Engineers Ass'n v. SPERRY GYROSCOPE CO., ETC., 38

• Decision Date: 27 December 1957
• Docket Number: No. 38,Docket 24605.,38
• Citation: 251 F.2d 133
• Parties: ENGINEERS ASSOCIATION, Petitioner-Appellee, v. SPERRY GYROSCOPE COMPANY, DIVISION OF SPERRY RAND CORPORATION, Respondent-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

251 F.2d 133 (1957)

ENGINEERS ASSOCIATION, Petitioner-Appellee, v. SPERRY GYROSCOPE COMPANY, DIVISION OF SPERRY RAND CORPORATION, Respondent-Appellant.

No. 38, Docket 24605.

United States Court of Appeals Second Circuit.

Argued October 14, 15, 1957.

Decided December 27, 1957.

Roosevelt & Freidin, New York City (Emanuel L. Gordon, New York City, of counsel), for appellant.

Mayer, Weiner & Mayer, New York City (Henry Mayer, Abraham Weiner, New York City, of counsel), for appellee.

Before MEDINA, HINCKS and WATERMAN, Circuit Judges.

WATERMAN, Circuit Judge.

Engineers Association (EA), a labor organization representing the non-supervisory professional engineers and technicians employed by Sperry Gyroscope Co. at the latter's plant in Great Neck, New York, proceeded in the District Court to compel Sperry to submit to arbitration in accordance with the terms of a collective bargaining agreement between the parties. The court, after a hearing, granted the relief requested and Sperry appeals. Reversal is sought on the grounds that (1) the District Court lacked jurisdiction, (2) the demand for arbitration was premature because of the failure of the union to exhaust the grievance procedure as required by the contract, and (3) under the terms of the contract the dispute is not arbitrable.

In March 1956, Sperry and EA entered into a collective bargaining agreement governing the terms and conditions of employment of the employees represented by the union. Several months later Sperry began construction of a new plant in Salt Lake City, Utah; and, in connection therewith, requested a number of its employees to transfer to a customer installation unit in Pasadena, California. It was understood that employees consenting to the transfer were to be assigned to the Utah plant when the construction of that plant was completed. There is no indication in the record as to how many employees Sperry approached about this program, but, in any event, twenty-eight employees consented to the transfer. Sixteen of these twenty-eight received an increase in salary. EA alleges that the salary increases were granted to provide an incentive to transfer to the new plant. Consequently, it contends, the salary increases violated that provision of the collective bargaining agreement which specifies that "Salary increases for individual employees * * * shall be on a merit basis only." Sperry denies that the salary increases were granted for considerations other than merit; and, in addition, asserts that the granting by it of merit increases is not arbitrable under the contract. In support of this assertion it relies upon the recital in the contract that "merit increases are at the sole discretion of the Employer * * *"

EA invoked the jurisdiction of the District Court under "Section 301 of the Labor Management Relations Act, 1947, U.S.C. Title 29, Section 185 and the United States Arbitration Act, U.S.C. Title 9." We need not determine whether jurisdiction might be sustained under the latter act, cf. Signal-Stat Corp. v. Local 475, 2 Cir., 1956, 235 F.2d 298, certiorari denied, 354 U.S. 911, 77 S.Ct. 1293, 1 L.Ed.2d 1428, since it is clear that Section 301 of the Labor Management Relations Act confers power upon the District Courts to compel arbitration in accordance with the terms of a collective bargaining agreement. Textile Workers Union v. Lincoln Mills, 1957, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972.

Sperry urges, however, that the present proceeding was commenced by Petition and Notice of Motion, a procedure it claims is authorized only by the Federal Arbitration Act. Hence, it contends, the present proceeding was not a suit commenced under Section 301, and Lincoln Mills is, therefore, not dispositive of the jurisdictional issues presented on this appeal. We may assume, without so deciding, that Sperry is correct in its contention that proceedings under Section 301 must be commenced by the filing of a complaint and the service of a summons. Nevertheless, the petition clearly invoked the jurisdiction of the District Court under Section 301. Sperry failed to object to the manner in which the proceeding had been commenced; and within twenty days following service upon it of the Petition and Notice of Motion filed its answer, denying that an arbitrable dispute existed and alleging that EA's demand for arbitration was premature. The answer did not state that there had been any impropriety in commencing the proceeding by petition. The failure to do so is a waiver by Sperry and it is precluded from asserting this contention at this time. See Rule 12(h), Fed.Rules Civ.Proc., 28 U.S.C.

A clause of the collective bargaining agreement at issue here requires as a condition precedent to arbitration that the grievance procedure elsewhere provided for in the contract be exhausted prior to a demand for arbitration.¹ In compliance with this requirement EA filed a grievance² with Sperry and therein stated its objections to the salary increases that are the basis of the present dispute. The employer denied the charges made by the union. During the next several months the parties discussed the subject matter of the grievance and exchanged correspondence. These negotiations failed to result in a settlement of the grievance. Finally EA notified Sperry of its intention to submit the dispute to arbitration, and, upon the latter's failure to comply with the demand, initiated the within proceeding. The District Court found that each step of the grievance procedure provided for in the contract had been completed. Sperry alleged that there had been an agreement between the parties to modify the prescribed grievance procedure so that Sperry might file a supplemental answer to EA's claim. On this issue the findings of the District Court rejecting Sperry's allegation are fully supported by the record.

The principal issue on this appeal is whether the dispute between the parties that caused EA to file its grievance is an arbitrable dispute under the language of the collective bargaining agreement. Merely because the dispute was "grievable," it does not necessarily follow that it was also arbitrable. The grievance procedure established by the contract covers a wider range of controversies than the arbitration clause. The former extends to "all disputes, differences or grievances that may arise between the Association and the Employer * *" The latter clause is more limited. It provides for the submission to arbitration of "all disputes, differences, or grievances arising out of the interpretation or application of the provisions of this agreement * * *" Hence Sperry contends that since, under the contract, the granting of merit increases is a matter within its sole discretion, the union's grievance does not give rise to an arbitrable dispute. EA replies, and we think correctly, that this contention begs the question. EA contends that even if merit increases are at the sole discretion of the employer, the issue here is whether the salary increases were in fact granted for merit, or whether in fact they were granted as an incentive for employees to transfer to the Utah plant. If the increases were granted on the latter basis they were increases that were prohibited by the collective bargaining agreement. A determination of their true nature is properly arbitrable under the contract.

EA argues that although merit increases are at the sole discretion of the employer, the present dispute concerns the interpretation of the phrase "on a merit basis only" as that phrase applies to the particular increases objected to. Hence, it concludes, the dispute "arises out of the interpretation or application" of the agreement, and is, therefore, arbitrable. In reply, Sperry asserts that under the contract it retains the right to grant merit increases, and that such increases are not reviewable by an arbitrator. It urges that the union should not be permitted to obtain a review of such increases merely by the device of attaching a...