiction over controversies involving collective bargaining agreements but also "authorizes federal courts to fashion a body of federal law for the enforcement of these collective bargaining agreements." See also Lingle v. Norge Division of Magic Chef, Inc., 108 S. Ct. 1877, 1880 (1988). The Court later concluded that state courts have concurrent jurisdiction over sec. 301 claims. Charles Dowd Box Co., Inc. v. Courtney, 368 U.S. 502 (1962). However, state as well as federal courts must apply federal law in deciding such claims. Teamsters v. Lucas Flour Co., 369 U.S. 95, T02 (1962); Lingle, 108 S. Ct. at 1880 n. 2.
In Lucas Flour, the Court was confronted with the issue of whether a collective bargaining agreement implicitly prohibited a strike that had been called by the union. The Washington Supreme Court had answered that question by applying state law rules of contract *505interpretation. Lucas Flour, 369 U.S. at 102. The Court rejected that approach and held that sec. 301 mandated resort to federal rules of law in order to ensure uniform interpretation of collective bargaining agreements because "[t]he possibility that individual contract terms might have different meanings under state and federal law would inevitably exert a disruptive influence upon both the negotiation and administration of collective agreements.” Id. at 103.
In Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 208 (1985), the Court considered the issue of whether sec. 301 of the LMRA preempted a state law tort action for bad-faith delay in making disability benefit payments due under a collective bargaining agreement. The Court held that "[t]he interests in interpretive uniformity and predictability that require that labor-contract disputes be resolved by reference to federal law also require that the meaning given a contract phrase or term be subject to uniform federal interpretation." Id. at 211. Consequently, since reference to the collective bargaining agreement as to the manner in which a benefit claim would be handled would necessarily have been relevant to any allegation that the claim was handled in a dilatory manner, the Court held that sec. 301 preempted the application of the state law tort remedy. Id. at 218-19. The Court concluded by holding "that when resolution of a state-law claim is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract, that claim must either be treated as a § 301 claim, see Avco Corp. v. Aero Lodge 735, 390 U.S. 557 (1968), or dismissed as pre-empted by federal labor-contract law." Id. at 220; see also Lingle, 108 S. Ct. at 1883-84 n. 10; Caterpillar Inc. v. Williams, 482 U.S. 386, 394 (1987).
*506Therefore, sec. 301 of the LMRA preempts state law claims which are founded directly on rights created by the collective bargaining agreements or which are substantially dependent upon analysis of a collective bargaining agreement. Caterpillar, 482 U.S. at 394; International Brotherhood of Electrical Workers v. Hechler, 481 U.S. 851, 859 n. 3 (1987); Evans v. Einhorn, 855 F.2d 1245, 1251 (7th Cir. 1988); Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1396 (9th Cir. 1988). If the resolution of a state law claim depends upon the meaning of a collective bargaining agreement, the application of state law is preempted. Lingle, 108 S. Ct. at 1881.
In the case before this court, the unions' complaint expressly sets out that the debts the unions are seeking to secure exist solely because of the collective bargaining agreement. Paragraphs 1 and 3 of the complaint state in part:
1. ... Plaintiffs are creditors of defendants with respect to wages, employee benefits, pension and welfare benefits, collective bargaining dues 'check-offs', and other matured and unmatured claims, pursuant to the collective bargaining agreement between the I AM and the defendants ....
3. The I AM employees of the defendants are creditors of defendants under the terms of the IAM Continental collective bargaining agreement in the approximate amount of $19,950,000. This indebtedness is comprised of matured as well as unmatured claims over the life of plaintiffs' current collective bargaining agreement for wages, vacation pay, sick leave pay, life, health and accident insurance, pension contributions, and other employee benefits, as well as claims asserted in various grievance and arbitration proceedings, all owed to the employees pursuant to the collective bargaining agreement.
*507(Emphasis added.) The unions' complaint also sets out the basis of its claims. Paragraphs 21, 25, and 27 of the complaint state:
21. As a result of defendant U.S. Can's acquisition of the Continental packaging sector pursuant to the merger transaction between the parties, defendants have made and will make conveyances and incur obligations which will render the surviving entity insolvent within the meaning of Section 4 of the Uniform Fraudulent Conveyance Act, Wis. Stat. § 242.04. These conveyances and obligations, as more fully set forth in paragraphs 11 through 17, supra, will render the merged entity insolvent in that the fair saleable value of the available, unencumbered post-merger assets will be far less than the amount that the post-merger enterprise will need to pay its probable liabilities or its existing debts as they become absolute and matured.
25. The transaction which defendants have completed, or are about to complete, involves conveyances and obligations on the part of defendants which will leave the surviving merged entity severely and unreasonably undercapitalized within the meaning of § 5 of the Uniform Fraudulent Conveyance Act, Wis. Stat. § 242.05. The property remaining in the surviving entity's hands upon completion of the merger transaction will be so encumbered by pledges, liens, and security interests that the surviving entity will be left with effectively no working capital, but will have insurmountable debt.
27. The conveyances and transfers which defendants have completed, or are about to complete, as part of the U.S. Can acquisition of the Continental packaging sector have been made to hinder, delay, or defraud plaintiffs, who are both present and future *508creditors of defendants, within the meaning of Section 7 of the Uniform Fraudulent Conveyance Act, Wis. Stat. § 242.07.
Consequently, in order to determine whether U.S. Can's acquisition of Continental's packaging division pursuant to the merger transaction between the parties will render the surviving entity insolvent, a circuit court would have to determine, under sec. 242.04, Stats., whether the present fair salable value of Continental's assets is less than the amount that will be required to pay Continental's liability on its existing debts as they become absolute and matured. Furthermore, in order to determine whether U.S. Can's acquisition of Continental's packaging division pursuant to the merger transaction between the parties would leave the surviving entity severely and unreasonably undercapitalized under sec. 242.05 the court would have to determine whether the property remaining after the conveyance is an unreasonably small capital. Finally, in order to determine whether U.S. Can's acquisition of Continental's packaging division pursuant to the merger transaction between the parties was made to hinder, delay, or defraud the unions under sec. 242.07 the court would have to determine the companies' actual intent.
In order to resolve these issues, the court would have to balance Continental's assets against its liabilities. To determine Continental's liabilities, the court would have to interpret the terms of the collective bargaining agreement to determine if the unions' claim of $19,950,000 in matured and unmatured claims over the life of unions' current collective bargaining agreement for wages, vacation pay, sick leave pay, life, health and accident insurance, pension contributions, and other employee benefits as well as claims asserted in various grievance and arbitration proceedings is correct. Making *509such a determination would undoubtedly force the court to construe the meaning and import of the numerous provisions of the collective bargaining agreement in light of the provisions and definitions of the Uniform Fraudulent Conveyance Act.1 Such substantial interpretation of the collective bargaining agreement by a state court to determine rights under state law would result in precisely the outcome that the doctrine of preemption under sec. 301 is supposed to prevent.
The possibility that individual contract terms might have different meanings under state and federal law would inevitably exert a disruptive influence upon both the negotiation and administration of collective agreements. Because neither party could be certain of the rights which it had obtained or conceded, the *510process of negotiating an agreement would be made immeasurably more difficult by the necessity of trying to formulate contract provisions in such a way as to contain the same meaning under two or more systems of law which might someday be invoked in enforcing the contract. Once the collective bargain was made, the possibility of conflicting substantive interpretation under competing legal systems would tend to stimulate and prolong disputes as to its interpretation.
Lucas Flour, 369 U.S. at 103-104.
In Brown v. Keystone Consolidated Industries, Inc., 680 F. Supp. 1212, 1216 (N.D. Ill. 1988), the United States District Court was confronted with a situation similar to the one presently before this court. Keystone Consolidated Industries, Inc. (Keystone), in order to alleviate its fiscal woes, allegedly conspired with Frank L. Corral (Corral) to circumvent Keystone's Chicago Heights Steel Division's (CHS Division) collective bargaining agreement and its pension agreement with its employees by executing a sham transaction in which Keystone would sell its CHS Division to a purported "independent buyer" who in reality was Corral, CHS Division's vice president and general manager. In this manner, Keystone would allegedly continue to realize profits from the operation of the CHS Division business without being saddled with the obligations under its collective bargaining and pension agreements. Id.
The plaintiffs, thirty-five former employees of CHS Division, alleged in part that they were preexisting creditors of Keystone in that Keystone owed the plaintiffs substantial sums of money in the form of pension and retirement benefits and contractual obligations under their collective bargaining agreement. Id. at 1219. The plaintiffs further alleged that the conveyance of Key*511stone to CHS Acquisition, which was incorporated by Corral and represented as an "independent buyer," was a false and fraudulent conveyance entered into by those parties for the purpose of avoiding the claims of the plaintiffs. Id.
The district court held:
This cause of action, like the claim for common law fraud, is preempted by both the LMRA and the NLRA. As the plaintiffs' allegations concede, they are only 'preexisting creditors' of Keystone to the extent that Keystone owes them monies under the terms of the CBA and Pension Agreement. Indeed, the Shutdown Agreement also directly addresses the plaintiffs' eligibility for these benefits. Thus, it would be necessary to analyze the terms of at least three labor agreements in order to resolve the plaintiffs' fraudulent conveyance claim. Obviously, then, this cause of action is preempted by sec. 301.
Id. at 1219 (emphasis in original).
In Deford v. Soo Line R. Co., 867 F.2d 1080, 1081-82 (8th Cir. 1988), employees adversely affected by the sale of a portion of a railroad's rail lines and a labor association brought an action alleging common law creditors' rights violations and a Minnesota Uniform Fraudulent Transfer Act violation in state court. The employees attempted to avoid removal of their action to federal court by arguing that the Minnesota Fraudulent Transfer Act imposed duties and obligations on all creditors completely independent of any collective bargaining agreement. Id. at 1087.
The court of appeals found that the existence and extent of the creditors' rights asserted by the employees could be determined only by interpreting the collective bargaining agreements. Id. at 1086. The court noted that the employees, in their complaint, predicated their *512claims upon entitlements to accrued but unpaid wages, vacation pay, life and health insurance, pension contributions, and severance benefits arising "pursuant to continuing labor contracts and employee protection agreements." Id. Therefore, the court concluded that the creditors' rights asserted by the employees directly involved the interpretation of collective bargaining agreements and were, therefore, preempted under the Railway Labor Act (RLA), 45 U.S.C. secs. 151-188 (1982). Id. at 1087.
Similarly, I would hold in the case before this court that the unions' cause of action under the Uniform Fraudulent Conveyance Act, ch. 242, Stats., is preempted by sec. 301 of the LMRA, 29 U.S.C. sec. 185, because resolution of the unions' cause of action before this court will require substantial interpretation of the collective bargaining agreement between the unions and Continental Can Company. The majority opinion is simply wrong when it asserts that "any references in future stages of this litigation to collective-bargaining agreements will be 'tangential.' " Majority opinion at 503.
For the above reasons, I respectfully dissent.
I am authorized to state that JUSTICE WILLIAM G. CALLOW and JUSTICE DONALD W. STEINMETZ join in this dissenting opinion.

 I note that:
A collective-bargaining agreement may, of course, contain information such as rate of pay and other economic benefits that might be helpful in determining the damages to which a worker prevailing in a state law suit is entitled. See Baldracchi v. Pratt & Whitney Aircraft Div., United Technologies Corp., 814 F.2d 102, 106 (2d Cir. 1987). Although federal law would govern the interpretation of the agreement to determine the proper damages, the underlying state law claim, not otherwise pre-empted, would stand. Thus, as a general proposition, a state law claim may depend for its resolution upon both the interpretation of a collective-bargaining agreement and a separate state law analysis that does not turn on the agreement. In such a case, federal law would govern the interpretation of the agreement, but the separate state law analysis would not be thereby preempted.
Lingle, 108 S. Ct. at 1885 n. 12 (emphasis added).
However, in the case before this court, the state law claim is not separate because liability, not just damages, is decided by reference to the collective bargaining agreement. The companies' liability under state law is decided by reference to the collective bargaining agreement. As a result, Baldracchi is not applicable to the situation before this court.