The opinion of the court was delivered by: NEAHER
On July 25, 1972, petitioner, Paramount Bag Manufacturing Co., Inc. ("Paramount"), filed its petition in the Supreme Court, Kings County, for an order staying arbitration of a labor dispute which had been demanded on June 7, 1972 by respondent Rubberized Novelty and Plastic Fabric Workers' Union, Local 98, I.L.G.W.U. ("the union"). Paramount obtained a temporary restraining order staying arbitration pending a hearing on its application for a preliminary injunction. Prior to that hearing the union removed the proceeding to this court. Thereafter the union moved for summary judgment, asserting that as a matter of law Paramount's petition to stay arbitration should be denied and dismissed. Paramount thereupon cross-moved (1) to remand the proceeding to the State court or (2) alternatively, for summary judgment granting the relief sought in its petition. For the reasons which follow the union's motion is granted and Paramount's cross-motion is denied in all respects.
It appears from the removal petition and exhibits thereto in the State court, as well as the parties' affidavits on these motions, that the following material facts are not in dispute. Paramount, with its place of business in Brooklyn, New York, is presently engaged in the warehousing and distribution of plastic shoe bags and related products. At one time Paramount engaged in the manufacturing of such items, but in 1957, due to operating losses, it began to purchase such products from other manufacturers and sell them to its clientele. By March 1972 Paramount had completely terminated its manufacturing operations and confined itself solely to warehousing and wholesaling of the products it purchases from suppliers who do not manufacture them specifically or specially for Paramount.
The union is a labor organization representing over 5,000 employees in the soft plastics material industry in and about New York City. It has a collective bargaining relationship with the Plastic Soft Materials Manufacturers' Association, Inc. ("Association"), a group of about 85 employers. Paramount has been a member of the Association since 1964, and consequently has been bound by successive collective labor agreements entered into between the union and the Association. Two agreements are here in question, one dated March 3, 1969, covering the period to February 29, 1972, the other dated March 14, 1972, covering the period to February 28, 1975.
The union's demand for arbitration, which provoked this proceeding, relates to Paramount's termination of manufacturing operations covered by the foregoing agreements while continuing to deal in plastic shoe bags. As expressed in the union's letter to the arbitrator, the gist of its complaint is that in violation of the agreements, "the firm has obtained its products from other concerns and at the same time has laid off and failed to supply with work its employees covered by said agreements." That claim is premised on paragraph 26 in both agreements, which provides:
"No member of the Association shall permit any work to be performed for it, directly or indirectly, outside of its own shop by any other concern, and no member of the Association shall purchase any of its products from any other concern, unless the workers of the inside shop of the member of the Association are fully supplied with work."
The foregoing labor agreements also contain identical provisions for the arbitration of "[any] and all disputes, complaints, controversies, claims and grievances whatsoever . . . arising under, out of or in connection with, or in any manner related to this agreement, including . . . any claim arising out of any alleged dissolution or termination of the business of any member of the Association prior to the expiration of the term of this agreement. . . ."
Despite its admitted membership in the Association and the existence of the labor agreements containing the provisions above quoted, Paramount nonetheless insists that the court lacks jurisdiction to entertain this proceeding. Basically, Paramount contends the action is not one for "violation of a contract" between an employer and a labor organization within the meaning of Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a), and must therefore be remanded to the State court. In view of the challenge to the court's jurisdiction that question must be considered first.
In urging remand, Paramount contends that an action between an employer and a labor organization can only be removed from a State court if it is a suit for a "violation" of a contract between the parties. The legislative history of Section 301, it argues, manifests a congressional intent to provide a federal forum simply "for the enforcement of collective bargaining agreements affecting interstate commerce." This proceeding, says Paramount, is not a suit to " enforce " a collective bargaining agreement but rather one to negate it in respect of the claims asserted by the union. Thus, it argues, paragraph 26 of the agreements is a "hot cargo" clause made unlawful by the National Labor Relations Act and therefore the union cannot legally demand arbitration of the claimed violation of that provision. Additionally, Paramount asserts it entered into the 1972 agreement only because it was fraudulently induced to do so by union representations that paragraph 26 would not be enforced against it.
Paramount's arguments are disingenuous to say the least and plainly confuse the issue of jurisdiction with issues going to the merits. If this court has original jurisdiction under Section 301 to entertain a suit by a union to compel arbitration where the issue is whether or not a contract exists, Procter & Gamble Independent Union v. Procter & Gamble Mfg. Co., 312 F.2d 181 (2 Cir. 1962), cert. denied 374 U.S. 830, 83 S. Ct. 1872, 10 L. Ed. 2d 1053 (1963), or an action by an employer resisting arbitration on the ground that an existing union contract did not cover the particular controversy, Black-Clawson Co., Inc. v. International Ass'n of Mach., 313 F.2d 179 (2 Cir. 1962), then assuredly this court has removal jurisdiction to entertain such a proceeding as this. And it has been so held. Application of Contessa Lingerie, Inc., 227 F. Supp. 37, 39 (S.D.N.Y. 1964).
As a final thrust on the jurisdictional issue, Paramount asserts that all the cases previously cited have in effect been overruled by what the Supreme Court said about Section 301 in Boys Markets, Inc. v. Retail Clerks Union, 398 U.S. 235, 90 S. Ct. 1583, 26 L. Ed. 2d 199 (1970). In Boys Markets, however, as Paramount's quotation from that opinion shows, the Supreme Court merely reiterated what it had said in 1962 -- prior to the decisions Paramount would now avoid -- regarding the congressional purpose embodied in Section 301(a). Referring to its prior decision in Charles Dowd Box Co., Inc. v. Courtney, 368 U.S. 502, 82 S. Ct. 519, 7 L. Ed. 2d 483 (1962), the Court reaffirmed what it had said in Dowd, i.e., "that the purpose of conferring jurisdiction upon the federal district courts [by § 301] was not to displace, but to supplement, the thoroughly considered jurisdiction of the courts of the various States over contracts made by labor organizations." See 368 U.S. at 511, 82 S. Ct. at 525.
Boys Markets recognized that the Court's prior decisions in the Sinclair and Avco cases
had frustrated the congressional purpose by in effect ousting State courts of their jurisdiction to issue injunctions in labor matters. This court is unable to discover the slightest intimation in Boys Markets to support Paramount's fear that a "failure to remand here . . . would effect the 'wholesale dislocation in the allocation of judicial business between the State and Federal Courts' warned against by the Supreme Court in Boys Markets." No State court remedy is being displaced by this removal. If there is a valid arbitration agreement covering the dispute in question both the ...