Leber, Alison v. Universal Music ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-4069
ALISON LEBER, et al.,
Plaintiffs-Appellants,
v.
UNIVERSAL MUSIC AND VIDEO DISTRIBUTION, INC., et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Southern District of Illinois.
No. 99-cv-4276-JPG—J. Phil Gilbert, Judge.
____________
ARGUED MAY 19, 2003—DECIDED JUNE 9, 2003
____________
Before EASTERBROOK, ROVNER, and EVANS, Circuit
Judges.
EASTERBROOK, Circuit Judge. Until four years ago,
Universal Music and Video Distribution operated facilities
in Pinckneyville, Illinois, that not only made compact
disks (CDs) but also handled returns of unsold or defective
products. Manufacturing and returns were separate de-
partments, though employees of both were represented
by the International Leather Goods, Plastics, Novelty
and Service Workers Union under a single collective bar-
gaining agreement. Late in 1998 Universal began to
negotiate with Panasonic Disc Services Corporation about
the possibility of expanding the plant to make digital
2 No. 02-4069
versatile discs (DVDs) as well as CDs. Panasonic was inter-
ested in the manufacturing facilities but not Universal’s
returns department. In May 1999 Universal and Panasonic
formed Matsushita Universal Media Services LLC (MUMS),
a Delaware limited liability company, which acquired
Universal’s CD-manufacturing assets but not its returns
assets. Panasonic contributed the cash needed to expand
the facility into DVD production. MUMS hired most of the
employees who had worked in the CD-making facility; it
recognized the Union as their representative and signed a
new collective bargaining agreement containing the same
economic terms as before, but some changes in work rules.
Universal notified the Union that the returns facility
(which it retained) would be closed, and it honored all
promises that the collective bargaining agreement made
to laid off employees. Some of the returns-department
staff found work at MUMS, which agreed to give them a
preference in hiring, for it needed extra employees to
expand into DVDs. Some of the returns employees were not
hired under this preference, however. (The record does
not disclose why.) When MUMS refused to give laid off
returns-department workers a right to displace persons
who had less seniority at Universal, they sued MUMS,
Universal, Panasonic, and the Union for breach of the
collective bargaining agreement. (Since this suit began,
affiliations have changed. Panasonic Disc Services has
been acquired by Thompson Multimedia Inc. and renamed
Technicolor Disc Services Corporation. MUMS now is TUMS.
The Union, which used to be affiliated with the Service
Employees International Union, AFL-CIO, now is Local 2000
of the SEIU, and the body representing MUMS’ employees
is Chapter 352 of Local 2000. We use the old names for
convenience.)
Plaintiffs are not parties to the collective bargaining
agreement, and the Union does not believe either that
Universal has failed to keep its promises or that MUMS
No. 02-4069 3
acquired any of Universal’s obligations under the old
agreement. To bypass the Union and sue in their own
right, the employees first must establish that the Union
violated its duty of fair representation. See Air Line Pilots
Ass’n v. O’Neill, 499 U.S. 65 (1991). The district court
found that the Union had fulfilled all duties and on that
account granted summary judgment for the defendants.
225 F. Supp. 2d 928 (S.D. Ill. 2002). The court added, for
good measure, that (a) neither Panasonic nor MUMS ac-
quired any of Universal’s obligations, so that MUMS’ fail-
ure to give the plaintiffs transfer or bumping rights could
not violate any of plaintiffs’ entitlements under that
collective bargaining agreement, and (b) Universal had
not been served with process and thus is not a party to
begin with.
Service should have been the lead item in plaintiffs’
appellate brief, for their rights derive from an agreement
between Universal and the Union, and if Universal is not
a party to the case then their claim has little prospect of
success. Yet plaintiffs’ opening brief ignores the problem.
Plaintiffs do not get around to it until their reply brief,
which is too late. Any contest to this ingredient of the
district court’s resolution has been forfeited. What plain-
tiffs contend, in an effort to sidestep the consequences of
their failure to make Universal a party, is that Panasonic
and Universal formed a joint venture or partnership in the
months between the outset of negotiations and the forma-
tion of MUMS. Suppose that this is so—though we very
much doubt it, for negotiations differ from agreements.
See Lerro v. Quaker Oats Co., 84 F.3d 239 (7th Cir. 1996).
Neither Panasonic nor Universal purported to act in
MUMS’ name before its technical formation. It was MUMS
and Universal, not “the joint venture,” that agreed that
Universal would retain the returns department. And it
was MUMS, not “the joint venture,” that declined to hire the
plaintiffs or give them seniority over other workers. Once
4 No. 02-4069
MUMS came into being, Universal became its investor.
Plaintiffs do not contend that MUMS, Panasonic, and
Universal have failed to observe the formalities of corporate
(or LLC) life, so MUMS cannot be held liable on a contract
to which only Universal is a party, any more than Universal
may be held liable on a contract to which only MUMS
and the Union are parties. See 6 Del. Code §18-303; Abbott
Laboratories v. CVS Pharmacy, Inc., 290 F.3d 854, 858
(7th Cir. 2002); Secon Service System, Inc. v. St. Joseph
Bank & Trust Co., 855 F.2d 406, 416-17 (7th Cir. 1988).
Compare NLRB v. International Measurement & Control
Co., 978 F.2d 334, 339-41 (7th Cir. 1992), with Esmark, Inc.
v. NLRB, 887 F.2d 739, 749-52 (7th Cir. 1989). See also Fall
River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 41-
43 (1987) (successor employer not bound by predecessor’s
collective bargaining agreement unless this is an essential
remedy for unfair labor practices such as refusing to hire
union adherents on equal terms); NLRB v. Burns Interna-
tional Security Services, Inc., 406 U.S. 272, 285-87 (1972)
(same). MUMS hired union adherents who applied and
immediately recognized and bargained with the Union; it is
therefore bound by the new terms, not its predecessor’s.
Contrast U.S. Marine Corp. v. NLRB, 944 F.2d 1305 (7th
Cir. 1991) (en banc). There is thus no way in which the
Union, Panasonic, and MUMS, the only defendants that
became parties to the case, could be held liable for any
wrongs committed by Universal. (After all, the Union did
not agree to employ or pay the plaintiffs; any obliga-
tion along those lines rests on Universal itself.) Even if
Universal should have paid MUMS to assume the old
collective bargaining agreement or hire the returns-depart-
ment employees, the fact remains that it did not—and,
as a non-party, cannot be ordered to do so now. This
makes it unnecessary to determine whether the Union
may have violated its duty of fair representation.
Plaintiffs seem to think that technical rules of law just
do not matter, because (in plaintiffs’ view) MUMS hood-
No. 02-4069 5
winked the State of Illinois. According to plaintiffs, MUMS
got a tax break for augmenting the number of local jobs
but concealed from Illinois the fact that the net increase
(new DVD workers less laid-off returns workers) would
be small. It is hard to give the flavor of this argument
without using plaintiffs’ words, so we quote the lead
paragraph in their brief:
The District Court erred when it concluded there
is no evidence that MUMS creation was improp-
er motive or by any unlawful purpose. District
Court erred in acknowledging the fact that EDGE
[the state’s Economic Development for a Growing
Economy program], a campaign promise of former
Illinois Governor George Ryan worked, but did
not consider the evidence of improper economic
motive or the unlawful purpose of Universal and
Panasonic in receiving tax benefits by replacing 184
returns employees who were qualified, with replace-
ment workers, which MUMS claimed as “new employ-
ees” under 35 ILCS 10/5-5 for tax benefits under
EDGE application Illinois Compiled Statutes, Chap-
ter 35, Revenue, Income Taxes, Act 10 Economic
Development for a Growing Economy Tax Credit
Act submitted by MUMS. The Court erred in failing
to consider the timing of Senate Bill 40, to consider
the effect of former Illinois Governor Ryan’s cam-
paign promise to help fund the MUMS’s project
with state funds prior to MUMS formation and to
consider the unique 60% Panasonic 40% Universal
composition of MUMS under provision of EDGE.
The brief contains more in the same vein, but plaintiffs
never explain how “the timing of Senate Bill 40” and the
like have any bearing on their legal entitlements—or
why, indeed, they are entitled to litigate MUMS’ tax liability.
See Allen v. Wright, 468 U.S. 737 (1984). How much MUMS
pays in state taxes (or receives in subsidies) is between
6 No. 02-4069
MUMS and the State of Illinois. The meaning and effect of
collective bargaining agreements are matters of federal law.
See Textile Workers v. Lincoln Mills, 353 U.S. 448 (1957).
Nothing a state legislature does with respect to taxes
or subsidies enlarges or diminishes any rights under a
collective bargaining agreement. The district court prop-
erly dismissed this case.
AFFIRMED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-9-03