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UNITED RUBBER v. LEE NATL. CORP.

February 24, 1971

United Rubber, Cork, Linoleum and Plastic Workers of America, AFL-CIO et al., Plaintiffs,
v.
Lee National Corporation, Defendant


Mansfield, D. J.


The opinion of the court was delivered by: MANSFIELD

MANSFIELD, D. J.

In this suit by an international union (the "Union"), against an employer (the "Company") for alleged breaches of collective bargaining contracts with respect to employees at the Company's former Conshohocken and Youngstown plants, the complaint alleges three claims. The Company has moved for summary judgment as to the last two of these claims, one of which (2nd claim of complaint) seeks either (a) arbitration of the Union's claim to sums allegedly owed by the Company to certain of its former employees as a special distribution upon the Company's permanent discontinuance of operations at the Conshohocken plant, or (b) judgment for $2 million. The other seeks (a) $2 million in damages for alleged breach of contract arising from the Company's discontinuance of a life insurance plan *fn1" for its former retired employees, or (b) arbitration of this cause of action. For the reasons stated below, defendant's motion for summary judgment dismissing the second cause of action is granted to the extent that the claim of right to arbitration is dismissed; otherwise it is denied. Defendant's motion is granted as to the third cause of action.

 For many years the Company -- through its Lee Tire Division -- manufactured automobile tires for distribution and sale throughout the country. The tires were made at its Conshohocken plant and sold either through its sales branches through its wholly-owned sales subsidiary (Lee Tires Centers, Inc.), or through retail outlets of the Phillips Petroleum Company, The Pep Boys, and a few other purchasers who sold Lee-built tires under their own labels.

 At all relevant times a majority of the Company's production and maintenance employees and test drivers were represented for collective bargaining purposes by Local 227 of the Union pursuant to an agreement between the Company and the Local, hereinafter called the "Working Agreement." All other employees were expressly excluded from the Working Agreement and were not represented by any union. The Working Agreement covered such matters as wages, hours, and working provisions, and it also contained an arbitration and grievance procedure. The last Working Agreement was effective from June 30, 1961 to July, 1963, when it expired.

 On April 6, 1950, the Company entered into a separate agreement with Local 227 under which the Company established a non-contributory pension plan for certain of its employees, and an agreement whereby the Company would provide insurance coverage to employees covered by the Working Agreement. Later, in 1959, two further agreements for workers' benefits were reached: effective July 1, 1959, the Company provided a plan for supplemental workmen's compensation benefits for employees covered by the Working Agreement and also a plan for paying a service award and a special distribution on discontinuance of operations to certain of those employees upon the termination of their employment under certain circumstances and conditions. Finally, there was what may be described as a codification: On June 30, 1961, these four agreements were brought together and modified into a single agreement, effective July 1, 1961, which will be called the Welfare Agreement.

 During this period the labor-management relations were calm, but it was the calm before a storm. About July, 1962, Maurice M. Clairmont acquired working control of the Company. The Union contends that Clairmont was and is a "Corporate Raider," whose procedure, allegedly followed in this case, is to take a marginally profitable company, liquidate its business operations, and realize a substantial profit over and above the purchase price paid by him for its shares. The Company denies all this.

 Whatever Clairmont's intentions, he was faced with the Working Agreement and the Welfare Agreement. The expiration dates of these agreements did not coincide: the Working Agreement was to run from June 30, 1961 to June 30, 1963, and thereafter renew itself for yearly periods unless proper notice of termination was given (Working Agreement § 18.01); and the Welfare Agreement from July 1, 1961 to June 30, 1966. However the Welfare Agreement provided that it could be reopened after May 1, 1964, by either party for renegotiation and that failure to agree on new terms within a certain period of time would permit either party to terminate the Welfare Agreement upon stipulated notice, together with the Working Agreement, which would leave the Union free to strike. The Working Agreement also provided that it could be terminated by either party upon stipulated notice if, after reopening, the Welfare Agreement should be terminated.

 The Company came upon hard times, with profits low. On April 16, 1963, the first day when notice could be given by either the Company or the Union of a desire to amend the Working Agreement prior to its otherwise automatic renewal for one year on July 1, 1963, top executives of the Company met with officials of the Union and its Local 227. Lengthy negotiations followed. The Company argues that it was trying in good faith to keep on its feet in spite of hard times. The Union argues that the negotiations show that the hard times were not attributable to the employees or the beneficial provisions of the Welfare and Working Agreements.

 On June 29, 1963, one day before the Working Agreement expiration date the Company informed the Union that the Company would continue to maintain the same wages and working conditions contained in the expiring Working Agreement until formal notice by the Company. The Union responded that its members would work on a day-to-day basis under the provisions of the old contract while negotiations continued. Clairmont, at a bargaining meeting on July 3, 1963, suggested that the Union accept a 25% wage cut and a productivity sharing plan in return for a profit sharing agreement. The Union -- perhaps to no one's surprise -- refused to go along with the wage cut. However, the Union did offer a one-year extension of all agreements, at the end of which time the Union would agree to accept a wage cut in proportion to any cost increase chargeable to labor only. Clairmont rejected this offer. The Union also suggested that it would take 5% of its wages in Company stock, but this proposal was also rejected. Finally, the Federal Mediator (who was present at this as well as many other bargaining sessions) suggested that both sides submit to either binding or nonbinding arbitration. The Union accepted this proposal but the Company rejected it.

 On July 12, 1963, the Union indicated that it would agree to a substantial rollback of the 1961 benefits, vacation pay formula, and contract termination date. The Company reply on July 16, 1963, informed the Union that it would no longer even continue in force the old Working Agreement but instead would put into effect new terms and conditions of employment which were less favorable to the workers -- e.g., wage reduction of 20% -- and which were designed -- says the Company -- to put the Company in a more competitive position. On that same day and in response to this new Company position the Union began what became the longest work stoppage (the Company calls it a strike but the Union calls it a lockout) in the history of Pennsylvania.

 On May 1, 1964 (during the strike), the Company notified the Union that it wished to open for renegotiation the provisions of the Welfare Agreement, which that agreement permitted; the Company wished to reduce the Union benefits provided by the existing agreement; the Union did not agree and so the Company gave its 60-day notice that it desired to terminate the Welfare Agreement, which was terminated on September 8, 1964.

 On September 18, the Company notified its retired employees that the Welfare Agreement was terminated and their insurance coverage under that Agreement would terminate at the end of September, because premiums were only paid until then. The Union immediately objected and on October 2, 1964, the Company announced that it would continue modified insurance coverage for retired bargaining unit employees and other Company employees. This program the Company labelled as "voluntary," and it was terminated as of June 1, 1965.

 Meanwhile on November 30, 1964, the Board of Directors of the Company voted to discontinue all operations at the Conshohocken plant; on December 10 the Company reported this decision to the Union, which stated that it would continue to picket the plant. On December 14, 1964, the Company sent letters to its employees formally announcing that their employment by it was terminated. Picketing continued until a subsidiary of the Goodyear Tire & Rubber Company actually occupied the plant in July of 1965, under a lease from the Company.

 On July 14, 1965, the Union notified Local 227 that it was terminating the strike against the Company and discontinuing strike benefits. On November 4, 1965, the Union revoked the Local's charter as of November 30, 1965. The Union now claims that it is the successor to all of the assets, liabilities, right, title, and interest of the Local. United Rubber, Cork, Linoleum and Plastic Workers of America v. Local 227, United Rubber, Cork, Linoleum and Plastic Workers ...


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