Colfax Envelope Corp. v. Local No. 458-3M, Chicago Graphic Communications Intern. Union, AFL-CIO

• Citation: 20 F.3d 750
• Decision Date: 01 April 1994
• Docket Number: No. 93-3010,D,AFL-CI,93-3010
• Parties: 145 L.R.R.M. (BNA) 2974, 127 Lab.Cas. P 11,062 COLFAX ENVELOPE CORPORATION, Plaintiff-Appellant, v. LOCAL NO. 458-3M, CHICAGO GRAPHIC COMMUNICATIONS INTERNATIONAL UNION,efendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 750

20 F.3d 750

145 L.R.R.M. (BNA) 2974, 127 Lab.Cas. P 11,062

COLFAX ENVELOPE CORPORATION, Plaintiff-Appellant, v. LOCAL NO. 458-3M, CHICAGO GRAPHIC COMMUNICATIONS

INTERNATIONAL UNION, AFL-CIO, Defendant-Appellee.

No. 93-3010.

United States Court of Appeals,

Seventh Circuit.

Argued Feb. 14, 1994.

Decided April 1, 1994.

Dean A. Dickie (argued), Michael I. Rothstein, Kathleen H. Klaus, Pope, Cahill & Devine, Chicago, IL, for plaintiff-appellant.

Eugene Cotton, Thomas D. Allison, Robert H. Nichols (argued), James W. Green, Jr., Cotton, Watt, Jones & King, Chicago, IL, for defendant-appellee.

Before POSNER, Chief Judge, CUDAHY, Circuit Judge, and McDADE, District Judge. ^*

POSNER, Chief Judge.

This appeal in a suit over a collective bargaining agreement presents a fundamental issue of contract law, that of drawing the line between an ambiguous contract, requiring interpretation, and a contract that, because it cannot be said to represent the agreement of the parties at all, cannot be interpreted, can only be rescinded and the parties left to go their own ways. Colfax, the plaintiff, is a manufacturer of envelopes. It does some printing of its envelopes, and the seventeen employees who do the printing are represented by the defendant union. Colfax has two printing presses. One prints 78-inch-wide sheets in four colors. The other prints 78-inch-wide sheets in five colors, but most of the time Colfax prints only four-color sheets on it.

Colfax has so few printing employees that it does not bother to participate in the collective bargaining negotiations between the union and the Chicago Lithographers Association, an association for collective bargaining of the other Chicago printing companies whose employees are represented by this union. Instead, whenever the union and the CLA sign a new collective bargaining agreement, the union sends Colfax a summary of the changes that the new agreement has made in the old one. If Colfax is content with the changes, the union sends it a copy of the complete new agreement, which Colfax signs and returns. If Colfax doesn't like the terms negotiated by the CLA, it is free to do its own bargaining with the union.

The collective bargaining agreements specify minimum manning requirements for each type of press used by the printers. The agreement in force between 1987 and 1991 fixed those minima as three men for four-color presses printing sheets 45 to 50 inches wide and four men for four-color presses printing sheets wider than 50 inches. Five-color presses printing sheets more than 55 inches wide required five men unless only four colors were printed, in which event only four men were required. The upshot was that under these agreements, all of which Colfax had signed, Colfax had to man each of its presses (which were 78-inch presses) with four men except on the rare occasions when it printed five-color sheets on its second press, and then it had to add a man.

In 1991 the union negotiated a new agreement with the CLA and sent a summary of the changes to Colfax. The letter enclosing the summary asked Colfax to indicate whether it agreed to the terms in the summary. (This may have been a departure from past practice, in which Colfax signed the complete agreement rather than the summary, but if so neither party makes anything of it.) In a section on manning requirements, the summary lists "4C 60" Press--3 Men" and "5C 78" Press--4 Men." Believing (in part because union members who claimed to be familiar with the new agreement had told Colfax that Colfax would really like the changes in it) that this meant that all presses operated as four-color presses would now require only three men to man them, Colfax's president and majority shareholder, Charles Patten, signed the union's letter, indicating acceptance of the terms in the summary. Later a copy of the actual agreement arrived, but it contained a crucial typo, which supported Patten's understanding of the summary. When a corrected copy of the agreement finally arrived, the manning requirements stated in it were different from what Patten had understood from the summary. Four-color presses between 45 and 60 inches required three men, but all four-color presses over 60 inches required four men. The changes had not benefited Colfax at all, and because it was under competitive pressure, it would have liked to negotiate better terms. Patten refused to sign the agreement but the union took the position that Colfax was bound to it by its acceptance of the summary.

Colfax brought this suit under section 301 of the Taft-Hartley Act, 29 U.S.C. Sec. 185, for a declaration that it has no collective bargaining contract with the union because the parties never agreed on an essential term--the manning requirements for Colfax's printing presses. The union counterclaimed for an order to arbitrate. The union's position was that Colfax had accepted the new agreement, which requires arbitration of all disputes "arising out of the application or interpretation of this contract." The district judge granted summary judgment for the union, concluding that the reference to the new manning requirement for a four-color 60-inch press in the summary of changes that Colfax had accepted referred unambiguously to 60-inch presses and had no application to any other presses, such as Colfax's 78-inch presses. Colfax has appealed.

One way to describe the issue that divides the parties is that they disagree about the meaning of the term "4C 60" Press--3 Men." Colfax believes that it means four-color presses printing sheets 60 inches and over, while the union believes that it means four-color presses 60 inches and under (down to 45 inches). Remember that the previous agreement had allowed the use of three-man crews on four-color presses between 45 and 50 inches. The union interprets the change as extending the upper bound of the three-man range to 60 inches. Ordinarily a dispute over the meaning of a contractual term is, if the contract contains an arbitration clause, for the arbitrator to decide. But sometimes the difference between the parties goes so deep that it is impossible to say that they ever agreed--that they even have a contract that a court or arbitrator might interpret. In the famous though enigmatic and possibly misunderstood case of Raffles v. Wichelhaus, 2 H. & C. 906, 159 Eng.Rep. 375 (Ex. 1864), the parties made a contract for the delivery of a shipment of cotton from Bombay to England on the ship Peerless. Unbeknownst to either party, there were two ships of that name sailing from Bombay on different dates. One party thought the contract referred to one of the ships, and the other to the other. The court held that there was no contract; there had been no "meeting of the minds." See generally A.W. Brian Simpson, "Contracts for Cotton to Arrive: The Case of the Two Ships Peerless," 11 Cardozo L.Rev. 287 (1989).

The premise--that a "meeting of the minds" is required for a binding contract--obviously is strained. 2 E. Allan Farnsworth, Contracts Sec. 7.9, at p. 251 (1990). Most contract disputes arise because the parties did not foresee and provide for some contingency that has now materialized--so there was no meeting of minds on the matter at issue--yet such disputes are treated as disputes over contractual meaning, not as grounds for rescinding the contract and thus putting the parties back where they were before they signed it. So a literal meeting of the minds is not required for an enforceable contract, which is fortunate, since courts are not renowned as mind readers. Let us set the concept to one side, therefore, and ask how (else) to explain Raffles v. Wichelhaus and cases like it. It seems to us as it has to other courts that a contract ought to be terminable without liability and the parties thus allowed to go their own ways when there is "no sensible basis for choosing between conflicting understandings" of the contractual language, as the court said in an American Raffles -like case, Oswald v. Allen, 417 F.2d 43, 45 (2d Cir.1969), quoting William F. Young, Jr., "Equivocation in the Making of Agreements," 64 Colum.L.Rev. 619, 647 (1964). In Oswald the misunderstanding arose because the parties did not speak the same language (literally). In Balistreri v. Nevada Livestock Production Credit Association, 214 Cal.App.3d 635, 262 Cal.Rptr. 862 (1989), the parents of an aspiring farmer thought they had pledged property they owned in Sebastopol to secure a loan to their son, and indeed the lender's cover letter described the property as "your Sebastopol residence." But the actual deed of trust listed the parents' home in Petaluma as the collateral. The court held that there had been no meeting of the minds.

Raffles and Oswald were cases in which neither party was blameable for the mistake; Balistreri a case in which both were equally blameable, the parents for having failed to read the deed of trust, the lender for having drafted a misleading cover letter. It is all the same. Restatement (Second) of Contracts Secs. 20(1)(a), (b) (1981). If neither party can be assigned the greater blame for the misunderstanding, there is no nonarbitrary basis for deciding which party's understanding to enforce, so the parties are allowed to abandon the contract without liability. Neel v. Lang, 236 Mass. 61, 127 N.E. 512 (1920); Konic International Corp. v. Spokane Computer Services, Inc., 109 Idaho 527, 529, 708 P.2d 932, 934 (App.1985). These are not cases in which one party's understanding is more reasonable than the other's. Compare Restatement, supra, Sec. 20(2)(b). If rescission were permitted in that kind of case, the enforcement of every contract would be at the mercy of a jury, which might be persuaded that one of the parties had genuinely held an idiosyncratic idea of its meaning, so that there had been, in fact, no meeting of the minds. Cf. Young, supra, at 646. Intersubjectivity is not the test of an enforceable contract.

The...