United Steelworkers v. St. Gabriel's Hosp.

871 F. Supp. 335

UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC, Plaintiff, v. ST. GABRIEL'S HOSPITAL, Catholic Health Corporation, Franciscan Sister Health Care, Inc. and St. Cloud Hospital, Defendants.

Civ. No. 5-94-117.

United States District Court, D. Minnesota, Fifth Division.

December 20, 1994.

Scott Adams Higbee, John Gilbert Engberg, Peterson Engberg & Peterson, Minneapolis, MN, for plaintiff.

Eric L. Leonard, Briggs & Morgan, Minneapolis, MN, Michael John Galvin, Jr., Briggs & Morgan, St. Paul, MN, for St. Gabriel's Hosp., Catholic Health Corp., Franciscan Sisters Health Care, Inc.

Thomas Monroe Vogt, Felhaber Larson Fenlon & Vogt, St. Paul, MN, James Mushat Dawson, Felhaber Larson Fenlon & Vogt, Minneapolis, MN, for The St. Cloud Hosp.

Michael J. Vanselow, MN Atty. Gen., St. Paul, MN, for State of Minn.

ORDER

DOTY, District Judge.

This matter is before the court on plaintiff's motion for injunctive relief and defendants' motion to dismiss or in the alternative for summary judgment. Based on a review of the file, record and proceedings herein, and for the reasons stated below the court denies plaintiff's motion for injunctive relief and grants defendants' motion to dismiss.¹

BACKGROUND

For almost three decades, St. Gabriel's Hospital ("St. Gabriel's") has operated a kidney dialysis unit in Little Falls, Minnesota. St. Gabriel's is a party to collective bargaining agreements with the United Steelworkers of America ("USWA" or "union") and the Minnesota Nurses Association, the organizations which represent the employees of the kidney dialysis unit. The collective bargaining agreement between the USWA and St. Gabriel's contains a successor clause which provides that:

This Contract Agreement shall be binding upon any successors or assign of the Employer, and no terms, obligations and provisions herein contained shall be affected, modified, altered or changed in any respect whatsoever by the whole or partial consolidation, merger, sale, transfer or assignment of the Employer, or affected, modified, altered, or changed in any respect whatsoever by any change of any kind of the ownership or management of the Facility.

The expiration date of the agreement is September 30, 1995.²

In recent years, St. Gabriel's kidney dialysis unit has been operated at a loss. In 1992, Franciscan Sister Health Care, Inc., the parent organization of St. Gabriel's, investigated whether the kidney dialysis unit could be made profitable or should be sold or closed. In October 1993, Franciscan Sister Health Care sold its health care facilities to Catholic Health Corporation. St. Gabriel's continued studying alternatives for the kidney dialysis unit and, in early 1994, decided that selling the unit was the most viable option.

St. Gabriel's intends to sell its kidney dialysis unit to St. Cloud Hospital ("St. Cloud"). St. Cloud is a regional hospital with nearly ten times the patient capacity of St. Gabriel's. St. Cloud operates kidney dialysis units in the cities of St. Cloud and Brainerd. A letter of intent was entered into by St. Gabriel's and St. Cloud Hospital in early April 1994 and St. Gabriel's notified the USWA of the possible sale.

The letter of intent resulted in a sale agreement which was executed on June 30, 1994. St. Gabriel's furnished a copy of the collective bargaining agreement to St. Cloud during the negotiations of the sale. St. Cloud is non-union and does not intend to honor the terms and conditions of the collective bargaining agreement. St. Cloud plans to integrate the Little Falls kidney dialysis unit into its existing operations. St. Gabriel's tried to provide for job protection by providing jobs for all kidney dialysis unit employees who did not accept positions with St. Cloud. The sale was scheduled to close on September 12, 1994. A few days earlier, employees who had not obtained jobs with St. Cloud were assured of jobs and positions with St. Gabriel's for a minimum of 90 days at the same or similar hours and rates of pay.

The USWA brought this action seeking a declaration that St. Cloud is bound by the collective bargaining agreement pursuant to Minnesota's successor statute. The statute makes a new employer liable for the obligations of a predecessor's collective bargaining agreement where the agreement contains a successor clause. Minn.Stat. § 338.01, et seq. The successor statute provides in part:

Where a collective bargaining agreement between an employer and a labor organization contains a clause regulating the rights and obligations of a new employer, that clause shall be binding upon and enforceable against any new employer until the expiration date of the agreement. That clause shall not be binding upon or enforceable against any new employer for more than three years from the effective date of the collective bargaining agreement between the contracting employer and the labor organization.

Minn.Stat. § 338.02, subd. 2. The statute defines a "new employer" as:

Any purchaser, assignee, or transferee of a business the employees of which are subject to a collective bargaining agreement, if the purchaser, assignee, or transferee conducts or will conduct substantially the same business operation, or offer the same service, and use the same physical facilities, as the contracting employer.

Id. § 338.02, subd. 1. The only exception in the statute relates to businesses in receivership or bankruptcy and is not applicable here. See id. § 338.02, subd. 4.

The USWA seeks to enjoin St. Gabriel's and St. Cloud from closing the sale of the kidney dialysis unit unless the collective bargaining agreement is honored. Defendants represent that St. Cloud will not complete the purchase if it is forced to assume the collective bargaining agreement and the kidney dialysis unit will likely be closed. Defendants contend that Minnesota's successor statute is preempted by federal labor law. The USWA and the intervenor, State of Minnesota (collectively "plaintiffs"), respond that the state legislation regulates in an area of deep local concern and is not preempted by the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151, et seq. The validity of a state successor statute is a question of first impression.³

DISCUSSION

1. Federal Successorship Law

The term "successor" is not very meaningful in the abstract; every new employer is a successor in the sense that it succeeded to the operation of a business entity formerly operated by another employer. The NLRA does not define successorship or address the labor law obligations of a new employer to the employees of its predecessor. Rather, the federal common law of successorship has developed primarily through Supreme Court decisions.

Successor status under federal labor law turns on whether there is "substantial continuity of identity in the business enterprise." John Wiley & Sons v. Livingston, 376 U.S. 543, 551, 84 S.Ct. 909, 915, 11 L.Ed.2d 898 (1964). Where a new employer operates essentially the same business without substantial change and hires a majority of its employees from the predecessor, it is generally deemed a successor under federal labor law. Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 41, 107 S.Ct. 2225, 2234-35, 96 L.Ed.2d 22 (1987).⁴ A successor employer may be compelled to bargain with an incumbent union or to arbitrate the extent of its obligations. Wiley, 376 U.S. at 548-51, 84 S.Ct. at 913-16 (1964) (duty to arbitrate); NLRB v. Burns Security Services, 406 U.S. 272, 278-81, 92 S.Ct. 1571, 1577-79, 32 L.Ed.2d 61 (1972) (duty to recognize and bargain with union representing predecessor's employees); Fall River Dyeing, 482 U.S. at 41, 107 S.Ct. at 2234-35 (same). The existence of a bargaining relationship, however, "does not compel either party to agree to a proposal or require the making of a concession." 29 U.S.C. § 158(d). Rather, Congress left those matters to free collective bargaining. Burns, 406 U.S. at 282, 92 S.Ct. at 1579.

In Burns, the successful bidder on a contract to provide security services at a Lockheed Aircraft plant took a majority of its employees from the ranks of the guards employed at the plant by the previous contractor, Wackenhut. Wackenhut had entered into a collective bargaining agreement with the United Plant Guard Workers (UPG). Burns refused to recognize UPG or honor the agreement and denied any obligation to bargain with UPG. Burns told the guards that, as a condition of their employment, they would have to join the union with which Burns already had collective bargaining agreements at other locations. The National Labor Relations Board ("Board") ordered Burns to bargain with the incumbent union. The Board also found that Burns, as a successor employer, was bound by the terms of the existing collective bargaining agreement. The Board reasoned that:

The stability of labor relations will be jeopardized and ... employees will face uncertainty and a gap in the bargained-for terms and conditions of employment, as well as the possible loss of advantages gained by prior negotiations, unless the new employer is held to have assumed, as a matter of federal labor law, the obligations under the contract entered into by the former employer.

Burns, 406 U.S. at 285, 92 S.Ct. at 1581.

The Supreme Court agreed that Burns had hired enough of Wackenhut's employees to require it to bargain with the union as commanded by the NLRA. The Court held, however, that Burns could not be compelled to honor the terms of Wackenhut's collective bargaining agreement against its will. Although preventing industrial strife is an important aim of federal labor legislation, the Court noted that "Congress has not chosen to make the bargaining freedom of employers and unions totally subordinate to this goal." Id. at 287, 92 S.Ct. at 1582. The Court stated that:

This bargaining freedom means both that parties need not make any concessions as a result of Government compulsion and that they are free from having contract provisions

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