COLGATE PALMOLIVE PEET COMPANY v. WAREHOUSE UNION LOCAL INTERNATIONAL LONGSHOREMEN WAREHOUSEMEN UNION

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District Court of Appeal, First District, Division 1, California.

COLGATE-PALMOLIVE-PEET COMPANY, Plaintiff and Respondent, v. WAREHOUSE UNION LOCAL 6, INTERNATIONAL LONGSHOREMEN'S & WAREHOUSEMEN'S UNION, etc., et al., Defendants and Appellants.

Charles DUARTE et al., Cross-Complainants and Appellants, v. COLGATE-PALMOLIVE-PEET COMPANY, etc., et al., Cross-Defendants and Respondents.

Civ. 16240.

Decided: April 26, 1955

Gladstein, Anderson, Leonard & Sibbett, Norman Leonard, Rubin Tepper, San Francisco, for appellants. Philip S. Ehrlich, Albert A. Axelrod, R. J. Hecht, Irving Rovens, San Francisco, for respondents.

In this action the defendants in their answer pleaded six affirmative defenses, and one of them, on his behalf and on behalf of the union and its members, filed a cross-complaint joining some new parties. The trial court sustained demurrers without leave to amend to the six affirmative defenses, and also sustained without leave to amend a general demurrer to the cross-complaint. Defendants and cross-complainants appealed from the entire minute order. On motion of plaintiff this court dismissed the appeal from that portion of the order sustaining the demurrers to the six affirmative defenses, on the ground that such order was nonappealable. Thus, the only portion of the order to be considered on this appeal is that part of the order sustaining, without leave to amend, the demurrer to the cross-complaint.1

This action was commenced by the Colgate-Palmolive-Peet Company against Warehouse, Union, Local 6, the International Longshoremen's and Warehousemen's Union, and certain of the officers and agents of the union to recover damages alleged to have been sustained by the plaintiff employer by reason of claimed coercion of the company's union employees by defendants so as to slow down their output and in other ways to vex, annoy and damage plaintiff.

The defendants answered, denying the major allegations of the complaint, and setting forth six affirmative defenses. In addition, one of the defendants, Duarte by name, claiming to act in a representative capacity on behalf of all members of the union, filed a cross-complaint against the plaintiff and against two of its officers. This was the first time that these officers were brought into the action as parties. The cross-defendants generally demurred to the cross-complaint. This demurrer was sustained without leave to amend, and cross-complanant appeals. It is our duty to determine whether the cross-complaint state a cause of action good against a general demurrer.

The cross-complaint contains two causes of action. In the first cause of action, after alleging the representative character of the proceeding, it is averred that the union is the sole collective bargaining representative of the employees; that since July 9, 1941, the union and the company have been parties to a collective bargaining agreement, which apparently has no terminal date. Section 18 of that contract is set forth in haec verba, and reads as follows:

‘Section 18. Future Changes: The above constitutes an agreement between the company and its employees, represented by the International Longshoremen's and Warehousemen's Union, Local 6, and shall remain in effect unless and until changes become necessary because of conditions beyond the control of the company, or are requested by the employees through their representatives.

‘Thirty (30) days notice will be required before the adoption of any change suggested either by the employees or the company, and no change of any sort will be made without collective agreement to it having been arrived at between the company and the representatives of the employees. If and when such changes are found necessary they will be made with due regard for mutual rights, privileges and well-being of the employees and the company.’

It is then alleged that on February 4, 1952, the company was informed of the union's desire to reopen the agreement for the purpose of proposing certain changes in the contract; that on March 11, 1952, certain specific proposals respecting modifications in wages, hours and working conditions were made by the union to the company; that on or about March 12th the company and its officials named in the cross-complaint ‘agreed, combined, confederated, and conspired with each other and with other persons * * * to interfere with, restrain and coerce the employees at said Berkeley plant * * * in their freedom to negotiate through the representative of their own choosing, i. e., Local 6, the terms and ocnditions of their employment, and to engage in other concerted activities for the purposes of collective bargaining or other mutual aid and protection * * *’ It is then alleged that in pursuance of this agreement and conspiracy the cross-defendants refused to accept the proposals advanced by Local 6 and ‘refused to make bona fide counter-proposals, adopted an intra [n]sigent attitude in collective bargaining relations, unreasonably and without justifiable cause protracted said negotiations, coercively discharged employees at its Berkeley plant for engaging in concerted activities for their mutual aid and protection, and in other ways demonstrated its unwillingness to bargain in good faith with Local 6.’ It is alleged that by reason of the actions and attitude of cross-defendants the employees in order ‘to protect their right to engage in free collective bargaining * * * in order to preserve Local 6 as their collective bargaining representative, and in order to protect their wages, hours and working conditions' were compelled to strike against the company.

On February 1, 1953, it is alleged, the cross-defendants abandoned their conspiracy and then did bargain collectively in good faith, as a result of which a new collective bargaining agreement was entered into on February 10, 1953, and the employees then returned to work. It is averred that as a direct and proximate cause of the conspiracy the employees suffered loss of wages for which judgment is asked.

The second cause of action incorporates the charging allegations of the first, and alleges, in addition, that as a direct and proximate result of the ‘illegal agreement, combination, confederation and conspiracy,’ of the cross-defendants the labor union and its members suffered losses including $15,000 loss of dues which were noncollectible during the strike, and $80,000 paid out as strike benefits. In addition to these damages, $500,000 punitive damages are prayed for.

It is our opinion that this cross-complaint, in each of its two causes of action, somewhat inartfully, alleges good causes of action in both contract and tort. Both parties argue at length the question as to whether there exists in this state a statutory public policy, by virtue of section 923 of the Labor Code, requiring employers and employees to bargain collectively in good faith. Much can be and is said on both sides of that question. But we do not have to decide it in this case. The cross-complaint alleges the existence of an agreement between the parties, pursuant to the express terms of which the union gave notice of intention to reopen negotiations and offered specific proposals of change. It then alleges that the company and some of its officers conspired to refuse to bargain in good faith, and that the employees, in self-protection, were required to strike, with the result that wages were lost to the employees and dues were lost by the union, which was also compelled to pay out large sums in strike benefits. The cross-complaint sets forth section 18 of the collective bargaining agreement which recognizes the indefinite term of the agreement by setting forth a method of modifying or reopening the contract to consider future changes suggested by either party. If all the arguments about whether a duty to bargain collectively in good faith exists generally under California law be disregarded, the contract still remains. The reasonable interpretation of that ocntract as pleaded, is that the parties have mutually agreed to consider modifications which may be proposed from time to time. Having made that an express term of the contract, the refusal to negotiate in good faith, or the refusal to consider in good faith a proposal for change, constitutes a breach of contract. This duty to listen in good faith to a proposal made by the other side should not be confused with the free choice of bargaining that each side possesses. Neither the company nor the union is committed by the agreement to accept any proposals made by the other, but each is bound to discuss mutually and to consider in good faith—that is, bargain collectively—any requested changes. If this were not the proper interpretation of the agreement it is obvious that a contract such as the one here involved with an indefinite term could become, under changing conditions, completely unconscionable. If either side could not propose changes which the other side was required in good faith to consider, the party adversely affected by a change in circumstances would never be able to effect a modification since any proposals made by such party need not be even listened to or considered by the other side. The parties here protected themselves against such a contingency by the provision in reference to future changes. Thus, the question is not one of public policy at all, but a simple question of contract law. The parties provided for a means of securing future changes, and such provision, necessarily, imposed on each side the duty to consider in good faith any proposal made pursuant to section 18 by the other party. If this duty was not contemplated by and included within section 18 that provision would be meaningless. The breach of that contract obligation is averred.

The parties dispute the question as to whether the breach of such a contract to bargain collectively can be the basis for civil liability in damages. This point, assuming the breach of the contract, is settled by the provisions of section 1126 of the Labor Code. It provides: ‘Any collective bargaining agreement between an employer and a labor organization shall be enforceable at law or in equity, and a breach of such collective bargaining agreement by any party thereto shall be subject to the same remedies, including injunctive relief, as are available on other contracts in the courts of this State.’

Obviously, under this section, the breach of a collective bargaining agreement is no different from the breach of any other contract. Under normal contract law the breach of the contract set forth in the cross-complaint, if proved, permits the recovery of damages in an ‘amount which will compensate the party aggrieved for all of the detriment proximately caused thereby’. Civ.Code, § 3300.

It is equally clear that the cross-complaint sets forth a cause of action in tort. The allegations, already analyzed, that demonstrate that a cause of action ex contractu has been pleaded, plus the allegation that the breach was induced, unlawfully, as a result of a conspiracy on the part of the named cross-defendants, demonstrates that this is so. The intentional unlawful interference with contract rights is an actionable tort. Imperial Ice Co. v. Rossier, 18 Cal.2d 33, 112 P.2d 631; Buxbom v. Smith, 23 Cal.2d 535, 145 P.2d 305; see also California Auto Court Ass'n v. Cohn, 98 Cal.App.2d 145, 219 P.2d 511; Dominguez Estate Co. v. Los Angeles Turf Club, 119 Cal.App.2d 530, 259 P.2d 962; Prosser on Torts, p. 976 et seq.

The second cause of action also sets forth good causes of action in both contract and tort. This cause of action incorporates all the charging allegations of the first and sets forth a cause of action for the damages sustained by the union. For the reasons already discussed this states good causes of action and the damages sought are recoverable if the allegations of the cross-complaint can be proved.

Thus it is apparent that the cross-complaint sets forth sufficient facts to allege causes of action good against a general demurrer. If this were the only issue involved on this appeal a reversal would obviously be called for. But there is present, although almost entirely unargued, a much broader question, and that is the question of the jurisdiction of the state courts to hear this controversy at all. Counsel have failed to discuss the question in their briefs, except most superficially, and no opportunity was presented at the time of oral argument to discuss the question because counsel submitted the appeal without oral argument. The really difficult question is whether or not the federal government has pre-empted jurisdiction in this type of labor dispute.

This question is only involved, of course, if respondent company is engaged in interstate commerce. While it is true that that fact does not appear in the pleadings, because of the importance of the jurisdictional question the point will be discussed on the assumption, obviously in accord with the facts of which we probably can take judicial knowledge, that respondent company is engaged in interstate commerce.

The National Labor Relations Act (hereafter referred to as the N.L.R.A.) provides that it is an unfair labor practice for an employer ‘to refuse to bargain collectively with the representatives of his employees'. 29 U.S.C.A. § 158(a)(5). The act also gives the National Labor Relations Board (hereafter referred to as N.L.R.B.) the exclusive power to prevent any person involved in interstate commerce from engaging in an unfair labor practice. 29 U.S.C.A. § 160(a). There can be no doubt that under the facts alleged in the cross-complaint the appellants, interstate commerce being present, had available to them the procedures set forth in the N.L.R.A., one of which was to seek a cease and desist order from the N.L.R.B. pursuant to the terms of the statute. There can be but little doubt that, had appellants sought a mandatory injunction in the state courts to compel the employer to bargain, they would have been met by the argument that the sole jurisdiction to grant such relief, the conditions of interstate commerce being met, was the N.L.R.B. The real question is whether the federal act has pre-empted jurisdiction in actions for breach of contract or for tort such as the ones here involved.

This problem has been discussed in two relatively recent cases of the Supreme Court of the United States. The first of these is Garner v. Teamsters C. & H. Local Union, 346 U.S. 485, 74 S.Ct. 161, 98 L.Ed. 228 decided in December of 1953. In that case an injunction was issued by a state court under state law in a labor dispute involving peaceful picketing for the purpose of inducing the employer to compel his employees to join a union. The Pennsylvania Supreme Court, 373 Pa. 19, 94 A.2d 893, held that the grievance was within the exclusive jurisdiction of the N.L.R.B., and was not within state jurisdiction. The Supreme Court of the United States agreed. It stated, 346 U.S. at page 488, 74 S.Ct. at page 164:

‘This is not an instance of injurious conduct which the National Labor Relations Board is without express power to prevent and which therefore either is ‘governable by the state or it is entirely ungoverned.’ In such cases we have declined to find an implied exclusion of state powers. International Union, U. A. W. A. F. of L, Local 232 v. Wisconsin Employment Relations Board, 336 U.S. 245, 254, 69 S.Ct. 516, 521, 93 L.Ed. 651.

‘* * * It is not necessary or appropriate for us to surmise how the National Labor Relations Board might have decided this controversy had petitioner presented it to that body * * *. The question then is whether the State, through its courts, may adjudge the same controversy and extend its own form of relief.

‘Congress did not merely lay down a substantive rule of law to be enforced by any tribunal competent to apply law generally to the parties. It went on to confide primary interpretation and application of its rules to a specific and specially constituted tribunal and prescribed a particular procedure for investigation, complaint and notice, and hearing and decision, including judicial relief pending a final administrative order. Congress evidently considered that centralized administration of specially designed procedures was necessary to obtain uniform application of its substantive rules and to avoid these diversities and conflicts likely to result from a variety of local procedures and attitudes toward labor controversies.’

In the instant case the appellants, under the allegations of their complaint, could have sought an injunctive order from the N.L.R.B. to compel the employer to bargain collectively. This they did not do. Instead they sought to recover damages arising from breach of the agreement, and for a conspiracy on the part of the company and certain of its officials to refuse to bargain collectively, or at all. The Taft-Hartley Amendment to the N.L.R.A., 29 U.S.C.A. § 185, provides: ‘Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.’

The broad implication of the Garner case was that all activities cognizable by the federal law, whether remediable or not thereunder, were exclusively pre-empted to the federal domain. The case actually involved, however, a factual situation of peaceful picketing and the relief sought was an injunction. A damage action under the last quoted section was not involved, although the reasoning of the case would seem to indicate that there too the federal power was exclusive. If the Garner case were the only available authority, we would be inclined to hold that under the rules there set forth the California courts have no jurisdiction in either the contract or tort causes of action pleaded. But the Garner case is not the only available authority. Another pronouncement of the United States Supreme Court in this field was made in June of 1954 in the case of United Construction Workers v. Laburnum Const. Corp., 347 U.S. 656, 74 S.Ct. 833, 98 L.Ed. 1025. In that case the court stated the problem involved in the following language, 347 U.S. at page 657, 74 S.Ct. at page 834: ‘The question before us is whether the Labor Management Relations Act, 1947, has given the National Labor Relations Board such exclusive jurisdiction over the subject matter of a common-law tort action for damages as to preclude an appropriate state court from hearing and determining its issues where such conduct constitutes an unfair labor practice under that Act.’

The case involved a suit by an employer against the union for tort damage allegedly resulting from union intimidation of the employer and some if its employees which caused the employer to shut down its projects in the area. The courts of Virginia had upheld a substantial award of actual and punitive damages against the union. The United States Supreme Court granted certiorari for the sole purpose of determining the jurisdictional question involved. 346 U.S. 936, 74 S.Ct. 374, 98 L.Ed. 425. Mr. Justice Burton, speaking for the majority, held that the N.L.R.A. did not give the N.L.R.B. exclusive jurisdiction over common-law tort actions for damages even though the tortious conduct constituted an unfair labor practice under the federal act, and so of course could be enjoined under that act. The rationale of the opinion is disclosed in the following quotation, 347 U.S. at page 663, 74 S.Ct. at page 837:

‘Petitioners contend that the Act of 1947 has occupied the labor relations field so completely that no regulatory agency other than the National Labor Relations Board and no court may assert jurisdiction over unfair labor practices as defined by it, unless expressly authorized by Congress to do so. They claim that state courts accordingly are excluded not only from enjoining future unfair labor practices and thus colliding with the Board, as occurred in Garner v. Teamsters Union, 346 U.S. 485, 74 S.Ct. 161, but that state courts are excluded also from entertaining common-law tort actions for the recovery of damages caused by such conduct. The latter exclusion is the issue here. In the Garner case, Congress had provided a federal administrative remedy, supplemented by judicial procedure for its enforcement, with which the state injunctive procedure conflicted.2 Here Congress has neither provided nor suggested any substitute for the traditional state court procedure for collecting damages for injuries caused by tortious conduct. For us to cut off the injured respondent from his right of recovery will deprive it of its property without recourse or compensation. To do so will, in effect, grant petitioners immunity from liability for their tortious conduct. We see no substantial reason for reaching such a result. The contrary view is consistent with the language of the Act and there is positive support for it in our decisions and in the legislative history of the Act.

‘In the Garner case, we said:

“The National Labor Management Relations Act, as we have before pointed out, leaves much to the states, though Congress has refrained from telling us how much. We must spell out from conflicting indications of congressional will the area in which state action is still permissible.

“This is not an instance of injurious conduct which the National Labor Relations Board is without express power to prevent and which therefore either is ‘governable by the State or it is entirely ungoverned.’ In such cases we have declined to find an implied exclusion of state powers. International Union v. Wisconsin Board, 336 U.S. 245, 254, 69 S.Ct. 516, 521, 93 L.Ed. 651. Nor is this a case of mass picketing, threatening of employees, obstructing streets and highways, or picketing homes. We have held that the state still may exercise ‘its historic powers over such traditionally local matters as public safety and order and the use of streets and highways.’ Allen-Bradley Local No. 1111, etc., v. Wisconsin Employment Relations Board, 315 U.S. 740, 749, 62 S.Ct. 820, 825, 86 L.Ed. 1154.' 346 U.S. at page 488, 74 S.Ct. at page 164.

‘To the extent that Congress prescribed preventive procedure against unfair labor practices, that case recognized that the Act excluded conflicting state procedure to the same end. To the extent, however, that Congress has not prescribed procedure for dealing with the consequences of tortious conduct already committed, there is no ground for concluding that existing criminal penalties or liabilities for tortious conduct have been eliminated. The care we took in the Garner case to demonstrate the existing conflict between state and federal administrative remedies in that case was, itself, a recognition that if no conflict had existed, the state procedure would have survived. The primarily private nature of claims for damages under state law also distinguishes them in a measure from the public nature of the regulation of future labor relations under federal law.’

After pointing out that the federal act did prescribe a judicial procedure in the case of secondary boycotts for recovery of tort damage in federal or other courts, the Supreme Court reasoned that ‘it is not consistent to say that Congress, in that section, authorizes court action for the recovery of damages caused by tortious conduct related to secondary boycotts and yet, without express mention of it, Congress abolishes all common-law rights to recover damages caused more directly and flagrantly through such conduct as is before us.’ 347 U.S. at page 666, 74 S.Ct. at page 839. Thus, the Supreme Court recognized that although the employer may have some tort remedy under the federal act, he is not precluded from seeking another remedy in the state courts. The two dissenting justices believed that the rule of the Garner case was controlling, and that the state courts had no jurisdiction of the controversy.

The problem in the instant case falls between the Garner and Laburnum cases. Until the United States Supreme Court clarifies its position on this problem the best a state court can do is to make an informed guess as to what the position will ultimately be. (For good discussions of the problems involved in the federal pre-emption of jurisdiction in the labor field see 54 Columbia Law Rev. 997; 5 Labor Law Journal 743; see for collection of lower court opinions on the subject, all decided before the Garner and Laburnum cases, 7 Vanderbilt Law Rev. 374, fn. 21, p. 377.)

In the absence of a definitive opinion by the United States Supreme Court we have come to the following conclusions:

1. The N.L.R.A. has no provision for a tort cause of action of the type here involved brought by the union against the employer;

2. The federal act does have a section permitting federal suit by either party for damages for a breach of a collective bargaining agreement;

3. As we read the Garner case as modified by the Laburnum case, the law seems to be that where the federal act is silent as to the injurious conduct, there was no intent on the part of the Congress to destroy the common-law remedies offered in the state courts.

It therefore follows that, in the instant case, insofar as the cross-complaint states a common-law tort cause of action, i. e., a conspiracy to induce a breach of contract, the federal act has not pre-empted jurisdiction in the federal courts. In other words, the state courts have jurisdiction over that cause of action. This would seem to be clear from the Laburnum case.

State jurisdiction over the principal cause of action alleged in the cross-complaint, i. e., for breach of contract, however, is very dubious indeed. As already pointed out, the federal act expressly provides for a suit for damages for breach of a collective bargaining agreement. The Garner case would seem to determine that the federal act has pre-empted jurisdiction in that filed for the federal tribunals. While the Laburnum case recognizes a sphere of concurrent jurisdiction, the implication of that case is that where the federal act has provided for damages for breach of contract, such remedy is exclusive. The test to be derived from these cases seems to be whether the federal act provides an adequate remedy—not whether it provides a right of action. The Garner opinion excluded the jurisdiction of state courts, even where the conduct complained of violated state law, because the federal act provided an adequate remedy. While the Laburnum case undoubtedly limited the Garner case, it seems to hold that the federal act is exclusive when and only when the federal act provides an adequate remedy for the conduct condemned by the federal act. If a state court offers a remedy not in conflict with the federal remedies, or one not available under federal law, state jurisdiction exists. Conversely, where the federal act provides a remedy that is adequate, even though state law provides a comparable remedy, the federal courts have exclusive jurisdiction. In the tort cause of action no comparable remedy for damages is provided by the federal act. Therefore, the state courts have jurisdiction. But as to the contract cause of action, the federal law does provide the remedy of damages for breach of a collective bargaining agreement. This being so, the federal jurisdiction is exclusive.

Because the cross-complaint states a good cause of action for damages in tort, and because the state courts have jurisdiction of such cause of action, it was error to sustain the demurrer without leave to amend.

The order appealed from is reversed.

FOOTNOTES

1.  This portion of the order is appealable because the cross-complaint joined several third parties who were not parties to the original action. In such event the dismissal as to them is final, making the order appealable. Herrscher v. Herrscher, 41 Cal.2d 300, 259 P.2d 901; Howe v. Key System Transit Co., 198 Cal. 525, 246 P. 39; Young v. Superior Court, 16 Cal.2d 211, 105 P.2d 363; Halterman v. Pacific Gas & Electric Co., 22 Cal.App.2d 592, 71 P.2d 855; County of Humboldt v. Kay, 57 Cal.App.2d 115, 134 P.2d 501.

2.  ‘The cases relied upon to exclude state jurisdiction are those where a conflict with federal control has been made clear.“[W]hen Congress does exercise its paramount authority, it is obvious that Congress may determine how far its regulation shall go. There is no constitutional rule which compels Congress to occupy the whole filed. Congress may circumscribe its regulation and occupy only a limited field. When it does so, state regulation outside that limited field and otherwise admissible is not forbidden or displaced. The principle is thoroughly established that the exercise by the State of its police power, which would be valid if not superseded by federal action, is superseded only where the repugnance or conflict is so ‘direct and positive’ that the two acts cannot ‘be reconciled or consistently stand together.” Kelly v. State of Washington ex rel. Foss Co., 302 U.S. 1, 10, 58 S.Ct. 87, 82 L.Ed. 3; See also, Amalgamated Ass'n v. Wisconsin Employment Relations Board, 340 U.S. 383, 71 S.Ct. 359, 95 L.Ed. 364; International Union of United Automobile Workers v. O'Brien, 339 U.S. 454, 70 S.Ct. 781, 94 L.Ed. 978; Plankinton Packing Co. v. Wisconsin Board, 338 U.S. 953, 70 S.Ct. 491, 94 L.Ed. 588; La Crosse Telephone Corp. v. Wisconsin Board, 336 U.S. 18, 69 S.Ct. 379, 93 L.Ed. 463; Bethlehem Steel Co. v. New York State Labor Relations Board, 330 U.S. 767, 67 S.Ct. 1026, 91 L.Ed. 1234; Hill v. State of Florida, 325 U.S. 538, 65 S.Ct. 1373, 89 L.Ed. 1782.’

PETERS, Presiding Justice.

BRAY and FRED B. WOOD, JJ., concur.

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