E.M. Diagnostic Systems, Inc. v. Local 169, International Brotherhood of Teamsters

812 F.2d 91, 124 L.R.R.M. (BNA) 2633

• Court: Court of Appeals for the Third Circuit
• Decided: February 13, 1987
• Docket: No. 86-5331
• Status: Published

Opinions

OPINION OF THE COURT

STAPLETON, Circuit Judge:

E.M. Diagnostic Systems, Inc. (“the Company”) filed this suit seeking to enjoin arbitration of a grievance that concerned its use of an outside contractor to perform certain cleaning work. The district court held that the grievance was arbitrable and granted summary judgment to Local 169, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (“the Union”). The Company now appeals. Because the grievance comes within the scope of the contract’s broad arbitration clause and because there is no clear evidence of an agreed-upon intent to exclude such a grievance from the arbitration process, we affirm.

I.

The Company and the Union are parties to a collective bargaining agreement effective from April 12, 1985, through April 11, 1988. This litigation involves a grievance filed on April 15, 1985, by Joseph Ehrman, a bargaining unit employee and a member of the Union’s negotiating committee. The grievance form states:

This grievance concerns the matter about an outside agency doing our union job as porters. When we met on 4-12-85 the committee asked Jack Holms [sic]¹ if they would be leaving since the strike was over and we were coming back to work. Holms [sic] said no. This is a clear case of violating the contract, also unfair to the 15 or so people still on layoff. So in concluding, since the agency is not part of local 169 we demand they be released and the jobs that are rightfully ours are [sic] given back to us.

App. at 61.

The collective bargaining agreement contains the following relevant provisions. Article Y, “Functions of Management,” provides:

Section 1. The management of the operation and the direction of the working force including the right to hire, suspend, transfer, promote and discharge or discipline for just cause and to maintain discipline and efficiency of its employees, to establish reasonable work rules, to subcontract, to establish and discontinue incentive systems, and to relieve workers from duty because of lack of work or for other legitimate reasons in accordance with this Agreement are vested in the Company. The Union or its representatives shall not interfere with the exercise of such authority, or responsibility, subject only to the restrictions contained in this Agreement.

App. at 28 (emphasis added). Article XII, “Supervision,” states:

Non-union personnel shall not perform the duties normally assigned to Union employees except for emergencies, experimental work, purposes of instruction, production or operational difficulties. The Company has the right to continue the practice of having non-union personnel participate in the taking of inventories.

App. at 37. In addition, Article X, “Seniority,” provides that “seniority as used in this ARTICLE shall be the sole determining factor in cases of layoff and recall” and contains a detailed description of the seniority system. App. at 33. Section 6 of Article X states, “When any recall takes place,, employees shall be rehired by seniority before new employees are hired; ____ App. at 35.

Article XIX, “Settling of Disputes,” specifies the agreement’s grievance and arbitration procedures. This article states:

Section 1. Any dispute arising out of a claimed violation of this Agreement shall be considered a grievance and shall be handled in the following manner:

The Company and the Union both encourage and endorse the principal [sic] that the Union person and his/her immediate supervisor sit and discuss any misunderstanding prior to the beginning of any formal grievance procedures.

Step 1. After such discussions and within three (3) working days following occurrence or first knowledge of the incident complained of, the employee, if not satisfied, shall reduce the grievance to writing and review the matter with his/her immediate Supervisor____ The Supervisor shall give an answer within three (3) working days____

Step 2. If the matter is not resolved in Step 1. the grievance shall be referred to the next level of management within one (1) week following the conclusion of Step 1____ The company shall provide a written answer within seven (7) working days.

Step 3. If the matter is not resolved in Step 2. it shall, within two (2) weeks of the answer, be referred to the Vice President, Personnel and Organization and the Business Agent for Local 169. These parties, or their designated representative(s), shall discuss, within four (4) weeks, the grievance.

Step 4- In the event of a failure to adjust the grievance satisfactorily by methods set forth in Step 3., the Company and the Union shall agree upon an Arbitrator satisfactory to both. In the event an Arbitrator cannot be decided upon, the parties will utilize the American Arbitration Association procedures for the determination of an Arbitrator. The Arbitrator’s decisions shall be final and binding upon all parties____ The Arbitrator shall interpret and apply this Agreement but shall not rewrite or add to it.

App. at 41-42 (emphasis added).

II.

Because the Company, in arguing that this grievance is not arbitrable under the collective bargaining agreement, relies on the history of its relationship with the Union, we begin with an account of the events that led up to the current dispute. Prior collective bargaining agreements between the Company and the Union, including the agreement in effect from 1981 to 1984, have also contained the “Functions of Management” provision, with its “right ... to sub-contract,” quoted above.

The Company began contracting out cleaning work at its Gibbstown, New Jersey, facility to Service World Corporation on June 22, 1984. Four days later, a Union member filed the following grievance:

I’m writing this grievance on behalf of Union people who are both in building & out on Layoff & the Company hiring non union persons to do job that has always been considered a union job.

App. at 53. The Company’s two written responses to this grievance each acknowledged subcontracting, but stated that the action was “in total conformance with the terms of our labor contract.” App. at 53. Although the initial steps of the grievance procedure failed to redress the Union’s problem, it did not seek to submit the 1984 grievance to arbitration.

At a July 19,1984, meeting between Jack Holmes, the Company’s Vice President, and the Union’s grievance committee, the Union raised the issue of the contract with Service World. According to Mr. Holmes’ affidavit, William Nolén, the Union’s business agent, said then “that the agreement did provide that the Company can subcontract and that it had the right to do so in these circumstances.” App. at 17. Nolen’s affidavit, however, states, “At no time did I or any member of the grievance committee state at this meeting that the agreement provided the company with an absolute right to subcontract.” App. at 106. Nolen’s affidavit also states that the “right ... to sub-contract” language at no time gave the Company “the right to subcontract out bargaining unit work regularly performed by bargaining unit personnel.” Id.

Negotiations for the current collective bargaining agreement commenced in September, 1984. During negotiations the pri- or agreement was extended, to expire on February 28, 1985. In the initial contract negotiation meetings, the Union proposed prohibiting the subcontracting of work by the Company. According to Holmes’ supplemental affidavit, the Union later “modified its position, proposing that there be no subcontracting of work normally done by bargaining unit employees while bargaining unit employees were on layoff.” App. at 97.

In November, 1984, the Company expanded its contract with Service World so that this company performed some of the cleaning work in the Gibbstown plant, as well as in the office, reception, and cafeteria areas. The Union did not file a grievance concerning the November expansion of Service World’s work.

On March 1, 1985, the bargaining unit employees went on strike. On March 4 the Company contracted with Macke, a successor to Service World, to perform all the cleaning work at the Gibbstown facility. The Company contends that at an April contract negotiation meeting the Union president, Joseph Lyons, voiced concern that if the Company could subcontract janitorial work, then it could subcontract all bargaining unit work. Nolen, who was present at this meeting, states in his affidavit that he did not hear Lyons make any such statement.

The current collective bargaining agreement was signed in April of 1985. It made no change in the “right ... to sub-contract” language contained in the prior agreement. Nolen’s affidavit states that after execution of the 1984-88 agreement,

a bargaining committee member asked the employer when outside employees who had been contracted to perform the parties’ work in question during the strike would be released as required under the contract. The employer through its authorized representative advised the union that it intended to use the outside contractor to perform the plant janitorial work despite the clause in question.

App. at 107. Holmes’ supplemental affidavit recounts that after agreement on a new contract was reached, he stated that the employees of the subcontractor would remain on the job, but that all strikers should nonetheless return to work, reporting to their supervisors.

On April 15, Union member Ehrman filed the grievance at issue in this case. On April 26, 1985, Holmes gave the company’s written response to a Union shop steward. The response states:

The Company has the right to sub-contract work. The grieved subject does not, in any way, violate the collective bargaining agreement. Grievance denied.

App. at 61. According to Holmes’ affidavit, he told the shop steward at that time that it did not seem necessary to utilize the subsequent steps in the dispute resolution procedure that provided for further discussion, because the parties’ positions on the subject were known.

The Union’s attorney sent the Company a letter dated May 31,1985, suggesting the names of arbitrators for an arbitration pursuant to the dispute resolution procedures of the contract. In reply the Company’s attorney wrote, “[I]t is clear that the parties intended to exclude the subject of the instant grievance from arbitration. Accordingly, the Company views the matter as not subject to arbitration.” App. at 65. The Union continued to go forward with preparations for arbitration.

III.

On review of a summary judgment, the appellate court is required to apply the same test that the district court should have used. Taking the non-movant’s factual allegations as true, we must determine whether the moving party is entitled to judgment as a matter of law. See Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977).

The relevant labor law is well-settled. Arbitration is the preferred method for resolving disputes between a union and an employer. Butler Armco Independent Union v. Armco Inc., 701 F.2d 253, 255 (3d Cir.1983). Arbitration, however, “is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960). Therefore, whether a collective bargaining agreement creates a duty to arbitrate a particular grievance is an issue for judicial determination. AT & T Technologies, Inc. v. Communications Workers of America, — U.S. —, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986). If the contract contains an arbitration clause, there is a presumption of arbitrability in that

“arbitration 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. Doubts should be resolved in favor of coverage.”

AT & T Technologies, 106 S.Ct. at 1419 (quoting Warrior & Gulf, 363 U.S. at 582-83, 80 S.Ct. at 1352-53). Where, as in the instant case, the arbitration provision is a broad one,

“[i]n the absence of any express provision excluding a particular grievance from arbitration, ... only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail.”

AT & T Technologies, 106 S.Ct. at 1419 (quoting Warrior & Gulf, 363 U.S. at 584-85, 80 S.Ct. at 1353-54). A further settled principle of labor law is that,

in deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits of the underlying claims. Whether “arguable” or not, indeed even if it appears to the court to be frivolous, the union’s claim that the employer has violated the collective-bargaining agreement is to be decided, not by the court asked to order arbitration, but as the parties have agreed, by the arbitrator. “The courts, therefore, have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim. The agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.” American Mfg. Co., 363 U.S., at 568, 80 S.Ct., at 1346 (footnote omitted).

AT & T Technologies, 106 S.Ct. at 1419. As the Supreme Court noted in Steelworkers v. American Manufacturing Co., 363 U.S. 564, 568, 80 S.Ct. 1343, 1346, 4 L.Ed.2d 1403 (1960), “[t]he processing of even frivolous claims may have therapeutic values of which those who are not a part of the plant environment may be quite unaware.”

Thus, our analysis will be directed to three issues: (1) Does the present dispute come within the scope of the arbitration clause? (2) does any other provision of the contract expressly exclude this kind of dispute from arbitration? and (3) is there any other “forceful evidence” indicating that the parties intended such an exclusion? Whether the contract allows the Company to subcontract the work in dispute is not relevant to our analysis of any of these issues.

The collective bargaining agreement in this case provides for arbitration of “any dispute arising out of a claimed violation of this Agreement.” The Union argues that it has made a claim that the employer’s conduct violates the agreement and that this “claimed violation” alone is sufficient to bring the dispute within the scope of the agreement’s broad arbitration clause. Such an interpretation of the contract, however, leaves the scope of the arbitration clause subject to the unilateral and unfettered discretion of the Union. The Company insists that, given its explicit right to subcontract and the other provisions of the contract, there is no language in the agreement from which the Union’s claim can be said to “aris[e] out of.” On this basis the Company argues that the Union has not stated a grievance within the scope of the arbitration clause. The Union responds that it can, if necessary, point to several provisions in the agreement that relate to this dispute. The Union warns, however, that under AT & T Technologies an examination of the merits of the Union’s claim is reserved for the arbitrator.

It will suffice for present purposes to hold that a claimed contract violation comes within the scope of an arbitration clause of this character when the subject matter of the grievance is one that is within the zone of interests that have received protection in the collective bargaining agreement. To require more, we believe, would infringe upon territory reserved for arbitrators in AT & T Technologies.

As the Company stresses, the contract bestows a “right ... to sub-contract.” It is apparent on the face of the contract, however, that this right is not absolute; it is “subject ... to the restrictions contained in this Agreement.” Limits on the right to subcontract would be implicit, however, even if they were not so explicitly declared. An absolute right to subcontract would include the right to subcontract all work of the bargaining unit and would be inconsistent with the agreement's recognition of the Union as the bargaining agent for the Company’s employees.

Moreover, the interests of Union members in being able to perform the work of the bargaining unit are recognized and protected in more specific provisions of the agreement. In Section 1 of Article V, the section that sets out the right to subcontract, the employer’s right to “relieve workers from duty” and thereby deprive them of their right to perform the work of the bargaining unit is limited to non-arbitrary actions. The right to relieve workers may be exercised only “because of lack of work or for other legitimate reasons in accordance with this Agreement.” Article XII protects Union members’ interest in bargaining unit work free from competition with “non-union personnel,” at least where that personnel is supervisory and perhaps more broadly. Article X recognizes the interest of laid-off Union workers in the work of the unit by requiring their recall before the recall of less senior employees or the hiring of new ones.

Based on these provisions, we have no difficulty concluding that the subject matter of the Union’s grievance comes within the zone of its protected interests under the collective bargaining agreement. Accordingly, we find that this is a “dispute arising out of a claimed violation of” the agreement.² We therefore turn to the questions of whether the agreement expressly excludes this dispute from the arbitration procedure and, if not, whether there is “forceful evidence” indicating that the parties intended to exclude a dispute of this kind from arbitration.

The answer to the first of these questions is undisputed. The contract contains no provision expressly excluding from arbitration claims of contract violation that involve the subcontracting of work. While the second of these questions warrants more extended discussion, we believe it equally clear that the Company has presented no other forceful evidence indicating that the parties meant to exclude a dispute of this type from the arbitration process.

The mere fact that the Union has not pressed other complaints about subcontracting to arbitration proves nothing about its ability under the contract to do so. Indeed, the Union’s filing of grievances in June, 1984, and April, 1985, and the Company’s treatment of them as complaints entitled to processing under the first three steps of Article XIX indicate that both parties contemplated resolution of such a complaint under that article, which provides for arbitration as the final available step for all previously unresolved disputes.

Nor do we find the required “forceful evidence” in the history of the collective bargaining between the Company and the Union. Accepting the Company’s version of that history, there is nothing in its evidence that suggests an intent to exclude from arbitration grievances regarding the subcontracting of work. Contrary to the Company’s suggestion, the fact that the Union sought to. negotiate a specific limitation on the Company’s right to subcontract work does not demonstrate that the Union viewed the prior contract as containing no implied limitations. More importantly, however, even if it did suggest that the Union held this view, this bargaining history would provide us with no indication of whether the parties’ minds ever met on the issue of excluding subcontracting grievances from arbitration. The same can also be said for Mr. Holmes’ account of the statement made by the Union’s business agent allegedly acknowledging the Company’s right to sub-contract work. However relevant that statement might be to the merits of the Company’s case on the subcontracting issue, it does not enlighten us on whether the parties agreed to limit the arbitration clause of the agreement to less than its apparent scope.³

In essence, we believe the Company’s argument reduces to an assertion that its right to subcontract work is so clear on the face of the agreement that there is no need for arbitration. This is but another way of saying that the Union’s grievance is frivolous. We are not free to so characterize the Union’s position; AT & T Technologies teaches that we must not address the merits of the grievance “even if it appears to the court to be frivolous.” 106 S.Ct. 1415 (1986). Decisions on the merits, whether easy or difficult, must be left to the arbitrator.⁴

Since we have determined that the Union’s claim must be allowed to proceed to arbitration, it is premature to conclude, as the Company would have us, that any award made by the arbitrator would “rewrite or add to” the collective bargaining agreement in violation of Article XIX. If the arbitrator renders an unlawful award, the aggrieved party has available the remedy of a suit to vacate. See, e.g., Sears, Roebuck & Co. v. Teamsters Local Union No. 243, 683 F.2d 154 (6th Cir.1982).

IV.

The district court’s grant of summary judgment to the Union will be affirmed.

1 . Jack Holmes is the Company’s Vice-President for Personnel and Organization.

2 . The cases relied upon by the Company in arguing the contrary involve both more narrow arbitration clauses and situations in which the subject matter of the union’s grievance was wholely unrelated to any interest protected by the collective bargaining agreement. In Boeing Co. v. International Union, United Automobile, Aerospace and Agricultural Implement Workers, 231 F.Supp. 930 (E.D.Pa.1964), aff’d 349 F.2d 412 (3d Cir.1965), for example, the arbitration process in the contract was limited to grievances involving a specific provision of the agreement. The court held a grievance protesting the failure to distribute Christmas turkeys barred from arbitration because “[t]here is no provision specific or otherwise in the agreement relative to the distribution of Christmas turkeys." 231 F.Supp. at 932. Halstead Industries, Inc. v. United Steelworkers, 432 F.Supp. 109, 111 (W.D. Pa.1977), similarly rejected arbitration because arbitration was limited, under the contract, to “application of particular clauses of this Agreement” and none of the provisions pointed to by the Union was related in any way to the subject matter of the grievance.

3 . In stressing the importance of bargaining history, the Company relies on Independent Petroleum Workers of America v. American Oil Co., 324 F.2d 903 (7th Cir.1963), aff'd by an equally divided court without opinion, 379 U.S. 130, 85 S.Ct. 271, 13 L.Ed.2d 333 (1964) and Local No. 725, International Union of Operating Engineers v. Standard Oil Co. of Indiana, 186 F.Supp. 895 (D.N.D.1960). In Standard Oil, the Union had repeatedly sought to broaden the scope of a relatively narrow arbitration clause to include disputes like the one it wished to arbitrate and Standard Oil consistently refused to accept any change. The Court understandably concluded that the language of the arbitration clause and this bargaining history indicated that the parties had not agreed to arbitrate the dispute that the Union wanted to arbitrate. In American Oil, the Union had unsuccessfully tried to negotiate a clause specifically prohibiting or limiting the right to contract out work. The existing collective bargaining agreement contained no reference to the subcontracting of work and the arbitration clause expressly provided that either party could refuse to arbitrate any matter not covered by the agreement. The Court held that the plaintiff was barred by res judicata and that in any event the contract, properly construed, did not evidence an intent to arbitrate subcontracting issues. While it noted in passing that the "bargaining history ... fortifies the conclusion ... that plaintiffs [arbitration] claim is without merit,” the Court also stated that the bargaining history was "of course not controlling.” 324 F.2d at 907. We doubt that the American Oil Court would have found the bargaining history there to be the kind of forceful evidence referred to in AT & T Technologies. In any event, in the context of this case, we believe that the Company’s evidence regarding bargaining history is ambiguous at best.

4 . We consider ourselves foreclosed by AT & T Technologies from addressing the dissent’s assertion "that no provision of the Collective Bargaining Agreement has been violated.”