Adams v. Gould, Inc.

687 F.2d 27, 111 L.R.R.M. (BNA) 2307
CourtCourt of Appeals for the Third Circuit
DecidedSeptember 2, 1982
DocketNo. 82-1118
StatusPublished
Cited by20 cases

This text of 687 F.2d 27 (Adams v. Gould, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Adams v. Gould, Inc., 687 F.2d 27, 111 L.R.R.M. (BNA) 2307 (3d Cir. 1982).

Opinion

OPINION OF THE COURT

ALDISERT, Circuit Judge.

The sole question presented for resolution in this interlocutory appeal certified under 28 U.S.C. § 1292(b) is whether certain individual employees, plaintiffs below, are bound by the results of an arbitration between their employer and their union and thereby barred from bringing their complaint in federal court. The district court determined they were not and denied defendants’ motion for summary judgment. Defendants obtained the district court’s certification of the question, however, and we allowed the appeal. We reverse.

I.

In 1962, appellant Gould, Inc. purchased the Wilkening Manufacturing Co. piston ring manufacturing plant, whose employees were represented by Local 416 of the United Auto Workers. The union and Gould entered into successive collective bargaining agreements as well as a pension agreement whose trust assets are administered by appellant First Trust Co. In 1973, because of its “antiquated plant, .. . failing product line, intense competition, and a declining market share,” Gould announced its intention to terminate operations at the plant and to release all of the employees. Gould and UAW representatives met to discuss the phase-out of operations, including the ramifications for the pension plan. Determining that the plan’s assets were actuarially insufficient to provide full benefit payments to all claimants and retirees, the union demanded that Gould fully fund the plan. When Gould refused, the union filed a grievance under Article XVII (“Grievance [29]*29Procedure”) of the collective bargaining agreement, even though Article XII (“Pension Plan”) of the same agreement established procedures for the resolution of pension disputes.

Unable to resolve the dispute, Gould and the union submitted it to a single arbitrator pursuant to the final step of Article XVII. The union again demanded that Gould fully fund the plan or, alternatively, fund it on a sound actuarial basis. Gould argued that it had met its contractual obligations. Professor John Perry Horlacher, Chairman of the University of Pennsylvania Department of Political Science and former Vice President of the National Academy of (Labor) Arbitrators, served as arbitrator and found that Gould had not properly funded the plan. On November 24, 1975, he issued an award which in part ordered the following:

5. The Company is directed to make further contributions to the fund, using to calculate them the assumptions that were in effect at the end of 1968. These shall be in addition to the contributions already made.
6. These additional contributions shall be for the period when the changed assumptions were made effective after 1968 until the Plan terminated.
7. In the event of. disagreement concerning the amount of these additional contributions, the Company’s and the Union’s actuaries shall negotiate the sums. If they cannot agree, their contentions in writing shall be forwarded to me and I will make the determination.
8. The money put into the Plan’s fund by direction of this award shall be distributed to the eligible employees in accordance with Section 7.2 of the Plan contract as modified by any side agreement in effect at the time of the Plan’s termination.

Although the arbitrator rejected the union’s demand for full funding, he required Gould to recalculate its contributions so that the benefits could be increased in line with the pension agreement’s asset allocation provisions. The union, by its counsel and actuary, reviewed the new computations and agreed that they complied with the arbitrator’s award. The record does not indicate that this post-arbitration activity was anything more than what a Gould official characterized as “a question of implementing the award and ... working out numbers.”1 The union also released any employee claims against Gould arising from the arbitration.

Appellees, active employees whose pension benefits had vested,2 contended that . although some additional money was placed in the trust fund, the dispute was resolved so as to give them no benefits while giving retired employees full benefits. They brought an action in the district court claiming that Gould had breached its contractual obligation under the pension plan and had fraudulently induced the plaintiffs to continue their employment, and that First Trust had breached its fiduciary duty in refusing to pay pension benefits when due. Defendants, citing the finality provision of the Article XVII grievance procedure, moved for summary judgment on the ground that the plaintiffs were bound by the arbitrator’s award. Basing its decision on Hauser v. Farwell, Ozmun, Kirk & Co., 299 F.Supp. 387 (D.Minn. 1969), the district court denied the motion. The court was of the view that in submitting the dispute to arbitration, Gould and the union had at[30]*30tempted to “bargain away” rights that were vested under the plan:

Accordingly, the court finds that the union and Gould impermissibly engaged in a negotiation endeavor which resulted in the divestiture of the plaintiffs’ pension rights. As a consequence, because the plaintiffs did not consent, the settlement and release are inapplicable as a bar to the present action.

Adams v. Gould, Inc., No. 78-2365, mem. op. at 11-12 (E.D.Pa. May 12, 1981). In response to defendants’ subsequent motion, however, the district court certified for appeal the question now before this court: “Whether Plaintiffs are bound by the results of the arbitration between Gould and their collective bargaining representative and thereby barred from this suit.”

II.

Because the district court relied on Hauser v. Farwell, Ozmun, Kirk & Co., we begin our discussion with that case. We are persuaded that its holding and reasoning are irrelevant to the case before us. The union and the company in Hauser entered into negotiations that detracted from vested rights of certain employees; under those circumstances the court stated that it was bound by Elgin, Joliet & Eastern Railway Co. v. Burley, 325 U.S. 711, 65 S.Ct. 1282, 89 L.Ed. 1886 (1945), aff’d, 327 U.S. 661, 66 S.Ct. 721, 90 L.Ed. 928 (1946), and held that although a union may bargain as to prospective matters, it cannot bargain away accrued or vested rights of its members. Hauser involved no arbitration proceeding; indeed, the court noted that the “collective bargaining contract containing grievance procedures had become defunct.” 299 F.Supp. at 392.

In the case at bar, however, Gould and the union did not bargain or negotiate; rather, they referred the matter to arbitration pursuant to a viable collective bargaining agreement. Apparently the district court mistakenly equated arbitration — a method of adjudication — with negotiation and bargaining. Appellees contend that the final agreement was a product of negotiation independent of the arbitration.

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Bluebook (online)
687 F.2d 27, 111 L.R.R.M. (BNA) 2307, Counsel Stack Legal Research, https://law.counselstack.com/opinion/adams-v-gould-inc-ca3-1982.