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Over a spirited dissent by Chief Judge Edward R. Becker, a divided panel of the 3rd U.S. Circuit Court of Appeals has ruled that a successor employer that has expressly refused to be bound by its predecessor’s collective bargaining agreement cannot be forced to arbitrate grievances pertaining to the agreement. “While we must respect the vital role that arbitration plays in settling labor disputes (and the correspondingly broad authority granted to arbitrators), we think it goes without saying that courts should not compel parties to submit to arbitration when there is nothing to arbitrate,” Judge Marjorie O. Rendell wrote in AmeriSteel Corp. v. International Brotherhood of Teamsters. “To hold otherwise would create the paradoxical situation in which AmeriSteel would be forced to arbitrate the extent of its obligations under the CBA, and yet, because it has no such obligations, the arbitrator would be powerless to enforce these obligations,” Rendell wrote in an opinion joined by visiting Senior Judge Frank J. Magill of the 8th U.S. Circuit Court of Appeals. Rendell concluded that relieving such an employer of the duty to arbitrate “avoids creating the incongruous situation in which a successor employer may be forced to arbitrate the extent of its obligations under its predecessor’s agreement, and yet the arbitrator is powerless to enforce these obligations because they are not binding on the successor employer.” But Becker said he believed that the case was controlled by the U.S. Supreme Court’s 1964 decision in John Wiley & Sons v. Livingston and that the majority’s analysis had improperly “relegated Wiley to the dustbin of history.” Becker said that if Wiley has been “implicitly overturned” by later Supreme Court cases, it is up to the Supreme Court to say so. “But if, as I believe, it still plays a viable role in protecting the rights of those employees who are in fact retained in the transition from one corporate organization to another from sudden changes in the terms and conditions of their employment, the court should reaffirm that fact,” Becker wrote. In the meantime, Becker said, “I believe that the better interpretation of Supreme Court precedent is that the rule of Wiley is still in force and that rule should be applied to the case at bar to enforce the arbitration provision of the CBA against AmeriSteel. Indeed, if Wiley has continuing viability, its rule would apply here if it applied anywhere.” Rendell responded in a footnote, saying: “We do not agree that our result in this case necessarily emasculates Wiley, or relegates it ‘to the dustbin of history,’ although we do decline to give Wiley as broad a reading as does Chief Judge Becker. We suggest that one who reads Wiley on its own, start to finish, would be struck by its careful and restrictive analysis, which leads to its equally narrow holding … that collective bargaining agreement provisions do not automatically go by the wayside when a corporate consolidation occurs.” The plaintiff in the suit, AmeriSteel, is a Florida steel manufacturer that purchased assets of Brocker Rebar, a York, Pa., company, in April 1999. Teamsters Local 430 represented employees at the York factory whose CBA with Brocker Rebar was set to extend until November 1999. But the purchase agreement between AmeriSteel and Brocker Rebar included provisions expressly stating that AmeriSteel was not to be bound by the terms of the CBA. In its dealings with the union, AmeriSteel has consistently and repeatedly maintained that it is not bound by the terms of the CBA and, therefore, that it is not bound to arbitrate under the agreement. AmeriSteel hired 50 employees to work in the York facility, and all but six members of Local 430 who had worked for Brocker Rebar were hired by AmeriSteel. Because it had hired a majority of the Local 430 members who had worked for Brocker Rebar, AmeriSteel was obligated to bargain with the union. But negotiations broke down in May 1999 when AmeriSteel withdrew recognition of the union on the basis of a petition purportedly signed by a majority of the union employees, in which they supposedly stated that they no longer wanted to be represented by Local 430. By then, Local 430 had already filed a grievance on behalf of all its members against Brocker Rebar and AmeriSteel, challenging unilateral changes that would occur in working conditions at the York facility when the AmeriSteel purchase agreement was consummated. When the union invoked the arbitration clause, AmeriSteel sought a declaratory judgment that it was not required to arbitrate because it was not bound by the pre-existing CBA. U.S. District Judge William W. Caldwell of the Middle District of Pennsylvania agreed, saying AmeriSteel had no duty to arbitrate because it was not the “alter ego” of Brocker Rebar. Rendell found that the appeal “requires us to navigate the treacherous waters of the Supreme Court’s labor law successorship doctrine, which has, at times, imposed extracontractual duties upon successor employers.” Lawyers for the union argued that AmeriSteel, as a successor employer to Brocker Rebar, must arbitrate grievances brought by the union under the CBA. But lawyers for AmeriSteel insisted that since it was never a party to the CBA and expressly rejected the agreement during its asset purchase negotiations with Brocker Rebar, it was not bound by the terms of the CBA, including its arbitration clause. Rendell found that simply labeling AmeriSteel a “successor employer” to Brocker Rebar was not enough to resolve the case. “As the Supreme Court has explained, a new employer, like AmeriSteel, ‘may be a successor for some purposes and not for others,’ and the question whether AmeriSteel is a successor to Brocker Rebar is simply not meaningful in the abstract,” Rendell wrote. Instead, Rendell said, the critical question for the court was: What are the legal obligations of AmeriSteel to the employees of Brocker Rebar? The answer, she said, depended on the interpretation of a trilogy of Supreme Court decisions — Wiley in 1964, NLRB v. Burns International Security Services Inc. in 1972, and Howard Johnson Co. v. Hotel and Restaurant Employees in 1974. That interpretation is a complex one, Rendell found, because Wiley and Burns “appear to be in direct conflict.” “On the one hand, the holding in Wiley necessarily implies that unconsenting successor employers may be bound by the substantive terms of pre-existing CBAs. But on the other hand, Burns endorses the idea that unwilling successors cannot be bound by such terms,” Rendell wrote. The justices didn’t make things any easier with the Howard Johnson decision, Rendell said, because they “chose not to deal with this conflict, and instead walked a very narrow path.” Rendell found that while Howard Johnson “does not bridge the gap between Wiley and Burns,” it nonetheless offered “some indication as to the Court’s thinking on the conflict.” Throughout the opinion, she said, the Court “downplays the significance of Wiley, describing its holding as a ‘guarded, almost tentative statement,’ and focusing on the limited factual context in which Wiley arose.” By contrast, Rendell said, the Howard Johnson Court “takes an expansive view of Burns, repeatedly extolling its reasoning.” Rendell concluded that “the best reading of Howard Johnson is that it does not resolve the conflict between Wiley and Burns, but it does much to strengthen and reaffirm the reasoning of Burns, and certainly does nothing to call into question Burns’ assertion that successor employers ‘are not bound by the substantive provisions of a collective bargaining contract negotiated by their predecessors but not agreed to or assumed by them.’ “ As a result, Rendell concluded that the wisest path was to apply Burns. “We believe the clear mandate of Burns — that an unconsenting successor employer cannot be bound by the substantive terms of a CBA negotiated by its predecessor — provides more persuasive guidance than the limited holding in Wiley,” Rendell wrote. “That being the case, AmeriSteel cannot be bound by the substantive terms of the CBA at issue here, which was negotiated between Brocker Rebar and the union and which AmeriSteel’s purchase agreement specifically stated would not be binding on it. And because AmeriSteel cannot be bound by the substantive terms of the CBA, no arbitration award to the union — which, of course, would be based on the substantive terms of the CBA — could receive judicial sanction, and therefore AmeriSteel cannot be compelled to submit to arbitration.” Becker disagreed, saying, “I think the best reconciliation of the Wiley-Burns-Howard Johnson trilogy is that the cases set out a ‘sliding scale’ for what types of burdens can be imposed on what types of successors.” The successorship relationships in the three cases were “very different,” Becker said, “and the burdens imposed on the successors varied with the corresponding strength of the successor relationship, thus providing an outline for deciding future cases.” In Burns, Becker said, there was a very weak relationship of succession between the corporations — no merger or sale of assets, and no dealings whatsoever between the predecessor and Burns. As a result, Becker said, the justices held that the successor corporation only had the duty to bargain with the union representing the employees and was not bound by the substantive terms of the predecessor’s CBA. By contrast, Becker found that in Wiley there was a very strong relationship of succession between the corporations — the predecessor merged into the successor — so the justices held that the successor was bound by the arbitration provision of the predecessor’s CBA. In Howard Johnson, Becker said, the relationship of succession was not as strong as in Wiley. “While there was a sale of assets by the predecessor to the successor, there was not nearly as much continuity of business operations as there was in Wiley (or here) — so the court held that the successor was not bound to arbitrate under the predecessor’s CBA,” Becker said. Becker said he would have reversed U.S. District Judge Caldwell and ordered arbitration because “I believe that AmeriSteel is much more like a Wiley successor than a Howard Johnson successor. In other words, in my view there is sufficient ‘substantial continuity of identity in the business enterprise,’ between Brocker Rebar and AmeriSteel to justify holding that AmeriSteel is bound to the arbitration provision (and possibly to the substantive provisions) of Brocker Rebar’s CBA with Local 430.”

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