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Laborers' Intern. Union of North America, AFL-CIO v. Foster Wheeler Energy Corp.

filed: May 20, 1994; As Corrected June 24, 1994.


On Appeal From the United States District Court For the District of New Jersey. (D.C. Civ. No. 85-04240).

Before: Becker and Nygaard, Circuit Judges, and Yohn, District Judge.*fn*

Author: Becker


BECKER, Circuit Judge.

This appeal arises out of bitterly contested litigation over the applicability of a national "prehire" labor agreement to a worksite in Alabama. At ultimate issue is the defendant employers' failure to hire the employees engaged at the site from the plaintiff union's hiring hall. The parties have been ceaselessly embroiled in this matter for over eight years. During this time they have appeared before the district court thrice and an arbitrator once; they are now before this Court for the third time. Given what appears to us to be the relatively modest stakes and the fact that the primary point of contention in the case will probably never recur,*fn1 it is unfortunate that their litigation strategies have prevented them from settling. We can only hope that the opinion that follows will edge them toward a swift resolution of their remaining disputes instead of propelling them back to the arbitrator for another round of pugnacious battle.

The principal question before us, one we will answer in the affirmative, is whether the district court erred in not applying retrospectively the National Labor Relation Board's decision in John Deklewa & Sons, Inc., 282 N.L.R.B. 1375 (1987), enf'd sub nom. Iron Workers, Local 3 v. NLRB, 843 F.2d 770 (3d Cir.) (per curiam), cert. denied, 488 U.S. 889, 109 S. Ct. 222, 102 L. Ed. 2d 213 (1988). A host of other questions is also before us, but many of them are rendered extraneous by our resolution of the retrospectivity question. As to those we need reach, we first conclude that the district court properly referred the issue of damages to the arbitrator, but should also have referred the question of breach as well. In addition, we will clarify the mandate we issued the last time the parties appeared before this Court -- specifically, we will describe its effect on two factual findings which an arbitrator had made and the district court had adopted prior to the parties' second rendezvous here -- and comment on the employers' contention that no damages may flow from their alleged breach of the prehire agreement because the union operated an illegal hiring hall in contravention of the prehire agreement as well as state and federal law.

In the end, we will instruct the district court to modify its Order of June 22, 1992, as modified on March 11 and 31, 1993, and to direct the parties to arbitrate the issue of breach of their pre-hire agreement in addition to the issue of damages, if any, flowing therefrom.


A. Facts

1. The Parties

Foster Wheeler Corporation ("FWC") is a major international construction firm with its principal place of business in Livingston, New Jersey. For a long time it was an exclusively union shop employer. It entered into its first National Agreement with the Laborers' International Union of North America, AFL-CIO ("LIUNA") in 1973, agreeing thereby, among other things, to recognize and acknowledge LIUNA as the exclusive bargaining representative for all field construction workers it would employ. LIUNA, in return, guaranteed that the terms of the agreement would govern irrespective of locale.

In 1974, in pursuit of a longterm expansion plan, FWC reorganized its commercial operations and became a holding company. Among FWC's motives for reorganizing was to become a double-breasted contractor, that is, to establish the capability to compete in both the open shop and the union shop markets. On November 11, 1974, FWC notified LIUNA that it had transferred its domestic engineering, manufacturing, and construction activities to Foster Wheeler Energy Corporation ("FWEC"), a newly formed, wholly-owned subsidiary, and that it had correspondingly assigned to FWEC all labor agreements covering the affected employees. Since then FWC has neither performed field construction work nor entered into field construction labor agreements; instead, FWEC (but not FWC) was listed as the employer in each subsequent National Agreement with LIUNA. FWEC itself was segmented into independently operated divisions, including Foster Wheeler World Services ("FWWS"), which performed all of FWEC's field construction work on a union basis, and Houston Engineering Center ("HEC"), which performed FWEC's engineering and procurement services.

Four years later, FWC furthered its 1974 reorganization plan and spawned Energy Plant Constructors, Inc. ("EPC"), a wholly-owned subsidiary which FWC formed and designed as the open shop counterpart to FWEC. To implement its open-shop policies, EPC hired its own employees and administered its own labor relations policies. EPC discontinued business operations in 1987.

LIUNA is the parent body of LIUNA Local 70 of Mobile, Alabama. The Local, in accordance with its constitution and bylaws, is affiliated with a regional building and trades council, Mobile Building Trades Council ("MBTC"). MBTC represents and acts on behalf of LIUNA Local 70 with regard to the negotiation and administration of labor agreements.

2. The Agreement

On April 20, 1982, FWEC and LIUNA entered into the National Agreement (the "Agreement") at issue here. The Agreement applied to all construction projects "performed by the Employer or by any person, firm or corporation owned or financially controlled by the Employer" within the political boundaries of the United States, except for those performed in one of three states (not including Alabama) already subject to a Tri-State Agreement.

On covered projects, the Agreement imposed several noteworthy requirements on FWEC: to hire employees through the referral systems of LIUNA's local affiliates; to recognize LIUNA as the exclusive bargaining agent for those employees; to adhere to certain requirements regarding wages, fringe benefits, and overtime; and to compel its subcontractors to comply with the substantive terms of the Agreement. The Agreement, however, expressly relieved FWEC of any obligation to recruit laborers through any local area hiring hall whose procedures violated state or federal laws or discriminated for or against laborers on the basis of their union membership.

3. The Project

At approximately the same time as FWEC was entering into its new agreement with LIUNA, Mobil Oil Exploration & Producing Southeast, Inc. ("MOEPSI") began the process of selecting a general contractor to oversee the engineering and construction of a sour gas treatment and sulfur recovery facility it wanted built at Bayou Jonas near Mobile. The project consisted of an offshore platform and natural gas production facility, a pipeline to carry the gas onshore, and a sour gas treatment and sulfur recovery plant (the only portion of the project to which this case relates). Through a rather convoluted set of developments, MOEPSI eventually nominally awarded the construction contract for the gas processing plant to EPC in October 1984, with FWC guaranteeing EPC's performance and EPC nominally subletting the engineering work to HEC (a divison of FWEC). This arrangement as depicted by the documents was suffused with subterfuge, however, for it is quite clear from the record, as both the district court and the arbitrator independently found, that in reality FWEC was the actual prime contractor on the MOEPSI project and EPC its subcontractor.*fn2

The local press widely publicized MOEPSI's award of the contract to EPC -- as well as EPC's open-shop policy -- during the fall and winter of 1984. LIUNA officials, suspicious of the goings-on, made numerous inquiries to the defendants concerning the application of the Agreement to the MOEPSI project. Apparently in each instance the defendants informally told the LIUNA officials that EPC was a non-union contractor not bound by the Agreement, and that, accordingly, the project would be completed by non-union labor. There is disputed evidence regarding whether FWEC affirmatively misrepresented to LIUNA its part in the project and its relationship to EPC.

As already mentioned, the Agreement required signatory employers to comply with the hiring provisions of local affiliates, but only if they were operated legally and did not discriminate against non-union laborers. MBTC, LIUNA's local affiliate, operated a hiring hall for construction workers, but, to LIUNA's chagrin, it discriminated against non-union members.*fn3 Seemingly unaware of MBTC's discrimination, EPC -- itself not a signatory to the Agreement -- opened its own hiring office for the MOEPSI project on January 29, 1985. Since the local press had widely publicized the available job opportunities, EPC received over 5,000 applications in the three days the hiring office accepted them. EPC hired all the construction workers it employed on the MOEPSI project either through the applications that were submitted at that office or at the entrance to the job site. On April 2, 1985, the day EPC hired its first laborer for the project, the local union had over 200 union supporters on the local hiring hall's out-of-work list, although some unspecified number of them were busy working for non-union contractors.

4. The Dispute

On April 9, 1985, LIUNA sent out a formal grievance letter to the various entities related to FWC involved with the MOEPSI project -- namely, FWC, FWIC, FWEC, and EPC -- claiming that each of them was in violation of the Agreement as a result of its participation in the MOEPSI project (insofar as the laborers had not been hired out of LIUNA's affiliate's, MBTC's, hiring hall). FWEC's counsel responded about one month later that FWEC would sometime in the future formally address the matters raised in LIUNA's letter, but that in the meanwhile he would meet informally with LIUNA representatives to discuss any difficulties clouding their relationship. Approximately one month after that, on June 3, 1985, EPC through its president also answered LIUNA's letter by denying any contractual obligation toward LIUNA and, in the alternative, providing notice of termination of any collective bargaining agreement it may have been a party to, whether by operation of law or otherwise. When several subsequent meetings between FWEC and LIUNA failed to resolve the matter, FWEC formally responded to LIUNA's grievance in a letter dated July 11, 1985, reiterating its previous position and stating:

Since the work in question is presently being undertaken by a company over which FWEC does not have and can exert no control, the LIUNA/FWEC National Agreement is not applicable. There is a different bargaining unit there with a different employer who, as we have very recently been given to understand, is proceeding pursuant to its agreement with the owner. FWEC employs no field construction laborers or mechanics at Mobile. There is nothing FWEC could do to make local labor agreements applicable.

Less than one month later, EPC filed a Petition for Election with the National Labor Relations Board ("NLRB" or "Board") to elect a union representative for all EPC's field construction employees at the MOEPSI project, or, more precisely, to dispel any doubts or reservations concerning whether the Agreement applied to the project at all by demonstrating LIUNA's lack of majority support amongst the workers. The Board failed to reach a decision on EPC's petition for several months and never completed the election.

In the meantime FWEC formally modified its stance toward LIUNA: although it still maintained that the Agreement did not pertain to its activities on the MOEPSI project, on August 9, 1985 it expressly repudiated the Agreement to the extent that the Agreement was found to apply to the MOEPSI project. It identified Painters Local Union No. 64 of Brotherhood of Painters v. Epley, 764 F.2d 1509 (11th Cir. 1985), cert. denied, 475 U.S. 1120, 106 S. Ct. 1636, 90 L. Ed. 2d 182 (1986) as establishing its right to limit its repudiation of an area-wide prehire agreement to a single job site. The Eleventh Circuit Court of Appeals, the court exercising jurisdiction over the situs of the MOEPSI project, had handed down Epley a scant month earlier. At that time, of course, FWEC had already committed itself internally to using non-union labor, and, furthermore, had contractually bound itself to MOEPSI to use EPC as the non-union construction subcontractor (although, as structured on paper, EPC was the (nominal) prime contractor and FWEC the (nominal) subcontractor, see supra at n.).*fn4

By letter dated May 15, 1986, FWEC validly repudiated the entire (National) Agreement according to its terms effective July 15, 1986.

B. Procedural History

1. Round 1

On August 29, 1985, LIUNA filed this action on behalf of itself, its local, and its membership against FWEC and FWC under § 301(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C.A. § 185(a) (1978). LIUNA sought to compel FWEC and FWC to submit to arbitration LIUNA's grievance concerning the applicability of the Agreement to the MOEPSI project. The Complaint alleged that FWEC, FWC, FWIC, and EPC were alter egos and/or a single employer, and hence that all of them were bound by the ...

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