Transport Workers Union of America v. Hawaiian Airlines Inc.
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Transport Workers Union of America v. Hawaiian Airlines Inc.
2009 WL 972483, 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 2007. 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
1position 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, 2008. 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 2012. 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
2the 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 10-31-08" 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 e-mail 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.
3managers, 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
4compel 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 524-525 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, 331-332 (7th 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 (4th 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 331-332, “ the fact that a union has bylaws that
require all agreements to be ratified does not automatically result in a condition precedent to contract
5formation. In National Labor Relations Board v. General Teamsters Union Local 662, 368 F.3d 741
7th 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 (6th 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 1171-1172.
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 non-
ratification.
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 (6th Cir. 1975). Tri-Produce Co., 300
NLRB 974 (1990)--“...the parties had not agreed that the Respondent’s offer could by accepted only
6by 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 1171-1172. 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
7ratification 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
8before 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 124-125.
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-
9caucus presentation. 334 NLRB at 1069-1070. 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 1070.
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, 50 1985)” 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
10ultimately 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 (11th 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, 572-573 (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, 823-824 (7th 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 (9th 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 (9th 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:
11Where 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 628-629, 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 20. 300 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 985.
12Sunglass 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]. 2009 WL 972483*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 (7th Cir. 2004); Nat’l Labor Relations Bd. v. Roll &
Hold Div. Area Transp. Co., 957 F. 2d 328, 331 (7th 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 1150.
13Decision 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.
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