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GULF & WESTERN MFG. CO. v. USW

February 9, 1988

GULF & WESTERN MANUFACTURING CO., Plaintiff,
v.
UNITED STEELWORKERS OF AMERICA, DISTRICT NO. 9, Defendant



The opinion of the court was delivered by: BISSELL

 HON. JOHN W. BISSELL, UNITED STATES DISTRICT JUDGE.

 These cross-motions for summary judgment arise out of a complaint filed on December 1, 1986 by Gulf & Western Manufacturing Company ("Gulf & Western") against United Steelworkers of America, District No. 9 (the "Union"), requesting this Court to vacate and set aside the labor arbitration award issued September 12, 1986, pursuant to Section 301 of Labor Management Relations Act ("LMRA"), 29 U.S.C. Section 185. This Court has federal question jurisdiction over this action pursuant to 28 U.S.C. Sections 1331 and 1337, and 29 U.S.C. Section 185. *fn1"

 Plaintiff alleges in its complaint that the arbitration award must be vacated because the arbitrator exceeded the scope of his authority, the opinion and award do not draw their essence from the collective bargaining agreement between the parties and are otherwise contrary to the agreement and controlling law. In its counterclaim, the Union seeks to confirm and enforce the arbitration award and correspondingly order Gulf & Western to fulfill the terms of the arbitration award, including payment of interest on amounts due and owing, as well as costs and attorneys' fees.

 In 1984, plaintiff's parent, Gulf & Western Industries, Inc., embarked on a divestiture program which included plaintiff's Taylor Forge Stainless Division, then consisting of a manufacturing plant in Somerville, New Jersey. The production and maintenance employees at plaintiff's Somerville facility were represented by the defendant Union. The Union negotiated a collective bargaining agreement on behalf of these employees effective April 1, 1981, with an expiration date of April 1, 1984. Rather than negotiate a new agreement in light of the company's decision to sell the Taylor Forge Stainless Division, the plaintiff and the Union agreed that the 1981 agreement would be extended on a month-to-month basis and would remain in effect for two weeks after the date of sale to allow the Union to negotiate with the new owners for a renewal of the agreement.

 On October 26, 1984, the Somerville plant was sold to Michael Kearney, a former on-site manager of the facility. Defendant contends that two days before this sale Kearney held a meeting of all the bargaining unit employees at the plant and announced that he was taking over as the new owner on Friday. At that time there were 120 union employees on layoff and only 30 actively employed. Kearney stated at this meeting that it was his intention to cut the workforce even further and that employees on layoff status would never be called back.

 The instant grievance, dated October 24, 1984, was allegedly filed with Gulf & Western's Taylor Forge plant manager, Thomas Murphy, the next day. The company, however, contends that it did not receive the grievance until it was forwarded to it by the new owner, who was given a copy during negotiations with the Union on November 5, 1984. The Union characterized its grievance as a request for severance pay and sought the following relief:

 "Local 5846 demands that all our member (sic) who are entitled under Article XXI (Severance) be paid in full if they meet the eligibility requirement. Mr. Keaney (sic) on Wed., 10/24/84 told the employees that the laid off people would never come back."

 Plaintiff's App., J-3 at 436. The issue of whether the company's employees were entitled to pension benefits due to the shutdown of the plant was subsequently raised by the Union in an exchange of letters between the parties addressing the Union's grievance in December 1984 and January 1985, without any objection from the company at that time.

 Gulf and Western's active employees continued to work for the new company for two weeks after the sale. Negotiations with Kearney during this time period resulted in an agreement in which the Union relinquished its right to represent any employee of Taylor Forge Stainless, Inc., the new owner, and the employees agreed to take voluntary layoffs.

 The issues before the arbitrator included the threshold questions of timeliness of the Union's grievance and the "substantive" arbitrability of the claim for pension benefits, as well as the claim that the company violated the collective bargaining agreement by not giving severance and pension benefits to all eligible affected employees. After presentation of argument, testimony, proofs and briefs, arbitrator Pearce Issued his opinion and award on September 23, 1986. The arbitrator found that the grievance was timely filed within five-working-days as required in the agreement between the parties. Moreover, he held that the Union's right to pension benefits was arbitrable because "(i)t is the matter of being 'vested' and 70/80 Pensions under Article VIII of the Labor Agreement that concerns us here - that goes to the provisions of the labor agreement" and therefore is arbitrable. *fn2" Pl. App., Part I, J-1 at 11. As to the merits of the substantive issues raised, the arbitrator concluded that the grievants were entitled to both a severance allowance under Article XXI of the collective bargaining agreement and to pension benefits earned pursuant to Articles V and VI of the pension plan, referred to in Article VIII of the agreement. Id. at 22-23.

 Discussion

 A. Severance Pay Issue

 Entitlement to severance allowances is addressed in Article XXI of the collective bargaining agreement which limits the "Conditions of Allowance" to:

 "When, in the sole judgment of the Company, it decides to relocate or close the plant permanently, or a substantial portion thereof, and terminate the employment of individuals, an employee whose employment is terminated shall be entitled to a severance allowance in accordance with and subject to the following provisions (of eligibility addressing years of service, etc.)."

 Plaintiff's App., Part III at 382, Section 144 (emphasis added). The gravamen of the dispute between the parties is whether the arbitrator was correct in finding that Gulf & Western's sale of its Taylor Forge Stainless Division was a closing of the plant or a substantial portion thereof leading to a termination of the employment of the employees represented by the Union who were actively employed or in layoff status at the time of the sale.

 Gulf & Western argues that the arbitrator exceeded his authority when he found that the sale of its Somerville plant as an ongoing business was a closing of the plant permanently or a substantial portion thereof, thereby entitling the employees to severance pay. This interpretation of the agreement, contends the company, manifestly disregards the clear and unambiguous language of the collective bargaining agreement and must be vacated because ...


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