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MERK v. JEWEL FOOD STORES

November 25, 1992

KELLY MERK, JOSEPH STASZEWSKI, VICKIE MENAGH, DONNA McCORMICK, DAVID THERKIELD, JOHN MALONE, MARLENE WAGNER, MICHAEL DEMARE, WAYNE VOLKER, ELEANORE COLLINS, ANDREW KACHIK, PATRICIA TODD, KEVIN QUAID, and LINDA SINGLETON, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
JEWEL FOOD STORES, DIVISION JEWEL COMPANIES, INC., and UNITED FOOD AND COMMERCIAL WORKERS UNION LOCAL NO. 881, chartered by UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION, AFL-CIO and CLC, Defendants.



The opinion of the court was delivered by: MARVIN E. ASPEN

MEMORANDUM OPINION AND ORDER

 MARVIN E. ASPEN, District Judge:

 Plaintiffs, representing a class comprising approximately 2,000 former employees of Jewel Food Stores ("Jewel"), move for entry of judgment on all issues of liability related to Count I of the third-amended complaint. Additionally, plaintiffs seek (1) adjudication of issues related to their entitlement to prejudgment interest on the damages fund created in conjunction with this action, and (2) to reopen discovery with respect to the issue of damages. Jewel has filed a cross-motion for entry of judgment on the liability issue, alternatively seeking additional evidentiary hearings concerning liability. For the reasons detailed below, we deny Jewel's motion for entry of judgment or alternatively for further evidentiary proceedings, and we grant plaintiffs' motions for entry of judgment, for adjudication of prejudgment interest issues, and for the conduct of limited discovery.

 I. Background

 Jewel operates approximately 180 supermarkets in and around Chicago, employing some 15,000 employees represented by Local 881 of the United Food and Commercial Workers Union (the "Union"). In September of 1982, the Union began negotiations with Jewel for a new collective bargaining agreement ("CBA") to run from September 15, 1982 to June 15, 1985. Negotiations stalled, however, as Jewel insisted on a "most favored nations" clause, whereby Jewel would have the right to reduce wages unilaterally to the level achieved by any competing food store that might negotiate a more favorable contract with the Union during the term of the CBA. Jewel anticipated that Cub Foods, a warehouse-style grocery store chain, was poised to enter the Chicago market. The Union refused Jewel's demand for a "most favored nations" clause and, after protracted negotiations, the parties reached an agreement without such a clause. The agreement was reduced to writing and ratified by the Union membership on January 27, 1983, and took effect retroactive to September 19, 1982.

 With Cub Foods' entry into the Chicago market in 1983, Jewel announced the reopening of contract negotiations. After reaching an impasse, on February 26, 1984, Jewel unilaterally implemented its final offer, cutting wages below levels mandated by the CBA. The Union immediately filed suit in the United States District Court for the Northern District of Illinois, alleging unfair labor practices. Ultimately, the parties resolved their differences, with the Union agreeing to drop the suit and Jewel agreeing to award backpay to its current employees. Plaintiffs represent a class of individuals who were employed by Jewel at the time of the unilateral wage reduction, but who quit, retired or were fired before the settlement. At Jewel's insistence, plaintiffs and the represented class were specifically left out of the settlement agreement. As such, plaintiffs filed this action against the Union for breach of its duty of fair representation and against Jewel for breach of contract. On June 26, 1986, this court granted summary judgment in favor of the Union, holding that the Union owed no duty of fair representation to former employees. Merk v. Jewel Food Stores, 641 F. Supp. 1024, 1032 (N.D. Ill. 1986), aff'd, 848 F.2d 761 (7th Cir.) ("Merk I"), cert. denied, 488 U.S. 956, 109 S. Ct. 393, 102 L. Ed. 2d 382 (1988). The remaining claim against Jewel for breach of the CBA went to a jury, which found in favor of Jewel (i.e., that the Union had agreed to a "reopener" provision). After plaintiffs' unsuccessful post-trial motions, the court entered judgment in favor of Jewel. Merk v. Jewel Food Stores, 734 F. Supp. 330, 331 (N.D. Ill. 1990) (Posner, J., sitting by designation). Plaintiffs appealed, and the Seventh Circuit reversed the judgment, holding that the secret "reopener" provision violated federal labor policy and, hence, was unenforceable. Merk v. Jewel Food Stores, 945 F.2d 889, 899 (7th Cir. 1991), cert. denied, 112 S. Ct. 1951, 118 L. Ed. 2d 555 (1992) ("Merk II"). The cause was remanded to this court for further proceedings consistent with the Seventh Circuit's ruling in Merk II.

 II. Entry of Judgment

 In support of their motion for entry of judgment, plaintiffs contend that without the reopener provision, Jewel had no contractual right to reduce their wages and that liability is therefore established. Plaintiffs point to jury instruction 17(2), an instruction uncontested by Jewel, which provides: "If you find that there was no oral reopener agreement, then you must find for the Plaintiffs." Additionally, plaintiffs cite Jewel's own memorandum in support of its motion to bifurcate issues for trial, summarizing the liability issue as follows: "Liability hinges solely on the existence of the economic reopener agreement. . . ." In response, Jewel argues, first, that invalidation of the reopener renders the entire CBA unenforceable because the reopener provision was essential to the entire agreement. Second, Jewel maintains that the action is time-barred by the federal six-month statute of limitations for actions arising out of unfair labor practices. Lastly, Jewel argues that, regardless of whatever the oral agreement of January 1983 may have provided and regardless of its enforceability, the Union agreed in January of 1984 to reopen the negotiations. We address each of Jewel's "defenses" seriately.

 A. Severability

 It is settled law that the invalidation of a CBA provision which runs afoul of the public policy will render the entire CBA unenforceable where the "forbidden provision is so basic to the whole scheme of [the CBA] and so interwoven with all its terms that it must stand or fall as an entirety." National Labor Relations Bd. v. Rockaway News Supply Co., 345 U.S. 71, 78, 73 S. Ct. 519, 523, 97 L. Ed. 832 (1953); see also National Labor Relations Bd. v. Custom Sheet Metal & Serv. Co., 666 F.2d 454, 460 (10th Cir. 1981). As framed by Jewel, the question currently confronting the court is as follows: Was the reopener provision so basic to the whole scheme of the CSA and interwoven with its terms to such an extent as to affect its enforceability entirely? Assuming that this issue has not been waived, we can only answer the above question negatively.

 The gravamen of Jewel's argument that the reopener provision may not be severed from the remaining terms of the CBA is that the oral side agreement broke the impasse in the initial negotiations between the Union and Jewel. In this sense, according to Jewel, the invalid provision is essential to the CBA in its entirety as the CBA would not have existed (at least in the form agreed upon) in the absence of the reopener provision. Jewel's focus, however, is misplaced. Severability depends on the character of the invalidated provision in reference to the remaining terms of the CBA, and not in reference to the preliminary negotiations culminating in the CBA. Although the Seventh Circuit in Merk II characterizes the reopener provision as "fundamental," and "central," the context of the discussion is ultimately the duration of the CBA. Merk II, 945 F.2d at 893, 895-96. Respecting the remaining provisions of the CBA, the court summed up the impact of the reopener as follows: "Thus Union members who reasonably believed that they were guaranteed a fixed rate of pay for the duration of the CBA unexpectedly found their wages slashed at mid-term." Id. at 896. Viewed in such a manner, the only provision modified by the reopener is that which provides that the CBA will remain in effect for three years. That the reopener is not essential to the enforcement of the remaining provisions of the CBA is evident upon comparing the effect of its invalidation against the effect of the invalidation of the relevant provision in Custom Sheet Metal, a case where the entire CBA was held unenforceable. In that case, the court invalidated a minimum qualifications provision of a CBA which referred to only two classifications of workers who could be employed by the company--journeymen and apprentice sheet metal workers. Custom Sheet Metal, 666 F.2d at 460. Because the wage scale in the CBA was directly tied to the classification scheme, the court concluded that the invalid provision was "truly vital" to the CBA in its entirety. Id. Unlike the remaining wage provisions in Custom Sheet Metal, enforcing the remaining provisions of the present CBA does not present this court with a logical impossibility. After severance of the unenforceable reopener, the "new contract" adequately provides for the determination of back pay for the period between September, 1982, and June, 1985. See Local 206 v. R.K. Burner Sheet Metal, Inc., 859 F.2d 758, 761 (9th Cir. 1988).

 More significantly, rendering the entire CBA unenforceable would undermine the Seventh Circuit's decision in Merk II. As the court noted, "an economic reopener provision permits the company to reopen all economic terms of the CBA upon occurrence of the condition precedent. Negotiations may then proceed as if the parties were bargaining over a totally new contract . . . ." Merk II, 945 F.2d at 891. Thus, enforcing the reopener means, by definition, rendering the entire *fn1" CBA unenforceable. The court in Merk II, however, held the secret reopener invalid as a violation of national labor policy. Id. at 896. Striking the entire CBA would amount to the same result as enforcing the reopener provision, a result the Seventh Circuit clearly condemned by implication. This ...


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