Labor Union of Pico Korea, Ltd. v. Pico Products, Inc.

Pico Korea Ltd. (PK) was a South Korean company that manufactured electronic components. PK’s employees were citizens of and domiciled in South Korea. PK was a wholly owned subsidiary of Pico Macom Inc. (Macom), a Delaware corporation, which in turn was a wholly owned subsidiary of Pico Products, Inc. (defendant), a New York corporation. PK sold nearly all its manufactured components to Macom. At one point, PK experienced cash shortages, requiring Macom to advance working capital. PK’s employees formed a South Korean labor union (the union) (plaintiff), which negotiated a collective-bargaining agreement with PK. Eventually, Pico Products’ board of directors decided to stop Macom’s provision of working capital to PK, and PK went out of business. The union sued Pico Products in federal district court, alleging state contract and tort claims based on the assertion that the shutdown of PK did not conform to the provisions of the collective-bargaining agreement. The union alleged that federal court jurisdiction was proper under § 301 of the Labor Management Relations Act. The district court found that the act did not apply but the suit could proceed based on diversity jurisdiction. The parties stipulated to applying New York law. Thereafter, the court found that Pico Products was not liable to the union based on state alter-ego principles and entered judgment accordingly. The union appealed, arguing that federal labor law should have been applied to hold Pico Products liable.