Opinion
Cause No. 1:03-CV-307-TS.
November 22, 2004
MEMORANDUM OF DECISION AND ORDER
The Plaintiff, Local Union No. 414 of the Chauffeurs, Teamsters and Helpers, (the Union), filed its Complaint against the Defendant, Leath Furniture, LLC, to compel arbitration under the parties' collective bargaining agreement (CBA). The Union filed its suit pursuant to § 301 of the Labor Management Relations Act, 29 U.S.C. § 185(a), on August 18, 2003, after the Defendant refused to arbitrate a subcontracting disagreement because the Union bypassed the third step of the contractual grievance procedure.
The Defendant, believing that disputes are not arbitrable under the CBA unless the Union first exhausts a four-step grievance process, moved for summary judgment [DE 15] on the Union's Complaint. The Union also moved for summary judgment [DE 14] on the same day, May 24, 2004, arguing that the subject matter presented in its grievance is arbitrable and that whether it was entitled to skip step three of the grievance process is a procedural question that the arbitrator, not the court, must decide.
SUMMARY JUDGMENT STANDARD
The usual Rule 56 standard of review applies to cross-motions for summary judgment. Int'l Brotherhood of Elec. Workers v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002). Federal Rule of Civil Procedure 56 mandates that motions for summary judgment be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).Here, the parties submit that there are no genuine issues of material fact and that the matter may be properly resolved on summary judgment.
STATEMENT OF FACTS
The Union represents a bargaining unit of drivers, helpers, warehousemen, and furniture finishers at a Leath Furniture retail operation in Fort Wayne, Indiana. The Union and Defendant Leath Furniture are parties to a CBA that covers the terms and conditions of employment for the bargaining unit employees during the period from March 1, 2002, to March 1, 2005.
On August 6, 2002, the Union filed a written grievance protesting the Defendant's decision to subcontract the work of five bargaining unit employees (the Grievance). The Union alleged that the Defendant violated Article 2 of the CBA when it subcontracted work without conferring with the Union or showing that it had an economic or operational basis for subcontracting the work. Article 2, Section 2 of the CBA provides:
The parties agree that the Employer has the right to subcontract work and to decide on the persons, means and methods to be so utilized. The Employer agrees that it will not subcontract unless, in the Employer's judgment, there is an economic or operational basis for doing so. . . . The Employer also agrees that, prior to implementing any plan to subcontract, it will meet and confer with the Union regarding employees affected by the decision to subcontract.
On August 9, 2002, the Defendant provided a written answer denying the Grievance. On February 20, 2003, the Union requested a panel from the Federal Mediation and Conciliation Service. The Defendant refused to strike names from the panel of arbitrators on the grounds that the Union bypassed Step 3 of the contractual grievance procedure and the Grievance had been automatically closed by operation of Section 2 of the grievance procedures.
The grievance procedures are set forth in Article 29 of the CBA, entitled Adjustment of Grievances:
Section 1. Should differences arise between the Company and the Union or any employee of the Company covered by this Agreement, as to the meaning, application or interpretation of this Agreement, there shall be no strike or work stoppage, but such differences shall be settled in the following manner.STEP 1
Within five (5) working days after the occurrence of acts giving rise to a Grievance, the employee shall report the matter to his/her immediate supervisor and attempt to settle the Grievance thereby and the supervisor will give his decision within two (2) working days after the presentation of the matter.STEP 2
If the decision of the supervisor is unsatisfactory, the aggrieved employee or employees shall record their grievance on a grievance form and present the same to the Steward. The Steward shall present the grievance to the Store Manager and attempt to settle the grievance. The Store Manager will give his written answer within fifteen (15) working days after submission.STEP 3
If no satisfactory adjustment is agreed on in Step 2, the matter may be taken to a conference between the Steward, the business representative of the Union and the Regional Manager of the Company and/or his designated representative. The Company's answer is to be given within ten (10) working days after the conference.STEP 4
If no satisfactory adjustment is agreed on in Step 3, the matter may be taken to Arbitration as provided in Section 3 below.
Section 2. Any grievance not presented in writing within fifteen (15) days after the occurrence of the event out of which the grievance arose shall not be entitled to consideration. . . . Any grievance not referred from Step 2 or 3 of the grievance procedure to the next step within fifteen (15) working days shall be considered closed on the basis of the Company's last answer.
Section 3. In the event that the representative of the Union and the Employer shall fail to agree, or be unable to settle a grievance, the entire matter may be submitted to and settled by a Board of Arbitration. . . . [A] decision by a majority of such Board of Arbitration, shall be final and binding upon both parties hereto.
DISCUSSION
Several general principles guide a court in an action seeking to compel arbitration of a labor dispute. The first is that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit." AT T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 648-50 (1986). The second principle is that whether a collective bargaining agreement creates a duty for the parties to arbitrate a particular grievance is an issue for the court, unless the parties have "clearly and unmistakably" established that an arbitrator is to determine issues of arbitrability. Id. The third principle requires that a court avoid ruling on the potential merits of any underlying claims when deciding whether parties have agreed to submit a particular grievance to arbitration. Finally, when a contract contains an arbitration clause, a presumption of arbitrability exists such that an "order to arbitrate should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id.Here, the CBA allows arbitration of differences that arise "as to the meaning, application or interpretation of this Agreement" if "no satisfactory adjustment is agreed on in Step 3." (CBA,
Art. 29, Sec. 1.) The parties do not dispute that the Grievance involves a disagreement as to the application or interpretation of the CBA, particularly the provision regarding subcontracting. It is also undisputed that the Union did not take the Grievance from Step 2 to Step 3. The Defendant argues that the Union's failure to exhaust the grievance procedures means that the dispute is not arbitrable because only those grievances not resolved in Step 3 are eligible for arbitration. The Defendant submits that, by virtue of Section 2, the Grievance was closed when the Union failed to take it to Step 3 within fifteen days. (Art. 29, Sec. 2) ("Any grievance not referred from Step 2 or 3 of the grievance procedure to the next step within fifteen (15) working days shall be considered closed on the basis of the Company's last answer.")
The Union posits several reason for not pursuing the Grievance to Step 3, none of which are important for this Court's arbitrability analysis.
The Union contends that although matters involving substantive arbitrability are reserved for the courts, whether the Union was required to refer the Grievance to Step 3 is an issue of "procedural arbitrability" that is within the exclusive province of the arbitrator per the Supreme Court's decision in John Wiley Sons, Inc. v. Livingston, 376 U.S. 543 (1964). (Pf.'s Mem. at 6.) In response, the Defendant argues that John Wiley does not apply.
In John Wiley Sons, Incorporated v. Livingston, the Supreme Court distinguished between the question whether a particular dispute concerns a subject that the parties have agreed to arbitrate and the question whether a party has adequately abided by procedural requirements of an arbitration agreement. 376 U.S. at 557. In John Wiley, the union sued to compel the company to arbitrate pursuant to their collective bargaining agreement. The company argued that because the union failed to follow the procedural prerequisites to arbitration, the court should decline to compel arbitration. In particular, the employer claimed that the union had not followed steps one and two of the grievance procedure which required conferences between the employer and the employee or the union before the dispute was to be submitted to arbitration, and had not filed the grievance within the four-week period following the occurrence of the event giving rise to the grievance. Id. at 555-56 n. 11. Under the grievance procedure, disputes that were not filed within the four-week time limit were "construed and deemed to be an abandonment of the grievance." Id. at 556.
The Court rejected the defendant's invitation to decide the procedural issues and held that "[o]nce it is determined . . . that the parties are obligated to submit the subject matter of the dispute to arbitration, `procedural' questions which grow out of the dispute and bear on its final disposition should be left to the arbitrator." Id. at 557. The Court reasoned that the purposes of arbitration and the policies behind federal labor law would best be served by regarding procedural disagreements not as separate disputes but as aspects of the dispute which called the grievance procedures into play. Id. at 559.
The Seventh Circuit has heeded John Wiley in cases involving timeliness and failure to exhaust issues indistinguishable from those presented in this case. In Local Unoin No. 51, International Brotherhood of Electrical Workers v. Illinois Power Company, the court recognized that John Wiley resolved a conflict between the circuits when it held that procedural disputes relating to arbitrability are for the arbitrator, not the court, to decide. 357 F.2d 916, 919 (7th Cir. 1966). Accordingly, even though the union failed to invoke the grievance procedure within a five-day time limit and the contract provided that, in the event of such a failure, the difference "shall be assumed to have been settled and the right to invoke Step 1 or any succeeding Step on arbitration as the case may be shall be deemed to have been waived," the court held that it was for the arbitrator to determine whether the union had lost its right to arbitrate under the collective bargaining agreement. Id.
In Niro v. Fearn International, Incorporated, the Seventh Circuit rejected the employer's argument that the union's utter failure to pursue preliminary grievance procedures was a procedural shortcoming that was severe enough to become a substantive failing so as to necessitate a conclusion, by the court, that the underlying dispute was nonarbitrable. 827 F.2d 173, 175-76 (7th Cir. 1987). The Court disagreed and held that the union's failure to pursue certain grievance procedures before seeking arbitration was a matter that the arbitrator should weigh the significance of:
This court . . . [is] slow to enter the thicket of deciding whether, under a particular collective bargaining agreement reached by private parties, an alleged violation of the agreement should be characterized as essentially "procedural" or "substantive." . . . [O]nce it is determined that the underlying dispute concerns a subject matter covered by arbitration provisions, the court's only role is to order arbitration. The arbitrator should determine the effect of any "procedural" shortcomings of either party.827 F.2d at 176; see also Beer, Soft Drink, Water, etc. Local Union No. 744 v. Metro. Distribs., Inc., 763 F.2d 300, 303 (7th Cir. 1985) (affirming district court's conclusion that the union's alleged failure to submit grievances within the time limitations specified in the collective bargaining agreement was an issue of procedural arbitrability reserved for the arbitrator).
Substantive arbitrability refers to whether a dispute involves a subject matter that the parties have contractually agreed to submit to arbitration. Beer, Soft Drink, Water, 763 F.2d at 303. Procedural arbitrability refers to whether particular grievance procedures apply to a dispute, whether the procedures have been followed or excused, and whether the unexcused failure to follow such procedures avoids a party's duty to arbitrate. Id.
With the proceeding cases and definitions in mind, the Court has no problem finding that the subject matter of the Grievance, whether the Defendant's decision to subcontract work violated the CBA, is one that the parties contractually agreed to submit to arbitration. The Court further finds that the Defendant's arguments regarding the Union's failure to adhere to the grievance procedures are procedural issues that are reserved for the arbitrator. In light of John Wiley and Seventh Circuit case law, the Defendant faces an uphill battle to convince this Court that it should not compel arbitration.
Nevertheless, the Defendant submits three arguments against arbitration. The first is that a court asked to compel arbitration must interpret the parties' agreement to determine whether they agreed to submit a dispute to arbitration and that here, the parties agreed that all grievances not referred from Step 2 to Step 3 would be ineligible for submission to arbitration and thereafter closed by operation of the CBA. However, this argument simply ignores the distinction between procedural and substantive issues. The defendant in Niro attempted to blur this distinction when it argued that the union's utter failure to pursue preliminary grievance procedures were so severe that they became substantive failings that rendered the underlying dispute nonarbitrable. In response, the Seventh Circuit cautioned courts against undertaking the daunting task of trying to classify alleged violations of private labor agreements as essentially "procedural" or "substantive." 827 F.2d at 176. Instead, once a court determines that an underlying dispute concerns a subject matter covered by arbitration provisions, the "court's only role is to order arbitration." Id.
Here, again, the subject matter of the underlying dispute involves interpretation or application of the subcontracting provision found in the CBA. Even if the Defendant is correct that the CBA can only be reasonably interpreted to mean that Steps 1 through 3 of the Grievance Procedure must be exhausted before any grievance is eligible for submission to an arbitrator, this is a procedural bar and "[q]uestions of procedural slippage or shortfalls are for the arbitrator." Niro, 827 F.2d at 176. The Defendant has not established how the exhaustion and timeliness issues implicated by the language in its CBA are materially different from those that other courts have determined are issues of procedure that are reserved for an arbitrator. See John Wiley, 376 U.S. at 556 n. 11 (failure to advance grievance through steps and timely file grievance under agreement where arbitration was reached under step 3 if grievance was not resolved or settled in step 2 and untimely grievances were deemed abandoned); Illinois Power Co., 357 F.2d at 918-19 (failure to timely file grievance under agreement providing that untimely disputes would be considered waived); Beer, Soft Drink, Water, 763 F.2d at 303 (failure to submit grievance within time limit specified in collective bargaining agreement).
In one case outside the Seventh Circuit, the Sixth Circuit in General Drivers, Warehousemen and Helpers, Local Union 89 v. Moog Louisville Warehouse, 852 F.2d 871, 873, 875 (6th Cir. 1988), found that, as a substantive matter, the language of the collective bargaining issue did not compel arbitration unless the timeliness condition was met. The agreement under consideration provided that if the union failed to pursue a grievance for fifteen days beyond the second step "then the Union shall be conclusively presumed to have accepted the Company's answer thereto and said grievance shall not thereafter be arbitrable" Id. at 873. The court distinguished this language from arbitration clauses that provided, in the event of untimely notification, that claims would be "considered abandoned," and other clauses with similar effect. Id. at 874 n. 3. Those provisions, held the court, were not as clear and unambiguous about the intent of the parties concerning arbitrability. Id. The procedures in the CBA here suggest only a time limitation and a process to be followed; they do not provide for a substantive exclusion of a particular type of grievance explicitly declared not arbitrable. Thus, even if Moog was controlling, it is distinguishable.
The Defendant's remaining arguments against application of the John Wiley rule are derived from aspects of the Court's holding in John Wiley itself. First, the Defendant argues that the John Wiley holding included a significant exception to the general proposition that procedural arbitrability issues are reserved for an arbitrator. Indeed, the Supreme Court, after announcing its rule, held that "[e]ven under a contrary rule, a court could deny arbitration only if it could confidently be said not only that a claim was strictly `procedural,' and therefore within the purview of the court, but also that is should operate to bar arbitration altogether, and not merely limit or qualify an arbitral award." 376 U.S. at 557-58. The Court opined that in light of the polices favoring arbitration and the parties' adoption of arbitration as the preferred means of settling disputes, such cases were likely to be "rare indeed." Id. at 558. The Defendant contends that the procedural issue in this case is one of those rare situations.
The Defendant does not cite to any Seventh Circuit case, and this Court has found none, applying this rare exception, or even recognizing it as a viable exception. Looking outside the Seventh Circuit, the cases considering this exception did so in the context of collective bargaining agreement language that explicitly stated the parties' intentions that breach of procedural rules would preclude arbitration. See Rochester Tel. Corp. v. Communication Workers of Am., 340 F.2d 237, 239 (2d Cir. 1965) (failure to make a timely demand meant not only that "the grievance will be considered closed" but that "the grieving party [will be] foreclosed from taking the grievance to arbitration.") (alteration in original); see also Oil, Chem. Atomic Worker's Int'l Union, Local 4-447 v. Chevron Chem. Co., 815 F.2d 338, 341 (5th Cir. 1987) (collective bargaining agreement provided that "[o]nly grievances . . . which are processed . . . within the time limits herein provided shall be subject to arbitration").
Here, the CBA did not include language like that found in the agreements considered in Chevron or Rochester. Thus, this Court cannot find that "no rational mind" could question that the parties intended for the procedural provisions to preclude arbitration. Chevron, 815 F.2d at 342 (explaining that the rare exception from John Wiley means that "a court will not order arbitration if `no rational mind' could questions that the parties intended for a procedural provision to preclude arbitration and that the breach of the procedural requirement was clear.") (quoting Rochester, 340 F.2d at 239). Because the preclusive effect of the Union's failure to follow the grievance procedures is not unquestionable, the Court does not address the second prong of the exception, whether the breach was clear. Cf. Rochester, 340 F.2d at 239 (finding that history of parties' arbitral dealing might throw significant light on whether union's actions could be deemed an invocation of arbitration such that procedures were not clearly breached); Chevron, 815 F.2d at 342 (finding that because legitimate dispute as to the union's compliance with procedural requirements existed case did not fall within rare exception).
Although the Defendant argues that "it is clear the parties intended to preclude arbitration in cases where, as here [the Union] failed to comply with the procedural requirements of the Grievance Procedure," Def.'s Mem. at 15, this intent was not explicitly stated as it was in the cases cited supra.
For its final argument, the Defendant attempts to distinguish John Wiley. In John Wiley, the Court reasoned that doubts regarding the applicability of grievance procedures, whether they have been followed, and the consequences of any failure to follow them "cannot ordinarily be answered without consideration of the merits of the dispute which is presented for arbitration." Id. at 557. The Defendant argues that here, by contrast, a determination of the procedural issue does not require the Court to delve into the merits of the Grievance. Although this is an attractive argument at first blush, the John Wiley Court also indicated that "[q]uestions concerning the procedural prerequisites to arbitration do not arise in a vacuum; they develop in the context of an actual dispute about the rights of the parties to the contract or those covered by it." Id. at 556-57. Here, the question whether the Union was required to go through Step 3 of the grievance procedure necessarily developed in the context of such an actual dispute. Moreover, the Seventh Circuit is particularly adamant that "once it is determined that the underlying dispute concerns a subject matter covered by arbitration provisions, the court's only role is to order arbitration." Niro, 827 F.2d at 173. The subcontracting dispute is a subject the parties intended to be a matter of arbitration. "That is all [the Court] need and should decide." Id.
There are no genuine issues of material fact and the Union is entitled to judgment as a matter of law and to an order compelling arbitration of the Grievance. The Defendant may present its procedural arguments to the arbitrator.
CONCLUSION
For the foregoing reasons, the Plaintiff's Motion for Summary Judgment [DE 14] is GRANTED and the Defendant's Motion for Summary Judgment [DE 15] is DENIED. JUDGMENT is ENTERED against the Defendant and in favor of the Plaintiff. The court ORDERS that the parties submit the Grievance to arbitration.
SO ORDERED.