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June 30, 1960

Olga ZDANOK, John Zacharczyk, Mary A. Hackett, Quitman Williams and Marcelle Kreischer, Plaintiffs,

The opinion of the court was delivered by: PALMIERI

This case involves a dispute between a corporate employer and a group of employees concerning the seniority provisions of an expired collective bargaining agreement. *fn1" Plaintiffs, former employees of the defendant at its Elmhurst, New York, plant, commenced this action in 1958 in the Supreme Court of the State of New York, County of New York, seeking to recover damages for defendant's alleged breach of its contract with General Warehousemen's Union, Local 852 of the International Brotherhood of Teamsters, Chauffeurs, and Warehousemen, a labor union of which the plaintiffs are members. Defendant is an Ohio corporation authorized to do business in New York; plaintiffs are New York residents.

On defendant's petition setting forth the diverse citizenship of the parties and the value of the matter in controversy, the action was removed to this court. 28 U.S.C. § 1332, 1441(a). Jurisdiction here is based solely upon diversity of citizenship. The union is not a party and the court's power to proceed under 301 of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 185, has not been invoked. In urging their respective contentions, the parties have apparently assumed that the substantive law to be applied is that of New York. See Association of Westinghouse Salaried Employees v. Westinghouse Electric Corp., 1954, 348 U.S. 437, 460, 75 S. Ct. 489, 99 L. Ed. 510. With respect to the legal issue raised by the complaint, however, the court has examined both New York law and the policy of our national labor laws, see Textile Workers Union v. Lincoln Mills, 1957, 353 U.S. 448, 77 S. Ct. 912, 1 L. Ed. 2d 972, and has been unable to detect any differences which might bear upon the resolution of this controversy. See Local Lodge 2040 v. Servel, Inc., 7 Cir., 268 F.2d 692, certiorari denied, 1959, 361 U.S. 884, 80 S. Ct. 155, 4 L. Ed. 2d 120.

Statement of Facts *fn2"

 From 1929 until November 30, 1957, defendant operated a plant at Elmhurst where it engaged, among other things, in the manufacture of coconut products, spices and condiments. Defendant and Local 852 first entered into a collective bargaining agreement on January 6, 1950, effective December 1, 1949, and expiring November 30, 1951. Thereafter, successive agreements were effected at two-year intervals. The last of these successive two-year agreements is dated March 13, 1956 and embraced the period from December 1, 1955 to November 30, 1957. By its terms, the agreement would be automatically renewed unless either party gave sixty days' notice of termination. Such notice was given by defendant on September 16, 1957 and the agreement was terminated on November 30, 1957. *fn3"

 The defendant terminated the collective bargaining agreement pursuant to the decision of its Board of Directors to discontinue operations at the Elmhurst plant and to establish a new plant at Bethlehem, Pennsylvania. Defendant leased the Bethlehem plant on May 6, 1957 and, on May 16, 1957, Elmhurst employees were notified that operations would be discontinued in several months. In October, November and December of 1957, defendant removed some of the Elmhurst machinery and equipment were relocation at the Bethlehem plant. *fn4" Additional machinery and equipment were installed at Bethlehem and changes in manufacturing procedures were effected for the purpose of increasing production.

 Under the agreement which was terminated on November 30, 1957, Elmhurst employees were entitled to seniority rights and certain fringe benefits. Defendant did not offer the plaintiffs continued employment at its Bethlehem plant with retention of seniority rights acquired at Elmhurst; it did offer to receive applications at the Bethlehem plant from former Elmhurst employees and to give Elmhurst applicants fair consideration along with all other applicants. Defendant did not give Elmhurst employees the opportunity to submit at the Elmhurst plant applications for Bethlehem employment. None of the plaintiffs filed applications for positions at the Bethlehem plant. *fn5" However, applications were received from two former Elmhurst employees who are not parties to this action and offers of employment were made to One accepted and is currently employed at the Bethlehem plant. He has received no credit for seniority accrued while employed by defendant at its plant in Elmhurst.

 The Alleged Breach of Contract

 On these agreed facts, plaintiffs have raised a narrow and sharply defined legal issue. It is conceded that the collective bargaining agreement governing employment relationships at the Elmhurst plant was terminated on November 30, 1957 and that, in effecting the termination of the agreement, the defendant fully complied with all statutory and contractual requirements. Nor do plaintiffs challenge defendant's right to close or impugn its good faith in closing the Elmhurst plant and establishing a new plant in Bethlehem. Cf. United Steel Workers v. New Park Mining Co., D.C.Utah 1958, 169 F.Supp. 107, 110-111. The sole issue raised by the complaint concerns the scope and significance of the seniority provisions of the collective bargaining agreement. *fn6"

 Plaintiffs maintain that it was an implied condition of the bargain between the union and the company that the seniority rights created by the contract would survive the termination date of the agreement. It is urged that to meet the continuing obligations imposed by the surviving seniority provisions, defendant was required to offer plaintiffs employment at Bethlehem to which seniority status acquired at Elmhurst would attach. Plaintiffs claim that defendant's failure to make such an offer resulted in the deprivation, not only of their right to continued employment, but also of their interest in fringe benefits arising from defendant's pension *fn7" and group life insurance *fn8" plans and the union's welfare plan. *fn9"

 Defendant contends that no implied understanding as to the survival of seniority rights can reasonably be drawn from the terms of the agreement or the prior relationship of the parties. Rather, it is defendant's position that seniority ratings acquired at Elmhurst and the benefits secured by such ratings derived from and depended upon a contract expressly confined in scope and application to terms and conditions of employment at the plant in Elmhurst. Accordingly, defendant asserts that upon cessation of operations and lawful termination of the agreement, the subject of plaintiffs' seniority rights, i.e., employment at Elmhurst, ceased to exist. In short, defendant maintains that the contracting parties never bargained for transferable seniority rights and that the implication that such rights were designed to outlive the life of the plant and the agreement is without foundation.

 The Prior Proceedings and

 The Defense of Res Judicata

 On October 23, 1957, Local 852 served on defendant a notice of intention to arbitrate certain disputes pursuant to section 1458-a of the New York Civil Practice Act and the terms of the collective bargaining agreement. The defendant then moved in the Supreme Court of New York, Queens County, to stay arbitration upon the ground that the disputes were not arbitrable under the arbitration clause of the collective bargaining agreement. That clause provides as follows:

 'Any question, grievance or dispute arising out of and involving the interpretation and application of the specific terms of this Agreement * * * shall, at the request of either party, be referred to ...

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