Children's Rehabilitation Center, Inc., a Corporation v. The Service Employees International Union, Local No. 227, Afl-Cio

OPINION OF THE COURT

HASTIE, Circuit Judge.

On motion, the district court dismissed, for failure to state a claim upon which relief could be granted, an employer’s action for money damages for breach of contract against a union that represented its employees. The action was brought under Section 301 of the Labor-Management Relations Act of 1947. 29 U.S.C. § 185.

The complaint alleged that a strike, which had begun on December 4, 1972 and was still in progress, had been called by the union in violation of a no strike provision in the parties’ labor contract. For this breach damages were claimed in the amount of $550 per day, beginning December 4, 1972. The complaint also alleged that “on Friday, December 15, 1972, the work stoppage not having terminated, the Plaintiff notified the Defendant that it considers the Agreement to be terminated in its entirety”.

It was the theory of the district court that the employer’s admitted December 15 election to “terminate” the labor contract “in its entirety” deprived it of the remedy it now seeks.

In cases arising under Section 301 of the Labor-Management Relations Act the courts of the United States are shaping a national common law of labor relations. In that process it has been established that a violation of a no strike provision of a comprehensive labor contract does not ipso facto relieve the employer of the complex of legal obligations that the contract has imposed upon it. Drake Bakeries, Inc. v. Local 50, American Bakery Workers, 1962, 370 U.S. 254, 82 S.Ct. 1346, 8 L.Ed.2d 474; Local Union No. 721, United Packinghouse, F. & A. Workers v. Needham Packing Co., 1964, 376 U.S. 247, 84 S.Ct. 773, 11 L.Ed.2d 680. However, the cited cases do not reach the question whether such a breach could empower the employer, by a clear pronouncement to the union, unilaterally to abrogate the entire labor contract. That remedy for material breach of a contract was available at common law “at the option of the injured party, and it should be, and in general is allowed . . . for any breach of contract of so material and substantial a nature as would constitute a defense of an action brought by the party in default for refusal to proceed with the contract”. 12 Williston, Contracts, 3d ed. 1970, 186.

The district court, properly cited Boeing Airplane Co. v. Aeronautical Industrial District Lodge 751, I. A. M., W.D.Wash.1950, 91 F.Supp. 596, aff’d., 9th Cir. 1951, 188 F.2d 356, cert. denied 342 U.S. 821, 72 S.Ct. 39, 96 L.Ed. 621, as a precedent for the recognition of such power where a labor contract has been breached by a prohibited strike. Accord, United Electrical R. & M. Workers v. N. L. R. B., 1955, 96 U.S.App.D.C. 46, 223 F.2d 338. See also Local Joint Executive Board v. Nationwide Downtowner Motor Inns, Inc., W.D.Mo.1964, 229 F.Supp. 413, 416. Moreover, in the present case, the union has acquiesced in and now relies upon the termination of the labor contract. Therefore, the district court correctly stated in its dispositive order “that plaintiff cannot properly claim damages for continuing breach of labor contract . . . [after] December 15, 1972. . . .”

However, in dismissing the complaint the court denied relief for injury sustained before as well as after the December 15 contract termination, despite the claim for damages in the amount of $550 dollars per day, beginning December 4, 1972, and despite the fact that jurisdiction under Section 301 does not depend upon the amount in controversy.

It is arguable that the injured party’s abrogation of a breached labor contract should be effective only to free the parties of future obligations under their comprehensive long term bargain, and not to destroy any cause of action for pre-termination damages attributable to the breach. But we think that limitation should not be recognized in the evolving federal common law of labor relations.

A detailed labor contract promotes economic stability by defining terms and conditions of employment, usually for a term of several years. After most strikes, whether legal or illegal, that occur while a labor contract is in effect, work is resumed with a large part, if not all, of the labor contract intact. Certainly such continuity in the mutually agreed terms and conditions of employment is in the public interest and should be encouraged. On the other hand, fairness to an employer confronted by an illegal strike may dictate judicial recognition of contract abrogation or damages as alternative available remedies. But it is neither necessary nor desirable to encourage the termination of labor contracts by allowing both remedies. From this viewpoint, the loss of the right it otherwise would have to collect damages for a breach is not an unfair price for an employer to pay if it insists upon total and permanent relief from the obligations it accepted under a labor contract.

Accordingly, the judgment will be affirmed.