Copeland v. PENSKE LOGISTICS LLC

In the

United States Court of Appeals
For the Seventh Circuit

No. 11-1955

B EVERLY K. C OPELAND, et al.,
Plaintiffs-Appellants,
v.

P ENSKE L OGISTICS LLC; P ENSKE L OGISTICS, INC.; and
C HAUFFEURS, T EAMSTERS, W AREHOUSEMEN, AND
H ELPERS L OCAL U NION N UMBER 135,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:09-cv-1287-RLY-DML—Richard L. Young, Chief Judge.

A RGUED S EPTEMBER 21, 2011—D ECIDED A PRIL 6, 2012

Before E ASTERBROOK, Chief Judge, and T INDER and
H AMILTON, Circuit Judges.
E ASTERBROOK, Chief Judge. Penske Logistics provided
transportation services for the Indianapolis Star news-
paper between 1999 and 2009. When the end of the
contract approached, the Star put the work up for bids,
and Penske Logistics lost. It informed the employees’
2 No. 11-1955

union (Teamsters Local 135) that it would cease opera-
tions on May 19, 2009. The collective bargaining agree-
ment between Penske Logistics and the Union expired
two days later. As the Star was Penske Logistics’ only
customer, the business itself would be discontinued.
Employers and unions must bargain in good faith
about the effects of closures, though employers need not
bargain about whether to leave the business. See First
National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981).
Penske Logistics and the Union engaged in “effects bar-
gaining.” The employer agreed to give the workers
(a) extended recall rights, (b) preferential treatment
should they apply for employment at other firms within
the Penske group of companies, (c) payment for earned
but unused vacation and holiday time, (d) severance
pay equal to one week’s wages (done by offering an
extra week’s vacation time), and (e) assistance in
preparing resumes and securing letters of recommenda-
tion to help find new jobs.
Dissatisfied with this package of benefits, some of
Penske Logistics’ former employees filed this suit, which
they style a hybrid breach-of-contract / duty-of-fair-
representation action under §301 of the Labor-Management
Relations Act, 29 U.S.C. §185. To prevail in such a suit,
employees must demonstrate both that the employer
violated a collective bargaining agreement and that the
union breached its duty of fair representation in the
course of failing to hold the employer to its promise. See,
e.g., Vaca v. Sipes, 386 U.S. 171 (1967). As a hybrid action,
it is doomed by the fact that the plaintiffs do not even
No. 11-1955 3

contend that Penske Logistics failed to implement
the collective bargaining agreement. The CBA did not
promise any severance benefits should Penske Logistics
lose its business with the Star and lay off its work force.
Thus the first requirement of a hybrid action is missing,
and the district court granted summary judgment for
the defendants. 2011 U.S. Dist. L EXIS 28326 (S.D. Ind.
Mar. 18, 2011). The judge added that plaintiffs, who
never complained to the Union or used its internal reme-
dial processes about this issue, are in no position to
maintain that Local 135 violated its duty of fair repre-
sentation. (Plaintiffs did present grievances about some
other issues; we agree with the district court that they
did not establish that the Union’s response to them vio-
lated its duty of fair representation. That subject need
not be discussed further in this opinion.)
In this court plaintiffs advance two lines of argument.
One is that Penske Logistics failed to give them all
benefits available under its contract (the “logistics agree-
ment”) with the Star. Plaintiffs describe themselves as
third-party beneficiaries of the logistics agreement. One
paragraph in the logistics agreement provides that, if
Penske Logistics agrees to provide its workers with
severance benefits should it lose the business (as it did),
the Star will cover the expense of these benefits. Plain-
tiffs say that, because Penske Logistics could have pro-
vided more generous benefits and shifted the cost to
the Star, it was required to do so. The other line of argu-
ment is that the Union did not bargain hard enough with
Penske Logistics to achieve extra benefits and should
be held liable on that ground.
4 No. 11-1955

The first line of argument does not rely on federal
labor law; it is a contract claim. But what’s the basis
of federal jurisdiction? The supplemental-jurisdiction
statute, 28 U.S.C. §1367(a), permits a court to entertain a
claim that is part of the same case or controversy as the
claim within a federal court’s original jurisdiction. Plain-
tiffs do not contend that a supposed breach of the
logistics agreement between Penske Logistics and the
Indianapolis Star is the same “controversy” as a sup-
posed breach of the CBA between Penske Logistics and
Local 135. Jurisdiction therefore would depend on diver-
sity of citizenship. 28 U.S.C. §1332. But all of the plain-
tiffs and at least some of the defendants appear to be
citizens of Indiana (a union is a citizen of all states of
which any member is a citizen, see Steelworkers v. R.H.
Bouligny, Inc., 382 U.S. 145 (1965), and a limited liability
company’s citizenship includes every state of which any
unit holder is a citizen, see Cosgrove v. Bartolotta, 150
F.3d 729 (7th Cir. 1998)). What’s more, none of the plain-
tiffs asserts a claim exceeding $75,000. Even a greatly
enhanced severance package for any one employee
would be less than $75,000, and the claims of multiple
plaintiffs cannot be aggregated to reach the jurisdic-
tional minimum. See Snyder v. Harris, 394 U.S. 332 (1969).
The plaintiffs’ appellate brief asserts jurisdiction under
§1332 but does not contain any of the details—concerning
either citizenship or amount in controversy—required
to establish diversity jurisdiction.
There’s a separate jurisdictional problem with the
argument that the Union engaged in superficial bar-
gaining about the effects of the shutdown. Here the
problem is that failure to bargain in good faith is an
No. 11-1955 5

unfair labor practice, and only the National Labor Rela-
tions Board is authorized to provide remedies for unfair
labor practices committed during the course of collective
bargaining. See Marquez v. Screen Actors Guild, Inc., 525
U.S. 33, 49–51 (1998); Communications Works v. Beck, 487
U.S. 735, 742–45 (1988). Action by the Board depends
on the General Counsel’s decision to issue a complaint.
As far as we can see, plaintiffs did not take their
grievance to the General Counsel, and the Board certainly
has not issued a decision finding that either the Union
or Penske Logistics failed to bargain in good faith.
Section 301, the sole source of authority for employees
to present labor-law issues directly to federal court,
covers “[s]uits for violation of contracts between an
employer and a labor organization” (§185(a)). Since
breach of a labor contract also can be an unfair labor
practice, the Board and the federal courts have
concurrent jurisdiction to this extent. Smith v. Evening
News Association, 371 U.S. 195 (1962). But a contention
that a union did not bargain hard enough to obtain
benefits beyond those provided in the existing collective
bargaining agreement is not a suit for a violation of the
CBA and so is outside §301. Such a claim asserts a
pure unfair labor practice, within the Board’s primary
jurisdiction.
The parties may have been confused between preemp-
tion and lack of jurisdiction. When a claim arises under
some other federal statute (the antitrust laws, for exam-
ple), the Board’s authority over unfair labor practices
may supersede (or in the case of state law, preempt) the
application of these other sources of law. See San Diego
Building Trades Council v. Garmon, 359 U.S. 236 (1959). This
6 No. 11-1955

doctrine usually is a defense, not a limit on subject-
matter jurisdiction. See Baker v. IBP, Inc., 357 F.3d 685,
688 (7th Cir. 2004). Jurisdiction of an antitrust suit is
secure even when labor law displaces the Sherman Act.
See, e.g., Brown v. Pro Football, Inc., 518 U.S. 231 (1996).
The problem in this case, by contrast, is that the plain-
tiffs’ claim does not arise under any federal statute
other than §301, which is at once a grant of jurisdiction
and a source of substantive rights. See Textile Workers v.
Lincoln Mills, 353 U.S. 448 (1957). Section 301 is limited
to suit on a contract; an asserted violation of a union’s
duty of fair representation by failing to enforce the
contract can be ancillary to the claim that a promise in
a CBA has been broken. See Motor Coach Employees v.
Lockridge, 403 U.S. 274, 298–301 (1971). Plaintiffs’ argu-
ment that Local 135 did not bargain hard enough to
get benefits exceeding those provided in the CBA is not
a claim for breach of contract and therefore can’t be
pursued under §301. It belongs to the Labor Board
alone. Section 301 provides enforcement of deals that
were struck, rather than damages for deals never made.
To the extent the district court granted summary judg-
ment to the defendants on the hybrid contract/DFR
claim, the judgment is affirmed. With respect to the plain-
tiffs’ claims based on the logistics agreement and
the Union’s asserted failure to bargain harder for extra
severance benefits, the judgment is vacated and the
case is remanded with instructions to dismiss for lack
of subject-matter jurisdiction.

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