Butchers' Union Local 229 v. Cudahy Packing Co.

• Decision Date: 23 June 1967
• Citation: 428 P.2d 849,59 Cal.Rptr. 713,66 Cal.2d 925
• Court: California Supreme Court
• Parties: , 428 P.2d 849 BUTCHERS' UNION LOCAL 229 et al., Plaintiffs and Appellants, v. CUDAHY PACKING COMPANY, Defendant and Respondent. L.A. 27843. In Bank

Page 713

59 Cal.Rptr. 713

66 Cal.2d 925, 428 P.2d 849

BUTCHERS' UNION LOCAL 229 et al., Plaintiffs and Appellants, v. CUDAHY PACKING COMPANY, Defendant and Respondent.

L.A. 27843.

Supreme Court of California,

In Bank.

June 23, 1967.

Brundage, Hackler & Williams and Jerry J. Williams, San Diego, for plaintiffs and appellants.

Gray, Cary, Ames & Frye, Josiah L. Neeper, James K. Smith and Gregory B. Hovendon, San Diego, for defendant and respondent.

TOBRINER, Justice.

The union petitioned for an order compelling the company to arbitrate a pension eligibility grievance, and for appointment of an arbitrator, pursuant to a section of a collective bargaining agreement providing for arbitration of a 'disagreement arising within the terms of this Agreement.' Finding that the company was engaged in interstate commerce, and purporting to apply federal substantive law, the trial court nevertheless denied the petition. The court concluded that the dispute involved an interpretation of 'the rules and regulations of the Pension Fund,' which 'constitute a written collateral agreement to the collective bargaining agreement that makes it clear that this area of dispute is not a matter for arbitration.' We hold that the trial court failed to apply to this issue the required federal standard, which commands a state court to order arbitration unless, after resolving all doubts in favor of that procedure, it can determine 'with positive assurance' that the dispute is not covered by the arbitration clause.

Since this case turns upon the legal effect and scope of the arbitration provision of the collective bargaining contract of the union and employer, entered into on May 23, 1960, we set it forth: 'In the event of a disagreement arising within the terms of this Agreement (the parties shall first resort to the grievance procedure described, and then) if no agreement is reached at this latter meeting, the parties shall submit the matter to an Arbitrator. * * * This procedure shall apply to all disputes (with inclusions pertaining to discharge and suspension, and exceptions pertaining to management rights) * * *. While a dispute is in the process of discussion and/or arbitration under the terms of this section, there shall be no cessation of work or lockout. * * *'

In this collective bargaining contract the parties agreed that the company would not reduce benefits in the employees' pension fund of the Cudahy Packing Company, effective January 1, 1927, as previously amended and as amended by the collective bargaining negotiations leading to the 1960 contract. ¹ The parties expressed their negotiated changes as appendix I, ² which they made a part of the collective bargaining agreement.

Appendix I provided, Inter alia, for 'vested pensions' as follows: 'An employee who is covered by the Agreement and whose employment is terminated with the Company under circumstances which entitle him to separation pay at the time when he has (A) attained age 55, and (B) completed 25 or more years of credited service will be entitled to a pension upon his attaining age 65 * * *.' Section 7 likewise gave to the employee the option of electing a pension or accepting separation pay, provided that he exercised such election in writing within 18 months after termination of his employment.

Under the rules and regulations in effect before the 1960 agreement a pension board administered the pension fund. The board consisted of representatives appointed by the company; the members served so long as they continued in the employ of the company; section VI(g) provided that 'The decision of the Pension Board upon any question of fact, interpretation, definition or administration under the plan shall be conclusive and, without limiting the generality of the foregoing, the Pension Board is specifically empowered to determine at its discretion what constitutes continuous service and substantially full time employment hereunder. * * *'

The grievance arose when the company closed its San Diego plant and terminated the employment of one Saunders. Saunders, having been in the company's employment for 25 years, came within six working days of the attainment of the age of 55 years. The union requested 'that a pension be paid to Mr. Saunders in accord with the provisions of (the collective) bargaining agreement * * *.'

Specifically the claim stated: 'Your records will show that Mr. Saunders has completed more than 26 years of credited service. They will also show that Mr. Saunders was 55 years of age on May 3, 1961, and that he worked at your San Diego location through April 1, 1961, at which time he was paid for three weeks' vacation, pursuant to the Agreement, which paid him through April 21, 1961. Thus at the effective date of his termination--April 21, 1961--he was but 6 working days short of his having been on the payroll until the age of 55.' In these circumstances, the union said, 'it is evident that Mr. Saunders * * * has substantially performed the contract. * * *' The sole question of the dispute, according to the union's claim, 'is whether the age qualification set out in subparagraph (a) (of section 7 of the appendix to the collective bargaining agreement) has been met.'

The company replied that its only 'obligation in respect to pensions, as ser forth in Section 16 (see fn. 1), is to continue the pension plan of the Company and see to it that pension benefits will not be reduced and eligibility requirements will not be changed, except as indicated in Appendix I (see fn. 2). * * * The pension program is administered by a pension board of five members who are also the trustees under the pension trust. The pension board, you will observe under subparagraph (g) on page 17 (section VI(g), quoted supra at p. 4) are empowered to make a decision 'upon any question of fact, interpretation, definition or administration under the plan' and such decisions shall be conclusive. Sub-section (1) on page 8 (of the rules and regulations) covers the matter of a vested pension * * *. In our opinion, the arbitrator, under the Collective Bargaining Agreement, has the power to determine only whether the Company has or has not carried out Its obligations in respect to the pension plan (and) has no power or authority to decide that the pension board should or should not grant a pension in any particular case.'

In brief, the employer contends that, although disputes arising from the collective bargaining contract are subject to arbitration, this controversy emanates from the pension plan, which is entirely separate from the contract. The union, however, urges that the dispute involves the interpretation of a provision of the collective bargaining contract creating vested pensions, and that the dispute therefore falls under the clause, 'a disagreement arising within the terms of this Agreement,' contained in the arbitration provision.

We examine the cases to establish (1) that the instant matter must be decided according to the federal standard, (2) that the federal standard requires that a state court order arbitration unless, after resolving all doubts in favor of that procedure, it can determine 'with positive assurance' that the arbitration clause does not cover the dispute, and (3) that the federal courts, confronting issues of pension eligibility similar to the instant one, have broadly applied the arbitration provision of the contract to cover the dispute.

Since the activities of the company affect interstate commerce, the issue of arbitrability must be resolved under the substantive federal law fashioned by the federal courts pursuant to the command of section 301 of the Labor Management Relations Act of 1947. (29 U.S.C. § 185(a) (1964).) In Textile Workers Union of America v. Lincoln Mills (1957) 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972, the United States Supreme Court held that in enacting section 301(a), Congress promulgated more than a mere jurisdictional statute; it authorized the federal courts to draw together a body of federal law for the enforcement of collective bargaining agreements within the ambit of congressional power. The court declared that 'state law, if compatible with the purpose of § 301, may be resorted to in order to find the rule that will best effectuate the federal policy,' but noted that '(a)ny state law applied, however, will be absorbed as federal law * * *.' (Id. at 457, 77 S.Ct. at 918.) In accord with the holding of Lincoln Mills, we said in O'Malley v. Wilshire Oil Co. (1963) 59 Cal.2d 482, 486, 30 Cal.Rptr. 452, 381 P.2d 188, that although 'federal courts * * * (they must), in adjudicating an action which could have been brought in the federal courts under section 301 of the Labor Management Relations Act, apply federal law.'

Congress strongly expressed its policy favoring arbitration in section 203(d) of the Labor Management Relations Act: 'Final adjustment by a method agreed upon by the parties is declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement. * * *' (29 U.S.C. § 173(d) (1964); see United Steelworkers of America v. Warrior & Gulf Co. (1960) 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409.) Section 301 was reported by the Senate Labor Committee to be aimed at securing 'mutual responsibility necessary to vitalize collective bargaining agreements,' by prescribing 'an effective method of assuring freedom from economic warfare for the term of the agreement.' (S.Rep. No. 105, 80th Cong., 1st Sess., pp. 16--17; see Charles Dowd Box Co. v. Courtney (1962) 368 U.S. 502, 509, 82 S.Ct. 519, 7 L.Ed.2d 483; Textile Workers v. American Thread Co. (1953) 113 F.Supp. 137, 141.)

Under federal law, the function of a court in deciding whether a dispute is subject to arbitration 'is confined to ascertaining whether the party seeking arbitration Is making a claim which on its face is governed by the contract.' (...