Local Union 7107 v. Clinchfield Coal Co ( 1997 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
LOCAL UNION 7107, UNITED MINE
WORKERS OF AMERICA, DISTRICT 28,
Plaintiff-Appellant,
No. 96-1731
v.
CLINCHFIELD COAL COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Virginia, at Big Stone Gap.
Samuel G. Wilson, Chief District Judge.
(CA-94-274-B)
Argued: June 3, 1997
Decided: September 11, 1997
Before HALL and MICHAEL, Circuit Judges, and TILLEY,
United States District Judge for the
Middle District of North Carolina, sitting by designation.
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Affirmed by published opinion. Judge Hall wrote the opinion, in
which Judge Michael and Judge Tilley joined.
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COUNSEL
ARGUED: Susan Debra Oglebay, Pound, Virginia, for Appellant.
Mark Evan Heath, SMITH, HEENAN & ALTHEN, Charleston, West
Virginia, for Appellee. ON BRIEF: Forrest H. Roles, SMITH, HEE-
NAN & ALTHEN, Charleston, West Virginia, for Appellee.
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OPINION
HALL, Circuit Judge:
United Mine Workers Local 7107 (the union) appeals a summary
judgment entered in favor of defendant Clinchfield Coal Company
(Clinchfield) in the union's suit challenging the closing of a mine
without the 60-day notice period generally required by the Worker
Adjustment and Retraining Notification (WARN) Act, 29 U.S.C.
§§ 2101-2109. We affirm.
I.
Clinchfield, a subsidiary of The Pittston Company, operated the
Splashdam mine in Dickenson County, Virginia. All of the coal
mined at Splashdam was used in a metallurgical blend called "Mc-
Clure B." The sole customer for coal mined at Splashdam was
Dofasco, Inc., a steelmaker headquartered in Hamilton, Ontario.
Dofasco had been a Pittston/Clinchfield customer for thirty years.
Contracts for the sale of McClure B coal to Dofasco were negoti-
ated annually. Clinchfield's side of the bargaining was handled by
Pittston Coal Sales Corporation (Pittston Coal Sales), an affiliate that
specialized in coal marketing. On January 26, 1994, negotiations
broke down when Dofasco proposed a price per ton below that at
which Clinchfield felt it could continue to operate Splashdam mine.
On January 28, 1994, Clinchfield gave notice to the miners that the
mine would close the very next day. We will describe the course of
negotiations in more detail below.
The union brought this suit under the WARN Act on behalf of the
displaced miners. See 29 U.S.C. § 2104(a)(5). After discovery,
Clinchfield moved for summary judgment. It contended that the
undisputed facts showed that the closing was due to business circum-
stances not reasonably foreseeable at the time notice would have been
required, i.e. November 29, 1993. The district court agreed, and held
further that, as required by the statute, Clinchfield had given as much
notice as was practicable.
The union appeals.
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II.
We review an order granting summary judgment de novo. Disputed
issues of fact must be resolved in favor of the non-moving party, and
reasonable inferences should be drawn in its favor as well. Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-588 (1986).
On the other hand, to avoid summary judgment, the non-moving
party's evidence must be of sufficient quantity and quality as to estab-
lish a genuine issue of material fact for trial. Anderson v. Liberty
Lobby, 477 U.S. 242, 252 (1986). Fanciful inferences and bald specu-
lations of the sort no rational trier of fact would draw or engage in
at trial need not be drawn or engaged in at summary judgment. See
Sylvia Development Corp. v. Calvert County, 48 F.3d 810, 817-818
(4th Cir. 1995).
The WARN Act ordinarily requires sixty days' advance notice of
plant closings or mass layoffs. 29 U.S.C. § 2102(a). It contains sev-
eral exceptions, however, including one for closings"caused by busi-
ness circumstances that were not reasonably foreseeable as of the time
that notice would have been required." § 2102(b)(2)(A). An employer
relying on this exception must nevertheless give as much notice as is
practicable and briefly explain "the basis for reducing the notification
period." § 2102(b)(3). Because the WARN Act is remedial legisla-
tion, its exceptions are construed narrowly. Carpenters District Coun-
cil of New Orleans v. Dillard Department Stores, Inc., 15 F.3d 1275,
1282 (5th Cir. 1994), cert. denied, 513 U.S. 1126 (1995). Moreover,
an employer relying on an exception bears the burden of persuasion.
20 C.F.R. § 639.9; International Ass'n of Machinists and Aerospace
Workers v. General Dynamics Corp., 821 F.Supp. 1306, 1311
(E.D.Mo. 1993).
The Department of Labor has promulgated regulations interpreting
the "not reasonably foreseeable" language. Circumstances are not rea-
sonably foreseeable if they are "caused by some sudden, dramatic,
and unexpected action or condition outside the employer's control."
20 C.F.R. § 639.9(b)(1). The employer must exercise "commercially
reasonable business judgment" in predicting the demands of its mar-
ket, though it need not "accurately predict general economic condi-
tions that also may affect demand for its products or services."
§ 639.9(b)(2). An example of an unforeseeable business circumstance
3
is a "principal client's sudden and unexpected termination of a major
contract." § 639.9(b)(1). When confronted with an assertion that the
exception applies, a reviewing court must be careful to avoid analysis
by hindsight; the trail of harbingers of an unforeseen event always
looks brighter in retrospect. See Loehrer v. McDonnell Douglas
Corp., 98 F.3d 1056, 1061 (8th Cir. 1996) ("The Act and its regula-
tions necessarily recognize that even the most conscientious employ-
ers are not perfect, and they thus allow needed flexibility for
predictions about ultimate consequences that, though objectively rea-
sonable, proved wrong."); Chestnut v. Stone Forest Industries, Inc.,
817 F.Supp. 932 (N.D.Fla. 1993) (employer's market predictions
need not be accurate so long as they are reasonable when made).
In sum, the inquiry in this case is whether, in Clinchfield's "com-
mercially reasonable business judgment," its failure to obtain an
acceptable contract with Dofasco was "sudden and expected" enough
to entitle it to give but one day of notice to the miners. We now turn
to the events leading up to that failure.
III.
Every year during their thirty-year business relationship, Dofasco
and Clinchfield would begin negotiations in the fall for the upcoming
year's contract. In 1993, Dofasco had purchased 435,000 tons of
McClure B coal from Clinchfield, with an option for 58,000 more
tons, at a price of $37.05 per ton.
On September 30, 1993, Dofasco told Pittston Coal Sales that it
planned to buy about as much coal in 1994 as in 1993. However,
Dofasco stated that it had concerns about the McClure B's coke
strength after reaction (CSR), a measure of the coal's usefulness for
steelmaking.1 At this point, Pittston Coal Sales' experienced negotia-
tors considered Dofasco's concerns to be mere posturing -- part of
the jockeying for position that accompanies any contract negotiation.
Nevertheless, they had George Denton, a technical expert and vice-
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1 CSR was the predominant, though not the only, quality problem
Dofasco had with McClure B coal. For example, Dofasco also com-
plained about McClure B's excessive variability.
4
president of another Pittston subsidiary,2 test McClure B's CSR. Den-
ton's tests showed that the 1993 coal was of as high a quality as that
of earlier years.
On December 15, 1993, negotiations resumed in Ontario. Dofasco
again brought up CSR. Moreover, it informed Clinchfield that it
would buy less coal in 1994. The parties had not yet discussed price,
but, based on the general coal market, Clinchfield expected the price
to be about a dollar per ton less than in 1993. 3
Dofasco's reiteration of its CSR concerns apparently began to trou-
ble Pittston Coal Sales. On January 14, 1994, its senior vice-president
and chief negotiator, Joseph McEnaney, wrote a memorandum to
management summarizing Pittston's 1994 metallurgical coal busi-
ness. Here is what he had to say about Dofasco (emphasis added):
Our current and future position with Dofasco is in serious
jeopardy. We have already been advised that the maximum
tonnage we can hope for in 1994 will be on the order of
200,000 [tons] of the McClure B coal, down from last year's
level of 435,000 tons. The reason for the reduction is the
inability of our coal to produce satisfactory CSR results in
their coke blends. This issue has been brought to our atten-
tion regularly over the last six months by Dofasco and
absent our ability to resolve the problem, they have opted to
go with another supplier. The tonnage which Dofasco has
left open for us is not secure as yet. Dofasco still awaits our
plan to improve that quality, which can only be achieved by
reconfiguring the raw coal blend, and receive assurances
that Pittston is at least expending its best efforts in this area.
In addition to quality improvement, we will also be obliged
to take a price reduction as we remain the highest priced
coal in their blend.
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2 Pittston Coal Marketing and Development Company.
3 The notes taken by a Clinchfield negotiator at the December 15 meet-
ing reveal that Dofasco considered Clinchfield's"current price" to be
"too high in today's market" and that Clinchfield "[n]eed[ed] to do some-
thing on CSR to establish value."
5
Clinchfield contends that, at this point, its negotiators still fully
expected to get a contract with Dofasco for 200,000 tons at about $36
per ton, and that it could have continued to operate the Splashdam
mine for at least four months at that tonnage and price. It presented
affidavits to that effect, including one from McEnaney himself. None-
theless, on January 26, Dofasco made a take-it-or-leave-it offer to
purchase 200,000 tons at $32.50 per ton, about ten percent less per
ton than Clinchfield expected. It took Clinchfield two days to recover
from its "shock" at this offer, to analyze its economic consequences,
and to conclude that it had no choice but to decline it and close the
Splashdam mine. It gave a one-day WARN notice on January 28.
We agree with the district court that there is no genuine issue of
material fact over whether notice could have been given sixty days
before the closing (November 29, 1993). There is no evidence that
before December Clinchfield had any real worries about a renewal of
the contract on acceptable terms. Vis-a-vis the 60-day period, it is
clear that the loss of the Dofasco contract was not reasonably foresee-
able.
IV.
Much less clear, however, is whether a reasonable trier of fact
could find that the contract loss was no longer"sudden and unex-
pected" as of some time in December or January. Indeed, the union
asserts that McEnaney's January 14 memorandum itself creates a tri-
able issue of fact.
Clinchfield asserts that price -- and price alone-- caused its deal
with Dofasco to fall through. This argument points in the right direc-
tion but is a tad too pat. Dofasco had emphasized its view that
McClure B coal was not of optimal quality for its purposes, and that
view inevitably influenced the amount it was willing to pay for the
coal. The quality of goods affects demand for them; the day-old
doughnuts are half-price for a reason. In fact, on January 24, 1994,
Dave Mothersill of Dofasco told McEnaney that McClure B was only
"worth" $32.50 a ton.4 This statement clearly reveals that quality, in
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4 Mothersill did not then offer to buy at that or any price.
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addition to the general supply of and demand for coal as a commod-
ity, affected the price Dofasco ultimately offered.
On the other hand, Dofasco did ultimately offer to buy a substantial
amount of McClure B coal. The union does not contend that Dofas-
co's offer was insincere or was made with the intention that it be
rejected. Indeed, though the price per ton offered"shocked" Clinch-
field, it was not self-evident that Clinchfield could not accept Dofas-
co's terms. Only after two days of economic analysis did Clinchfield
conclude that accepting the offer was not in its best interests. In the
end, then, there was not a sudden and unexpected termination by
Dofasco. Instead, there was an economic decision by Clinchfield to
stop selling McClure B coal to Dofasco.
This decision could not have been made at any time before it was
made. While a trier of fact could perhaps find that Clinchfield should
have expected a price somewhat below its $36 market-based estimate,
the parties had simply not addressed price in any specific way before
the last week of January 1994. That both sides negotiated for so long
without settling on price is mute -- but powerful-- testimony to their
expectation that price would not make or break the deal.
In this regard, we cannot ignore the longstanding business relation-
ship between Clinchfield and Dofasco. For thirty years they had met
at the bargaining table, and for thirty years they had come up with a
deal. This fact alone cannot be dispositive. On the other hand, a
lengthy relationship builds a sense of security; the more storms
weathered, the fewer feared.5 The airing and smoothing over of diffi-
culties, real or postured, is central to the negotiator's art, and detect-
ing a deal-breaking grievance among deal-molding gripes is a skill
acquired only through experience. Clinchfield's negotiators had that
experience, both in general and with Dofasco. They expected an offer
to buy coal, and they got one. They could not have reasonably fore-
seen that Clinchfield would be unable to accept it.
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5 See Jones v. Kayser-Roth Hosiery, Inc., 748 F.Supp. 1276 (E.D.Tenn.
1990) (In light of 30-year business relationship with retailer, manufactur-
er's belief that retailer's complaints could be satisfactorily addressed was
commercially reasonable).
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The judgment of the district court is affirmed.
AFFIRMED
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