UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
September 2, 1982
ADAMS, ROBERT J., BUCKLEY, MERREDNA T., CALLOWAY, WILLIAM J., CONNNELL, JAMES JOSEPH, COSELLA, ANTHONY MICHAEL, COOK, JOHN R., CROWLEY, ANNE, ON BEHALF OF THE ESTATE OF WILLIAM J. CROWLEY, DECEASED, CULLEN, KATHRYN M., DICARLO, ANGELINA A., DELGRAMMASTRO, ROCCO, DIEHL, KATHLEEN, AS EXECUTRIX OF THE ESTATE OF JOHN M. DILLENSCHNEIDER, DECEASED, DOMAROTSKY, WANDA A., DREGAR, FRANK A., EBY, ROBERT J., FAY, AMANDA, FLINN, MARTHA, FLOOD, THOMAS E., FRAZIER, CORNELIUS, JR., GERACE, MARY, GUOKAS, ROSE T., HABINA, MARY F., HICKMAN, JAMES, JONES, ROBERT H., KELLY, PEARL, KLEIN, JOSEPH J., LINDER, ELIZABETH D., MARUCCI, AUGUSTINE, MCGOWAN, JAMES, MCNALLY, ELIZABETH A., MORRIS, JOHN, MUMBOWER, JOHN, MYERS, ANNA M., MYERS, AGNES M., NEFF, JOHN A., PAPALA, GRACE MARY, PETRICCIONE, ANNA, PHILLIPS, RICHARD M., RALLS, RUSSELL, RAYSICK, FLORENCE, RONAU, DANIEL J., RUSSELL, BERNARD C., RUSSELL, JOHN V., RUSSELL, MARGARET, SANTOLERI, ANTHONY, STANOWITCH, WALTER J., STEIN, MADELINE T., STEINMETZ, JOHN F., STILLWELL, BEATRICE L., SMITH, MARIE, SWALLOW, NANCY, WATTS, WILLIAM J., WEISS, ANTOINETTE W., WILLIAMS, CLIFFORD W., WILLIAMS, ROBERT, UMSTETTER, FRANK, VENTI, MARIE, WOLLNER, JAMES C., BARLOW, BRIDGET
GOULD, INC. AND FIRST TRUST COMPANY OF ST. PAUL, MINNESOTA, IDIVIDUALLY AND AS TRUSTEE OF THE GOULD INC. PENSION TRUST FOR HOURLY EMPLOYEES AND PENSION BENEFIT GUARANTY CORPORATION GOULD, INC., AND FIRST TRUST COMPANY OF ST. PAUL, MINNESOTA APPELLANTS
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
Before: ALDISERT and WEIS, Circuit Judges, and RE, Chief Judge.*fn*
Opinion OF THE COURT
ALDISERT, Circuit Judge.
The sole question presented for resolution in this interlocutory appeal certified under 28 U.S.C. § 1292(b) is whether certain individual employees, plaintiffs below, are bound by the results of an arbitration between their employer and their union and thereby barred from bringing their complaint in federal court. The district court determined they were not and denied defendants' motion for summary judgment. Defendants obtained the district court's certification of the question, however, and we allowed the appeal. We reverse.
In 1962, appellant Gould, Inc. purchased the Wilkening Manufacturing Co. piston ring manufacturing plant, whose employees were represented by Local 416 of the United Auto Workers. The union and Gould entered into successive collective bargaining agreements as well as a pension agreement whose trust assets are administered by appellant First Trust Co. In 1973, because of its "antiquated plant, . . . failing product line, intense competition, and a declining market share," Gould announced its intention to terminate operations at the plant and to release all of the employees.Gould and UAW representatives met to discuss the phase-out of operations, including the ramifications for the pension plan. Determining that the plan's assets were actuarially insufficient to provide full benefit payments to all claimants and retirees, the union demanded that Gould fully fund the plan. When Gould refused, the union filed a grievance under Article XVII ("Grievance Procedure") of the collective bargaining agreement, even though Article XII ("Pension Plan") of the same agreement established procedures for the resolution of pension disputes.
Unable to resolve the dispute, Gould and the union submitted it to a single arbitrator pursuant to the final step of Article XVII. The union again demanded that Gould fully fund the plan or, alternatively, fund it on a sound actuarial basis. Gould argued that it had met its contractual obligations. Professor John Perry Horlacher, Chairman of the University of Pennsylvania Department of Political Science and former Vice President of the National Academy of (Labor) Arbitrators, served as arbitrator and found that Gould had not properly funded the plan. On November 24, 1975, he issued an award which in part ordered the following:
5. The Company is directed to make further contributions to the fund, using to calculate them the assumptions that were in effect at the end of 1968.These shall be in addition to the contributions already made.
6. These additional contributions shall be for the period when the changed assumptions were made effective after 1968 until the Plan terminated.
7. In the event of disagreement concerning the amount of these additional contributions, the Company's and the Union's actuaries shall negotiate the sums. If they cannot agree, their contentions in writing shall be forwarded to me and I will make the determination.
8. The money put into the Plan's fund by direction of this award shall be distributed to the eligible employees in accordance with Section 7.2 of the Plan contract as modified by any side agreement in effect at the time of the Olna's termination.
Although the arbitrator rejected the union's demand for full funding, he required Gould to recalculate its contributions so that the benefits could be increased in line with the pension agreement's asset allocation provisions. The union, by its counsel and actuary, reviewed the new computations and agreed that they complied with the arbitrator's award. The record does not indicate that this post-arbitration activity was anything more than what a Gould official characterized as "a question of implementing the award and . . . working out numbers."*fn1 The union also released any employee claims against Gould arising from the arbitration.
Appellees, active employees whose pension benefits had vested,*fn2 contended that although some additional money was placed in the trust fund, the dispute was resolved so as to give them no benefits while giving retired employees full benefits. They brought an action in the district court claiming that Gould had breached its contractual obligation under the pension plan and had fraudulently induced the plaintiffs to continue their employment, and that First Trust had breached its fiduciary duty in refusing to pay pension benefits when due. Defendants, citing the finality provision of the Article XVII grievance procedure, moved for summary judgment on the ground that the plaintiffs were bound by the arbitrator's award. Basing its decision on Hauser v. Farwell, Ozmun, Kirk & Co., 299 F. Supp. 387 (D.Minn. 1969), the district court denied the motion. The court was of the view that in submitting the dispute to arbitration, Gould and the union had attempted to "bargain away" rights that were vested under the plan:
Accordingly, the court finds that the union and Gould impermissibly engaged in a negotiation endeavor which resulted in the divestiture of the plaintiff's pension rights. As a consequence, because the plaintiffs did not consent, the settlement and release are inapplicable as a bar to the present action.
Adams v. Gould, Inc., 93 Lab. Cas. (CCH) P13,472, No. 78-2365, mem. op. at 11-12 (E.D. Pa. May 12, 1981). In response to defendants' subsequent motion, however, the district court certified for appeal the question now before this court: "Whether Plaintiffs are bound by the results of the arbitration between Gould and their collective bargaining representative and thereby barred from this suit."
Because the district court relied on Hauser v. Farwell, Ozmun, Kirk & Co., we begin our discussion with that case. We are persuaded that its holding and reasoning are irrelevant to the case before us. The union and the company in Hauser entered into negotiations that detracted from vested rights of certain employees; under those circumstances the court state that it was bound by Elgin, Joliet & Eastern Railway Co. v. Burley, 325 U.S. 711, 89 L. Ed. 1886, 65 S. Ct. 1282 (1945), aff'd, 327 U.S. 661, 90 L. Ed. 928, 66 S. Ct. 721 (1946), and held that although a union may bargain as to prospective matters, it cannot bargain away accrued or vested rights of its members. Hauser involved no arbitration proceedings; indeed, the court noted that the "collective bargaining contract containing grievance procedures had become defunct." 299 F. Supp. at 392.
In the case at bar, however, Gould and the union did not bargain or negotiate; rather, they referred the matter to arbitration pursuant to a viable collective bargaining agreement. Apparently the district court mistakenly equated arbitration -- a method of adjudication -- with negotiation and bargaining. Appellees contend that the final agreement was a product of negotiation independent of the arbitration. Although the union and Gould held further discussions following the arbitration, as their written agreement demonstrates, they merely implemented the arbitrator's award in all its sophisticated ramifications, performing the calculations he had ordered. Paragraph 7 of the award shows that the arbitrator clearly contemplated that, because of the nature of actuarial assumptions, the parties would be likely to differ about the details of the funding, and therefore he directed them to resolve those differences between themselves, if possible.
Moreover, we believe that in its application of Hauser, the district court embraced the fallacy of petitio principii by assuming the conclusion that sum certain financial rights under the pension plan already had vested in the plaintiffs. The clear words of the pension plan militate against this assumption,*fn3 for its schedule of priorities for distribution upon plan termination provides that "to the extent that such assets are sufficient," they are to be distributed first to retirees, then to participants with vested interests "in full if the remaining assets be sufficient, otherwise on a proportional basis." Thus, the agreement was drafted in comtemplation of a circumstance where there might not be enough money to go around, and the employees' "vested" right was only a right to participate in whatever distribution there might be. See United Steelworkers v. Crane Co., 605 F.2d 714 (3d Cir. 1979).
In sum, neither the arbitration nor the post-award agreement can be said to represent independent negotiation to disturb rights that were already vested;*fn4 accordingly, we conclude that the district court's reliance on Hauser was error. We now turn to the intertwined questions of whether the issue was appropriate for arbitration under the collective bargaining agreement and, if so, whether the parties used the proper arbitration provision.
If there is any expression of public policy pertaining to labor-management relations that has emerged loud and clear in today's jurisprudence it is the national policy favoring arbitration of labor disputes. The governing principles are familiar. Federal labor law imposes on the parties to a collective bargaining agreement no inherent duty to arbitrate; instead, arbitration is a matter of contract, and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. The arbitrability of a given dispute is to be determined by the court on the basis of its interpretation of the agreement. In this, the court must be mindful of the federal labor policy encouraging arbitration of labor disputes. The Supreme Court has established a strong presumption favoring arbitrability:
[T]o be consistent with congressional policy in favor of settlement of disputes by the oarties through the machinery of arbitration, . . . . [a]n 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.
United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S. Ct. 1347, 1352, 4 L. Ed. 2d 1409 (1960). See cases collected in Eberle Tanning Co. v. Section 63L, 682 F.2d 430 (3d Cir. 1982). Consistent with this policy, the Supreme Court has held that arbitration awards bind not only the union, but also all employees represented by the union. United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 62 N.4, 67 L. Ed. 2d 732, 101 S. Ct. 1559 (1981) ("AN arbitration award stands between the employee and any relief which may be awarded against the company"). See also Panza v. Armco Steel Corp., 316 F.2d 69 (3d Cir.) (per curiam), cert. denied, 375 U.S. 897, 11 L. Ed. 2d 125, 84 S. Ct. 174 (1963).
We have no difficulty applying these precepts to the collective bargaining agreement before us. Although, as appellees stress, Article XVII appears to focus on shop-related disputes, it is not limited to those issues.*fn5 Indeed, the opening sentence of Article XVII demonstrates the parties' understanding that the grievance procedure would be used to resolve "any questions that may arise in the minds of employees." Pension matters properly could be included among these questions, as the pension agreement is, by incorporation in Article XII, made part of the collective bargaining agreement. We are persuaded that the differing views in funding the plan were serious and resulted from varying but reasonable interpretations of Gould's contractual duties under the pension plan. The union argued that the pension agreement required either full funding or funding on a sound actuarial basis; Gould's response was based on section 5.3 of that same agreement:
Gould's board of directors shall determine the method by which the plan shall be funded and may change the method of funding from time to time. . . . [I]f each participating employer makes the contributions required by the computation of the actuary . . . the participating employer shall have no further responsibility for the payment of benefits provided by the plan. . . .
In our view the dispute between the UAW and Gould over this pension plan was a classic case for arbitration.
Nor can we agree with appellees that Gould and the union employed an inappropriate procedure.Appellees argue that the arbitration parties erred in using the agreement's general grievance procedure, that they should have presented the dispute to a three-person board for resolution under Article XII.*fn6 The crucial difference between the two procedures is that unlike Article XVII, Article XII has no provision that the board's determination will be final and binding.
We conclude that the union and Gould properly chose arbitration under Article XVII. The informal procedure outlined in Article XII deals with relatively simple issues, such as dates of individual service or matters realting to dates of indidual retirement. The very structure of the Article XII baord -- one employee, one management representative, and a third member to be chosen by the first two -- suggests that the parties to the agreement contemplated XII board -- one employee, one management representative, and a third member to be chosen by the first two -- suggests that the parties to the agreement contemplated that the three-person board would be required to resolve only uncomplicated issues concerning merely the application of the plan. By contrast, the dispute in this case centered on interpretation of basic provisions of the plan, required sophisticated actuarial computations, and concerned all of the covered employees. The particular credentials of the arbitrator chosen here -- a nationally known specialist who had to grapple with esoteric problems of pension plan funding -- is in itself a strong indication that the parties intended that the more formal arbitration provisions of the actuarial provisions of the collective bargaining agreement and the pension plan it incorporated.*fn7
Accordingly, we answer the certified question in the affirmative: the plaintiffs in the district court were bound by the results of the arbitration between Gould and their collective bargaining representatives and therefore barred from the action in district court.*fn8
The order of the district court will be reversed and the proceedings remanded with a direction to enter summary judgment in favor of the defendants.