Laboreres' Internat'l Union v. Foster Wheeler Corp. , 26 F.3d 375 ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
5-20-1994
Laboreres' Internat'l Union v. Foster Wheeler
Corp., et al.
Precedential or Non-Precedential:
Docket 93-5208
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________________________________________
NOS. 93-5208, 93-5233, 93-5243
_______________________________________________
LABORERS' INTERNATIONAL UNION OF
NORTH AMERICA, AFL-CIO,
Appellant in No. 93-5208
v.
FOSTER WHEELER CORPORATION;
FOSTER WHEELER ENERGY CORPORATION
____________________
LABORERS' INTERNATIONAL UNION OF
NORTH AMERICA, AFL-CIO,
v.
FOSTER WHEELER CORPORATION;
FOSTER WHEELER ENERGY CORPORATION,
Foster Wheeler Energy Corporation
Appellant in No. 93-5233
____________________
LABORERS' INTERNATIONAL UNION OF
NORTH AMERICA, AFL-CIO,
v.
FOSTER WHEELER CORPORATION;
FOSTER WHEELER ENERGY CORPORATION,
Foster Wheeler Corporation
Appellant in No. 93-5243
______________________________________________________
On Appeal From the United States District Court
For the District of New Jersey
(D.C. Civ. No. 85-04240)
______________________________________________________
Argued: December 10, 1993
Before: BECKER and NYGAARD, Circuit Judges, and
YOHN, District Judge.0
(Filed May 20, 1994)
THEODORE T. GREEN, Esquire (ARGUED)
MICHAEL BARRETT, Esquire
International Laborers Union of
North America
905 16th Street, N.W.
Washington, DC 20006
Attorneys for Laborers' Internation-
al Union of North America
VINCENT J. APRUZZESE, Esquire (ARGUED)
FRANCIS A. MASTRO, Esquire
Apruzzese, McDermott, Mastro & Murphy
25 Independence Boulevard
Somerset Hills Corporate Center
Liberty Corner, New Jersey 07938
Attorneys for Foster Wheeler Corpo-
ration
STUART ROTHMAN, Esquire (ARGUED)
DAVID D. DIBARI, Esquire
Rogers & Wells
607 14th Street, N.W., 9th Floor
Washington, DC 20005-2011
Attorneys for Foster Wheeler Energy
Corporation
________________________________________
OPINION OF THE COURT
________________________________________
BECKER, Circuit Judge.
This appeal arises out of bitterly contested litigation
over the applicability of a national "prehire" labor agreement to a
worksite in Alabama. At ultimate issue is the defendant employers'
failure to hire the employees engaged at the site from the plaintiff
0
Honorable William H. Yohn, Jr., United States District Court for the
Eastern District of Pennsylvania, sitting by designation.
2
union's hiring hall. The parties have been ceaselessly embroiled in
this matter for over eight years. During this time they have
appeared before the district court thrice and an arbitrator once;
they are now before this Court for the third time. Given what
appears to us to be the relatively modest stakes and the fact that
the primary point of contention in the case will probably never
recur,0 it is unfortunate that their litigation strategies have
prevented them from settling. We can only hope that the opinion that
follows will edge them toward a swift resolution of their remaining
disputes instead of propelling them back to the arbitrator for
another round of pugnacious battle.
The principal question before us, one we will answer in
the affirmative, is whether the district court erred in not applying
retrospectively the National Labor Relation Board's decision in John
Deklewa & Sons, Inc., 282 N.L.R.B. 1375 (1987), enf'd sub nom. Iron
Workers, Local 3 v. NLRB, 843 F.2d 770 (3d Cir.) (per curiam), cert.
denied, 488 U.S. 889, 109 S. Ct. 222 (1988). A host of other
questions is also before us, but many of them are rendered
extraneous by our resolution of the retrospectivity question. As to
those we need reach, we first conclude that the district court
properly referred the issue of damages to the arbitrator, but should
also have referred the question of breach as well. In addition, we
will clarify the mandate we issued the last time the parties
appeared before this Court --specifically, we will describe its
effect on two factual findings which an arbitrator had made and the
0
See Letter from John D. Burgoyne, Assistant General Counsel,
National Labor Relations Board, to Stuart Rothman, Esq., Counsel to
Foster Wheeler Energy Corp. (Aug. 4, 1993), in Reply Br. of FWEC,
App. A.
3
district court had adopted prior to the parties' second rendezvous
here -- and comment on the employers' contention that no damages may
flow from their alleged breach of the prehire agreement because the
union operated an illegal hiring hall in contravention of the
prehire agreement as well as state and federal law.
In the end, we will instruct the district court to modify
its Order of June 22, 1992, as modified on March 11 and 31, 1993,
and to direct the parties to arbitrate the issue of breach of their
pre-hire agreement in addition to the issue of damages, if any,
flowing therefrom.
I. BACKGROUND
A. Facts
1. The Parties
Foster Wheeler Corporation ("FWC") is a major internation-
al construction firm with its principal place of business in Living-
ston, New Jersey. For a long time it was an exclusively union shop
employer. It entered into its first National Agreement with the
Laborers' International Union of North America, AFL-CIO ("LIUNA") in
1973, agreeing thereby, among other things, to recognize and
acknowledge LIUNA as the exclusive bargaining representative for all
field construction workers it would employ. LIUNA, in return,
guaranteed that the terms of the agreement would govern irrespective
of locale.
In 1974, in pursuit of a longterm expansion plan, FWC
reorganized its commercial operations and became a holding company.
Among FWC's motives for reorganizing was to become a double-breasted
4
contractor, that is, to establish the capability to compete in both
the open shop and the union shop markets. On November 11, 1974, FWC
notified LIUNA that it had transferred its domestic engineering,
manufacturing, and construction activities to Foster Wheeler Energy
Corporation ("FWEC"), a newly formed, wholly-owned subsidiary, and
that it had correspondingly assigned to FWEC all labor agreements
covering the affected employees. Since then FWC has neither
performed field construction work nor entered into field construc-
tion labor agreements; instead, FWEC (but not FWC) was listed as the
employer in each subsequent National Agreement with LIUNA. FWEC
itself was segmented into independently operated divisions,
including Foster Wheeler World Services ("FWWS"), which performed
all of FWEC's field construction work on a union basis, and Houston
Engineering Center ("HEC"), which performed FWEC's engineering and
procurement services.
Four years later, FWC furthered its 1974 reorganization
plan and spawned Energy Plant Constructors, Inc. ("EPC"), a wholly-
owned subsidiary which FWC formed and designed as the open shop
counterpart to FWEC. To implement its open-shop policies, EPC hired
its own employees and administered its own labor relations policies.
EPC discontinued business operations in 1987.
LIUNA is the parent body of LIUNA Local 70 of Mobile,
Alabama. The Local, in accordance with its constitution and bylaws,
is affiliated with a regional building and trades council, Mobile
Building Trades Council ("MBTC"). MBTC represents and acts on
behalf of LIUNA Local 70 with regard to the negotiation and
administration of labor agreements.
5
2. The Agreement
On April 20, 1982, FWEC and LIUNA entered into the
National Agreement (the "Agreement") at issue here. The Agreement
applied to all construction projects "performed by the Employer or
by any person, firm or corporation owned or financially controlled
by the Employer" within the political boundaries of the United
States, except for those performed in one of three states (not
including Alabama) already subject to a Tri-State Agreement.
On covered projects, the Agreement imposed several
noteworthy requirements on FWEC: to hire employees through the
referral systems of LIUNA's local affiliates; to recognize LIUNA as
the exclusive bargaining agent for those employees; to adhere to
certain requirements regarding wages, fringe benefits, and overtime;
and to compel its subcontractors to comply with the substantive
terms of the Agreement. The Agreement, however, expressly relieved
FWEC of any obligation to recruit laborers through any local area
hiring hall whose procedures violated state or federal laws or
discriminated for or against laborers on the basis of their union
membership.
3. The Project
At approximately the same time as FWEC was entering into
its new agreement with LIUNA, Mobil Oil Exploration & Producing
Southeast, Inc. ("MOEPSI") began the process of selecting a general
contractor to oversee the engineering and construction of a sour gas
treatment and sulfur recovery facility it wanted built at Bayou
6
Jonas near Mobile. The project consisted of an offshore platform and
natural gas production facility, a pipeline to carry the gas
onshore, and a sour gas treatment and sulfur recovery plant (the
only portion of the project to which this case relates). Through a
rather convoluted set of developments, MOEPSI eventually nominally
awarded the construction contract for the gas processing plant to
EPC in October 1984, with FWC guaranteeing EPC's performance and EPC
nominally subletting the engineering work to HEC (a divison of
FWEC). This arrangement as depicted by the documents was suffused
with subterfuge, however, for it is quite clear from the record, as
both the district court and the arbitrator independently found, that
in reality FWEC was the actual prime contractor on the MOEPSI
project and EPC its subcontractor.0
0
As the first step in its selection process, MOEPSI sent detailed
questionnaires to 21 companies, including FWC. Since it no longer
had any engineering or construction capabilities of its own, FWC
referred the questionnaire to FWEC. Although neither FWEC nor FWC
had ever engineered or constructed the precise type of facility
MOEPSI specified, FWC forwarded the questionnaire to FWEC and not
EPC, because only FWEC (which had worked on many more projects than
had EPC) had the experience MOEPSI demanded.
During 1982 and 1983, MOEPSI twice reviewed and pared down
the initial solicited applications, and on August 22, 1983 MOEPSI
revealed a "short" list of five contractors which it asked to submit
comprehensive bids. FWEC did not make the "short" list, but Ortloff
Corporation ("Ortloff"), a Midland, Texas contractor with close ties
to FWEC, did. Ortloff and FWEC had earlier reached an understanding
that each would consider bringing the other one in on projects in
the $10-$150 million range that it was awarded or was pursuing.
That option appealed to Ortloff when FWEC suggested they jointly
pursue the MOEPSI project because it did not wish to individually
take on the risks involved. The two agreed to cooperate on
preparation of a joint bid, but MOEPSI conditioned consideration of
a joint bid on a single entity taking overall responsibility for the
project. As a result of Ortloff's equivocations, FWEC agreed to
serve as the prime contractor for the project and Ortloff assumed
responsibility for the construction work and certain specialized
engineering services.
In the course of preparing its proposal for a joint bid
with Ortloff, FWEC apparently determined that MOEPSI wanted to use
7
non-union labor on the Bayou Jonas project, and therefore FWEC
arranged with Ortloff to have Foster Wheeler Intercontinental
Corporation ("FWIC") -- an international subsidiary of FWC with no
employees in the United States but subject to no union obligations
-- substitute as the prime contractor. The only practical effect of
having FWIC rather than FWEC be the contracting party was that a
non-union entity would bid on the construction work. There ensued a
campaign of subterfuge directed at MOEPSI and LIUNA, only a portion
of which we will recount here, which entailed FWEC holding out FWIC
as the non-union bidder, whereas in fact only FWEC, a signatory to
the Agreement, was working on the project.
On February 8, 1984, John Sarappo, Vice President of FWEC,
sent the joint bid to MOEPSI on FWIC letterhead, in which he
proposed that FWEC's engineering and procurement services division,
HEC, manage the project and engineer the utility and supporting
facilities, and that Ortloff engineer the process units and
construct all the facilities. MOEPSI promptly agreed, whereupon the
staff of FWEC (rather than that of FWIC) began preparing the bid
documents.
Shortly before the bid package was to be submitted,
however, MOEPSI in a sudden about-face determined that Ortloff
lacked the capacity to construct the project, placing FWEC under
significant time constraints to find an acceptable replacement
subcontractor. Following a quick review of three alternative open
shop companies, including EPC, FWEC's open-shop sibling construction
company, Sarappo approved the selection of EPC to supplant Ortloff
in all its responsibilities except for those in connection with
certain specialized engineering technologies. FWIC, in keeping with
its disguised role as the prime contractor, submitted the bid
package to MOEPSI on May 1, 1984, designating FWEC and EPC -- the
actual work engines -- as its subcontractors. The bid was signed by
W. Robert Campbell, who falsely identified himself as the area sales
manager for FWIC whereas in fact FWEC employed him as an account
sales engineer.
MOEPSI negotiated with the five qualified bidders and
scrutinized their bid packages over the next five months. It
eventually narrowed the candidate pool down to two, of which the
FWIC/FWEC/EPC/Ortloff combined bid earned the highest marks. In the
final days before the bid was to be awarded, however, MOEPSI's legal
counsel determined that the prime contractor should have an Alabama
general contractor's license. As FWIC -- an international contrac-
tor -- was not in possession of the requisite license, MOEPSI
decided it could no longer serve as even the nominal prime
contractor. To preserve the FWIC/FWEC/EPC/Ortloff bid package,
MOEPSI assented to EPC, which did hold an Alabama general contrac-
tor's license, replacing FWIC as the prime contractor (FWC, of
course, preferred substituting EPC instead of FWEC for FWIC so that
it could continue its pretense about the prime contractor being open
shop), but only under the qualification that FWC guarantee EPC's
performance. FWC willingly executed the requested guarantee.
8
The local press widely publicized MOEPSI's award of the
contract to EPC -- as well as EPC's open-shop policy -- during the
fall and winter of 1984. LIUNA officials, suspicious of the goings-
on, made numerous inquiries to the defendants concerning the appli-
cation of the Agreement to the MOEPSI project. Apparently in each
instance the defendants informally told the LIUNA officials that EPC
was a non-union contractor not bound by the Agreement, and that,
accordingly, the project would be completed by non-union labor.
There is disputed evidence regarding whether FWEC affirmatively
misrepresented to LIUNA its part in the project and its relationship
to EPC.
As already mentioned, the Agreement required signatory
employers to comply with the hiring provisions of local affiliates,
but only if they were operated legally and did not discriminate
against non-union laborers. MBTC, LIUNA's local affiliate, operated
a hiring hall for construction workers, but, to LIUNA's chagrin, it
discriminated against non-union members.0 Seemingly unaware of
MBTC's discrimination, EPC -- itself not a signatory to the
With this final obstacle overcome, MOEPSI awarded the
contract to EPC during the last week of September, 1984. The
contract was formally executed on October 1, 1984. In a separate
contract, EPC nominally sublet the engineering work on the project
to FWEC.
0
Testimony at trial from the secretary-treasurer of MBTC, who was
responsible for making referrals, casts substantial doubt on the
equality of the hall's treatment of non-union members. The evidence
led the district court to find that the procedures MBTC employed to
fulfill work requests favored union over non-union workers, and
hence to conclude that MBTC ran an illegal hiring hall. Because at
the time LIUNA had placed the local into trusteeship, LIUNA was
responsible for the discrimination. No evidence was proffered,
however, showing that any of the defendants knew about this practice
(or that LIUNA officials in fact knew about it) during the period
the MOEPSI project underwent construction.
9
Agreement --opened its own hiring office for the MOEPSI project on
January 29, 1985. Since the local press had widely publicized the
available job opportunities, EPC received over 5,000 applications in
the three days the hiring office accepted them. EPC hired all the
construction workers it employed on the MOEPSI project either
through the applications that were submitted at that office or at
the entrance to the job site. On April 2, 1985, the day EPC hired
its first laborer for the project, the local union had over 200
union supporters on the local hiring hall's out-of-work list,
although some unspecified number of them were busy working for non-
union contractors.
4. The Dispute
On April 9, 1985, LIUNA sent out a formal grievance letter
to the various entities related to FWC involved with the MOEPSI
project -- namely, FWC, FWIC, FWEC, and EPC -- claiming that each of
them was in violation of the Agreement as a result of its
participation in the MOEPSI project (insofar as the laborers had not
been hired out of LIUNA's affiliate's, MBTC's, hiring hall). FWEC's
counsel responded about one month later that FWEC would sometime in
the future formally address the matters raised in LIUNA's letter,
but that in the meanwhile he would meet informally with LIUNA
representatives to discuss any difficulties clouding their relation-
ship. Approximately one month after that, on June 3, 1985, EPC
through its president also answered LIUNA's letter by denying any
contractual obligation toward LIUNA and, in the alternative,
providing notice of termination of any collective bargaining
10
agreement it may have been a party to, whether by operation of law
or otherwise. When several subsequent meetings between FWEC and
LIUNA failed to resolve the matter, FWEC formally responded to
LIUNA's grievance in a letter dated July 11, 1985, reiterating its
previous position and stating:
Since the work in question is presently being
undertaken by a company over which FWEC does not have and
can exert no control, the LIU[NA]/FWEC National Agreement
is not applicable. There is a different bargaining unit
there with a different employer who, as we have very
recently been given to understand, is proceeding pursuant
to its agreement with the owner. FWEC employs no field
construction laborers or mechanics at Mobile. There is
nothing FWEC could do to make local labor agreements
applicable.
Less than one month later, EPC filed a Petition for
Election with the National Labor Relations Board ("NLRB" or "Board")
to elect a union representative for all EPC's field construction
employees at the MOEPSI project, or, more precisely, to dispel any
doubts or reservations concerning whether the Agreement applied to
the project at all by demonstrating LIUNA's lack of majority support
amongst the workers. The Board failed to reach a decision on EPC's
petition for several months and never completed the election.
In the meantime FWEC formally modified its stance toward
LIUNA: although it still maintained that the Agreement did not
pertain to its activities on the MOEPSI project, on August 9, 1985
it expressly repudiated the Agreement to the extent that the
Agreement was found to apply to the MOEPSI project. It identified
Painters Local Union No. 64 of Brotherhood of Painters v. Epley, 764
F.2d 1509 (11th Cir. 1985), cert. denied, 475 U.S. 1120, 106 S. Ct.
1636 (1986) as establishing its right to limit its repudiation of an
area-wide prehire agreement to a single job site. The Eleventh
11
Circuit Court of Appeals, the court exercising jurisdiction over the
situs of the MOEPSI project, had handed down Epley a scant month
earlier. At that time, of course, FWEC had already committed itself
internally to using non-union labor, and, furthermore, had
contractually bound itself to MOEPSI to use EPC as the non-union
construction subcontractor (although, as structured on paper, EPC
was the (nominal) prime contractor and FWEC the (nominal)
subcontractor, see supra at Error! Bookmark not defined. n.Error!
Bookmark not defined.).0
0
About this time the parties became enmeshed in some collateral
litigation before the Board, litigation which does not directly
affect the outcome here but which helps set the stage. Coinciden-
tally on the same day that FWEC notified LIUNA of its limited
repudiation, LIUNA filed separate unfair labor practices actions
against FWC, FWEC, and EPC for their failure to provide it with
information it alleged § 8(a)(5) of the National Labor Relations Act
("NLRA"), 11 U.S.C.A. § 158(a)(5) (1973), gave it a right to. Each
action was in turn dismissed by three different Regional Directors
of the NLRB, principally on the ground that the Agreement was a
prehire agreement pursuant to § 8(f), id. § 158(f), but that LIUNA
had not demonstrated that it had achieved majority status at the
work site as was necessary to convert the § 8(f) prehire agreement
into a § 9(a), see id. § 159(a), collective bargaining agreement.
That conversion was crucial to the charges LIUNA levelled against
FWC, FWEC, and EPC, because only a collective bargaining agreement
imposes on the employer the statutory duty to bargain with the
employees' union representative and derivatively to supply that
representative with information. The three regional decisions were
joined for purposes of appeal and thereafter affirmed by the Board's
General Counsel for substantially the reasons given by the Regional
Directors.
As the text above touched upon, EPC for its part on August
1, 1985, filed a petition in Region 15 of the NLRB (encompassing
Mobile) to hold a representation election, in which EPC requested an
election among all its field construction employees at the MOEPSI
project. NLRB Petition 15-RM-387. LIUNA moved to dismiss the
petition, asserting that the election was slated to poll all of
EPC's field construction workers whereas it had disclaimed any
interest in representing all those employees because traditionally
it represented only some categories of workers at the site -- the
construction workers but not the skilled craftspersons and their
associates. On November 18, 1985, over LIUNA's objection, the
Regional Director issued a Decision and Direction of Election in
12
By letter dated May 15, 1986, FWEC validly repudiated the
entire (National) Agreement according to its terms effective July
15, 1986.
B. Procedural History
1. Round 1
On August 29, 1985, LIUNA filed this action on behalf of
itself, its local, and its membership against FWEC and FWC under
§301(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C.A.
§185(a) (1978). LIUNA sought to compel FWEC and FWC to submit to
arbitration LIUNA's grievance concerning the applicability of the
Agreement to the MOEPSI project. The Complaint alleged that FWEC,
FWC, FWIC, and EPC were alter egos and/or a single employer, and
hence that all of them were bound by the Agreement. The Complaint
further alleged that EPC, FWC, and FWIC each had breached the Agree-
ment in connection with the MOEPSI project.
Upon considering defendants' alternative motions to
dismiss, change venue, and stay the proceedings pending the outcome
response to EPC's petition. Among other conclusions, he resolved
that 1) the Agreement constituted a prehire agreement under § 8(f);
2) the work unit could not be split into different sub-units for
election purposes; 3) LIUNA had not demonstrated it had achieved
majority status at the work site; and 4) EPC's filing of the Peti-
tion for Election would allow it to repudiate any prehire agreement
which might have been in effect between EPC and LIUNA if the vote
demonstrated that LIUNA lacked majority status among all the field
construction workers at the work site. Based on these conclusions,
the Director ordered an election involving all the field
construction employees, and apparently one was held. LIUNA appealed
from that decision, however, and when the appeal was granted the
ballots were impounded. The Board remanded the matter to the
Regional Director, but since another election was never held before
FWEC and EPC completed the project, the Board on June 1, 1988
vacated its remand order and dismissed the petition as moot.
13
of the representation election scheduled at the MOEPSI site as well
as plaintiff's motion for summary judgment, the district court on
December 9, 1985 granted plaintiff's motion and ordered FWC and FWEC
to submit LIUNA's grievance to arbitration. The court decided first
that the Agreement as signed was a prehire agreement pursuant to §
8(f) of the National Labor Relations Act ("NLRA"), 29 U.S.C.A. §
158(f) (1973), not a collective bargaining agreement pursuant to §
9(a) of the NLRA, see id. § 159(a).0 Next, it resolved that since
EPC's employees at MOEPSI had not yet elected a bargaining
0
The distinguishing feature of a prehire agreement as compared to a
collective bargaining agreement is that an employer and a union
enter into it before the workers to be covered by the agreement and
represented by the union have even been hired. The basic provisions
of the NLRA forbid the employer from bargaining with a union which
has not been "designated or selected by the majority of the employ-
ees in a unit appropriate for such purposes." 29 U.S.C.A. § 159(a)
(1978). Although other methods exist, designation or selection is
best accomplished by the cumbersome and time-consuming instrument of
election by secret ballot. See id. § 159(c)(1) (providing for
certification as the employees' representative). Prehire agreements
developed in the fluctuant construction trade because the typically
short duration and seasonal variation of employment in that industry
make designating a union representative using the procedures
developed for the more stable industries, such as manufacturing,
unworkable.
Responding to the particularized needs of the construction
industry and recognizing the practices prevailing prior to the
Board's invalidation of prehire agreements (the Board disapproved of
prehire agreements shortly after obtaining jurisdiction over the
construction industry in 1947, see NLRB v. Irvin, 475 F.2d 1265,
1267 (3d Cir. 1973)), Congress engrafted § 8(f) onto the NLRA in
1959. That amendment allowed a union to act as the bargaining
representative for employees before the Board certified it as
enjoying majority status. See Iron Workers, Local 3, 843 F.2d at
772-74; S. REP. No. 187, 86th Cong., 1st Sess. (1959), reprinted in
1959 U.S.C.C.A.N. 2318, 2344; I CHARLES J. MORRIS, THE DEVELOPING LABOR
LAW, at 48, 714-15 (3d ed. Patrick Hardin ed. 1992). Once the union
has attained majority status, the § 8(f) prehire agreement is
converted into a § 9(a) collective bargaining agreement. See NLRB
v. Local Union No. 103, Int'l Ass'n of Iron Workers (Higdon Constr.
Co.), 434 U.S. 335, 349-50, 98 S. Ct. 651, 660 (1978); see also
supra at Error! Bookmark not defined. n.Error! Bookmark not
defined..
14
representative and since LIUNA did not even claim majority status at
the MOEPSI site, the Agreement had not yet been converted into a
collective bargaining agreement under § 9(a).
The court then ordered arbitration solely on the issue of
whether the Agreement applied to the MOEPSI site vel non, reasoning
that LIUNA had raised a colorable claim that EPC was FWEC's alter
ego and that the question of the application of the Agreement to any
specific project fell within the scope of the Agreement's capacious
arbitration clause. The court reserved for itself, however, the
questions of LIUNA's majority representation, the size and
composition of the appropriate bargaining units, and defendants'
alleged repudiation of the Agreement. We dismissed the defendants'
appeal from the district court's arbitration order as interlocutory.
See Laborer's Int'l Union v. Foster Wheeler Corp., Nos. 86-5079, 86-
5080 (3d Cir. May 1, 1986).
2. Round 2
On November 10, 1986, after a lengthy hearing and extended
briefing, Arbitrator Sam Kagel issued a decison in LIUNA's favor.
The arbitrator found that FWEC and FWC were alter egos and that EPC
was a joint or single employer with FWEC. Based on these findings,
he concluded that EPC (through FWEC) was a party to the Agreement
and consequently that both FWC and FWEC had breached the Agreement.
He additionally determined that, contrary to the arrangements as
they existed on paper, FWEC was the prime contractor and EPC the
subcontractor at the MOEPSI site, and that the defendants had listed
EPC as the prime contractor with the express intent to delude LIUNA.
15
3. Round 3
Just over a year later, the district court entered an
order confirming the arbitrator's award insofar as he had found that
the Agreement applied to the MOEPSI project, but rejecting as an
improper and unnecessary appendage beyond the scope of the reference
that portion of the arbitrator's decision which found that FWC and
FWEC had breached the Agreement. After rejecting numerous
contentions raised by the defendants, the district court turned to
the date of defendants' alleged repudiation of the Agreement.
Because of Deklewa's supposed deviation from the decision reached by
the Supreme Court in Jim McNeff, Inc. v. Todd, 461 U.S. 260, 103 S.
Ct. 1753 (1983) (approving the pre-Deklewa rule), the district court
held that Deklewa (discussed at length infra Part 21) was invalid
and refused to acquiesce in the rule it announced. This cleared the
way for the court to find that FWC and FWEC had effectively
repudiated the Agreement on June 6, 1985, the date LIUNA had
received EPC's June 3 letter repudiating any agreement which may
have existed between them.
The court wrapped up its decision with the observation
that only the issues of defendants' breach and liability for damages
accruing before June 6, 1985 remained. The parties thereafter
stipulated to $18,500 in damages so as to expedite their appeal to
this Court.
4. Round 4
16
On February 22, 1989, this Court partially vacated the
district court's order, holding that the district court had errone-
ously allowed the arbitrator to decide whether FWC was FWEC's alter
ego. The district court's error in ordering arbitration of the
alter ego issue lay in its failure to realize that the question of
the duty to arbitrate is one for judicial resolution, and therefore
that "it is the role of the district court, not the arbitrator, to
pierce the corporate veil and require a parent corporation to
participate in arbitration of a contract to which a subsidiary is
formally a party." Laborer's Int'l Union v. Foster Wheeler Corp.,
868 F.2d 573, 576-77 (3d Cir. 1989) (per curiam).0
Accordingly, we remanded for the district court to deter-
mine whether the two corporations were alter egos. In the process,
we vacated all of the district court's orders subsequent to the one
allowing discovery on the alter ego issue which were "predicated on
the assumption that FWEC was FWC's alter ego," and instructed the
district court that it "may reconsider the[ vacated orders] in light
of our recent decision in International Ass'n of Iron Workers, Local
3 v. NLRB, 843 F.2d 770 (3d Cir.), cert. denied, 488 U.S. 889, 109
S. Ct. 222 (1988)[, and enforcing Deklewa, supra]." Id. at 577.
5. Round 5
After the district court's proceedings recommenced, FWC
and FWEC conceded in open court on January 22, 1991 that FWC was
0
Cf. United Ass'n of Journeymen & Apprentices of Plumbing &
Pipefitting Indus. Union, Local 342 v. Valley Eng'rs, 975 F.2d 611,
614-15 & n.7 (9th Cir. 1992) (holding that a district court must
usually stay its proceedings if the Board is in the process of
determining an employer's alter ego or single employer status).
17
FWEC's alter ego. After presiding over a two-day bench trial, the
district court filed the opinion and order now under review on June
22, 1992.
The court first reaffirmed its prior ruling that the
Deklewa rule did not apply, but, since Iron Workers, Local 3 had
approved of the Deklewa rule, did so on a revised basis.
Specifically, it adjudged that it would be manifestly unjust to
apply the rule retrospectively to these defendants, and concluded
that this Court's decision in Iron Workers, Local 3 did not dictate
the automatic retrospective application of Deklewa but instead
required a case-by-case evaluation of the justice of so doing. Mem.
Op. at 27-29, 37-38. Analyzing the three Chevron Oil factors for
guidance on whether or not to apply Deklewa's new rule of law
retrospectively, see Chevron Oil Co. v. Huson, 404 U.S. 97, 106-08,
92 S. Ct. 349, 355-56 (1971), the court concluded that its
application of the rule would further the rule's underlying
principles, but that the rule clearly departed from prior precedent
and that its application would lead to an inequitable result. As
part of its analysis of this issue, the court determined that
LIUNA's unclean hands, due to the discriminatory referral practices
of MBTC's hiring hall, equitably estopped it from arguing that FWEC
and FWC (which had cirumvented the Agreement's hiring procedures)
were barred (by equitable estoppel) from justifying their
repudiation of the Agreement by reason of LIUNA's lack of majority
support at the MOEPSI work site.
Next, the court rescinded its earlier finding of a June 3,
1985 repudiation date, finding instead that the defendants had not
18
repudiated the Agreement until three months later on August 9, 1985.
It explained that FWEC's repudiation could not have occurred before
June 3, 1985 because before then FWEC and EPC had simply claimed
that the Agreement did not apply to the MOEPSI project. Moreover,
due to its conclusion that the defendants' scheme involving FWIC was
designed to deceive LIUNA regarding the applicability of the
Agreement, the court withdrew from its earlier position and found
that EPC's June 3, 1985 letter to LIUNA, in which it had repudiated
any agreement with LIUNA to which it may have been a party, did not
suffice to repudiate the Agreement. It reasoned that EPC's June 3
repudiation did not extend to FWEC, despite the facts that FWEC and
EPC were alter egos and that LIUNA had suspected that EPC was bound
by the Agreement, because the defendants' calculated deception
prevented LIUNA from being certain that EPC intended its repudiation
to apply to FWEC as well. Finally, the court concluded that FWEC's
August 9, 1985 single-site repudiation was effective. Thus, the
court held that FWEC would be liable for damages LIUNA sustained up
to August 9, 1985.
Having disposed of the main issue of liability, the court
ordered the parties to notify it within twenty days if they could
settle on LIUNA's damages, or else to submit to it the issue of
damages. Upon LIUNA's Motion for Reconsideration and Clarification,
the court on March 11, 1993 modified its prior order and directed
the parties to submit the issue of damages to arbitration. On March
31, the court denied defendants' application to file a Motion for
Reconsideration of the court's March 11 Order. It is from the June
19
22, 1992 Order, as modified on March 11 and 31, 1993, that the
parties appeal.
6. Round 6
This appeal followed. The district court had original
jurisdiction to determine whether the defendants are obligated to
arbitrate a grievance arising under a § 8(f) prehire agreement
pursuant to 29 U.S.C.A. § 185 (1978), see Jim McNeff, Inc. v. Todd,
461 U.S. 260, 271-72, 103 S. Ct. 1753, 1759 (1983), and we have
appellate jurisdiction pursuant to 28 U.S.C.A. § 1291 (1993).0
0
Although the district court referred the question of damages to the
arbitrator without designating its order as "final," we are
satisfied that we have jurisdiction pursuant to § 1291. On March
31, 1993, the district court by letter denied defendants' second
Motion for Reconsideration, explaining that "[t]he issues of whether
there has been any breach of the agreement and what damages might
flow from that shall, as provided in the National Agreement and as I
ruled on March 15, be resolved through arbitration." Letter from
Honorable Harold A. Ackerman, U.S. District Judge, to Litigants in
Laborer's Int'l Union v. Foster Wheeler Corp., No. 85-4240 (D.N.J.
Aug. 24, 1985) (Mar. 29, 1993) (emphasis added).
In its complaint, LIUNA had sought a variety of relief in
addition to an order compelling arbitration. But it submitted in
its letter defending this Court's jurisdiction that "[a]lthough the
remedy portion of the complaint also sought the alternative relief
of a money judgment from the court, the plaintiff has not pursued
that remedy. Instead, the plaintiff has consistently maintained that
the damages are an issue for the arbitrator . . . ." Letter from
Theodore T. Green, Counsel for LIUNA, to P. Douglas Sisk, Clerk,
U.S. Court of Appeals for the Third Circuit, at 2-3 (Apr. 29, 1993).
The defendants have not disputed this assertion, see Letter from
Francis A. Mastro, Counsel for FWC, to P. Douglas Sisk, Clerk, U.S.
Court of Appeals for the Third Circuit, at 4 n.4 (April 30, 1993),
and we have not found anything in the record to the contrary.
Thus, the order compelling arbitration is the "full
relief" LIUNA seeks, and no substantial issue remains outstanding
for the district court to decide after the arbitration. Although
the district court may still need to issue an order enforcing any
arbitration award LIUNA may secure -- a fact which obtains virtually
whenever a court orders a recalcitrant party to arbitrate a dispute
-- the cases make clear that such a limited potential future
undertaking does not torpedo an appeal prior to the arbitration.
20
II. THE RETROSPECTIVITY OF DEKLEWA
In Deklewa, the Board abruptly reversed seventeen years of
precedent established by R.J. Smith Construction Co., 191 N.L.R.B.
693, 695 & n.5 (1971), enforcement denied sub nom. Local No. 150,
International Union of Operating Engineers v. NLRB, 480 F.2d 1186
(D.C. Cir. 1973) and Ruttman Construction Co., 191 N.L.R.B. 701, 702
(1971), and held that construction industry prehire agreements
negotiated under §8(f) of the NLRA, 29 U.S.C. § 158(f), are no
longer subject to unilateral repudiation by either the employer or
the union. See Deklewa, 282 N.L.R.B. at 1377-78. The Board held
instead that both parties must observe such contracts until "the
employees vote, in a Board-conducted election, to reject (decertify)
or change their bargaining representative." See id. at 1385. This
represented a complete about-face: before that decision, under the
reign of the R.J. Smith rule, the employer was free to repudiate a
prehire agreement at any time unless the union obtained majority
status. The union's attainment of majority status at any time
subsequent to the parties' entering into the prehire agreement would
"convert" the § 8(f) pre-hire into a § 9(a) collective bargaining
agreement and thereby consummate a full bargaining relationship,
regardless of whether the union had majority support at the time of
See Zosky v. Boyer, 856 F.2d 554, 558-60 (3d Cir. 1988), cert.
denied, 488 U.S. 1042, 109 S. Ct. 868 (1989) (discussing cases); cf.
Goodall-Sanford, Inc. v. United Textile Workers, 353 U.S. 550, 551-
52, 77 S. Ct. 920, 921 (1957) ("A decree under § 301(a) ordering
enforcement of an arbitration provision in a collective bargaining
agreement is . . . a `final decision' within the meaning of 28
U.S.C. § 1291."). If any substantial issues remained for the
district court to resolve after the arbitration, of course, there
would have been no final order and we would lack jurisdiction. See,
e.g., Zosky, 856 F.2d at 557-58; Nationwide Ins. Co. v. Patterson,
953 F.2d 44, 45-46 (3d Cir. 1991); Patten Sec. Corp. v. Diamond
Greyhound & Genetics, Inc., 819 F.2d 400, 403 (3d Cir. 1987).
21
repudiation. See NLRB v. Local Union No. 103, Int'l Ass'n of Iron
Workers (Higdon Constr. Co.), 434 U.S. 335, 345, 349-50, 98 S. Ct.
651, 657-58, 660 (1978); Deklewa, 282 N.L.R.B. at 1378; Ruttman
Constr. Co., 191 N.L.R.B. at 702.
The controlling question presented by this appeal is
whether this new rule (issued on February 20, 1987) -- which turned
the old rule on its head -- should be retrospectively applied to
conduct by the parties transpiring in mid-1985. The Board for its
part determined to apply the rule retrospectively to all cases
pending before it. See Deklewa, 282 N.L.R.B. at 1389.
Nevertheless, the district court correctly determined that
retrospectivity must be decided on a case-by-case basis: in
affirming Deklewa, this Court applied the new rule retrospectively
to the parties before it only after engaging in a case-sensitive
review of the parties' circumstances. See Iron Workers, Local 3,
843 F.2d at 780.0
0
LIUNA contends that the retrospectivity analysis at work here is
affected by the decisions in James B. Beam Distilling Co. v.
Georgia, 501 U.S. 529, 111 S. Ct. 2439 (1991) and Harper v. Virginia
Department of Taxation, 113 S. Ct. 2510 (1993), which worked a major
substantive change in the federal law of retrospectivity. Both
decisions ruled that the Constitution outlaws selective prospecti-
vity of Supreme Court decisions, that is, the practice of applying a
new rule of law promulgated by the Court to some but not all parties
in pending cases. See Harper, 113 S. Ct. at 2516 n.9, 2517-18;
James B. Beam, 111 S. Ct. at 2447-48 (Souter, J., plurality
opinion); id. at 2451 (Scalia, J., concurring); cf. id. at 2449
(White, J., concurring); id. at 2451-53 (O'Connor, J., dissenting);
see also id. at 2451 (Scalia, J., concurring) (finding "both `selec-
tive prospectivity' and `pure prospectivity' beyond [the Court's]
power"). James B. Beam produced a fragmented decision of five
opinions, with no opinion garnering more than three votes, so in our
discussion we will focus on Harper, the majority opinion of which
attracted five votes.
Although both opinions dealt with decisions issued by the
Supreme Court, given the ratio decidendi of both cases, we suspect
that other courts are probably correct that there is no cogent basis
22
for distinguishing decisions handed down by the inferior federal
courts. See Eckstein v. Balcor Film Investors, 8 F.3d 1121, 1128
(7th Cir. 1993), cert. denied, 114 S. Ct. 883 (1994); Newport News
Shipbuilding & Dry Dock Co. v. Garrett, 6 F.3d 1547, 1554 (Fed. Cir.
1993); United States v. Goodner Bros. Aircraft, Inc., 966 F.2d 380,
385 (8th Cir. 1992), cert. denied, 113 S. Ct. 967 (1993); Sterling
v. Block, 953 F.2d 198, 200 (5th Cir. 1992); May v. Hobart Corp.,
839 F. Supp. 309, 318 (E.D. Pa. 1993); Hebert v. Manchester, N.H.,
Sch. Dist., 833 F. Supp. 80, 84 (D.N.H. 1993). But see, e.g.,
Gruber v. Price Waterhouse, 911 F.2d 960, 965 (3d Cir. 1990) (pre-
dating Harper and Beam) ("the determination of retroactivity vel non
involves a balancing which must be done on a case by case basis");
Gatto v. Meridian Medical Assocs., Inc., 882 F.2d 840, 842-43 (3d
Cir. 1989) (applying a case-by-case selective prospectivity analysis
under Chevron Oil), cert. denied, 493 U.S. 1080, 110 S. Ct. 1136
(1990). However, we do believe that there are cogent grounds for
distinguishing administrative agencies from federal courts, meaning
that the Supreme Court likely would not extend the doctrine disap-
proving of "selective prospectivity" to agencies or Article I
courts.
Both Beam's and Harper's rejection of selective prospecti-
vity turned on principles of stare decisis and equal treatment of
those appearing before the Court; those Justices who rejected pure
prospectivity additionally invoked the Cases or Controversies
Clause, see U.S. CONST. art. III, § 2, cl. 1. Harper placed heavy
emphasis on Griffith v. Kentucky, 479 U.S. 314, 107 S. Ct. 708
(1987), overruling Linkletter v. Walker, 381 U.S. 618, 85 S. Ct.
1731 (1965), which "eliminated limits on retroactivity in the
criminal context." Harper, 113 S. Ct. at 2516. Griffith reasoned
that the
failure to apply a newly declared constitutional rule to
criminal cases pending on direct review violates basic
norms of constitutional adjudication. First, it is a
settled principle that this Court adjudicates only "cases"
and "controversies." See U.S. Const., Art. III, § 2.
Unlike a legislature, we do not promulgate new rules of
constitutional criminal procedure on a broad basis.
Rather, the nature of judicial review requires that we
adjudicate specific cases . . . . But after we have decid-
ed a new rule in the case selected, the integrity of
judicial review requires that we apply that rule to all
similar cases pending on direct review.
. . .
Second, selective application of new rules violates
the principle of treating similarly situated defendants
the same. . . . As we pointed out in United States v.
Johnson, [457 U.S. 537, 102 S. Ct. 2579 (1982),] the
problem with not applying new rules to cases pending on
direct review is "the actual inequity that results when
the Court chooses which of many similarly situated defen-
23
dants should be the chance beneficiary" of a new rule.
457 U.S., at 556, n.16, 102 S. Ct., at 2590, n. 16 (empha-
sis in original).
Griffith, 479 U.S. at 322-23, 107 S. Ct. at 713; see Beam, 111 S.
Ct. at 2444, 2446 (plurality) (Souter, J.) (raising the equality and
stare decisis rationales); id. at 2450 (Blackmun, J., concurring)
(stressing the equality rationale derived from the integrity of the
judicial process and referring to the stare decisis rationale); id.
at 2450-51 (Scalia, J., concurring) (referring to the stare decisis
rationale).
These rationales do not apply analogously to administra-
tive agency adjudications, cf. Atlantic Richfield Co. v. United
States Dep't of Energy, 977 F.2d 611, 614 (Temp. Emer. Ct. App.
1992) ("Whether Beam has any application to agency adjudications is
questionable."), cert. denied, 113 S. Ct. 1256 (1993); District
Lodge 64, Int'l Ass'n of Aerospace Workers v. NLRB, 949 F.2d 441,
447 (D.C. Cir. 1991) ("Whether Beam should apply to agency adjudica-
tions is unclear." (emphasis in original)); United Food & Commercial
Workers Int'l Union, Local No. 150-A v. NLRB, 1 F.3d 24, 35 (D.C.
Cir. 1993) (same), cert. granted sub nom. Dubuque Packing Co. v.
United Food & Commercial Workers, Local No. 150-A, 62 U.S.L.W. 3657
(U.S. Apr. 4, 1994) (No. 93-1103), primarily because the doctrine of
stare decisis is far less rigorous in that context, see NLRB v.
Curtin Matheson Scientific, Inc., 494 U.S. 775, 787, 110 S. Ct.
1542, 1549 (1990) ("[A] Board rule is entitled to deference even if
it represents a departure from the Board's prior policy."); NLRB v.
Local 103, Int'l Ass'n of Iron Workers, 434 U.S. 335, 351, 98 S. Ct.
651, 660-61 (1978) ("An administrative agency is not disqualified
from changing its mind; and when it does, the courts still sit in
review of the administrative decision and should not approach the
statutory construction issue de novo and without regard to the
administrative understanding of the statutes."); NLRB v. J.
Weingarten, Inc., 420 U.S. 251, 265-66, 95 S. Ct. 959, 967-68 (1975)
("The use by an administrative agency of the evolutional approach is
particularly fitting. To hold that the Board's earlier decisions
froze the development of this important aspect of the national labor
law would misconceive the nature of administrative
decisionmaking."); NLRB v. Wyman-Gordon Co., 394 U.S. 759, 766, 89
S. Ct. 1426, 1429 (1969) (plurality) (referring to the "qualified
role of stare decisis in the administrative process"); NLRB v.
Seven-Up Co., 344 U.S. 344, 349, 73 S. Ct. 287, 290 (1953) ("The
constant process of trial and error, on a wider and fuller scale
than a single adversary litigation permits, differentiates perhaps
more than anything else the administrative from the judicial
process."); Iron Workers, Local 3, 843 F.2d at 776 ("As decisional
law has made clear, it is not the function of the courts to
interpret § 8(f), nor is any initial interpretation of one act made
by the Board to be deemed `frozen in concrete.'"); see also
Lechmere, Inc. v. NLRB, 112 S. Ct. 841, 847-48 (1992) ("`Once we
have determined a statute's clear meaning, we adhere to that
24
determination under the doctrine of stare decisis, and we judge an
agency's later interpretation of the statute against our prior
determination of the statute's meaning.'" (quoting Maislim Indus.,
U.S., Inc. v. Primary Steel, Inc., 497 U.S. --, --, 110 S. Ct. 2759,
2768 (1990) (emphasis added)).
A second, fundamental difference between agencies and
Article III courts is that an agency boasts both judicial and
legislative powers. When an agency exercises its legislative
powers, neither the "cases" or "controversies" prerequisite, nor the
rule of stare decisis, rears its head. And, as Chenery illustrates,
agencies are free to exercise their legislative powers in adjudica-
tions. See SEC v. Chenery Corp., 332 U.S. 194, 202-03, 67 S. Ct.
1575, 1580 (1947) ("[A]ny rigid requirement [that the agency fill
interstices in its organic statute through rulemaking] would make
the administrative process inflexible and incapable of dealing with
many of the specialized problems which arise. . . . Not every
principle essential to the effective administration of a statute can
or should be cast immediately into the mold of a general rule. Some
principles must await their own development, while others must be
adjusted to meet particular, unforeseeable situations. In perform-
ing its important functions in these respects, therefore, an
administrative agency must be equipped to act either by general rule
or by individual order. . . . There is thus a very definite place
for the case-by-case evolution of statutory standards."); NLRB v.
Bell Aerospace Co. Div. of Textron, Inc., 416 U.S. 267, 293, 94 S.
Ct. 1757, 1771 (1974). Although arguably an agency endowed with
rule-making powers may not announce purely prospective rules in
adjudications, the restriction is not of constitutional origin. See
Wyman-Gordon Co., 394 U.S. at 761-64, 89 S. Ct. at 1427-29
(plurality of four) (stating that the Board cannot circumvent the
rule-making procedural provisions of the NLRA with purely
prospective adjudications); id. at 779, 89 S. Ct. at 1436 (Douglas,
J., dissenting) ("I would hold the agencies governed by the rule
making procedure strictly to its requirements . . . ."); id. at 781,
89 S. Ct. at 1437 (Harlan, J., dissenting) ("[T]he Labor Board has
promulgated a rule in violation of the governing statute . . . .").
Finally, some agencies lack rulemaking powers, and requir-
ing them to always apply each of their new rules retrospectively
would effectively deny them the flexibility which is the cornerstone
of administrative action and the sine qua non of administrative
responsiveness. Especially as to them, a retrospective straight-
jacket would be counterproductive.
Thus, the considerations prompting the Beam and Harper
decisions cannot simply be transposed to the administrative context.
In recognition of these important distinguishing characteristics,
courts insulated from the dynamic political pressures agencies face
should jealously guard their protective power to watch over agen-
cies, so that agencies' retrospective changes to the law do not
brand conduct that was legal when performed illegal when challenged
when to do so would cause "manifest injustice." See NLRB v.
Majestic Weaving Co., 355 F.2d 854, 860 (2d Cir. 1966) (Friendly,
25
Applying what the district court believed to be the proper
test, it decided not to apply Deklewa retrospectively.0 See Mem. Op.
J.) ("Although courts have not generally balked at allowing
administrative agencies to apply a rule newly fashioned in an
adjudicative proceeding to past conduct, a decision branding as
`unfair' conduct stamped `fair' at the time a party acted, raises
judicial hackles . . . ."); cf. Landgraf v. USI Film Prods., 62
U.S.L.W. 4255, 4262 (U.S. Apr. 26, 1994) ("[R]etroactive statutes
raise particular concerns. The Legislature's . . . responsivity to
political pressures poses a risk that it may be tempted to use
retroactive legislation as a means of retribution against unpopular
groups or individuals."). But agencies should retain their power to
administer their organic statutes flexibly. Expansion of Beam and
Harper to the administrative agency context is, in short, far from a
foregone conclusion, and because we conclude that even under a
choice-of-law analysis the Dekelwa rule applies retrospectively, we
need not definitively decide this question.
We also do not think that the fact that this Court in Iron
Workers, Local 3 applied the Deklewa rule retrospectively implies
that Beam and Harper require this Court to apply it retrospectively
again to this case. There exists a substantial distinction between
Beam and Harper on the one hand and Iron Workers, Local 3 on the
other, in that in Iron Workers, Local 3 this Court deferred to the
Board's revised construction of its organic statute; it did not
construe the statute for itself. See Iron Workers, Local 3, 843
F.2d at 776 (noting that while the Supreme Court had twice applied
the pre-Deklewa rule, that rule was not stare decisis because the
Court was merely reviewing the Board's interpretation and not
announcing its own). Were a court's application of law as
proclaimed by an agency binding in subsequent cases before that
court, agencies would effectively labor under the same stringent
stare decisis doctrine which binds courts, and this has never been
the case. See supra. To the extent that here the agency was
exercising its legislative powers, moreover, Iron Workers, Local 3
construed the law as expounded by the agency to be that the new rule
applies lest manifest injustice would result. We do not doubt that
legislative rules may within bounds incorporate some forms of
selective prospectivity. See, e.g., 28 U.S.C.A. § 2074(a) (Supp.
1993) (granting the Supreme Court the authority to fix the extent to
which a newly promulgated rule of civil procedure or evidence shall
apply to pending proceedings, but only "to the extent that, in the
opinion of the court in which such proceedings are pending, the
application of such rule . . . would not . . . work injustice"); cf.
Bradley v. School Bd., 416 U.S. 696, 716-21, 94 S. Ct. 2006, 2019-21
(1974) (determining whether retrospective application of a newly
enacted procedural statute in that case would breed manifest
injustice).
0
The question whether in a particular instance the retrospective
application by a district court of a rule of law announced in an
26
at 26-29. That court erred, however, when it departed from
Chenery's "manifest injustice" analysis appropriate for agency
adjudications and instead applied the three-prong Chevron Oil
analysis once appropriate for judicial adjudications. See Chevron
Oil v. Huson, 404 U.S. 97, 106-08, 92 S. Ct. 349, 355-56 (1971)
(setting forth the test for retrospective application of new rules
of law announced in "judicial decisions"). As we explained in Iron
Workers, Local 3, while SEC v. Chenery Corp., 332 U.S. 194, 67 S.
Ct. 1575 (1947) "has been applied exclusively to administrative
agency adjudications," Chevron Oil "appears to have been applied
exclusively to judicial adjudications." 843 F.2d at 780 n. 12.
Thus, to the extent that the Chenery inquiry differs from the
Chevron Oil test, the district court committed legal error.0
agency adjudication will cause manifest injustice is a question of
law, not one of equity, notwithstanding the fact that some
"equitable" considerations may play a role in the outcome. See In
re Graham, 973 F.2d 1089, 1093 (3d Cir. 1992) (holding that we
exercise plenary review over the district court's retrospective
application of a Supreme Court decision); cf. Gruber v. Price
Waterhouse, 911 F.2d 960, 965 (3d Cir. 1990) (deciding de novo
whether a decision by this Court applied retrospectively); Gatto v.
Meridian Medical Assocs., Inc., 882 F.2d 840, 842-44, (3d Cir. 1989)
(same), cert. denied, 493 U.S. 1080, 110 S. Ct. 1136 (1990); Hill v.
Equitable Trust Co., 851 F.2d 691, 696-99 (3d Cir. 1988) (same),
cert. denied, 488 U.S. 1008, 109 S. Ct. 791 (1989); see also Iron
Workers, Local 3, 843 F.2d at 780-81 (holding review of the Board's
decision to apply a new rule of law retrospectively is deferential
and that the Board's ruling will be disturbed only if it wreaks
manifest injustice); Harper v. Virginia Dep't of Taxation, 113 S.
Ct. 2510, 2516 n.9 (1993) (not deciding whether Chevron Oil v.
Huson, 404 U.S. 97, 92 S. Ct. 349 (1971) was a "choice-of-law
principle" or "a remedial principle for the exercise of equitable
discretion"). A court of law is not blind to injustice. Hence
although we pay deference to an agency's ruling on the retrospec-
tivity of a rule it announces in an adjudication unless to do so
would cause a manifest injustice, we apply plenary review to a
district court's determination whether retrospective application of
such a rule would indeed cause manifest injustice.
0
In Iron Workers, Local 3 we mentioned the equivalency of the Chevron
Oil and Chenery analyses on the facts then before us. See 843 F.2d
27
 The numerous other courts to have considered the
retrospectivity of the Deklewa rule have divided over the issue,
with the slight majority of the cases not applying it
at 780 n.12 ("[O]n this record an independent analysis under either
test would reach the same result here."). Given that the factors in
Chevron Oil and Chenery vary in their emphasis, the same may not
hold in all cases, and, in particular, it may be that the district
court was correct when it decided that a Chevron Oil analysis would
not countenance retrospective application of Deklewa to this case
(although that is doubtful considering Iron Workers, Local 3).
The key discrepancy between the two inquiries is that,
whereas Chevron Oil focuses on the reasonable expectations of the
class of persons who will be adversely affected by retrospective
application of the newly announced rule of law, Chenery concentrates
on the actual reliance on the prior rule by the particular adversely
affected party before the court. That means that the Chevron Oil
analysis needs only be done once, in the decision first recognizing
the new rule; by contrast, the Chenery analysis must be repeated in
each case where the rule may be retrospectively applied.
This difference in application flows from the elemental
dissimilarity between the two doctrines: Chevron Oil dealt with the
question of pure prospectivity -- i.e., whether the rule should have
future effect as to all parties, see Chevron Oil, 404 U.S. at 105-
08, 92 S. Ct. at 355-56 (holding that the new rule of law "should
not be applied retroactively in the present case"); cf. Beam, 111 S.
Ct. at 2445 (plurality) (Souter, J.) ("selective prospectivity
appears never to have been endorsed in the civil context"); id. at
2449 (White, J., concurring) -- whereas Chenery dealt with the
question of selective prospectivity -- i.e., roughly, whether a rule
otherwise applied retrospectively should not apply retrospectively
to the particular parties before the court, see Chenery, 332 U.S. at
202-03, 67 S. Ct. at 1580-81; e.g., Ryan Heating Co. v. NLRB, 942
F.2d 1287, 1288-89 (8th Cir. 1991) (considering the adversely
affected parties' actual reliance on the discarded rule); Fox
Painting Co. v. NLRB, 919 F.2d 53, 56 (6th Cir. 1990) (same); Ballbe
v. INS, 886 F.2d 306, 310 (11th Cir. 1989) (same), cert. denied, 495
U.S. 929, 110 S. Ct. 2166 (1990); Ewing v. NLRB, 861 F.2d 353, 362
(2d Cir. 1988) (same); Southwestern Public Serv. Co. v. FERC, 842
F.2d 1204, 1208-09 (10th Cir. 1988) (same); Oil, Chem. & Atomic
Workers Int'l Union, Local 1-547 v. NLRB, 842 F.2d 1141, 1145 (9th
Cir. 1988) (same); NLRB v. Wayne Transp., Div. of Wayne Corp., 776
F.2d 745, 751 n.8 (7th Cir. 1985) (same); NLRB v. Ensign Elec. Div.
of Harvey Hubble, Inc., 767 F.2d 1100, 1102 n.2 (4th Cir. 1985)
(same), cert. denied, 479 U.S. 984, 107 S. Ct. 573 (1986); McDonald
v. Watt, 653 F.2d 1035, 1042-45 (5th Cir. Unit A Aug. 1981) (same);
Standard Oil Co. v. Department of Energy, 596 F.2d 1029, 1063-65
(Temp. Emer. Ct. App. 1978) (same); Retail, Wholesale & Dep't Store
Union v. NLRB, 466 F.2d 380, 390 (D.C. Cir. 1972) (same).
28
retrospectively; the roster is set forth in the margin.0 FWEC tries
0
Compare NLRB v. Viola Indus.-Elevator Div., 979 F.2d 1384, 1396-97
(10th Cir. 1992) (applying Deklewa retrospectively) (using the
"manifest injustice" standard and noting in passing that the union
had achieved majority status prior to the employer's repudiation),
Iron Workers, Local 3, 843 F.2d at 781 (same), NLRB v. Bufco Corp.,
899 F.2d 608, 611-12 (7th Cir. 1990) (using the "manifest injustice"
standard and relying on the union's attainment of majority status to
find no manifest injustice), NLRB v. W.L. Miller Co., 871 F.2d 745,
748-50 (8th Cir. 1989) (same, but due to the Board's incredible
delay finding manifest injustice with respect to the interest the
Board assessed), appeal after remand, 988 F.2d 834 (8th Cir. 1993)
(denying enforcement), R.W. Granger & Sons, Inc. v. Eastern Mass.
Carpenters, 686 F. Supp. 22, 28-30 (D. Mass. 1988) (using the
"manifest injustice" standard but finding none as a general matter
because of the uncertainty prevailing under the old rule) and
National Elevator Indus. Welfare Plan v. Viola Indus., Inc., 684 F.
Supp. 1560, 1561, 1563 (D. Kan. 1987) (deferring to the Board's
retrospectivity ruling without analysis although the union had
failed to achieve majority status) with C.E.K. Indus. Mechanical
Contractors, Inc. v. NLRB, 921 F.2d 350, 357-59 (1st Cir. 1990) (not
applying Deklewa retrospectively) (using the "manifest injustice"
standard and finding manifest injustice because there was no evi-
dence the union had achieved majority status, the dispute was purely
historical, and application of the rule would disappoint reasonable
private expectations and "penalize" the employer for having taken
action lawful when taken), Fox Painting Co. v. NLRB, 919 F.2d 53, 56
(6th Cir. 1990) (using the "manifest injustice" standard and defer-
ring to the Board's rule that it would not apply Deklewa retrospec-
tively to cases where an appellate court had already affirmed a
finding of liability before Deklewa was decided), United Bhd. of
Carpenters & Joiners Local Union 953 v. Mar-Len of La., Inc., 906
F.2d 200, 203-04 (5th Cir. 1990) (applying the Chevron Oil factors
and finding that the employer relied on the old rule when entering
into the prehire agreement and when repudiating it, that the work on
the site had been completed, and that there was no evidence the
union had obtained majority status), Sheet Metal Workers Local Union
No. 54 v. E.F. Etie Sheet Metal Co., 1 F.3d 1464, 1472 n.8 (5th Cir.
1993) (affirming Mar-Len of La., supra), cert. denied, 114 S. Ct.
1067 (1994), Mesa Verde Constr. Co. v. Northern Cal. Dist. Council
of Laborers, 895 F.2d 516, 518-19 & n.1 (9th Cir. 1989) (using the
"manifest injustice" standard and applying the Chevron Oil analysis,
finding that the employer had relied on the old rule when it repudi-
ated the prehire agreement, that the dispute was "strictly histori-
cal," that there was no way to determine if the union had enjoyed
majority support, and that retrospective application would "penal-
ize" the employer for taking action possibly legal when taken),
cert. denied, 498 U.S. 877, 111 S. Ct. 209 (1990), Camping Constr.
Co. v. District Council of Iron Workers, 915 F.2d 1333, 1337 n.2
(9th Cir. 1990) (affirming Mesa Verde Constr. Co., supra), cert.
29
to distinguish the cases applying Deklewa retrospectively from those
refusing to do so on the grounds that in all the former cases (i)
the proceedings were pending in the Board at the time Deklewa was
decided, and (ii) the employer effectively repudiated the agreement
before Deklewa was decided. The district court tried to distinguish
the cases on the basis of whether the union had clearly obtained
majority status or not prior to the employer's repudiation of the
prehire agreement. See Mem. Op. at 38. We think, however, that
these attempts to reconcile the cases along the lines of one or
another singular criterion must fail.
denied, 111 S. Ct. 1684 and 2260 (1991), Trustees for Mich. Laborers
Health Care Fund v. M.M. Vander Veen Constr. Co., 736 F. Supp. 138,
141-42 (W.D. Mich. 1989) (applying the Chevron Oil factors, finding
actual reliance by the employer on the old law, and without explana-
tion disagreeing with the Board that retrospective application of
Deklewa would promote the purposes of the NLRA), Trustees of Nat'l
Automatic Sprinkler Indus. Pension Fund v. American Automatic Fire
Protection, 680 F. Supp. 731, 734-35 (D. Md. 1988) (finding that the
controversy was strictly historical, which means that, unlike in
proceedings before the Board, the parties could not hold an election
to test the union's majority status, and that applying the new rule
would penalize the employer for taking action possibly legal when
taken) and Construction Indus. Welfare Fund of Rockford, Ill. v.
Jones, 672 F. Supp. 291, 293-94 (N.D. Ill. 1987) (using the "mani-
fest injustice" standard and finding that the controversy was
strictly historical, that the defendant actually relied on the old
rule, and that application of the new rule would "effectively punish
the [employer] for doing an act which was legally sanctioned at the
time it was committed"). But cf. Sheet Metal Workers, Local Union
#312 v. Action Enters., 136 L.R.R.M. (BNA) 2743, 2745 (D. Utah 1987)
(relying on prior Tenth Circuit precedent adopting the R.J. Smith
rule to reject Deklewa altogether).
Those courts applying Deklewa retrospectively in cases
where the union had obtained majority status, especially where that
factor was stressed, arguably did not truly apply the Deklewa rule
retrospectively, as under the old R.J. Smith rule those courts would
have reached the same result. Under the "conversion" doctrine of
the R.J. Smith rule, once the union had obtained majority status,
the pre-hire agreement became a collective bargaining agreement, and
the employer was no longer free to repudiate the agreement at its
pleasure.
30
First, not every court applies the same standard of
review: some courts do not defer to the administrative agency's
determination of retrospectivity at all, whereas this Court in Iron
Workers, Local 3 held that it would follow the Board's
retrospectivity ruling absent a manifest injustice. See NLRB v.
W.L. Miller Co., 871 F.2d 745, 748 & n.2 (8th Cir. 1989) (noting the
incongruity), appeal after remand, 988 F.2d 834 (8th Cir. 1993)
(denying enforcement of the NLRB's order). Compare, e.g., Iron
Workers, Local 3, 843 F.2d at 781 and C.E.K. Indus. Mechanical
Contractors, Inc. v. NLRB, 921 F.2d 350, 357 (1st Cir. 1990) with,
e.g., Sheet Metal Workers Local Union No. 54 v. E.F. Etie Sheet
Metal Co., 1 F.3d 1464, 1472 n.8 (5th Cir. 1993), cert. denied, 114
S. Ct. 1067 (1994) and Mesa Verde Constr. Co. v. Northern Cal. Dist.
Council of Laborers, 895 F.2d 516, 519 n.1 (9th Cir.), cert. denied,
498 U.S. 877, 111 S. Ct. 209 (1990). Moreover, the fact that some
recurring circumstances have been identified as rendering
retrospective application of the Deklewa rule manifestly unjust does
not dictate a similar result in other cases presenting a dissimilar
coincidence of circumstances. Finally, it appears that the courts
are inconsistent and somewhat divided over the meaning and applica-
tion of the "manifest injustice" doctrine.0
0
FWEC also argues that the Board only intended retrospective
application in cases pending before the agency, not those pending in
federal courts. See Construction Indus. Welfare Fund v. Jones, 672
F. Supp. 291, 293 (N.D. Ill. 1987). In Deklewa, the Board was
quoting from Deluxe Metal Furniture Co., 121 N.L.R.B. 995, 1006-07
(1958) when it determined to apply the new rule overruling R.J.
Smith "`to all pending cases in whatever stage.'" Deklewa, 282
N.L.R.B. at 1389. The Board, citing administrative efficiency, had
decided in Deluxe Metal Furniture that it would apply its new rule
retrospectively "not only [to] the case in which such revisions are
first announced and applied, but also [to] any other case which has
not yet been decided, because it has not reached the Board's level
31
or is at one of the other stages of the administrative process such
as the hearing." Id., 121 N.L.R.B. at 1006. The Board's reliance
on Deluxe Metal Furniture, then, seems to indicate to FWEC that the
Board meant the Deklewa rule to be applied retrospectively only to
cases before the agency, not to those brought in the district courts
under § 301 of the LMRA. Cf. Trustees of Nat'l Automatic Sprinkler
Indus. Pension Fund v. American Automatic Fire Protection, 680 F.
Supp. 731, 734-35 (D. Md. 1988) (suggesting that a rule different
from that applied by the Board in unfair labor practice proceedings
under § 8(f) might apply in § 301 proceedings); Construction Indus.
Welfare Fund of Rockford, Ill. v. Jones, 672 F. Supp. 291, 293 (N.D.
Ill. 1987) (intimating the same).
We hesitate to read too much into the Board's circumspect
retrospective application of its new rule, however, because we think
perhaps the Board was only being politic when it chose not to direct
federal courts as to which rule of law to apply. In our view, the
retrospectivity standard should be the same whether the proceeding
was initiated in a district court or the agency. The whole concept
of a uniform national law is thwarted if the parties can select the
substance of federal law by the simple expedient of forum shopping.
Cf. Harper v. Virginia Dep't of Taxation, 113 S. Ct. 2510, 2516-17
(1993) (stressing equality of treatment and stating that the
"`substantive law [cannot] shift and spring' according to `the
particular equities of [individual parties'] claims'"); see also
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 74-78, 58 S. Ct. 817, 820-22
(1938) (stressing equality of the law). The defendants' rule would
raise the spectre, too, that this Court would eventually be placed
in the compromising and awkward position of applying two irreconcil-
able rules of law to the same transaction between the same parties,
one upon appeal from a district court and the other upon appeal from
the Board.
Furthermore, we do not wish thoughtlessly to set in motion
a practice of interpreting statutes administered by dedicated
agencies without affording the agency due deference simply because
the initial forum was a federal district court rather than the
agency. Not only would the practice unjustifiably undermine the
effectiveness with which agencies may cultivate their organic
statutes by adjudication instead of rulemaking, but the paramount
rationales undergirding deference --agency expertise and
congressional intent, see Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 843-45 104 S. Ct. 2778, 2782-83
(1984) -- are by no means less pressing when the action is initiated
in a federal district court instead of a federal agency. When a
federal agency pronounces a rule of law subject to stage two Chevron
deference, see Chevron, 467 U.S. at 842-44 & n.9, 104 S. Ct. at
2781-82 & n.9 (Congress may impliedly or expressly delegate
"authority to the agency to elucidate a specific provision of the
statute by regulation"), assuming the construction is a permissible
one, the pronouncement essentially defines what the federal law is,
not merely what the agency considers it to be for its own purposes.
See, e.g., Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565-70,
32
As mentioned above, the decision controlling retrospective
application of a rule of law an agency promulgates in an adjudi-
cation and providing the benchmark for the "manifest injustice"
inquiry remains Chenery. Chenery stated as the general rule that
the ill effects of retrospectivity
must be balanced against the mischief of producing a
result which is contrary to a statutory design or to legal
and equitable principles. If that mischief is greater
than the ill effect of the retroactive application of a
new standard, it is not the type of retroactivity which is
condemned by law.
Chenery, 332 U.S. at 203, 67 S. Ct. at 1581. This Court has not had
many opportunities to apply Chenery, however, and indeed the only
case we have found decided by this Court that discusses Chenery in a
helpful way is E.L. Wiegand Div. v. NLRB, 650 F.2d 463 (3d Cir.
1981), cert. denied, 455 U.S. 939, 102 S. Ct. 1429 (1982).0 There we
referenced five factors announced by Retail, Wholesale & Dep't Store
Union v. NLRB, 466 F.2d 380, 390 (D.C. Cir. 1972) to evaluate
"whether the inequity of retroactive applications is counterbalanced
100 S. Ct. 790, 796-99 (1980) (deferring to the construction of the
Federal Truth in Lending Act by the Federal Reserve Board's staff in
a case originally brought in a district court).
0
The reference to NLRB v. Semco Printing Ctr., Inc., 721 F.2d 886,
892 (2d Cir. 1983) in Iron Workers, Local 3, see 843 F.2d at 780,
was dicta and also, we think, not fully considered. Semco Printing
relied on a line of cases considering retrospective legislative
lawmaking or agency rulemaking of procedural rules, not
retrospective agency adjudication of substantive rules. See Bradley
v. School Bd., 416 U.S. 696, 709-10, 94 S. Ct. 2006, 2015 (1974)
(fee-shifting statute enacted by Congress); Thorpe v. Housing Auth.
of Durham, 393 U.S. 268, 274-77, 89 S. Ct. 518, 522-23 (1969)
(circular issued pursuant to agency's rulemaking powers); Landgraf
v. USI Film Prods., 62 U.S.L.W. 4255, 4264-66 (U.S. Apr. 26, 1994)
(explaining that Bradley and Thorpe dealt with procedural rules and
that legislation changing substantive rules has a different
presumption regarding retrospectivity). We have no occasion to
consider how retrospectivity differs between agency rulemaking and
agency adjudication, if at all, but insofar as we have not ruled out
the possibility that the standards may diverge somewhat, we think it
prudent to draw on precedent dealing with adjudications.
33
by sufficiently significant statutory interests." E.L. Wiegand
Div., 650 F.2d at 471. Although the factors could be characterized
as dicta insofar as this Court never applied them in that case, they
originate from the District of Columbia Circuit's landmark decision
in Retail, Wholesale and appear to be in accord with other courts'
interpretation of Chenery, see supra at Error! Bookmark not defined.
n.Error! Bookmark not defined., and thus we will adopt those five
factors and apply them to this case.
The five factors we will consider are "(1) whether the
particular case is one of first impression, (2) whether the new rule
represents an abrupt departure from well established practice or
merely occupies a void in an unsettled area of law, (3) the extent
to which the party against whom the new holding is applied in fact
relied on the former rule, (4) the degree of the burden imposed, and
(5) the statutory interest in application of this new rule." E. L.
Wiegand Div., 650 F.2d at 471 n.5. We determine that the first and
fourth factors favor neither party, that the third and fifth factors
militate in favor of the Union, and that the second factor favors
the defendants. After going through a balancing operation, we
conclude that Deklewa applies retrospectively to this case.0
Three of these factors can quickly be disposed of. First,
as we are not newly announcing the Deklewa rule in this case, the
0
In light of our resolution of the "manifest injustice" inquiry, we
may disregard LIUNA's contention that FWEC and FWC are equitably
estopped from complaining that retrospective application of Deklewa
to this case would be manifestly unjust because of their deceptive
conduct and their calculated failure to utilize MBTC's hiring hall.
Br. of LIUNA at 25-29. We digress to observe, however, that it is
far from clear that equitable principles apply to the "manifest
injustice" choice-of-law inquiry. See supra at Error! Bookmark not
defined. n.Error! Bookmark not defined..
34
issue is not one of first impression. If it were, we would be
compelled either to apply the new rule retrospectively or to reject
it, as the prohibition against advisory opinions, see Retail,
Wholesale, 466 F.2d at 390; NLRB v. Majestic Weaving Co., 355 F.2d
854, 860 (2d Cir. 1966), assures that "[e]very case of first
impression has a retroactive effect," Chenery, 332 U.S. at 203, 67
S. Ct. at 1581. Subsequent cases, on the other hand, do not always
demand retrospective application of the "new" rule (we speak now
only of agency adjudications). See supra at Error! Bookmark not
defined. n.Error! Bookmark not defined.. Second, as all agree, the
rule "represents an abrupt departure from well-established prece-
dent." This fact cuts against retrospective operation, since the
parties' reliance interests will more likely be disappointed.
Third, the Board found, and this Court in Iron Workers, Local 3
concurred, that there was a great statutory interest in the retro-
spective application of Deklewa, even in cases (like Deklewa itself)
where the dispute was purely of historical interest.0 This factor
accordingly weighs in on the side of retrospectivity.
0
We are not unaware of the fact that many courts have stressed that
applying Deklewa retrospectively to a dispute of purely historical
interest does not further the interests which the new rule was
fashioned to advance, namely, labor stability and employee freedom
of choice, see Iron Workers, Local 3, 843 F.2d at 780-81. See
United Bhd. of Carpenters & Joiners Local Union 953 v. Mar-Len of
La., Inc., 906 F.2d 200, 203, 204 n.4 (5th Cir. 1990); Mesa Verde
Constr., 895 F.2d at 519; Trustees for Mich. Laborers Health Care
Fund v. M.M. Vander Veen Constr. Co., 736 F. Supp. 138, 142 (W.D.
Mich. 1989); Trustees of Nat'l Automatic Sprinkler Indus. Pension
Fund v. American Automatic Fire Protection, 680 F. Supp. 731, 735
(D. Md. 1988). But we have already held in a case which was only of
historical interest that Deklewa applies restrospectively without
being moved by that fact, see Iron Workers, Local 3, 843 F.2d at
772, 780-81; Deklewa, 282 N.L.R.B. at 1376, 1385 n.40, 1386, 1389,
and under our Internal Operating Procedure 9.1 we are not competent
to retreat from that position even if we were inclined to do so.
35
As to the question of the substantiality of the burden,
the record is unclear. The parties stipulated that if FWEC's breach
of the Agreement dated only from April to June 1985, LIUNA's damages
would come in under $20,000, almost a trifling sum in this context
even when compared just to the costs and fees presumably expended in
this 8-year litigation. If the period of the breach is extended to
July 1986, the damages may not be disproportionately larger,
although under some remedial theories advanced by LIUNA at oral
argument, ones obviously different from those upon which the $20,000
calculation was premised, the damages might grow substantially.0
Counterbalancing this fact is the defendants' great size and
considerable wealth, as financial fortitude blunts the blow of
damages. In sum, this inconclusive factor might favor either side.
Finally, as to the weighty factor of actual reliance by
the adversely affected party, the record convincingly establishes
that there was no actual reliance by the defendants on the
superseded rule. While true that an abrupt about-face in the law
(the second factor) "strongly advises" the conclusion of an
"inequitable result" under the inapposite Chevron analysis, Gruber
v. Price Waterhouse, 911 F.2d 960, 968 (3d Cir. 1990), this Chenery
actual reliance factor spotlights the subjective question whether
the party opposing retrospective application did, in fact, rely upon
the retracted rule, rather than the objective question whether that
0
LIUNA orally argued that it might be entitled to recover the full
amount of salary lost by (presumably identified) workers who desired
employment at the MOEPSI project, regardless of mitigation of
damages. The defendants rejoin that this position is preposterous.
Neither party cites any authority on the point, but that is of
little concern to us, as the fashioning of remedies for breach of a
prehire agreement is, as we explain below at 56, suited especially
for the experience and expertise of a labor arbitrator.
36
party reasonably and justifiably could have relied upon it, see
supra at Error! Bookmark not defined. n.Error! Bookmark not
defined.; see also infra at Error! Bookmark not defined. n.Error!
Bookmark not defined..
The district court found that "the defendants tried to
deceive the union about the applicability of the [Agreement] to the
MOEPSI project for a long time," Mem. Op. at 37, which strongly
suggests that the defendants themselves felt bound by the Agreement
at that site.0 In essence, they perpetrated the deception by
pretending that the nominal contractor FWIC was the prime contractor
on the project.0 Furthermore, the district court found that "the
defendants initially believed they could not repudiate the agreement
0
The court determined in this regard:
[A]s part of their effort to support their claims that the
National Agreement did not apply to EPC or the MOEPSI
project, I find the defendants worked to conceal the ample
evidence of FWEC's extensive involvement in the bidding
process and in MOEPSI's project management. For instance,
during the bidding process, FWEC officials and employees
used FWIC's letterhead to communicate with [MOEPSI].
Similarly, although FWEC employees actually prepared the
bid and Mr. Sarappo suggested conducting the project
management from FWEC's headquarters at the Houston
Engineering Center, FWIC and later EPC were technically
designated as MOEPSI's project managers. These actions
and the others detailed in the findings of fact convince
this court that the defendants not only failed to
repudiate the National Agreement prior to June 3, 1985 but
that they actively deceived LIUNA regarding its
applicability.
Mem. Op. at 44.
0
FWEC attempts to deride the district court's finding of deception by
focusing on the fact that EPC was openly and notoriously non-union.
See Br. of FWEC at 29-31. But the trial court's finding was
predicated on FWEC's surreptitious use of FWIC as a surrogate
contractor and its subsequent misidentification of EPC as the prime
contractor rather than as the subcontractor, not on any action taken
by EPC to conceal the fact that it ran an open shop.
37
for a single project and that they did not want to repudiate the
agreement as a whole," seemingly because they wished to reap the
rewards of the Agreement in other regions of the country where union
influence was stronger. Mem. Op. at 32.
The defendants' initial belief was justified until they
learned about Painters Local Union No. 64 of Brotherhood of Painters
v. Epley, 764 F.2d 1509 (11th Cir. 1985), cert. denied, 475 U.S.
1120, 106 S. Ct. 1636 (1986), in which the Eleventh Circuit held
that an employer could repudiate an area-wide prehire agreement with
respect to a particular job site without affecting the agreement at
other job sites. Undoubtedly the defendants' early belief that they
could not selectively repudiate the Agreement with regard to a
particular site accounts for the deception noted above. But Epley
was handed down on July 12, 1985 (the district court found that FWEC
explicitly repudiated the Agreement as to the MOEPSI site alone on
August 9, 1985), months after the defendants had fully committed
themselves, both internally and contractually, to use non-union
labor, and saddled themselves with that obligation by opening their
own hiring hall (in January 1985) and hiring their workers from
there (commencing on April 2, 1985) instead of from MBTC's hiring
hall. See supra at 10.
Given this state of affairs, we do not see how, measured
from the moment the defendants reached their decision to "repudiate"
the Agreement (which we think happened at the time FWEC decided to
use FWIC as the nominal contractor, sometime before February 1984,
see supra at Error! Bookmark not defined. n.Error! Bookmark not
defined.), they possibly could have relied on their as of yet
38
unestablished right to repudiate the Agreement selectively with
respect to a single job site.0 Rather, it is abundantly clear from
the measures they undertook to conceal FWEC's involvement in the
project that they in fact believed they had no such right. In
short, we are persuaded that had Deklewa been decided and entrenched
long before the defendants ever heard of the MOEPSI project, neither
FWEC nor FWC would have behaved any differently. At all events, in
February 1984 -- the date, as noted above, when the defendants chose
to bypass the Agreement at the MOEPSI site -- the defendants could
not have been very confident that LIUNA would not enjoy majority
support at the MOEPSI site. See supra at Error! Bookmark not
defined. n.Error! Bookmark not defined. (discussing the implications
of a union obtaining majority status).
We turn now to the balancing exercise. We bear in mind
the backdrop that "when the Board changes a rule and makes it
retroactive, particularly when the Board assigns as its reasons for
doing so the furtherance of the fundamental statutory policies of
employee free choice and labor relations stability, the Board should
be entitled to exercise its broadest power." Iron Workers, Local 3,
843 F.2d at 780. We are also reminded of the truism that in the
context of adjudication, retrospectivity is, and has since the birth
of this nation been, the norm. See, e.g., Harper v. Virginia Dep't
of Taxation, 113 S. Ct. 2510, 2516 (1993); cf. Hill v. Equitable
0
Even in its brief before this Court, neither FWEC nor FWC cites a
case predating Epley which approved of a single-site repudiation,
and our own research has shown Epley to be a ground-breaking case.
See, e.g., New Mex. Dist. Council of Carpenters & Joiners v. Jordan
& Nobles Constr. Co., 802 F.2d 1253, 1255-56 (10th Cir. 1986);
Trustess for Mich. Laborers Health Care Fund v. M.M. Vander Veen
Constr. Co., 736 F. Supp. 138, 143-44 (W.D. Mich. 1989).
39
Trust Co., 851 F.2d 691, 695-96 (3d Cir. 1988) (discussing the
competing views on retrospectivity), cert. denied, 488 U.S. 1008,
109 S. Ct. 791 (1989).
Although retrospectivity is not mandated, as this case is
not one of first impression, the sole factor opposing retrospec-
tivity is the fact that the rule signalled an abrupt departure from
prior precedent. But this factor itself was considered in Deklewa
and, on appeal, in Iron Workers, Local 3, and neither tribunal found
it defeated retrospective application of the Deklewa rule then.0
0
The Board in Deklewa abstractly addressed the reliance interest in
the old rule as follows:
Some employers probably have relied on R.J. Smith as a
means of repudiating a prehire agreement. However, that
reliance interest is not a particularly strong one in
light of the purposes that Congress sought to achieve
under Sec. 8(f). The interest that is entitled to protec-
tion is the ability of an employer to avail itself of the
Board processes to determine whether there is continued
majority support to undergird the union and the agreement.
The new rule, which affirms the Board's election proce-
dures for resolving that issue, does not seriously detract
from what an employer should appropriately expect in the
way of protection under the old rule.
282 N.L.R.B. at 1389 n.61. The Board is correct that generally an
employer could not reasonably rely on a right of repudiation that
was contingent on the union not acquiring majority status, but there
may be an exception if the employer was realistically confident that
the union would not obtain majority status. For this reason we have
focused on the particular evidence of lack of reliance in this case.
It may well be true that the repudiator's reliance
interest is less compelling when the case is still pending before
the Board, since then the Board could perhaps conduct an election
"to test the union's majority status." Trustees of Nat'l Automatic
Sprinkler Indus. Pension Fund v. American Automatic Fire Protection,
680 F. Supp. 731, 735 (D. Md. 1988). But the Board has applied
Deklewa retrospectively, found the employer guilty of an unfair
labor practice, and ordered appropriate remedies without first
holding an election. See, e.g., MIS, Inc., 289 N.L.R.B. No. 62
(1988) (ordering an employer to make its employees whole but not
scheduling an election). Moreover, contrasting the sluggish rate at
which the Board's bureaucratic wheels sometimes rotate with the
40
Indeed, defendants have not in fact relied to their detriment upon
the discarded rule, a factor of primary importance. Moreover, we
held in Iron Workers, Local 3 that the statutory interest in
application of the new rule is substantial. Finally, the burden the
defendants might bear does not look to be disproportionately large
given their means. In view of the foregoing, we conclude that the
factors strongly weigh in favor of retrospective application of the
Deklewa rule to this case.0
rapid turnaround prevalent in the construction industry convinces us
that even in cases pending before the Board an election will quite
often be impracticable. For example, in this case the Board had to
dismiss a petition for election when the sizable MOEPSI project
terminated before the election could be held. In any event, we
agreed with the Board in Iron Workers, Local 3, see 843 F.2d at 781,
so the issue is water over the dam.
0
Because of this disposition we are not called upon to reach the
question whether the defendants were precluded from repudiating the
Agreement at their pleasure for purposes of an action under § 301
notwithstanding the fact that under the R.J. Smith rule it would not
have been an unfair labor practice for them to do so. That is to
say, merely because repudiation would not have been an unfair labor
practice under R.J. Smith would by no means have been conclusive as
to whether or not the repudiator would have breached the pre-hire
agreement and the other party would be entitled to damages. The
parties have approached and argued this case as if the issue of
whether the Board would consider repudiation an unfair labor
practice were dispositive of whether there was a breach of the §
8(f) prehire agreement, and consequently whether the other party
could recoup damages for said breach. Such assumption was unwise.
See, e.g., Jim McNeff, Inc. v. Todd, 461 U.S. 260, 267, 103 S. Ct.
1753, 1757 (1980) (differentiating between duties under the NLRA and
"contractual obligations that accrued" under a prehire agreement).
Although some language in Jim McNeff may have led the
parties to believe that to be the proper strategy, the Supreme Court
there expressly declined to address whether valid § 8(f)
repudiations under the NLRA are also valid for § 301 purposes. See
461 U.S. at 271 n.13, 103 S. Ct. at 1759 n.13. Because of our
resolution of the Deklewa issue, we easily conclude, however, that
FWEC was not at liberty to repudiate the Agreement. We do not
decide, as we need not, whether our decision as to the continued
vitality of the Agreement for purposes of § 301 would have been
different had we concluded that the defendants validly repudiated
the Agreement for purposes of an unfair labor practice charge before
the Board.
41
The consequence of our conclusion that Deklewa applies
retrospectively is that the Agreement at the MOEPSI site was never
repudiated by the defendants until they rightfully terminated it
effective July 15, 1986. Under Deklewa, an employer cannot repudi-
ate a prehire agreement unless the Board first conducts an election
decertifying the union. See 282 N.L.R.B. at 1385. The facts
indicate that no effective election was ever held (the NLRB did
conduct an election, but on appeal from the election petition the
ballots were impounded and by the time the Board remanded the matter
the election had been mooted). See supra at Error! Bookmark not
defined. n.Error! Bookmark not defined.. Thus, the parties
continued to be bound by the Agreement at the MOEPSI site until July
15, 1986, when FWEC within the window provided therefor properly
terminated the Agreement in its entirety.0
III. THE EFFECT OF THIS COURT'S MANDATE ON THE
ARIBTRATOR'S FACTUAL FINDNGS
The arbitrator made several findings of fact in his
arbitration decision, a decision which preceded the parties' second
appeal to this Court. The two important facts found by the
arbitrator were that (i) FWEC and EPC were a "single employer," and
(ii) FWEC was the prime contractor at the MOEPSI site, contrary
representations in the paper trail notwithstanding. The district
0
The parties expend much effort debating the precise date of each
defendant's supposed repudiation of the Agreement. See, e.g., Br.
of FWC at 38-48; Br. of FWEC at 35-42; Reply Br. of LIUNA at 33-39;
Reply Br. of FWC at 21-23; Reply Br. of FWEC at 10-16. Since we
conclude that Deklewa operates retrospectively to this case, the
issue of what constitutes a repudiation is mooted.
This disposition also allows us to avoid the question
whether as a matter of choice of law we would need to apply the law
of the Eleventh Circuit as defined by Epley, 764 F.2d at 1513-14 to
the issue of repudiation.
42
court adopted those findings as its own, but then the parties
appealed to this court, disputing the legality of the district
court's arbitration order. On appeal we vacated some, but not all,
of the district court's orders subsequent to the arbitration order.
See supra at 48; infra at 48. Upon remand, the district court
concluded that we had vacated all of its post-arbitration orders,
including the one adopting some of the arbitrator's facts as its
own.
The parties now dispute whether those findings survived
our vacatur of portions of the district court's orders linked to the
arbitration. The employers argue that our prior decision vacated
the district court's entire order, including those factual findings;
the union, conversely, maintains that those factual determinations
survived and are now the law of the case. Because the answer lies
in this Court's prior opinion in this case, we are called upon to
interpret it.
On December 9, 1985, the district court ordered the defen-
dants to "participate in an arbitration of the Plaintiff's grievance
concerning the applicability of Section 1 of the parties' National
Agreement [(Scope)] to the construction project." Order at 1-2.
The court in its accompanying decision explained this order:
I warn the parties not to attempt to confuse the
narrow question I have found arbitrable with other issues
such as majority representation, bargaining units and
repudiation. Before anything else is to be determined in
this suit, the threshold issue of whether the Section 8(f)
agreement applies must be determined.
Mem. Op. at 19 (Dec. 9, 1985). After a hotly contested arbitration
--the arbitrator conducted three days of hearings, reviewed 192
exhibits, and considered 299 pages of briefs -- Arbitrator Kagel
43
concluded, inter alia, that (1) FWEC and FWC were alter egos; (2)
EPC was a joint or single employer with FWEC; (3) EPC had been
listed as the prime contractor on the MOEPSI site only to dupe LIUNA
and that FWEC was the actual prime contractor; and (4) the Agreement
obligated FWC and FWEC to apply its terms to the MOEPSI project.
Mem. Op. at 2; see Op. & Dec. at 33-35 (Kagel, Arb.) (Nov. 10,
1986).
One year later, the district court partially granted
plaintiff's motion to confirm the arbitrator's award. Order at 1
(Nov. 17, 1987). In its opinion, the court explained that the
arbitrator's conclusion that FWC and FWEC breached the Agreement
(derived from finding (4), supra), went beyond the scope of its
reference and hence it would not defer to that finding, but it let
stand his other conclusions. Mem. Op. at 7-10 ("Aside from his
final conclusion regarding breach, the arbitrator's decision falls
within the four corners of my intended submission.").
LIUNA now claims that FWEC in its earlier appeal to this
Court argued only that Deklewa should not be applied retrospectively0
and that it had repudiated the Agreement on or before June 6, 1985,
but did not attack finding (2) (to the effect that EPC and FWEC were
a joint employer) or finding (3) (to the effect that FWEC was
actually the prime contractor on the MOEPSI site), and submits that
therefore both the findings became res judicata.0 Assuming arguendo
0
On the parties' prior successful appeal we did not resolve that
question, remanding the issue instead for the district court to
reconsider in light of Iron Workers, Local 3. See Laborer's Int'l
Union, 868 F.2d at 577.
0
Assuming the validity of its premise that the defendants did not
attack the entire judgment on their previous appeal, LIUNA appears
to be correct on the res judicata point:
44
that the defendants appealed from the district court's entire
judgment rather than simply from some subset of issues, the decision
would have established the law of the case solely with respect to
those issues the decision reached explicitly or by necessary
inference.
The parties did not include the initial notice of appeal
in the record, and neither FWEC nor FWC asserts that it noticed its
appeal from the entire judgment in its 1988 cross-appeal. Nonethe-
If an appeal is taken from only part of the judg-
ment, the remaining part is res judicata, and the vacation
of the portion appealed from and remand of the case for
further proceedings does not revive the trial court juris-
diction of the unappealed portion of the judgment.
1B JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE ¶ 0.404[4.-3], at II-17
(2d ed. 1993); see Habecker v. Clark Equip. Co., 942 F.2d 210, 218
(3d Cir. 1991) (stating that a district court may enter any order or
reach any decision so long as it was neither disposed of by an
earlier district court order and not pursued on appeal, nor disposed
of by the appellate court's mandate in the earlier appeal); Seese v.
Volkswagenwerk, A.G., 679 F.2d 336, 337 (3d Cir. 1982) (per curiam)
("The district court is without jurisdiction to alter the mandate of
this court on the basis of matters included or includable in defen-
dants' prior appeal." (emphasis added)); Aubrey v. Director, Office
of Worker's Compensation Programs, 916 F.2d 451, 456 (8th Cir. 1990)
("failure to cross-appeal prohibits an appellee from attempting to
enlarge her rights or to lessen her adversary's rights" upon remand
(citing cases)); Payne v. Travenol Lab., Inc., 673 F.2d 798, 816 &
n.24 (5th Cir.), cert. denied, 459 U.S. 1038, 103 S. Ct. 451 (1982).
But if the appeal stems from the entire judgment and the judgment is
reversed or vacated and the case remanded generally for further
proceedings, the district court, barring some narrow exceptions
finding no application here, must apply the mandate as established
explicitly or by necessary inference by the appellate court (though
it is free to reconsider other issues). See, e.g., United States v.
Kikumura, 947 F.2d 72, 76 (3d Cir. 1991); Day v. Moscow, 955 F.2d
807, 812 (2d Cir.), cert. denied, 113 S. Ct. 71 (1992); 1B MOORE ET.
AL., MOORE'S FEDERAL PRACTICE ¶ 0.404[4.-3], at II-17; id. ¶ 0.404[10];
18 CHARLES ALAN WRIGHT, ARTHUR R. MILLER, & EDWARD H. COOPER, FEDERAL PRACTICE
AND PROCEDURE § 4478, at 792-94 (1981); cf. In re Resyn Corp. (Resyn
Corp. v. United States), 945 F.2d 1279, 1281-82 (3d Cir. 1991)
(holding that issues raised but not reached on a prior appeal are
not within the law of the case doctrine); Elias v. Ford Motor Co.,
734 F.2d 463, 465 (1st Cir. 1984) (affirmance).
45
less, because it is not outcome-determinative, we will give the
defendants the benefit of the doubt and assume that they noticed
their appeal from the entire judgment. The defendants' case falters
because (1) in their briefs on the earlier appeal they did not
actually attack the district court's adoption of the arbitrator's
factual findings; (2) this Court did not expressly or by necessary
implication reverse the district court's earlier validation of the
arbitrator's two factual findings; and (3) this Court did not vacate
that portion of the district court's order adopting the factual
findings. Consequently, the two findings became res judicata after
the remand -- hence, absent certain extraordinary circumstances,
they were beyond the authority of the district court to revisit.
In the Statement of Issues in its 1988 appellate brief,
FWEC posed the question "[w]hether the District Court erred in
compelling Arbitration on any issue and in later failing to set
aside the arbitrator's decision in its entirety." 1988 Br. of FWEC
at 2 (emphasis added). But beyond that brief reference it never
mentioned or developed that issue in its argument section. In fact,
after asserting in a conclusory fashion that it could establish that
the district court should have vacated the arbitrator's decision,
FWEC stated that it "will not, however, address these issues herein
because, although it would result in a reduction or total vacation
of damages, it would require remand and trial and/or another
arbitration which would serve only to prolong a small dispute which
has been out of control for much too long." Id. at 5 (Statement of
the Case).
46
To complicate matters, though, FWEC followed its
disclaimer with the declaration that it would "adopt[] those argu-
ments of . . . FWC which establish why the arbitrator exceeded his
jurisdiction, why the District Court's refusal to overturn the
Arbitrator's decision should be vacated and why the court's order
compelling arbitration should be overturned." Id. at 5-6; see FED.
R. APP. P. 28(i) ("In cases involving more than one appellant or
appellee, . . . any appellant or appellee may adopt by reference any
part of the brief of another."). However, a perusal of FWC's 1988
brief finds no argument that helps FWEC.0
LIUNA concedes that FWEC addressed the arbitration issue
in its 1988 reply brief (which was not placed in the record), see
Reply & Opp'n Br. of LIUNA at 31, but argues that by then it was too
late to do so. We agree. An issue is waived unless a party raises
it in its opening brief, and for those purposes "a passing reference
to an issue . . . will not suffice to bring that issue before this
court." Simmons v. City of Philadelphia, 947 F.2d 1042, 1066 (3d
Cir. 1991) (plurality opinion) (Becker, J.), cert. denied, 112 S.
Ct. 1671 (1992); International Raw Materials v. Stauffer Chem. Co. ,
0
FWC raised four issues on appeal. First, it argued that the
district court improperly compelled it (FWC) to submit to arbi-
tration since it was not a signatory to the Agreement; FWEC being a
signatory, the argument did not pertain to it. 1988 Br. of FWC at
14-24. Second, it argued that if it were bound by the Agreement,
then FWEC's and EPC's repudiations were effective as to it too. Id.
at 25-31. Third, FWC did argue that the arbitrator's award should
be set aside, but it did not challenge the arbitrator's factual
filings, restricting itself to arguing that the arbitrator erred in
considering "external law" when he construed the Agreement. Id. at
31-34. Although FWC prayed for relief that the entire arbitration
award be vacated, it advanced no arguments addressing why the
factual findings in particular should have been vacated. Fourth,
FWC argued Deklewa should not be retrospectively applied to this
case. Id. at 34-40.
47
978 F.2d 1318, 1327 n.11 (3d Cir. 1992), cert. denied, 113 S. Ct.
1588 (1993). Accordingly, unless the 1989 decision reversed that
portion of the district court's order affirming the arbitrator's
findings of fact or vacated the corresponding portion of its order,
FWEC's failure to contest those points on appeal renders them res
judicata. See supra at Error! Bookmark not defined. n.Error!
Bookmark not defined.
Nowhere did the 1989 decision reverse the district court's
order adopting the facts, although it did vacate the district
court's orders "predicated on the assumption that FWEC was FWC's
alter ego." Laborer's Int'l Union, 868 F.2d at 577. We conclude
that the 1989 decision did not vacate the district court's
ratification of the arbitrator's two findings of fact (which had to
do with FWEC and EPC's relationship) because that portion of the
district court's order was the only portion of the order which both
was not predicated on the alter ego finding and remained contested.0
0
The district court issued three "subsequent orders." First, the
district court denied defendants' motion to vacate the arbitration
decision and granted plaintiff's motion to affirm it except insofar
as the arbitrator found that the defendants breached the Agreement.
As should be clear, while some of the arbitration decision was
predicated on the assumption that FWEC was FWC's alter ego, see 868
F.2d at 577, the two factual findings at issue which the court had
embraced were not, as they dealt exclusively with the relationship
obtaining between FWEC and EPC. Second, the court denied
defendants' motion for summary judgment and partially granted
plaintiff's motion for summary judgment. This order was obviously
predicated on the defendants' alter ego status, hence it was
vacated. Third, the court ordered the parties to stipulate to
damages within 60 days or the court would hold a further hearing to
"determine the appropriate forum and procedure by which said issue
may be resolved." Order at 1-2. Because the parties stipulated to
damages prior to taking the 1989 appeal, this order had already been
rendered moot. Thus, by necessary implication, the district court's
confirmation of the arbitrator's two factual findings must have been
the portion of the district court's "subsequent orders" which this
Court did not vacate.
48
We hesitate to construe a carefully crafted vacatur as having
vacated the entire matter under review. This interpretation is
reinforced by the absence of any reason this Court would have had
for vacating those particular factual findings and requiring a
duplication of effort: FWEC was properly compelled to arbitrate
those factual issues, and an arbitrator eventually would have needed
to resolve them anyway to settle FWEC's liability.
Nevertheless, the district court interpreted this Court's
1988 mandate to vacate all of the arbitrator's factual findings.
Mem. Op. at 5 n.3. Therefore, the court decided to "review this
matter afresh." Id. Unfortunately, that alternative route ignores
the fact that the parties had contractually agreed to have exactly
these questions answered by an arbitrator. The moment FWC conceded
that it was FWEC's alter ego, the central question whether it could
be compelled to arbitrate the dispute was affirmatively answered,
and the district court should thereupon have dispatched the parties
to arbitration as soon as it determined the effective
repudiation/termination date of the Agreement. See infra at Error!
Bookmark not defined. n.Error! Bookmark not defined..
In any event, we believe that the district court miscon-
strued this Court's mandate. Even if this Court meant to vacate the
order compelling FWEC (as opposed to FWC) to submit to arbitration,
an issue which was not presented to this Court,0 as stated above, we
0
This Court vacated the arbitration order because the district court,
not the arbitrator, was to decide whether FWC was bound by the
Agreement, since if it were not bound, it could not be commanded to
submit to arbitration. See 868 F.2d at 576-77. The reason is
straightforward: a party cannot be compelled to arbitrate the
arbitrability issue. See, e.g., Litton Fin. Printing Div. v. NLRB,
501 U.S. 190, 111 S. Ct. 2215, 2226 (1991). As a signatory to the
Agreement, FWEC was unquestionably obligated to arbitrate the
49
did not vacate the district court's subsequent confirmation of the
arbitrator's factual findings. Accordingly, the arbitrator's
findings once adopted by the district court, namely, that FWEC and
EPC were a single employer and that FWEC was really the prime
contractor at the MOEPSI site, are res judicata, and the district
court should not have revisited them.
IV. THE ARBITRABILITY OF THE ISSUES OF BREACH AND DAMAGES
A. Introduction
Where no factual determinations are involved, this Court
reviews the district court's decision to send the issues of damages
and breach to arbitration as a matter of law. See Sheet Metal
Workers Int'l Ass'n, Local 19 v. 2300 Group, Inc., 949 F.2d 1274,
1278-79 (3d Cir. 1991) ("We have plenary review on whether the terms
of the collective bargaining agreements are ambiguous. Moreover, we
review de novo the district court's construction of the collective
bargaining agreements, which is a question of law." (citation
omitted)); cf. Lukens Steel Co. v. United Steelworkers, 989 F.2d
668, 672 (3d Cir. 1993) (where a collective bargaining agreement is
ambiguous and the parties' intent is controlling, the scope of
review is for clear error). See generally Ram Constr. Co. v.
American States Ins. Co., 749 F.2d 1049, 1052-53 (3d Cir. 1984)
(comparing when plenary and clear error review is appropriate). Our
primary guide is the strong federal labor policy favoring arbitra-
tion, a policy in large part premised on the arbitrator's superior
dispute. FWC, on the other hand, was not a signatory thereto, and
hence the court could direct it to arbitration only if the court
first determined that somehow FWC had become bound by the Agreement.
50
expertise in the mechanics of collective bargaining and collective
bargaining agreements, greater understanding of the law of the shop,
and greater efficiency in resolving labor disputes. See Luden's
Inc. v. Bakery, Confectionery & Tobacco Worker's Int'l Union Local
6, -- F.3d --, -- (3d Cir. 1994).
The parties inserted an extremely capacious arbitration
clause into the Agreement: it provided that "all grievances and
disputes [over the application or interpretation of this Agreement],
excluding jurisdictional disputes, shall be handled as hereinafter
provided."0 Agreement art. XV. Given the jurisprudence in this
area, see, e.g., A T & T Technologies, Inc. v. Communications
Workers, 475 U.S. 643, 650, 106 S. Ct. 1415, 1419 (1986) ("`[An]
order to arbitrate the particular grievance should not be denied
unless it may be said with positive assurance that the arbitration
clause is not susceptible of an interpretation that covers the
asserted dispute. Doubts should be resolved in favor of coverage.'"
(quoting United Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S.
574, 582-83, 80 S. Ct. 1347, 1352-53 (1960))), neither defendant
could plausibly argue that such an inclusive arbitration clause can
be read to exclude a dispute over whether the agreement applies to a
certain work site or not, and neither does.
B. The Enforceability of Arbitration Clauses in Prehire Agreements
0
A jurisdictional dispute in this context signifies not a dispute
over the application of the Agreement to a specific construction
site, but rather a dispute over the proper labor organization to be
assigned a given job. See id. art. XIV. See generally II CHARLES J.
MORRIS, THE DEVELOPING LABOR LAW, at 1366-98 (3d ed. Patrick Hardin ed.
1992).
51
Defendants do argue that prehire agreements are not
subject to arbitration and attempt to anchor this innovative
argument in Jim McNeff, Inc. v. Todd, 461 U.S. 260, 103 S. Ct. 1753
(1983). In Jim McNeff a union brought suit under § 301 of the LMRA,
29 U.S.C.A. § 185 (1978), complaining that the employer had breached
a prehire agreement by failing to make contributions to the union's
fringe benefit trust fund. The Court made no mention of an
arbitration clause, but alluded to the "critical distinction between
an employer's obligation under the [NLRA] to bargain with the
representative of the majority of its employees and its duty to
satisfy lawful contractual obligations that accrued after it enters
a prehire contract." Jim McNeff, 461 U.S. at 267, 103 S. Ct. at
1757. Thus, the Court held that while an employer must not bargain
with the union before the union obtains majority status, the
conditions of § 9(a) of the NLRA not having been fulfilled, when a
union and employer enter into a prehire agreement, "both parties
must abide by its terms until it is repudiated." Id. at 271, 103 S.
Ct. at 1759. We note that Jim McNeff predated Deklewa, and thus at
the time either party could have unilaterally repudiated a prehire
agreement without contravening the NLRA (that is, the R.J. Smith
rule was then in effect). Ibid.
The defendants maintain that McNeff implies quite the
opposite of what it says. They urge that a signatory to a prehire
agreement containing an arbitration clause cannot be compelled to
arbitrate until the § 8(f) prehire agreement has been transmogrified
into a § 9(a) collective bargaining agreement. Br. of FWEC at 48-
49. Without giving any reason for so doing, the defendants attempt
52
to confine Jim McNeff to its narrow holding that "the monetary
obligations assumed by an employer under a prehire contract may be
recovered in a § 301 action brought by a union prior to the
repudiation of the contract, even though the union has not attained
majority support in the relevant unit." Id. at 271-72, 103 S. Ct.
at 1759. Based on this niggardly understanding of Jim McNeff, they
contend that LIUNA is limited to recovering damages in the district
court. But clearly their reading of Jim McNeff misses its essential
point that the terms of an operative prehire agreement are
enforceable despite the union's lack of majority status. The Court
analyzed the statutory text and purposes of § 8(f) to arrive at this
preeminently logical conclusion.
FWEC additionally attempts to distinguish Jim McNeff on
the ground that here FWEC repudiated the Agreement before LIUNA
sought arbitration, whereas in Jim McNeff the prehire agreement
remained in effect throughout the litigation. Reply Br. of FWEC at
18. But even if that distinction could hold water, which it cannot,
see Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 111 S. Ct.
2215, 2225 (1991) (holding that a postexpiration grievance is
subject to arbitration if the grievance "involves facts and
occurrences that arose before expiration"); Nolde Bros., Inc. v.
Bakery & Confectionary Workers Union, 430 U.S. 243, 255, 97 S. Ct.
1067, 1074 (1977) ("the parties' failure to exclude from arbitrabi-
lity contract disputes arising after termination . . . affords a
basis for concluding that they intended to arbitrate all grievances
arising out of the contractual relationship"), the retrospectivity
analysis we engaged in eliminates that distinction: since Deklewa
53
applies retrospectively, the parties continued to be bound by the
Agreement at the MOEPSI site until FWEC terminated it effective July
15, 1986, a long time ago but still almost a full year after LIUNA
instituted this action to compel arbitration.
C. Relevancy of the Merits of the Dispute
The defendants also argue that arbitration is improper in
this case in particular because no damages can flow from a finding
they breached the Agreement, as LIUNA operated an illegal hiring
hall. They are correct that discriminatory hiring halls are
probably illegal, e.g., NLRB v. International Bhd. of Elec. Workers
Local 322, 597 F.2d 1326, 1330 (10th Cir. 1979), that they
apparently violate the Agreement, see Agreement art. V §§ 1-2, that
the district court found the local hiring hall to be run in a
discriminatory fashion, see Mem. Op. at 18 n.6, and, the local union
having been under LIUNA's trusteeship since May 1984, that LIUNA
cannot distance itself from the illegal conduct. Thus it may very
well be true that LIUNA is entitled to no damages.0
We cannot be certain of that, however, as the correct
answer completely depends on the interpretation to be given the
Agreement. Because it appears that neither defendant in fact
suspected that the union hiring hall was being run illegally until
well after the filing of the complaint in this case, and because of
the defendants' deception described earlier, the arbitrator may have
to name a winner in the battle of the unclean hands. It may also be
0
However, if LIUNA may recover damages on behalf of its injured
membership, this equitable defense may not aid defendants with
respect to LIUNA's membership, even if dispositive vis-à-vis LIUNA.
54
that, insofar as FWEC never attempted to invoke the Agreement and
make use of MBTC's hiring hall (i.e., insofar as FWEC never tendered
performance), it cannot establish LIUNA even breached, much less
materially breached, the Agreement by not having a non-
discriminatory hiring hall available for its use.
The arbitrator may also deem it possible that, had FWEC
requested referrals from MBTC's hiring hall, the hall would have
ceased its illicit ways and changed its procedures to bring the
local into compliance with the Agreement and the law. That is,
LIUNA's illegal operation of a hiring hall with respect to other
employers would not necessarily mean it would run the hall the same
way with FWEC and hence excuse FWEC's non-compliance with the
Agreement. Alternatively, the arbitrator could perhaps construe the
Agreement to have forbidden FWEC from repudiating the entire
Agreement until it had provided LIUNA with a reasonable opportunity
to cure by bringing its hiring hall into compliance with the law and
the terms of the Agreement.0
All this is not to imply LIUNA is entitled to damages, but
only to show that an arbitrator might award LIUNA damages. It is
not our place to resolve or even to speculate on the solution to the
questions we have posed in the preceding paragraph or to others
which we have not raised, because they are matters of interpretation
of the parties' pre-hire agreement, and as such are matters the
0
Although the district court charged LIUNA with constructive knowl-
edge of the illegality of the local hiring hall's procedures because
it had placed the local in trusteeship, there is no evidence in the
record that LIUNA officials actually knew that the hall was being
run illegally. In fact, the evidence indicates that no party ever
complained that the hiring hall was discriminating against non-union
members. Perhaps, given the stakes, LIUNA would have promptly
remedied the deficiency had someone brought it to LIUNA's attention.
55
parties entrusted to the sound judgment of a labor arbitrator. A
court cannot refuse to order arbitration based on its perception of
the frivolousness of the claim or the futility of doing so. See,
e.g., A T & T Technologies, Inc. v. Communications Workers, 475 U.S.
643, 649-50, 106 S. Ct. 1415, 1419 (1986) ("Whether `arguable' or
not, indeed even if it appears to the court to be frivolous, the
union's claim that the employer has violated the collective
bargaining agreement is to be decided, not by the court asked to
order arbitration, but as the parties have agreed, by the
arbitrator."); Beck v. Reliance Steel Prods. Co., 860 F.2d 576, 579
(3d Cir. 1988).
Moreover, as the Supreme Court has explained, the arbitra-
tor's informed judgment is "especially [helpful in reaching a fair
solution to a problem] when it comes to formulating remedies."
United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 41, 108
S. Ct. 364, 372 (1987) (emphasis and internal quotations omitted).
In light of these considerations, we conclude that the district
court's finding that LIUNA operated an illegal hiring hall provides
no reason to deny LIUNA's prayer for relief, compelled arbitration.
D. What Should Be Arbitrated
We also conclude that on remand the district court should
compel both FWEC and FWC to submit to arbitration. FWEC should
arbitrate the dispute because it is a signatory to the Agreement.
And as FWEC's admitted alter ego, FWC should also be ordered to
submit to arbitration. As this Court's opinion in the parties'
prior appeal made abundantly clear, the defendants' stipulation that
56
FWC and FWEC were alter egos0 was critical to the determination of
the arbitrability of LIUNA's claim against FWC, since unless the
defendants were alter egos the district court could not compel FWC
to arbitration under the Agreement. See Laborers' Int'l Union, 868
F.2d at 576-77 ("The district court erred by letting an arbitrator
determine whether FWC was an alter ego of FWEC and hence a party to
the National Agreement. That question is for the district court,
not an arbitrator."). Accordingly, that concession will now be
enforced.
The validity of the Agreement and the expansiveness of its
arbitration clause having already been established, once the
defendants made this concession the district court's role in the
grievance should have been over. It should not have entertained the
case beyond establishing those facts necessary to determine that the
defendants were duty-bound to arbitrate LIUNA's grievance.
Accordingly, its conclusion that the defendants breached the
Agreement exceeded its authority -- the broad arbitration clause
reserved for an arbitrator the power to answer that question.0
0
The colloquy at trial was as follows:
THE COURT: It is my understanding . . . that it is the
defendants' position today that they are going to drop the
alter ego issue before this Court. Is that correct?
MR. APRUZZESE: We do not choose to contest it, your
Honor.
THE COURT: I assume there's no objection. . . .
MR. GREEN: . . . The plaintiff has no objection to that
amendment (sic).
Tr. at 6 (Jan. 22, 1991).
0
We have assumed throughout this opinion without having expressly
decided that the court, not the arbitrator, is the proper body to
decide the date of repudiation insofar as it impacts the extent of
the parties' duty to arbitrate. Because the parties have not
briefed the question, and seem to have accepted that as proper, both
57
V. CONCLUSION
Because the Board's ruling in Deklewa applies
retrospectively to the parties, FWEC never successfully repudiated
the Agreement as to any location prior to its total termination of
that agreement in July 1986. The Agreement contains a broad,
inclusive arbitration clause, one whose reach extends to whether the
Agreement governs operations at a specific construction site or not.
Therefore, FWEC must arbitrate the dispute over application of the
Agreement to the MOEPSI site with LIUNA according to the procedure
specified in Article XV thereof. Since FWC is FWEC's alter ego, it
too must comply with Article XV of the Agreement and proceed to
arbitration alongside its subsidiary.
Accordingly, we will reverse the district court's June 22,
1992 order insofar as it concludes that Deklewa does not apply
retrospectively to this case, that our earlier mandate vacated the
arbitrator's two factual findings, and that the defendants breached
the Agreement. We will remand with instructions that the court
modify its June 22, 1992 Order, as revised by the orders of March 11
and 31, 1993, to direct the parties to submit to arbitration the
issues of breach and the amount of damages allegedly sustained by
LIUNA, its local, and its membership0 on account of FWEC's alleged
breach of the pre-hire agreement at the MOEPSI site up to the date
of FWEC's effective termination of the Agreement, July 15, 1986.
parties have waived the issue, and our treatment of that issue does
not imply that a court is always the proper forum to address it.
0
We intimate no view whether LIUNA may pursue or recover damages on
behalf of its local affiliate and/or membership under the facts of
this case.
58