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Koven v. Local Union 5767

decided: May 5, 1967.

L. O. KOVEN & BROTHER, INC., A NEW JERSEY CORPORATION, APPELLEE
v.
LOCAL UNION 5767, UNITED STEELWORKERS OF AMERICA, AFL-CIO, APPELLANT



Forman, Freedman and Seitz, Circuit Judges.

Author: Forman

FORMAN, Circuit Judge.

This case involves the question of an employer's duty to arbitrate a grievance where the underlying claim is alleged to have been discharged by an order of confirmation entered in a proceeding under Chapter XI of the Bankruptcy Act*fn1 and a general release executed by a union. It is here on appeal from an order of the United States District Court for the District of New Jersey, declaring that the union's claim was discharged by operation of law and permanently enjoining the union from submitting the claim to arbitration.

I -- Background

The plaintiff-appellee, L. O. Koven & Brother, Inc. (hereinafter Koven) is the successor by merger to Koven Fabricators, Inc., which entered into a collective bargaining agreement (hereinafter Agreement) on or about June 17, 1960 with the defendant-appellant, Local Union No. 5767, United Steelworkers of America, AFL-CIO (hereinafter Union). The Agreement was to expire by its own terms at midnight, June 17, 1963, but it was extended to midnight June 17, 1965 by a subsequent agreement reached on June 17, 1963. It is unquestioned that Koven was bound by this contract of its predecessor.

On September 4, 1963, Koven filed an original petition for arrangement under Chapter XI of the Bankruptcy Act*fn2 in the United States District Court for the District of New Jersey. On the same day Bertram J. Latzer was appointed Receiver of Koven and authorized to conduct its business. Koven subsequently proposed a plan of arrangement in which it offered to pay, inter alia, "all priority claims and administration expenses in cash upon . . . confirmation . . . or upon such terms or conditions and with such security and on such deferred payments as will be agreed upon [with] this class of creditors. . . ." On January 10, 1964 the Referee entered an order confirming the plan of arrangement as amended and revesting Koven with its assets.

On or about January 8, 1964, the Union filed eight proofs of "priority claims" against Koven in the arrangement proceedings, numbered 453 to 460 by the Referee in Bankruptcy, for various wage-associated amounts due under the Agreement,*fn3 but not including any claim for vacation pay earned since June 1, 1963.

The Union and Koven, on April 30, 1964, entered into and filed with the Referee in Bankruptcy a "Stipulation of Settlement," whereby it was agreed that "Claims No. 453 through 460, inclusive . . . shall be settled and compromised by the payment to said Union of the sum of $7,000.00" to be made by Koven's receiver from the funds then in his hands. This "Stipulation" also provided that upon receipt of said sum, the Union would "execute and deliver a general release" to Koven and its receiver.

On May 18, 1964, the Union in consideration of the sum of $7,000 executed a general release to Koven and its receiver, expressly stating that it was made "in accordance with a Stipulation dated April 30, 1964 and Order of the same date based on said Stipulation, filed in a matter entitled 'In the Matter of L. O. Koven & Brother, Inc. . . . Debtor,' pending in the United States District Court for the District of New Jersey." The release purported to discharge Koven and its receiver:

" their successors and assigns, of and from all manner of action and actions, . . . suits, debts, dues, sums of money, accounts, . . . contracts, controversies, agreements, promises, . . . claims and demands whatsoever in law or in equity, which . . . it ever had, now has or which [it] and assigns hereafter can, shall, or may have, for, upon or by reason of any matter, . . . from the beginning of the world to the day of the date of these Presents, . . ."

specifically excluding, however, an unfair labor practice claim then pending before the National Labor Relations Board, which is not a part of the present suit. The unitalicized portion of the foregoing quotation was in the standardized language of a printed form of release.

Article XVI of the labor Agreement provided in part for the establishment of vacation periods or the equivalent in pay for employees who "have worked one thousand (1000) hours or more during the period from June 1 to June 1 of the preceding year, . . ."*fn4

Article XII of the Agreement set forth a grievance procedure applicable to "any difference . . . as to the meaning, compliance with, or application of the provisions of this agreement," the last phase of which required the grievance to be "determined by an arbitrator to be selected by the parties" under the rules of and from a list provided by the American Arbitration Association. A clause added by the June 17, 1963 extension agreement stated that "the decision of the arbitrator shall be final and binding upon the parties."

On or before June 15, 1964, the Union filed with Koven a "Grievance Report" claiming that Koven was in violation of the collective bargaining agreement by its failure to pay vacation benefits to those employees so entitled. Koven and the Union met pursuant to the latter's request on June 29, 1964 to discuss the grievance. At that time, Koven declined to honor the claim on the ground that it was barred by the order of confirmation and general release. On the following day, the Union wrote to the ...


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