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OWENS-ILLINOIS, INC. v. DISTRICT 65

June 5, 1967

Owens-Illinois, Inc., Plaintiff
v.
District 65, Retail, Wholesale and Department Store Union, AFL-CIO, Defendant


McLean, D.J.


The opinion of the court was delivered by: MCLEAN

McLEAN, D.J.:

This is an action under Section 301 of the Labor Management Relations Act (29 U.S.C. § 185) by an employer against a union for a declaratory judgment and an injunction restraining defendant from proceeding to arbitrate against plaintiff under a collective bargaining agreement between defendant and Atlantic Container Corporation (Atlantic). Both sides move for summary judgment. There is no dispute as to any material fact. The facts are set forth in detail in the affidavits. They may be briefly summarized as follows.

 In 1964 Atlantic was engaged in manufacturing corrugated boxes in a leased plant in Moonachie, New Jersey. It had a collective bargaining agreement with defendant. No copy of this agreement has been furnished to the court, but it is said, without contradiction, to have been substantially similar to a collective bargaining agreement, a copy of which has been supplied, between defendant and an employers' association of which Atlantic had formerly been a member and which it rejoined during the term of the agreement. The agreement expired by its terms on August 31, 1964, but was extended by written agreement between the association and the union to August 31, 1965, and by subsequent oral agreement to September 30, 1965.

 A separate memorandum signed by the association and the union contained a provision reading as follows:

 
"Should an Employer covered by the agreement between the Metropolitan Container Council and District 65 assign, sell or otherwise dispose of its business in whole or in part, then in such event, such vendees, assignees or successors shall be bound by the terms of the agreement between the Metropolitan Container Council and its present members or any future members and District 65 and in addition, the aforesaid Employer shall deliver to the Union an assumption agreement executed by such vendee, assignee, or successor which shall be delivered prior to the consumation of such sale, assignment or other transference."

 This provision was intentionally omitted from the collective bargaining agreement in order to conceal its existence from any prospective purchaser of an employer's business. The union's affidavit states:

 
"The reason why said clause was omitted from the printed agreement (Exhibit A attached to plaintiff's complaint), arises from the fact that the negotiating team on behalf of the Association specifically requested that said clause be omitted from the printed document! They felt it might be difficult for any member of the Association to consummate a sale of its business, in whole or in part, if the prospective purchaser were aware of the existence of said clause."

 On May 14, 1965 Atlantic filed a petition under Chapter XI of the Bankruptcy Act in the United States District Court for the District of New Jersey. The court appointed a receiver. In July 1965 the receiver discontinued manufacturing operations. All production employees were discharged.

 On August 9, 1965, plaintiff entered into an agreement with Atlantic and its receiver pursuant to which plaintiff purchased all the machinery and equipment in the plant and all inventories of raw material and work in process. Atlantic also assigned to plaintiff its lease on the building. Plaintiff subsequently, by agreement with the landlord, cancelled this lease and entered into a new one. The agreement between plaintiff and Atlantic was approved by the referee in bankruptcy. By order dated September 20, 1965, the referee confirmed a Plan of Arrangement for Atlantic. The order provided that the sale of the assets of Atlantic to plaintiff "shall be free and clear of any and all rights, claims, liens, encumbrances and/or security interests of whatsoever kind or nature," except as set forth in the agreement of sale. There was no reference in the agreement of sale to Atlantic's collective bargaining agreement with defendant. Plaintiff did not know of the existence of the secret memorandum between the association and the union.

 Plaintiff began to operate the Moonachie plant on January 17, 1966, after it had made various alterations to it and had installed certain additional machinery. It manufactures corrugated boxes there. It began operations with thirty-three production employees. The number of such employees has gradually increased to 110. Only seven of these production employees formerly worked for Atlantic.

 Plaintiff has another plant in Newark, New Jersey, in which it manufactures corrugated boxes. Plaintiff has a collective bargaining agreement with another union, Local 300 of the International Brotherhood of Pulp, Sulphite and Paper Mill Workers, covering the employees at that plant. On January 17, 1966 Local 300 demanded that it be recognized as the bargaining agent of the employees at the Moonachie plant, a majority of whom were members of Local 300. Plaintiff accepted this demand and entered into an agreement with Local 300 extending its collective bargaining agreement to cover the Moonachie employees.

 The operations of the two plants are fully integrated. Thirty-one of the original thirty-three production employees at Moonachie were transferred there from Newark. Supervisors and some clerical employees were also transferred.

 Plaintiff hired two of the former executives of Atlantic, the Feldmans, as "consultants" for a period of three years. The papers do not make clear what they consult about. Plaintiff says that they have not procured any customers for plaintiff. According to plaintiff, none of the plaintiff's customers supplied from the Moonachie plant "was obtained from any customer list furnished to us by Atlantic."

 Article XXV of the collective bargaining agreement between defendant and the association is entitled ...


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