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Nix v. Spector Freight System Inc.

Decided: June 28, 1960.

WILLIAM A. NIX (AND 32 OTHERS), PLAINTIFFS-APPELLANTS,
v.
SPECTOR FREIGHT SYSTEM, INC., ET AL., DEFENDANTS-RESPONDENTS



Goldmann, Conford and Freund. The opinion of the court was delivered by Goldmann, S.j.a.d.

Goldmann

Plaintiffs appeal from a Law Division judgment dismissing the amended complaint and discharging the order to show cause in their action to set aside an arbitration award and to have the issues submitted to arbitration pursuant to the provisions of the collective bargaining agreement under which they claim employment seniority. The opinion filed by the trial judge shows he relied solely upon plaintiffs' failure to take action with respect to the award within three months after it was delivered, as required by section 8 of the Arbitration Act, L. 1923, c. 134; N.J.S. 2 A:24-7.

In February 1956 defendant Spector Freight System, Inc. (Spector) and Mid-States Freight Lines, Inc. (Mid-States) jointly requested authority from the Interstate Commerce Commission under section 5 of the Interstate Commerce Act for (a) acquisition by Spector of control of Mid-States through the purchase of its capital stock; (b) the concurrent merger of the operating rights and property of Mid-States into Spector for ownership, management and operation; and (c) acquisition by Spector's controlling interests of concurrent control of the operating rights and properties of Mid-States. The Commission subsequently gave its approval and the transaction took effect as of April 1, 1957. Mid-States was dissolved and its assets and goodwill transferred to Spector, which has continued to operate the properties of both companies and has adopted the trade name "Spector-Mid-States."

Spector had maintained a terminal in Union, N.J., and Mid-States one in Newark. Following Spector's acquisition of Mid-States it closed its Union terminal and transferred operations to Newark. It has retained all the employees who formerly worked at the two terminals. The employees of both Spector and Mid-States were members in good standing of defendant Local 478, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers Union of America (Union) at the time of Spector's acquisition of Mid-States. They enjoyed seniority privileges in their respective companies in accordance with the terms of identical contracts between the companies and the Union. These contracts, effective September 1, 1956, were to continue in full force and effect until midnight, August 31, 1958. (There is presently a new two-year collective bargaining agreement between Spector-Mid-States and the Union, which went into effect September 1, 1958.)

Section 5 of the 1956-58 contract provided that seniority according to job classification should prevail at all times; the employer was to compile a seniority list, subject to Union approval; and employees were to be ranked in seniority according to their length of service in the work classification to which they were assigned. Section 22 declared that the contract was to be binding upon the successors and assigns of the parties. Unlike the new 1958-60 contract, there were no provisions governing seniority rights in case of company merger or where one company acquired or purchased control of the business of another. Section 17 provided that should any dispute arise between the employer and the employees, or the employer and the Union, concerning the application or interpretation of any provisions of the collective bargaining agreement, or concerning any term or condition of employment, or otherwise, the parties were to attempt to adjust the controversy amicably between themselves and, if unable to do so, to submit to arbitration.

Immediately after Spector's acquisition of Mid-States a dispute arose as to whether Spector's employees had seniority

as a class over those who had worked for Mid-States. The Union itself followed an uncertain course. During the first week of the new arrangement it decided that separate seniority lists should be kept for each set of employees, the Spector lists to take precedence over Mid-States'. Thereafter, it took the position that the seniority lists should be dovetailed into a single list for each employment category, the first name on the corresponding Spector and Mid-States lists to become first and second, respectively, on a combined list; the second names on the two lists to become third and fourth on the combined list, etc. Finally, the Union's executive committee ruled that the seniority lists should again be separated and the old Spector lists entitled to priority over those pertaining to the old Mid-States employees. Spector contended that this method for determining seniority was inequitable because its acquisition of Mid-States was in fact a merger, and therefore the seniority lists of Mid-States' employees ought to be merged with those of Spector's employees. The Union, on the other hand, viewed the transaction between Spector and Mid-States as a purchase rather than a merger, so that when Spector added Mid-States' employees to its payroll, they became new employees of Spector and accordingly had to accept a seniority status below that of the old Spector employees.

The dispute was submitted to arbitration. The arbitrator held that when Spector acquired Mid-States and the latter dissolved as a corporation, there was an end to the employment relationship between Mid-States and its employees. Seniority with Mid-States ceased to exist. There was no provision in the Union contract for transfer or merger of seniority rights in the event of consolidation, so that the former Mid-States employees, having entered a new employment relationship, obviously could not claim seniority rights on the basis of service with Spector. Nor could they under the contract claim the right to transfer seniority from Mid-States. Further, their seniority rights were not protected under the Interstate Commerce Commission order.

Accordingly, the arbitrator held the conclusion inescapable that there was no basis for integrating the seniority lists under the existing contract. He thereupon entered an award, dated July 26, 1957, holding that the Union's determination on the question of the seniority of Spector's employees in its Newark terminal following the combining of operations of Mid-States and Spector was proper.

On September 16, 1957, 52 days after the arbitrator's award, plaintiffs, who are 33 of the former Mid-States employees, instituted suit against Spector in the United States District Court for New Jersey charging that Spector had failed and refused to compile a seniority list (as required by section 5 of the Union contract) designating them as senior to the former Spector employees, but permitted the Union to compile a list which gave the former Spector employees a higher seniority. The complaint further alleged that plaintiffs' attorney had demanded restoration of their seniority on pain of suit, but that thereafter Spector and the Union, "desiring to circumvent the legal and contractual rights of plaintiffs, and secretly agreeing to do so, conspired to present the matter to an alleged arbitration." Plaintiffs complained they had not been represented at the arbitration. They prayed that the award be set aside as illegal, the seniority provisions of the Union contracts specifically performed, and plaintiffs made whole for losses suffered through deprivation of seniority since April 1, 1957. Spector thereupon moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b) because of failure to state a claim upon which relief could be granted, failure to name the former Spector employees and the Union as indispensable parties, and lack of jurisdiction of the court over ...


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