Opinion
Rehearing Denied Oct. 25, 1962.
McLaughlin & McLaughlin and Joseph M. McLaughlin, Los Angeles, for appellant Thriftimart, Inc.
Hill, Farrer & Burrill, Carl M. Gould, Stanley E. Tobin, and Barry R. Weiss, Los Angeles, for appellant Customers Finance Co.
Arnold, Smith & Schwartz, George L. Arnold, Kenneth M. Schwartz, and Laurence D. Steinsapir, Los Angeles, for respondent.
WOOD, Presiding Justice.
Appeals from an order and a judgment confirming an arbitration award.
Thriftimart, Inc., a corporation, operates 60 retail food stores in and about Los Angeles County. Retail Clerks Union, Local 770, is an unincorporated association whose members are retail clerks in and about Los Angeles County, and the purpose of the union, among other things, is to negotiate, execute, and maintain collective bargaining agreements on behalf of its members and employees who are engaged in retail businesses.
In January 1959, and at all times herein mentioned, Thriftimart and the union were parties to a collective bargaining agreement. The agreement provided that all matters of controversy between the parties and arising out of or involving the interpretation or application of the terms of the agreement should be settled by arbitration. The agreement also stated that it was made between Thriftimart, Inc., a corporation, 'all locations,' the first party, and Retail Clerks Union, Local 770, the second party.
In May 1961 Thriftimart acquired all of the outstanding shares of stock, and the physical assets, of Customers Finance Co., doing business as More, which acquisition was an involved transaction that will be referred to in some detail later herein.
Thereafter, the union asserted that the collective bargaining agreement (between it and Thriftimart) was applicable to the employees of More. Thriftimart disputed that assertion of the union. Thriftimart and the union agreed to arbitrate the dispute. They appointed an arbitrator pursuant to the terms of the bargaining agreement. Thriftimart reserved the right to move to dismiss the proceeding on the ground that the substantive issue was not arbitrable.
One issue presented to the arbitrator was the issue of arbitrability. The other issue was whether the collective bargaining agreement applies to and covers the employees of the Customers Finance Co., doing business as More. After testimony was received, Thriftimart moved to dismiss the proceeding. On August 7, 1961, the arbitrator decided that the issue was arbitrable, and that the agreement applies to and covers the employees of More.
On August 22, 1961, the union filed a notice of motion to confirm the award of the arbitrator.
On August 25, 1961, More made a motion, in superior court, for permission to intervene On September 7, 1961, the superior court made an order confirming the award. On October 2, 1961, judgment confirming the award was entered. Thriftimart, and Customers Finance Co., doing business as More, appeal from said order and judgment.
Customers Finance Co., doing business as More, was not a party to the arbitration proceeding, and did not consent to or participate in that proceeding. The employees of that company did not consent to or participate in that proceeding. It was established that Thriftimart and More were engaged in interstate commerce.
Appellant Thriftimart contends that the arbitrator's award is void (1) because it purports to bind More which did not consent to or participate in the arbitration proceeding; and (2) because the National Labor Relations Board has sole power and jurisdiction to decide questions of representation of employees, whose employers are engaged in businesses which affect interstate commerce.
Appellant More contends (1) that the award, as confirmed, is a judgment which denies More due process of law in that it adjudicates the rights and duties of More and its employees despite the fact that they were not parties to, and did not participate in or consent to the arbitration proceeding; (2) that the arbitrator lacked jurisdiction to decide the question of jurisdiction in that the matter of designating an appropriate unit for representation is exclusively within the jurisdiction of the National Labor Relations Board. The arbitrator's opinion is set forth in a footnote. Appellants cite Retail Clerks Union v. L. Bloom Sons Co., 173 Cal.App.2d 701, 344 P.2d 51. At the time of making the bargaining agreement therein L. Bloom Sons Appellant More cites several cases which were decided by the National Labor Relations Board, among which is (as stated in its brief) 'Illinois Malleable Iron Co., 120 N.L.R.B. 451 (1958).' In that case there was a bargaining agreement between Appleton Electric Company Company and a union (International Brotherhood of Electrical Workers), which agreement provided that it would be applicable to 'any future plants or divisions' of Appleton. Soon after making the agreement, Appleton purchased substantially all of the stock of Illinois Malleable Iron Company; and Malleable retained its corporate entity. A question before the National Labor Relations Board was whether the employees of the newly acquired Malleable plant were covered by the bargaining agreement with the Union, IBEW, under the provision therein that the agreement would be applicable to any future plants of Appleton. The Board found to the effect that those employees were not covered by the agreement. Appellant More, in the present case, states that: 'Clearly, the contract provision between Appleton and the IBEW was, if anything, more inclusive than that in the instant case.'; that the decision of the Board in the Malleable case was 'In language and facts that are virtually definitive of the instant case'; and that, 'Surely, the Malleable case is virtually a replica of the instant fact situation, and yet the Board ruled completely contrary to the summary judgment of the arbitrator [in the present case]. Surely, such conflicts cannot be allowed to exist and the rule, as enunciated by the Board, must reign supreme since Congress has so directed.' Appellant More quotes at length from the Board's opinion in the Malleable case. It is to be noted, however, that the United States Court of Appeals reviewed the order of the Board in that case (upon a petition for enforcement of the order) and that said court reversed the order (i. e., denied the petition to enforce the order). (National Labor Relations Board v. Appleton With reference to the question of arbitrability in the present case, the bargaining agreement provides, as above stated, that the question shall be determined in the first instance by the arbitrator. In United Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.C.t. 1343, 4 L.Ed.2d 1403, it was said at page 566, 80 S.Ct. at page 1345: 'Section 203(d) of the Labor Management Relations Act * * * states, 'Final adjustment by a method agreed upon by the parties is hereby declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement. * * *' That policy can be effectuated only if the means chosen by the parties for settlement of their differences under a collective bargaining agreement is given full play.' It was said therein (pp. 567-568, 80 S.Ct. p. 1346): 'The collective agreement calls for the submission of grievances in the categories which it describes, irrespective of whether a court may deem them to be meritorious. * * * In these circumstances the moving party should not be deprived of the arbitrator's judgment, when it was his judgment and all that it connotes that was bargained for.' It was also said therein (p. 569, 80 S.Ct. p. 1347): 'When the judiciary undertakes to determine the merits of a grievance under the guise of interpreting the grievance procedure of collective bargaining agreements, it usurps a function which under that regime is entrusted to the arbitration tribunal.'
'ARBITRATOR'S OPINION AND AWARD
In United Steelworkers v. Enterprise Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424, the collective bargaining agreement provided that any differences 'as to the meaning and application' of the agreement should be submitted to arbitration and that the arbitrator's decision 'shall be final and binding on the parties.' It was said therein (p. 596, 80 S.Ct. p. 1360): 'The refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under collective bargaining agreements. The federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards.' It was also said therein (p. 599, 80 S.Ct. p. 1362): 'It is the arbitrator's construction which was bargained for; and so far as the arbitrator's decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.'
As above indicated, the acquisition by Thriftimart of all the outstanding shares of stock of Customers Finance Co., doing business as More, was an involved transaction. The W. I. T. Co., a corporation, was organized and 18,660 shares of stock were issued. That corporation transferred all of its issued stock (18,660 shares) to Thriftimart for 67,854 shares of Thriftimart stock. Then the W. I. T. Co. transferred all of its Thriftimart stock to Customers Finance Co., doing business as More, for all stock and physical assets of Customers Finance Co., which company (Customers) transferred its corporate name and its trade name (More) to W. I. T. Co. At that stage of the transaction, Thriftimart owned all the stock of W. I. T. Co., which owned all the stock and assets of Customers Finance Co., doing business as More, which last mentioned company owned 67,854 shares of Thriftimart. The name of W. I. T. Co. was changed and it was then known as Customers Finance Co., doing business as More. The former or old Customers Finance Co. was then in the process of dissolution and was not a store operator.
It is upon this intricate factual background, relating to Thriftimart's acquisition of More, that the arbitrator was required The trial court properly confirmed the award.
The order and judgment are affirmed.
LILLIE, J., concurs.
'Pursuant to stipulation, the above entitled matter came duly on for hearing before the undersigned, ROBERT KINGSLEY, as Arbitrator on July 12, 1961. The firm of McLaughlin & McLaughlin, Laughlin, by Messrs. Joseph M. McLaughlin and Edward C. Barretta, appeared for the Employer and the firm of Arnold, Smith & Schwartz, by Kenneth M. Schwartz, Esq., appeared for the Union.
'The parties evidenced substantial difficulty in reaching a submission agreement. After some debate, it was stipulated that the Union should proceed with its evidence on the merits of the ultimate issue as hereinafter set forth, that the Employer should follow with such evidence on such issue as it might desire to offer, reserving to Employer the right, at the close of testimony, to move to dismiss the proceeding on the ground that the substantive issue was nonarbitrable. On this basis, evidence, both oral and documentary, was received, the Employer has moved to dismiss, briefs were filed and the matter submitted for decision.
'I
'The Issue of Arbitrability
'(1) The contract provides (Art. XIV, Sec. D(1):
"* * * If a question of the arbitrability of an issue is raised by either party, such question shall be determined in the first instance by the arbitrator or board. Neither party to this Agreement shall refuse to proceed to arbitration upon the grounds that the matter in question is not arbitrable.'
I am, thus, not only authorized but, by the express terms of the contract, required, to decide the preliminary issue of arbitrability.
'(2) The arbitration clause of the contract reads as follows:
"Any and all matters of controversy, dispute or disagreement of any kind or character existing between the parties and arising out of or in any way involving the interpretation or application of the terms of this Agreement, except as may be otherwise provided in Paragraph D of this Article, shall be settled and resolved by the procedures and in the manner hereinafter set forth.'
'The issue, as set forth below, does not fall within the exceptions set out in Article D; it clearly is within the broad general language just quoted. The issue is arbitrable.
'II
'The Issue on the Merits
'The issue on the merits was stated, by stipulation, to be as follows:
"Does the Collective Bargaining Agreement between the Employer and the Union, by its terms, apply to and cover employees of Customers Finance Co., dba MORE, employed in the appropriate classifications covered by the said contract and within the territorial area of the Union, because of its acquisition by Thriftimart?'
'III
'Background
'For some time prior to May 18, 1961, a corporation named Customers Finance Co., doing business under the trade name of 'MORE', operated a group of so-called 'discount houses'--two of which were located within the geographical jurisdiction of the Union herein involved. Sometime prior to December, 1960 (the record does not disclose exactly when), the management of Thriftimart began to consider the acquisition of the MORE operation. During December, 1960, and January, 1961, certain employees of Thriftimart were loaned to MORE--remaining, however, on the Thriftimart payroll. One of these employees was ultimately to resign from Thriftimart and become an employee of MORE. For some months (again exact dates are not disclosed on the record) supervisory employees of Thriftimart were present at the MORE stores, in the capacity of observers, with the objective of reports on the MORE operation. Ultimately (and the record suggests prior to April 5, 1961) a decision to acquire the MORE operation was made by the management of Thriftimart. It is not clear when the exact method of acquisition was decided on, nor, except for the general statement that it was for 'tax and other business reasons' and on advice of counsel, do we know why the acquisition was carried out as it was. The method used was as follows:
'Thriftimart, Inc., procured the incorporation of a new California corporation, named 'The W.I.T. Co.,' with an authorized capital stock of 20,000 shares, of which 18,600 were issued. The W.I.T. Co., then exchanged all of its issued stock (i. e., 18,660 shares) for 67,854 shares of the Class A stock of Thriftimart, Inc. As a result, Thriftimart, Inc., became the sole owner of the W.I.T. Co., and the W.I.T. had, as its sole asset, the 67,854 shares of Thriftimart, Inc., stock, W.I.T. then exchanged the Thriftimart stock for the physical assets of Consumers Finance Co. At this point, Consumers Finance Co. was no longer a store operator, but was a stockholder of Thriftimart, and W.I.T. owned the MORE store operation. Thereafter, Consumers Finance Co., transferred its corporate name, and its trade name, to W.I.T., assuming a new corporate name for the purpose of ultimate dissolution.
'Subsequent to May 18, 1961, then, there have been three corporations: Thriftimart, Inc., which is the sole stockholder of the new Consumers Finance Co.; Consumers Finance Co., dba MORE (formerly the W.I.T. Co.) a wholly owned subsidiary of Thriftimart, Inc., operating the MORE stores; and a newly named corporation (formerly Consumers Finance Co.), owning 67,854 shares of Thriftimart, Inc., which corporation is now in the process of dissolution.
'Except for Mr. Lampman, Controller and Assistant Secretary of Thriftimart, Inc., who is a Director of Consumers Finance Co., there are no officers or directors in common. The two companies maintain separate offices, keep separate books, and engage in somewhat divergent lines of retail business. There is no evidence of direct operational control of MORE by Thriftimart.
'V
'Discussion
'Based on these facts, the Union contends, and Thriftimart denies, that the contract requires the MORE operations to be regarded as locations of Thriftimart. The Union relies on two parts of the contract. I agree with the Company that Article XIX is not directly in point; it deals merely with the seniority rights of employees transferred by an employer to a newly opened branch. This is not the issue here. However, it is clear from the preamble to the contract, and from Article I, that the parties intended the contract to apply to any new location; and this doctrine is implicit in Article XIX. Clearly, had Thriftimart purchased the assets of MORE, and operated those stores for its own account, with its own employees, contractual coverage would have extended to the newly acquired stores. I do not think that the result is affected by Thriftimart's decision to consummate the operation in a more involved form. Whether exercised or not, it is clear that Thriftimart has the power of complete domination of Consumers Finance--Thriftimart selects Consumer's directorate; through them it selects management.
'I cannot regard it as significant that Thriftimart and MORE are different kinds of retail stores. Thriftimart's obligations would continue if it were to begin to sell shoes, or furniture, or automobiles; whether it sells one product in one store and other products in another, or all products in all stores, is immaterial.
'I must emphasize that I deal only with the situation before me. I do not speculate as to the consequences of a stock purchase of a non-retail business, nor of purchase of a minority interest--nor even as to how much less than 100% stock ownership would have the same effect. What I rule is that the acquisition of Consumers Finance Co., in the manner disclosed on this record, constituted the opening by Thriftimart, Inc., of a new location, to which location, the Collective Bargaining Agreement, in terms, applied. The formally stated issue is answered in the affirmative. Los Angeles, August 7, 1961.'