St. Thomas—St. John Hotel & Tourism Ass'n v. Government of the United States Virgin Islands

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit

6-30-2000

St Thomas St John Hotel Tourism, Inc. v. Govt of
VI
Precedential or Non-Precedential:

Docket 99-3513

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Filed June 30, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 99-3513, 99-3563

THE ST. THOMAS - ST. JOHN HOTEL & TOURISM
ASSOCIATION, INC.; THE ST. THOMAS - ST. JOHN
CHAMBER OF COMMERCE, INC.; ST. CROIX HOTEL &
TOURISM ASSOCIATION, INC.

v.

GOVERNMENT OF THE UNITED STATES VIRGIN
ISLANDS, by and through the Virgin Islands Department
of Labor; ELEUTERIA ROBERTS, in her official capacity
as Acting Commissioner of the Virgin Islands Department
of Labor,
Appellants in No. 99-3563

Elsa Huggins; Ladiah Whyte,
Intervenors/Appellants in No. 99-3513

On Appeal from the District Court of the Virgin Islands
(D.C. No. 99-cv-00054)
District Judge: Hon. Thomas K. Moore

Argued: October 22, 1999

Before: SLOVITER and RENDELL, Circuit Judges,
and BYRNE, District Judge*

_________________________________________________________________
*Hon. Wm. Matthew Byrne Jr., United States District Court for the
Central District of California, sitting by designation.
(Filed: June 30, 2000)

Iver A. Stridiron
Pamela R. Tepper
Carol S. Moore
Department of Justice
St. Thomas, USVI 00802

Attorneys for Appellants
in No. 99-3563

Scott A. Kronland
Altshuler, Berzon, Nussbaum
Berzon & Rubin
San Francisco, CA 94108

Jonathan P. Hiatt
Washington, D.C. 20006

Richard Austin
Kathleen Navin (Argued)
Legal Services of Virgin Islands, Inc.
Christiansted, St. Croix, USVI 00820

Attorneys for
Intervenors/Appellants
in No. 99-3513

Charles E. Engeman (Argued)
Dudley, Topper & Feuerzeig
Charlotte Amalie, St. Thomas,
USVI 00804

Attorney for Appellees

2
OPINION OF THE COURT

SLOVITER, Circuit Judge.

I.

INTRODUCTION

Before us is an appeal from the order of the District
Court granting a preliminary injunction enjoining
enforcement of the Virgin Islands Wrongful Discharge Act
(WDA or "Act"), V.I. Code Ann. tit. 24, SS 76-79, a territorial
law that declares that an employee discharged for any
reason other than for cause as set forth in nine enumerated
reasons "shall be considered to have been wrongfully
discharged," unless modified by a union contract. The
central issue is the District Court's holding that the

plaintiffs have a probability of success on the merits on
their claim that the WDA is preempted by the National
Labor Relations Act (NLRA), 29 U.S.C. SS 151-169. The
Government of the Virgin Islands and two intervening
employees who have claims pending under the WDAfiled
appeals, which we consolidated.

We have jurisdiction over the appeal from the grant of the
preliminary injunction pursuant to 28 U.S.C. S 1292(a)(1).
Although the issuance of a preliminary injunction is
reviewed for abuse of discretion, the underlying legal
determination regarding preemption is reviewed de novo.
Acierno v. New Castle County, 40 F.3d 645, 652 (3d Cir.
1994).

3
II.

BACKGROUND

A.

The Virgin Islands Wrongful Discharge Act

Section 76 of the WDA, enacted by the Virgin Islands
legislature in 1986, sets forth the grounds for lawful
employee discharge as follows:

(a) Unless modified by union contract, an employer
may dismiss any employee:

(1) who engages in a business which conflicts with his
duties to his employer or renders him a rival of his
employer;

(2) whose insolent or offensive conduct toward a
customer of the employer injures the employer's
business;

(3) whose use of intoxicants or controlled substances
interferes with the proper discharge of his duties;

(4) who wilfully and intentionally disobeys reasonable
and lawful rules, orders, and instructions of the
employer; provided, however, the employer shall not
bar an employee from patronizing the employer's
business after the employee's working hours are
completed;

(5) who performs his work assignments in a negligent
manner;

(6) whose continuous absences from his place of
employment affect the interests of his employer;

(7) who is incompetent or inefficient, thereby impairing
his usefulness to his employer;

(8) who is dishonest; or

(9) whose conduct is such that it leads to the refusal,
reluctance or inability of other employees to work with
him.

4
 (b) The Commissioner may by rule or regulation adopt
additional grounds for discharge of an employee not
inconsistent with the provisions enumerated in
subsection (a) of this section.

(c) Any employee discharged for reasons other than
those stated in subsection (a) of this section shall be
considered to have been wrongfully discharged;
however, nothing in this section shall be construed as
prohibiting an employer from terminating an employee
as a result of the cessation of business operations or as
a result of a general cutback in the work force due to
economic hardship, or as a result of the employee's
participation in concerted activity that is not protected
by this title.

V.I. Code Ann. tit. 24, S 76.

Any employee covered by the WDA and discharged in
violation of S 76 may file an administrative complaint with
the Commissioner of Labor, who has the authority to order
reinstatement and back pay. See V.I. Code Ann. tit. 24,
S 77. In addition, the employee may file a lawsuit for
compensatory and punitive damages in any court of
competent jurisdiction. See V.I. Code Ann. tit. 24, S 79.

As originally enacted, the text of S 76 began,"Unless
modified by contract . . . ." In 1991, the Virgin Islands
Department of Labor defined the term "contract" as a
"written agreement negotiated between an employer and an
employee, or representatives thereof, which contains the
specific grounds for discharge, where the employment
relationship has an established mechanism or procedure
for resolving discharge grievances and this mechanism or
procedure is referred to in the agreement or is otherwise
known by the parties, such as a collective bargaining
agreement." V.I.R. & Regs. tit. 24, S 77-1(E). Expressly
excluded from that definition were printed statements on
an application for employment, in employee manuals, or in
statements of employers' rules. Id. However, in its
administrative rulings, the Department later relaxed the
definition by holding that the Department was deprived of
jurisdiction under the WDA if an employee agreed in any
contract, even an application for employment, that s/he

5
was an at-will employee. This interpretation permitted the
employer to remove the protection of the Act by contracting
with one or more individual employees.

In 1996, the Virgin Islands legislature amendedS 76(a) to
begin, "Unless modified by union contract . . .." See V.I.
Code Ann. tit. 24, S 76(a). Since that time,S 76(a) has been
interpreted to apply to all employees in the Virgin Islands,
absent a collective bargaining agreement setting discharge
terms to the contrary.

B.

Procedural Background

The District Court that issued the preliminary injunction
in this case had previously considered the same issue in
Bell v. Chase Manhattan Bank, 40 F. Supp. 2d 307 (D.V.I.
1999), a suit brought by a former employee alleging that
she was discharged in violation of the WDA. The court held
in Bell that the WDA was preempted by the NLRA and
dismissed the employee's WDA action on that ground. Soon
thereafter, the Department of Labor postponed all hearings
then scheduled under the WDA. After a public hearing held
by the Virgin Islands legislature on March 15, 1999,
however, the Department of Labor announced that it would
reschedule all hearings. The first hearing was rescheduled
to commence on April 6, 1999.

On April 5, 1999, the St. Thomas-St. John Hotel &
Tourism Association, Inc., the St. Thomas-St. John
Chamber of Commerce, Inc., and the St. Croix Hotel &
Tourism Association, Inc. (collectively "the associations")
filed this action in the District Court of the Virgin Islands
seeking to restrain the enforcement of the WDA in any
pending or future WDA wrongful discharge proceeding. The
associations, relying on the District Court's earlier decision
in Bell, alleged that the WDA was preempted by the NLRA
and contended that enforcement of the Act deprived them
of federal rights in violation of 42 U.S.C. S 1983. They
sought declaratory and injunctive relief under the
Declaratory Judgment Act, 28 U.S.C. SS 2201, 2202, as well
as injunctive relief under 42 U.S.C. S 1983 and attorneys'

6
fees under 42 U.S.C. S 1988 and V.I. Code Ann. tit. 5,
S 541.

The associations are three not-for-profit corporations that
represent the interests of more than 800 employers on the
islands of St. Thomas, St. John, and St. Croix in the Virgin
Islands. Together, their members employ over 12,000
employees in the Virgin Islands. The associations named as
defendants the Government of the Virgin Islands, the
Department of Labor, and the Acting Commissioner of the
Department of Labor (collectively "the government"). Elsa
Huggins and Ladiah Whyte, two employees who have WDA
claims pending before the Virgin Islands Department of
Labor, intervened as additional defendants.

The associations sought a preliminary injunction against
the Virgin Islands Department of Labor, prohibiting it from
holding any preliminary or formal hearings under the WDA.
After a hearing, the District Court, adopting its earlier
reasoning in Bell, concluded that the associations were
likely to succeed on the merits of their preemption
arguments and issued the requested preliminary
injunction. St. Thomas-St. John Hotel & Tourism Assoc., Inc.
v. Government of the United States Virgin Islands , Civ. No.
1999-54 (D.V.I. June 2, 1999) (hereafter "slip op."). The
court believed that the WDA is "directly" preempted by S 7
of the NLRA "because it requires union involvement before
any contractual modification to the WDA's requirements,"
and also preempted because "it upsets the `balance of
power' between labor and management in an area Congress
intended to remain free [from regulation]." Slip op. at 6.

The court's order permitted the Department of Labor to
continue to accept complaints and to encourage voluntary
mediation, and to hold formal hearings for employees who
are not covered by the NLRA. It also required the
associations to post a bond in the amount of $25,000 to
cover losses to any employee who may ultimately be
awarded back pay under the WDA and is unable to recover
from the former employer. In their appeal, the government
and intervening employees argue that the District Court
erred as a matter of law in its determination that the WDA
was preempted.

7
III.

DISCUSSION

A.

Preemption Principles

An understanding of the principles of preemption is
necessary background for all of the issues raised, including
the appellants' challenge to standing, a jurisdictional issue.
Preemption derives from the Supremacy Clause of the
United States Constitution, which provides that the laws of
the United States "shall be the supreme Law of the Land
. . . any Thing in the Constitution or Laws of any State to
the Contrary notwithstanding." U.S. Const. art. VI, cl. 2.
Those principles are made applicable to the laws of the
Virgin Islands through the Revised Organic Act, which
authorizes the Virgin Islands legislature to enact territorial
laws that are "not inconsistent with . . . the laws of the
United States made applicable to the Virgin Islands." 48
U.S.C. S 1574(a).

The NLRA, "a comprehensive code passed by Congress to
regulate labor relations in activities affecting interstate and
foreign commerce," Nash v. Florida Industrial Comm'n, 389
U.S. 235, 238 (1967), expressly applies to the Virgin
Islands, a territory of the United States. See 29 U.S.C.
S 152(6). Accordingly, we must apply the preemption
principles as articulated by the Supreme Court of the
United States. See, e.g., Abdullah v. American Airlines, Inc.,
181 F.3d 363 (3d Cir. 1999) (applying general preemption
principles to determine whether application of territorial law
was preempted by the Federal Aviation Act).

The Supreme Court has recognized three general ways in
which federal law may preempt, and thereby displace, state
law: (1) "express preemption," which arises when there is
an explicit statutory command that state law be displaced,
see Morales v. Trans World Airlines, Inc., 504 U.S. 374
(1992); (2) "field preemption," which arises when federal law
"so thoroughly occupies a legislative field as to make

8
reasonable the inference the Congress left no room for the
States to supplement it," Cipollone v. Liggett Group, Inc.,
505 U.S. 504, 516 (1992) (internal quotations omitted); and
(3) "conflict preemption," which arises when a state law
makes it impossible to comply with both state and federal
law or when the state law "stands as an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress," Hines v. Davidowitz , 312 U.S. 52,
67 (1941).

Because the NLRA contains no express preemption
provision, and because the NLRA regulates in an area of
law traditionally regulated by the states, any NLRA
preemption analysis starts "with the basic assumption that
Congress did not intend to displace state law." Building and
Constr. Trades Council v. Associated Builders and
Contractors of Mass./R.I., 507 U.S. 218, 224 (1993)
(quoting Maryland v. Louisiana, 451 U.S. 725, 746 (1981)).1
Nonetheless, although the NLRA neither contains an
express preemption provision nor indicates a congressional
intent to usurp the entire field of labor-management
relations, courts have often found state laws impliedly
preempted by conflict with the NLRA, its express provisions
as well as its underlying goals and policies, on the ground
that the state law stands "as an obstacle to the
accomplishment and execution of the full purposes and
objectives" of Congress. See, e.g., Livadas v. Bradshaw, 512
U.S. 107, 120, 134-35 (1994) (holding a state policy
preempted by conflict with employee's right, implicit in the
structure of the NLRA, to "complete the collective
bargaining process and agree to an arbitration clause");
Nash, 389 U.S. at 238-40 (holding a state policy preempted
_________________________________________________________________

1. The associations argue that this assumption does not apply here
because the WDA is a territorial law rather than a state law and,
therefore, does not raise a problem of "dual sovereignties." Appellees'
Brief at 10. We see no reason to alter our preemption analysis, which is
premised on the purpose of Congress in enacting the NLRA, based on a
distinction between the legislative power of the Virgin Islands and that
of the states, nor have we seen such reason in the past. See Peter v.
Hess Oil V.I. Corp., 903 F.2d 935, 937 n.1 (3d Cir. 1990) ("For purposes
of our [preemption] analysis, the Virgin Islands stands in no different
position than would a state.").

9
by conflict with the NLRA because "Congress has made it
clear that it wishes all persons with information about
[unfair labor practices] to be completely free from coercion
against reporting them to the Board").

Although the general preemption principles "are no less
applicable in the field of labor law," Brown v. Hotel &
Restaurant Employees & Bartenders Int'l Union Local 54,
468 U.S. 491, 501 (1984), two unique subspecies of
preemption, commonly known as Garmon preemption and
Machinists preemption, are often invoked in connection
with the NLRA. Garmon preemption, which derives from
San Diego Building Trades Council v. Garmon, 359 U.S. 236
(1959), protects the primary jurisdiction of the National
Labor Relations Board (NLRB) by displacing state
jurisdiction over conduct which is "arguably within the
compass of S 7 or S 8 of the Act." Id. at 246. The doctrine
is based on an "overriding interest in a uniform, nationwide
interpretation of the federal statute by the centralized
expert agency created by Congress," rather than on federal
protection of particular conduct of private bargaining
parties. New York Tel. Co. v. New York State Dept. of Labor,
440 U.S. 519, 528 (1979) (plurality opinion). Because
Garmon preemption concerns cases which "arguably" fall
within the NLRA, a determination of whether state
jurisdiction is displaced under Garmon preemption may
require a consideration of the strength of the state's interest
in its regulation over the relevant conduct. See Brown, 468
U.S. at 502-03.

In contrast to Garmon preemption, Machinists
preemption, derived from Lodge 76, Int'l Ass'n of Machinists
v. Wisconsin Employment Relations Comm'n, 427 U.S. 132
(1976), is premised on congressional intent that certain
conduct of private bargaining parties be unregulated.
Machinists preemption can be described as a form of
conflict preemption under which state regulation of the
bargaining conduct of private parties is displaced because
it conflicts with the purpose of Congress in enacting the
NLRA to leave that conduct "to be controlled by the free
play of economic forces." Id. at 140. 2 Although "[a]n
_________________________________________________________________

2. As we have noted elsewhere, the distinction between conflict
preemption and field preemption is "not necessarily airtight." Orson,
Inc.,

10
appreciation of the State's interest in regulating a certain
kind of conduct may . . . be relevant in determining
whether Congress in fact intended the conduct to be
unregulated," because the doctrine of Machinists
preemption is premised solely on congressional intent that
an area of conduct be unregulated, an analysis under this
doctrine does not require a balancing of the state and
federal interests in the first instance. Metropolitan Life Ins.
Co. v. Massachusetts, 471 U.S. 724, 749 n.27 (1985).

A brief summary of the underlying facts in Machinists
sheds light on the types of state regulation that are
preempted under the doctrine. During negotiations for
renewal of an expired collective-bargaining agreement, the
employer sought and the union resisted an increase of the
basic workweek from 37 to 40 hours. After a vote of the
membership, the union instructed its members to refuse to
work more than 37 hours. While negotiations continued,
the employer filed a charge with the NLRB seeking a
determination that the union's action was an unfair labor
practice prohibited by S 8 of the NLRA. The NLRB dismissed
the charge, finding that the union's conduct did not violate
any provision of the NLRA. The employer also filed a
complaint with the Wisconsin Employment Relations
Commission, charging that the refusal to work overtime
constituted an unfair labor practice under state law. The
state Commissioner granted an injunction that the union
cease and desist encouraging the employees' concerted
refusal to accept overtime assignments. This injunction was
subsequently upheld by the state courts.

The United States Supreme Court reversed. Drawing from
earlier decisions, the Court held that even though the
employees' concerted refusal to work overtime was neither
prohibited nor protected under specific provisions of the
_________________________________________________________________

v. Miramax Film Corp., 189 F.3d 377, 382 (3d Cir. 1999). "Indeed, field
pre-emption may be understood as a species of conflict pre-emption: A
state law that falls within a pre-empted field conflicts with Congress'
intent (either express or plainly implied) to exclude state regulation."
English v. General Elec. Co., 496 U.S. 72, 79 n. 5 (1990). The overlap is
evident in Machinists preemption, which recognizes an area within the
field of labor-management relations where there is to be no state
regulation.

11
NLRA, the NLRA nonetheless preempts state regulation of
that conduct because the conduct is a "weapon of self-help"
that Congress meant to leave unregulated. Machinists, 427
U.S. at 146 (quoting Garner v. Teamsters Union , 346 U.S.
485, 500 (1953)).

B.

Jurisdiction

Before we apply the principles of NLRA preemption to the
case at hand, we consider first a question raised by the
intervenors, joined by the government, with respect to the
standing of the associations to challenge the WDA as
preempted by conflict with S 7 of the NLRA. The issue of
standing is jurisdictional.

A declaratory judgment or injunction can issue only
when the constitutional standing requirements of a"case"
or "controversy" are met. See U.S. Const., Art. III, S 2;
Maryland Casualty Co. v. Pacific Coal & Oil Co. , 312 U.S.
270, 272 (1941). Although declaratory judgments are
frequently sought in advance of the full harm expected,
they must still present a justiciable controversy rather than
"abstract, hypothetical or contingent questions." Alabama
State Fed'n of Labor v. McAdory, 325 U.S. 450, 461 (1945).
We have explained that these standing requirements are
satisfied when "there is a substantial controversy, between
parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a
declaratory judgment." Step-Saver Data Sys., Inc. v. Wyse
Tech., 912 F.2d 643, 647 (3d Cir. 1990) (quoting Maryland
Casualty, 312 U.S. at 273 (1941)).

That there is a substantial controversy between the
parties here sufficient to meet the constitutional
requirement of standing is evident. When the complaint
was filed, the WDA was being enforced in the Virgin
Islands. Employees had filed claims with the Department of
Labor seeking relief under the Act. Hearings had been
scheduled for April 6, 1999, and at least 12 employers
scheduled for April hearings were members of the St.
Thomas-St. John Hotel and Tourism Association. As a

12
consequence of the enforcement of the WDA, the employers'
ability to freely discharge their employees or to contract for
terms of discharge was limited as they would be subject to
liability if they discharged their employees for reasons other
than those stated in the challenged act.

The associations, representing the interests of employers
in the Virgin Islands, seek declaratory and injunctive relief
from enforcement of the statute on the ground that the
WDA is unenforceable because it is preempted by the NLRA,3
and seek prospective injunctive relief under 42 U.S.C.
S 1983 against the Commissioner of Labor in her official
capacity, alleging that by enforcing the WDA the
Commissioner is violating their federal rights. The parties'
interests in this action could not be more adverse, as the
government and employees, both defendants here, seek to
enforce the protections provided by the WDA, and the
employers, through the associations, seek to avoid
enforcement of those protections.

The intervenors and the government do not question the
associations' organizational standing to bring a cause of
action challenging the statute on behalf of their member
employers. Instead, the intervenors challenge the
associations' ability to argue that the WDA is preempted
based on conflict with S 7.

The appellants claim that because employers, unlike
employees, have no substantive rights under S 7, they are
precluded from relying on S 7 for their preemption claim.
Section 7 provides:

Employees shall have the right to self-organization, to
form, join, or assist labor organizations, to bargain
collectively through representatives of their own
choosing, and to engage in other concerted activities
for the purpose of collective bargaining or other mutual
aid or protection, and shall also have the right to
_________________________________________________________________

3. The associations also allege that "supervisors cannot be covered by the
[WDA] pursuant to the Supreme Court's decision in Beasley v. Food Fair
of North Carolina, Inc., 416 U.S. 653, 662 (1974)." Compl. P 13. The
District Court declined to decide that claim, and it is therefore not
before
us on appeal.

13
 refrain from any or all such activities except to the
extent that such right may be affected by an agreement
requiring membership in a labor organization as a
condition of employment as authorized in section
158(a)(3) of this title.

29 U.S.C. S 157.

It is indeed evident, as the appellants argue, thatS 7
confers rights on employees rather than employers, but
that is not determinative of the associations' standing to
raise that issue. We know of no governing authority to the
effect that the federal statutory provision which allegedly
preempts enforcement of local legislation by conflict must
confer a right on the party that argues in favor of
preemption. On the contrary, a state or territorial law can
be unenforceable as preempted by federal law even when
the federal law secures no individual substantive rights for
the party arguing preemption. See, e.g., California Fed. Sav.
& Loan Assoc. v. Guerra, 479 U.S. 272 (1987) (action for
declaratory and injunctive relief brought by employers
arguing that California state law was preempted by the
Pregnancy Discrimination Act of 1978, which gives rights to
pregnant employees under Title VII); Ray v. Atlantic
Richfield Co., 435 U.S. 151 (1978) (action brought by a
tanker company arguing that Washington Tanker Law was
preempted by conflict with the Ports and Waterways Safety
Act of 1972, which imposes operation, safety, and
environmental requirements on tanker companies).

But our conclusion that the associations have standing
to bring this action challenging enforcement of the WDA
does not end the jurisdictional inquiry, for the District
Court must also have subject matter jurisdiction over the
associations' claims. See 48 U.S.C. S 1612(a) (providing that
the District Court of the Virgin Islands "shall have the
jurisdiction of a District Court of the United States"); see
generally Estate of Thomas Mall, Inc. v. Territorial Court of
the V.I., 923 F.2d 258, 260-64 (3d Cir. 1991) (explaining
jurisdictional system for civil actions in the Virgin Islands).

Jurisdiction is established in this case under 28 U.S.C.
S 1331. The associations seek injunctive and declaratory
relief from enforcement of a territorial regulation on the

14
ground that the regulation is preempted by the NLRA, a
federal statute which grants employers as well as
employees substantive federal rights. See Golden State
Transit Corp. v. City of L.A., 493 U.S. 103, 108-12 (1989)
(Golden State II) (holding that the NLRA confers a
substantive right on employers and employees to be free of
governmental regulation within the zone of Machinists
preemption).4 The Supreme Court has recognized that such
a challenge presents a federal question which the federal
courts have jurisdiction under 28 U.S.C. S 1331 to resolve.
See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14
(1983); see also Lawrence County v. Lead-Deadwood Sch.
Dist. No. 40-1, 469 U.S. 256, 259 n.6 (1985). 5

C.

Application of Preemption Principles to the WDA

The associations argue, and the District Court agreed,
that the WDA is preempted by the NLRA under the
Machinists doctrine because it regulates conduct that
Congress meant to leave unregulated. That argument is
_________________________________________________________________

4. The associations assert that, in addition to the right conferred by the
NLRA under Machinists preemption, the NLRA also confers a substantive
right of "voluntary unionism" on employers. Our research uncovered no
case in which a court has recognized such a right. Moreover, even if
such a right were to exist, we find questionable the District Court's
assertion that the right would enure in the text ofS 7, see slip op. at 14
(stating that "section 7 . . . guarantee[s] rights to employers as well as
to employees"), rather than its being implicit in the structure and goals
of the NLRA as a whole. In any event, we do not reach that issue in this
case.

5. In finding federal jurisdiction under 28 U.S.C. S 1331 we do not decide
whether territorial officials in their official capacities are "persons"
under
S 1983 when sued solely for prospective injunctive relief. Cf. Ngiraingas
v. Sanchez, 495 U.S. 182, 192 (1990) (holding that plaintiff who sought
damages against territory of Guam and its officials in their official
capacities could not state a S 1983 claim because the territory and its
officials are not "persons" under the section). Nor do we decide whether
the federal Declaratory Judgment Act, 28 U.S.C.S 2201, applies to the
Virgin Islands. Cf. 28 U.S.C. S 2201 (authorizing such relief by "any
court of the United States").

15
foreclosed by the Supreme Court's decisions in Metropolitan
Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985), and
Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987).

At issue in Metropolitan Life was a Massachusetts statute
that required that specified minimum mental health care
benefits be provided to a state resident who was insured
under a general insurance policy, an accident or sickness
insurance policy, or an employee health-care plan that
covered hospital and surgical expenses. Metropolitan Life
Insurance Co. brought suit for declaratory and injunctive
relief, arguing, inter alia, that the Massachusetts law was
preempted by the NLRA under the Machinists doctrine
"because Congress intended to leave the choice of terms in
collective-bargaining agreements to the free play of
economic forces." Metropolitan Life, 471 U.S. at 748. After
examination of the congressional concerns behind the
enactment of the NLRA, the Court rejected the argument
that state regulations imposing minimum substantive
standards on contract terms are preempted under
Machinists. As the Court explained:

The NLRA is concerned primarily with establishing an
equitable process for determining terms and conditions
of employment, and not with particular substantive
terms of the bargain that is struck when the parties
are negotiating from relatively equal positions. . .. The
evil Congress was addressing thus was entirely
unrelated to local or federal regulation establishing
minimum terms of employment. . . . No incompatibility
exists, therefore, between federal rules designed to
restore the equality of bargaining power, and state or
federal legislation that imposes minimal substantive
requirements on contract terms negotiated between
parties to labor agreements, at least so long as the
purpose of the state legislation is not incompatible with
the[ ] general goals of the NLRA.

Id. at 753-55.

The Court addressed a similar argument two years later
in Fort Halifax. The state statute at issue in Fort Halifax
required employers in Maine to provide a one-time
severance payment to employees in the event of a plant

16
closing, unless the employee was "covered by a contract
that deals with the issue of severance pay." 482 U.S. at 5.
Employees of a closed packing plant, as well as the Maine
Director of the Bureau of Labor Standards, brought suit in
state court for enforcement of the statute. On certiorari to
the Supreme Court, the owner of the closed plant, like the
insurer in Metropolitan Life, argued that preemption of the
state statute was necessary under Machinists"to further
Congress' intent that the conduct involved be unregulated
because [it should be] left to be controlled by the free play
of economic forces." Id. at 19-20 (internal quotations
omitted). It argued that its case was not controlled by
Metropolitan Life because the statutory obligation under the
Maine statute applied only in the absence of an agreement
between an employer and its employees.

The Fort Halifax Court confirmed its holding in
Metropolitan Life that a state law establishing a minimum
employment standard is not preempted by the NLRA,
adding that there is no preemption even when the state law
permits parties to an employment agreement to contract
out of the protections provided by the law. See id. at 22.
The Court explained:

It is true that the Maine statute gives employees
something for which they otherwise might have to
bargain. That is true, however, with regard to any state
law that substantively regulates employment
conditions. Both employers and employees come to the
bargaining table with rights under state law that form
a "backdrop" for their negotiations.

Id. at 21 (quoting Metropolitan Life, 471 U.S. at 757).

Metropolitan Life and Fort Halifax clearly stand for the
proposition that, in enacting the NLRA, Congress did not
intend to prevent states from establishing minimum
substantive requirements for contract terms. See generally
Metropolitan Life, 471 U.S. at 754-55 (discussing goals of
the NLRA). Although the associations insist that the WDA
is not a minimum substantive requirement like the ones at
issue in Metropolitan Life or Fort Halifax, they provide no
principled basis for distinguishing the WDA from the
statutes upheld in those cases.

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The associations attempt to draw support from two cases
decided in the Court of Appeals for the Ninth Circuit. In the
first, the court held that a wrongful discharge claim
brought by an employee under the Montana Wrongful
Discharge from Employment Act, Mont. Code Ann. SS 39-2-
901 et seq. (providing that discharge must be for good
cause), was preempted by the NLRA. See Barnes v. Stone
Container Corp., 942 F.2d 689 (9th Cir. 1991). A look at the
facts of Barnes reveals, however, that it is of little value
here.

The collective-bargaining agreement between Barnes's
employer, Stone Container Corp., and his union expired
and, after its extension for unsuccessful negotiations, the
employer exercised its right to terminate the agreement and
hired a number of replacement workers. Two of those new
employees were sprayed with water at the work site, and
Stone Container charged Barnes with the harassment of
those employees and fired him. The union filed an unfair
labor practice charge on behalf of Barnes, asserting that
the stated reason for his discharge was pretextual and that
Stone Container fired him for his union activity. After
investigation, the NLRB found no basis for the retaliation
charge and the union withdrew the complaint.

Barnes then filed an action under the Montana wrongful
discharge act, alleging dismissal without just cause. After
Barnes had been discharged, the bargaining between his
employer and union reached an impasse. The employer
sought summary judgment from the federal court to which
the action had been removed, arguing preemption under
Machinists, because the wrongful discharge act would
impose a just cause term where one did not exist. The
district court denied summary judgment but the court of
appeals reversed. The court held that permitting a wrongful
discharge action during the period after contract expiration
but before a bargaining impasse is the sort of entanglement
Machinists sought to avoid, as it altered significantly the
incentives to negotiate. The court did not invalidate the
state statute but merely held its use in those unique
circumstances was preempted.

That the Barnes decision is limited to a narrow set of
circumstances was made clear by the Ninth Circuit itself

18
the following year in National Broad. Co., Inc. v. Bradshaw,
70 F.3d 69, 73 (9th Cir. 1995) (holding that because a state
statutory remedy was not invoked until after bargaining
impasse was reached, "the type of interference with
negotiations frowned upon in Barnes did not occur"). That
set of circumstances is not present in this case.

The second case out of the Ninth Circuit relied on by the
associations, Chamber of Commerce of United States v.
Bragdon, 64 F.3d 497 (9th Cir. 1995), is also
distinguishable from this case. There, the court held that a
county ordinance that required private employers to pay
"prevailing wages" to employees on certain types of private
industrial projects costing over $500,000 was preempted by
the NLRA under Machinists preemption. See id. at 498. The
court noted that imposition of such substantive
requirements affects the bargaining process and could
dictate the results of a contract, id. at 501, an undue
governmental interference with the collective bargaining
processes protected by the NLRA, id. at 504.

Even if we were to agree with the Ninth Circuit that
Metropolitan Life and Fort Halifax permit the extension of
Machinists preemption to displace state law that imposes
substantive minimum requirements for contract terms
rather than regulates the use of economic bargaining
weapons, see id. at 501, the county ordinance at issue in
that case is remarkably different from the WDA. In
establishing nine statutory bases for lawful discharge in the
Virgin Islands, the WDA neither regulates the process of
bargaining nor upsets the balance of power of management
on one side and labor on the other that is established by
the NLRA.

Instead, the WDA is directed to limiting the permissible
bases for discharge of an employee to a broad list,
including, inter alia: engaging in conflicting business;
engaging in insolent or offensive conduct; using intoxicants
or controlled substances that affect the employee's work;
disobeying reasonable rules or instructions; being
negligent, incompetent, inefficient, dishonest, or unable to
work with others; and, regardless of the employee's
behavior, economic hardship of the employer. See V.I. Code

19
Ann. tit. 24, S 76. This appears to be a comprehensive list,
covering all or almost all legitimate reasons for discharge.

The associations also argue that the WDA cannot be a
minimum employment standard because it treats union
and non-union employees differently by permitting the
union to contract its members out of the protections
provided by the WDA but not permitting non-union
employees to contract out of the protections. They argue
that this opt-out for union employees "forces" unionization,
triggering preemption by conflict with S 7 and the
Machinists doctrine.

Our analysis of this alternative argument is guided by the
Supreme Court's discussion in Livadas v. Bradshaw, 512
U.S. 107 (1994). A California state law guaranteed to all
California workers immediate payment of wages upon
discharge. Livadas, an employee of Safeway supermarket,
was covered by a collective-bargaining agreement which
provided for binding arbitration for disputes as to the
interpretation or application of the agreement, including
grievances arising from allegedly unjust discharge or
suspension. Id. at 110. When Livadas was discharged, she
demanded her payment immediately, but the store manager
refused, instead sending her payment by mail. Livadas filed
an administrative claim against Safeway for a statutory
penalty for the three-day delay caused by the mailing, but
the Commissioner of Labor refused to enforce the claim
because Livadas was covered by a collective-bargaining
agreement containing an arbitration clause. Livadas then
filed suit, asserting that the Commissioner's non-
enforcement policy was preempted.

The Supreme Court agreed, holding that the
Commissioner's policy was preempted by the NLRA because
it forced Livadas to choose between exercising her state law
right to immediate payment and exercising her right to
enter into a collective bargaining agreement with an
arbitration clause. See id. at 117. In doing so, the Court
distinguished Fort Halifax, which involved a minimum
employment standard with an opt-out provision, in part on
the ground that "the minimum protections of Maine's plant-
closing law were relinquished not by the mere act of signing
an employment contract (or collective-bargaining

20
agreement), but only by the parties' express agreement on
different terms." Id. at 131. The Court stated:

While the Commissioner and her amici call our
attention to a number of state and federal laws that
draw distinctions between union and nonunion
represented employees, virtually all share the
important second feature observed in [Fort Halifax],
that union-represented employees have the full
protection of the minimum standard, absent any
agreement for something different. These `opt out'
statutes are thus manifestly different in their operation
(and their effect on federal rights) from the
Commissioner's rule that an employee forfeits his
state-law rights the moment a collective-bargaining
agreement with an arbitration clause is entered into.
Hence, our holding that the Commissioner's unusual
policy is irreconcilable with the structure and purposes
of the Act should cast no shadow on the validity of
these familiar and narrowly drawn opt-out provisions.

Id. at 131-32 (citations omitted). In a footnote, the Court
added: "Nor does is seem plausible to suggest that
Congress meant to pre-empt such opt-out laws, as
`burdening' the statutory right of employees not to join
unions by denying nonrepresented employees the `benefit'
of being able to `contract out' of such standards." Id. at 132
n.26.

The Supreme Court's discussion in Livadas thus
supports a conclusion that the WDA is not preempted by
the NLRA even though it provides an opt-out by express
terms of union contract. Like the Maine statute at issue in
Fort Halifax, and unlike the California Commissioner's
policy in Livadas, the WDA does not force an employee to
choose between collective bargaining and the protections of
state law; rather, it protects all Virgin Islands employees,
but gives employees the option of relinquishing the
territorial statutory protections through the terms of a
collective-bargaining agreement.

We are not alone in our conclusion that state minimum
employment requirements are not inconsistent with the
NLRA even when they provide for a union contract opt-out.

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We have seen no case in which a court of appeals has
decided otherwise. Indeed, there are several cases in which
the Court of the Appeals for the Ninth Circuit held that an
opt-out provision for union contracts did not trigger
preemption by the NLRA. See Viceroy Gold Corp. v. Aubry,
75 F.3d 482, 490 (9th Cir. 1996) (holding that statute
limiting mine workers to an 8-hour day unless otherwise
provided in a collective bargaining agreement is not
preempted); National Broadcasting Co., 70 F.3d at 73
(holding that state regulations requiring employers to pay
double time for all hours worked over 12 hours in a day
unless the employees were covered by a collective
bargaining agreement providing specified minimum
overtime benefits are not preempted).

Underlying the associations' argument and the District
Court's opinion in this case is the unsettling supposition
that by enacting the WDA the Virgin Islands legislature is
regulating in an area that has traditionally been left to the
freedom of contract between an employer and an employee.
The Supreme Court has made clear that Machinists
preemption does not extend into the realm of establishment
of minimum employment standards like that established by
the WDA. Moreover, the Court has cautioned that"[i]n
labor pre-emption cases . . . our office is not to pass
judgment on the reasonableness of state policy." Livadas,
512 U.S. at 120. It appears that the determination of the
Virgin Islands legislature that its citizens are in need of
minimum employment protections falls within the
precedent established by the Supreme Court that such
legislation is not preempted by the NLRA.

IV.

CONCLUSION

We have determined that the District Court's conclusion
that the associations have a likelihood of success on the
merits of their claim that the WDA is preempted by the
NLRA under the Machinists doctrine or by conflict with S 7
was based on erroneous legal analysis. It follows that we
will vacate the District Court's order granting the
preliminary injunction.

22
It is apparent that although the District Court referred to
testimony introduced by the associations at the hearing on
the preliminary injunction, that testimony was not factual
and the District Court relied on its earlier legal ruling in
Bell as the basis for its preemption decision. At argument,
the parties seemed to agree that there are no factual issues
to be decided and no further evidence to be taken that
would be relevant to a ruling on a permanent injunction.
The Supreme Court has counseled that "if a district court's
ruling rests solely on a premise as to the applicable rule of
law, and the facts are established or of no controlling
relevance, that ruling may be reviewed even though the
appeal is from the entry of a preliminary injunction."
Thornburgh v. American Coll. of Obst. & Gyn., 476 U.S. 747,
757 (1986). However, we have not asked the parties to brief
this issue and there remains for decision by the District
Court the associations' claim that the WDA should not be
applied to supervisors. Accordingly, we will not presume to
go further than the appellants request, i.e. that we vacate
the preliminary injunction, and we will remand for further
proceedings consistent with this opinion.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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