Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

LOEWEN GROUP INTL. v. HABERICHTER

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION


August 22, 1994

LOEWEN GROUP INTERNATIONAL, INC., Plaintiff,
v.
WILLIAM J. HABERICHTER, Defendant.

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

MEMORANDUM OPINION AND ORDER

 MARVIN E. ASPEN, District Judge:

 Among other things, plaintiff Loewen Group International, Inc. ("Loewen") owns and operates funeral homes and cemeteries. Loewen is currently suing defendant William J. Haberichter ("Haberichter") for breaching an employment agreement that included a covenant not to compete. Presently before us is Haberichter's converted motion for summary judgment. *fn1" For the following reasons, we grant the motion.

 I. Factual Background

 In 1992, Loewen, a Delaware corporation, acquired the funeral home business of Donovan and Schaer Funeral Homes, P.C. ("D & S"). At the time of the purchase, Haberichter was an assistant manager at D & S's Arlington Heights' location. *fn2" According to Loewen, D & S, like most funeral home businesses, relies heavily on the goodwill and local contacts of its employees within the community in which it operates. Consequently, it is not unusual for buyers to include, as a condition of sale, that certain key employees of the seller remain with the business for at least a transitional period. Similarly, sellers generally agree not to compete with their former business, either directly or indirectly, within a reasonable radius and for a reasonable period of time.

 In the Asset Purchase Agreement signed by Loewen and D & S, D & S agreed not to participate in a competing business within 50 miles of either the Arlington Heights or Des Plaines facility. Furthermore, in addition to providing that each of D & S's principals *fn3" would enter into similar covenants not to compete, the Agreement required Loewen to enter into individual employment contracts with, among others, Haberichter. If Haberichter did not wish to be bound by such an agreement, he could decline. However, if he chose to avail himself of an employment agreement, the Agreement stipulated that the employment contract would contain a covenant not to compete. Cmplt., Exh. B at PP 12 & 13.

 In February, 1992, Haberichter and Loewen signed an individual employment contract under which Haberichter was to work for Loewen for at least five years at an annual salary of $ 52,000 and was to refrain from competing with Loewen within a ten mile radius of the facility for a period of at least ten years. As separate consideration for this covenant, Haberichter received $ 75,000. Cmplt., Exh. C. at P 12(b).

 According to Loewen, barely had the ink dried on the employment agreement before Haberichter began making plans to set up a competing funeral home. Haberichter allegedly compiled records and information regarding families D & S had served in Arlington Heights, prepared a business plan and financial projections for his potential facility, and began getting the financing and permits necessary to launch a funeral home. Finally, in November, 1993, Haberichter told Loewen that he was planning to open a competing funeral home in April, 1994, and that he had been working on the project for several months. *fn4" At the same time, Haberichter tendered his resignation, seeking to obtain severance benefits pursuant to his employment agreement. Loewen did not permit Haberichter to "resign," but has sued its former employee for breach of the employment agreement (Count I), breach of the covenant not to compete (Count II), breach of fiduciary duty (Count III), and for injunctive relief (Count IV).

 II. Discussion

 As discussed above, we converted Haberichter's motion to a motion for summary judgment in order to address legal issues stemming from Haberichter's union status. Although Loewen was given an opportunity to challenge Haberichter's union membership, it proffered no evidence suggesting that the defendant, in fact, was not a member of the Funeral Directors and Embalmers Union Local No. 727. Accordingly, we proceed to address the merits of Haberichter's motion.

 A. Preemption of Counts I, II and III by § 301 of the Labor Management Relations Act

 Section 301 of the LMRA, 29 U.S.C. § 185(a), confers jurisdiction on federal courts over disputes involving violations of collective bargaining agreements. In an effort to ensure uniformity of adjudication, the Supreme Court has ruled that "if the resolution of a state-law claim depends upon the meaning of a collective-bargaining agreement," the state-law claim is preempted. Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 108 S. Ct. 1877, 1885, 100 L. Ed. 2d 410 (1988). See also Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 105 S. Ct. 1904, 85 L. Ed. 2d 206 (1985). However, the Court emphasized that "an application of state law is pre-empted by § 301 of the [LMRA] only if such application requires the interpretation of a collective bargaining agreement." Accordingly, in ruling on state law claims, a court may look at the same facts that would govern the outcome of a contract claim, but the claim will only be preempted if the court is called upon to interpret a term of a collective bargaining agreement. See Pantoja v. Texas Gas and Transmission Corp., 890 F.2d 955, 959 at n.1 (7th Cir. 1989) (court held that § 301 did not preempt retaliatory discharge claim where complaint frequently referred to collective bargaining agreement, but did not require interpretation of any terms).

 Here, the parties disagree about whether resolution of Counts I (breach of the employment contract), II (breach of the covenant not to compete), and III (breach of fiduciary duty) will require this Court to interpret the collective bargaining agreement. Because Loewen is suing Haberichter based on an independent employment contract, rather than on the collective bargaining agreement itself, Loewen maintains that Counts I, II, and III do not, and logically will not, require any interpretation of the collective bargaining agreement. Haberichter, on the other hand, contends that the collective bargaining agreement is inescapably implicated here, because the employment agreement contains terms that conflict with the collective bargaining agreement, imposing on Haberichter terms that are more onerous than those contained in the union agreement.

 Both positions have merit. There is no question that a plaintiff may pursue state law claims in connection with an individual employment contract, despite the fact that the relationship is also covered by a collective bargaining agreement, as long as the complaint is not "substantially dependent" upon interpretation of the collective bargaining agreement. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 394-95, 107 S. Ct. 2425, 2430-31, 96 L. Ed. 2d 318 (1987) ("As the Court has stated, 'it would be inconsistent with congressional intent under [§ 301] to pre-empt state rules that proscribe conduct, or establish rights and obligations, independent of a labor contract.'") (quoting Allis-Chalmers Corp., 471 U.S. at 212, 105 S. Ct. at 1912)). See also Lingle, 486 U.S. at 409-10, 108 S. Ct. at 1883 ("If dispute resolution pursuant to a collective bargaining agreement, on the one hand, and state law, on the other, would require addressing precisely the same set of facts, as long as the state-law claim can be resolved without interpreting the agreement itself, the claim is 'independent' of the agreement for § 301 preemption purposes.").

 However, courts have regularly found preemption where provisions in an independent contract are inconsistent with (in a less favorable manner than) a term of the collective bargaining agreement. *fn5" See, e.g., Melanson v. United Air Lines, Inc., 931 F.2d 558, 561 (9th Cir. 1991) ("The Supreme Court has ruled that the CBA supersedes inconsistent individual employment contracts.") (citing J.I. Case Co. v. NLRB, 321 U.S. 332, 337-39, 64 S. Ct. 576, 580-81, 88 L. Ed. 762 (1944)); Bale v. General Telephone Co., 795 F.2d 775, 779 (9th Cir. 1986) ("The individual employment contracts entered into by Bale and Fife could therefore be effective only insofar as they were consistent with the collective agreement."); Malia v. RCA Corp., 794 F.2d 909, 912 (3rd Cir. 1986). Accordingly, there is some threshold burden on a court being asked to enforce an individual employment contract to examine the related collective bargaining agreement to determine whether the contract conflicts with the agreement. *fn6"

 Haberichter suggests that the necessity of looking to the collective bargaining agreement to assess whether inconsistencies exist, by itself, results in preemption. We disagree. As the Ninth Circuit has aptly observed:

 

If [an examination of the collective bargaining agreement's terms] were [an interpretation], the section 301 preemption doctrine would swallow the rule that employees covered by collective bargaining agreements are entitled "to assert legal rights independent of that agreement, including state-law contract rights, so long as the contract relied upon is not a collective bargaining agreement."

 Milne Employees Ass'n. v. Sun Carriers, Inc., 960 F.2d 1401, 1409-10 (9th Cir. 1992) (quoting Caterpillar, 482 U.S. at 396, 107 S. Ct. at 2431). This is not to say that perusal of a collective bargaining agreement will never result in preemption. Where a conflicting (or potentially conflicting) provision is uncovered, preemption may well be required, since assessment of whether the collective bargaining agreement is actually inconsistent with the contract will necessary involve the court in interpreting the agreement. *fn7"

 1. Count I

 Here, Haberichter, albeit belatedly, identifies several provisions of the collective bargaining agreement that potentially conflict with the individual employment contract before us. First, Haberichter argues that he was fired for cause, and points out that the collective bargaining agreement covers discharge for cause, thereby creating a conflict. Indeed, the collective bargaining agreement states that "an employer member shall not discharge any employee without just cause," but fails to limit the definition of "cause." On the other hand, the employment contract permits discharge for cause, and goes on to define "cause" to mean various things, including "actively and intentionally pursuing interests of a competitor to the detriment of Company or Chapel." Agreement, P 18(a)(iv). Although "cause" is more specifically defined in the employment contract, it is unclear whether the superficially more narrow definition of "cause" in the employment agreement restricts or expands the termination provision in the collective bargaining agreement. That is, while the collective bargaining agreement on its face allows for termination for "cause, it remains unclear whether "cause" includes competition. Determination of whether the two agreements conflict (in a manner more restrictive of Haberichter's rights) requires interpretation of the collective bargaining agreement. *fn8" Accordingly, we need look no further to conclude that Count I of the complaint is preempted. We therefore grant Haberichter summary judgment on Count I.

 2. Count II

 Haberichter further argues that he should be awarded summary judgment on Count II because the covenant not to compete is clearly inconsistent with the collective bargaining agreement. Haberichter bases this claim on the fact that the collective bargaining agreement specifically states that "employees may perform jobs the same as or substantially similar to those covered by this agreement for employers who have a substantially similar agreement with the union." CBA, Article X, Section 3. According to Haberichter, because the collective bargaining agreement permits employees to work for competitors, the covenant not to compete more narrowly confines his rights. Loewen explains that the proffered provision simply pertains to possible economic retribution in the wake of a strike and therefore does not pretend to proscribe employees' competitive rights in any other circumstances. However, the meaning of Article X, section 3 is not clear from the face of the collective bargaining agreement. As such, in order to determine whether the covenant not to compete restricts Haberichter's rights, we would necessarily have to interpret the collective bargaining agreement. Given this fact, we find that Count II is preempted and grant Haberichter summary judgment on it.

 3. Count III

 Finally, Haberichter argues that he is entitled to summary judgment on Loewen's breach of fiduciary duty claim. In Count III, Loewen complains that Haberichter, as an employee, violated his duty of loyalty and good faith by setting up a competing business. Although it is not clear whether Loewen is alleging that these duties derived from the employment relationship as governed by the collective bargaining agreement or by the individual employment contract, under either scenario the claim is preempted.

 Haberichter's basic employment status is governed by the collective bargaining agreement. Obviously, then, if Loewen is charging that Haberichter's status as an employee, by itself, gave rise to a duty of loyalty and good faith, then the claim implicates the collective bargaining agreement and is preempted. Alternatively, if Loewen maintains that Haberichter's duty of loyalty and good faith arises from the individual employment contract, then we can only enforce the duty if the contract itself is consistent with the collective bargaining agreement. As discussed above, however, there are potential inconsistencies between the agreements regarding Haberichter's freedom to work for competing businesses. Accordingly, under any analysis, Count III is preempted. *fn9"

 B. Rule 11 Sanctions

 Haberichter has also moved for Rule 11 sanctions against Loewen, arguing that an investigation into the governing law would have revealed the fact that Loewen's complaint was preempted by § 301 and/or Garmon. In addition to the fact that Haberichter fails to make this motion in a separate pleading, as required by Rule 11, see Fed. R. Civ. P. 11(c)(1)(A) ("A motion for sanctions under this rule shall be made separately from other motions or requests . . . ."), we do not share Haberichter's belief that § 301's applicability was beyond dispute. Indeed, Haberichter's motion for sanctions borders on the frivolous and is denied.

 III. Conclusion

 For the foregoing reasons, we grant defendant's converted motion for summary judgment on plaintiff's complaint and deny his motion for sanctions. *fn10" It is so ordered.

 MARVIN E. ASPEN

 United States District Judge

 Dated 8-22-94


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.