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April 9, 1975

In the Matter of Arbitration between Local 259, United Automobile Workers, UAW, Petitioner-Respondent and Kellogg Pontiac Sales Corporation, Respondent-Petitioner

Griesa, D.J.

The opinion of the court was delivered by: GRIESA


Local 259, United Auto Workers, petitioned the New York Supreme Court to confirm the arbitration awards of Arbitrator Nathan Cohen of June 18, 1973 and December 27, 1973, issued in an arbitration proceeding between Local 259 and Kellogg Pontiac Sales Corp. Kellogg removed the suit to this court, which has jurisdiction under Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a).

 Kellogg moves to dismiss the petition to confirm the arbitration awards on the ground that it fails to state a claim on which relief may be granted, and alternatively moves for summary judgment dismissing the case.

 The National Labor Relations Board has intervened, and moves -- like Kellogg -- to dismiss the petition or in the alternative for summary judgment.

 The motions of Kellogg and the NLRB to dismiss the petition to confirm the Arbitrator's awards, or in the alternative for summary judgment, are denied. The motion of Local 259 to confirm the arbitration awards is denied as to the award of June 18, 1973 and granted in part and denied in part as to the award of December 27, 1973.


 Kellogg Pontiac Sales Corp. was incorporated in 1937 to operate a Pontiac dealership in New York City, and, after 1955, was owned 50% by Israel Solomon, who was sole franchisee, and 50% by Fay Solomon. Through the Automobile Dealers Industrial Relations Association of New York, Kellogg for many years had collective bargaining agreements with Local 259 with respect to its service shop employees. The most recent such agreement between Kellogg and Local 259 was for a term from July 1, 1972 to June 30, 1974.

 Kellogg was located in Manhattan. In or about 1970 New York City commenced a condemnation proceeding with reference to Kellogg's properties, and in March 1971 took title to the properties. Kellogg was given final notice to vacate by the end of 1972. Because of the condemnation and other reasons, Israel Solomon decided to leave the business, and allowed the franchise to expire. However, his son, Jack Solomon, an employee of Kellogg, and his son-in-law, Alan Grossman, a vice-president of Kellogg and its general manager, secured a Pontiac franchise in their names in November 1972. This franchise was for Mt. Vernon, New York, some 15 miles away from the Manhattan location, and had been operated by Persina Pontiac, whose assets Jack Solomon and Alan Grossman proceeded to buy.

 The corporate entity of Kellogg Pontiac Sales Corp. continued, and the Mt. Vernon dealership was operated by that corporation. Grossman and Jack Solomon purchased Fay Solomon's shares in the corporation. Israel Solomon continued to own his 50% share of the corporation as a result of making a loan to Grossman and Jack Solomon. However, there is an agreement whereby Grossman and Jack Solomon will purchase the shares of Israel Solomon over a period of time in repayment of the loan.

 It appears that Grossman and Jack Solomon purchased no tangible assets, fixtures or inventory from Kellogg's Manhattan operation although in their advertising from the Mt. Vernon location they clearly sought to carry over the goodwill of the name Kellogg.

 The Mt. Vernon operation of Grossman and Jack Solomon commenced in December of 1972.

 When Local 259 was apprised of the move to Mt. Vernon, in November of 1972, it demanded that Kellogg offer the Manhattan employees continued employment at the new location, and that Kellogg continue to implement its collective bargaining agreement with the union. However, when Kellogg moved to Mt. Vernon it dismissed the Manhattan Kellogg employees and hired the non-union Persina employees instead. It appears that at this time there were nine Persina employees. Twelve Kellogg employees had been dismissed from the Manhattan location.

 Local 259, as representative of the Manhattan Kellogg employees who lost their jobs, petitioned for arbitration, alleging breach of its collective bargaining agreement. On June 18, 1973 Arbitrator Cohen handed down an Opinion and Award. He noted the collective bargaining contractual provisions to the effect that Local 259 was recognized as the duly accredited collective bargaining representative of Kellogg's service shop employees, and that no employees should suffer any reduction in pay or loss of any economic benefit during the term of the agreement. Arbitrator Cohen held that the contract bound the Kellogg corporate entity, which was still in existence, and did not merely bind an individual franchisee. The Arbitrator noted that the recognition clause in the contract contained no geographic limitations. The Arbitrator concluded that Kellogg had improperly avoided the continued implementation of the contract and had denied both Local 259 and the employees the rights and benefits arising out of the contract. On the question of the remedy, the Arbitrator requested the parties to recognize the realities of the situation in which the Persina personnel were in effect employed at the new location, and requested the parties to bargain over what precisely should be done. The Arbitrator therefore issued the following direction:

"(1) The collective bargaining agreement between the Employer and the Union did not terminate with the cessation of the business operation at the New York location. The Employer is obligated to continue to recognize the Union and implement the terms of the collective bargaining agreement at its current Mount Vernon location.
"(2) The Employer and the Union are directed to meet and negotiate, the questions of the employment status of both the former New York employees and the present Mount Vernon employees, their possible monetary and benefit losses and the losses incurred by the Union as a result of the Employer's cessation of recognition of the Union and the failure to implement the collective bargaining agreement from about December 1, 1972 to the present.
"(3) In the event the parties are unable to reach full agreement with respect to the remedy directed in paragraph (2), above, either party may resubmit the unresolved portion of the remedy for determination as part of this proceeding."

 Kellogg had participated in the arbitration, but when the Arbitrator decided against it, Kellogg petitioned the NLRB to determine the question of union representation at its Mt. Vernon location, on the ground that the NLRB had jurisdiction under § 9 of the Labor Management Relations Act, 29 U.S.C. § 159, to determine representation questions. The NLRB accepted jurisdiction.

 On October 12, 1973 Sidney Danielson, Regional Director of NLRB Region 2, issued a Decision and Direction of Election. This decision held that the Arbitrator's ruling that the Kellogg operation at Mt. Vernon was bound to the pre-existing collective bargaining agreement with Local 259 was erroneous. The Regional Director found that the employer at the Mt. Vernon location was a "completely new business entity" not bound to adopt the collective bargaining agreement between Local 259 and Kellogg. The Regional Director placed his main reliance upon the fact that the operation of an automobile dealership depended on the franchise given to an individual, which franchise was different at the Mt. Vernon location than it had been at the Manhattan location. The Regional Director held that the accoutrements of corporate structure were essentially irrelevant for the purposes of the NLRB proceeding. The decision held that the Arbitrator's conclusion that the employer at Mt. Vernon had an obligation to employ or offer employment to the Manhattan employees was at odds with NLRB principles and policies. The Regional Director declined to defer to the Arbitrator with respect to the questions of the interpretation of the collective bargaining agreement, because the Regional Director stated that the question related not merely to ...

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