Local 917 of the Int'l Bhd. of Teamsters v. NLRB

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 [5] 6 August Term, 2008 [8] 9 (Argued: December 3, 2008 Decided: August 11, 2009) [10] 11 Docket No. 07-2424-ag(L), 07-2696-ag(XAP) [13] 14 - - - - - - - - - - - - - - - - - - - -X [16] 17 LOCAL 917, INTERNATIONAL BROTHERHOOD 18 OF TEAMSTERS, 19 Petitioner-Cross-Respondent, [21] 22 -v.- 07-2424-ag(L) 23 07-2696-ag(XAP) [24] 25 NATIONAL LABOR RELATIONS BOARD, 26 Respondent-Cross-Petitioner. * [28] 29 - - - - - - - - - - - - - - - - - - - -X [31] 32 Before: JACOBS, Chief Judge, McLAUGHLIN, and PARKER, 33 Circuit Judges. [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. [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. [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.