Fitzsimmons v. Western Airlines, Inc.
80 L.R.R.M. (BNA) 2167, 290 A.2d 682, 1972 Del. Ch. LEXIS 118 (1972)
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Rule of Law:
Under Delaware's corporate merger statute, 8 Del. C. § 259, a surviving corporation assumes all liabilities and duties of the constituent corporations, including obligations arising from a collective bargaining agreement.
Facts:
- The International Brotherhood of Teamsters (IBT) had three collective bargaining agreements with Western Airlines, Inc. (Western) covering airline mechanics, service employees, and clerks, pursuant to the Railway Labor Act.
- On December 17, 1970, Western and American Airlines, Inc. (American) entered into an agreement for Western to merge into American.
- American's employees in the same job classifications were represented by a different union, the Transport Workers Union of America (TWU).
- In March 1971, American announced that upon consummation of the merger, it would not recognize Western's collective bargaining agreements with IBT.
- The merger was contingent upon approval from the Civil Aeronautics Board (CAB) and the President of the United States, which had not yet been granted.
Procedural Posture:
- The International Brotherhood of Teamsters (IBT) filed a suit for declaratory judgment in the Delaware Court of Chancery against Western Airlines, Inc. and American Airlines, Inc.
- IBT sought a declaration that its collective bargaining agreements with Western would survive the proposed merger and be binding upon American.
- Western and American jointly filed a motion to dismiss the complaint, arguing the court lacked subject matter jurisdiction and that the complaint failed to state a claim upon which relief could be granted.
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Issue:
Does a collective bargaining agreement entered into by a constituent corporation survive a merger and become an enforceable obligation of the surviving corporation under Delaware's corporate merger statute, 8 Del. C. § 259?
Opinions:
Majority - Duffy, Chancellor
Yes, under Delaware's merger statute, 8 Del. C. § 259, the duties and liabilities of a constituent corporation, including those arising from a collective bargaining agreement, attach to the surviving corporation and are enforceable against it. The court reasoned that the plain language of § 259 is broad, stating that 'all debts, liabilities and duties' of a constituent corporation attach to the surviving corporation. This statutory language does not exclude duties arising from union contracts. This principle is consistent with federal labor law, as established in cases like John Wiley & Sons, Inc. v. Livingston, which held that a merger does not automatically terminate employee rights under a collective bargaining agreement. Although federal agencies like the National Mediation Board have exclusive jurisdiction over representation disputes and the specifics of integrating workforces, state courts have concurrent jurisdiction to determine the threshold question of whether the contractual duty itself survives the merger as a matter of state corporate law. Therefore, the court denied the defendants' motion to dismiss, holding that the complaint stated a valid claim for relief under Delaware law.
Analysis:
This decision clarifies the interplay between state corporate law and federal labor law in the context of mergers. It establishes that a state's general corporate succession statute can create a substantive, enforceable obligation for a surviving company to honor a pre-existing collective bargaining agreement, even where the industry is heavily regulated by federal law. The ruling affirms a state court's concurrent jurisdiction to decide the fundamental issue of contract survival, while leaving the complex, operational details of representation and employee integration to specialized federal agencies. This provides unions with a state-law anchor to assert the continuity of their contracts, preventing corporations from using mergers as a means to unilaterally abrogate labor agreements.
