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Controlled Sanitation Corp. v. District 128 of International Association of Machinists and Aerospace Workers

argued: June 23, 1975.


On Appeal from the United States District Court for the Middle District of Pennsylvania.

Biggs, Van Dusen and Rosenn, Circuit Judges. Rosenn, Circuit Judge, dissenting.

Author: Biggs


BIGGS, Circuit Judge.

On September 22, 1970, plaintiff-appellee, Controlled Sanitation Corporation (the Company) filed an amended complaint against District 128 and Lodge 2305 of the International Association of Machinists and Aerospace Workers, AFL-CIO, (the Unions), defendants-appellants, basing its suit on section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. The Company alleged that (1) a collective bargaining agreement existed between the Company and the Unions; (2) during its term on July 1, 1969 the Unions struck in violation of the no-strike clause contained in the agreement; and (3) as a result of the strike the Company "suffered the loss of its contract with the City of Scranton for the collection and disposal of refuse . . .. " The Company sought money damages for the alleged injury. The Unions denied that they had an agreement with the Company and asserted that if an agreement was found to exist all other issues presented were subject to determination by arbitration in accordance with the terms of that contract. A bifurcated jury trial ensued, and at the close of the first phase two questions were submitted to the jury, and were answered "Yes". Interrogatory No. 1 asked the following question: "Did the defendant unions agree to be bound by the provisions of the contract entered into by the City of Scranton and Controlled Sanitation, including the provisions of the Administrative Agreement [the collective bargaining agreement] which is a part of that contract?"*fn1 Appendix, p. 166.

At the second phase of the trial, devoted primarily to the issue of the amount of damages, the jury was instructed to determine the amount of damages, if any, which the Company suffered because of its loss of the contract. The jury assessed damages in favor of the Company in the sum of $208,000 and judgment was entered forthwith against the Unions in the sum indicated.*fn2 The Unions moved for a new trial, and in their brief in support of these motions*fn3 urged, among other things, that if there was found to be a contract, arbitration should be employed to determine the remaining issues.*fn4 On appeal, the Unions raise the arbitrability issue and acquiesce in the jury's determination that there was a collective bargaining agreement between the parties. Definitely, therefore, the issue of the existence or lack of existence of an agreement is not presented by this appeal.

Two issues are raised on this appeal, and both relate to the question of whether, once the existence of the contract was established, the proper forum for the resolution of this controversy lay in the judicial process or in arbitration. We are required, first, to determine whether the contract's arbitration and grievance procedures bound the Company to submit its claim for damages due to the strike of July, 1969 to arbitration. If they did, we must then confront the Company's contention that judicial proceedings were warranted because the Unions' conduct constituted a repudiation of the arbitration provisions. We find that the broad arbitration provisions of the contract encompassed this controversy and envisioned its submission to arbitration. Similarly, we believe the repudiation question is also subject to arbitration.


The contract contains a standard no-strike clause (Article XVI) and grievance and arbitration procedure. Section I of Article XIII reads: "For the purpose of this Agreement, the term 'Grievance' means any dispute between the Employer and the Union or between the Employer and any employee concerning the effect, interpretation, application, claim of breach or violation of this Agreement or any other dispute which may arise between the parties."

The procedure for handling grievances is detailed in Article XIII as follows: "Section 2. Any such grievance shall be settled in accordance with the following grievance procedure: A. The dispute or grievance shall be taken up by the Steward, the aggrieved employee and the foreman of the department involved within 24 hours of the occurrence of the alleged grievance. The foreman shall render a decision by the close of the working day if handed in before noon, otherwise by noon of the following day. B. If no satisfactory settlement is reached between the Steward, and the foreman, the grievance shall be reduced to writing. The Shop Committee shall then investigate, present and discuss such grievance with the designated Employer official, who shall render a decision within two (2) working days. C. If no satisfactory settlement is reached, the Shop Committee shall call in the Business Representative and/or Grand Lodge Representative of the International Association of Machinists and Aerospace Workers who shall meet with the designated Employer official and the Shop Committee. . . ."*fn5

The agreement provided for the resolution of any unresolved grievance by arbitration as follows: "In the event the grievance or dispute is settled, such settlement shall be reduced to writing and copies distributed to all persons involved. In the event the grievance or dispute is not settled in a manner satisfactory to the grieving party (Union or Employer), within five (5) days, the grieving party may proceed, as follows: a Board of Arbitration shall be selected and such Board shall consist of one (1) member selected by the Union and one (1) member selected by the Employer. In the event these two (2) members of the Board fail to agree upon the disposition of the grievance or dispute within five (5) working days after meeting for this purpose, then they shall attempt to select a third member who shall act as chairman. If the parties fail to agree upon the third member, they shall petition the Court of Common Pleas of Lackawanna County to provide or select a third member. The decision of the majority of the Board shall be final and binding upon the parties to this agreement and shall be complied with within five (5) days, longer if agreed to by the parties, after the decision has been reached. Each party to this agreement shall pay 50% of the cost of the third member." (emphasis added). Article XIII, Section 2(D).

Finally, the agreement provided that the grievance arbitration procedure provided would be the sole means for settling disputes (Article XIII, Section 6): "The grievance procedure as provided for herein shall constitute the sole and exclusive method of determination, decision, adjustment or settlement between the parties of any and all grievances as herein defined and the said grievance procedure provided herein shall constitute the sole and exclusive remedy to be utilized by the parties hereto for such determination, decision, adjustment, or settlement of any and all grievances and disputes as herein defined, whether or not either party to the contract considers the same as a material breach of the contract or otherwise." (emphasis added).


There are certain aspects of unfairness, we believe, in permitting the Unions to first deny - a vigorous denial which lasted for a period of approximately three and a half years - the existence of a valid contract for arbitration, and then when they have lost that point to permit them to assert that they are entitled to arbitration under the contract. We would have grave doubts about enforcing the arbitration proceeding if it were not for more important governing circumstances. First and most important are a series of decisions of the Supreme Court of the United States in which the Court has emphasized that arbitration of labor disputes is a federally favored policy under the Labor Management Relations Act, 29 U.S.C. § 141 et seq. Consequently, although the parties are bound to arbitrate only those disputes which they have agreed to arbitrate, all doubts or ambiguities should be resolved in favor of arbitration. In effect, there is a presumption in favor of arbitrability which should be dispelled only when the agreement explicitly exempts certain conduct from arbitration or when the terms of the agreement, read as a whole, clearly envision non-arbitrability. Typical of these decisions is United Steelworkers of America v. Warrior & Gulf Co., 363 U.S. 574, 581-585, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960), which stated: "Apart from matters that the parties specifically exclude, all of the questions on which the parties disagree must therefore come within the scope of the grievance and arbitration provisions of the collective agreement. . . . An order to arbitrate the 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. . . . In the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail, particularly where, as here, the exclusion clause is vague and the arbitration clause quite broad." (emphasis added).*fn6

Applying these precepts to the arbitration provisions of the agreement in this case, we must rule that the Company's damage claim for breach of the no-strike clause is a dispute susceptible to arbitration. We are aware, of course, that the Company contends that the agreement delineates a grievance procedure oriented solely to employee grievances. In so doing, it points to the procedures established in Article XIII, Section 2 (A), (B), and (C). In view of the language employed in the contract, however, we cannot accept this argument.

The grievance and arbitration provisions of this contract are unusually broad. Section 1 of Article XIII makes clear that a grievance includes a dispute between the employer and the union involving a claimed breach of contract. Most importantly, Section 2 (D) of that article specifically states that the employer may be the grieving party. A fair interpretation of the contract would then indicate that an employer - oriented grievance (i.e., an unsettled dispute) begins with the arbitration process or with Section 2 (C). Finally, Section 6 of Article XIII represents a strong statement evidencing the parties' intention that all disputes between the employer and the union, regardless of whether either party considers the dispute a material breach of contract, be subject to arbitration. Under these circumstances, the Company bound itself to arbitrate this damage claim.*fn7


We turn to a consideration of the Company's argument that the Unions repudiated the arbitration procedures, thereby permitting the Company to obtain judicial redress. There is an underlying and preliminary question here as to whether the alleged defense of repudiation is itself subject to arbitration, and the Unions urge us to hold that repudiation is an arbitrable question. This position, if valid, means that the district court, after finding the existence of a contract, should have required the parties to present to arbitration all other issues including repudiation itself. This is indeed a difficult question to answer and the law in respect to it is somewhat unclear.

We acknowledge that "the circumstances of the claimed repudiation are critically important" for they determine whether an arbiter or a court will resolve the underlying dispute. Drake Bakeries v. Bakery Workers, 370 U.S. 254, 262-263, 8 L. Ed. 2d 474, 82 S. Ct. 1346 (1962). In Drake Bakeries, the employer sued the union for damages resulting from an alleged one day strike. The union sought to stay the suit pending arbitration, but the employer opposed the stay arguing that the dispute was not arbitrable or, in the alternative, that the dispute was not arbitrable or, in the alternative, that the union had repudiated the arbitration provisions. The Supreme Court held that the district court had properly stayed the action pending completion of arbitration. In rejecting the repudiation argument, the Court quoted from 6 Corbin, Contracts § 1443 (1961 Supp., n. 34, pp. 192-193) which suggests that the issue of repudiation is one for judicial resolution.*fn8 370 U.S. at 263, n. 10. It then proceeded to rule that the union's actions did not excuse the employer from its duty to arbitrate. Implicitly, repudiation would appear a justiciable issue.*fn9

On the other hand, we must consider the effect of Operating Engineers Local 150 v. Flair Builders, Inc., 406 U.S. 487, 32 L. Ed. 2d 248, 92 S. Ct. 1710 (1972). In Flair, the Union brought an action seeking damages and injunctive relief from the Flair Corporation alleging breach of their collective bargaining agreement. In 1964 the Union had entered into an agreement with Flair, incorporating by reference the 1963 master agreement between the Union and several contracting associations. The Union and these associations in 1966 entered into a new master agreement requiring arbitration of "any difference . . . between the parties hereto which cannot be settled by their representatives within forty-eight hours of its occurrence." In 1968, four years having passed since the memorandum agreement was signed, a Union business agent found that four of Flair's employees were non-union and that their wages were unsatisfactory. Flair refused to recognize any obligation under the 1964 agreement. Subsequently, in November, 1968, the Union filed suit to compel arbitration according to the terms of the 1966 master agreement. After an evidentiary hearing, the District Court, in an unreported opinion, decided there was an enforceable agreement between the company and the Union during the period 1964-68, but that the Union was barred by laches. The Court of Appeals affirmed, Operating Engineers Local 150 v. Flair Builders, Inc., 440 F.2d 557 (7th Cir. 1971). The Supreme Court, however, reversed, holding as we read the opinion that the court's duty was limited to deciding whether the parties ...

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