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Summary: Opinions of the United 1994 Decisions States Court of Appeals for the Third Circuit 6-16-1994 Luden's, Inc. v. Local Union No. 6, Bakery, Confect'ry;Tobacco Wrkrs Internat'l Precedential or Non-Precedential: Docket 92-1982 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1994 Recommended Citation "Luden's, Inc. v. Local Union No. 6, Bakery, Confect'ry;Tobacco Wrkrs Internat'l" (1994). 1994 Decisions. Paper 51. http://digitalcommons.law.villanova.edu/third
Summary: Opinions of the United 1994 Decisions States Court of Appeals for the Third Circuit 6-16-1994 Luden's, Inc. v. Local Union No. 6, Bakery, Confect'ry;Tobacco Wrkrs Internat'l Precedential or Non-Precedential: Docket 92-1982 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1994 Recommended Citation "Luden's, Inc. v. Local Union No. 6, Bakery, Confect'ry;Tobacco Wrkrs Internat'l" (1994). 1994 Decisions. Paper 51. http://digitalcommons.law.villanova.edu/thirdc..
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Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
6-16-1994
Luden's, Inc. v. Local Union No. 6, Bakery,
Confect'ry;Tobacco Wrkrs Internat'l
Precedential or Non-Precedential:
Docket 92-1982
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"Luden's, Inc. v. Local Union No. 6, Bakery, Confect'ry;Tobacco Wrkrs Internat'l" (1994). 1994 Decisions. Paper 51.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________________
NO. 92-1982
_______________________
LUDEN'S INC.,
Appellee
v.
LOCAL UNION NO. 6 OF THE BAKERY, CONFECTIONERY AND
TOBACCO WORKERS INTERNATIONAL UNION OF AMERICA;
AMERICAN ARBITRATION ASSOCIATION,
Bakery, Confectionery and Tobacco Worker's
International Local Union 6,
Appellant
_________________________________________________
On Appeal From the United States District Court
For the Eastern District of Pennsylvania
(D.C. Civ. No. 92-01545)
_________________________________________________
Argued: June 24, 1993
Before: BECKER, ALITO, and ROTH, Circuit Judges.
(Filed June 17, 1994)
BERNARD N. KATZ, Esquire
(ARGUED)
LYNNE P. FOX, Esquire
Meranze and Katz
12th Floor, Lewis Tower
Bldg.
Philadelphia, PA 19102
Attorneys for
Appellant
DANA S. SCADUTO, Esquire
(ARGUED)
McNees, Wallace & Nurick
100 Pine Street
P.O. Box 1166
Harrisburg, PA 17108-1166
Attorney for Appellee
2
_________________________________
OPINION OF THE COURT
_________________________________
BECKER, Circuit Judge.
Luden's Inc. ("Luden's"), the manufacturer of a
well-known brand of cough drops, among other products, commenced
this action in the United States District Court for the Eastern
District of Pennsylvania against Local Union No. 6 of the Bakery,
Confectionery, and Tobacco Workers International Union of America
(the "Union") and the American Arbitration Association ("AAA"). It
sought a declaratory judgment and an injunction to prevent the Union
from submitting to arbitration before AAA a dispute between Luden's
and the Union concerning the retroactivity of wages under the terms
of a lapsed collective bargaining agreement ("CBA").0 The parties
presented the district court with stipulated facts and documents,
and then by agreement filed cross-motions for summary judgment
pursuant to Federal Rule of Civil Procedure 56. The district court
granted Luden's motion and denied the Union's, thereupon permanently
enjoining the scheduled arbitration proceedings. See Luden's, Inc.
v. Local Union No. 6 of Bakery, Confectionery & Tobacco Workers
Int'l Union, 805 F. Supp. 313, 327 (E.D. Pa. 1992).
The Union appealed. For the reasons that follow,
we conclude that the parties' duty to arbitrate survived Luden's
termination of their CBA effective July 3, 1992 as a term of an
"implied-in-fact CBA" which was formed on that date. We will
0
AAA did not actively participate in the disposition of the
controversy on the merits, and agreed to be bound by its resolution.
Stip. of Facts ¶¶ 32-33 & Exh. J.
3
therefore vacate the injunction entered by the district court, and
will remand with instructions to direct the parties to proceed to
arbitrate the retroactive wage grievance.
I. FACTS AND PROCEDURAL HISTORY
The parties stipulated to all the relevant facts.
Luden's, the plaintiff in the underlying action and the appellee
here, owns and operates a manufacturing plant in Reading, PA. The
Union represents some of Luden's employees at that plant. AAA,
which has an office located in Philadelphia, provides, among other
services, arbitrators to hear and resolve disputes arising out of
the administration of CBAs.
On May 1, 1988, Luden's and the Union jointly
executed a CBA (the "1988 CBA") governing the terms and conditions
of employment for certain employees whom the Union represents at
Luden's Reading plant. Stip. of Facts ¶ 1. Article XXIX of the
agreement, the centerpiece of this litigation, was entitled
"Duration of Agreement" and provided in its entirety:
This Agreement shall be and remain in full force
and effect for a period of three (3) years until and
including April 29, 1991, and thereafter, until a new
agreement, the wage clause of which shall be retroactive
to the above given date, has been consummated and signed,
or until this Agreement, upon sixty (60) days notice in
writing, has been terminated by the Union with the
sanction of the Bakery, Confectionery and Tobacco Workers'
International Union of America or has been terminated by
the Company.
Stip. of Facts, Exh. A. As will become apparent, the unartful and
imprecise drafting of the retroactive wage clause is the raison
d'être for this litigation.
4
Like most CBAs, the 1988 CBA incorporated a tiered
grievance procedure in Article XVI to facilitate the amicable
resolution of grievances arising between employees and management in
the course of their intimate employment relationship.0 The fifth and
final step of that procedure permitted either party to submit
unresolved grievances to final and binding arbitration; the parties
were to select the arbitrator cooperatively from a short list
provided by AAA. Stip. of Facts, Exh. A.
The 1988 CBA by its terms was scheduled to expire
on or after April 29, 1991, the exact date being triggered by either
sixty days notice of either party or the parties' joint execution of
a replacement CBA. In a letter dated February 14, 1991, the Union
by its President Joseph Rauscher provided Luden's Plant Manager
0
Article XVI, entitled "Settlement of Grievances and Arbitration,"
provided in pertinent part:
Step I. Any employee who believes that he has a
grievance which involves only him shall discuss the griev-
ance with his or her Department Supervisor within three,
(3), days of the time the alleged grievance became known
to the employee.
. . .
Step V. Where the parties have been unable to
reach a mutually satisfactory resolution of the grievance
at Step IV, either party may request the American Arbi-
tration Association to submit a list of arbitrators for
the consideration of the parties. Thereafter, the matter,
unless settled, shall be processed [through] arbitration
in accordance with the rules and procedures of the AAA.
The decision of the Arbitrator shall be final and
binding upon the parties, provided, however, the
Arbitrator shall have no authority to alter, amend or
modify the terms and conditions of the collective
bargaining agreement or to substitute his judgment for
that of the parties or either of them with respect to any
matter he is not expressly authorized to resolve whether
by the terms of the Agreement or by mutual request of the
parties.
Stip. of Facts, Exh. A.
5
Donald B. Watson with the required sixty days notice that the Union
intended to "change, modify or terminate" the 1988 CBA (pursuant to
Article XXIX thereof). Stip. of Facts ¶ 2 & Exh. B. The letter
included a "Notice to Mediation Agencies," signed by the Union's
President, designating April 29, 1991 as the contract termination
date. Id. Soon thereafter, on March 11, 1991, the parties began
negotiations on a new CBA. Of the fifteen separate negotiating
sessions the parties eventually met for, nine took place prior to
the arranged April 29, 1991 termination date for the 1988 CBA.
Stip. of Facts ¶ 3. At the last of the pre-April 29 meetings,
Luden's extended three separate written contract offers. The Union
rejected each of these offers but verbally proposed counteroffers,
each of which, in turn, Luden's rejected. None of these offers or
counteroffers clarified the issue of the retroactive application of
the new wage clause according to the terms of Article XXIX. Stip.
of Facts ¶ 4 & Exhs. C-E.
By memorandum dated April 29, 1991, Luden's Plant
Manager Donald B. Watson advised Union employees of the general
status of contract negotiations, and specifically reported that
Luden's and the Union had "agreed to disregard the deadline of April
[29] and [to] continue operating under the terms of the current
contracts." Stip. of Facts ¶ 5 & Exh. F. A few days later,
however, in a letter dated May 3, 1991, Luden's disclosed a changed
strategy. On that occasion, Watson notified the Union's business
representative Francis Ryan that Luden's wished to terminate the
1988 CBA "effective 12:01 a.m. Monday, May 13, 1991" (about ten days
later). In addition, the letter contained both a "comprehensive
6
offer" for a new CBA and an attempt by Luden's to condition its
payment of wages according to the new wage scale retroactively to
April 29, 1991 on the Union's timely acceptance of the enclosed
proposal. Stip. of Facts ¶ 6 & Exh. G. The Union's negotiating
committee promptly rejected Watson's offer. Stip. of Facts ¶ 7.
Over the course of the next few months, the parties
continued their negotiations, each submitting various offers or
counteroffers. Stip. of Facts ¶¶ 8, 10. During this time Luden's
sent or distributed several letters directly to its employees to
familiarize them with its bargaining position and to entreat them to
accept its contract offers at their Union's contract ratification
meetings.0 Stip. of Facts ¶ 11 & Exh. O. Each of these letters
reported that Luden's would pay retroactive wages to April 29, 1991
if the Union and its membership accepted Luden's offer in its
entirety.0 Despite Luden's efforts, though, the membership rejected
0
The Union, distressed over the letters Luden's sent to its
employees, filed concurrently with the ongoing negotiations an
unfair labor charge against Luden's with the National Labor
Relations Board ("NLRB"), which charge it later amended. Stip. of
Facts ¶ 13, 14. The amended charge accused Luden's both of
"violat[ing] its obligation to bargain in good faith by both threat-
ening improper actions and by undermining and bypassing the
bargaining representatives of the employees" and also of engaging in
"surface bargaining behavior by having preconceived inflexible
positions," but did not bring the disagreement over the meaning of
the retroactive wage clause before the Board. Stip. of Facts, Exhs.
K, L. The Regional Director of the NLRB, Peter Hirsch, rejected the
Union's contentions on August 20, 1991 and declined to issue a
complaint. Stip. of Facts ¶ 15 & Exh. M. On October 18, 1991 the
NLRB's General Counsel denied the Union's appeal from that decision.
Stip. of Facts ¶¶ 16, 17 & Exh. P. For a more thorough discussion
of these collateral proceedings, see 805 F. Supp. at 317-18.
0
The relevant portions of the letters to the Union and/or members
stated:
I have enclosed a comprehensive offer . . . . Should it be
accepted we will pay retroactive wages to Monday April 29,
1991.
7
each of the Luden's offers which the Union submitted to it for
approval (specifically, the offers of May 16 and June 20, 1991).
Stip. of Facts ¶¶ 9, 12.
On November 1, 1991, during a negotiation session,
Luden's proposed what was, from the Union's perspective, a superior
agreement, but one which was silent with respect to the retroactivi-
ty of wages. Stip. of Facts ¶ 18 & Exh. Q. The following day the
Union submitted certain terms and conditions of that proposal to its
membership, tallying a vote in favor of approval. Stip. of Facts ¶
19. Luden's thereafter posted a notice enumerating the terms it
thought comprised the proposal that the Union membership had
ratified and also undertook to memorialize the agreement by drafting
a document reflecting its understanding of the terms of the member-
ship's vote. Stip. of Facts ¶ 21.
Stip. of Facts, Exh. G (Letter from Watson, Luden's Plant Manager,
to Ryan, Union's Business Representative (May 3, 1991)).
Wages will be paid retroactive to April 29, 1991 should
this entire package be accepted by Mon. evening May 20,
1991.
Stip. of Facts, Exh. H (Offer by Luden's to the Union (May 16,
1991)).
Wages will be paid retroactive to April 29 should this
package be accepted by the membership.
Stip. of Facts, Exh. I (Offer by Luden's to the Union (June 20,
1991)).
Wages will be paid retroactive to April 29, 1991, should
you accept revised language for Article XXIX . . . .
Stip. of Facts, Exh. J (Letter from Watson, Luden's Plant Manager,
to Luden's Employees (July 15, 1991)).
8
Luden's posted notice and its written proposal both
indicated an effective date of November 4, 1991 for the new wage
scale. The Union dissented from this aspect of the writings, and
took the position that the retroactivity provision of the old
Article XXIX mandated retroactive application of the new pay scale
to May 1, 1991. Stip. of Facts ¶ 22 & Exhs. R, S, T. Faced with
this major disagreement between the parties, the Union on January
17, 1992 invoked the grievance procedure of the 1988 CBA (quoted
supra at Error! Bookmark not defined. n.Error! Bookmark not
defined.) and requested AAA to provide a list of arbitrators to
resolve the conflict over the retroactivity provision of Article
XXIX. Stip. of Facts ¶ 24. AAA reserved September 15 and 16, 1992
for the arbitration of the dispute. Stip. of Facts ¶ 25.
On March 6, 1992, Luden's initiated the instant
action against the Union and AAA, seeking a declaratory judgment
that the dispute between the parties regarding the retroactivity of
wages under the "lapsed" 1988 CBA was not arbitrable.0 Moreover,
Luden's prayed for an injunction against the arbitration proceeding
which the Union had scheduled with AAA. Stip. of Facts ¶¶ 24-25.
The parties submitted stipulated facts and documents to the district
court and agreed to submit the issues for resolution upon cross-
motions for summary judgment based solely and exclusively thereon.
Stip. of Facts ¶¶ 29-31. After ordering the parties to supply
supplemental motions addressing the intervening decision in Litton
Financial Printing Division v. NLRB, 501 U.S. 190,
111 S. Ct. 2215
0
Luden's places a great deal of stock in what it regards as the
consequential distinction between an expired and a terminated CBA.
To avoid confusion on this issue, we will utilize "lapsed" herein to
denote either an expired or a terminated CBA.
9
(1991), the district court granted Luden's motion and denied the
Union's. See 805 F. Supp. at 315 n.1, 327. In granting the relief
requested by Luden's, the district court permanently enjoined the
arbitration slated for mid September. As of the date of oral
argument before this Court, their minds had not yet met, and the
plant operated without a signed CBA. Stip. of Facts ¶ 23.
II. THE DISTRICT COURT'S DECISION AND THE ISSUES ON APPEAL
In resolving the summary judgment motions, the
district court reached a number of conclusions which neither party
challenges on appeal. The district court subdivided its analysis
into two sections, first considering the issue of the termination of
the 1988 CBA and only then addressing the arbitrability of the post-
termination dispute. In the first section of its opinion, the
district court concluded that it, not an arbitrator, was to decide
the issue of the arbitrability of the dispute;0 that either party
could unilaterally terminate the 1988 CBA according to Article XXIX
thereof on or after April 29, 1991 with sixty days notice; that,
because of the parties' subsequent arrangement to continue honoring
the 1988 CBA, the Union's letter of February 14, 1991 did not
actually terminate the Agreement; that Luden's May 3, 1991 letter
(which specified May 13, 1991 as Luden's intended termination date)
operated to terminate the Agreement, but not until sixty days after
its receipt (on July 2, 1991); and that the Agreement's arbitration
clause (Article XVI) was inclusive enough to encompass grievances
0
See A T & T Technologies, Inc. v. Communications Workers, 475 U.S.
643, 649,
106 S. Ct. 1415, 1418 (1986) (holding that "[u]nless the
parties clearly and unmistakably provide otherwise, the question of
whether the parties agreed to arbitrate is to be decided by the
court, not the arbitrator").
10
over the application of the retroactivity provision of Article XXIX.
See 805 F. Supp. at 320-25.
We do not pass judgment on these rulings and, for
purposes of this appeal, treat them as correct in all respects.
Although the Union in its brief approaches the issue from several
discrete angles, in substance it challenges on appeal only the
second half of the district court's decision. In that portion of
its opinion, the court held that the construction and effect of the
retroactive wage provision of the 1988 CBA was not subject to
arbitration because, by the time the parties settled on a tentative
new agreement, there was no longer an arbitration provision in
effect between the parties. See 805 F. Supp. at 323-27.
In reaching this conclusion, the district court
read Litton and Nolde Brothers, Inc. v. Local No. 358, Bakery &
Confectionery Workers Union, 430 U.S. 243,
97 S. Ct. 1067, reh'g
denied,
430 U.S. 988,
97 S. Ct. 1689 (1977) to hold that it could
order the parties to arbitrate their post-termination dispute only
if it first determined that the dispute arose under the CBA. 805 F.
Supp. at 326. The court then construed the 1988 CBA to determine
whether under the three-prong test announced by Litton the instant
dispute arose under that agreement.0 See infra at Error! Bookmark
0
The district court apparently did not consider why Luden's was not
obliged to arbitrate the retroactivity question at least with
respect to wages earned before July 2, 1991, the effective
termination date of the 1988 CBA.
See 805 F. Supp. at 326-27. We
can speculate that, having already concluded, in the course of
construing the 1988 CBA to determine if it should order arbitration
for the period after July 2, 1991, that the retroactivity clause was
never activated (a conclusion upon which we decline to pass judg-
ment), the court perhaps reasoned that it would be pointless to send
the same issues to an arbitrator, since the Union might have been
collaterally estopped from advocating a different contruction of the
relevant provision. Of course, since we will vacate the court's
11
not defined. n.Error! Bookmark not defined.. Conscious of the fact
that in the process of applying the Litton test it had construed the
provisions of the 1988 CBA, the court justified its approach by
reference to Litton, which had instructed courts to determine
"whether the parties intended to arbitrate the dispute, even if it
requires the court to interpret a provision of the expired
agreement." Id. at 327 (citing
Litton, 111 S. Ct. at 2227). The
court, at bottom, held that Luden's did not have to arbitrate the
dispute.
The district court exercised jurisdiction over the
claim brought under the Declaratory Judgment Act, see 28 U.S.C.A. §§
2201-02 (1982 & Supp. 1993), pursuant to § 301(a) of the Labor
Management Relations Act ("LMRA"), 29 U.S.C.A. § 185(a) (1978),
which grants district courts jurisdiction over suits to enforce the
terms of CBAs. See Mack Trucks, Inc. v. International Union, UAW,
856 F.2d 579, 583-90 (3d Cir. 1988), cert. denied,
489 U.S. 1054,
109 S. Ct. 1316 (1989); Huettig & Schromm, Inc. v. Landscape
Contractors Council,
790 F.2d 1421, 1425-26 (9th Cir. 1986). We
have jurisdiction over an appeal from a final judgment of a United
States district court. See 28 U.S.C.A. § 1291 (1993).
We exercise plenary review over a district court's
grant of summary judgment. See Wheeler v. Towanda Area Sch. Dist.,
950 F.2d 128, 129 (3d Cir. 1991). In doing so, we employ the same
test the district court initially should have employed. See Public
Interest Research Group v. Powell Duffryn Terminals, Inc.,
913 F.2d
64, 76 (3d Cir. 1990), cert. denied,
498 U.S. 1109,
111 S. Ct. 1018
judgment, collateral estoppel will not bar the arbitrator from
reconsidering afresh the district court's ruling.
12
(1991). Since the parties stipulated to all material facts, we need
not concern ourselves with conflicting affidavits; nonetheless,
where we must draw inferences from the stipulated facts, we still
must resolve them against the moving party and in favor of the
nonmoving party. See Goodman v. Mead Johnson & Co., 534 F.2d 566,
573 (3d Cir. 1976), cert. denied,
429 U.S. 1038,
97 S. Ct. 732
(1977); Erie Telecommunications, Inc. v. City of Erie, Pa.,
853 F.2d
1084, 1093 (3d Cir. 1988).
III. THE PARTIES' DUTY TO ARBITRATE ISSUES UNDER A LAPSED CBA
A. Introduction
Resolution of this appeal within the framework of
the parties' initial briefs would have required us to modulate Nolde
and Litton, two Supreme Court decisions which are in tension and
which therefore breed uncertainty in the sphere of labor law. In
Nolde the Supreme Court held that courts are not to reach the merits
of the dispute, but instead are to order arbitration if the lapsed
CBA arguably creates the obligation at the center of the grievance.0
0
See Nolde, 430 U.S. at 249, 97 S. Ct. at 1071 ("Of course, in
determining the arbitrability of the dispute, the merits of the
underlying claim for severance pay are not before us." (emphasis
supplied)); AT & T Technologies, Inc. v. Communications Workers, 475
U.S. 643, 649-50,
106 S. Ct. 1415, 1419 (1986) (holding 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" (emphasis supplied)); cf. United
Steelworkers v. Warrior & Gulf Nav. Co.,
363 U.S. 574, 582-83, 80 S.
Ct. 1347, 1353 (1960), quoted infra at 28; United Steelworkers v.
Enterprise Wheel & Car Corp.,
363 U.S. 593, 596,
80 S. Ct. 1358,
1360 (1960) ("The refusal of courts to review the merits of an
arbitration award is the proper approach to arbitration under
collective bargaining agreements."); United Steelworkers v. American
Mfg. Co., 363 U.S. 564, 568,
80 S. Ct. 1343, 1346 (1960) ("The
courts . . . have no business weighing the merits of the grievance,
considering whether there is equity in a particular claim, or
13
In particular, the Court held that the need to construe the lapsed
agreement to determine if the grievance has merit -- even if the
necessary interpretation involves answering the query whether the
asserted right vested under the CBA or survived its termination --
is enough to require arbitration. See Nolde, 430 U.S. at 249-52, 97
S. Ct. at 1071-72.
The problem is that Litton is at odds with Nolde in
terms of the court's duty to reach the merits of a dispute relating
to a lapsed CBA on the one hand, and Litton's disavowal that it was
overruling Nolde on the other hand. See Litton, 111 S. Ct. at 2219,
2225;
id. at 2228-29 (Marshall, J., dissenting);
id. at 2232
(Stevens, J., dissenting); John F. Corcoran, Note, The Arbitrability
of Labor Grievances that Arise After the Expiration of the
Collective Bargaining Agreement, 43 SYRACUSE L. REV. 1073, 1085 & n.87
(1992) [hereinafter Arbitrability of Labor Grievances]. In
contradistinction to Nolde, Litton held that a court has the duty to
reach the merits of the claim, and can order arbitration only if it
concludes that the lapsed CBA in fact creates the right or
obligation at issue. See
Litton, 111 S. Ct. at 2227.0
As far as we can tell, other courts have uniformly
resolved this tension by reading Litton as having impliedly
determining whether there is particular language in the written
instrument which will support the claim." (footnote omitted)).
0
The Court, moreover, took this prescription quite seriously, for, as
Justice Marshall pointed out in his dissent, it was debatable wheth-
er the obligation at issue in Litton arose under the expired CBA or
not. Compare Litton, 111 S. Ct. at 2227 (construing the qualified
seniority provision as not having vested) with
id. at 2230-31
(Marshall, J., dissenting) (contra) and Corcoran, Arbitrability of
Labor
Grievances, supra, 43 SYRACUSE L. REV. at 1086-88 (agreeing with
Justice Marshall's dissent). Cf.
Litton, 111 S. Ct. at 2232
(Stevens, J., dissenting) (declining to address the merits of the
dispute).
14
overruled the portion of Nolde holding that a court answering the
arbitrability question is not to look to the merits of the
underlying claim.0 Being reluctant to follow their course, and
having conscientiously reviewed this case after oral argument, we
requested the parties to file supplemental memoranda setting forth
their views as to whether, under the federal common law of CBAs,
this Court should recognize an implied-in-fact CBA which arose by
virtue of the parties' conduct after the lapse of the 1988 CBA.0 If
we were to do so, we would not need to confront the tension between
Nolde and Litton, since the duty to arbitrate would stem from the
implied-in-fact CBA (albeit derived in part from the lapsed CBA)
rather than directly from the lapsed contract, and the question
whether the right at issue accrued, if at all, under the lapsed
contract or during the interim period before Luden's implementation
of the November 4, 1991 near "agreement" would be mooted. Because
we conclude that Luden's contractual duty to arbitrate grievances
never lapsed completely, this avenue provides the route whereby we
0
See Cincinnati Typographical Union No. 3, Local 14519 v. Gannett
Satellite Info. Net., Inc., 17 F.3d 906, 910-11 (6th Cir. 1994);
International Bhd. of Teamsters, Local Union 1199 v. Pepsi-Cola Gen.
Bottlers, Inc.,
958 F.2d 1331, 1333-34 (6th Cir. 1992); Cumberland
Typographical Union No. 244 v. Times & Alleganian Co.,
943 F.2d 401,
404-05 (4th Cir. 1991); Winery, Distillery & Allied Workers, Local
186 v. Guild Wineries & Distilleries,
812 F. Supp. 1035, 1037-38
(N.D. Cal. 1993); Amalgamated Clothing Workers Union v. Stanbury
Uniforms, Inc.,
811 F. Supp. 464, 467-69 (E.D. Mo. 1992); New York
Newspaper Printing Pressmen's Union No. 2 v. New York Times Co., No.
91-Civ.-5937,
1991 WL 206290, at *2-*3 (S.D.N.Y. Oct. 2, 1991),
aff'd,
953 F.2d 635 (2d Cir. 1991); cf. Independent Lift Truck
Builders Union v. Hyster Co.,
2 F.3d 233, 236-37 (7th Cir. 1993)
(concluding that "the rule that courts must decide the arbitrators'
jurisdiction takes precedence over the rule that courts are not to
decide the merits of the underlying dispute").
0
Both parties fully briefed the question of law presented, and
neither party requested to supplement the stipulated facts for
purposes of their cross-motions for summary judgment.
15
may avoid addressing the uncertain interplay between Nolde and
Litton, though we express hope that the Supreme Court will take on
that challenge itself.
B. Implied-in-Fact Contracts and Their Application
to Lapsed Collective Bargaining Agreements
To settle the question whether the duty to
arbitrate arose as a term of an implied-in-fact CBA between Luden's
and the Union in light of the facts before us, we need to consult
the federal common law of CBAs. Section 301 of the LMRA, as Litton
stated, "authorizes federal courts to fashion a body of federal law
for the enforcement of [CBAs]." 111 S. Ct. at 2223 (quoting Textile
Workers Union v. Lincoln Mills of Ala.,
353 U.S. 448, 451,
77 S. Ct.
912, 915 (1957)) (emphasis and internal quotation omitted). As to
the substantive content of this federal common law, traditional
rules of contract interpretation provide a plenteous resource, but
will be mined only when compatible with federal labor policy. See
Local 174, Teamsters v. Lucas Flour Co.,
369 U.S. 95, 102-04, 82 S.
Ct. 571, 576-77 (1962); John Wiley & Sons, Inc. v. Livingston,
376
U.S. 543, 548,
84 S. Ct. 909, 914 (1964) ("State law may be utilized
so far as it is of aid in the development of correct principles or
their application in a particular case, but the law which ultimately
results is federal." (citation omitted)); Mack Trucks, 856 F.2d at
591-92 (holding that we look to "federal labor relations law, not
state contract law," to ascertain if a contract has formed, as "[i]n
the field of labor relations, the technical rules of contract law do
not determine the existence of an agreement"). Implied-in-fact CBAs
encompassing arbitration clauses, then, will have their surest
16
footing if both "ordinary" contract law and federal labor policy
sanction them.0
General contract law recognizes and enforces
"implied-in-fact" contracts. Section 4 of the Restatement (Second)
of Contracts, which employs the rubric "inferred from fact" to
discuss that brand of contract, provides that "[a] promise may be
stated in words either oral or written, or may be inferred wholly or
partly from conduct." Cf. REST.2D CONTRACTS § 19(1) (1981) ("The
manifestation of assent may be made wholly or partly . . . by . . .
acts or by failure to act."). Comment a to that section explains:
Contracts are often spoken of as express or implied. The
distinction involves, however, no difference in legal
effect, but lies merely in the mode of manifesting assent.
Just as assent may be manifested by words or other
conduct, sometimes including silence, so intention to make
a promise may be manifested in language or by implication
from other circumstances, including course of dealing or
usage of trade or course of performance.
REST.2D CONTRACTS § 4 cmt. a (1981). Professor Corbin, whose treatise
ventures nearer the precise issue we confront, writes that "if the
parties at the expiration of a written contract of employment,
0
Of course, an implied-in-fact CBA suffices to confer jurisdiction
under § 301 because it preserves and advances the statutory
objectives of labor peace and stability. See, e.g., International
Bhd. of Boilermakers -- Local 1603 v. Transue & Williams Corp., 879
F.2d 1388, 1392 (6th Cir. 1989) (holding that jurisdiction under §
301 does not require an actual written CBA because the Supreme Court
has broadly interpreted "`contract' to include any `agreement
between employers and labor organizations significant to the mainte-
nance of labor peace between them'" (quoting Retail Clerks Int'l
Ass'n, Local Unions Nos. 128 & 633 v. Lion Dry Goods,
369 U.S. 17,
28,
82 S. Ct. 541, 548 (1962))); United Paperworkers Int'l Union v.
International Paper Co.,
920 F.2d 852, 859 (11th Cir. 1991) (same);
Smith v. Kerrville Bus Co.,
709 F.2d 914, 920 (5th Cir. 1983)
(holding that §301 "must be broadly construed to encompass any
agreement, written or unwritten, formal or informal, which functions
to preserve harmonious relations between labor and management"),
appeal after remand,
799 F.2d 1079 (5th Cir. 1986); cf. Garrett R.R.
Car & Equip., Inc. v. NLRB,
683 F.2d 731, 737 (3d Cir. 1982).
17
continue as before without a new express agreement, it will be
inferred that the service and the compensation are the same as
before." 2 CORBIN ON CONTRACTS § 504, at 717 (1963). Other treatises
issue comparable pronouncements.0
Thus general principles of contract law teach us
that when a contract lapses but the parties to the contract continue
to act as if they are performing under a contract, the material
terms of the prior contract will survive intact unless either one of
the parties clearly and manifestly indicates, through words or
through conduct, that it no longer wishes to continue to be bound
thereby, or both parties mutually intend that the terms not survive.
The rationale for this rule is straightforward: when parties to an
ongoing, voluntary, contractual relationship, especially a
relationship which by its nature generally implies that some
mutually agreed upon rules govern its configuration, continue to
behave as before upon the lapse of the contract, barring contrary
indications, each party may generally reasonably expect that the
0
See 2 WILLISTON ON CONTRACTS § 6.42, at 452 (4th ed. Lord ed. 1990)
("When a contract of employment for a definite time has been made,
and the employee's services are continued after the expiration of
the definite time without objection, the inference is ordinarily
that the parties have assented to another contract for a term of the
same length with the same salary and conditions of service
. . . ."); CHARLES G. BAKALY, JR. & JOEL M. GROSSMAN, MODERN LAW OF EMPLOYMENT
CONTRACTS §§3.1.1, 3.1.4 (1985 Supp.) ("In the employment context, an
implied offer may arise when an employer has previously retained an
employee. The employer may ask the former employee to perform a new
job without mentioning that the employee will receive compensation
for it. . . . If a reasonable person would have inferred from the
employer's request that he intended to pay for the services, then
the employer's request will be deemed an offer.") ("[A]cceptance
need not always be formal or explicit, but may be implied from the
circumstances. For instance, an employee may accept an offer of
employment merely by showing up for work, even if he has never
formally notified the employer of his acceptance."); see also 1
WILLISTON ON CONTRACTS §§ 1:6, 4:2, 4:20; 2 id. §6:42.
18
lapsed agreement's terms remain the ones by which the other party
will abide.
While this rationale loses some of its cogency in
situations where the contract lapses because one party terminates it
(rather than because the contract expires of its own force), it does
retain most of its persuasiveness because the party's motive for
terminating the contract in a continuing relationship will often be
to change just a few of its terms. In the present context of labor
arbitration clauses, for example, we think that a party's termina-
tion of a CBA generally does not signify that the party wishes to
abandon arbitration in the future, for the parties' "interest in
obtaining a prompt and inexpensive resolution of their disputes by
an expert tribunal," Nolde, 430 U.S. at 254, 97 S. Ct. at 1073, does
not dissipate the moment the contract lapses.0 Indeed, although we
have not been made privy either to the Union's or to Luden's motives
in moving to terminate the 1988 CBA, neither evidence nor reason
suggests that discontent with the arbitration procedure was a
contributing factor.
Consistent with that observation is the fact that
neither party clearly notified the other -- whether by an express0 or
0
We say "generally" because the events leading up to the termination
of a CBA may reveal clearly to the other party that the terminating
party is fed up with the arbitration provision and that this
dissatisfaction is the basis for its termination or otherwise
clearly transmit an intent to be rid of the arbitration provision.
In context of this opinion, clear cases of implicit repudiation nor-
mally fall within the domain of what we denote as disavowals or
repudiations.
0
On this basis it is apparent that, even if the retroactive wage
provision were subject to inclusion in an implied-in-fact CBA, it
would not be encompassed by the implied-in-fact CBA which arose
between Luden's and the Union. Luden's in its May 3, 1991 letter to
the Union specifically explained that, if the Union rejected its
comprehensive offer (which the Union proceeded to do), Luden's would
19
clearly implicit disavowal, see supra at Error! Bookmark not
defined. n.Error! Bookmark not defined., or by clearly incompatible
conduct, see infra at Error! Bookmark not defined. n.Error! Bookmark
not defined. -- that it was unilaterally revoking or repudiating the
arbitration provision so well established between the parties. Cf.
International Bhd. of Boilermakers -- Local 1603 v. Transue &
Williams Corp.,
879 F.2d 1388, 1390, 1393 (6th Cir. 1989)
(emphasizing that the employer did not explicitly inform the union
it wished "to revoke the parties' agreement as to the grievance
procedures" and that there was "no evidence to indicate a dispute
over the terms of the grievance and arbitration provisions" before
finding an implied-in-fact contract arose after expiration of the
parties' CBA); United Paperworkers Int'l Union Local No. 200 v.
Wells Badger Indus., Inc.,
835 F.2d 701, 702-04 (7th Cir. 1987)
(same). In fact, Luden's November 7, 1992 memorialization of the
parties' near "agreement" contains a grievance and arbitration
procedure virtually identical to the one the 1988 CBA contained. In
short, the record does not reveal that the parties disagreed about
the continuation of the arbitration procedure during the interim
bargaining period in any meaningful way or that both parties
make "no retroactive payments." Letter from Donald P. Watson, Plant
Manger, to Frances Ryan, Business Representative (May 3, 1991).
While we do not consider the effect of this statement on Luden's
obligation to pay retroactive wages, it being an issue reserved for
an arbitrator to rule on, we think the letter clearly and expressly
evinces Luden's intention not to be bound by that clause in the
implied-in-fact CBA.
We briefly note, too, that Luden's letter went on
to state that, even if the Union rejected its offer, "we agree to
continue normal operations," id., a fact which in a case (unlike
this one) presenting conflicting evidence of the parties' intent
would be of relevance to the survival of the arbitration clause in
an implied-in-fact CBA.
20
actually intended for the arbitration clause not to endure, the
occurrence of either of which would have excluded that term from the
implied-in-fact CBA, but instead indicates that Luden's kept the
doors to its business open, invited its employees to enter, and
conducted business as usual.
In context of these facts, we think that the
Union's membership was working under the reasonable presumption that
it was entitled to arbitrate grievances rather than be forced to
turn to the less efficient and more expensive mechanism of
litigating them. The employer's uninterrupted fidelity to the
arbitration provision stood as the implied consideration for the
employees' continued diligent and loyal service. Even had Luden's
entertained a subjective desire to end its obligation to arbitrate
grievances, since the record does not show the Union to have shared
that desire, the objective terms of the implied-in-fact CBA
controlling the parties' relationship would not have changed. See
Mack Trucks, 856 F.2d at 592 ("The parties' objective intent to
create a contract is relevant -- not their subjective beliefs.").
Had Luden's demonstrably disavowed that provision, the union
employees could have consciously chosen whether or not to continue
working diligently for their employer (that is, they could have
elected, based on their employer's decision to refuse arbitration,
whether to quit, strike, engage in a boycott, work slow-down, or
work stoppage, or to continue to execute their job responsibilities
faithfully).0 But Luden's did not do so, and its employees were thus
0
We cannot provide a recipe for conduct which suffices to preclude
the formation or annul the existence of an implied-in-fact
arbitration provision, and leave that question for later devel-
opment. We can provide some guidance now, though. Since the
21
deprived of the potential to make an informed choice. Throughout
the relevant period, Luden's reaped benefits from its union
employees' loyal service, and now it must accept the consequences.0
peaceful continuation of the contractual relationship is the linch-
pin of our decision, we note that resort to ultimate economic
weapons (either a lock-out or a strike) would usually manifest an
intent to repudiate the arbitration provision of the implied-in-fact
CBA. Needless to say, the quid pro quo for arbitration clauses is
typically a promise not to strike or lock-out. See United Steelwor-
kers v. American Mfg. Co., 363 U.S. 564, 567,
80 S. Ct. 1343, 1346
(1960) (stating that a no-strike clause is the quid pro quo for a
grievance clause); Indiana & Mich. Elec. Co.,
284 N.L.R.B. 53, 58
(1987) ("an agreement to arbitrate is a product of the parties'
mutual consent to relinquish economic weapons, such as strikes or
lockouts, otherwise available under the [National Labor Relations]
Act to resolve disputes"); Hilton-Davis Chem. Co., 185 N.L.R.B. 241,
242 (1970) (same); cf. International Bhd. of Teamsters, Local Union
1199 v. Pepsi-Cola Gen. Bottlers, Inc.,
958 F.2d 1331, 1335 (6th
Cir. 1992) (holding that while "[t]he existence of a labor contract
may be shown by conduct manifesting an intention to abide by agreed-
upon terms," the fact that the union called a strike after the
employer implemented its final pre-impasse offer "demonstrates that
[the union] did not believe that an implied agreement incorporating
all the undisputed terms of the old [CBA] existed"); International
Union, United Mine Workers v. Big Horn Coal Co.,
916 F.2d 1499, 1502
(10th Cir. 1990) (holding that the union's strike after the employer
instituted its final offer showed an implicit "rejection of the
employer's offer"), cert. denied,
112 S. Ct. 1172 (1992); Transue &
Williams
Corp., 879 F.2d at 1394 (highlighting the fact that "[a]t
all relevant times [after the expiration of the CBA], the parties
refused to marshal economic weapons and adhered to the grievance and
arbitration provisions of their contract"). Accordingly, such
conduct would probably send a clear message that the acting party no
longer wishes to be bound by an implied-in-fact arbitration provi-
sion. Cf. Carpenters S. Cal. Admin. Corp. v. J.L.M. Constr. Co.,
809 F.2d 594, 598 (9th Cir. 1987) ("[A]n employer can repudiate [an
agreement] . . . by engaging in conduct so overtly inconsistent with
contractual obligations that it is sufficient to put the union on
notice of the employer's intent to repudiate."), vacated and reh'g
granted, 840 F.2d 723 (9th Cir. 1988), vacated as moot,
872 F.2d 930
(9th Cir. 1989).
0
Luden's asserts that its May 3, 1991 letter "constituted an `express
indication' of its intention to abrogate all contractual terms."
Suppl. Br. of Appellee at 16. We are unpersuaded, however, not only
because the contractual employment relationship continued, but
because we do not believe that Luden's genuinely wished to abrogate,
for example, its employee's obligations to clean and maintain their
uniforms, to work specified shifts, or to notify security of
22
Having looked only to ordinary principles of
contract interpretation, we are inclined at this juncture to
recognize an implied-in-fact CBA incorporating the arbitration
provision from a lapsed CBA. We cannot do so, however, unless an
implied-in-fact CBA incorporating a duty to arbitrate is also
compatible with federal labor policy. We think that it is.
As a general matter, implied-in-fact CBAs are
compatible with federal labor law and advance the goals of federal
labor policy. We have intimated that an employer and a union may
adopt an enforceable labor contract without reducing the agreement
to writing, and that what really is crucial is "conduct manifesting
an intent to be bound by agreed-upon terms." Mack Trucks, 856 F.2d
at 592; cf. John Wiley &
Sons, 376 U.S. at 551, 84 S. Ct. at 915.
In this result we find ourselves sharing company with many courts of
appeals who have concluded that a union may (impliedly) accept a
tardinesses or absences, or the Union's obligation to submit copies
of notices to it for inspection before posting them on the company
bulletin board, all of which were part of the 1988 CBA. Indeed, for
all we can tell, Luden's expected its employees to continue abiding
by the gamut of rules of employment which Luden's had imposed prior
to its termination of the 1988 CBA. It is precisely the ambiguity
and unfairness resulting from a selective and sub rosa continuation
of only those contractual arrangements which in hindsight are
beneficial to one party, a selectivity which will consistently breed
discontent and disharmony, that the implied-in-fact contract theory
helps eject from the labor arena.
This discussion sheds some light on a critical
dissimilarity between arbitration provisions and many other terms of
agreement between parties to a CBA. For many terms and conditions
of employment, it is patently obvious if either party elects to
reject it. For example, had the employees been dissatisfied with
their obligation to wear uniforms, they would have shown up for work
in regular street clothes, and Luden's would immediately have known
of its employees' intent not to abide by that expired condition of
employment. Not so with an arbitration provision, whose subjective
unilateral rejection will not be apparent until a dispute erupts
unless either party clearly and objectively expresses or indicates
its views on the matter.
23
"unilateral offer" made when an employer implements its final offer
after reaching a bargaining impasse by the ordinary act of entering
the employer's open doors, a view with which we now concur.0
0
See Cumberland Typographical Union No. 244 v. Times & Alleganian
Co., 943 F.2d 401, 405 (4th Cir. 1991); United Paperworkers Int'l
Union v. International Paper Co.,
920 F.2d 852, 854, 855, 858 (11th
Cir. 1991); International Union, United Mine Workers v. Big Horn
Coal Co.,
916 F.2d 1499, 1502 (10th Cir. 1990), cert. denied, 112 S.
Ct. 1172 (1992); Transue & Williams
Corp., 879 F.2d at 1393, 1392;
Bobbie Brooks, Inc. v. International Ladies' Garment Workers Union,
835 F.2d 1164, 1168 (6th Cir. 1984); United Paperworkers Int'l
Union, 835 F.2d at 704; Capitol-Husting Co. v. NLRB,
671 F.2d 237,
243 (7th Cir. 1982); Maxwell Macmillan Co. v. District 65, UAW,
790
F. Supp. 484, 485-86 (S.D.N.Y. 1992); cf. Chicago Typographical
Union No. 16 v. Chicago Sun-Times, Inc.,
935 F.2d 1501, 1510 (7th
Cir. 1991) (contrasting the view that an employer's unilateral
implementation of its final offer cannot give rise to a contract
because the offer is "unilateral; the whole point is that the
employer is implementing an offer that the union has not accepted"
with the view that "the union might accept the offer, arbitration
clause and all, by conduct rather than by express words," but
refusing to pick sides (emphasis in original)); Chauffeurs, Team-
sters & Helpers, Local Union 238 v. C.R.S.T., Inc.,
795 F.2d 1400,
1402, 1404 (8th Cir. 1986) (en banc) (holding that an employer's
past refusal to arbitrate grievances under unilaterally instituted
terms and conditions of employment as well as its implementation of
a new grievance procedure limited to only one specific type of
dispute manifested an objective intent by the employer not to be
bound by the expired agreement's arbitration provision), cert.
denied,
479 U.S. 1007,
107 S. Ct. 647 (1986); Taft Broadcasting Co.,
WDAF AM-FM-TV v. NLRB,
441 F.2d 1382, 1384-85 (8th Cir. 1971)
(holding that a letter by the employer telling the union it would
comply with a draft agreement gave rise to an interim agreement to
abide by the draft agreement when the union continued to work); see
also Intermountain Rural Elec. Ass'n v. NLRB,
984 F.2d 1562, 1568
(10th Cir. 1993) ("[A]n uninterrupted and accepted custom [estab-
lished during the life-span of an expired CBA] may become an implied
term and condition of employment by mutual consent of the parties.
Once an implied term is established, a unilateral change regarding
the term is unlawful." (citation omitted)); Franklin Elec. Co. v.
International Union, UAW, 886 F.2d 188, 192 (8th Cir. 1989) (holding
in context of an employer's voluntary submission to an arbitrator
for the arbitrator to decide the arbitrability of a dispute that
"[c]onsent to arbitrate may be implied from the parties' conduct");
Smith v. Kerrville Bus Co.,
709 F.2d 914, 920 (5th Cir. 1983)
(holding that an employees' manual may become an implied term of a
CBA if accepted by both parties and "significant to the maintenance
of labor peace"); 1 WILLISTON ON CONTRACTS § 4:20, at 473-75 (4th ed.
24
Similarly, the employer may make an (implied) offer simply by
leaving the shop doors open for its unionized employees,0 especially
when there has been sixty days notice of intent to terminate prior
to the termination of the CBA and the employer is at liberty to keep
its doors shut, see 29 U.S.C.A. § 158(d)(4) (1973) (prohibiting
lock-outs unless 60 days notice of termination was provided and the
CBA has expired).
Turning now specifically to arbitration clauses, we
think that federal labor policy condones their incorporation into an
Lord ed. 1990). But see United Food & Commercial Workers Int'l
Union Local 7 v. Gold Star Sausage Co., 897 F.2d 1022, 1024, 1026
(10th Cir. 1990).
0
See NLRB v. Haberman Constr. Co.,
641 F.2d 351, 355-57 (5th Cir.
1981) (en banc) (affirming the Board's finding that "the Company
manifested an intent to abide by the [national] contract," although
it was not a signatory thereto, "by enjoying its benefits and
abiding by its provisions," and thereupon concluding that the
company was bound by the terms of the national contract) ("It is
well settled that a union and employer's adoption of a labor con-
tract is not dependent on the reduction to writing of their inten-
tion to be bound. Instead, what is required is conduct manifesting
an intention to abide by the terms of an agreement." (footnote and
citations omitted)); BAKALY & GROSSMAN, MODERN LAW OF CONTRACTS, supra, §
3.1.1 at 22 ("In the employment context, an implied offer may arise
when an employer has previously retained an employee. The employer
may ask the former employee to perform a new job without mentioning
that the employee will receive compensation for it. . . . If a
reasonable person would have inferred from the employer's request
that he intended to pay for the services, then the employer's
request will be deemed an offer."); 1 HOWARD A. SPECTER & MATTHEW W.
FINKIN, INDIVIDUAL EMPLOYMENT LAW AND LITIGATION §§ 1.01, 1.02 (1989) ("[An
employment contract] may be expressed in words or arise by
implication from the conduct of the parties.") ("[A]n offer may be
implied from the employer's actions or practices.") ("Acceptance [of
an employment contract] may be made orally, in writing, or by
commencement or continuing performance."); I FARNSWORTH ON CONTRACTS
§3.15a, at 242 (1990) ("occasionally both the employer's offer and
the employee's acceptance are implied-in-fact from their conduct"
(citing, inter alia, Novosel v. Nationwide Ins. Co., 721 F.2d 894,
902-03 (predicting Pennsylvania law regarding the creation of an
implied contractual "just cause" provision), reh'g denied,
721 F.2d
903 (3d Cir. 1983)))).
25
implied-in-fact CBA.0 First, federal labor policy, insofar as it is
solicitous of peaceful labor relations, favors the existence of
CBAs, and we will generally apply contract law liberally in order to
recognize a CBA which lessens strife and fosters congenial relations
between employees and management. See John Wiley & Sons, Inc. v.
Livingston, 376 U.S. at 550, 84 S. Ct. at 914-15 ("[A]lthough the
duty to arbitrate . . . must be founded on a contract, the
impressive policy considerations favoring arbitration are not wholly
overborne by the fact that [the employer] did not sign the contract
being construed."); Eastern Air Lines, Inc. v. Air Line Pilots
Ass'n, Int'l, 861 F.2d 1546, 1550 (11th Cir. 1988); see also Smith
0
The general contract treatises maintain that if an employment
contract for a fixed term expires and the parties continue their
relationship, "another contract by implication of fact would arise
for another similar period." See 1 WILLISTON ON CONTRACTS § 39, at 121
(3d ed. 1959) (emphasis supplied); accord 1 WILLISTON ON CONTRACTS §
4:20, at 456 (4th ed. Lord ed. 1990); 1 CORBIN ON CONTRACTS § 18, at 43.
But federal labor law does not support that specific result; rather,
under the circumstances of this case, federal labor policy just
favors the formation of an implied-in-fact CBA terminable at will by
either party. Incorporating the duration provision of the lapsed CBA
would in most if not all instances substantially interfere with
collective bargaining because, depending on what other terms are
incorporated into the implied-in-fact CBA, it might leave nothing to
bargain over. Perhaps more problematically, when an arbitration
clause in particular is incorporated into the implied-in-fact CBA,
inclusion therein also of a duration clause could prevent the
parties from marshaling their economic weapons during negotiations
"if no agreement can [otherwise] be achieved." Hilton-Davis Chem.
Co.,
185 N.L.R.B. 241, 242 (1970). Yet the Board impliedly found
such a result contrary to federal labor policy when it ruled that
arbitration procedures are exempted from the general prohibition
against pre-impasse unilateral changes to terms subject to mandatory
collective bargaining. See ibid.; cf. Indiana & Mich. Elec. Co.,
284 N.L.R.B. 53, 55-56, 58 (1987). Allowing either party to
terminate the arbitration provision of the implied-in-fact CBA at
will, of course, eliminates any conflict with federal labor policy,
because resort to ultimate economic weapons alone will generally
signal an intent to terminate the implied-in-fact arbitration
provision.
See supra at Error! Bookmark not defined. n.Error!
Bookmark not defined..
26
v. Evening News Ass'n, 371 U.S. 195, 199,
83 S. Ct. 267, 270 (1962)
("[Section] 301 is not to be given a narrow reading.").
Second, to effectuate the federal labor policy
favoring the resolution of employee grievances by "a method agreed
upon by the parties," 29 U.S.C.A. § 173(d) (1978), the Supreme Court
has established a strong presumption favoring arbitrability of
disputes between parties who include arbitration provisions in their
CBAs. The Supreme Court explained the basis for this policy in
Nolde:
The labor arbitrator is usually chosen because of the
parties' confidence in his knowledge of the common law of
the shop [-- the practices of the industry and the shop
--] and their trust in his personal judgment to bring to
bear considerations which are not expressed in the
contract as criteria for judgment. . . . The ablest judge
cannot be expected to bring the same experience and
competence to bear upon the determination of a grievance,
because he cannot be similarly informed.
Nolde, 430 U.S. at 253, 97 S. Ct. at 1073 (quoting United
Steelworkers v. Warrior & Gulf Nav. Co.,
363 U.S. 574, 582, 80 S.
Ct. 1347, 1352-53 (1960)).0
0
See AT & T
Technologies, 475 U.S. at 650, 106 S. Ct. at 1419
(observing that "[t]h[e] presumption of arbitrability for labor
disputes recognizes the greater institutional competence of arbitra-
tors in interpreting collective-bargaining agreements, `furthers the
national labor policy of peaceful resolution of labor disputes and
thus best accords with the parties' presumed objectives in pursuing
collective bargaining'" (quoting Schneider Moving & Storage Co. v.
Robbins,
466 U.S. 364, 371-72,
104 S. Ct. 1844, 1849-50 (1984));
CLARENCE M. UPDEGRAFF, ARBITRATION AND LABOR RELATIONS 21-22 (1978) (enumerat-
ing the advantages of arbitration over litigation); FRANK EKLOURI &
EDNA ASPER ELKOURI, HOW ARBITRATION WORKS 7-9 (4th ed. 1985) (same). See
generally Archibald Cox, The Legal Nature of Collective Bargaining
Agreements, 57 MICH. L. REV. 1 (1958). For a practiced labor
arbitrator versed in the singular, byzantine universe of labor
relations, it is quite likely that the retroactivity provision at
issue here has a relatively clear meaning because it evinces a
recognizable intent. Arbitrators are accustomed to settling disputes
"that require for their solution knowledge of the custom and
practices of a particular factory or of a particular industry as
27
Applying that policy, the Supreme Court in Nolde
held that "`[a]n order to arbitrate [a] particular grievance 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.'" Nolde, 430 U.S. at 255, 97 S. Ct. at 1074 (quoting
United Steelworkers v. Warrior & Gulf Nav. Co.,
363 U.S. 574, 582-
83,
80 S. Ct. 1347, 1353 (1960)); see Lukens Steel Co. v. United
Steelworkers,
989 F.2d 668, 672-73 (3d Cir. 1993). Even "where the
dispute is over a provision of the expired agreement, the
presumptions favoring arbitrability must be negated expressly or by
clear implication."
Nolde, 430 U.S. at 255, 97 S. Ct. at 1074.
Litton reiterated the fact that the duty to arbitrate can outlive
the CBA and reaffirmed the centrality of the pro-arbitration policy
to federal labor relations law. See
Litton, 111 S. Ct. at 2226.0
reflected in particular agreements." United Steelworkers v.
Enterprise Wheel & Car Corp.,
363 U.S. 593, 596,
80 S. Ct. 1358,
1360 (1960). Not so for a federal court of general (albeit limited)
jurisdiction steeped (at best) in the world of ordinary contract
interpretation, a fact which Luden's may be banking on. Besides the
other obvious benefits in prompt and inexpensive dispositions, it is
in part the arbitrator's capacity -- a capacity derived from
extensive experience, specialization, and submersion in the "common
law of the shop" -- to locate and discern meaning and intent where
judges can unearth only ambiguity and doubt that renders arbitration
such a popular dispute resolution technique in CBAs.
0
The salience of an arbitration provision to both parties as well as
its weighty stature under federal labor law is further demonstrated
by its membership in the set of mandatory subjects of collective
bargaining. See, e.g., United Elec. Workers v. NLRB,
409 F.2d 150,
156 n.9 (D.C. Cir. 1969); NLRB v. Davison,
318 F.2d 550, 557 (4th
Cir. 1963) (dicta); NLRB v. Montgomery Ward & Co.,
133 F.2d 676, 685
(9th Cir. 1943); NLRB v. Boss Mfg. Co.,
118 F.2d 187, 189 (7th Cir.
1941); Indiana & Mich. Elec. Co.,
284 N.L.R.B. 53, 58 (1987); see
also NLRB v. United Nuclear Corp.,
381 F.2d 972, 976-978 (10th Cir.
1967) (grievance procedure); Industrial Union of Marine &
Shipbuilding Workers v. NLRB,
320 F.2d 615, 620 (3rd Cir. 1963)
(same), cert. denied,
375 U.S. 984,
84 S. Ct. 516 (1964).
28
Luden's objects, however, that our recognition that
an implied-in-fact CBA arises despite an employer's announcement of
its intent to terminate a CBA would render the announcement nugatory
and "would altogether eliminate the significance of contract
expiration or termination." Suppl. Br. of Appellee at 12-13. We
disagree. First, termination of the CBA will effectively terminate
those terms with respect to which both parties intend that result,
and furthermore termination still empowers either party to repudiate
the implied-in-fact terms unilaterally at any time afterwards
without providing the notice required were the CBA still in effect.
See supra at Error! Bookmark not defined. n.Error! Bookmark not
defined.. We only hold that the termination of a CBA, standing
alone, does not objectively manifest the clear, particularized
intent to disavow its terms needed to prevent certain of the lapsed
CBA's provisions from being instantaneously revived as part of an
implied-in-fact CBA.
Either party may renege on the term at any time by
clearly disavowing -- whether by word, pen, or deed -- the arbitra-
tion provision of the implied-in-fact CBA.0 Of course, repudiation
would affect only future disputes arising after such notice,
whenever it may come, and such a termination could certainly not
affect disputes involving pre-termination facts, accrued rights, or
persisting rights (as measured with respect to the lapsed or the
0
Obviously either party may prevent the implied-in-fact terms from
arising altogether by repudiating them concurrently with, or in some
instances before, see supra at Error! Bookmark not defined. n.Error!
Bookmark not defined., its termination of the CBA. Just as
obviously, a term will never arise as part of an implied-in-fact CBA
if both parties consciously do not intend for that term to survive
the lapse of the CBA.
29
implied-in-fact CBA).0 That is to say, an implied-in-fact arbitration
provision is in its legal effect indistinguishable from that of the
standard written and undersigned one.
Second, a lapsed CBA opens the door for collective
bargaining and allows the employer, once it has in good faith
bargained to impasse with the union, to institute unilateral changes
(in conformity with prior offers) to those terms and conditions of
employment subject to the Katz prohibition against unilateral
changes. See NLRB v. Katz, 369 U.S. 736, 745,
82 S. Ct. 1107, 1112-
13 (1962).0 Finally, the term of the implied-in-fact CBA we
0
In Litton the Supreme Court enumerated three types of disputes
which, albeit flaring up post-expiration, could "arise under the
[lapsed] contract:"
A postexpiration grievance can be said to arise under the
contract only [(1)] where it involves facts and occurrenc-
es that arose before expiration, [(2)] where an action
taken after expiration infringes a right that accrued or
vested under the agreement, or [(3)] where, under normal
principles of contract interpretation, the disputed con-
tractual right survives expiration of the remainder of the
agreement.
111 S. Ct. at 2225 (the "pre-expiration facts," "accrued rights,"
and "persisting rights" prongs, respectively).
There is no need to consider whether any of these
three Litton prongs applies to the facts of this case because our
conclusion that the duty to arbitrate never came to rest clearly
compels the result that the dispute must proceed to arbitration.
The parties' duty to arbitrate was never discharged because during
the interim period between July 2 and November 4, 1991 it survived
in the implied-in-fact CBA and thereafter as part of the near
"agreement." The three Litton prongs, of course, apply only to
disputes surfacing after the parties have been relieved of their
contractual duty to arbitrate; while the duty to arbitrate is
operative, the strong presumption favoring arbitration governs. See
Nolde, 430 U.S. at 255, 97 S. Ct. at 1074, quoted supra at 28.
0
Section 8(a)(5) of the National Labor Relations Act, 29 U.S.C.A. §
158(a)(5) (1973), imposed on Luden's the statutory duty to continue
operating according to certain existing terms and conditions of
employment until the parties reached a good faith bargaining
impasse, see
Katz, 369 U.S. at 741-43, 82 S. Ct. at 1110-11, even
30
recognize here is restricted to an arbitration provision; it may
well be that the implied-in-fact CBA does not incorporate all, or
any other, of the terms of the lapsed CBA. Cf. General Warehousemen
& Employees Union Local No. 636 v. J.C. Penney Co., 484 F. Supp.
130, 134 (W.D. Pa. 1980) ("Even though employees continue to work
under the compensation arrangements of an old contract, the court
cannot imply that the entire contract was extended." (emphasis
supplied)). We cannot foretell what other, if any, terms of the
lapsed agreement would similarly generally survive. But see supra at
Error! Bookmark not defined. n.Error! Bookmark not defined.. But
since it is the case that the implied-in-fact CBA will incorporate
at most those terms of the lapsed CBA which have not clearly been
disavowed in some way and whose inclusion is compatible with federal
labor policy, we can mention some potential considerations.
We do not doubt that the particulars of federal
labor law affect whether or not a party may have a reasonable
expectation that the other party's continued adherence to a
provision of a lapsed CBA means that the other party has consented
to the continuation of the provision. Although arbitration is a
subject of mandatory bargaining, the Supreme Court has deferred to
the Board's ruling that a party may effect unilateral changes to an
arbitration provision when the CBA lapses. See Litton, 111 S. Ct.
at 2221-22; cf. Indiana & Mich. Elec. Co.,
284 N.L.R.B. 53, 58
(1987). We have said above with respect to arbitration provisions
that, as both parties are free to modify the arbitration clause
unilaterally after the lapse of the CBA, the absence of contrary
where, as here, the parties were negotiating a new agreement after
the expiration of the previous one, see
Litton, 111 S. Ct. at 2221.
31
indications generally gives rise to a reasonable presumption that
the silent party has agreed to continue in effect the arbitration
provision of the lapsed CBA. See supra at 21.
On this basis, arbitration differs markedly from
most other mandatory topics of collective bargaining, the unilateral
modification of which would run afoul of the National Labor
Relations Act ("NLRA") and amount to an unfair labor practice. As
to those terms and conditions of employment, one party's failure
clearly to disavow them is logically attributable to its statutory
duty preventing it from doing so and requiring it instead to
maintain the status quo. Thus, the other party can not generally
reasonably presume that silence and maintenance of the status quo is
due to the first party's voluntary election not to institute unila-
teral changes.0
The Board's primary jurisdiction over unfair labor
practices also counsels against the inclusion in an implied-in-fact
CBA of a term or condition which is a memberof the group of items
subject to mandatory bargaining but not subject to a party's
unilateral modification. See 29 U.S.C.A. § 160(a) (1973); e.g.,
Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 83,
102 S. Ct. 851, 859
(1982) ("The Board is vested with primary jurisdiction to determine
what is or is not an unfair labor practice. As a general rule,
0
Thus although we acknowledge and appreciate the dissent's concern
that in some circumstances "the employer's post-termination conduct
may have been based on its understanding of its statutory
obligations under the [NLRA]," infra at X (dissenting opinion at 2),
because arbitration clauses have definitively been excluded from the
ban against unilateral modification of mandatory subjects of bar-
gaining, we do not agree that this potential ambiguity is realized
when the term incorporated into the implied-in-fact CBA is an
arbitration clause.
32
federal courts do not have jurisdiction [under § 301] over activity
which is arguably subject to § 7 or § 8 of the [NLRA], and they must
defer to the exclusive competence of the . . . Board." (internal
quotations omitted)). But since under the NLRA it is not an unfair
labor practice to abandon an arbitration provision unilaterally
after the lapse of a CBA without first having bargained to impasse,
our recognition of an implied-in-fact CBA incorporating the lapsed
CBA's arbitration provision does not undermine the NLRB's primary
jurisdiction over unfair labor practices.
Moreover, despite the fact that the Union likely
could have brought its grievance before the Board packaged as an
unfair labor practice charge,0 our recognition of an implied-in-fact
arbitration provision respects the Board's turf, because it
0
There can be little doubt but that retroactive wages fall within the
scope of what §§ 8(a)(5), (d), and 9(a) mandate the parties must
bargain over, as "[t]he categories `rates of pay' and `wages' have
been given a broad construction by the Board and the courts to cover
most of the common forms of compensation for labor performed, as
well as most types of agreements to protect standards of
compensation." I CHARLES J. MORRIS, THE DEVELOPING LABOR LAW 864 (3d ed.
Patrick Hardin ed. 1992); see 29 U.S.C.A. §§ 158(a)(5), (d), 159(a)
(1973); Capitol Roof & Supply Co., 217 N.L.R.B. 1004 (1975); cf.
Local Union No. 47, Int'l Bhd. of Elec. Workers v. NLRB,
927 F.2d
635, 640-41 (D.C. Cir. 1991). Consequently, Luden's was under the
statutory duty not to modify the wages its employees were earning on
July 2, 1991 (when Luden's termination of the 1988 CBA became effec-
tive) unilaterally, unless, of course, it first bargained with the
Union to impasse (or the Union consented). This probably did not
happen prior to Luden's November 4 institution of the new wage
scale. It therefore would appear that the Union could have had the
NLRB interpret Article XXIX of the 1988 CBA to determine what the
wages were on July 2, but in fact it did not ask the NLRB to do so
(although it did unsuccessfully bring an unfair labor practices
charge against Luden's on other counts,
see supra at Error! Bookmark
not defined. n.Error! Bookmark not defined.). See, e.g., Derrico v.
Sheehan Emergency Hosp.,
844 F.2d 22, 26 (2d Cir. 1988) ("The terms
of an expired agreement . . . retain legal significance because they
define the status quo" from which neither party may depart before
bargaining to impasse.).
33
implicates primarily the interpretation and application of the 1988
and the implied-in-fact CBAs, over which § 301 grants federal courts
jurisdiction, not the interpretation and application of the NLRA,
over which the Board maintains special expertise. See, e.g., Smith
v. Evening News Ass'n, 371 U.S. 195, 197-98,
83 S. Ct. 267, 268-69
(1962) (holding courts and the Board exercise concurrent jurisdic-
tion over breaches of CBAs that amount to an unfair labor practice).
In appreciation of this distinction, the Board itself has adopted a
system of prearbital deferral which exalts the parties' agreed-upon
method to resolve a dispute above Board proceedings. See Collyer
Insulated Wire,
192 N.L.R.B. 837 (1971). See generally II CHARLES J.
MORRIS, THE DEVELOPING LABOR LAW 1016-49 (3d ed. Patrick Hardin ed. 1992).
We highlight these observations because the same might not be true
for subjects of mandatory bargaining whose unilateral modification
does constitute an unfair labor practice.0
Luden's also contends that an implied-in-fact
contract approach is incompatible with Litton's concentration on the
contractual moorings of the duty to arbitrate. Suppl. Br. of
Appellee at 8-13. In Litton the Court announced firmly that under
the NLRA "arbitration is a matter of consent, and . . . will not be
imposed upon parties beyond the scope of their agreement." 111 S.
Ct. at 2222. Our analysis complies with that principle, contrary to
Luden's supposition, for we recognize that it generally is the
parties' actual (albeit implied-in-fact) agreement to continue in
effect the arbitration term of the lapsed CBA absent contrary
0
We deem it notable also that our decision will not threaten to
inundate the federal courts with § 301 suits which should by statu-
tory design proceed as unfair labor practice charges before the
Board.
34
indications.0 Because the duty to arbitrate we recognize is rooted
0
The dissent suggests that we may be employing a quasi-contract
rather than an implied-in-fact contract approach. See infra at X
(dissenting opinion at 3-4). As the preceding discussion should
make clear, such is not the case. Our approach only recognizes that
the parties, by not clearly disavowing or otherwise repudiating an
arbitration clause, objectively manifested their intent to continue
the arbitration clause in effect; either party is entitled, however,
to reject the arbitration provision at any time. See supra at 29.
The same would not be true were we to tread down
the quasi-contract path, as such a "contract" is not predicated "on
the apparent intention of the parties to undertake the performances
in question." REST.2D CONTRACTS § 4 cmt. b (1981); accord 1 CORBIN ON
CONTRACTS § 19, at 44 (defining a quasi-contract as "an obligation
that is created by the law without regard to expression of assent by
either words or acts"); 1 WILLISTON ON CONTRACTS § 1:6, at 25 (4th ed.
Lord ed. 1990) ("Quasi contractual obligations are imposed by the
courts for the purpose of bringing about a just result without
reference to the intention of the parties."). While the boundary
line between contract and quasi contract may be "wavering and
blurred," 1 CORBIN ON CONTRACTS § 19, at 44, the difference is real.
Instead, our conclusion is based on the "objective"
in lieu of the "subjective" theory of contract formation. The
subjective theory has been roundly rejected by courts, commentators,
and, of greatest moment, by this Court, in favor of the objective
one. See Mack Trucks, 856 F.2d at 592 (holding in context of a CBA
that "[t]he parties' objective intent to create a contract is
relevant -- not their subjective beliefs"); e.g., Warehousemen's
Union Local No. 206 v. Continental Can Co.,
821 F.2d 1348, 1350-51
(9th Cir. 1987); REST.2D CONTRACTS § 19(3) (1981) ("The conduct of a
party may manifest assent even though he does not in fact assent.
In such cases a resulting contract may be voidable because fraud,
duress, mistake, or other invalidating cause."); id. § 2 cmt. b
("The phrase `manifestation of intent' adopts an external or
objective standard for interpreting conduct; it means the external
expression of intention as distinguished from undisclosed
intention."); I FARNSWORTH ON CONTRACTS § 3.6 (1990); 1 WILLISTON ON
CONTRACTS § 3:5 (4th ed. Lord ed. 1990); Randy E. Barnett, A Consent
Theory of Contract, 86 COLUM. L. REV. 269 (1986); Clare Dalton, An
Essay in the Deconstruction of Contract Doctrine, 94 YALE L.J. 997,
1042-45 (1985). A famed, if hyperbolic, depiction of the objective
theory was made by Judge Learned Hand:
A contract has, strictly speaking, nothing to do with the
personal, or individual, intent of the parties. A con-
tract is an obligation attached by the mere force of law
to certain acts of the parties, usually words, which
ordinarily accompany and represent a known intent. If,
however, it were proved by twenty bishops that either
party, when he used the words, intended something else
35
in an implied-in-fact CBA, a contractual agreement which like any
other is predicated on the parties' manifest intent and not on any
statutory or legal duty, cf. Indiana & Mich. Elec. Co., 284 N.L.R.B.
at 57, our decision does not run afoul of Litton's teachings that a
court must decide whether an issue is arbitrable, and that it must
do so on the basis of the parties' contractual consent thereto, see
Litton, 111 S. Ct. at 2222, 2226, 2227.
IV. CONCLUSION
For the foregoing reasons, we hold that in a
continuing employment relationship an arbitration clause may survive
than the usual meaning which the law imposes upon them, he
would still be held, unless there was some mutual mistake,
or something else of that sort.
Hotchkiss v. National City Bank of N.Y., 200 F. 287, 293 (S.D.N.Y.
1911), aff'd,
201 F. 664 (2d Cir. 1912), aff'd,
231 U.S. 50, 34 S.
Ct. 20 and
231 U.S. 60,
34 S. Ct. 22 (1913).
The dissent correctly points out that the record
does not disclose the parties' subjective understanding of the
implied-in-fact CBA. See infra at X (dissenting opinion at 2).
Since we are proceeding under an objective theory of contract
formation, and since the record does not disclose that both parties
in fact intended for the arbitration clause to cease existing, the
natural result is to give effect to the parties' objective mani-
festations of intent. The formation of the implied-in-fact CBA
would not be defeated just because one party was not sure whether a
right under a term of the the lapsed CBA continued in effect;
parties often have doubts about the precise contours of their rights
and obligations, even under well-drafted written agreements, and
such uncertainty does not negative the right. Assuming an objective
manifestation of intent by both parties necessary for the formation
of an implied-in-fact CBA, a term may be included as a part of the
CBA unless both parties subjectively intended that it not be.
The burden to come forward with evidence that no
implied-in-fact CBA arose because both parties intended it not to
arise naturally rests on the party attempting to avoid being bound
by its objective manifestations. The same holds true for any
particular term which the implied-in-fact CBA would otherwise
incorporate.
36
the expiration or termination of a CBA intact as a term of a new,
implied-in-fact CBA unless (i) both parties in fact intend the term
not to survive, or (ii) under the totality of the circumstances
either party to the lapsed CBA objectively manifests to the other a
particularized intent, be it expressed verbally or non-verbally, to
disavow or repudiate that term. This result injects substantially
more stability and certainty into labor law, and promotes the
primary statutory objectives of peaceful and stable labor relations
underpinning the NLRA, at the slight cost of a notice requirement
forcing a party to make clear its wish no longer to abide by the
arbitration clause.
In the circumstances of this case, where neither
party in any palpable way challenged the continued vitality of the
arbitration provision in particular (as opposed to the CBA as a
whole) before the dispute erupted, and where no evidence shows that
both the parties in fact intended their obligation to arbitrate
grievances to be discharged, we think that the parties' duty to
arbitrate grievances according to the terms of their 1988 CBA was
never totally discharged. In other words, Luden's general,
undifferentiated termination of the 1988 CBA effective July 2, 1992
merely transmuted the parties' duty to arbitrate into a term of an
implied-in-fact CBA which the parties formed on that date.
Accordingly, we will vacate the order and
injunction entered by the district court, and will remand with
instructions to direct the parties to proceed to arbitrate the
retroactive wage grievance. The parties shall bear their own costs.
37
38
Luden's Inc. v. Bakery, Confectionery and Tobacco Worker's
International Local Union 6
No. 92-1982
ALITO, Circuit Judge, dissenting.
I would affirm the decision of the district court.
For essentially the reasons explained by that court (see Luden's
Inc. v. Local Union No. 6, 805 F. Supp. 313, 323-27 (E.D. Pa.
1992)), I would hold that the union's grievance concerning the
retroactivity of the proposed wage increase was not subject to the
arbitration provision of the terminated 1988 collective bargaining
agreement.
I would not reach the theory on which the court's
decision is based, i.e., that the parties, upon the termination of
the 1988 agreement, entered into an implied-in-fact agreement
containing an arbitration requirement similar to that in the 1988
agreement. The union did not advance this theory in the district
court or in its brief in our court. Indeed, the union does not
appear to have relied on the theory of an implied agreement until
after this court requested the parties to submit post-argument
memoranda addressing this subject. Under these circumstances, I do
not think that it is necessary or appropriate to reach this theory,
which may have considerable precedential importance.
While I am not willing, without the benefit of full
briefing and argument, to express any conclusive views concerning
39
the court's theory, I will say that I have reservations about the
correctness of the court's analysis. At the outset, I am uncertain
that the parties reached any implied-in-fact agreement
after the 1988 agreement was terminated. I agree that a party's
conduct following the expiration of a contract may manifest assent
to be bound by a new, tacit contract, but I am not sure that the
conduct of Luden's in this case manifested such assent. After all,
Luden's took pains to terminate the 1988 collective bargaining
agreement. While it appears to be true that "Luden's kept the doors
to its business open, invited its employees to enter, and conducted
business as usual" (Maj. typescript 19), I am not sure that this
conduct should be interpreted as a manifestation of assent to a new,
tacit contract, particularly since federal labor law placed
limitations on Luden's ability to engage in a different course of
conduct. See Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 198-
99 (1991) (concerning an employer's unilateral changes in terms and
conditions of employment); Stokely-Van Camp, Inc.,
186 N.L.R.B. 440
(1970) (concerning pre-impasse lock-outs).
Even assuming for the sake of argument that the
parties entered into some type of implied agreement, I am not
certain that this agreement also contained an arbitration
requirement. The rules set out in section 201 of the Restatement
(Second) of Contracts seem potentially applicable. That provision
states:
(1) Where the parties have attached the same meaning to a
promise or agreement or a term thereof, it is interpreted
in accordance with that meaning.
(2) Where the parties have attached different meanings to
a promise or agreement or a term thereof, it is
40
interpreted in accordance with the meaning attached by one
of them if at the time the agreement was made
(a) that party did not know of any different meaning
attached by the other, and the other knew the meaning
attached by the first party; or
(b) that party had no reason to know of any different
meaning attached by the other, and the other had reason to
know the meaning attached by the first party.
(3) Except as stated in this Section, neither party is
bound by the meaning attached by the other, even though
the result may be a failure of mutual assent.
Under the these rules, the meaning attached by each
of the parties is important, but in this case the record does not
disclose what meaning either party attached to the implied agreement
when it was formed. In particular, the record does not contain any
stipulation or affidavit indicating that either party believed that
the implied contract contained an arbitration requirement.
Consequently, I find it difficult to see how the court can hold at
this juncture that the implied contract included such a requirement.
On the assumption that the issue of an implied-in-fact contract is
properly before us, I am inclined to think that the most that the
court could do is to reverse the award of summary judgment for
Luden's and remand for further proceedings (and perhaps for a trial)
on the question whether the implied-in-fact contract contained an
arbitration agreement.
Because the court does not seem to be concerned
about the meaning that the parties attached to their putative
agreement, the court's decision does not appear to be based on a
contract that is implied in fact, that is, "an agreement . . .
founded upon a meeting of minds, which, although not embodied in an
2
express contract, is inferred, as a fact, from conduct of the
parties showing, in the light of the surrounding circumstances,
their tacit understanding." Baltimore & Ohio R.R. v. United States,
261 U.S. 592, 597 (1923). Rather, the court's decision seems to be
based on "an agreement `implied in law,' more aptly termed a
constructive or quasi contract, where, by fiction of law, a promise
is imputed to perform a legal duty."
Id. The court summarizes its
holding as follows:
[W]e hold that in a continuing employment relationship an
arbitration clause may survive the expiration or
termination of a CBA intact as a term of a new, implied-
in-fact CBA unless either or both parties in fact intend
the term not to survive, or under the totality of the
circumstances either party to the lapsed CBA objectively
manifests to the other a particularized intent, be it
expressed verbally or non-verbally, to disavow or
repudiate that term.
Maj. typescript at 34. This flat rule is suggestive of an
obligation that arises by operation of law, not one based on an
actual, albeit tacit, agreement between two particular parties.
If this interpretation of the court's decision is
correct, I have serious reservations whether that decision is
consistent with the Supreme Court's refusal in Litton, 501 U.S. at
200-01, to recognize a legal duty to arbitrate disputes arising
after a collective bargaining agreement expires. In Litton, the
Court "reaffirm[ed] . . . that under the NLRA arbitration is a
matter of consent, and that it will not be imposed upon parties
beyond the scope of their agreement."
Id. at 201.
For these reasons, I am not willing at this point
to endorse the court's analysis, and I therefore respectfully
dissent.
3
