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Smith v. Pittsburgh Gage and Supply Co.

decided: July 17, 1972.


Rosenn and Rosen, Circuit Judges and VanArtsdalen, District Judge.

Author: Rosenn


This case is now before us for the third time.*fn1 Appellant Pittsburgh Gage and Supply Company (Company) seeks to overturn a jury finding that it wrongfully discharged appellees from their jobs in violation of an oral contract. Jurisdiction for the suit is based on Section 301 of the Labor Management Relations Act, 29 U.S.C. ยง 185(1970).

The Company's first contention is that this suit is barred by the res judicata effect of the first district court decision dealing with this case.*fn2 In explaining why we believe that that judgment does not bar this action, we must review the tortuous history of this case.

For several years prior to 1959 Steam Fitters Union Local No. 449 represented the working force at the Company's plant. The complaint alleges that in 1959, the union and management signed a one year contract which was to extend to May 1, 1961, "and shall continue in full force and effect until a new Agreement is negotiated, but both parties may mutually agree to change or amend any part of this Agreement at any time." By letter dated February 22, 1960, the Union notified the Company of its intention to terminate the agreement on April 30th next and the Company acknowledged the notice.

There were bargaining sessions thereafter between the Company and the Union representatives. The negotiations resulted in a "package" for the employees aggregating about 37 1/2 cents per hour divided between wages, a major medical plan and a proposed pension. No agreement was signed at the time, however, because the benefits for the pension plan could not be spelled out without the completion of actuarial studies. Notwithstanding, the parties allegedly shook hands on the agreement, and as of July 1960 the new medical plan went into effect. The employees also began earning money at their new wage scale retroactive to May 1, 1960.

On July 20, 1960, E. W. Olson, vice president of the Company, allegedly gave appellee Smith, a shop steward at the plant, a copy of a memorandum he had prepared stating that the working provisions of the 1959 agreement were to remain the same in the new agreement to April 30, 1963. On August 26, Mr. Olson sent another letter to Smith stating, inter alia, that the Company would live up to the basic provisions in the labor contract which expired on May 1, 1960, and that "there would be certain changes in the new contract which we feel sure are understood by your Union and us, and these changes would be embodied in the new contract." On August 30, Mr. Olson received a letter in return from Smith for the Union Shop Committee informing him that the Union had voted unanimously the day before to accept the Company offer and that they were agreeable to work under the terms of the 1959 agreement between them until a new agreement was signed.

Nothing more happened until December 31, 1960, when the Company submitted a contract proposal to the Union. It contained all of the previously negotiated increases and benefits which had been in effect for some months, and also a proposed pension plan which did not, however, meet the Union's expectations. The employees rejected the contract as submitted but continued to work. On January 19, 1961, Olson wrote Smith another letter stating that: "We are working under the provisions of the old contract until a new one is signed."

Smith alleges that on January 27, 1961, he was discharged by the Company. The other appellees make similar allegations of discharges in the same month although on other dates. They contend that their dismissals were improper because they violated the contract and were motivated by their activities on behalf of the rest of the employees.

The appellees filed a grievance with the Union, but there was nothing done after a meeting at the "first step" in the grievance process. The Company contended that no contract existed. It has continued to insist through all the litigation preceding this appeal that no contract was in force.

Appellees first filed an unfair labor practice charge with the National Labor Relations Board (NLRB). The Regional Director determined that there was insufficient evidence to proceed. Appellees then filed suit in the state courts, but the Supreme Court of Pennsylvania determined that its jurisdiction was pre-empted by the NLRB.*fn3

At this point, appellees sought relief in federal court, alleging a conspiracy between the Union and the Company to have them discharged, and urging that the district court had jurisdiction under Section 301. Both the Union and the Company moved to dismiss. The Union contended that the matter was an unfair labor practice that could be heard only by the NLRB. The Company argued that there was no contract that could have been breached. Therefore, the court was deprived of jurisdiction because Section 301 only gives federal courts the power to enforce valid labor contracts. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 1 L. Ed. 2d 972, 77 S. Ct. 912 (1957).

The Company submitted various affidavits stating that there was no contract, and that it and the Union were in continuous negotiations for a new contract from April 30, 1961, until August 26, 1964, when a written agreement was ultimately signed. Appellees filed only one affidavit in that action. Smith deposed that "by its very terms" the 1959 agreement was to continue in full force and effect until a new agreement was signed, and that it was "common knowledge" that the old agreement had in fact remained in effect until the signing of the new agreement in 1964.

District Judge Rosenberg found that the complaint did not state an action for breach of contract cognizable under Section 301 and was primarily an action to seek redress for an unfair labor practice. Therefore, he concluded that he did not have jurisdiction. However, he also determined that on the basis of the affidavits, ...

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