Press Release
June 24, 2010

U. S. Supreme Court Issues Graniterock Ruling Legal Outcome Welcomed by Local Company

The Supreme Court of the United States announced its decision in Granite Rock Company v. International Brotherhood of Teamsters & Teamsters Local 287 on Thursday morning. The Court confirmed Graniterock’s jury verdict against Local 287 and refused to dismiss the International Brotherhood of Teamsters from the case, leaving Graniterock several options to pursue claims against the International. The Court’s decision was unanimous concerning the International. The Court’s confirmation of Graniterock’s jury verdict was issued on a 7–2 vote.

Concrete ready-mix drivers represented by Teamsters Local 287 went on strike against Graniterock in June of 2004. The strike forced more than 450 Graniterock Team Members from their jobs, harming hundreds of families, the Company’s customers, and the Company.

The Company and the union settled the strike in the early morning hours of July 2, 2004, with the union agreeing to return to work immediately. After ratifying a collective bargaining agreement that contained a no-strike clause, the union refused to allow its members to return to work unless the Company agreed to release the union for damage claims and unfair labor practice charges that arose during the strike. The Teamsters Union demanded the release for the benefit of the union locals, as well as the International. When Graniterock refused to provide the release, the strike continued for more than two months.

Graniterock filed an action against Local 287 and the International Brotherhood of Teamsters in U.S. District Court in San Jose, alleging that the Local violated the no-strike clause of the newly-ratified agreement, and that the International was orchestrating the continued strike for its own benefit (to obtain the release).

The District Court dismissed Graniterock’s claims against the International, ruling that those claims were preempted by federal labor law. The claims against the Local proceeded to a jury trial on the issue of whether the collective bargaining agreement negotiated in July had actually been ratified by the Local membership. The jury reached a unanimous verdict in favor of Graniterock, finding that the agreement had in fact been ratified.

The Local union appealed this jury verdict, claiming the issue of whether the contract was ratified should have been heard in arbitration, not by a jury. Graniterock appealed the court’s dismissal of its claims against the International. The Ninth Circuit Court of Appeal ruled in favor of the unions on both issues. Graniterock petitioned the Supreme Court for review of the Ninth Circuit’s ruling.

The Supreme Court Ruling
The Court upheld Graniterock’s 2008 jury verdict against Local 287, turning away the union’s argument that the decision should have been made by an arbitrator rather than the jury.

On the second issue, the Court held that federal law does not provide a shield for an international union that uses its influence over a local union to injure an employer. While the Court declined to recognize a new federal tort cause of action, the Court stated this “does not mean that we approve of the IBT’s alleged actions.” Accordingly, the Court held that Graniterock may still seek its damage claims from the 2004 strike. The Court described several avenues that Graniterock could pursue against the International.

The 2004 strike has already been determined to have been unlawful by the National Labor Relations Board, a decision that was affirmed by a court of appeal. Graniterock’s attorneys labeled the International’s conduct “extortion” during oral argument before the high Court. As the Court stated in the Opinion, “Graniterock describes a course of conduct that does indeed seem to strike at the heart of the collective bargaining process federal labor laws were designed to protect.”

Graniterock is seeking significant strike cost reimbursement, including back pay for Team Members.

Company Hails the Decision
Graniterock Team Members expressed joy that the multi-year lawsuit is nearing completion and that justice continues to be served. Tom Treanor, Preventive Maintenance Manager who attended the Supreme Court’s oral argument, was pleased with the Court’s decision. “The Teamsters Union decided to hold Graniterock Team Members hostage and use blackmail to escape responsibility for what they did. The Court obviously values the promises made in collective bargaining agreements and does not believe that those promises should be easily forgotten or broken,” said Treanor. “Unions will now be held responsible for their conduct because of the Supreme Court’s decision and the payment of damages will push their repugnant actions into the light of day.”

Graniterock was represented by Garry Mathiason of Littler Mendelson in San Francisco and Arthur Miller, professor of law at New York University. “We are in the process of thoroughly reviewing the Court’s decision. The Supreme Court has actually opened the door to additional legal steps that we can now take, and we will carefully evaluate those and decide on the best course of action,” said Mathiason.

Graniterock’s case was selected for review by the Supreme Court in June 2009, one of 75 selected from 10,000 cases annually considered for review. Graniterock and the Union appeared before the Court in oral argument in January, 2010. The Court’s decision concerning the International was unanimous. Justices Sotomayor and Stevens dissented from the portion of the decision concerning arbitration.

Kevin Jeffery, a Graniterock lawyer, participated in the drafting of briefs submitted to the Court and attended the oral argument. “The Ninth Circuit decision wrongfully granted the International immunity for interfering with the contract between Graniterock and the Local. The Ninth Circuit said there was effectively a ‘no man’s land’ in the law that allowed an international union to cause the violation of contracts made by its locals, and legally avoid the consequences of its bad acts. The Ninth Circuit dismissed the International from the case. The Supreme Court refused to adopt this view. Instead, the Court simply declined to recognize a new federal tort cause of action, and suggested several potential claims that Graniterock may bring against the International under existing law,” said Jeffery.

Regarding the arbitration issue, Tom Squeri, Graniterock General Counsel, said that “the high Court completely rejected the Ninth Circuit’s argument that an arbitrator should decide the issue of whether a contract agreement had been reached. Without a contract formed, there could not be original authority for any arbitrator to act. Further, the Court dismissed the Union’s argument that Graniterock could be required to submit the matter to an arbitrator under the terms of the very contract that the Union denied had been ratified.”

“Graniterock sought to enforce its labor contracts which the union had violated. During the strike, the Union misleadingly stated publicly that it was embroiled in a labor contract dispute with the Company over health care and other contract terms. In fact, there were no such unsettled contract matters because a labor contract had been reached and ratified. The actual fact was the Union used its own members in a deliberate scheme to escape financial liability. Union officials, including Locals 890, 912, 287, and 853, and the International required their members to honor an unlawful strike in the summer of 2004 to apply inappropriate pressure on a business to give up its rights to enforce contract violations. The Union demanded complete amnesty so it could avoid paying damages from deliberate union-caused violations of multiple labor contracts. There is simply no reason to have a labor contract if the terms and promises in that contract cannot be enforced,” said Bruce Woolpert, President and CEO.

The U. S. Chamber of Commerce, the National Association of Manufacturers, the Associated General Contractors of America, and the Center for National Labor Policy submitted amicus curiae briefs to the Court with legal arguments supporting Graniterock’s position. The AFL-CIO submitted an amicus brief supporting the Teamsters Union.

About Graniterock
Graniterock was founded on Valentine’s Day, February 14, 1900. The Company celebrated its 110th anniversary this year.

Graniterock is headquartered in Watsonville, California, and has 22 branch office locations which supply construction building materials and is a civil engineering contractor. The Company employs 800 Team Members and has received the nation’s highest recognition for quality and customer service, the Malcolm Baldrige National Quality Award, the Governor’s Golden State Quality Award, and the NOVA Innovation Award.