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Teamsters Local Union No. 430 v. Cement Express Inc.

submitted: February 4, 1988.


Appeal from the United States District for the Middle District of Pennsylvania, Scranton, D.C. Court No. 85-1196.

Sloviter, Stapleton and Mansmann, Circuit Judges.

Author: Mansmann


MANSMANN, Circuit Judge.

Teamsters Local Union No. 430 appeals from a district court granting the motions of defendants Herman Brothers, Inc. and Bulk, Inc. for an award of counsel fees as sanctions against Local 430 pursuant to Federal Rule of Civil Procedure 11. The defendant companies succeeded on their motions for summary judgment in the underlying action brought by Local 430 under Section 301 of the Labor Management Relations Act, 29 U.S.C. ยง 185, to enforce an arbitration award against Herman Brothers and Bulk. We affirmed. Teamsters Local Union No. 430 v. Cement Exp., Inc., 804 F.2d 1249 (3d Cir. 1986).

On the question of Rule 11 sanctions, however, we find that the plaintiff's argument, though unsuccessful, constituted a good faith argument for the extension, modification, or reversal of the existing labor law doctrine of successor liability. Therefore we will reverse the district court's order awarding counsel fees.


Cement Express, Inc., employed members of Teamsters Local Union No. 430 in executing Cement Express' contract to haul cement for Lehigh Portland Cement Company ("Lehigh"). Cement Express and the union were parties to a collective bargaining agreement containing a comprehensive arbitration clause. The agreement also contained a successorship clause wherein Cement Express undertook to require a purchase, transferee or lessee of its operation to be bound by the collective bargaining agreement.*fn1

In April, 1985, Cement Express obtained Lehigh's assent to the termination of their cartage contract. Lehigh then entered into a cartage contract with Bulk, Inc. for the same route. Bulk, or Herman Brothers, Inc., purchased for Bulk's use a substantial portion of Cement Express' equipment and invited employment applications from all Cement Express employees. According to the union, Bulk offered wages substantially lower than those paid by Cement Express, and invited applications from the public in general after the union refused those terms. Cement Express ceased operations on May 1, 1985 and permanently laid off all of its employees.

The union filed a grievance on May 13, 1985 against Cement Express, Lehigh, Bulk, and Herman Brothers. By grievance, the union sought to determine whether Cement Express has breached its duty to require the assumption by a transferee of its obligations under the collective bargaining agreement. Bulk and Herman Brothers denied being parties to any agreement with the union and did not appear at the arbitration hearing. The arbitrators deadlocked as to whether Cement Express had met its obligations under the agreement, but they upheld the grievance against Bulk and Herman Brothers. The arbitrators decided that Bulk and Herman Brothers were "'successors' under the law and the contract and were obligated by its terms."


The union filed an action in the district court seeking enforcement of the arbitration award. Finding that there was no basis in the pleadings for concluding that the defendants had agreed to honor Cement Express' collective bargaining agreement with the union, the district court granted summary judgment for the defendants, relying on the general rule in NLRB v. Burns Security Services ("Burns"), 406 U.S. 272, 32 L. Ed. 2d 61, 92 S. Ct. 1571 (1972) (successor employers not bound by the substantive provisions of a collective bargaining agreement negotiated by their predecessors but not agreed to or assumed by them). We affirmed the summary judgment order, but we relied on the alternate theory that the plaintiff's allegations were insufficient to establish the jurisdiction of the arbitrator either under the collective bargaining agreement or under the labor law doctrine of successorship as set forth in John Wiley & Sons, Inc. v. Livingston, ("Wiley"), 376 U.S. 543, 11 L. Ed. 2d 898, 84 S. Ct. 909 (1964) and clarified in Howard Johnson Co., Inc. v. Hotel Employees, 417 U.S. 249, 94 S. Ct. 2236, 41 L. Ed. 2d 46 (1974).

The district court also granted the defendants' motion for an award of attorneys' fees against the union under Fed. R. Civ. P. 11. The court characterized the action as "frivolous" because a reasonable inquiry would have revealed that there was no basis for the union's claim and because counsel for the union made no effort to support the allegations in opposition to the defendants' motion for summary judgment. The union now appeals from the fee award, asserting that the claim constituted a good faith argument for the extension of the labor law doctrine of successorship and was therefore not frivolous.

Our review of the imposition or denial of sanctions under Rule 11 is limited to determining whether the district court has abused its discretion. Gaiardo v. ...

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