Johnson Controls Sec. Solutions, LLC v. Int'l Bhd. of Elec. Workers

• Decision Date: 28 January 2022
• Docket Number: No. 21-1460,21-1460
• Citation: 24 F.4th 87
• Parties: JOHNSON CONTROLS SECURITY SOLUTIONS, LLC, Plaintiff, Appellee, v. INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL 103, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

24 F.4th 87

JOHNSON CONTROLS SECURITY SOLUTIONS, LLC, Plaintiff, Appellee,

v.INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL 103, Defendant, Appellant.

No. 21-1460

United States Court of Appeals, First Circuit.

January 28, 2022

Christopher N. Souris, with whom Richard M. Olszewski and Krakow, Souris & Landry, LLC were on brief, for appellant.

Brian D. Lee, with whom Ogletree, Deakins, Nash, Smoak & Stewart, P.C. was on brief, for appellee.

Before Lynch, Kayatta, and Barron, Circuit Judges.

LYNCH, Circuit Judge.

In this dispute between the International Brotherhood of Electrical Workers, Local 103 (the "Union"), and Johnson Controls Security Solutions, LLC over Johnson Controls' compliance with the terms of the parties' collective bargaining agreement (the "CBA"), the district court refused to order arbitration as called for by a clause in the agreement. We reverse.

I.

Johnson Controls is a limited liability company with offices in Massachusetts which sells, installs, and maintains security alarms and provides related services to commercial clients. Its Norwood, Massachusetts facility has entered into a CBA with the Union, a labor organization that represents Johnson Controls employees.¹

We next describe the pertinent terms of the CBA, which are found in three clauses. Article 5, Section 1 (the "Arbitration Clause") states:

In the event that an agreement cannot be reached between the Union and the Employer with respect to a grievance involving and limited to the interpretation and application of any specific provision of this Agreement, it may be submitted, by the Union to arbitration, pursuant to the Labor Arbitration Rules of the American Arbitration Association.

Article 5, Section 2 (the "Exclusion Clause"), provides:

Changes in business practices, matters involving capital expenditures, the opening and/or closing of new units/facilities, the choice of personnel (subject to the seniority provisions, if applicable)[,] the choice of materials, service products, processes and equipment, or any dispute which either directly or indirectly involves the interpretation or application of the plans covering pensions, disability benefits and death benefits, shall not be arbitrable.

(emphasis added).

The third relevant clause is Article 9, which states: "The Employer hereby agrees to provide the 401(k) Plan, disability benefits and death benefits as in effect as of May 6, 2008." It is this clause which the Union says Johnson Controls has violated and which gives rise to the dispute the Union seeks to arbitrate.

Around April 2020, Johnson Controls "temporarily reduced its matching contribution to the Company's 401(k) Plan" (the "Plan"). The Union's grievance, which was filed on May 1, 2020, concerns Johnson Controls' reduction in the employer match, "which the Union view[ed] as a violation of Article 9 of [the CBA]."² Following Johnson Controls' denial of the grievance, the Union filed a demand for arbitration on May 19, 2020 with the American Arbitration Association (the "AAA") pursuant to the Arbitration Clause.

The next day, the AAA opened the arbitration case and Johnson Controls sent an email to the Union's counsel, objecting that "per Article 5 Section 2 of the labor agreement th[e grievance] is not arbitrable." On June 8, 2020, Johnson Controls sent an email to the AAA, stating again that "[t]he subject matter of the Union's arbitration request ... is not arbitrable." The Union disagreed, and an arbitrator was appointed on June 19, 2020. On July 7, 2020, the arbitrator declined to stay the arbitration absent a court order, and scheduled a hearing for February 9, 2021.

On January 14, 2021, Johnson Controls filed the instant lawsuit in the U.S. District Court for the District of Massachusetts pursuant to the Labor Management Relations Act, 29 U.S.C. § 185, seeking a declaratory judgment that the dispute is not arbitrable under the CBA, see also 28 U.S.C. § 2201.³ On March 15, 2021, the Union moved to dismiss Johnson Controls' court complaint. The parties agreed to treat the motion as one for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c).

The district court stated at the end of the May 12, 2021 motion hearing that the Union's dispute was not arbitrable. The court did not enter a written opinion. The court did not address the exact terms of the CBA. On May 17, 2021, the district court entered a declaratory judgment in favor of Johnson Controls. The Union appeals from that judgment.

II.

Our review of a district court's allowance of a motion for judgment on the pleadings under Fed. R. Civ. P. 12(c) is de novo. Curran v. Cousins, 509 F.3d 36, 43 (1st Cir. 2007).

Under AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), four principles govern the determination of whether a certain labor dispute concerning the collective bargaining agreement is subject to arbitration: (1) that arbitration is a matter of contract and the parties must have agreed in a contract to arbitrate the dispute, id. at 648, 106 S.Ct. 1415 ; (2) that the question of whether a collective bargaining agreement requires the parties to arbitrate a particular grievance is one of law for the court, not the arbitrator, to determine, id. at 649, 106 S.Ct. 1415 ; (3) that, in making this determination, "a court is not to rule on the potential merits of the underlying claims," id. at 649, 106 S.Ct. 1415 ; and, most relevant here, (4) that "where the contract contains an arbitration clause, there is a presumption of arbitrability," id. at 650, 106 S.Ct. 1415.

The presumption, in turn, requires a court to permit a grievance to proceed to arbitration "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Id. at 650, 106 S.Ct. 1415 (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) ). Where, as here, there exists a relatively broad arbitration clause, the presumption can be rebutted only by a specific and "express provision excluding a particular grievance from arbitration" or "the most forceful evidence of a purpose to exclude the claim." Id. at 650, 106 S.Ct. 1415 (quoting Warrior & Gulf, 363 U.S. at 585, 80 S.Ct. 1347 ). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ); see also Gateway Coal Co. v. United Mine Workers of Am., 414 U.S. 368, 377, 94 S.Ct. 629, 38 L.Ed.2d 583 (1974) (noting "[t]he federal policy favoring arbitration of labor disputes"); cf. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) ("[D]ue regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration." (quoting Volt Info. Sci., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489 U.S. 468, 476, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) )).⁴

On de novo review, we cannot say "with positive assurance" that the Union's grievance is not arbitrable. The grievance concerns whether the CBA was violated by Johnson Controls' unilateral reduction of its matching contribution to the company's 401(k) plan. The parties agree that it plainly constitutes "a grievance involving and limited to the interpretation and application of any specific provision of [the CBA]," namely, Article 9.

This takes us to the relevant language of the Exclusion Clause, which expressly excludes from arbitration only disputes that "directly or indirectly" involve the "interpretation or application" of "plans covering pensions, disability benefits and death benefits." These types of plans, which include the 401(k) plan, are governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), and its statutorily mandated claims procedures. See 29 U.S.C. §§ 1002 – 03, 1133 ; 29 C.F.R. § 2560.503-1 (ERISA claims procedures). There is no colorable claim that the Union's grievance "directly" involves the "interpretation" or "application" of the Plan.⁵ The question becomes whether the grievance clearly "indirectly" does. Johnson Controls argues for a broad reading of the term "indirectly." It says the term would be rendered meaningless and duplicative of "directly" if the Exclusion Clause did not apply to this grievance. Resolving all doubts in favor of arbitration, we disagree.

As the Union has argued, we cannot say "with positive assurance" that the Arbitration Clause does not apply to its grievance on account of the "indirect" language in the Exclusion Clause. This language, viewed in context, does not "specifically exclude" all disputes broadly having to do with the Plan.⁶ See Warrior & Gulf, 363 U.S. at 581, 80 S.Ct. 1347. Rather, the language can plausibly be read more narrowly, to exclude disputes other than the grievance at issue here. It is plausible to read the Exclusion Clause as not applicable to this dispute concerning compliance with the CBA's requirements as to the 401(k) plan.

The Union's reading would give meaning to the qualifying terms "interpretation or application" which limit the scope of the Exclusion Clause. See New England Carpenters Cent. Collection Agency v. Labonte Drywall Co., 795 F.3d 271, 282 (1st Cir. 2015) ("[E]very word and phrase of an instrument is if possible to be given meaning, and none is to be rejected as surplusage if any other course is rationally possible." (citation omitted)). Its reading is buttressed by the fact that ERISA-governed disputes are subject to separate, statutorily mandated dispute resolution procedures.⁷ See 29 U.S.C. § 1133 ; 29 C.F.R. § 2560.503-1 ; see also Senior v. NSTAR...