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EASTERN FREIGHT WAYS v. LOCAL 707

June 11, 1969

Eastern Freight Ways, Inc., Plaintiff,
v.
Local 707, Highway and Local Motor Freight Drivers, Dockmen and Helpers affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America et al., Defendants


Edelstein, District Judge


The opinion of the court was delivered by: EDELSTEIN

EDELSTEIN, District Judge

The genesis of the motion before this court lies in the failure of the New York and Worcester Express, Inc., (hereinafter Worcester) to make certain payments on behalf of certain union employees of Worcester for wages, vacation pay, and for pension and welfare contributions owing to these union employees of Worcester. *fn1" All of these claims allegedly were incurred during the first several months of 1967 and relate exclusively to employees hired by Worcester prior to 1967.

 The Union alleges that Eastern Freight Ways Inc., (hereinafter Eastern) is a "successor" to Worcester as that term is used in Article I, Sec. 5 *fn2" of the Worcester-Union collective bargaining agreement, that consequently Eastern is subject to and bound by the terms of that collective bargaining agreement, and that as a result Eastern must arbitrate its alleged liability for Worcester's debts before the grievance committee established pursuant to Art. VII *fn3" of the Worcester-Union collective bargaining agreement. Eastern brings on this motion for final judgment and seeks a permanent injunction against defendants from conducting a grievance committee hearing or arbitration on the ground that it is not as a matter of law a successor such that it can be forced to arbitrate. Eastern also asks for a declaratory judgment *fn4" that it is not a successor and in the alternative that if it is a successor it is a successor only to the extent of ten percent of Worcester's original debt. Defendant Union opposes these motions.

 The nature of these motions can best be understood against the background, the events of which transpired commencing in 1967. In the early part of 1967 Worcester was on the verge of bankruptcy. On approximately March 3, 1967, Eastern entered into a written agreement *fn5" to purchase from individual stockholders of Worcester shares of the capital stock of Worcester, then owned by them, subject to the approval of the Interstate Commerce Commission. Pursuant to that agreement an application was made to the Interstate Commerce Commission under § 210a(b) of the Interstate Commerce Act for approval of temporary management by Eastern of Worcester pending the Commission's action upon the application for approval of Eastern's acquisition of the individual stockholders capital stock of Worcester. Approval was granted by the I.C.C. and on April 25, 1967, Eastern assumed such management. As such managing agent, Eastern, by law, could and did act as agent, but only as agent, for Worcester.

 On May 3, 1967, a petition for arrangement of the liabilities of Worcester under Chapter XI of the National Bankruptcy Act was filed by Worcester in the United States District Court for the Southern District of New York. By order of Referee Herzog, the Referee in Bankruptcy, dated December 31, 1968, the plan of arrangement of Worcester with its creditors was confirmed. The arrangement was confirmed with the knowledge of and participation by the Union. It is clear that the Union filed a proof of claim against Worcester in the said proceedings for the identical claim which the Union now seeks to pursue against Eastern as Worcester's successor. Moreover, a stipulation was executed by Cohen and Weiss, attorneys herein for the Union, accepting the plan of arrangement.

 Worcester's obligation to the Union under the said order of confirmation was for Worcester to pay ten percent of the original debt. This ten percent is not an issue in this case; it has been paid or it is in the process of being paid. It is, rather, the ninety percent of the original debt which is the subject matter of the Union's claim.

 The order of confirmation, inter alia, provides:

 
"11. [The] debtor's arrangement, as confirmed by this order, shall be binding upon the debtor, and upon all its creditors, whether or not they are affected by the arrangement or whether or not they have accepted it.
 
"12. [All] creditors affected by the terms of the debtor's arrangement be, and they are hereby FOREVER RESTRAINED AND ENJOINED from taking any further action or proceeding in connection with their said claims, except to enforce the consummation of the terms of the capital arrangement, as confirmed by this order."

 The legal issues before this court are two: (1) who - the court or the Grievance Committee - determines if Eastern is a successor such that Eastern must arbitrate its dispute before the Grievance Committee; and (2) if it be incumbent upon this court to resolve the first issue, then is Eastern, in fact, successor?

 The first issue poses hardly any problem at all. The Union's position that the court's "limited function" in this matter "is to determine whether a dispute is within the scope of the grievance and arbitration provisions in the collective bargaining agreement" ignores and flies in the face of the clear command of John Wiley and Sons, Inc., v. Livingston, 376 U.S. 543, 11 L. Ed. 2d 898, 84 S. Ct. 909 (1964) *fn6" which lays this issue to rest. That case involved an action by a union to compel arbitration. The court, confronted with a problem identical to the one before this court said:

 
"The threshold question in this controversy is who shall decide whether the arbitration provisions of the collective bargaining agreement survived the Wiley-Interscience merger, so as to be operative against Wiley. Both parties urge that this question is for the courts. Past cases leave no doubt that this is correct. Under our decisions, whether or not the company was bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered into by the parties. Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241, 8 L. Ed. 2d 462, 82 S. Ct. 1318. Accord, e.g., United Steelworkers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574, 582, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 -" (at 546-547 84 S. Ct. at 912)

 Clearly, under Wiley, the court, and not the Grievance Committee, decides if a party must arbitrate.

 The court now moves to the second issue: whether Eastern is in fact a successor such that the Grievance Committee may arbitrate Eastern's alleged liability for the debts of Worcester in excess of the ten percent settled upon in the ...


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