Johnson Controls Security Solutions, LLC v. Int'l Brotherhood of Electrical Workers, Local 103

24 F.4th 87

• Court: Court of Appeals for the First Circuit
• Decided: January 28, 2022
• Docket: 21-1460P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 21-1460

JOHNSON CONTROLS SECURITY SOLUTIONS, LLC,

Plaintiff, Appellee,

v.

INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL 103,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

Before

Lynch, Kayatta, and Barron, Circuit Judges.

Christopher N. Souris, with whom Richard M. Olszewski and Krakow, Souris & Landry, LLC were on brief, for appellant. Brian D. Lee, with whom Ogletree, Deakins, Nash, Smoak & Stewart, P.C. was on brief, for appellee.

January 28, 2022 LYNCH, Circuit Judge. In this dispute between the

International Brotherhood of Electrical Workers, Local 103 (the

"Union"), and Johnson Controls Security Solutions, LLC over

Johnson Controls' compliance with the terms of the parties'

collective bargaining agreement (the "CBA"), the district court

refused to order arbitration as called for by a clause in the

agreement. We reverse.

I.

Johnson Controls is a limited liability company with

offices in Massachusetts which sells, installs, and maintains

security alarms and provides related services to commercial

clients. Its Norwood, Massachusetts facility has entered into a

CBA with the Union, a labor organization that represents Johnson

Controls employees.1

We next describe the pertinent terms of the CBA, which

are found in three clauses. Article 5, Section 1 (the "Arbitration

Clause") states:

In the event that an agreement cannot be reached between the Union and the Employer with respect to a grievance involving and

1 Johnson Controls is the successor-in-interest to Tyco Integrated Security, LLC, which was the signatory to the CBA that was in effect during the events giving rise to this dispute. That agreement was effective between October 21, 2017 and September 30, 2020. Johnson Controls and the Union have since executed a new collective bargaining agreement, operative between October 15, 2020 and December 31, 2023, which is in all material respects the same as the predecessor agreement. The parties do not dispute the validity of the CBA.

- 2 - limited to the interpretation and application of any specific provision of this Agreement, it may be submitted, by the Union to arbitration, pursuant to the Labor Arbitration Rules of the American Arbitration Association.

Article 5, Section 2 (the "Exclusion Clause"), provides:

Changes in business practices, matters involving capital expenditures, the opening and/or closing of new units/facilities, the choice of personnel (subject to the seniority provisions, if applicable)[,] the choice of materials, service products, processes and equipment, or any dispute which either directly or indirectly involves the interpretation or application of the plans covering pensions, disability benefits and death benefits, shall not be arbitrable.

(emphasis added).

The third relevant clause is Article 9, which states:

"The Employer hereby agrees to provide the 401(k) Plan, disability

benefits and death benefits as in effect as of May 6, 2008." It

is this clause which the Union says Johnson Controls has violated

and which gives rise to the dispute the Union seeks to arbitrate.

Around April 2020, Johnson Controls "temporarily reduced

its matching contribution to the Company's 401(k) Plan" (the

"Plan"). The Union's grievance, which was filed on May 1, 2020,

concerns Johnson Controls' reduction in the employer match, "which

the Union view[ed] as a violation of Article 9 of [the CBA]."2

2 The reduction in the employer match was for one year. Johnson Controls states that it has since restored its contributions, but does not claim to have made up the difference in the reduced benefits.

- 3 - Following Johnson Controls' denial of the grievance, the Union

filed a demand for arbitration on May 19, 2020 with the American

Arbitration Association (the "AAA") pursuant to the Arbitration

Clause.

The next day, the AAA opened the arbitration case and

Johnson Controls sent an email to the Union's counsel, objecting

that "per Article 5 Section 2 of the labor agreement th[e

grievance] is not arbitrable." On June 8, 2020, Johnson Controls

sent an email to the AAA, stating again that "[t]he subject matter

of the Union's arbitration request . . . is not arbitrable." The

Union disagreed, and an arbitrator was appointed on June 19, 2020.

On July 7, 2020, the arbitrator declined to stay the arbitration

absent a court order, and scheduled a hearing for February 9, 2021.

On January 14, 2021, Johnson Controls filed the instant

lawsuit in the U.S. District Court for the District of

Massachusetts pursuant to the Labor Management Relations Act, 29

U.S.C. § 185, seeking a declaratory judgment that the dispute is

not arbitrable under the CBA, see also 28 U.S.C. § 2201.3 On March

15, 2021, the Union moved to dismiss Johnson Controls' court

complaint. The parties agreed to treat the motion as one for

judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c).

3 The arbitrator stayed the arbitration hearing after being notified of the federal lawsuit.

- 4 - The district court stated at the end of the May 12, 2021

motion hearing that the Union's dispute was not arbitrable. The

court did not enter a written opinion. The court did not address

the exact terms of the CBA. On May 17, 2021, the district court

entered a declaratory judgment in favor of Johnson Controls. The

Union appeals from that judgment.

II.

Our review of a district court's allowance of a motion

for judgment on the pleadings under Fed. R. Civ. P. 12(c) is de

novo. Curran v. Cousins, 509 F.3d 36, 43 (1st Cir. 2007).

Under AT & T Technologies, Inc. v. Communications

Workers of America, 475 U.S. 643 (1986), four principles govern

the determination of whether a certain labor dispute concerning

the collective bargaining agreement is subject to arbitration:

(1) that arbitration is a matter of contract and the parties must

have agreed in a contract to arbitrate the dispute, id. at 648;

(2) that the question of whether a collective bargaining agreement

requires the parties to arbitrate a particular grievance is one of

law for the court, not the arbitrator, to determine, id. at 649;

(3) that, in making this determination, "a court is not to rule on

the potential merits of the underlying claims," id. at 649; and,

most relevant here, (4) that "where the contract contains an

arbitration clause, there is a presumption of arbitrability," id.

at 650.

- 5 - The presumption, in turn, requires a court to permit a

grievance to proceed to arbitration "unless it may be said with

positive assurance that the arbitration clause is not susceptible

of an interpretation that covers the asserted dispute." Id. at

650 (quoting United Steelworkers of Am. v. Warrior & Gulf

Navigation Co., 363 U.S. 574, 582–83 (1960)). Where, as here,

there exists a relatively broad arbitration clause, the

presumption can be rebutted only by a specific and "express

provision excluding a particular grievance from arbitration" or

"the most forceful evidence of a purpose to exclude the claim."

Id. at 650 (quoting Warrior & Gulf, 363 U.S. at 585). "[A]ny

doubts concerning the scope of arbitrable issues should be resolved

in favor of arbitration." Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985) (quoting Moses

H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25

(1983)); see also Gateway Coal Co. v. United Mine Workers of Am.,

414 U.S. 368, 377 (1974) (noting "[t]he federal policy favoring

arbitration of labor disputes"); cf. Mastrobuono v. Shearson

Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) ("[D]ue regard must be

given to the federal policy favoring arbitration, and ambiguities

as to the scope of the arbitration clause itself resolved in favor

- 6 - of arbitration." (quoting Volt Info. Sci., Inc. v. Bd. of Tr. of

Leland Stanford Junior Univ., 489 U.S. 468, 476 (1989))).4

On de novo review, we cannot say "with positive

assurance" that the Union's grievance is not arbitrable. The

grievance concerns whether the CBA was violated by Johnson

Controls' unilateral reduction of its matching contribution to the

company's 401(k) plan. The parties agree that it plainly

constitutes "a grievance involving and limited to the

interpretation and application of any specific provision of [the

CBA]," namely, Article 9.

This takes us to the relevant language of the Exclusion

Clause, which expressly excludes from arbitration only disputes

that "directly or indirectly" involve the "interpretation or

application" of "plans covering pensions, disability benefits and

death benefits." These types of plans, which include the 401(k)

plan, are governed by the Employee Retirement Income Security Act

of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), and its statutorily

mandated claims procedures. See 29 U.S.C. §§ 1002–03, 1133; 29

C.F.R. § 2560.503-1 (ERISA claims procedures). There is no

colorable claim that the Union's grievance "directly" involves the

4 See also Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 298 n.6 (2010) (discussing precedents applying the Federal Arbitration Act in a labor case "because they employ the same rules of arbitrability").

- 7 - "interpretation" or "application" of the Plan.5 The question

becomes whether the grievance clearly "indirectly" does. Johnson

Controls argues for a broad reading of the term "indirectly." It

says the term would be rendered meaningless and duplicative of

"directly" if the Exclusion Clause did not apply to this grievance.

Resolving all doubts in favor of arbitration, we disagree.

As the Union has argued, we cannot say "with positive

assurance" that the Arbitration Clause does not apply to its

grievance on account of the "indirect" language in the Exclusion

Clause. This language, viewed in context, does not "specifically

exclude" all disputes broadly having to do with the Plan.6 See

Warrior & Gulf, 363 U.S. at 581. Rather, the language can

plausibly be read more narrowly, to exclude disputes other than

the grievance at issue here. It is plausible to read the Exclusion

Clause as not applicable to this dispute concerning compliance

with the CBA's requirements as to the 401(k) plan.

The Union's reading would give meaning to the qualifying

terms "interpretation or application" which limit the scope of the

Exclusion Clause. See New England Carpenters Cent. Collection

5 The Exclusion Clause also does not expressly exclude grievances concerning the interpretation of Article 9. 6 Counsel for Johnson Controls does not explain why the parties, if they intended to exclude from arbitration essentially all disputes broadly "having to do with pension plans," did not say as much in the Exclusion Clause.

- 8 - Agency v. Labonte Drywall Co., 795 F.3d 271, 282 (1st Cir. 2015)

("[E]very word and phrase of an instrument is if possible to be

given meaning, and none is to be rejected as surplusage if any

other course is rationally possible." (citation omitted)). Its

reading is buttressed by the fact that ERISA-governed disputes are

subject to separate, statutorily mandated dispute resolution

procedures.7 See 29 U.S.C. § 1133; 29 C.F.R. § 2560.503-1; see

also Senior v. NSTAR Elec. & Gas Corp., 449 F.3d 206, 220–21 (1st

Cir. 2006) (interpreting a CBA against the backdrop of its "broader

context"). A dispute over the administration of the Plan's

benefits necessarily would involve the "interpretation or

application" of the Plan's governing documents. See Diaz v.

Seafarers Int'l Union, 13 F.3d 454, 456–59 (1st Cir. 1994)

(reviewing trustees' "interpretation" and "application" of ERISA-

governed pension plan in dispute over the administration of

benefits).

Johnson Controls' position turns on its surplusage

argument, which we do not accept. The Union's reading of the

7 Notably, counsel for Johnson Controls conceded at oral argument that there is no way to know what the drafters meant in the Exclusion Clause and whether they intended to exclude only ERISA-governed disputes. Because there is doubt as to what the drafters meant, at least insofar as the word "indirectly" is ambiguous, that doubt must be resolved in favor of arbitration. See Gambino v. Alfonso, 566 F. App'x 9, 12 (1st Cir. 2014) (unpublished) ("[I]f there is any doubt, an arbitration clause [in a CBA] should be interpreted to embrace a particular dispute.").

- 9 - Exclusion Clause does not leave the term "indirectly" without

meaning or render it surplus, as the company argues. The Union's

reading gives the term "indirectly" a purpose. Such a purpose is

illustrated by this example: An employee and employer resolve a

dispute over the employee's termination with a Severance

Agreement. That Agreement, among other things, terminates the

employee's participation in the pension plan and grants the

employee an annuity "of value equal to payments that would have

been received under the pension plan." The employee then sues for

breach of the Severance Agreement, claiming the annuity is too low

because the pension plan calls for higher payments than the

employer claims in setting the annuity. So while the claimed

breach of the Severance Agreement turns on determining whether the

annuity is enough, it indirectly would involve the interpretation

of the pension plan. Here, in contrast, a decisionmaker need not

resolve any dispute, directly or indirectly, concerning what the

Plan means or how it applies. The only issue raised by the Union's

grievance is whether Johnson Controls' unilateral reduction in its

matching contribution to the 401(k) plan violates the language of

the CBA.

We turn to the final stage of the AT & T Technologies

analysis. As that case teaches, "only the most forceful evidence

of a purpose to exclude the claim from arbitration can prevail."

475 U.S. at 650 (quoting Warrior & Gulf, 363 U.S. at 584–85).

- 10 - Johnson Controls has presented no evidence at all to rebut the

presumption of arbitrability. Nothing in the record "show[s] the

parties intended to exclude this type of dispute" over the meaning

of a provision in the CBA "from the scope of the arbitration

clause." Grand Wireless, Inc. v. Verizon Wireless, Inc., 748 F.3d

1, 9 (1st Cir. 2014) (emphasis in original) (citing AT & T Techs.,

475 U.S. at 650); see also Int'l Union, United Auto., Aerospace &

Agric. Implement Workers of Am. v. Trane U.S. Inc., 946 F.3d 1031,

1035 (8th Cir. 2020); Bressette v. Int'l Talc Co., Inc., 527 F.2d

211, 216 (2d Cir. 1975).

III.

Reversed.

- 11 -