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In re Arbitration Between Local One

decided: February 23, 1987.


Appeal from a judgment of the Southern District of New York, Kevin T. Duffy, District Judge, confirming an arbitration award. Reversed and remanded.

Author: Mahoney

Before: OAKES, MESKILL and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

This appeal presents the question of what is required to bind a non-signatory company to a union contract signed by another company. in an arbitration proceeding between Stearns & Beale, Inc. ("S&B") and Local One, Amalgamated Lithographers of America ("Local One")*fn1 the arbitrator decided that a non-signatory company which shared a common parent corporation with S&B, AAA International Printing Company ("AAA"), was bound by the S&B contract because the two companies were "a single employer." The arbitrator accordingly directed (in effect) that neither S&B or AAA assign any lithographic production work to nonunion AAA employees. Local One then brought this action against S&B in the Southern District of New York to confirm the arbitration award; upon motion of Local One, summary judgment was granted and the award confirmed. We reverse and remand.


Originally S&B and AAA were separate established companies. After a falling out between the two founders of AAA, Ronald Toler and John Racanelli, Toler bought out Racanelli's interest in the firm. Toler then sought out another company with which to associate.

At the same time, S&B was suffering business reversals, and its president and sole stockholder, Milton Kahn, was therefore receptive to Toler's overtures.

In 1981, S&B and AAA became wholly owned subsidiaries of a single parent holding company, Toler-Kahn, Inc. Toler and Kahn each received 50 percent of the Toler-Kahn stock; Toler-Kahn in turn owned S&B and AAA. At that time, AAA moved to the same location as S&B, at 150 Varick Street in New York, New York.

Between April 1981 and February 1982, AAA and S&B shared work space on the fifth floor at 150 Varick Street. In February 1982, S&B sublet work space from an adjacent tenant and installed a wall between its space and the new space, into which AAA moved. Several common managerial offices are located between S&B and AAA, however, with a common telephone number for the two companies, and one AAA employee, operates equipment in the S&B area because the machine's operation requires a water supply, which is located near the men's bathroom within the S&B area.

S&B produces high quality color processed lithographic work such as glossy advertisements, catalogues and brochures. S&B has eight lithographic employees, who are employed in the job categories of pressmen, operators, and tenders. S&B's preparatory work is done by outside companies. Preparatory work consists of photographically separating the original colors into the four primary colors, then plate-making. S&B then uses the plates for printing. In the printing process, the four primary colors are blended to reconstruct the colors of the original so that the finished product looks like a photograph. Making the press ready by blending the colors and producing the finished print is a long, involved process during which the customer generally checks the proofs and approves the final print. The S&B presses produce glossy prints of up to forty inches.

AAA is a "letter shop," which is a high output, low quality printing operation. AAA's lithographic employees include three pressmen, two multi-lith operators, and one lithographic preparation employee While the AAA presses can produce four color work, this work is done on uncoated stock and the colors of the output are not blended to appear like a photograph, but rather appear as blocks of colors. AAA does reproduction work on flat sheet or roll-fed paper. It presses can produce output of up to seventeen inches. The output of AAA takes significantly less time to make ready and produce than the S&B output.

The companies in operation have maintained their separate identities. For example, while S&B and AAA share some common customers, the work performed by AAA and S&B for these customers differs. Thus, one customer may have S&B produce a glossy fashion design handbook and AAA produce a mass mailing of a black and white letter.

Because of the differences in the operations of the companies, the skills and conditions of employment of the two groups' employees varies substantially. A four year apprenticeship is required to learn to operate the S&B presses. S&B employs "tenders" who assist the pressmen and learn the operations from the pressmen. While the apprenticeship is four years, it takes many more years for the pressman to perfect his craft. S&B employees work only on the S&B presses and do not perform any other work, like collating or binding.

The S&B employees work 35 hours straight time per week. Their hours of work are from 8:30 a.m. to 3:30 p.m., punched on the S&B time clock. The wage for S&B pressmen ranges from $14 to over $17 per hour depending upon the size and type of press. Wages of tenders are between $8 and $9 per hour. The S&B employees are covered by the union's benefit plan, which includes pension, welfare and unemployment funds.

The amount of time necessary to learn to use the production equipment in AAA varies by the piece of equipment, ranging from one week to several months (for the multi-lith equipment). The AAA employees occasionally shift around among the various positions within the AAA operation, which includes among other things collating and binding.

The AAA employees work 40 straight time hours per week. Their hours of work are form 8:30 a.m. to 5:00 p.m., punched on the AAA time clock. The AAA employees are covered by a profit-sharing retirement plan rather than a pension plan. The wage ranges of AAA employees appear to be substantially less than those of the S&B employees.

AAA employees have never performed work for S&B, and conversely S&B employees have never performed work for AAA. On one occasion when there was no work for the S&B employees, the eight employees worked on the maintenance of their presses and played cards rather than moving into the AAA side to perform work for AAA. No employees have been transferred from S&B to AAA nor has anyone transferred from AAA to S&B.

The foreman for S&B has never assigned work to, or in any other way supervised, AAA employees, nor has the AAA foreman assigned work to, or supervised, S&B employees. When an opening arose at S&B, the new employee was hired through Local One.

With the exception of the AAA employee who worked on the equipment located in S&B's work space, AAA employees only entered S&B's work area to use the men's bathroom located in a corner of S&B or to pick up the output of the AAA employee. S&B employees generally did not enter the AAA work space.

When S&B's output required binding or collating, it sometimes was contracted out to AAA and sometimes to outside companies. When it was given to AAA, S&B's foreman would take the work to the office located between the two sides or would notify the office that it was ready to be bound or collated. An office employee would then ...

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