United Paperworkers International Union v. Champion International Corp.

___________
No. 95-1025
No. 95-1252
___________
United Paperworkers *
International Union, AFL-CIO, *
Local 274; Michael J. Fielder, *
*
Plaintiffs - Appellees/ *
Cross-Appellants, *
* Appeals from the United States
v. * District Court for the
* District of Minnesota.
Champion International *
Corporation, *
*
Defendant - Appellant/ *
Cross-Appellee. *
___________
Submitted: October 18, 1995
Filed: April 19, 1996
___________
Before McMILLIAN, Circuit Judge, WHITE,* Associate Justice (Ret.), and
LOKEN, Circuit Judge.
___________
LOKEN, Circuit Judge.
Champion International Corporation ("Champion") fired employee
Michael J. Fiedler following an incident of sabotage at Champion's pulp and
paper mill in Sartell, Minnesota. Two months earlier, Champion had
terminated the collective bargaining agreement ("CBA") governing the
Sartell work force. When fired, Fiedler was president of Local 274 of the
United Paperworkers International Union ("Local 274" or "the Union").
Champion denied his grievance.
*
The HONORABLE BYRON R. WHITE, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
With the CBA's arbitration provision abrogated, Fiedler and the Union then
commenced this action under § 301 of the Labor Management Relations Act,
29 U.S.C. § 185, claiming no good cause for Fiedler's termination. A jury
agreed and awarded Fiedler $632,000 in front and back pay. The district
court denied Champion's post-trial motions, and Champion appeals, raising
a difficult § 301 issue. Fiedler and the Union cross-appeal the denial of
reinstatement, punitive damages, and attorneys' fees. Concluding that
Champion was prejudiced by an erroneous instruction regarding interim labor
agreements, we remand for a new trial.
I. Factual Background.
This case involves two distinct episodes: the unsuccessful
collective bargaining efforts of Champion and the Union in November and
December 1989, and the events leading up to Fiedler's termination in
February and March 1990. We will summarize the two episodes separately,
seeking of course to view all disputed facts in the light most favorable
to the jury's verdict.
A. The CBA Expires. In March 1989, with a three-year CBA about to
expire, the Union notified Champion that it wished to negotiate a new CBA.
The existing CBA expired on June 1, with negotiations in progress. The
expired agreement remained in effect under a provision that permitted
either party to terminate upon ten days notice. Dissatisfied with the on-
going negotiations, Champion gave notice it would terminate the CBA on
December 1.
Just prior to the December 1 termination date, Champion notified the
Union and the Sartell employees that it would unilaterally modify certain
terms and conditions of the expired CBA. Of greatest relevance here,
Champion abrogated its prior agreement to submit unresolved grievances to
binding arbitration. Local 274's President (Fiedler's predecessor)
expressed great concern over these unsettling developments. Champion's
Human
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Resources Manager, Ken Ebert, responded, "Just calm down, you still have
a contract, it is just these terms we are pulling out."
Shortly thereafter, Ebert complained to the Union's International
Representative, Marv Finendale, that Local 274's leaders were stirring up
trouble with Sartell employees, telling them that there was no contract in
place. Ebert explained that Champion proposed to post a notice to
employees stating that most of the terms of the terminated CBA would remain
in effect. Finendale replied, "I could live with that."
Champion posted this notice on December 1. After listing three
changes in working conditions, it stated, "All other provisions, including
wages and benefits, of the expired Agreement remain intact until further
notice." On December 10, again with prior notice to the Union and
employees, Champion unilaterally implemented six additional changes to the
terms and conditions of the expired CBA. Champion described these changes
as "encompassed within the Company's bargaining proposals." None of
Champion's unilateral changes affected two sections of the expired CBA
that, Fiedler claims, preclude Champion from terminating a member of the
bargaining unit without good cause.
Champion and the Union eventually negotiated a new CBA. But that
agreement is irrelevant to this lawsuit because it was not effective until
November 1990, long after Fiedler's termination.
B. Fiedler's Termination. Fiedler worked at the Sartell mill as an
assistant power plant operator. Early in the morning of February 15, 1990,
an alarm sounded indicating that four disks housed in computers located in
the mill's control room had failed. Champion's investigation suggested
that the disks had been deliberately erased with a hand-held magnet during
a two-minute period when Fiedler was the only employee working in the
control room. Fiedler denied tampering with the disks or observing anyone
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else do so. Champion fired Fiedler on March 27, 1990, stating that Fiedler
was "the person who was responsible for such damage."
Lacking Champion's agreement to submit the denial of Fiedler's
grievance to arbitration, Fiedler and the Union sued in Minnesota state
court, alleging wrongful discharge (plus other claims no longer at issue).
Champion removed the case to federal court. During the nine-day trial,
Union witnesses testified that they considered Champion's posted notices
to constitute an interim "implemented contract." On the discharge issue,
Fiedler presented evidence that many persons had access to the control
room, that the failed disks did not interrupt mill operations, that
Champion in terminating Fiedler ignored evidence that another employee had
been responsible for an earlier disk erasure, and that most members of the
mill's management did not believe Fiedler erased the disks. The jury found
that Champion terminated Fiedler without the good cause required under its
interim agreement with the Union. It awarded him $136,980 in back pay and
$495,197 in front pay. The district court granted the Union's motion for
prejudgment interest, denied all other post-verdict motions, and this
appeal followed.
II. The Legal Setting.
Section 8(a)(5) of the National Labor Relations Act, 29 U.S.C.
§ 158(a)(5), requires an employer to bargain in good faith with a union
representing its employees. After a CBA has expired, § 8(a)(5) requires
that the employer maintain the status quo, that is, the terms of the
expired contract, during negotiations for a new agreement. However, these
"are no longer agreed-upon terms; they are terms imposed by law, at least
so far as there is no unilateral right to change them." Litton Fin.
Printing Div. v. NLRB, 501 U.S. 190, 206 (1991).
Moreover, when the parties have bargained to an impasse, the employer
may unilaterally change terms and conditions of employ, so
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long as these changes are consistent with offers that the union has
rejected. See NLRB v. Katz, 369 U.S. 736, 743-45 (1962). The federal
labor laws protect the use of such economic pressures by both sides to the
collective bargaining process. See NLRB v. Insurance Agents' Int'l Union,
361 U.S. 477, 489 (1960) (NLRB may not outlaw union's post-expiration "Work
Without a Contract" program of slow-downs and sit-ins). Of course, the
purpose of this economic hurly-burly is to bring the obstinate negotiators
back to the bargaining table, somewhat the worse for wear, but without
violence or the need for a government-imposed settlement.
Section 301 confers federal jurisdiction over claims "for violation
of contracts between an employer and a labor organization representing
employees." If there was no such contract between Champion and the Union,
then Fiedler's § 301 wrongful discharge claim must be dismissed.1 After
a CBA expires, it cannot provide § 301 jurisdiction for post-expiration
claims, and any state law claims that the terms of the expired CBA form an
"implied contract" are preempted. See Derrico v. Sheehan Emergency Hosp.,
844 F.2d 22, 25-29 (2d Cir. 1988), cited approvingly in Litton, 501 U.S.
at 206; Teamsters Local Union 238 v. C.R.S.T., Inc., 795 F.2d 1400, 1404
(8th Cir.) (en banc), cert. denied, 479 U.S. 1007 (1986).
Champion's unilateral implementation of employment conditions after
bargaining to an impasse does not, without more, provide a contractual
basis for § 301 jurisdiction. See UAW, Local 33 v. R. E. Dietz Co., 996
F.2d 592, 595 (2d Cir. 1993); Chicago Typographical Union No. 16 v. Chicago
Sun-Times, Inc., 935 F.2d 1501, 1510 (7th Cir. 1991) ("An implemented final
offer is not contractual; it is unilateral"); UMW v. Big Horn Coal Co., 916
F.2d 1499 (10th Cir. 1990), cert. denied, 502 U.S. 1095 (1992).
1
Fiedler did not assert a non-§ 301 claim for breach of an
individual employment contract. See Caterpillar Inc. v. Williams,
482 U.S. 386, 393-97 (1987).
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Champion's compliance with the terms it has implemented may be enforced,
but not under § 301, and not under state law, which is preempted. See
Local 174, Teamsters v. Lucas Flour Co., 369 U.S. 95, 102-04 (1962).
Rather, non-compliance may be remedied only by the NLRB, as happened in
Taft Broadcasting Co. v. NLRB, 441 F.2d 1382 (8th Cir. 1971). See Litton,
501 U.S. at 201.
However, § 301 jurisdiction is not limited to formal CBAs. That
statute provides a federal forum for any "agreement between employers and
labor organizations significant to the maintenance of labor peace between
them." Retail Clerks Int'l Assoc., Local Unions Nos. 128 & 633 v. Lion Dry
Goods, Inc., 369 U.S. 17, 28 (1962). When a CBA has been terminated, the
parties have bargained to an impasse, and the employer has unilaterally
implemented all or part of its final offer, § 301 jurisdiction will lie to
enforce any "interim" agreement that the employer and union may reach to
preserve labor peace until a new CBA can be negotiated. See United
Paperworkers Int'l Union v. International Paper Co., 920 F.2d 852, 859
(11th Cir. 1991); Big Horn Coal, 916 F.2d at 1502; United Paperworkers
Int'l Union v. Wells Badger Indus., Inc., 835 F.2d 701, 704-05 (7th Cir.
1987). An employer -- even one like Champion that has declared an impasse
and unilaterally implemented new terms and conditions -- may always offer
the union an interim agreement on those terms (or others), for example, to
head off an impending strike. And the union, or employees authorized to
speak for the union, may accept that offer, expressly or by conduct. Thus,
a critical question in this case, one upon which § 301 jurisdiction
depends, is whether Fiedler and the Union proved that such an interim
agreement existed when Fiedler was terminated.
III. The Jury Instruction Error.
At the instructions conference, the district court heard extensive
argument on the interim agreement issue. The court noted that, in December
1989, Champion unilaterally imposed most of the
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terms and conditions from the expired CBA, including provisions allegedly
requiring good cause to terminate. Therefore, reasoned the court, Fiedler
and other Sartell employees who continued to work had relied upon these
terms and, if discharged in violation of them, should have a damage remedy
in addition to any unfair labor practice remedy available from the NLRB
To fit that remedial construct within the confines of its § 301
jurisdiction to enforce "contracts," the court borrowed a principle from
Minnesota employment law -- when an employer offers terms of employment,
and employees continue to work, the result is an implied employment
contract under state law, which the court considered sufficient to support
§ 301 jurisdiction and Fiedler's wrongful discharge claim in this case.
Cf. Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983). The
court implemented that conclusion with the following jury instructions, to
which Champion objected:
To reach a verdict you must determine whether or not the
parties had another agreement after the 1986 Collective
Bargaining Agreement was terminated . . . . Such an agreement
is not formed merely by an employer's unilateral implementation
of terms and conditions of employment. There must be something
more. . . . An interim agreement may be formed when the
employer makes a definite offer to maintain in effect certain
provisions of the terminated labor contract, and the employees
continue to work under the terms of the employer's offer.
(emphasis added). Champion argues that this instruction infringes the
employer's right under federal labor law to impose unilateral conditions
of employment after a bargaining impasse. We agree.
Once the parties have bargained to an impasse, federal law permits
them to apply relatively unfettered economic pressure. The union may call
a strike, or institute work slow-downs, as in Insurance Agents. The
employer may lock out its employees, or unilaterally implement terms and
conditions it has unsuccessfully proposed. It mischaracterizes this regime
to say that, when the employer imposes unilateral terms and conditions
after an impasse,
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and the employees continue to work, a § 301 contract has been formed.
Every employment relationship is essentially contractual, but this type of
post-impasse relationship is not a § 301 contract between employer and
union -- their impasse is the antithesis of a contract. See International
Union, UAW v. Atlas Tack Corp., 590 F.2d 384, 386 (1st Cir. 1979).
Moreover, to superimpose a fictional § 301 contract over the employer's
unilateral implementation of new terms and conditions, simply because the
employees responded by working instead of striking, dramatically lessens
the employer's leverage. That may or may not be wise as a matter of labor
policy, but changes in labor policy are for Congress to make.
Thus, we conclude that proof of an interim agreement requires not
only evidence of the employer's intent to make an offer, but also evidence
of the union's intent to accept that offer over and above the fact that
union members continued to work. Unilaterally implemented terms may form
the basis of an interim agreement. The employer may make such an offer,
for example, because the union has threatened economic reprisal. The union
may accept the proposal because it wishes to avoid a strike or lockout
while attempting to bargain out of the impasse. And because an interim
agreement is by definition informal, the union's acceptance need not be
formal or even express. See United Paperworkers, 920 F.2d at 857 (union
advised it would not strike without giving ten days notice). But the
evidence of offer and acceptance must relate to the union-employer
bargaining relationship to prove that a § 301 contract was formed. Thus,
the fact that the employer announced unilateral changes is not sufficient
evidence of an interim agreement offer. And the fact that the employees
continued to work is not sufficient evidence of union intent to accept an
offered interim agreement. See Big Horn Coal, 916 F.2d at 1502 (no interim
agreement when
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union members continued to work under imposed terms for three months and
then struck for seven months).2
For the foregoing reasons, we conclude that the jury was not properly
instructed on the requisites of a § 301 interim agreement between Champion
and the Union. Because this issue was critical to both the district
court's jurisdiction and the merits of Fiedler's claim, there must be a new
trial. See Walker v. AT & T Technologies, 995 F.2d 846, 849 (8th Cir.
1993).
IV. Other Issues.
A. Champion argues that we should order judgment as a matter of law
in its favor because there was insufficient evidence of an interim
agreement between Champion and the Union that would support Fiedler's § 301
claim for wrongful discharge. Though the case for an interim agreement is
perhaps thin, there is some evidence that Champion formalized its
unilateral implementation in an offer of an interim agreement to lessen
employee unrest and avoid a strike, and that the Union chose to accept that
offer rather than taking more hostile action. Bearing in mind the strict
standard of review for this issue, see Smith v. World Ins. Co., 38 F.3d
1456, 1460 (8th Cir. 1994), and recognizing that courts may legitimately
"stretch" to find interim agreements because such agreements further the
2
At oral argument, the Union relied heavily on the recent case
of Luden's Inc. v. Local Union No. 6, Bakery Workers' Int'l Union,
28 F.3d 347 (3d Cir. 1994). But we conclude that Luden's, and the
earlier case of International Bhd. of Boilermakers v. Transue &
Williams Corp., 879 F.2d 1388 (6th Cir. 1989), are distinguishable
because in those cases interim agreements were implied after a CBA
terminated but both parties continued to act consistently with all
of its terms and conditions. On the other hand, when one party
unilaterally changes or repudiates the terms of a terminated CBA,
as in this case, more affirmative evidence is required to prove
intent to enter into an enforceable § 301 interim agreement.
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federal policy of labor peace,3 we conclude that a properly-instructed jury
could have found a terminable-at-will interim agreement to keep in place
Champion's unilaterally implemented terms and conditions of employ.
B. We also reject Champion's two other arguments for judgment as a
matter of law -- that there was insufficient evidence of a good cause
contract provision, and that Champion had good cause to fire Fiedler. As
to the first, although Fiedler relies on CBA provisions that do not use the
term "good cause," the evidence strongly supports the Union's claim that
good cause was an essential term of the expired CBA, and therefore of any
interim agreement. As to the second, whether Champion had good cause was
hotly contested at trial, with powerful evidence on both sides. We will
not disturb the jury's resolution of that issue.
C. We likewise reject the Union's contention that the district court
erred by refusing to instruct the jury on punitive damages. We are
inclined to the view that punitive damages may not be awarded in a § 301
breach-of-contract case. Cf. Local 60, United Bhd. of Carpenters & Joiners
v. NLRB, 365 U.S. 651, 655 (1961) (NLRB powers are "remedial, not
punitive"). But in any event, we agree with the district court that
Champion's conduct was nowhere near so outrageous or extraordinary as to
warrant an instruction on punitive damages. As the court explained:
Although the jury has found that the defendant did not have
good cause to terminate Fiedler, it was clear from the evidence
that defendant Champion had what it believed to be a
justifiable reason for taking its actions.
3
Examples of this judicial predilection include Local 74,
Service Employees Int'l Union v. Ecclesiastical Maintenance Servs.,
Inc., 55 F.3d 105, 108-09 (2d Cir. 1995), and Wells Badger, 835
F.2d at 704-05. In our view, it can properly be taken into account
in reviewing a jury verdict that an interim agreement was formed.
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Cf. Butler v. Local Union 823, Int'l Bhd. of Teamsters, 514 F.2d 442, 454
(8th Cir.), cert. denied, 423 U.S. 924 (1975). For the same reason, we
conclude the district court did not abuse its discretion in denying the
Union's request for attorney's fees on account of Champion's alleged bad
faith. See Alyeska Pipeline Serv. Co. v. The Wilderness Soc'y, 421 U.S.
240, 258-59 (1975).
D. There are two remaining, interrelated issues -- the Union's
contention that the district court should have ordered Fiedler's
reinstatement, and Champion's claim that the court's alternative remedy of
$495,000 in front pay was excessive. They warrant more extensive comment
because of the need for a new trial.
The equitable remedy of reinstatement is left to the district court's
discretion. Tatum v. Frisco Transp. Co., 626 F.2d 55, 60 (8th Cir. 1980).
Here, the court found that the relationship between Fiedler and Champion
was acrimonious and that Champion had presented a legitimate and
substantial business justification for opposing reinstatement. Substantial
hostility, above that normally incident to litigation, is a sound basis for
denying reinstatement. See Brooks v. Woodline Motor Freight, Inc., 852
F.2d 1061, 1066 (8th Cir. 1988). Moreover, the Union failed to prove that
Fiedler was fired because of Union activities, so reinstatement was not
needed to avoid a chilling effect on other union members. We conclude that
the district court did not abuse its discretion in denying Fiedler's claim
for reinstatement. However, the passage of time may soften the most
acrimonious of relationships, and the discretion to reinstate must be
exercised on a specific trial record. Thus, the reinstatement issue is not
foreclosed on remand.
An equitable award of front pay is generally appropriate when
reinstatement must be denied. Williams v. Valentec Kisco, Inc., 964 F.2d
723, 730 (8th Cir.), cert. denied, 506 U.S. 1014 (1992). In this case,
Fiedler was awarded front pay for twenty-four years, until he reaches
retirement age. An award of front pay until
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retirement ignores the plaintiff's duty to mitigate damages and the
district court's corresponding obligation to estimate the financial impact
of future mitigation. See Dominic v. Consolidated Edison Co., 822 F.2d
1249, 1258 (2d Cir. 1987). Instead of warranting a lifetime of front pay,
Fiedler's relatively young age should improve his future opportunities to
mitigate through other employment.
Moreover, the Union cites no authority for an award of twenty- four
years of front pay, whereas a number of cases have rejected far shorter
awards as improperly speculative. See Hybert v. Hearst Corp., 900 F.2d
1050, 1056-57 (7th Cir. 1990) (five years was too speculative); Goss v.
Exxon Office Sys. Co., 747 F.2d 885, 890 (3d Cir. 1984) (affirming four
months of front pay because a longer period would be speculative); Snow v.
Pillsbury Co., 650 F. Supp. 299, 300 (D. Minn. 1986) (nine-year award
reduced to three years). For these reasons, although we need not decide
the issue because of the need for a new trial, we express grave doubt that
an award of $495,000 in front pay could be upheld.
For the foregoing reasons, the judgment of the district court is
reversed and the case is remanded for a new trial.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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