Transport Workers Union of America v. Hawaiian Airlines Inc WL , 186 LRRM 2384 (D. Hawaii)

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1 Transport Workers Union of America v. Hawaiian Airlines Inc WL , 186 LRRM 2384 (D. Hawaii) Richard S. Edelman O Donnell, Schwartz & Anderson, P.C. After negotiators for the Transport Workers Union of America ( TWU or Union ) and Hawaiian Airlines ( Hawaiian, HAL, or Carrier ) entered a tentative agreement ( T/A ) for amendment of their collective bargaining agreement, the Carrier refused to implement the agreement, claiming that there had been a mistake and that it could withdraw from the T/A anytime prior to the Union s ratification vote. TWU responded that Hawaiian s authorized negotiators had committed the Carrier to the T/A, that the Union s internal requirements for ratification process had no effect on the Carrier s commitment, and that Hawaiian s refusal to implement the T/A violated RLA Sections 2 Seventh and First. The Union sought a preliminary injunction, the Carrier responded that it could withdraw from the T/A on grounds of mutual mistake or unilateral mistake; HAL also argued that it could withdraw from the T/A any time prior to ratification by TWU s members because the Carrier claimed that ratification was a condition of an agreement that had not yet been fulfilled. The District Court denied TWU s motion for a preliminary injunction, concluding that ratification was a condition precedent to an agreement such that HAL was not bound until the Union s members voted to approve the T/A. The Union appealed that decision but the Court of Appeals for the Ninth Circuit denied the appeal, finding that the District Court did not rely on an erroneous legal premise or otherwise abuse its discretion in denying the injunction. This paper will summarize the facts of the case, discuss the decisions relied upon by each of the parties and then summarize the District Court s discussion. Because there was no RLA precedent on point, the parties and the Court relied on judicial and NLRB precedent under the NLRA. FACTS The parties began negotiations in November The Union proposed four annual wage increases of 5%, 3%, 3%, and 3%. Hawaiian s negotiators told TWU s negotiators that the Carrier was seeking a cost neutral agreement. In February 2008, Hawaiian advised the Union that it intended to implement a new flight planning system that would be administered by a key user, a 1

2 position within the scope of the collective bargaining agreement. The Carrier stated that it required one-and-one-half people for the system, but proposed to make one position a Union position and have a management person perform the work of the one-half of a position. The parties made a side agreement that the work of one-half of a key user position would be assigned to a manager, that the one-half position was worth $30,000, and that amount would be applied in a future agreement towards wage increases. Beginning in January of 2008 and continuing through October of 2008, HAL negotiators and Finance department managers had modeled various pay increase scenarios and knew the dollar costs of various outcomes to the bargaining over pay. Among other things, the Carrier costing models analyzed the dollar value of various percentage increases and the effect of multiple percentage increases compounding year over year, for example their models showed that increases of 5%, 3%, 3% and 3% would effectively mean overall increases from the prior contract of 5%, 8%, 11% and 14%. HAL officials shared these calculations internally over months, but did not share them with the Union. Negotiations resumed in October, By that time, the parties had understandings regarding certain issues such as sick leave accrual and health benefits, but they had not reached an overall agreement. The major remaining issue was compensation. The Union s proposal remained annual wage increases of 5%, 3%, 3%, and 3%. When the negotiations re-commenced, Hawaiian proposed the elimination of the position of Inter-Island Coordinator from the bargaining unit. When the HAL negotiators presented the proposal, the Union negotiators responded that, if the Carrier wanted the positions, it would have to buy them through an increase in wages for the Union members who remained under the collective bargaining agreement. On October 31, 2008, Hawaiian proposed that, if the Union would agree to take the Inter- Island Coordinator out of the bargaining unit, the Carrier would provide 2.34% plus 1% (in total, 3.34%) annual wage increases for each of four years, with the first raise taking effect at the commencement of the contract. A HAL negotiator wrote 2.34% plus 1% on a whiteboard four times for each year of the four-year contract. The 2.34% represented the value that Hawaiian had placed on the Inter-Island Coordinator position and the 1% represented the value of having a contract that extended to the end of Apart from the Inter-Island Coordinator position and the 2012 extension, the Carrier s negotiators had advised the TWU negotiators that HAL valued the Union s prior concessions, including the key user as worth 3% - 4% annual wage increases. HAL first viewed 2

3 the value of Inter-Island Coordinator position and the 2012 extension as supporting nearly a 7% annual wage increase, it reevaluated its calculation to 5.69%. TWU s negotiators responded that they could agree to, and advocate member ratification of, an agreement for four 6% annual increases. The Hawaiian negotiators left the room and consulted; on their return, they stated that HAL would agree to the 6% increases. However, the parties then had a discussion as to whether the increases would compound year over year (whether the increases would be the same amount each year as a percentage of 2008 pay, or whether the increase in each year of the contract would be a percentage of each preceding year s compensation). The Carrier s negotiators again consulted with other Carrier officials to get approval as to the compounding of the increases. When the Carrier negotiators returned, they agreed to annual and compounding 6% increases. Union negotiators then asked if they could take 0.15% of the 6% as well as a portion of the one-time payment for accrued sick leave and apply it to increase certain overrides. After the re-allocation, what remained were 5.85% annual wage increases and certain overrides. The Carrier s negotiators left the negotiating room again to verify the 5.85% figure and, upon returning, the lead HAL negotiator stated, we have a deal. The parties shook hands and, a Union negotiator, drafted a document, labeled HAL Dispatchers Tentative Agreement " which provided for a 5.85% pay increases on DOS, which stood for date of signing, and 5.85% increases each year thereafter. The date of signing is when the parties sign an official agreement, which would occur if the Tentative Agreement were ratified. 1 The Union s negotiators reminded HAL s negotiators that any agreement would have to be ratified. TWU s requirement for ratification is mandated by its Constitution which requires that agreements must be ratified by the membership. After the T/A was initialed and signed, Hawaiian s negotiators asked the Union negotiators if they thought that the Tentative Agreement would pass ratification and if the Union negotiators would support the Tentative Agreement. TWU s negotiators said that they thought that the Tentative Agreement would pass and that they would support it. The Tentative Agreement did not contain any provision requiring member ratification. Following the negotiations, HAL s chief negotiator sent an to upper-level HAL 1 The Carrier s negotiators subsequently acknowledged that the T/A was an accurate statement of the terms they agreed-to, and that they knew when they initialed the T/A that it provided for 5.85% increases in each year of the contract. 3

4 managers, advising them that the parties had entered a Tentative Agreement that was a flat contract except for a 1% increase per year for extending through 2012, and that [t] here are no changes from what has been reviewed with you. However, on November 2, 2008, Hawaiian s chief financial officer reviewed the T/A and came to the conclusion that there was a valuation error. In his view, the savings that the Carrier had achieved were only sufficient to equal initial 5.85% increases in pay; not the four annual 5.85% increases in pay that were provided by the T/A. According to HAL, this discrepancy arose because, its negotiators overlooked the fact that a pay increase in year one became embedded in the contract and the annual percentage pay increases would therefore compound each year. After HAL s CFO decided there was a valuation error, HAL s negotiators called a TWU negotiator and stated that they wanted to go back to the bargaining table. The Union negotiators denied any mistake and responded that they would proceed with the vote. When the Union advised Hawaiian that the T/A had been ratified. HAL responded stating that it had revoked the T/A and would not implement it. The Union then initiated action in the District Court and filed a motion for a preliminary injunction shortly thereafter. TWU asserted that when Hawaiian s negotiators had announced there was a deal, shook hands on the deal with the Union s negotiators and initialed the T/A which did not state that it was subject to further action or decision of the carrier, or to ratification by the union s members, the agreement was binding on the Carrier, with the only condition on its effectiveness being ratification by the Union s members as required by the TWU Constitution. The Union asserted that once the membership ratified the agreement, HAL s refusal to implement the agreement was an abrogation and effective unilateral change of an agreement without compliance with RLA Section 6 procedures, and therefore in violation of RLA Section 2 Seventh. TWU further asserted that the Carrier breached its duty under RLA Section 2 First (45 USC 152 First) to exert every reasonable effort to make and maintain agreements and to deal with the Union in good faith. HAL answered that there was no agreement because the Carrier had rescinded its commitment based on its assertion that there was either a mutual mistake because there was a supposed mutual understanding that the new agreement was to be cost-neutral or that there was a unilateral mistake by HAL; and that the Carrier could reject the deal if it did so before the Union completed ratification. HAL counter-claimed against the Union asserting that the Union s effort to 4

5 compel compliance with the agreement and refusal to resume negotiations with the Carrier violated the Union s duty to negotiate in good faith. The Union responded that there was no mutual mistake, that even if there was a mistake by HAL that was not a basis for HAL to negate the Agreement, that the ratification process was only an internal requirement of the Union which did not render Hawaiian s commitment any less binding, and that since the parties had completed an agreement there was no basis for resumption of negotiations. DECISIONS CITED BY THE UNION Decisions Holding That an Employer Whose Agents Enter an Agreement with a Union Is Bound by That Agreement Unless the Negotiators Have Expressly Reserved a Right to Revoke or Set a Clear Condition on the Employer s Commitment. H.J. Heinz v. NLRB, 311 U.S. 514 (1941)-- employer breached its duty to bargain in good faith by refusing to sign a written agreement accepted by the parties negotiators. Id. at and n. 4. Property Resources Corp. v. NLRB, 863 F. 2d 964, 965 (D.C. Cir.1988) -- company violated NLRA when it refused to implement and repudiated a negotiated agreement after a senior vice president made an offer which the union representatives accepted. Torrington Employees Assn v. NLRB, 17 3d 580, 595 (2d Cir. 1994)-- employer violated the Act by refusing to execute a negotiated agreement despite evidence that the company s negotiator had a mistaken impression of what the contract terms were since the contract itself was unambiguous and the union did not have reason to know that the company negotiator did not understand what he had agreed to. NLRB v. Roll & Hold Division, 957 F.2d 328, (7 th Cir. 1992)-- company violated the Act by refusing to implement a negotiated agreement after the union accepted the proposal advanced by the company s negotiators with the negotiators shaking hands across the bargaining table. Metco Products, Inc., Division of Case Manufacturing Company v. NLRB, 884 F.2d 156, 159 (4 th Cir. 1989)-- when an agent is appointed to negotiate a collective-bargaining agreement that agent is deemed to have apparent authority to bind his principal in the absence of clear notice to the contrary, so an employer s refusal to sign and implement an agreement accepted by its agent violates the NLRA. Roslyn Gardens Tenants Corp., and Service Employees, 294 NLRB No. 40 (1989) Decisions Holding That Member Ratification Is Normally an Internal Union Matter That Does Not Affect the Duties of the Employer NLRB v. Roll & Hold, supra. 957 F.2d , the fact that a union has bylaws that require all agreements to be ratified does not automatically result in a condition precedent to contract 5

6 formation. In National Labor Relations Board v. General Teamsters Union Local 662, 368 F.3d th Cir. (2004), the fact that a union has bylaws that require all agreements to be ratified does not automatically result in a condition precedent. [citation to Roll & Hold] Neither does the fact that the company negotiating with the union knows that the bylaws require ratification. Id. at 745. NLRB v. Seneca Environmental Products, 646 F. 2d 1170 (6 th Cir. 1981), an employer committed an unfair labor practice by refusing to sign an agreement, claiming that it was not obligated under the agreement unless the agreement was ratified by the union s members, because ratification is a process internal to the union; the company may have understood that ratification was a condition of the agreement and that the union intended to seek ratification, but it was never part of the agreement. Id at Tri-produce Company, and Food and Commercial Workers, 300 NLRB No.137 (1990), -- NLRB rejected an employer s claim that it could withdraw from a contract if it did so before the union gave notice of ratification because (1) there was a binding agreement when the union representative accepted; (2) even if the attempted withdrawal occurred before ratification, the parties had not agreed that the offer would be accepted only after ratification; and (3) a union representative s statement that final agreement would be subject to employee ratification only signified that rights and duties under agreement would not become effective until ratified by employees. Sunglass Products Inc. And Laborers Int l Union, 342 NLRB 958 (2004) Board law is clear regarding whether a binding agreement exists where employee ratification is an issue. Employee ratification is an internal union procedure; unless the parties expressly make ratification a condition precedent to reaching a contract, it is not obligatory. If ratification is a self-imposed requirement, an employer may not refuse to sign an otherwise agreed-upon contract because of nonratification. Decisions Holding That For Membership Ratification to Actually Be a Condition of an Agreement, There must Be Proof of an Express Agreement That Ratification Was a Condition Precedent. C & W Lektra Bat, 209 NLRB 1038, 1039 (1974) a company could not refuse to sign and implement an agreement because the union had not submitted it for ratification even though the union told the company that the agreement would be submitted for ratification in accordance with union policy. NLRB v. C&W Lektra Bat Co., 513 F. 2d 200 (6 th Cir. 1975). Tri-Produce Co., 300 NLRB 974 (1990)--...the parties had not agreed that the Respondent s offer could by accepted only 6

7 by a vote of the employees...lyons statement at the outset of negotiations that any final agreement would be subject to employee ratification was not a condition precedent to forming an agreement.... The Company negotiators past experience with union ratification and their belief that ratification was a precondition to formation of the contract is also not evidence that the Company had an express agreement to make ratification a condition precedent with the Union. Seneca Environmental Products, 243 NLRB 624, 627 (1979)-- although [the company s negotiators] may have felt or understood that it was agreed that ratification would be a precondition...the Board has stated that for ratification to be a condition precedent to a collective-bargaining agreement, the parties must agree in express words to such a condition... ; Auciello Iron Works, Inc., 303 NLRB 562, 566 (1991) citing Seneca, supra. The Board has consistently held that where there was no evidence of an explicit agreement between the negotiating parties about union ratification, the formality of such a vote by the membership is not required as the foundation of a binding collective-bargaining agreement. Id. at 565, citing various decisions. Decisions Finding Union Ratification Requirements, and Union Negotiator Discussion of Union Ratification Process Did Not Make Ratification a Term of Agreement. Negotiator s statement he was going to submit the tentative agreement to the members for ratification made ratification a condition precedent to an agreement (Roll and Hold, 957 F. 2d at 331); union negotiator s use of the word tentative was only an indication that the contract had not been executed (id. at 332). Medical Towers Limited, and Service Employees, AFL-CIO, Local 36, 285 NLRB No. 123 (1987) union s reference to agreement as tentative agreement in demanding execution by employer did not negate finding that final and binding agreement had been reached. Seneca Environmental Products --employer was not free to withdraw from an agreement based on the absence of a ratification vote, even though the union negotiators had said that the agreement would be submitted for ratification, and the company negotiators understood that ratification was a condition of an agreement, since such a condition was never put specifically into words. 664 F. 2d at Sunglass Products --rejected the employer s claims that the Union s urging of concessions to facilitate ratification or references to ratification in the Agreement evidenced a bilateral agreement to require ratification for a binding agreement. 342 NLRB at 962. In Sierra Publishing, -- Board rejected the employer s contention that it could withdraw from an agreement prior to ratification when the union s negotiators had committed to recommend ratification, and 7

8 ratification had to occur by a specified date (both of which occurred). Tri-Produce supra, -- rejected an employer s claim that it could withdraw from an agreement prior to notice of ratification, stating that ratification was just a self-imposed limitation on the union, signifying that the rights and duties under any agreement would not become effective until ratified by the employees, and that the employer s understanding based on practice of submission of agreements to ratification in prior rounds of bargaining did not mean that in the round of bargaining at issue there was no agreement as to the employer if it withdrew before receiving notice of ratification. Union Discussion of Decisions Holding That Ratification Was a Condition of Agreement and Therefore Holding That Employer Could Withdraw from T/A. Sheridan Manor Nursing Home, 329 NLRB 476 (1999)-- while the NLRB did conclude that the employer there was not bound by the agreement that had been negotiated, it did so on the basis that the agreement was incomplete, not that the employer was free to withdraw prior to ratification. Id at 478. The Board specifically reversed an Administrative Law Judge s finding that the union s ratification requirement was a condition precedent to a binding agreement so the employer could withdraw from the agreement; the Board noted that ratification was not a matter the [employer] and the Union negotiated mutually but, instead was a matter the Union unilaterally imposed on itself. Id. at 478 n. 9. Teledyne, Speciality Equipment and International Association of Machinist and Aerospace Workers, 327 NLRB 928 (1999), the NLRB found that two key aspects of the agreement were contract terms that the union s negotiators disclaimed any authority to accept, stating that they had to be voted on by the membership; so ratification by the membership was effectively an express requirement of the agreement. 327 NLRB at 930. The Board also found that the agreement was never actually signed by the union s representative so, there was not an executed T/A in Teledyne. Id. at 929. Observer Dispatch, 334 NLRB 1067 (2001), the agreement at issue was not signed or initialed, and there was no statement that the parties had a deal, the union negotiators who were bargaining for a unit of seven members were effectively displaced by a unit-member who came forward with a petition signed by four members of the seven member unit that expressed different bargaining goals than those sought by the union negotiators. The potential agreement was incorrect as to one item and was not corrected prior to the employers rejection of the potential agreement and 8

9 before there was a ratification vote, a majority of the members of the unit declared that they no longer wanted union representation and the employer withdrew recognition of the union and the ratification vote was held among a minority of the members of the unit, after the employer withdrew recognition of the union. Id. DECISIONS CITED BY THE CARRIER Decisions Holding That Ratification Was a Condition of Agreement So Employer Could Withdraw Price to Ratification. Teledyne Specialty Equipment, 327 NLRB 928 (1999). The parties negotiated and reached a tentative agreement. Shortly thereafter, the company s negotiator discovered a valuation error affecting savings that the company thought were to be achieved by increasing deductible in the medical plan. The negotiator then called the union, who was in the process of preparing for a ratification vote refused to cancel the vote. When the company refused to implement the tentative agreement, the union filed charges with the NLRB. The administrative law judge concluded that in the instant case, ratification was expressly required by the union s Constitution, a fact which was known to all parties and the union s bargaining representative had expressly refused to agree to the employer s repeated demands for a no strike agreement. 327 NLRB at 928. The ALJ concluded with NLRB approval that the employer had timely withdrawn its offer which thereby left the union with nothing to ratify. Sutherland s Inc., 194 NLRB 118 (1971), the NLRB affirmed the ALJ s finding that because the union negotiator admitted that they did not have final authority to accept or reject a contract offer, that ratification was a condition of reaching a binding agreement. 194 NLRB at 118 n.1. Ratification was not just a pure formality but instead a condition precedent. 194 NLRB at In Observer-Dispatch 334 NLRB 1067 (2001) the NLRB found that ratification was a condition precedent based upon the union president s testimony that he stated in negotiations that it is normal for us to take it back to the union and have them ratify the contract which we encourage them to do. (334 NLRB at 1069.) The union s president further explained that the members have the final say in whether this is a deal. Id. He also confirmed that ratification was necessary before the union negotiators could sign the contract. Id. The ALJ found according to Clark s admission, the document did not become an agreement, tentative or absolute, until it was accepted after the post- 9

10 caucus presentation. 334 NLRB at The ALJ quoted extensively from the testimony of the international representative of the union, who agreed that the local could not accept a contract if the membership refused to ratify and that it was necessary to conduct a ratification vote to determine whether the membership would accept or refuse the company s proposal. Id. At Although the union conducted a ratification vote, before it did so the company had withdrawn recognition. The ALJ found that thus, the characterization of the agreement as tentative becomes meaningful and not merely some verbal gloss by which the Respondent attempted to escape its agreement. Accordingly, I find that Respondent s final offer of February 24, 1998 had not been accepted and could not have been accepted until the Union members ratification vote. That vote did not occur until after the Respondent timely and lawfully withdrew recognition. In Sierra Publishing Company the Sacramento Union, 296 NLRB 477 (1989) concurring opinion by Chairman Stevens who expressed his frustration with the NLRB s approach to the issue of union ratification and the lack of clear guidance to employers. Chairman Stevens noted Sutherlands and its progeny allow for the Board to deduce that the union representatives did not have the authority to enter into a building contract from the evidence of the parties awareness during negotiations that any contract proposal must be ratified. As the judge himself found, but apparently did not think dispositive at the initial bargaining meeting, the union s bargaining representatives informed the employer representatives that any agreement had to be ratified by the union members. In addition, a union witness testified at the hearing that the union s Constitution required this action. Thus until ratification occurs, the employer could arguably unilaterally withdraw assent, citing State County Employees AFSCME Council 71 (Goldencrest 275 NLRB 49, ) Chairman Stevens also noted that as the analysis in State Council Employees supra, indicated, the board has sometimes found that the bargaining representative own indication of its need to obtain employee notification coupled with the union Constitutional requirement of ratification, is sufficient to preclude the union negotiators from entering into a binding contract. But, in Sierra Publishing, the ALJ had found that the evidence shows that both sides were represented at the bargaining table by individuals vested with full authority to conclude agreements which the union side was obligated by its own by-laws to take to its members for ratification. More specifically, there is no doubt about Wolfe s [the union negotiator] authority to conclude a final agreement. 296 NLRB at 487. The ALJ 10

11 ultimately concluded that the employer was not at liberty to withdraw its proposal after the bargaining committee s effective and unconditional acceptance. 296 NLRB at 489. Decisions Cited by the Carrier Regarding Mutual and Unilateral Mistake as Grounds for Revocation. Eastern Airlines v. Air Line Pilot Association, 861 F.2d 1546 (11 th Cir. 1988) the court identified a number of factors to be considered to determine whether a contract existed and rejected the carrier s claim that there was no agreement. The most significant factor in Eastern was the fact that the parties had implemented the terms of the agreement for a period of time before the mistake was discovered; the court relied on the parties course of conduct and the decision to implement a contract even though certain silent terms were at issue. Teledyne Speciality Equipment, 327 NLRB 928 (1999) after the company s negotiator s sent the union a tentative agreement it discovered a valuation error, specifically the savings to be achieved through increasing the deductibles in the medical plan. After the mistake was discovered, the company s negotiator called the union to withdraw the offer. 327 NLRB at 930. The union was preparing for a ratification vote and refused to cancel the vote. The NLRB held that the employer timely withdrew its assent before the agreement was ratified, rejecting the contention that ratification was not a condition precedent to an agreement. Mary Bridge Children s Hospital, 305 NLRB 570, (1991) allowing employer to rescind agreement after it was executed based on mistake in formula for night shift bonus pay. Courts have recognized that in certain circumstances it is inequitable to penalize a party who has made an honest mistake. In Re UAL Corp., 411 f.3d 818, (7 th Cir. 2005) (collecting cases) (Airline would be given relief where it mistakenly failed to reject airplane leases, where other party was aware of mistake and did not rely on it to its detriment); United States v. Figuerola, 58 F.3d 502, 503 (9 th Cir. 1995) (Remanding for hearing on issue of unilateral mistake by sureties); See also Libby, McNeil & Libby, California Canners & Growers v. United Steelworkers of America, AFL-CIO, 809 F.2d 1432 (9 th Cir. 1987) (Considering but rejecting unilateral mistake argument under state law where no evidence union knew or had reason to know of mistake). Hawaii recognizes the doctrine of unilateral mistake as set forth in the Restatement (Second) of Contracts 153. Thompson v. AIG Hawaii Isn. Co., Inc., 11 Haw. 413, 419, 420, 142 P.3d 277, 283, 284. (Haw. 2006). Under 153 of the Restatement: 11

12 Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in 154, and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know the mistake or his fault caused the mistake. Section 154 of the Restatement provides: A party bears the risk of a mistake when (a) the risk is allocated to him by agreement of the parties, or (b) he is aware, at the time the contract is made, that he was only limited knowledge with respect tot he facts to which the mistake relates but treats his limited knowledge as sufficient; or (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. Hawaiian s Response to Decisions Cited by the Union. In NLRB v. Roll & Hold Division, the facts showed that the only time ratification was mentioned was after the parties had reached an agreement, when the Union s negotiator told the company s negotiating team that he was going to have the agreement ratified by the employees. 957 F.2d at 331. Seneca Environmental Product, 243 NLRB 624 (1979) the ALJ after resolving credibility disputes found that the subject [of ratification] was not raised until the final June 2 session. In the NLRB decision, the ALJ had found that although the employer attempted to unilaterally impose ratification as a condition, the union had never agreed and it was never a requirement of the union. 243 NLRB at , 630. The ALJ relied heavily on the fact that the company s witnesses, except for one, did not substantiate the employer s claim that ratification was a condition. 243 NLRB at 626. Tri-Produce Company, 300 NLRB 974 (1990) involved a contract offer that was both accepted and ratified before the employer attempted to withdraw it. Two of the three-member NLRB panel found that the offer was accepted by the union s president on June NLRB at 974 n.2. The ALJ noted that the ratification vote, which was conducted immediately after negotiations were concluded in the company parking lot, made it reasonable to infer that the company knew that the agreement had been ratified and therefore accepted. These events occurred before Barsamian told Lyons that the proposal had been removed from the table, 300 NLRB at

13 Sunglass Products, Inc., 342 NLRB 958 (2004) the parties reached an agreement which was ratified by the union s negotiating committee and by the union s executive board. The employer argued that because the agreement had not been presented for a vote by the union s membership, that it had not been properly ratified and therefore it had no obligation to comply with it. The ALJ noted it was for the union, not the Respondent, to determine how to affect ratification. In Auciello Iron Works, 303 NLRB 562 (1991) the union was not required by its Constitution or otherwise to ratify agreements. The ALJ found the union never told the employer that ratification was needed to establish a binding contract. 303 NLRB at 565. DISTRICT COURT DECISION The District Court began its analysis by noting that [i]f the Tentative Agreement were found to be valid, then Hawaiian s refusal to honor the Tentative Agreement would constitute a unilateral effort to change the rates of pay...of its employees, as a class as embodied in [the] (Tentative Agreement) in contravention of RLA 2 Seventh ; and that [t]he central question is thus whether the Tentative Agreement is enforceable and therefore constitutes the status quo [which cannot be changed without compliance with RLA Section 6 procedures] WL *9 and n. 5. The Court then said that Hawaiian s argument that the T/A was invalid because it had a right to withdraw since the T/A was subject to a condition precedent of ratification by the Union s members, was an affirmative defense, and HAL therefore had a burden of demonstrating a likelihood that it would prevail on that defense at trial. Id. With respect to the question of whether and when an employer may reject its negotiators commitment to an agreement, the Court relied on precedent under the National Labor Relations Act. Id at *10-*12. The Court stated: An employer may withdraw its assent to a contract before a union s members ratify the contract if ratification is a condition precedent to the contract coming into being. Teledyne Specialty Equip., 327 N.L.R.B. 928, 928 n.l, 930 (1999); Sunderland s, Inc., 194 N.L.R.B. 118, 118 n.l, 124 (1971). Such ratification is a condition precedent where the requirement of ratification is agreed to by the parties. See Nat l Labor Relations Bd. v. Gen. Teamsters Union Local 662, 368 F.3d 741, 745 (7 th Cir. 2004); Nat l Labor Relations Bd. v. Roll & Hold Div. Area Transp. Co., 957 F. 2d 328, 331 (7 th Cir. 1992). Three of the National Labor Relations Board s decisions are instructive in defining the contours of this rule. See E. Air Lines, 861 F. 2d at

14 Decision at *10. The Court noted that, under TWU s Constitution, any tentative agreement is subject to member ratification, and that there is no deal for the Union until a tentative agreement is ratified. Id. at *11. The Court then observed that the Union s negotiators had told HAL s negotiators that tentative agreements are subject to member ratification, that the Union would not bring a low pay increase offer back to the membership, and ultimately, that the Union s negotiators would take a tentative agreement to the membership if it provided annual 6% increases. Id. at *11. The Court concluded that the Carrier s acceptance of the 6% increases was responsive to the statements of the Union s negotiators that they would be willing to take such a tentative agreement to the membership. The Court also noted that the agreement was called a tentative agreement, that it provided for pay increases on DOS or date of signing, which referred to a document that would memorialize the agreement after ratification, and that HAL s negotiators had asked TWU s negotiators whether they thought the membership would ratify the T/A. Id at *12. The Court therefore concluded that the T/A was not binding on the Carrier because it was necessary for the agreement to be ratified by the Union s membership, such that the use of the word tentative was not a verbal gloss. Based on that conclusion, the Court held that Hawaiian had shown a likelihood of success on its claim that ratification by the Union s members was a condition precedent to formation of a contract and [t]hat being the case, Hawaiian was entitled to withdraw its assent to the Tentative Agreement prior to the Union s ratification. Id at *12; citing Teledyne Specialty Equip. 327 N.L.R.B. at 928. Based on those findings, the Court concluded that the Union was not likely to prevail on its claim that HAL violated Section 2 Seventh by rejecting and refusing to implement the Tentative agreement. Id at *13. The Court therefore denied the Union s motion for a preliminary injunction. The Court of Appeals affirmed, finding that the District Court did not rely on an erroneous legal premise or otherwise abuse its discretion in denying the injunction. 14