Local 348 v. Meridian Management

07-0080-cv
Local 348 v. Meridian Management

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

_____________________

August Term, 2007
(Argued: June 20, 2008 Decided: October 2, 2009)
Docket No. 07-0080-cv
_____________________

LOCAL 348-S, UFCW, AFL-CIO,

Plaintiff-Appellee,

-v.-

MERIDIAN MANAGEMENT CORP.,

Defendant-Appellant.

_______________________

BEFORE: HALL, LIVINGSTON, Circuit Judges, and McMAHON, District Judge.*

_______________________

The district court issued an order compelling Defendant-Appellant Meridian Management

Corporation (“Meridian”) to submit to arbitration the issue of whether it was bound by the terms

of a collective bargaining agreement (“CBA”) between Plaintiff-Appellee Local 348-S, UFCW,

*
The Honorable Colleen McMahon, of the United States District Court for the Southern
District of New York, sitting by designation.

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AFL-CIO (“Local 348”) and Cristi Cleaning Services, Inc. (“Cristi”), Meridian’s predecessor

employer. On appeal, Meridian argues that it is not bound by the arbitration provision contained

in the CBA because it was not a party to that agreement. We hold that, as the successor of Cristi,

Meridian is obligated to arbitrate the question of whether and to what extent it is bound by the

substantive terms of the CBA. Accordingly, the judgment of the district court is AFFIRMED.

Judge Livingston dissents in a separate decision.

_______________________

Robert G. Riegel, Jr., Coffman, Coleman, Andrews & Grogan, P.A., Jacksonville,
Florida, for Defendant-Appellant.

J. Warren Mangan, O’Connor & Mangan, P.C., New Rochelle, New York, for
Plaintiff-Appellee.
_______________________

HALL, Circuit Judge:

Plaintiff-Appellee Local 348-S, UFCW, AFL-CIO (“Local 348”) brought suit against

Defendant-Appellant Meridian Management Corporation (“Meridian), alleging that Meridian had

failed to contribute to the union’s Health and Welfare Fund as required by a collective bargaining

agreement (“CBA”) that was between Local 348 and Cristi Cleaning Services, Inc. (“Cristi”),

Meridian’s predecessor. The complaint sought an order compelling Meridian to arbitrate the

fund dispute under the terms of the CBA. The district court found that because Meridian was the

successor employer to Cristi, Meridian was required to arbitrate the issue of whether it was

bound by any of the terms of the CBA. On appeal, Meridian urges us to adopt the holding of the

Third Circuit in AmeriSteel Corp. v. International Brotherhood of Teamsters, 267 F.3d 264 (3d

Cir. 2001), and conclude that, even if Meridian is obligated to arbitrate under the CBA, because

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it is not bound by the specific terms of that agreement, arbitration would be futile because no

arbitration award could receive judicial sanction. We disagree, and hold that, while Meridian’s

status as Cristi’s successor does not automatically bind Meridian to the substantive terms of the

pre-existing CBA, Meridian is required to arbitrate the issue of whether and to what extent it is

bound by the terms of that agreement. We offer no opinion regarding the extent to which

Meridian is bound by the substantive terms of the CBA between Cristi and Local 348. We leave

that question to the arbitrator to decide in the first instance. Accordingly, the judgment of the

district court is AFFIRMED.

BACKGROUND

I. Meridian Management Corporation Contracts with Cristi Cleaning Services, Inc.

In October 2003, Meridian successfully bid for a contract with the Port Authority of New

York and New Jersey to provide engineering and janitorial services at the Jamaica Air Train

Terminal (the “Terminal”) for the period from October 2003 until September 2006. Meridian

elected to perform the engineering services itself and to subcontract the janitorial services to

Cristi under a contract that was to begin in December 2003 and continue until December 2004

and would thereafter automatically renew on a month-to-month basis until one party gave the

other party 30-day notice of its intent to terminate the agreement.

At the time of the subcontract between Cristi and Meridian, Local 348 represented Cristi

employees who worked at JFK International Airport. The CBA between Cristi and Local 348

required Cristi to contribute to Local 348’s Health and Welfare Fund for each of its full-time

employees. The CBA contained an arbitration clause which provided that all disputes between

Cristi and Local 348 would be resolved through arbitration. The terms of the CBA were binding

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upon Cristi and Local 348 as well as their “successors.” After Meridian awarded Cristi the

subcontract at the Terminal, Local 348 and Cristi agreed to amend the CBA to apply to Cristi

employees who worked at the Terminal.

In September 2005, Meridian gave Cristi 30-day notice of its intent to terminate the

subcontract for the janitorial services at the Terminal, effective November 1, 2005. Although

Meridian initially accepted bids from other cleaning services, it eventually elected to perform the

janitorial services at the Terminal rather than subcontracting the work to another company. Prior

to November 1, 2005, Meridian hired a majority of Cristi employees who had worked at the

Terminal. Eventually, Local 348 sought from Meridian recognition as the bargaining

representative of the Meridian employees who performed the janitorial work at the Terminal.

Meridian declined to recognize Local 348 as the employees’ representative.

II. Local 348 Brings an Action Seeking to Arbitrate the Dispute

In January 2006, Local 348 filed a complaint against Meridian pursuant to the Labor

Management Relations Act (“LMRA”), 29 U.S.C. §§ 141, et seq., and the Employee Retirement

Income Security Act (“ERISA”), 29 U.S.C. §§ 1001, et seq. Local 348 alleged that after

November 1, 2005 there had “been a continuation of the Cristi cleaning services work” at the

Terminal and that employees represented by Local 348 had “continuously performed that work

by the same methods.” According to the complaint, after November 1, 2005, Meridian failed to

make the contributions to the Health and Welfare Fund that were required by the CBA. Local

348 asserted that “Meridian, by its continuation of the cleaning services work” at the Terminal,

had “assumed Cristi’s obligations under the CBA and . . . had a duty to contribute to the Fund” as

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required by the terms of the CBA. The Union requested that the district court enter judgment

compelling Meridian to submit the Health and Welfare Fund dispute to arbitration.

In July 2006, Local 348 filed a motion for summary judgment in which it argued that the

arbitration provision of the CBA applied to Meridian because there was a “substantial continuity

in the identity of the business” before and after Meridian assumed the janitorial services at the

Terminal. Thereafter, Meridian also sought summary judgment, arguing that it was not bound by

the terms of the CBA between Cristi and Local 348.

III. The District Court Compels Meridian to Arbitrate with Local 348

In November 2006, the district court issued an order granting Local 348’s motion for

summary judgment and denying Meridian’s motion for summary judgment. The court ordered

Meridian to arbitrate. In doing so, the court determined that there was “obvious continuity in the

workforce employed by [Meridian] and Cristi.” It also concluded that there was “continuity in

the work performed by the terminal employees under Cristi and [Meridian],” noting that, despite

Meridian’s claim that it had made “sweeping changes” to the nature of the cleaning work at the

terminal, “the fact remains that Cristi and [Meridian] were required by contract to perform the

exact same cleaning services at the terminal.” Noting that Local 348 sought contributions to the

Fund “for the period following [Meridian’s] hiring only,” the court rejected Meridian’s claim that

because Cristi remained a viable entity, Local 348 could have sought relief from that company.

The court concluded that “[b]ecause of the circumstances presented . . . it [was] appropriate for

the arbitrator to decide if [Meridian] is bound, as a successor, to any terms of the CBA beyond

the obligation to arbitrate.” In December 2006, the district court issued an order granting

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Meridian’s motion for a stay of its order compelling the company to arbitrate, pending the

outcome of this appeal.

Meridian appeals.

DISCUSSION

On appeal, Meridian raises three issues to support its argument that it is not obligated to

arbitrate in this case. Meridian first argues that the continuing identity of the workforce between

Cristi and Meridian is not sufficient to bind Meridian to the terms of the CBA between Local 348

and Cristi. Second, it contends that if the district court’s analysis were correct, it would bind

every successor employer to the terms of a pre-existing CBA. Third, according to Meridian, this

Court should adopt the Third Circuit’s reasoning in AmeriSteel Corp. v. International

Brotherhood of Teamsters, 267 F.3d 264 (3d Cir. 2001), and find that arbitration is futile because

Meridian is not bound by the specific terms of the CBA and, thus, no award could receive

judicial sanction.

This Court reviews a district court’s grant of summary judgment de novo, viewing the

evidence in the light most favorable to the nonmoving party. See Coosemans Specialities, Inc. v.

Gargiulo, 485 F.3d 701, 705 (2d Cir. 2007). In this case, the issue before this Court is not the

fact-based question of whether Meridian is the successor employer to Cristi. In its brief and at

oral argument, Meridian expressly denied that it was challenging the district court’s conclusion

on this point. Rather, we consider the legal issue of the extent to which a successor employer

either 1) is obligated to arbitrate under or 2) is bound by the substantive terms of a CBA between

a union and that successor employer’s predecessor. We review de novo the district court’s

determination of this question of law. Id.

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 As discussed below, the development of the case law on this topic compels the

conclusion that a successor employer is not automatically bound by the substantive terms of a

pre-existing CBA, even if that successor employer retains a majority of its predecessor’s

workforce. However, on the unique facts of this case, we agree with the district court that this

particular successor employer has an obligation to arbitrate the issue of whether, and to what

extent, it is bound by the substantive terms of the CBA that governed the workforce it inherited.

I. John Wiley & Sons, Inc.

The Supreme Court first addressed the issue of successor employers in John Wiley &

Sons, Inc. v. Livingston, 376 U.S. 543 (1964). In that case, certain employees of Interscience

Publishers, Inc. (“Interscience”) were represented by an AFL-CIO union with which Interscience

had entered into a CBA. In 1961, Interscience merged with John Wiley & Sons, Inc. (“Wiley”),

another publishing firm, and ceased to operate as a separate entity. Although Wiley retained the

majority of Interscience’s former employees, the company refused to recognize the union as the

employees’ bargaining representative. Wiley argued that the merger of the companies had

terminated the CBA and that it had never been a party to the CBA. The union filed a complaint

under § 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. §§ 141, et seq.,

seeking to compel arbitration.

The Supreme Court concluded that Wiley was required to arbitrate with the union under

the pre-existing CBA. 376 U.S. at 548. The Court began by acknowledging “the central role of

arbitration in [e]ffectuating national labor policy,” and noting that it had previously “described

arbitration as ‘the substitute for industrial strife’ and as ‘part and parcel of the collective

bargaining process itself.’” Id. at 549 (quoting United Steelworkers of Am. v. Warrior & Gulf

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Navigation Co., 363 U.S. 574, 578 (1960)). According to the Court, “[i]t would derogate from

‘[t]he federal policy of settling labor disputes by arbitration’ . . . if a change in the corporate

structure or ownership of a business enterprise had the automatic consequence of removing a

duty to arbitrate previously established.” Id. (quoting United Steelworkers of Am. v. Enterprise

Wheel & Car Corp., 363 U.S. 593, 596 (1960)).

The Court then pointed to the necessity of balancing the interests of business owners with

those of the employees, noting “[t]he objectives of national labor policy . . . require that the

rightful prerogative of owners independently to rearrange their businesses and even eliminate

themselves as employers be balanced by some protection to the employees from a sudden change

in the employment relationship.” Id. According to the Court, in this context, continuing to

resolve employees’ claims through arbitration would “ease[]” the transition from one employer

to another and avoid “industrial strife.” Id. The Court acknowledged that under general

principles of contract law a non-consenting successor would not normally be bound to the terms

of a contract to which that party did not agree. Id. at 550. The Court noted, however, that “a

collective bargaining agreement is not an ordinary contract,” and that “the impressive policy

considerations favoring arbitration [were] not wholly overborne by the fact that” the successor

employer had not signed the contract being construed. Id.

Finally, the Court acknowledged that the duty to arbitrate does not survive in every case

in which corporate ownership or structure changes. The Court recognized that “there may be

cases in which the lack of any substantial continuity of identity in the business enterprise before

and after a change would make a duty to arbitrate something imposed from without . . ..” Id. at

551. The Court noted that in the case of Wiley, “relevant similarity and continuity of operation

8
across the change in ownership [was] adequately evidenced by the wholesale transfer of

Interscience employees to the Wiley plant, apparently without difficulty.” Id.

II. Burns International Security Services, Inc.

The Supreme Court next addressed the issue of a successor employer’s obligations under

a pre-existing CBA in NLRB v. Burns International Security Services, Inc., 406 U.S. 272 (1972).

In that case, Burns International Security Services (“Burns”) took over the task of providing

security to a Lockheed facility in California. Security services at the facility had previously been

provided by Wackenhut Corporation (“Wackenhut”). At the time of the changeover of security

companies, Wackenhut had recently entered into a CBA with the United Plant Guard Workers of

America (“UPG”), which had been recently certified as the bargaining representative of

Wackenhut guards. Burns chose to retain 27 of the former Wackenhut guards. Thereafter, Burns

declined to recognize UPG as the employees’ bargaining representative and refused to honor the

CBA between UPG and Wackenhut. UPG filed an unfair labor practice charge with the National

Labor Relations Board (“NLRB”). The NLRB concluded that Burns had violated the National

Labor Relations Act (“NLRA”) by failing to recognize and bargain with UPG and refusing to

honor the CBA. On review, this Court held that the Board had exceeded its powers by ordering

Burns to honor the CBA.

The Supreme Court affirmed this Court’s decision, concluding that while Burns, as the

successor employer to Wackenhut, had a duty to bargain, the company was not bound by the

substantive terms of the CBA between UPG and Wackenhut. 406 U.S. at 281-82. The Court

began by acknowledging with approval the NLRB’s conclusion that Burns, as Wackenhut’s

successor, had an obligation to bargain with the union. Id. at 278-79. As the Court observed,

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“where the bargaining unit remains unchanged and a majority of the employees hired by the new

employer are represented by a recently certified bargaining agent there is little basis for faulting

the Board’s implementation of the express mandates of [the NLRA] by ordering the employer to

bargain with the incumbent union.” Id. at 281.

The Court also determined, however, that the duty to bargain with the incumbent union

did not extend to bind Burns to the substantive terms of the existing CBA. Id. at 281-82. The

Court noted that “Congress has consistently declined to interfere with free collective bargaining

and has preferred that device, or voluntary arbitration, to the imposition of compulsory terms as a

means of avoiding or terminating labor disputes.” Id. at 282. The Court pointed to the NLRB’s

prior decisions which, to that point, had “consistently held that, although successor employers

may be bound to recognize and bargain with the union, they are not bound by the substantive

provisions of a collective-bargaining contract negotiated by their predecessors but not agreed to

or assumed by them.” Id. at 284.

III. Howard Johnson

In Howard Johnson Co. v. Hotel and Restaurant Employees, 417 U.S. 249 (1974), the

Court revisited its holdings in Wiley and Burns. In Howard Johnson, the Grissom family entered

into an agreement with the Howard Johnson Company whereby the family would sell certain

equipment to the company and lease the company a restaurant and motor lodge that had

previously been operated by the family and its wholly-owned corporation. When the family

operated the facilities, the employees of the restaurant and motor lodge had been represented by

the Hotel & Restaurant Employees & Bartenders International Union (“Hotel & Restaurant

Employees”). In its agreement with the Grissoms, Howard Johnson expressly declined either to

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recognize the CBA between the Grissoms and the union or to assume any obligations or

liabilities arising from the CBA. Howard Johnson retained only nine of the forty-five employees

who had worked for the Grissoms. Characterizing Howard Johnson’s failure to hire all of the

Grissom’s employees as an illegal lock out, the union filed a complaint under § 301 of the

LMRA, seeking to compel Howard Johnson to arbitrate the extent of its obligations to the

Grissom employees under the CBA. The district court held that Howard Johnson was required to

arbitrate, and the Sixth Circuit affirmed. Both the district court and the court of appeals relied on

the Court’s decision in Wiley to determine that Howard Johnson, as the successor employer to the

Grissoms, was required to arbitrate with the union.

The Supreme Court reversed the Sixth Circuit’s decision and decided that Howard

Johnson had no duty to arbitrate under the CBA. 417 U.S. at 256. The Supreme Court

acknowledged the lower courts’ suggestion that the holding in Wiley– that a successor employer

is bound to arbitrate with an incumbent union– and the holding in Burns– that a successor

employer is not automatically bound to the substantive terms of the CBA between the

predecessor employer and the incumbent union– were “to some extent inconsistent.” Id. at 254.

The Court rejected the lower courts’ reasoning that Wiley controlled the result in Howard

Johnson’s case simply because Wiley involved a suit brought under § 301 of the LMRA, while

Burns on the other hand involved an NLRB order resulting from an unfair labor practice charge.

Id. at 255. The Court pointed to its prior decisions holding that, while § 301 of the LMRA

“authorized the federal courts to develop a federal common law regarding enforcement of

collective-bargaining agreements,” it was “clear that this federal common law must be

‘fashion[ed] from the policy of our national labor laws.’” Id. (citing and quoting Textile Workers

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Union v. Lincoln Mills, 353 U.S. 448, 456 (1957)). The Court reasoned, “[i]t would be plainly

inconsistent with this view to say that the basic policies found controlling in an unfair labor

practice context may be disregarded by the courts in a suit under § 301, and thus to permit the

rights enjoyed by the new employer in a successorship context to depend upon the forum in

which the union presses its claims.” Id. at 256.

However, the Court also concluded that it was “unnecessary . . . to decide in the

circumstances of th[e] case whether there is any irreconcilable conflict between Wiley and Burns”

because “even on its own terms, Wiley does not support the decision of the courts below.” Id.

The Court went on to note several relevant distinctions between the facts presented in Howard

Johnson and the facts of Wiley. One of these distinctions was that Wiley involved a merger, “as a

result of which the initial employing entity completely disappeared,” while Howard Johnson

“involves only a sale of some assets[ ] and the initial employers remain in existence as viable

corporate entities . . ..” Id. at 257. According to the Court, this distinction was relevant because,

as recognized in Wiley, New York State law “‘embodied the general rule that in merger situations

the surviving corporation is liable for the obligations of the disappearing corporation.’” Id.

(quoting Burns, 406 U.S. at 286). Furthermore, unlike the former employer in Wiley, because the

former employer in Howard Johnson continued to exist, the union had “a realistic remedy to

enforce their contractual obligations” against that former employer. Id.

According to the Court, the “more important” of the relevant distinctions between the

facts of Wiley and the facts of Howard Johnson was that in Wiley “the surviving corporation

hired all of the employees of the disappearing corporation.” Id. at 258. The Court noted that,

because John Wiley & Sons had hired the majority of its predecessor’s employees, “[t]he claims

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which the union sought to compel Wiley to arbitrate were thus the claims of Wiley’s employees

as to the benefits they were entitled to receive in connection with their employment. It was on

this basis that the Court in Wiley found that there was ‘substantial continuity of identity in the

business enterprise’ . . . which it held necessary before the successor employer could be

compelled to arbitrate.” Id. at 259 (quoting Wiley, 376 U.S. at 551). In Howard Johnson,

however, “the primary purpose of the Union in seeking arbitration . . . [was] not to protect the

rights of Howard Johnson’s employees,” but, rather, to protect the rights of “the former Grissom

employees who were not hired by Howard Johnson.” Id. at 260.

According to the Supreme Court, because there was no “substantial continuity of identity

in the business enterprise” before and after Howard Johnson assumed the operation of the hotel

and restaurant, under Wiley, Howard Johnson had no duty to arbitrate under the CBA. Id. at 263

(quoting Wiley, 376 U.S. at 551). In arriving at this conclusion, the Court observed “[t]his

continuity of identity in the business enterprise necessarily includes . . . a substantial continuity in

the identity of the work force across the change in ownership. The Wiley Court seemingly

recognized this, as it found the requisite continuity present there in reliance on the ‘wholesale

transfer’ of Interscience employees to Wiley.” Id. According to the Court, interpreting Wiley to

focus on the continuity of the identity of the workforce correctly balanced the interest of workers

with the interest of business owners:

This interpretation of Wiley is consistent also with the Court’s concern with
affording protection to those employees who are in fact retained in “[t]he
transition from one corporate organization to another” from sudden changes in the
terms and conditions of their employment, and with its belief that industrial strife
would be avoided if these employees’ claims were resolved by arbitration rather
than by “the relative strength . . . of the contending forces.” At the same time, it
recognizes that the employees of the terminating employer have no legal right to

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 continued employment with the new employer . . .. This holding is compelled . . .
if the protection afforded employee interests in a change of ownership by Wiley is
to be reconciled with the new employer’s right to operate the enterprise with his
own independent labor force.

Id. at 264 (citation omitted).

IV. Fall River

The holdings of Wiley, Burns and Howard Johnson, taken together, reflect the Court’s

identification of several principles that must influence any consideration of a successor

employer’s obligations under a pre-existing CBA. The decisions, particularly Wiley, emphasize

the central role of collective bargaining and arbitration in furthering the goals of national labor

policy – specifically by avoiding industrial strife and encouraging the peaceful resolution of labor

disputes. See, e.g., Wiley, 376 U.S. at 549; Burns, 406 U.S. at 282. They also demonstrate the

Court’s concern with balancing the interests of the parties most affected by changes in ownership

or corporate restructuring: (1) the employees represented by the incumbent union and (2) the

successor employer. In Wiley, the Court identified the successor employer’s duty to arbitrate as a

means by which the employees represented by an incumbent union would be protected from a

sudden change in the employment relationship. 376 U.S. at 549. In Burns, the Court declined to

bind a successor employer to the substantive terms of a pre-existing CBA, thus emphasizing the

successor employer’s right to rearrange or restructure its business. 406 U.S. at 281-82.

However, even in declining to extend a successor employer’s obligations to include the

substantive terms of the CBA, the Court emphasized the important role of collective bargaining

and arbitration, pointing to Congress’s preference for the use of arbitration and collective

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bargaining over the imposition of compulsory terms as means of avoiding labor disputes. Id. at 282.

In Howard Johnson, the Court reiterated the importance of the continuity of the identity

of the work force as a benchmark for determining whether a successor employer is obligated to

arbitrate under the pre-existing CBA. In so doing, the Court again stressed the necessity of

balancing the interests of employees represented by an incumbent union with the interests of a

successor employer. 417 U.S. at 264. Although in Howard Johnson the Court declined to

extend Wiley to the facts presented in that case, the Court’s explanation for that refusal

emphasized the importance of the workers’ interest in being shielded from sudden changes in the

employment relationship. The Court’s determination that Howard Johnson was not required to

arbitrate under the CBA was based in large part on the fact that Howard Johnson’s work force

was not composed of the same people as the Grissoms’ work force. In other words, the Howard

Johnson’s workers on whose behalf the union was advocating had not had an employment

relationship with the Grissoms and, thus, did not suffer changes in that relationship from which

they needed protection. Howard Johnson did not limit the holding in Wiley. Rather, in declining

to compel the Howard Johnson Company to arbitrate, the Court relied on the policies identified

and addressed by Wiley’s reasoning and determined that these policies would not have been

furthered by an order compelling arbitration.

The Court most recently revisited the issue of successor employers in Fall River Dyeing

& Finishing Corp. v. NLRB, 482 U.S. 27 (1987). There the Court discussed the rationale for

extending the bargaining obligation – and recognizing the incumbent union’s presumption of

majority status – in this context. The Court described a union’s precarious position during a

change in ownership or corporate restructuring:

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 During a transition between employers, a union is in a peculiarly vulnerable
position. It has no formal and established bargaining relationship with the new
employer, is uncertain about the new employer's plans, and cannot be sure if or
when the new employer must bargain with it. While being concerned with the
future of its members with the new employer, the union also must protect
whatever rights still exist for its members under the collective-bargaining
agreement with the predecessor employer.

482 U.S. at 39. Further, the Court noted that employees facing such transitions “may well feel

that their choice of a union is subject to the vagaries of an enterprise’s transformation. This

feeling is not conducive to industrial peace.” Id. at 39-40 (emphasis added).

In Fall River, the Court reiterated the holding of Burns that successor employers are not

bound by the substantive terms of their predecessors’ CBAs. Id. at 40. It also extended the

bargaining obligation to cases, unlike Burns, in which the union’s certification was not recent:

We now hold that a successor’s obligation to bargain is not limited to a situation
where the union in question has been recently certified. Where, as here, the union
has a rebuttable presumption of majority status, this status continues despite the
change in employers. And the new employer has an obligation to bargain with
that union so long as the new employer is in fact a successor of the old employer
and the majority of its employees were employed by its predecessor.

Id. at 41.

The Court also revisited the fact-based approach to determining whether a new employer

is a successor to a previous employer. Id. at 43. It acknowledged, with approval, the NLRB’s

analysis that focused on “whether those employees who have been retained will understandably

view their job situations as essentially unaltered.” Id. (internal quotation marks omitted).

According to the Court, “[t]his emphasis on the employees’ perspective furthers the [NLRA’s]

policy of industrial peace. If the employees find themselves in essentially the same jobs after the

employer transition and if their legitimate expectations in continued representation are thwarted,

16
their dissatisfaction may lead to labor unrest.” Id. at 43-44. Fall River demonstrates the

continued applicability of the Court’s oft-stated interest in affording represented workers

protection from changes in an employment relationship that result from a change in ownership.

The decision also confirms that imposing on a successor employer a duty to bargain or arbitrate

remains the most effective way to afford employees that important protection.

V. Synthesis of Case Law and the Present Case

In view of the foregoing, the district court properly concluded that Meridian was

obligated to arbitrate the question of whether, and to what extent, it must comply with the

substantive terms of the CBA between Local 348 and Cristi. Neither party disputes that here,

as was the case in Wiley, Meridian retained a majority of Cristi’s employees after assuming the

cleaning duties previously performed by Cristi; nor does anyone dispute that those employees

continued to perform substantially the same duties for Meridian as they had for Cristi. We

acknowledge that in Wiley the identical situation came about as a result of a merger, while in this

case the reason was the termination of Cristi’s subcontract. However, we do not believe that

Wiley can or should be limited to situations in which a merger occurs. Rather, as the Supreme

Court recognized in Howard Johnson, the issue is whether there exists a “substantial continuity

of identify of the work force.” Howard Johnson, 417 U.S. at 263. The merger of two

companies, resulting in the hiring of one company’s entire workforce by the other, undoubtedly

creates the continuity of identity contemplated by the Court. But we can imagine other ways in

which the same identity could come about. This case presents one of them.

In accordance with the Supreme Court’s decision in Fall River, the existence or non-

existence of substantial continuity in the context of assessing the duty to bargain is determined by

17
looking at: whether the business of both employers is essentially the same; whether the

employees of the new company are doing the same jobs in the same working conditions under

the same supervisors; whether the new entity has the same production process, produces the same

products, and basically has the same body of customers. We have previously used the Fall River

factors to make a fact-specific finding that a successor corporation was bound by a predecessor’s

CBA, at least to the extent of its arbitration clause. See Stotter Div. of Graduate Plastics Co. v.

Dist. 65, 991 F.2d 997, 1001 (2d Cir. 1993). Looking at those factors in this case, it is apparent

that this particular employer, Meridian, should be required to arbitrate the degree to which it is

otherwise bound by the CBA.

The key factor in our analysis is a particular fact that was not present in any of the prior

jurisprudence on this subject: at all times from the time that the employees represented by Local

348 began to work at the Terminal (including when Cristi was the employer of record), those

employees were essentially working for Meridian. Meridian had the contract to clean the

terminal. Meridian elected to fulfill its contractual obligations by retaining Cristi – a shop that

employed union workers pursuant to an existing CBA – to do Meridian’s work. Their wages

came from Cristi, of course, but Cristi was in turn paid by Meridian to perform the janitorial

services required by the contract between Meridian and the Port Authority. Cristi was simply the

middleman between Meridian and those workers. Put otherwise, when it entered into its

agreement with the Port Authority and obligated itself to provide janitorial services at the

Terminal, Meridian knowingly and voluntarily elected to carry out its obligation by hiring a

subcontractor that employed workers represented by Local 348, pursuant to a collective

bargaining agreement negotiated by Local 348. Eventually, Meridian decided to eliminate the

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middleman and, in November 2005, entered into a direct employment relationship with

approximately three-quarters of the janitorial workers at the Terminal. Otherwise, nothing

changed. The same people went to the same locations and performed janitorial services that

Meridian -- not Cristi -- had all along been contractually bound to provide for the Port Authority.

Looking at the Fall River factors against the backdrop of this crucial fact, it is clear that

the district court reached the correct conclusion.

First, both Meridian and Cristi are in the business of providing janitorial services to

commercial enterprises in the New York metropolitan area. Although Meridian provides more

than just janitorial services, as a part of its more general provision of building maintenance

services, Meridian undertakes to keep its buildings clean. To the extent that Meridian uses its

own employees to perform that task, it is in the same business as Cristi.

Second, the employees who woke up one morning to find that they were now employed

by Meridian rather than Cristi went to the same location -- the Terminal -- and performed the

same job -- cleaning -- in substantially the same working conditions as they always did.

Third, Meridian continues to the use those same workers to provide the same product to

the same customer. While Cristi, the predecessor employer, was technically providing janitorial

services to Meridian, not the Port Authority, that is a distinction without a difference, because

Cristi was acting as Meridian’s subcontractor for the purpose of providing services to the Port

Authority.

It is true that Cristi was not extinguished as a corporation when Meridian decided to

supplant it as the provider of janitorial services. There has been no merger here and there was

not even a sale of assets. Our dissenting colleague suggests that Local 348 could look to Cristi to

19
provide the benefits the union seeks to obtain through arbitration. In this case, however, the

continued existence of Cristi is irrelevant. As in Wiley, Local 348 would likely have no way of

obtaining the relief it has sought from Meridian by filing suit against Cristi. In Wiley, the original

employer ceased to exist after the merger and, thus, the union could not obtain relief by filing suit

against that original employer. Here, because Christi no longer employed the union members

after its agreement with Meridian was terminated, Cristi had no legal responsibility to make

further contributions to the Fund. There would thus be no basis upon which Local 348 could

obtain those contributions from Cristi. It is neither legally required nor equitably appropriate to

force Cristi to pay benefits that are owed to Meridian’s employees for work being performed by

Meridian. Given the nature of Local 348’s claims, only Meridian can provide Local 348 with the

relief it seeks.

The Supreme Court identified interests to be balanced in Burns and Howard Johnson.

This, however, is not a case like Burns, where one security service outbid its competitor and so

obtained the right to provide security services to Lockheed, the ultimate customer, and where the

issue was which of two union contracts would protect the security guards. Neither is this a case

like Howard Johnson, where most of the predecessor’s employees were fired and the union was

actually seeking to vindicate the rights of those displaced employees — not the rights of the few

who actually remained on the job. In this case, the union is seeking health and welfare

contributions for the employees who remained on the job, and who had a legitimate expectation

that they would continue to receive the same compensation (including benefits) for doing the

same work on behalf of the same ultimate contracting party.

20
 Enforcing a duty to arbitrate the issue of Meridian’s obligation to comply with the

substantive terms of the agreement is the most effective way to balance those interests recognized

by the Supreme Court in Wiley, as well as Burns and Howard Johnson. Arbitration provides a

forum in which the two parties can offer evidence and arguments regarding their dispute.

Although the obligation to arbitrate arises out of the agreement, and the case law clearly

establishes that a successor is not automatically obligated by the substantive terms, requiring

arbitration on this issue is the most efficient and fair means by which the parties can settle their

dispute, particularly in cases like this one where the dispute arises out of the employer’s refusal

to honor a particular term of the CBA. The duty to recognize the union is separate from the duty

to arbitrate grievances arising out of the existing CBA, and the two have different purposes. The

former may lead to negotiation of a new agreement between the successor employer and the

incumbent union. The latter protects the established right of union members to rely on the

protections negotiated for them by their union, at least until that union negotiates a new

agreement with their new employer. See Howard Johnson, 417 U.S. at 264 (noting that

interpreting Wiley to require a successor employer to arbitrate “is consistent . . . with the Court’s

concern with affording protection to employees who are . . . retained in the transition from one

corporate organization to another . . ..”) (internal quotation marks omitted). The narrow issue

before this Court arises from a dispute regarding the substantive terms of the CBA, not whether

Meridian violated its duty to bargain or recognize Local 348. See Wiley, 376 U.S. at 551 (“This

Union does not assert that it has any bargaining rights independent of the Interscience agreement;

it seeks to arbitrate claims based on that agreement . . . not to negotiate a new agreement.”).

Accordingly, the district court’s order of arbitration was appropriate in this case in that it required

21
the commencement of an arbitration that would decide two questions: first, the extent to which

Meridian is bound by the particular provisions of the CBA at issue, and second, if Meridian is

bound, then the nature of the relief available to Local 348.

We note Meridian’s argument that under the district court’s analysis all successor

employers will be bound by the substantive terms of pre-existing CBAs. This overstates the

relief awarded by the district court, however, as the very question to be considered by the

arbitrator in the first instance is whether and to what extent Meridian is required to comply with

the terms of the pre-existing CBA. We emphasize that our holding on this point is a narrow one.

We do not intend a rule that binds all successor employers to the substantive terms of pre-

existing agreements between their predecessors and the unions that represent the predecessors’

employees. Rather, we conclude that, as in this case, where there are sufficient indicia of

substantial continuity of identity of the workforce, it is possible that a successor employer will be

bound at least by some of the substantive terms of a pre-existing CBA. Determining the extent to

which the successor employer is bound by the preexisting agreement, however, is a question for

the arbitrator. See AmeriSteel, 267 F.3d at 287-88 (“Wiley’s holding necessarily means that, in

the right circumstances, some substantive terms of a predecessor’s CBA may be imposed on an

unconsenting non-alter-ego successor corporation. . . . [T]his case involves only arbitrating the

applicability of the CBA . . ..”) (Becker, J., dissenting) (emphasis in original). We offer no

opinion regarding the extent to which Meridian is bound by the substantive terms of the CBA
1
between Cristi and Local 348. We leave that question to the arbitrator.

1
Contrary to the dissent’s assertion, the balancing test that we undertake is not
“freewheeling.” See slip dissent at 11. Rather, as we have explained it above and as we apply it
here, its factors are those established by the Supreme Court. The situation before us, in which

22
VI. AmeriSteel

Meridian relies on the Third Circuit’s decision in AmeriSteel to argue that the district

court improperly compelled it to arbitrate with Local 348. The facts of AmeriSteel are simple

and, in this context, familiar. In 1999, AmeriSteel Corporation (“AmeriSteel”) purchased

various assets of Brocker Rebar, including a facility in York, Pennsylvania, where certain

employees were represented by the Teamsters. Brocker Rebar had entered into a CBA with the

Teamsters prior to the purchase of the facility by AmeriSteel. That company hired all but six of

the employees represented by the Teamsters. Despite this, AmeriSteel consistently maintained

that because it was not bound by the substantive terms of the CBA, it was not required to

arbitrate under the agreement. Prior to the effective date of the agreement between AmeriSteel

and Brocker Rebar, the Teamsters filed a grievance challenging changes at the location that

would occur after the purchase agreement was consummated. After the parties were unable to

resolve the dispute, the union requested arbitration pursuant to the terms of the CBA.

AmeriSteel filed a complaint in district court seeking an injunction prohibiting the union and the

American Arbitration Association from proceeding to arbitration with AmeriSteel as a party.

The district court granted AmeriSteel the injunction, finding that because AmeriSteel was not the

alter ego of Brocker Rebar and had not agreed to abide by the terms of the CBA, it had no duty to

arbitrate.

On appeal, the Third Circuit agreed with the district court. 267 F.3d at 265. The court

began by examining the facts and holdings of Wiley and Burns and by asserting that the two cases

the employees represented by Local 348 were working indirectly and then directly for Meridian
at all times that they worked at the terminal, presents a relatively unusual, if not unique, set of
facts to which we have applied that test.

23
“appear to be in direct conflict.” Id. at 270. According to the Third Circuit, “[o]n the one hand,

the holding in Wiley necessarily implies that uncontesting successor employers may be bound by

the substantive terms of pre-existing CBAs. But on the other hand, Burns endorses the idea that

unwilling successors cannot be bound by such terms.” Id. It went on to examine the Supreme

Court’s holding in Howard Johnson, and concluded that “Howard Johnson does not bridge the

gap between Wiley and Burns, nor does it establish broadly applicable guiding principles that

should be implemented when analyzing labor law successorship problems.” Id. at 272.

According to the Third Circuit, in Howard Johnson, the Supreme Court “downplay[ed] the

significance of Wiley” and “t[ook] an expansive view of Burns, repeatedly extolling its

reasoning.” Id. The circuit court went on to presume that, because – in that court’s opinion –

Howard Johnson relied heavily on Burns and limited the holding of Wiley, “after Howard

Johnson, Burns rests on solid ground.” Id. at 273. Finally, the court concluded that, because

“Burns . . . provides more persuasive guidance than the limited holding in Wiley,” AmeriSteel

“cannot be bound by the substantive terms of the CBA,” and “because AmeriSteel cannot be

bound by the substantive terms of the CBA, no arbitration award to the Union – which of course

would be based on the substantive terms of the CBA – could receive judicial sanction, and

therefore AmeriSteel cannot be compelled to submit to arbitration.” Id. at 273-74.

With all due respect, we disagree with the Third Circuit’s analysis of Howard Johnson.

While Howard Johnson arguably did not announce any new principles in this context, it did

reinforce the Supreme Court’s emphasis on assessing the protectable interests in question and the

means by which those interests are most effectively protected. In Howard Johnson, the Court

discussed the rationale of Wiley at length and clearly established the contours of its holding. The

24
Court considered the reasoning and policies underlying both Burns and Wiley and rejected neither

case. As discussed above, in declining to apply Wiley to the facts presented by Howard Johnson,

the Court described the policies underlying the rationales of both Wiley and Burns. This is

further evidenced by the Supreme Court’s decision in Fall River, which reiterated and extended a

successor employer’s duty to arbitrate or bargain with an incumbent union.

The result of the holding in AmeriSteel is clear, as it eviscerates the protection of

employees represented by incumbent unions—a protection that has been well identified in the

Supreme Court’s decisions to this point. AmeriSteel’s controlling rationale incorrectly minimizes

the Supreme Court’s clear reasoning in Howard Johnson and fails to account for the discussion

in Howard Johnson of the importance of the policies first identified in Wiley. Further,

AmeriSteel does not account for the oft-recognized importance of the role of arbitration in

settling labor disputes. In sum, the majority in AmeriSteel misperceived the reasoning of

Howard Johnson and minimized, if not ignored, the Supreme Court’s repeated descriptions of

the important interests at play in the context of successor employers and their obligations to

incumbent unions. The result in AmeriSteel is one-sided in a way that is in clear conflict with the

policies identified in Wiley and reinforced in Howard Johnson. We agree with the dissent in

AmeriSteel and will not adopt the majority’s reasoning in that case “because its logical

consequence flatly contradicts the holding of Wiley . . ..” AmeriSteel, 267 F.3d at 281 (Becker,

J., dissenting). As discussed in Section V, supra, imposing a duty to arbitrate the issue of the

successor employer’s obligations under the substantive terms of the CBA is the most efficient

way of balancing the interests recognized by the Supreme Court in Wiley, Burns, and Howard

Johnson. Accordingly, the district court did not err in concluding that Meridian had an

25
obligation to arbitrate under the CBA between Cristi and Local 348, and that it was appropriate

for an arbitrator to determine the extent of Meridian’s obligation to comply with the substantive

terms of the CBA.

CONCLUSION

For the reasons stated, we AFFIRM the judgment of the district court.

26
DEBRA A. LIVINGSTON , Circuit Judge, dissenting:

The majority opinion confuses the circumstances in which a “successor employer”

has a duty to recognize and bargain with a labor union, with the much more limited

circumstances in which that employer is bound to arbitrate with a union under a collective

bargaining agreement to which it has not agreed. This confusion may be understandable, given

“the difficulty of the successorship question,” see Howard Johnson Co. v. Detroit Local Joint

Executive Bd., 417 U.S. 249, 256 (1974), and its history of bedeviling courts. See Ameristeel

Corp. v. Int’l Bhd. of Teamsters, 267 F.3d 264, 267 (3d Cir. 2001) (referencing the “treacherous

waters” of the Supreme Court’s labor law successorship doctrine); Edward B. Rock & Michael L.

Wachter, Labor Law Successorship: A Corporate Law Approach, 92 Mich. L. Rev. 203, 203

(1993) (“Courts have struggled repeatedly to define the legal obligations of the buyer of a

business that has unionized workers.”). The fact remains, however, that the majority

misinterprets what until today had become a settled, if not well-charted, area of law. This error

leads the majority to an erroneous result in this case, and to an analysis that either will confound

the “successor employer” labor law of this Circuit indefinitely or that must be limited to “the

unique facts of this case,” slip op. at 7 — in which event today’s decision is little more than an

aberrational and unjustified departure from precedent.

* * *

It is well-settled that a “successor employer” — i.e., an employer whose business

has a “substantial continuity” with that of its predecessor — has a duty to recognize and bargain

with an existing union. Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 40, 43

27
(1987). This duty arises as a consequence of federal labor law, not from any contract, and

whether the “substantial continuity” test is met does turn on at least the main factors that the

majority opinion discusses. Meridian has conceded on appeal that the “substantial continuity”

test is met in today’s case and that Meridian therefore is a successor employer. Consequently,

Meridian concedes that it is obligated to recognize and bargain with the union, and I therefore do

not find it necessary to discuss the application of the “substantial continuity” test to these facts.

“Successor employers,” in some situations — but not all, as the majority at points

admits — also are bound by the terms of a collective bargaining agreement (“CBA”) entered into

by the predecessor employer, and therefore might be required to arbitrate with the union (if that

agreement contains an arbitration provision). It is not necessary exhaustively to catalog the

situations in which a “successor employer” might be bound by the pre-existing collective

bargaining agreement, but previous cases generally have required a company to abide by a

collective bargaining agreement where there has been a merger, where the company expressly or

impliedly assumed the CBA, or where the “successor employer” is in fact simply an alter ego of

the predecessor employer. See Howard Johnson Co., 417 U.S. at 259 n.5 (discussing alter ego);

John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 548-49 (1964) (merger); Southward v.

South Cent. Ready Mix Supply Corp., 7 F.3d 487, 493 (6th Cir. 1993) (assumption of liability).

All three theories are widely accepted outside the labor law context as grounds for

imposing successor liability on an entity that has not itself entered into a contract but is closely

related to another entity that has. See 1 Fletcher Cyc. Corp. § 41.10 (updated 2008) (“The alter

ego doctrine has been adopted by courts in cases where the corporate entity has been used as a

subterfuge and to observe it would work an injustice.”); 15 id. § 7121(“[I]n all jurisdictions

28
today, the surviving corporation in a statutory merger has the statutory obligation to assume the

duties and liabilities of a constituent corporation.”); id. § 7142 (“An implied assumption of

liabilities is one of the exceptions to the general rule of nonliability for a corporation that merely

purchases the assets of another corporation.”); cf. Howard Johnson, 417 U.S. 249 (declining to

impose liability under a CBA on a corporation that merely purchased the assets of the

predecessor employer, albeit on the theory that the “substantial continuity” requirement was not

met).

The majority in today’s decision, however, nowhere suggests that Meridian was

an “alter ego” of its predecessor or that Meridian expressly or impliedly assumed the agreement

at issue here, or that there was a merger. Nor does the majority argue that some other widely

accepted grounds for imposing successor liability on a contract applies to this case. On the facts

before us, such an argument is not available. Instead, the majority seems to hold simply that,

whenever there is a “substantial continuity of identity of the workforce” between a predecessor

and successor employer, the successor employer is bound at least by the arbitration clause of the

CBA. In other words, all successor employers who hire the bulk of a predecessor’s employees

have a duty not only to bargain with and recognize a union but also to arbitrate with it the extent

to which it is bound by the previous CBA. This is apparently the case even if the successor

employer, as here, is simply a contractor who elects no longer to subcontract work that another

has performed, and where there has been no merger, consolidation, stock acquisition, purchase of

assets, or any voluntary assumption, explicit or implicit, of any terms of the CBA, including its

arbitration provision.

29
 This is hard to square with what has gone before. The Supreme Court has held

that “although successor employers may be bound to recognize and bargain with the union, they

are not bound by the substantive provisions of a collective-bargaining contract negotiated by their

predecessors but not agreed to or assumed by them.” NLRB v. Burns Int’l Sec. Servs., Inc., 406

U.S. 272, 284 (1972). Granted, the Court has recognized that “in a variety of circumstances

involving a merger, stock acquisition, reorganization, or assets purchase,” a successor employer

may properly be found as a matter of fact to have assumed the obligations of an existing CBA.

Id. at 291. Such obligations, however, do not “ensue as a matter of law from the mere fact that

an employer is doing the same work in the same place with the same employees as his

predecessor. . . .” Id.; see also Fall River, 482 U.S. at 40 (“[A]lthough the successor has an

obligation to bargain with the union . . . it is not bound by the substantive provisions of the

predecessor’s collective-bargaining agreement.” (citing Burns, 406 U.S. at 284)). If they did,

such obligations would amount to imposing “something . . . from without, not reasonably to be

found in the particular bargaining agreement and the acts of the parties involved,” which the

Court has made clear is impermissible. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 551

(1964).

The majority might have argued that an arbitration clause is not a “substantive

provision” of the collective-bargaining agreement — a position that would at least have

attempted to reconcile the holding here with relevant Supreme Court authority. But even if the

arbitration clause were not a “substantive provision” of the collective-bargaining agreement,

ordering arbitration when the Supreme Court has clearly held that the substantive provisions are

not binding on a successor employer would be futile and therefore unwarranted. See Ameristeel

30
Corp. v. Int’l Bhd. of Teamsters, 267 F.3d 264, 276-77 (3d Cir. 2001). To avoid the evident

futility of its order of arbitration, the majority suggests that “it is possible that a successor

employer will be bound at least by some of the substantive terms of a pre-existing CBA.” Slip

op. at 22. The majority can find no authority, however, to support this conclusion, at least

insofar as it suggests that the substantive terms of a CBA might be binding on a successor in

circumstances analogous to those presented here.

The majority tries to justify its result by heavy reliance on John Wiley & Sons, Inc.

v. Livingston, 376 U.S. 543 (1964), but in so doing misreads Wiley and ignores several

subsequent Supreme Court cases that have interpreted Wiley not to permit what the majority does

today. Cf. Howard Johnson, 417 U.S. at 253 (reversing lower courts that “relied heavily on . . .

Wiley”). In Wiley, the Supreme Court held that, following a merger, the merged company would

be bound to arbitrate pursuant to a collective bargaining agreement entered into by one of the

predecessor companies. 376 U.S. at 548. This result can be understood as a straightforward

application of the widely accepted rule that a merged corporation is liable on all contracts of both

predecessor corporations. Although the Supreme Court did not rely principally on common law

successor liability rules in Wiley, it did refer to those principles as a partial explanation for its

result. See id. at 550 n.3. Moreover, although the Court did not touch on the question whether

terms of the CBA other than the arbitration clause might also be binding on the merged

corporation, given the state law background rule, it would appear quite clear that the arbitrator

could indeed find that the entire CBA was so binding. Arbitration was not futile in Wiley as it is

here.

31
 In every subsequent case construing Wiley, the Supreme Court has given a clear

indication that lower courts should not read too much into Wiley’s failure specifically to ground

its decision in common law successor liability rules. The Court has emphasized that the

background common law successor liability rule was important to the result in that case. In

Burns, for instance, Burns International Security Services, Inc. (“Burns”) successfully competed

for a contract to provide plant protection services to Lockheed Aircraft Service Company

(“Lockheed”) and replaced the Wackenhut Corporation (“Wackenhut”) as Lockheed’s security

company. Burns thereafter hired a substantial number of former Wackenhut employees to do the

work under its new contract. The NLRB invoked precisely the policy concerns that the majority

invokes today — “the peaceful settlement of industrial conflicts” and protection of employees

against sudden changes — to argue that Burns was bound to Wackenhut’s collective bargaining

agreement with the union. 406 U.S. at 285. But the Supreme Court rejected this argument in no

uncertain terms:

[T]he claim is that Burns must be held bound by the contract
executed by Wackenhut, whether Burns has agreed to it or not and
even though Burns made it perfectly clear that it had no intention of
assuming that contract. Wiley suggests no such open-ended
obligation. Its narrower holding dealt with a merger occurring against
a background of state law that embodied the general rule that in
merger situations the surviving corporation is liable for the
obligations of the disappearing corporation.

Id. at 286. Similarly, in Howard Johnson, the Court warned against “an unwarranted extension

of Wiley beyond any factual context it may have contemplated,” emphasizing again the

importance in that case of the state law background rule about merger liability. 417 U.S. at 257.

32
 The majority attempts to distinguish this precedent by arguing that the present

case is different in that the members of Local 348 “were essentially working for Meridian” all

along because Cristi was merely Meridian’s subcontractor. Slip op. at 18. This argument is in

serious tension with Burns, however, which involved a materially indistinguishable contracting

arrangement. Lockheed terminated its existing contractor and selected a new one, which hired a

majority of the previous contractor’s employees. 406 U.S. at 275. Nevertheless, the new

contractor was not bound by any provision of the previous CBA. The majority’s analysis

suggests that if Lockheed had simply fired its first security company and then elected to do the

work itself, hiring many of that company’s employees, then it would have been bound by the

CBA’s arbitration clause. But Burns holds that if it hired a new contractor to do the exact same

thing, neither that contractor nor Lockheed would be bound. Burns nowhere suggests that its

holding turns on such formalities. Its reasoning — that successor employers should not be bound

by CBAs “negotiated by their predecessors but not agreed to or assumed by them,” 406 U.S. at

284 — applies just as readily to the former case as it does to the latter.

In other words, in the major cases on which the majority itself focuses, the

Supreme Court has given every indication that a successor employer generally will only need to

arbitrate under a CBA where some common law theory would support successor liability on the

contract. And until today’s decision, the circuit courts appear to have been in accord in

interpreting the law in this fashion. See 3750 Orange Place Ltd. P’ship v. NLRB, 333 F.3d 646,

654 (6th Cir. 2003) (“[A] new employer is not bound by the substantive terms of a collective

bargaining agreement entered into by its predecessor absent an express or implied assumption of

the agreement . . . .”); AmeriSteel, 267 F.3d at 277 (“AmeriSteel, which is not bound by the

33
substantive terms of the CBA, cannot be compelled to submit to arbitration . . . .”); Road

Sprinkler Fitters Local Union No. 669 v. Indep. Sprinkler, 10 F.3d 1563, 1567 (11th Cir. 1994)

(“[A] successor is only bound to collectively bargain and is not bound to any extent by an

existing contract between the union and the predecessor.”); New England Mech., Inc. v. Laborers

Local Union 294, 909 F.2d 1339, 1342 (9th Cir. 1990) (“The flaw in the district court’s

reasoning is that it assumed that all successor employers will always be bound by the terms of a

predecessor’s CBA. However, the Supreme Court has continually indicated that a successor

employer is only bound to bargain with a union which had a CBA with the predecessor.”); Hosp.

& Institutional Workers Local 250 v. Pasatiempo Dev. Corp., 627 F.2d 1011, 1012 (9th Cir.

1980) (“[A] successor employer is not bound by the substantive terms of a collective bargaining

agreement unless it expressly or impliedly assumes them. . . . Nor are we persuaded that the

statutory duty to bargain in good faith obligates an employer in Pasatiempo’s situation to

arbitrate.”); Int’l Union of Elec., Radio and Mach. Workers v. NLRB, 604 F.2d 689, 693 (D.C.

Cir. 1979) (“[T]he successor employer is bound to recognize and bargain with the representative

of his employees . . . . [but] is not bound by the predecessor’s bargaining agreement . . . .”).

The majority reads Howard Johnson’s discussion of a “substantial continuity in

identity of the work force,” 417 U.S. at 263, as license to depart from this consensus. Indeed, the

majority leads off its synthesis of the case law by stating that “the issue is whether there exists a

‘substantial continuity of identity of the work force.’” Slip op. at 17 (citing id.). But Howard

Johnson could not have made this the issue without expressly overruling Burns, which made

clear that substantial continuity of identity of the workforce “is a wholly insufficient basis for

implying either in fact or in law that [the successor employer] had agreed or must be held to

34
have agreed to honor [the predecessor employer’s] collective-bargaining contract.” Burns, 406

U.S. at 286. And Howard Johnson did no such thing. See AmeriSteel, 267 F.3d at 272 (“It is

important . . . to appreciate the limited scope of the Court’s decision in Howard Johnson.”);

Southward, 7 F.3d at 494 (“Howard Johnson reaffirmed the Burns holding and further limited

Wiley.”). After stating that the “the reasoning of Burns must be taken into account,” the Howard

Johnson Court merely held that “Wiley [did] not” apply because, inter alia, there was no

substantial continuity of identity of the workforce in that case. 417 U.S. at 256. Howard

Johnson thus treats such continuity as a necessary but not sufficient condition for concluding that

a successor employer is bound to arbitrate under a predecessor’s CBA. See AmeriSteel, 267 F.3d

at 269 (“[T]he ‘substantial continuity’ concept . . . should properly be viewed as a necessary but

not a sufficient condition for the imposition of arbitration on an unconsenting successor.”). This

does not undercut the clear language of Burns — which the majority fails to cite, let alone

account for in its analysis.

The majority purports to rely on this Court’s decision in Stotter Division of

Graduate Plastics Co. v. District 65, 991 F.2d 997 (2d Cir. 1993), to support its holding. In that

case, however, the “successor employer” entered its own collective bargaining agreement with

the union that “expressly adopted the provisions of the [predecessor’s] Contract with only

immaterial exceptions.” Id. at 1002. Thus, this case provides no support for the notion that an

agreement will become binding, solely based on a “substantial continuity” of business operations.

Because the successorship doctrine is a creature of federal common law, federal

courts must decide exactly which theories of successor liability to recognize. See 1 Fletcher Cyc.

Corp. § 41 (updated 2008) (“The tests and factors that the courts consider to determine whether

35
to disregard the corporate form differ from state to state.”); see also Wiley, 376 U.S. at 548

(“State law may be utilized so far as it is of aid in the development of correct principles or their

application in a particular case, but the law which ultimately results is federal.” (citation

omitted)). But the Supreme Court has, in every decision on point, indicated that the arbitration

provision of a CBA is a creature of contract and therefore there must be some principled basis for

saying that the defendant to be charged with the contract either has agreed to it or is so closely

related to another entity that has that it is appropriate, essentially, to pierce the corporate veil and

hold the defendant bound to the agreement. The repeated indication that a “successor employer”

is not bound on the CBA makes clear that the mere “substantial continuity” test that the majority

relies on — which makes an entity a “successor employer” bound to recognize and bargain with

the union — is not enough to make the employer subject to the CBA.

It is true that some courts have described Wiley as creating a narrow “merger”

exception to the general rule that a successor is not liable for the substantive terms of a pre-

existing CBA — rather than reading Wiley, as I do, as simply an application of the general rule

that the entire CBA may be binding on the successor employer when there is an accepted

common law basis for imposing contractual successor liability on the successor employer. E.g.,

Indep. Sprinkler, 10 F.3d at 1567 (11th Cir. 1994) (“In some narrow circumstances [, i.e., if the

status of successor arises out of a merger,] . . . there may be an exception to the rule that the

successor inherits only a duty to bargain and does not inherit a preexisting collective bargaining

contract.”); New England Mech., 909 F.2d at 1342 (9th Cir. 1990) (“In only one case has the

Supreme Court indicated that a successor employer may be bound to some of the terms of a

predecessor’s CBA.” (citing Wiley)). But these particulars make no difference in substance: the

36
courts of appeals, at least since Fall River, have held that neither the arbitration provision nor any

other terms of the CBA will be binding on a successor employer unless the successor has

assumed the contract, is an alter ego of the predecessor, is the product of a merger with the

predecessor, or another analogous basis exists for imposing contractual liability. From this

widely understood set of rules the majority today departs, based on little more than a refusal to

follow the relatively clear interpretation that the Supreme Court has given to Wiley.

* * *

The majority tries to justify its decision today on the theory that requiring

arbitration “is the most effective way to balance those interests recognized by the Supreme Court

in Wiley, as well as Burns and Howard Johnson.” Slip op. at 21. The majority thus seems to

believe that whether a duty to arbitrate will be imposed will depend on a freewheeling balancing

test in which each panel of this Court is free to decide what result would most effectively

“balance [the various] interests” at stake. In contrast, I read the Supreme Court’s discussion of

the relevant policy considerations as merely a partial explanation for the rule of law that the

Supreme Court was laying down in those earlier cases — not as an invitation to the lower courts

to decide whether successor employers are bound to arbitrate on an ad hoc basis, driven by our

perceptions of what result in a given case will best balance the interests of employers and

employees.

Even if it were appropriate to consider such policy factors in deciding whether to

impose a duty to arbitrate in an individual case, the majority’s discussion of them is

unilluminating, involving little more than the invocation of generalities about the importance of

“avoiding industrial strife and encouraging the peaceful resolution of labor disputes.” Slip op. at

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14. The majority gives no indication of why it believes that these policy ends support its result in

this case, as opposed to in any other case in which a union might seek arbitration, and it gives no

guidance to district courts in this Circuit as to how to determine when these factors will or will

not require arbitration.

Indeed, a proper consideration of the very policy factors that the majority relies on

would support a contrary result in this case. Wiley recognized that the duty to arbitrate should

not be “something imposed from without, not reasonably to be found in the particular bargaining

agreement and the acts of the parties involved.” 376 U.S. at 551. “Saddling [a successor]

employer with the terms and conditions of employment contained in the old collective-bargaining

contract may make . . . changes impossible and may discourage and inhibit the transfer of

capital.” Burns, 406 U.S. at 288. These factors strongly cut against imposing an obligation to

arbitrate in the circumstances here.

The majority’s principal policy factor in favor of requiring arbitration is that

otherwise, “Local 348 would likely have no way of obtaining the relief it has sought . . . [because

the predecessor employer has] no legal responsibility to make further contributions to the [Health

and Welfare] Fund.” Slip op. at 20. Although the Supreme Court did recognize such a factor as

important in Wiley, where the predecessor employer no longer existed in any form other than the

merged company, see 376 U.S. at 548, Cristi did not cease to exist when Meridian terminated its

relationship with the company. Moreover, the collective bargaining agreement before us

expressly addresses Cristi’s obligations in the event of a takeover or transfer of its business

operation. See Agreement Between Cristi Cleaning Servs. & Local 348-S UFCW AFL-CIO

(effective Jan. 1, 2002) (“In the event the entire operation or any part thereof is sold, leased,

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transferred or taken over by the sale, transfer, lease, assignment, receivership or bankruptcy

proceedings, such operation shall continue to be subject to the terms and conditions of this

agreement for the life thereof. . . . Employees working under this agreement shall at all times be

entitled, acting through the Union as their representative, to hold the Employer directly

responsible for the full performance of all terms and conditions of this agreement.”). Even if this

provision is not applicable in the circumstances presented here, similar provisions appearing in

other labor cases to have reached this Circuit suggest that it is not uncommon for unions to

protect their interests by requiring predecessors to ensure that successors agree to the terms of

existing collective bargaining agreements. See, e.g., In re Chateaugay Corp., 891 F.2d 1034,

1035 (2d Cir. 1989) (“[E]ach Employer promises that its operations covered by this Agreement

shall not be sold, conveyed, or otherwise transferred or assigned to any successor without first

securing the agreement of the successor to assume the Employer’s obligations under this

Agreement.” (emphasis omitted) (quoting the National Bituminous Coal Wage Agreement of

1984) (internal quotation marks omitted)). The availability of such contractual protections

strongly suggests that labor unions have the ability through bargaining to protect their interests

against changes in the employer. Thus, even assuming it were appropriate to rely on such a

factor given the case law that binds us, there is no need to do violence to the principle that the

labor laws do not impose a duty to arbitrate “from without,” Wiley, 376 U.S. at 551, in order to

protect unions.

Lastly, the majority’s policy analysis focuses on what seems best ex post for the

particular union before the court, and fails to give due consideration to the ex ante incentives that

the majority’s rule will create. Employers who take over an operation, as Meridian did here,

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have no legal obligation to hire the old unionized employees or even to give them preference in

hiring — even if the entity plans to continue doing the exact same work. See Howard Johnson,

417 U.S. at 261 (“[N]othing in the federal labor laws requires that an employer . . . who

purchases the assets of a business be obligated to hire all of the employees of the predecessor . . .

.” (internal quotation marks omitted)). If the new employer refuses to rehire most of the old

unionized employees, the new employer will not be bound by the CBA, and in fact, it won’t have

to recognize or bargain with the union at all. See id. at 263 (holding that “continuity of identity

in the business enterprise necessarily includes, we think, a substantial continuity in the identity of

the work force across the change in ownership”). Although a new employer cannot refuse to

rehire the old employees solely because they are in a union, I am not the first to note that

employers will often be able to find ample business reasons to justify refusing to rehire old

employees, rendering the protection afforded by the majority today more ephemeral than real.

See Saks & Co. v. NLRB, 634 F.2d 681, 690 (2d Cir. 1980) (Meskill, J., dissenting) (“Although it

can be argued that discriminatory practices are condemned by and actionable under . . . the

National Labor Relations Act, it is obvious that the perspicacious, well-counselled employer will

hire just few enough of the subcontractor’s employees to elude the grasp of the successorship

doctrine.” (citation omitted)); see also Fall River, 482 U.S. at 40-41 (“[T]o a substantial extent

the applicability of Burns [, i.e., the successor employer’s obligation to bargain with the union,]

rests in the hands of the successor.”). Certainly, increasing the incentives for would-be successor

employers to simply fire the unionized employees and start over is hardly a manifest victory for

the cause of organized labor.

* * *

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 In my view, the majority misreads Supreme Court precedent. Therefore, I

respectfully dissent.

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