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Kobell v. Suburban Lines Inc.

decided: March 20, 1984.


On Appeal from the United States District Court for the Western District of Pennsylvania.

Aldisert and Becker, Circuit Judges and Pollak,*fn* District Judge. Aldisert, Circuit Judge, concurring.

Author: Becker


BECKER, Circuit Judge.

I. Preliminary Statement

This case arises under section 10(j) of the National Labor Relations Act, 29 U.S.C. § 10(j) (1976), which enables the National Labor Relations Board or its designated agent to seek interim injunctive relief from a federal district court pending the Board's own administrative adjudication of an unfair labor practice complaint.*fn1 As the jurisprudence has evolved, interim injunctive relief may be granted under section 10(j) without the showing of irreparable harm and a likelihood of success on the merits, which are the ordinary requisites for a preliminary injunction. Instead, a federal district court must merely find "reasonable cause" to believe an unfair labor practice has occurred and must determine that the relief sought is "just and proper."

In this case, Regional Director Gerald Kobell, as agent for the Board, contended before the district court that interim relief was required under section 10(j) to thwart a joint venture by a failing bus line and the company that took over its operations to divest themselves unlawfully of a particular union as the bargaining representative of their drivers.*fn2 After a three-day hearing, the district court denied the section 10(j) injunction because it found no reasonable cause to believe that a violation of the NLRA had occurred and because it concluded that it was not just and proper to grant relief. The Director appeals, and we affirm.

The appeal is complex and requires us to address difficult and important issues concerning the propriety of section 10(j) relief and the scope of appellate review over district court determinations in this field. It will therefore be helpful to sketch at the outset the manner in which the opinion will be developed.

We begin in Part II with a review of the evidence adduced at a hearing before the district court to show an alleged plot by appellee Holland Industries and its "Shortway" subsidiary to refuse discriminatorily to hire unionized employees of the operation it was assuming and thereby to evade the obligation that otherwise might well have existed to bargain collectively with the union those employees had previously elected as their representative. We then proceed in Part III to analyze whether the district court committed reversible error in finding no reasonable cause to believe that the defendants had committed unfair labor practices. This analysis shall sequentially entail (A) a discussion of the meaning of "reasonable cause" under section 10(j), (B) an examination of the scope of our review over district court determinations with respect to "reasonable cause," and (C) an application of that standard to the determination of the district court in this case. In this part we conclude that the district court's decision that no reasonable cause existed was reversible error.

We then proceed in Part IV to a similar analysis of whether the district court also erred in denying relief on grounds that it was not "just and proper." Here too our analysis begins with a discussion of the concept "just and proper," including a discussion of the broad purposes of section 10(j). We next examine the scope of our review over district court determinations that a given form of relief is not just and proper, and end this part of the opinion by applying the selected standard of review to the determination of the district court in the case.

We conclude that the district court did not abuse its discretion in finding that the relief requested by the Regional Director was not just and proper under the particular circumstances of this case. Accordingly, we will affirm the judgment.

II. Facts

Since 1962, under operating authority granted by the Pennsylvania Public Utility Commission ("PUC"), appellee Suburban Lines has operated a charter bus service and a commuter bus service between Washington, Pennsylvania and Pittsburgh. Since 1969, the Amalgamated Transit Union, Local 1543 ("ATU") has represented Suburban's 38 drivers and mechanics and has entered into a series of collective bargaining agreements with Suburban.*fn3 The most recent agreement, which expired December 31, 1982, provided for wages averaging $8.60 per hour.

During 1981 and 1982, Suburban Lines did not fare well financially.*fn4 In April of 1982, J. C. Hilty, the president and general manager of Suburban (and owner of 77 of the 737 shares of its stock), answered a job advertisement in Bus Rider magazine placed by appellee Holland Industries. Holland is a New York and Toledo-based firm, which through several subsidiaries operates a number of bus lines throughout the nation. Many of these subsidiaries had collective bargaining agreements with local affiliates of the Teamster's Union at wage rates then averaging less than five dollars per hour. The record does not disclose what response, if any, Holland gave to Hilty's submission. It is apparent from the record, however, that prior to July 15, 1982, Holland must have communicated at least something to some responsible official of Suburban. On that date, at a meeting presided over by Hilty, the Suburban board of directors discussed an offer by Holland to purchase Suburban. While the minutes of that meeting, which are a matter of record, do not disclose the board's opinion of the Holland offer, there was at least discussion of a counteroffer being made to Holland and an estimate made of the liquidation value of Suburban's assets.

On August 9, 1982, several significant events occurred. First, an attorney for Suburban, acting as incorporator, filed articles of incorporation for "Short Way Suburban Lines, Inc.," a wholly owned subsidiary of Holland Industries. Second, the Suburban stockholders held a special meeting and voted to accept a plan of liquidation approved earlier that day by the Suburban board of directors. According to Francis Olczak, a union driver for Suburban and owner of 10 shares of its 737 shares of stock, Hilty stated at the shareholders' meeting that Shortway had agreed to hire him (Hilty) as manager but that Holland, the acquiring company, would not be hiring any of the Suburban drivers.*fn5

There was also evidence produced at the evidentiary hearing before the district court from which it might be inferred that, while all of this was happening at the shareholder and director level of Suburban, Hilty began an effort to persuade or coerce the Suburban drivers into accepting the Teamsters as their bargaining representatives. According to testimony and an affidavit of Suburban driver Paul Phillips, Hilty told him that the new company would deal only with Teamsters.*fn6 Moreover, according to Olczak, Hilty told him on August 13 that Holland Industries "would deal only with the Teamsters Union," and that Holland would hire the Suburban drivers only if they would "go Teamsters." Olczak further testified that Hilty asked him to poll the other drivers to see if they would agree to changing their bargaining representative. Olczak testified that he complied with Hilty's request and that a week later he told Hilty that none of the other drivers would agree to switching their bargaining representative.

Evidence was also adduced that Holland Industries then decided that none of its Shortway employees would come from Suburban.*fn7 According to the testimony of Karl Thomas Wegerbauer, president of Holland Industries and of Shortway, this decision, which was reached sometime in early September, not to hire Suburban employees was not caused by any lack of applications from Suburban drivers.

On September 8 the Suburban board of directors met again. The directors approved sale of the company to Shortway for approximately one million dollars, twice the liquidation value estimated at the earlier July 15 meeting.*fn8 On September 14 the deal was finalized. Sale of the company, which was to take place on October 30, was contingent, however, on approval by the PUC of permanent transfer of Suburban's routes to Shortway. On September 15, the appropriate filings were made to the PUC in support of this transfer.

Between September 14 and October 30, Suburban and Shortway continued what the Regional Director regards as a clandestine and illegal venture to evade the obligations created by NLRB v. Burns International Security Services, Inc., 406 U.S. 272, 92 S. Ct. 1571, 32 L. Ed. 2d 61 (1972) and Howard Johnson Co. v. Detroit Joint Executive Board, 417 U.S. 249, 94 S. Ct. 2236, 41 L. Ed. 2d 46 (1974). Those cases impose a duty upon an employer who takes over a unionized operation and who conducts essentially the same business there as its predecessor to bargain collectively with the representative elected by the workers of the predecessor, provided that those workers constitute a majority of the successor's workforce. The Regional Director argues, in essence, that by discriminatorily refusing to hire Suburban employees -- a plan accomplished by lying to them about when applications were due and when jobs were available -- Shortway sought to evade its obligations under Burns and Howard Johnson and to rid itself of the high-priced ATU.

In support of this theory, the Regional Director notes that Holland/Shortway began hiring admittedly less experienced drivers in Detroit to take over operation of Suburban's Pennsylvania routes. According to uncontroverted testimony of Louis Keplar, Hilty -- who arguably knew that Holland had already decided not to hire any Suburban drivers, see supra at 1080 -- told Keplar in late September that the new company would be getting in touch with him and that "there was no reason to hound [Hilty] every day." Then, in early October, according to testimony from Suburban driver Phillips, Hilty told Phillips that the Suburban drivers would have jobs, though not for a month or so. According to testimony of Warren S. George, vice-president of the ATU, on October 15 Shortway attorney Sanford Pollack returned a telephone call and told George that, while Shortway was "presently training drivers in the Toledo/Detroit area for [the Pennsylvania] jobs," it would consider the Suburban drivers for subsequent openings. Pollack also sent George a letter dated October 19 containing job applications and stating, "We anticipate to begin operation with a complete staff and, therefore, see no urgent need in the return of the enclosed." What Pollack did not reveal was that Shortway had not yet completed its hiring for the Pennsylvania jobs; between October 15 and 25, Shortway hired five more drivers.*fn9 In sum, the Regional Director would have liked the district court to have found an illegal attempt to lull ATU members into a false sense of security and then to lie to ATU members -- or at least speak recklessly -- about the availability of employment.*fn10

Meanwhile, the deal between Suburban and Shortway was running into difficulty. On October 29, following a hearing at which the ATU had lodged a protest against the proposed sale, the PUC directed Suburban not to abandon service pending the PUC's final decision on transferring operation of the bus routes to Shortway. Temporary authority for Shortway to operate the routes, which the PUC had granted on October 15, remained in force. Thus, at least until the PUC decided differently, Shortway could operate the routes. But until the PUC approved permanent transfer of the routes to Shortway, the September 14 agreement did not permit consummation of the sale of Suburban to Shortway.

Faced with the PUC obstacle, Shortway and Suburban executed a second deal on October 29. Under the new agreement, Suburban would lease its buses and equipment to Shortway in return for a fixed rental. The lease would last as long as Shortway had temporary authority to operate the Suburban routes. Shortway began operations the next day. It also recognized the Teamsters as the bargaining representative for its employees. The Teamsters and Shortway agreed that the Shortway drivers would operate under a collective bargaining agreement in effect with another Holland subsidiary. Wages under this collective bargaining agreement averaged $4.80 per hour, considerably less than that paid by predecessor Suburban to the drivers, who were affiliated with the ATU.

Between November 1, 1982, and January of 1983, a rather curious event occurred: Shortway fired or transferred back to Detroit 27 of the 31 drivers it had originally hired.*fn11 It has since hired four of the former Suburban employees.

Formal legal proceedings challenging the propriety of the events described above began on November 9, 1982, when the ATU filed an unfair labor practice charge with the NLRB. After an investigation, the NLRB, acting through Regional Director Kobell, filed an unfair labor practice complaint against the defendants. The complaint, dated December 30, 1982, accused them of violating sections 8(a)(1), 8(a)(2), 8(a)(3), 8(a)(4), and 8(a)(5) of the NLRA. 29 U.S.C. §§ 158(a)(1)-(5). Three months later, on March 4, 1983, the Regional Director petitioned the district court for the Western District of Pennsylvania for interim injunctive relief under section 10(j).*fn12 The Regional Director requested, among other items, that the district court order the bus companies to make reinstatement offers to the displaced Suburban drivers, that the bus companies be required to recognize the ATU as the bargaining representative of the employees driving the old Suburban routes, and that the collective bargaining agreement between Suburban and the ATU be reinstated as governing the terms and conditions of the current employees.

The district court held three days of hearings on the complaint (April 18, 19 and 20) during which it heard testimony from fifteen witnesses called by the Director. The bus companies moved at the close of the Director's case for a directed verdict (or for the dismissal of the complaint). On April 20, 1983, the district court granted the bus companies' motion and dismissed the Regional Director's petition for interim injunctive relief.

Although the grounds upon which the district court dismissed the complaint will be taken up in detail below, they may be summarized as follows. First, while not specifically finding any of the testimony mentioned above to lack credibility or relevance, the district court nonetheless held that there was no reasonable cause to believe that an unfair labor practice had occurred. Although accepting arguendo (1) that the employees of the new company were less competent than the old Suburban employees; (2) "that the new owners of the bus line did not encourage the former employees to seek employment;" and (3) that "the former employees may have been confused as to how to go about applying," the district court nonetheless stressed that Shortway had never actually refused to hire any Suburban applicant. The district court also suggested that the old Suburban employees would not have been willing to work at the Shortway wage rates anyway and further held that there was no showing that anti-union animus solely motivated Shortway.

As a further basis for denying interim injunctive relief, the district court held that the relief sought by the NLRB was not "just and proper." In reaching this conclusion, the district court reasoned that a backpay award by the NLRB could fully remedy any discriminatory refusals to hire and that the ATU was a "small and intimate" union that could reconstitute itself upon favorable action by the NLRB.

III. Reasonable Cause

To have prevailed in the district court, the Regional Director needed to show that the evidence described above gave reasonable cause to believe that an unfair labor practice had occurred. We turn to an exploration of the meaning of this phrase.

A. The Meaning of "Reasonable Cause "

It is settled that the "reasonable cause" standard under section 10(j) bars the district court from behaving as if it had general jurisdiction over the nation's labor laws. The district court may not decide whether or not to issue relief based on its own belief as to whether an unfair labor practice has been committed. See, e.g., Boire v. International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers, 479 F.2d 778, 792 (5th Cir. 1973); Schauffler v. Local 1291, 292 F.2d 182 (3d Cir. 1961) (10(l) case). The amount of evidence required by the "reasonable cause" determination is less than that required to prove a violation. Yet, except to note that it is a "low threshold of proof," see Eisenberg v. Wellington Hall Nursing Home, Inc., 651 F.2d 902, 905-06 (3d Cir. 1981), this circuit has not yet resolved the precise meaning of "reasonable cause" in section 10(j) cases. We believe, however, that doctrine developed in cases brought under section 10(l) of the NLRA, 29 U.S.C. § 160(l), a companion provision directing the NLRB to seek interim injunctive relief when certain specified unfair labor practices are reasonably believed to have occurred, is helpful in ascertaining that meaning.*fn13

We see no reason why courts should accord "reasonable cause" a different meaning in 10(j) cases than they do in 10(l) cases. In Wellington Hall, 651 F.2d at 905, this court noted that in an earlier case, Eisenberg v. Hartz Mountain Corp., 519 F.2d 138, 143 (3d Cir. 1975), "we held that reasonable cause to believe a violation of the act has occurred, a standard for injunctive relief originally developed in cases arising under section 10(l) of the Act, is also applicable to section 10(j) proceedings." While this equation of the standard in section 10(j) cases with the standard in 10(l) cases does not, of course, mandate that all features of the "reasonable cause" standard must be the same, it is worth observing that there is nothing in those cases that suggests the appropriateness of any distinction. In a leading section 10(l) case, Hirsch v. Building & Construction Trades Council, 530 F.2d 298, 302 (3d Cir. 1976), the court held that the burden of proof faced by a regional director is "relatively insubstantial." Moreover, the court held that the district court need not be satisfied with the "validity of the legal theory upon which [the Regional Director] predicates his charges." So long as the legal theory presented by a regional director is "substantial and not frivolous," the district court may grant appropriate relief in a section 10(l) case.

Because of what we regard as the coincidence of the reasonable cause standard under section 10(l) of the NLRA and under section 10(j) of the Act, we believe that a district court need make one of two findings before denying relief. It must find there to be no legal theory implicit or explicit in the regional director's argument that is substantial and not frivolous. Alternatively, the district court must find insufficient evidence -- at least taking the facts favorably to the Labor Board -- to support any non-frivolous theory appropriate to the case at bar.

B. The Standard of Appellate Review

While the federal courts do not differ greatly on the precise meaning of "reasonable cause" in section 10(j) or section 10(l) cases, they are split on the standard of review that the courts of appeals are supposed to apply when examining the refusal of a district court to find reasonable cause. The Eighth and Ninth Circuits have held appellate review over the reasonable cause determination, at least in section 10(l) cases, to be plenary. See Wilson v. Milk Drivers & Dairy Employees Union, 491 F.2d 200, 203-04 (8th Cir. 1974); Local No. 83, Construction Building Materials & Miscellaneous Drivers Union v. Jenkins, 308 F.2d 516, 517 n.1 (9th Cir. 1962) (dictum). These courts have reasoned that, because there is a "congressional policy favoring the grant of such injunctions in appropriate circumstances," review ought not be limited to the clearly erroneous standard as it is in cases granting relief. The NLRB urges us to adopt their view.*fn14

On the other hand, the Second Circuit, in a recent opinion by Judge Friendly, and the Fifth Circuit, in an opinion by Judge Goldberg, have recognized that the district court's finding of "reasonable cause" has both a factual and legal component. See Kaynard v. Mego Corp., 633 F.2d 1026 (2d Cir. 1980) (Friendly, J.) (10(j) case); Boire v. International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers, 479 F.2d 778, 788 (5th Cir. 1973) (10(j) case). Accordingly, they have applied a bifurcated standard of review under which the factual findings of the district court about what happened and what is likely to happen are reviewable under the "clearly erroneous standard" as are all factual questions, whereas the substantiality of a regional director's legal theory tying the facts to a violation of the labor laws is deemed a legal issue, subject to plenary review. For the reasons outlined below, we reject the view of the Eighth and Ninth Circuits and adopt that of the Second and Fifth.

To begin with, the conclusion drawn by the Eighth and Ninth Circuits that appellate courts have plenary review over district court determinations that no reasonable cause exists does not necessarily follow from their assumption -- which we do not, in any event, accept as necessarily true -- that Congress favored injunctions in section 10(j) cases. Whatever Congressional policy exists in favor of injunctions would appear to be satisfied by the district court's application of a low "reasonable cause" standard to Labor Board requests for section 10(j) relief. To leap from a general policy to a particular doctrine requires a mediating theory not yet presented by the Board. Moreover, we note our discomfiture at establishing an asymmetric standard of review -- one which allows the district court great discretion in granting injunctive relief, but almost no discretion in denying it.*fn15 We will want a very good reason to introduce such an abnormality into the law of appellate review.

Instead, we believe that in 10(j) cases, as elsewhere, the scope of appellate review should be determined by the degree of trust we possess as a general matter in the district court's ability to make varying types of decisions correctly and the nature of the decisions made by the district court in the particular case. As we have suggested above, the district court's reasonable cause determination really involves two separate determinations: is there a substantial legal theory explicit or implicit in the case that would support a finding that an unfair labor practice had occurred? If a substantial legal theory exists, do the facts satisfy the theory? The first of these questions, which requires characterization of the legal theory, is itself a "legal" issue; discerning the plausible penumbras of Labor Act provisions is a task that a three-judge appellate tribunal with responsibility to secure uniformity in the law is better equipped to perform than a trial court. The second of these questions, whether the facts as found satisfy the theory, is largely a factual one; a determination of the sufficiency and credibility of the evidence is a task that a trial court is better equipped to perform than an appellate court.

In sum, because of the dual nature of the "reasonable cause" standard, an appellate court's review must also be dichotomous. If it believes the district court erred in determining whether the legal theory implicit or explicit in the Labor Board's case was substantial or not, it must -- absent other special factors -- reverse the district court. But only if it believes the district court clearly erred in finding the facts and whether the facts satisfied the theory may the appellate court reverse.*fn16

C. Applying the Scope of Review

Having set forth the appropriate standard of review, we now apply it to the case at bar. The district court's bench opinion can be fairly read as resting its finding of no reasonable cause on three underlying conclusions. First, it noted that, because no Suburban employee had actually applied for a job with Shortway during the relevant time period, there had been no "refusal to hire by the new employer [Shortway]." Second, it found that any anti-union animus that did exist on the part of the bus lines was not the sole reason for their failure to hire, a requirement the court grounded on footnote 8 of the Supreme Court's opinion in Howard Johnson Co. v. Detroit Joint Executive Board, Hotel & Restaurant Employees & Bartenders International Union, 417 U.S. 249, 94 S. Ct. 2236, 41 L. Ed. 2d 46 (1974). Third, it apparently concluded that, because of what it regarded ...

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