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November 9, 1959

Leo GREENSTEIN and Harvey Good, Plaintiffs,
NATIONAL SKIRT & SPORTSWEAR ASSOCIATION, INC., International Ladies' Garment Workers' Union, Joint Board of Cloak, Suit, Skirt and Reefer Markers' Union and Skirt Makers' Union, Local No. 23, ILGWU., Defendants

The opinion of the court was delivered by: WEINFELD

Plaintiffs move for a preliminary injunction to stay an arbitration hearing before the Impartial Chairman designated in a collective bargaining agreement between the defendant National Skirt and Sportswear Association, representing employers, hereafter called 'the Association', and the three union defendants, hereafter collectively referred to as 'the Union.' The membership of the Association is composed of jobbers and manufacturers of ladies' sportswear garments. The plaintiffs, manufacturers, have been members of the Association since 1951 and as such are bound by the terms, and entitled to the benefits, of the agreement between it and the Union.

The agreement, which has been in effect since June 1958, expires in May 1961 and is basically a renewal of prior agreements, the first of which was entered into in 1933. It provides against strikes and lockouts, and also contains a specified procedure for the resolution of disputes and grievances. In the event disputes are not resolved at the final stage of the grievance procedure they are referred to, and determined by the Impartial Chairman, who is granted power to conduct hearings and whose decision shall be final.

 Plaintiffs operate what is known as an 'inside shop' where they manufacture only a part of the garments they sell and distribute. The balance of their output is produced by sub-manufacturers and contractors to whom plaintiffs deliver goods, either uncut or cut, for processing into garments.

 On October 2, 1959, the Impartial Chairman notified the plaintiffs that the union defendant Local 23 had filed a complaint charging them with violations of the agreement and that a hearing thereon would be held on October 26, 1959. The alleged violations were:

 (1) failure to make payments to designated Health and Welfare, Retirement, and Severance Funds, hereinafter referred to as 'welfare funds';

 (2) manufacturing of the garments with non-union, non-designated and non-registered contractors;

 (3) failure to settle piece rates of garments produced by non-union, non-designated and non-registered contractors.

 The complaint also charged that the plaintiffs maintained more than one set of books to conceal violations and to evade provisions of the agreement and failed to submit all their books and records for examination by a union representative.

 Three days before the scheduled hearing on these charges, the plaintiffs commenced this action, naming their own Association and the Union as defendants. They charge that certain provisions of the collective bargaining agreement violate the Labor Management Relations Act of 1947, et seq., and the Sherman Act, and consequently are unenforceable. Upon the filing of the complaint, the plaintiffs moved for a preliminary injunction to stay the hearing before the Impartial Chairman, claiming that their alleged violations are based upon the provisions of the agreement which the suit seeks to invalidate, and that if the proposed hearing were held the plaintiffs would be deprived of 'our rights and our suit rendered valueless.'

 Plaintiffs, to obtain the drastic relief of staying the arbitration procedure which has been applied in this industry under the present and prior agreements for more than twenty-five years, must show: (1) a likelihood that their attack upon the alleged illegal provisions will be sustained upon a hearing on the merits, *fn1" and (2) even if so, that irreparable injury will result unless an immediate restraint is granted. *fn2"

 Thus we first consider the substance of the charges of illegality. These break down into an attack, first, on the welfare fund provisions, and, second, on other clauses of the contract which allegedly restrict competition and result in price-fixing.

 Welfare Fund Provisions

 The agreement provides for employer contributions to three separate funds, Health and Welfare, Retirement, and Severance. The payments are based upon a percentage of weekly wages of the workers employed by a manufacturer in his inside shop, if he maintains one, and, in addition, a percentage of the gross amount paid by him to each of his contractors and sub-manufacturers for labor, overhead and services. The agreement contemplates that work on garments, whether by employees of Association members or outside contractors, will be performed in union shops. However, it appears that plaintiffs, contrary to the agreement, placed work with non-union contractors and that the welfare fund payments made by them included sums computed on amounts paid to non-union contractors for labor, overhead and services.

 With respect to such payments the plaintiffs allege violation of section 302(a) and (b) of the Taft-Hartley Act, Labor Management Relations Act of 1947. *fn3" The first cause of action seeks to recover payments already made, based upon such non-union employees' ...

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