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").1 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 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.

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 p 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'etre for this litigation.

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.2 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 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 p 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 p 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 p 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 and [to] continue operating under the terms of the current contracts." Stip. of Facts p 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 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 p 6 & Exh. G. The Union's negotiating committee promptly rejected Watson's offer. Stip. of Facts p 7.

Over the course of the next few months, the parties continued their negotiations, each submitting various offers or counteroffers. Stip. of Facts pp 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.3 Stip. of Facts p 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.4 Despite Luden's efforts, though, the membership rejected each of Luden's offers which the Union submitted to it for approval (specifically, the offers of May 16 and June 20, 1991). Stip. of Facts pp 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 retroactivity of wages. Stip. of Facts p 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 p 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 membership's vote. Stip. of Facts p 21.

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 p 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 350 n. 2) and requested AAA to provide a list of arbitrators to resolve the conflict over the retroactivity provision of Article XXIX. Stip. of Facts p 24. AAA reserved September 15 and 16, 1992 for the arbitration of the dispute. Stip. of Facts p 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.5 Moreover, Luden's prayed for an injunction against the arbitration proceeding which the Union had scheduled with AAA. Stip. of Facts pp 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 pp 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, 115 L. Ed. 2d 177 (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 p 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;6 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 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, 51 L. Ed. 2d 300 (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.7 See infra at 361 n. 24. 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, 501 U.S. at 209-10, 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. Secs. 2201-02 (1982 & Supp.1993), pursuant to Sec. 301(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C.A. Sec. 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, 103 L. Ed. 2d 585 (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. Sec. 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, 112 L. Ed. 2d 1100 (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, 50 L. Ed. 2d 748 (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

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.8 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, 501 U.S. at 193-95, 20507, 111 S. Ct. at 2219, 2225; id. at 211-14, 111 S.Ct. at 2228-29 (Marshall, J., dissenting); id. at 218-19, 111 S.Ct. 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, 501 U.S. at 209-10, 111 S.Ct. at 2227.9

As far as we can tell, other courts have uniformly resolved this tension by reading Litton as having impliedly overruled the portion of Nolde holding that a court answering the arbitrability question is not to look to the merits of the underlying claim.10 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.11 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 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

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]." 501 U.S. at 202, 111 S.Ct. at 2223 (quoting Textile Workers Union v. Lincoln Mills of Ala., 353 U.S. 448, 451, 77 S. Ct. 912, 915, 1 L. Ed. 2d 972 (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, 7 L. Ed. 2d 593 (1962); John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 548, 84 S. Ct. 909, 914, 11 L. Ed. 2d 898 (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 footing if both "ordinary" contract law and federal labor policy sanction them.12

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 Sec. 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 Sec. 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, 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 Sec. 504, at 717 (1963). Other treatises issue comparable pronouncements.13

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 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 termination 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.14 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 express15 or clearly implicit disavowal, see supra at 356 n. 14, or by clearly incompatible conduct, see infra at 357 n. 16--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 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).16 But Luden's did not do so, and its employees were thus 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.17

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 "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.18 Similarly, the employer may make an (implied) offer simply by leaving the shop doors open for its unionized employees,19 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. Sec. 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 implied-in-fact CBA.20 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 v. Evening News Ass'n, 371 U.S. 195, 199, 83 S. Ct. 267, 270, 9 L. Ed. 2d 246 (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. Sec. 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, 4 L. Ed. 2d 1409 (1960)).21

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, 4 L. Ed. 2d 1409 (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, 501 U.S. at 207-08, 111 S.Ct. at 2226.22

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 359 n. 20. 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 arbitration provision of the implied-in-fact CBA.23 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-expiration facts, accrued rights, or persisting rights (as measured with respect to the lapsed or the implied-in-fact CBA).24 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, 8 L. Ed. 2d 230 (1962).25 Finally, the term of the implied-in-fact CBA we 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 359 n. 20. 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, 501 U.S. at 197-201, 111 S.Ct. at 2221-22; supra at 359 n. 20; 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 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 356-57.

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 unilateral changes.26

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 member of the group of items subject to mandatory bargaining but not subject to a party's unilateral modification. See 29 U.S.C.A. Sec. 160(a) (1973); e.g., Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 83, 102 S. Ct. 851, 859, 70 L. Ed. 2d 833 (1982) ("The Board is vested with primary jurisdiction to determine what is or is not an unfair labor practice. As a general rule, federal courts do not have jurisdiction [under Sec. 301] over activity which is arguably subject to Sec. 7 or Sec. 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,27 our recognition of an implied-in-fact arbitration provision respects the Board's turf, because it implicates primarily the interpretation and application of the 1988 and the implied-in-fact CBAs, over which Sec. 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, 9 L. Ed. 2d 246 (1962) (holding courts and the Board exercise concurrent jurisdiction over breaches of CBAs that amount to an unfair labor practice). In appreciation of this distinction, the Board itself has adopted a system of prearbitral 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.28

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." 501 U.S. at 201, 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 indications.29 Because the duty to arbitrate we recognize is rooted 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, 501 U.S. at 199-201, 207, 209, 111 S. Ct. at 2222, 2226, 2227.

For the foregoing reasons, we 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 (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.

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 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. op. at 357), 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, 111 S. Ct. 2215, 2221, 115 L. Ed. 2d 177 (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 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 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 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, 43 S. Ct. 425, 426-27, 67 L. Ed. 816 (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 (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.

Maj. op. at 364. 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, 111 S.Ct. at 2222, 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, 111 S. Ct. at 2222.

For these reasons, I am not willing at this point to endorse the court's analysis, and I therefore respectfully dissent.

Present: SLOVITER, Chief Judge, BECKER, STAPLETON, MANSMANN, GREENBERG, HUTCHINSON, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, LEWIS and McKEE, Circuit Judges.

SUR PETITION FOR PANEL REHEARING WITH SUGGESTION FOR REHEARING IN BANC

July 20, 1994.

The petition for rehearing filed by Appellee having been submitted to the judges who participated in the decision of this Court and to all the other available circuit judges in active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is DENIED.