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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 the New York State Mediation Board for arbitration.'

 The court granted defendant's motion, holding that the issues tendered for arbitration did not 'arise out of the specific terms' of the collective bargaining agreement. In an opinion filed in support of its order staying arbitration, *fn10" the court stated:

 'No provision was made in the collective bargaining agreement relating to the continuance or discontinuance of operations at Elmhurst; for the continuance of employment of the employees covered by the said agreement for any period of time other than the expiration date thereof, nor requiring the company to offer to each employee continued employment with full seniority in the event of discontinuance. It cannot, therefore, be said that the disputes the Union claims to have with Glidden are referable to arbitration under a clause which requires arbitration only with respect to 'specific terms' of a collective bargaining agreement.'

 'It follows * * * that Glidden's motion to stay arbitration must be granted, whatever other remedies the Union may have with respect to the alleged disputes.' (10 Misc.2d 700, at pages 705-706, 172 N.Y.S.2d at pages 683-684).

 Following this decision the plaintiffs instituted the present action. Before interposing its answer, defendant moved for summary judgment urging that the doctrine of res judicata required dismissal of the plaintiffs' claim. In a memorandum order, Judge Dimock denied the defendant's motion. *fn11" Defendant then filed its answer, affirmatively alleging the defense of res judicata.

 The question of fact litigated and determined by the state court and essential to its order staying arbitration was whether or not the claims as to survival of seniority rights arose out of the specific terms of the agreement. The state court found that none of the specific contractual provisions expressly conferred the rights now asserted by plaintiffs. *fn12" As to this issue, the state court judgment should have a collateral estoppel effect *fn13" precluding plaintiffs from relitigating the question whether their claims arise out of the specific language of the contract. However, defendant is entitled to no further benefit by reason of the prior adjudication. *fn14" To determine whether the union's claims were arbitrable, the state court was not required to reach the issue presented here. For plaintiffs now urge that when the ambiguities and gaps in the contract are studied in the context of the long-term employment relationship existing between the parties, the survival of seniority rights emerges as an implied part of the bargain. *fn15" In other words, the plaintiffs seek application of the agreement, in a manner alleged to be consistent with the intent of the parties, to a situation for which no specific provision was made. *fn16"

 The Scope of the Bargain

 Under the seniority system in effect at Elmhurst, *fn17" employees were to be laid off in reverse order of plant seniority and recalled in inverse order of layoff. In instances of continuous layoff, the seniority of an employee with less than five years' employment was to terminate after two years' continuous layoff; for employees with more than five years' service, seniority was to be terminated at the end of three years. *fn18" If seniority had been terminated by reason of continuous layoff, a former employee would still be entitled to preference before new employees were hired. *fn19" Plaintiffs point out that their employment was terminated by defendant shortly before the expiration date of the contract. *fn20" Therefore, they assert that their rights to three-year retention of seniority and indefinite preferential rehiring had accrued while the contract was fully effective. In other words, plaintiffs view the termination of their employment as a layoff due to curtailment of production and claim that their accrued three-year seniority retention rights entitled them to resume work when operations commenced in Bethlehem. *fn21"

 Whether the agreement should be understood to assure to plaintiffs retained seniority rights had operations continued at Elmhurst after the collective bargaining agreement expired would present a troublesome question of construction. See United Steelworkers of America v. Enterprise Wheel and Car Corp., 1960, 363 U.S. 593, S. Ct. 1358, 4 L. Ed. 2d 1424. However, it is unnecessary to determine whether plaintiffs are correct in asserting that the expired agreement continued to afford recall rights, to employees or whether, as defendant urges, all recall rights terminated when the period of the agreement came to an end. *fn22" For the critical issue is not whether plaintiffs' seniority retention rights accrued during the effective period of the collective bargaining agreement and survived its termination, *fn23" but whether the unit to which their rights could attach extended beyond the Elmhurst plant. *fn24" It is not enough for plaintiffs to establish that if Elmhurst operations had continued, their seniority status would have survived termination of the collective bargaining agreement. In order to recover, plaintiffs must also show that the governing seniority system gave them the right to 'follow their work' to the new plant.

 I find nothing in the record to warrant the conclusion urged by plaintiffs as to the unlimited geographic scope of their seniority rights. Wide variations exist in seniority systems used in industry. See Aeronautical Industrial District Lodge 727 v. Campbell, 1949, 337 U.S. 521, 526-27, 69 S. Ct. 1287, 93 L. Ed. 1512. With respect to the unit covered, an entire multi-plant company or district may be made subject to the same system, or the system may be limited to a particular plant, department or occupation. *fn25" Under the circumstances presented here -- the situation of the contracting parties, *fn26" their description of the subject of their agreement *fn27" and the absence of any prior history as to transferred seniority rights *fn28" -- I have concluded that the parties' bargain and understanding were limited to seniority rights at the Elmhurst plant.

 The agreement between Glidden and Local 852 refers to plant and department seniority but no reference is made to extension of the unit contingent upon events such as plant abandonment, transfer, merger or consolidation of operations. *fn29" However, agreements containing provisions for extension of the area in which seniority rights may be exercised are not uncommon. Since such provisions are tailored to meet the needs of particular enterprises, they very considerably in form and content. For example, they may be limited to a specific time period, to new plants only, or to employees laid off as a result of total plant closing. *fn30" In view of the alternative techniques which might be employed to deal with the issue of interplant seniority, *fn31" it would be unreasonable to expect a court to imply a general understanding between the parties as to the extent of the seniority unit when no evidence has been offered as to negotiations on the subject or an established course of practice on the part of the employer.

 Contrary to plaintiffs' contention, the collective bargaining agreement does not become illusory if its provisions are held to relate to a single existing plant. This is not the case of an employer who has abandoned the specified plant and transferred operations to a new location in order to circumvent contractual or statutory requirements. *fn32" Where, as here, the Board of Directors' decision to relocate is based on an exercise of business judgment in good faith, the employer's obligation to deal fairly and honestly with its employees is satisfied. *fn33" In sum, under the circumstances presented in this case, where no relevant limitation on the employer's freedom of action is found in the agreement or the prior conduct of the parties, no policy of New York law or our national labor laws requires the employer to preserve for its employees seniority status acquired under an expired agreement covering a closed plant. *fn34"


 Accordingly, it is my conclusion that plaintiffs have failed to prove facts which would entitle them to the relief sought. The Clerk is directed to enter judgment on the merits and with costs against the plaintiffs. Fed.R.Civ. P. 52(a), 28 U.S.C.A.

 So Ordered.

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