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Lineback v. SMI/Division of DCX-CHOL Enterprises, Inc.

United States District Court, N.D. Indiana, Fort Wayne Division

November 7, 2014

RIK LINEBACK, Regional Director of the Twenty-Fifth Region of the National Labor Relations Board, for and on behalf of the NATIONAL LABOR RELATIONS BOARD, Petitioner,


JON E. DeGUILIO, District Judge.

This matter is before the Court on a petition by the Regional Director of the National Labor Relations Board for a temporary injunction under section 10(j) of the National Labor Relations Act. The Director alleges that the Respondent, SMI/Division of DCX-Chol Enterprises, Inc., engaged in various unfair labor practices after it purchased the assets of a previous employer whose employees were unionized, most notably by refusing to bargain with the union after it became aware of a petition for decertification signed by over half of the bargaining unit members. The matter is proceeding through the administrative process before the Board, so the Director is seeking interim relief pending the conclusion of that process. For the reasons that follow, the Court grants the petition in part and denies it in part, and issues an injunction against the Respondent.


In August 2013, DCX-Chol Enterprises, Inc. purchased all of the assets of Stuart Manufacturing, Inc., a company located in Fort Wayne, Indiana that manufactures electronic parts, wires, cables, and harnesses, mostly for the defense industry. For over thirty years, through various changes of ownership, Stuart Manufacturing's employees were unionized, and were represented by the Indiana Joint Board, Retail, Wholesale, Department Store Union, United Food & Commercial Workers, Local 835. The bargaining unit is defined as: "[A]ll full-time and regular part-time Production and Maintenance employees, but excluding Guards, Professional employees, Technical employees, Supervisors, and all other office employees at the Company's production facilities located in the City of Fort Wayne and County of Allen, Indiana." [DE 17-5 p. 4]. The collective bargaining agreement in effect at the time of the transfer had been executed in February 2011 and ran until February 2014. David Altman, President of the Indiana Joint Board, has represented the union members since 2000.

On August 19, 2013, shortly after the transaction took place, Gerald Pettit, Stuart Manufacturing's general manager, and Carol Goods-North, its director of human resources, held a meeting with Mr. Altman, and handed him a letter formally notifying him of the change in ownership. [DE 17-5 p. 34]. The letter stated that Lionel Tobin, Stuart Manufacturing's owner, would retain ownership of Stuart Manufacturing, but that DCX was purchasing all of its assets and would continue operations at the facility under the name "SMI - a Division of DCX." The letter further stated, "DCX understands that by purchasing the Stuart assets, they became a successor, therefore would request various modifications of the Bargaining Unit Agreement in order to effectively and successfully manage the operations at SMI." [ Id. ]

At the meeting, Ms. Goods-North stated that the only change she knew DCX would request of the Union was to change their pay date from every other Wednesday to the 5th and 20th of each month, to align the facility's pay periods with the rest of DCX. Mr. Altman said that he did not anticipate a problem with that request, but that he would need to submit it to the bargaining unit for a vote. At a plant-wide meeting around the same time, Mr. Tobin and Neal Castleman, DCX's president, announced the transaction to the employees. They indicated that it would take some time to transition to new ownership, but they had few details to offer as to how the transition would affect the employees. Nonetheless, the facility continued its operations, and with the exception of Mr. Tobin, all of the employees at the facility continued on as employees of DCX.

On August 22, 2013, DCX and the Union held their monthly grievance meeting. Ms. Goods-North attended the meeting by phone, while Mr. Pettit and Mr. Altman were present in person. Following the meeting, Mr. Altman asked Mr. Pettit for permission to go to the employee break room to have a cup of coffee with the employees so that he could talk with them and answer any of their questions, as was his practice. During the seven years Mr. Goods-North had chaired the meetings, she had granted Mr. Altman's request every time, except for possibly one occasion. However, Mr. Pettit denied Mr. Altman's request. He said that the employees were busy and it would be disruptive for Mr. Altman to be in the break room. Mr. Pettit also later testified before the Administrative Law Judge that the company did not have a lot of information to give the employees about the change of ownership and transition, so he did not want them to be discussing the issue, which could lead to speculation and concern over their jobs. [DE 17-1 p. 87-88].

Around this same time, one of the bargaining unit employees began collecting signatures on a petition to decertify the Union. From August 21 to 23, 2013, twenty-nine members of the approximately fifty-four member bargaining unit signed the petition. [DE 17-4 p. 2]. Ms. Goods-North also stayed in contact with Mr. Altman relative to DCX's requested changes to the collective bargaining agreement. On August 29, 2013, Ms. Goods-North sent Mr. Altman an email with the following proposal: "[DCX] accepts the existing contract with a minor change[][.] The Pay period changes fro[]m every other Wednesday to the 5th and the 20th of the month. As I mentioned before, the difference is merely 1 day. All the other Work Rules remain[] the same. If you can agree to this, I believe I can get the new owner to sign." [DE 17-3 p. 89]. Mr. Altman responded on September 3, 2013, by proposing having the employees vote by secret ballot in the break room, in order to expedite the process. Later that day, however, Ms. Goods-North responded that DCX was notified that a petition for decertification had been filed with the Board. She thus proposed waiting for the Board to act on that petition before moving forward, and Mr. Altman did not object. [DE 17-3 p. 90]. Accordingly, all of the terms and conditions of the employees' employment, including their pay dates, remained the same as they had been under Stuart Manufacturing.

Throughout this time, Mr. Tobin and DCX were exploring the possibility of having Stuart Manufacturing reopen its operations, apart from DCX, on a limited basis at the facility. Stuart Manufacturing was minority-owned and qualified as a "HUB zone" entity because it was located in an area targeted for economic development and employed a certain percentage of employees who lived in that area. These designations made Stuart Manufacturing eligible to perform work on certain contracts for the federal government because of incentives that were tied to those designations. DCX, however, did not meet either of those criteria, and would not be able to retain that component of Stuart Manufacturing's business. Mr. Tobin was therefore considering hiring back some of the employees and leasing a portion of the facility from DCX in order to service those contracts. DCX allowed Mr. Tobin to use his same office during this time, and with DCX's permission, Mr. Tobin spoke to about 15 of the employees to gauge their interest in accepting a job with this newly constituted version of Stuart Manufacturing.

During the monthly grievance meeting on October 16, 2013, Mr. Altman inquired of Ms. Goods-North about the plans to operate the two companies at the facility. Ms. Goods-North answered that they were still considering having both companies operate at the plant, and she confirmed that Mr. Tobin had spoken with several of the employees about accepting employment with his company. Mr. Altman then asked if both companies would operate under the same existing collective bargaining agreement. Ms. Goods-North stated that DCX would operate under the union contract. According to Mr. Altman, Ms. Goods-North also said that Mr. Tobin's company would not operate under the collective bargaining agreement because it would be non-union. DCX denies that Ms. Goods-North made this statement, though, and Ms. Goods-North testified that she never said there was a plan between DCX and Mr. Tobin to operate a non-union company at the facility.

Ultimately, the plan for Mr. Tobin to operate Stuart Manufacturing at the facility never came to fruition. Mr. Tobin and DCX encountered disagreements over their asset purchase agreement, and the parties have each retained counsel in the matter and may be heading towards litigation. That caused their relationship to sour, which put any plan for Mr. Tobin to lease DCX's facility and equipment to reopen Stuart Manufacturing on hold. Mr. Tobin did not ever hire any employees or lease any space or equipment from DCX, and he has not been to the facility in some time.

For the month of October 2013, the SMI Division shipped over $1 million of products in a single month. Mr. Castleman had set that mark as the facility's production goal after DCX acquired it, as he viewed that as the point at which the facility would be profitable, but the facility had not reached that mark in several years. As the end of the month neared, the managers realized that they were approaching the goal, so everyone at the facility made an extra effort to reach the $1 million mark. Once they did so, Mr. Castleman wished to express his appreciation, so he directed Mr. Pettit to give every employee at the facility, from the janitor to the general manager, "a crisp $100 bill." [DE 17-1 p. 79, 81]. Mr. Pettit held a plant-wide meeting on November 4, 2013, to announce the award, and later that day, the managers handed each employee an envelope containing a $100 bill. All of the employees accepted the money. However, DCX never notified the Union of the award or bargained with it. Further, a Union membership meeting at which the employees were scheduled to elect their union officers was scheduled after the workday on November 4, 2013. After receiving the $100 bills, though, only three employees attended the meeting. This was a substantial decrease from the eight to fifteen employees who typically attended such meetings.

Since the collective bargaining agreement was set to expire on February 8, 2014, Mr. Altman and Ms. Goods-North began exchanging emails to initiate the bargaining process for a new agreement. By an email on November 25, 2013, Mr. Altman stated that the Union would like to meet with DCX as soon as possible in order to negotiate a new agreement. Mr. Altman and Ms. Goods-North arranged for the first bargaining session to take place on January 6, 2014. By this time, the Board had dismissed the employees' petition for decertification, but the employees refiled it on November 4, 2013. In addition, in December 2013, an employee anonymously left a copy of the decertification petition, containing signatures of over half of the bargaining unit employees, on Mr. Pettit's chair.

Upon receiving a copy of the petition, DCX began discussing the matter with its attorneys, and on January 3, 2014, on the eve of the parties' first scheduled bargaining session, counsel for DCX sent Mr. Altman a letter stating that DCX was no longer willing to bargain with the Union. Specifically, the letter stated:

At this time, DCX-CHOL is in possession of a document signed by a majority of the DCX-CHOL bargaining unit employees indicating that they do not wish to be represented by the Union going forward.
Importantly, we will honor the Collective Bargaining Agreement that is currently in effect as required by law. However, the mere fact that the Union has filed a blocking charge does not alter the fact that we are in possession of a document signed by a majority of the bargaining unit employees indicating that they do not wish to be represented by the R.W.D.S.U., Local 835. As such, we believe that we are legally obligated to honor that Petition and cannot negotiate for a contract that would cover a period of time within which the Union no longer represents the employees.
If you believe that we are in error in our legal analysis, please do not hesitate to provide us immediately law which suggest that we are in error. We would obviously review such information and reconsider our position. However, we believe that we are legally bound to honor the clear directive of the majority of the unit employees.

[DE 175-5 p. 36]. No bargaining has taken place between DCX and the Union since that time, even though the collective bargaining agreement has since expired. Thereafter, in April 2014, DCX changed the employees' pay dates from every other Wednesday to the 5th and 20th of each month, as it had proposed previously. It did not notify or bargain over the change with the Union, though.

Mr. Altman filed seven separate unfair labor practice charges against DCX relative to these events on behalf of the Union. The charges alleged that DCX violated the Act by denying Mr. Altman access to the break room, by stating that Mr. Tobin's company would operate at their facility non-union but with current union employees, by awarding $100 bonuses to each employee without bargaining over them, by refusing to bargain with the Union as the collective bargaining representative of the employees, and by unilaterally changing the employees' pay dates without bargaining with the Union, among other reasons. On April 30, 2014, the Director filed a consolidated complaint against DCX before the Board. An administrative law judge held a hearing on the matter on July 15 and 16, 2014, at which DCX and the Board were each represented by counsel and presented witnesses and exhibits. In a decision dated September 23, 2014, the ALJ found in the Director's favor as to five of the seven charges-each of the charges described above. The ALJ ordered DCX to cease and desist from each of the unfair labor practices, and also ordered DCX to bargain with the Union as the exclusive collective-bargaining representative of the employees, among other relief.

On July 31, 2014, after the administrative hearing but before the ALJ issued his decision, the Director initiated this action by filing a petition for a temporary injunction against DCX. The petition seeks injunctive relief as to each of the seven charges pending the Board's final resolution of this matter, as it could still be some time before the Board reaches a final decision and is able to enforce its orders. The Director also moved to try this petition on the record made before the administrative law judge, which Magistrate Judge Cosbey granted without objection on September 5, 2014. This matter is now fully briefed, and both parties have also had the opportunity to address the effect of ALJ's decision on this matter.


Section 10(j) of the National Labor Relations Act authorizes a district court to "order injunctive relief pending the Board's final disposition of an unfair labor practice claim if such relief would be just and proper.'" Lineback v. Irving Ready-Mix, Inc., 653 F.3d 566, 569 (7th Cir. 2011); 29 U.S.C. § 160(j). An injunction granted under § 10(j) is an "extraordinary remedy" and should only be granted in those situations in which effective enforcement of the Act is threatened by the delays inherent in the NLRB ...

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