07-1192-ag
Cibao Meat Products v. NLRB

                          UNITED STATES COURT OF APPEALS

                                   FOR THE SECOND CIRCUIT

                                      _______________

                                      August Term, 2008

(Argued: September 10, 2008                                        Decided: November 4, 2008)

                                Docket No. 07-1192-ag
             ________________________________________________________

                                 CIBAO MEAT PRODUCTS, INC.,

                                                   Petitioner,

                                            —v.—

                              NATIONAL LABOR RELATIONS BOARD ,

                                                   Respondent,

                  THE TRUSTEE OF THE UNITE HERE NATIONAL RETIREMENT
                                  AND HEALTH FUNDS


                                                   Intervenor-Respondents.

             ________________________________________________________

               B e f o r e : CABRANES, POOLER, and KATZMANN , Circuit Judges.

                                      _______________


         Petition for review of an order of the National Labor Relations Board (NLRB) affirming
in part the decision of the Administrative Law Judge that petitioner employer engaged in an
unfair labor practice when it unilaterally ceased payments to employee-benefit funds following
expiration of the collective-bargaining agreement with the employees’ union. Because the NLRB
did not err in finding that petitioner’s action was not excused by an economic exigency, or that
the collective-bargaining agreement was a sufficient written agreement pursuant to which
petitioner could have continued payments, we deny the petition for review and grant respondent’s
application for enforcement of the NLRB order.
                                        _______________

Counsel for Petitioner:               IRENE DONNA THOMAS , Thomas & Associates, Brooklyn,
                                      NY.

Counsel for Respondent:               KELLIE ISBELL, Attorney (David Habenstreit, Supervisory
                                      Attorney, and Ronald Meisburg, General Counsel, of
                                      counsel), National Labor Relations Board, Washington, DC.

Counsel for Intervenor-Respondent: RONALD E. RICHMAN , (Scott A. Gold and Max Garfield, of
                                   counsel) Schulte Roth & Zabel LLP, New York, NY.

                                      _______________

KATZMANN , Circuit Judge:

       In this case, petitioner-appellant Cibao Meat Products, Inc. seeks review of an order of

the respondent-appellee National Labor Relations Board (NLRB) holding that Cibao engaged in

an unfair labor practice when it ceased payments to employee-benefit funds after the expiration

of its collective-bargaining agreement with its employees’ union. Cibao argues that it was

excused from making those payments because the union’s actions in seeking to review certain

company records created an “economic exigency,” and that, due to the expiration of the

collective-bargaining agreement and the benefit funds’ merger into other larger funds, additional

contributions would have constituted payments to the union without a “written agreement,” in

violation of § 302 of the Labor-Management Relations Act (LMRA), 29 U.S.C. § 186. We write

today principally to clarify that an expired collective-bargaining agreement does constitute a

written agreement under which an employer may legally continue benefit payments under

§ 302(c)(5)(B) of the LMRA. Indeed, under § 8(a)(5) of the National Labor Relations Act

(NLRA), 29 U.S.C. § 158(a)(5), absent an impasse in negotiations, an employer’s failure to

continue making such payments constitutes an unfair labor practice. We therefore deny Cibao’s

petition for review and grant the NLRB’s application for enforcement of its order.

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                                          BACKGROUND

       Petitioner Cibao Meat Products, Inc. is a Bronx-based meat-processing company. In

March 2000, the NLRB certified Local 169 UNITE to serve as the bargaining representative for

Cibao’s production employees, mechanics, and drivers. On March 19, 2001, Local 169 and

Cibao signed a collective-bargaining agreement, which was set to expire on February 28, 2005.

Articles 18 and 19 of the collective-bargaining agreement governed payments of employee

pension and insurance benefits, respectively. Article 18 provided, in pertinent part, that Cibao

“shall be a contributing employer to the Amalgamated Washable Clothing, Sportswear & Allied

Industries Fund – The Pension Plan of Local 169,” and that Cibao “shall, at the request of the

Union, allow the Union or its representative to examine and copy [Cibao’s] payroll records of

bargaining unit employees as to insure compliance with this section of the Agreement.”

Similarly, Article 19 provided that Cibao “shall be a contributing employer to the Amalgamated

Washable Clothing, Sportswear & Allied Industries Fund – Health and Welfare Plan,” and

contained an identical provision requiring Cibao to allow a Union representative to “examine and

copy” Cibao’s payroll records. Both provisions also specified that such benefits would be paid to

the Funds (collectively the “Washable Funds”) according to the Plan Descriptions “as established

by the Trustees.” The Washable Funds were multi-employer funds governed by an Agreement

and Declaration of Trust, which gave the Funds’ trustees the “right at any time and from time to

time to modify, change, amend or terminate to any extent any or all of the terms and provisions

of the Plan.”

       Storm clouds began to loom in September 2004, when the Washable Funds sent a

representative to audit Cibao’s payroll records, as authorized by the collective-bargaining

agreement. Upon reviewing the payroll records, the auditor informed the Company’s vice

                                                 3
president, Lutzi Vielf Isidor, that one employee did not appear to be receiving the correct amount

of pay. Isidor responded that the payroll formula was correct. The auditor demanded Cibao’s tax

records and other documents to monitor compliance with the fund-contribution provisions of the

agreement, and Cibao refused, purportedly because Isidor believed that the documents were

unrelated to an audit of the pension and insurance benefits under the Washable Funds.

       In January 2005, the Union and Cibao held their first meeting to discuss the future of the

collective-bargaining agreement, which was set to expire on February 28, 2005. Present at this

meeting were, among others, Alexandre Fuentes, the chief negotiator for the Union, and Heinz

Vieluf, then the president of Cibao. Vieluf testified before the Administrative Law Judge in this

case that Fuentes made a proposal, but Vieluf responded that “we were looking to stopping the

payments when the contract terminates. Because we were looking at other plans.” A second

meeting was held on February 11, 2005, at which apparently Vieluf made a counterproposal

involving Cibao’s establishing its own benefit plans, and again intimating that it planned to

discontinue payments to the Washable Funds at the expiration of the current agreement. After

the meeting, Fuentes asked Vieluf if he would be amenable to simply extending the whole

collective-bargaining agreement. Vieluf responded that Fuentes should put the proposal in

writing, but before Fuentes could, on February 16, 2005, Vieluf sent a letter to the Union

informing it that “after careful consideration, Cibao will not agree to extend the current

agreement past February 28, 2005. We are anticipating that the parties, negotiating in good faith,

can reach an appropriate agreement.” Cibao ceased payments to the Washable Funds following

the expiration of the collective-bargaining agreement on February 28, 2005, and has not made

any such payments since.



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       Soon after Cibao ceased contributions, on April 1, 2005, the Washable Funds merged

with the UNITE National Insurance Fund and the UNITE National Retirement Fund (collectively

the “National Funds”). According to the Funds, the merger was necessary to ensure the

sufficiency of funds to cover employee benefits. The National Funds informed Cibao of the

merger by letter dated June 7, 2005. The letter states, in part, that “the merger does not change

the contribution rate as referenced in the collective bargaining agreement between UNITE-HERE

and Cibao Meat Products, Inc. Additionally, the employee benefit plan will remain unchanged at

this time.”

       Negotiations on a new collective-bargaining agreement between the parties continued

throughout 2005 until early 2006. In a letter dated February 3, 2006, Cibao asserted to the Union

that the parties had reached an impasse. The Union disputed this assertion in its reply letter,

dated February 7, 2006, claiming that further negotiations might yet solve remaining disputes and

expressing a desire to meet further. But negotiations apparently did not resume after this

exchange.

       In the meantime, the parties litigated before an Administrative Law Judge (ALJ) the

question of whether Cibao was justified in stopping payments to the National Funds. Cibao

argued below, as it does in this Court, that the auditor’s actions constituted an “economic

exigency” that excused payment to the National Funds, and that, in any event, any such payments

would be illegal because of the lack of a valid “written agreement” between Cibao and the

National Funds. The ALJ conducted a hearing on June 5, 2006, and issued an opinion on

September 25, 2006. In her opinion, the ALJ held that Cibao was unjustified in stopping

payments to the benefit funds, but only until February 2006, when, in her view, the parties

reached an impasse. Both parties filed exceptions to the ALJ’s rulings with the NLRB. On

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March 6, 2007, the NLRB issued an order affirming the ALJ’s decision with respect to Cibao’s

unilateral discontinuation of benefit payments, but reversing her finding that the parties reached

an impasse on February 10, 2006. The Board ruled that Cibao was therefore liable for its unpaid

contributions to the National Funds from the expiration date of the collective-bargaining

agreement through the present, subject to a later compliance proceeding that will determine if

and when the parties reached an impasse. Cibao now appeals the NLRB’s decision affirming the

ALJ’s ruling that stopping payments to the National Funds was an unfair labor practice.

                                             DISCUSSION

Standard of Review

       “[W]e uphold the NLRB’s findings of fact if supported by substantial evidence and the

NLRB’s legal determinations if not arbitrary and capricious.” Long Island Head Start Child Dev.

Servs. v. NLRB, 

, 257 (2d Cir. 2006) (internal quotation marks and citation omitted).

“Our review is deferential: ‘This court reviews the Board’s legal conclusions to ensure they have

a reasonable basis in law. In so doing, we afford the Board a degree of legal leeway.’” 

v. Caval Tool Div., Chromalloy Gas Turbine Corp., 

, 188 (2d Cir.

2001) (internal quotation marks omitted)). Moreover, the NLRB’s answer to the particular

question of whether an employer’s conduct constitutes a refusal to bargain is “entitled to

considerable deference.” Ford Motor Co. v. NLRB, 

, 495 (1979).

Whether Economic Exigency Excused the Discontinuation of Benefits

       Section 8(a)(5) of the NLRA makes it an unfair labor practice for an employer “to refuse

to bargain collectively with the representatives of his employees.” 29 U.S.C. § 158(a)(5). Courts

have long held that, absent an impasse in negotiations, “an employer’s unilateral change in

conditions of employment under negotiation is . . . a violation of § 8(a)(5), for it is a

                                                   6
circumvention of the duty to negotiate which frustrates the objectives of § 8(a)(5) much as does a

flat refusal.” NLRB v. Katz, 

, 743 (1962); accord NLRB v. WPIX, Inc., 

, 901 (2d Cir. 1990). Along these lines, an employer may not cease paying employee benefits

after the expiration of a collective-bargaining agreement unless the parties have reached an

impasse. Derrico v. Sheehan Emergency Hosp., 

, 26 (2d Cir. 1988).

       Here, Cibao does not dispute that, in general, ceasing payment of benefits during

renegotiation of an expired collective-bargaining agreement violates § 8(a)(5) of the NLRA. Nor

does Cibao suggest that it had reached an impasse with the Union when it stopped making

payments to the Washable Funds. Rather, Cibao attempts to rely on the rare exception for

“economic business emergencies.” The NLRB has held that there is an exception to the general

bar against unilateral changes in the conditions of employment prior to negotiations reaching an

impasse under “circumstances which require implementation at the time the action is taken or an

economic business emergency that requires prompt action.” RBE Elecs. of S.D., Inc., 

, 81 (1995); see also Robert A. Gordon & Matthew W. Finkin, Basic Text on Labor

Law: Unionization and Collective Bargaining 606 (2d ed. 2004). But the NLRB has also noted,

and we agree, that there is a “heavy burden” upon an employer trying to establish application of

the exception, and that the “Board has limited its definition of these considerations to

extraordinary events which are an unforeseen occurrence, having a major economic effect

[requiring] the company to take immediate action. Absent a dire financial emergency, the Board

has held that economic events such as loss of significant accounts or contracts, operation at a

competitive disadvantage, or supply shortages do not justify unilateral action.” RBE 

(internal quotation marks and footnotes omitted); see also Duffy Tool &

Stamping, L.L.C. v. NLRB, 

, 997 (7th Cir. 2000) (describing the exception as

                                                 7
requiring immediate action in order to “stave off disaster”); Angelica Healthcare Servs. Group,

Inc., 

, 853 (1987) (loss of 14% of revenue is not an exigency); Triple A Fire

Protection, Inc., 

, 414-15 (1994) (“[O]perating at a competitive disadvantage

does not necessarily equate to an economic emergency . . . .”).

       Cibao argues that there was an economic exigency in this case because the auditor wanted

access to the company’s tax and business records to search for wage-and-hour violations, and

Cibao did not believe that the auditor had power under the collective-bargaining agreement to

conduct an audit for this purpose. Whether or not the auditor’s actions were improper, and there

is no evidence that they were, cf. Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp.,

Inc., 

, 571 n.12 (1985), it is hard to see how they constituted an economic exigency,

especially given that Cibao continued to make benefit payments to the Funds for four months

after the supposedly improper audit. Certainly, if Cibao had truly believed that the auditor’s

actions posed an imminent threat to its business, there were alternatives at its disposal to confront

the issue other than ceasing benefit payments. Given the “heavy burden” on the employer to

demonstrate the application of the exigency exception, we see no reason to disturb the NLRB’s

finding that no such exigency existed here.

Written-Agreement Requirement of LMRA § 302(c)(5)(B)

       Cibao argues that payments to the National Funds would be illegal under § 302 of the

LMRA, 29 U.S.C. § 186. The statute makes it “unlawful for any employer . . . to pay, lend, or

deliver . . . any money or other thing of value” to any employee representative or labor

organization, unless certain exceptions apply. 29 U.S.C. § 186(a). One such exception, found in

§ 302(c)(5), allows such payments to a trust fund for the benefit of employees if, among other

requirements not at issue here, “the detailed basis on which such payments are to be made is

                                                 8
specified in a written agreement with the employer.” 29 U.S.C. § 186(c)(5)(B). As we have

noted, the statute “was principally intended to protect the collective bargaining process by

eliminating the corruptive influence of side payments by employers to union representatives.”

Haley v. Palatnik, 

, 1040 (2d Cir. 1975); see also S. Rep. No. 86-187, at 13 (1959)

(noting that the purpose of § 302 is to make the LMRA “applicable to all forms of extortion and

bribery in labor-management relations”).

       Today, we join several of our sister circuits in holding that an expired collective-

bargaining agreement satisfies the written-agreement requirement of § 302(c)(5)(B). See, e.g.,

Alaska Trowel Trades Pension Fund v. Lopshire, 

, 883 (9th Cir. 1996); Denver

Metro. Ass’n of Plumbing, Heating, Cooling Contractors v. Journeyman Plumbers & Gas Fitters

Local No. 3, 

, 1373 (10th Cir. 1978); see also Gariup v. Birchler Ceiling &

Interior Co., 

, 375 (7th Cir. 1985) (finding that the written agreement need not be a

signed, unexpired collective-bargaining agreement). This follows from both the requirement that

an employer maintain the status quo following expiration of a collective-bargaining agreement,

and that such continued payments under an expired collective-bargaining agreement do not

implicate the purpose of § 302.

       Cibao argues that even if an expired collective-bargaining agreement constitutes a written

agreement under § 302, there was no written agreement between Cibao and the National Funds.

Rather, in Cibao’s view, its written agreement was with only the Washable Funds, and it has no

such agreement with the National Funds, the Washable Funds’ post-merger successor. This

argument need not long detain us. Articles 18 and 19 of the collective-bargaining agreement

required that Cibao make contributions to the Washable Funds according to plans “as established

by the Trustees” of the Funds. The Funds themselves were governed by an Agreement and

                                                 9
Declaration of Trust granting the Trustees the “right . . . to modify, change, amend or terminate

to any extent any or all of the terms and provisions of the Plan.” The Declaration of Trust further

provided that “[t]he decision of the Trustees in any matter administering the affairs of this Trust

shall be final and binding on the Fund, the Employees, any applicant or claimant for benefits, the

Employer and the Union.” As such, under the collective-bargaining agreement and the Funds’

governing documents, the Trustees had the right both to change the Washable Funds’ name and

to merge them into the National Funds. The merger of the Washable Funds into the National

Funds in no way relieved Cibao of its obligations to contribute to the National Funds when the

collective-bargaining agreement allowed the Trustees to effectuate the merger. See DeVito v.

Hempstead China Shop, 

, 654 (2d Cir. 1994) (finding that the employer remained

obligated to make contributions to a successor fund, after a merger, when the terms of the

collective-bargaining agreement and the declaration of trust authorized the trustees to make the

merger decision). Unlike Moglia v. Geoghegan, 

, 117-18 (2d Cir. 1968), on which

Cibao relies, in this case there was a valid, signed collective-bargaining agreement which granted

the Funds’ trustees authority to effect the merger. Therefore, the collective-bargaining agreement

required continued payments to the National Funds after the merger, and those payments were

not precluded by § 302 of the LMRA.

                                           CONCLUSION

       For the foregoing reasons, we DENY Cibao’s petition for review and GRANT the

NLRB’s application for enforcement of its March 6, 2007 order.




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