Kropfelder v. Snap-On Tools Corp.

• Decision Date: 10 August 1994
• Docket Number: No. K-94-867.,K-94-867.
• Citation: 859 F. Supp. 952
• Parties: Joseph E. KROPFELDER v. SNAP-ON TOOLS CORP.
• Court: U.S. District Court — District of Maryland

859 F. Supp. 952

Joseph E. KROPFELDER v. SNAP-ON TOOLS CORP.

No. K-94-867.

United States District Court, D. Maryland.

August 10, 1994.

Stephen D. Langhoff, Joseph Tauber, and Langhoff & Wacker, P.C., Baltimore, MD, for plaintiff.

Darrell R. Van Deusen, Scharon L. Ball, and Venable, Baetjer & Howard, Baltimore, MD, for defendant.

FRANK A. KAUFMAN, Senior District Judge:

Plaintiff began working for defendant Snap-on in 1979 as a stockroom warehouseman in defendant's Baltimore area warehouse which received and sent goods from and into interstate commerce. According to Snap-on's 1993 letter to shareholders,¹ "the foundation of Snap-on Tools" is "direct sales of tools to professional technicians in automotive service" through mobile dealer vans. In 1986, plaintiff was promoted to warehouse manager and signed an employment agreement with defendant. That agreement did not contain an arbitration clause. Defendant believes that plaintiff did not sign further agreements in 1987, 1988, or 1989, although plaintiff "has no reason to believe that contracts were not signed" for those years.² Plaintiff signed an agreement with defendant on January 2, 1990, which, apparently, was the first contract between the parties which contained an arbitration clause. Plaintiff signed another agreement with an arbitration clause on March 26, 1991, concerning the period from January 1, 1991 to December 31, 1991. On February 12, 1992, plaintiff signed another agreement, running from January 1, 1992, to December 31, 1992, also containing an arbitration clause. The latter reads as follows:

Any controversy or dispute out of or relating to this Agreement or breach thereof, including but not limited to its termination, ... shall be submitted to final and binding arbitration as the sole and exclusive remedy for any controversy or dispute.

No agreement was signed by the parties in relation to the year 1993.

During 1992, a series of thefts occurred in defendant's Baltimore warehouse where plaintiff was the manager. On March 4, 1993, defendant questioned plaintiff about his knowledge of the thefts. Plaintiff asserts that defendant's questioning led plaintiff to suffer severe emotional trauma and that as a result plaintiff became unable to work. Plaintiff received short-term disability leave beginning on July 27, 1993, and has not returned to work since that date. In this case, plaintiff contends that he is entitled to receive benefits under defendant's severance plan, which is governed by ERISA, because the Baltimore warehouse, in which he worked, closed on September 3, 1993, resulting in the elimination of his position. Defendant contends that plaintiff was not discharged as a result of the closing and is therefore not entitled to benefits under the plan. In addition, defendant claims that the said dispute is subject to arbitration in accord with the 1992 employment agreement. In response, plaintiff states that because he did not sign an employment contract in 1993, he is not bound to arbitrate the within dispute. Further, plaintiff contends that he falls within the exclusionary language of section 1 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, which provides that the FAA does not govern the "class of workers engaged in foreign or interstate commerce."

"In determining whether parties should be compelled to arbitrate, courts `perform a two-step inquiry ... `First, the court must determine whether the parties agreed to arbitrate the dispute.... Then it must consider whether any federal statute or policy renders the claims nonarbitrable.'" Weston v. ITT-CFC, 8 IER Cases 503, 504, 1992 WL 473846 (N.D.Tex.1992) (quoting R.M. Perez & Associates, Inc. v. Welch, 960 F.2d 534, 538 (5th Cir.1992) (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985))).

AGREEMENT TO ARBITRATE

The general presumptions governing arbitration disputes under the FAA are set forth by Judge Russell in Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809 (4th Cir.1989):

Of course, `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.' Nonetheless, it is well settled that there exists a `healthy regard for the federal policy favoring arbitration.' Indeed, the heavy presumption of arbitrability requires that when the scope of the arbitration clause is open to question, a court must decide the question in favor of arbitration. Thus `an 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.'

Id. at 812 (emphasis added) (citations omitted).

As Judge Niemeyer has written, the FAA "leaves interpretation of an arbitration agreement to the application of common law principles of contract law." Whiteside v. Teltech Corp., 940 F.2d 99, 101 (4th Cir.1991) (citing Perry v. Thomas, 482 U.S. 483, 493 n. 9, 107 S.Ct. 2520, 2527 n. 9, 96 L.Ed.2d 426 (1987)). With regard to whether terms set forth in the 1992 employment agreement survived into 1993, "if the parties at the expiration of a written contract of employment, continue as before without a new express agreement, it will be inferred that the service and the compensation are the same as before." 2 Corbin on Contracts § 504, at 717 (1963). "When a contract of employment for a definite time has been made, and the employee's services are continued after the expiration of the definite time without objection, the inference is ordinarily that the parties have assented to another contract for a term of the same length with the same salary and conditions of service." 2 Williston on Contracts § 6.42, at 452 (4th ed. 1991). Judge Russell has affirmed those common law principles, noting that "`continuance of employment can be evidence of an implied agreement to the terms of that employment.'" Bodie v. City of Columbia, 934 F.2d 561, 564 (4th Cir.1991) (quoting Rousseau v. Teledyne Movible Offshore, Inc., 805 F.2d 1245 (5th Cir.1986), cert. denied, 484 U.S. 827, 108 S.Ct. 95, 98 L.Ed.2d 56 (1987) (citing Shepler v. Crucible Fuel Co., 140 F.2d 371, 374 (3rd Cir.1944))).³

In Luden's Inc. v. Local Union No. 6 of the Bakery, 28 F.3d 347 (3d Cir.1994), the Third Circuit was called upon to determine whether the parties' duty to arbitrate survived the plaintiff's affirmative termination of the collective bargaining agreement between the parties. Relying on the aforementioned common law authority, Judge Becker concluded that the duty to arbitrate continued as a term of an implied-in-fact collective bargaining agreement — even where one party had unilaterally terminated the agreement:

General principles of contract law teach us that when a contract lapses but the parties to the contract continue to act as if they are performing under a contract, the material terms of the prior contract will survive intact unless either one of the parties clearly and manifestly indicates, through words or through conduct, that it no longer wishes to continue to be bound thereby, or both parties mutually intend that the terms not survive. The rationale for this rule is straightforward: when parties to an ongoing, voluntary, contractual relationship, especially a relationship which by its nature generally implies that some mutually agreed upon rules govern its configuration, continue to behave as before upon the lapse of the contract, barring contrary indications, each party may generally reasonably expect that the lapsed agreement's terms remain the ones by which the other party will abide.

Id. at 355-56.⁴

Herein, plaintiff argues that none of his employment contracts with defendant contain provisions automatically renewing the contract at the end of the term, and that 1993 was the first year in which defendant did not present a contract to plaintiff for signature.⁵ Plaintiff states that defendant chose not to have employees sign contracts in 1993 because it knew it would be closing the warehouse and sought to convert employment status to at-will employment. The fact that 1993 may have been the first year in which defendant did not offer employment contracts to employees does raise the question of whether such failure was meant to signal that the terms of prior contracts were terminated. In Borg-Warner Corp. v. Ostertag, 18 Wis.2d 484, 118 N.W.2d 900 (1963), the Supreme Court of Wisconsin concluded that where an employee signed contracts in two successive years, a contract would not be implied for the third year in which no contract was signed. However, in Borg-Warner the employee asked about a new contract for the third year, the employer felt free to change the contract terms, and the contracts specified monetary bonuses based on the year particularly specified. In that context, the Wisconsin court concluded that "it appears at most the old terms of employment were to continue until the parties reached a new agreement, or found they could not agree." 118 N.W.2d at 903.

In this case, the failure to sign a new agreement, without any explanation by either party, would not appear enough to rebut the presumption favoring extension of the terms of definite contracts with specific arbitration clauses — especially in the light of the strong federal policy favoring arbitration. Moreover, it appears that plaintiff has received disability benefits pursuant to the 1992 contract, past the date of expiration of that contract. Such payment and acceptance of benefits indicates, in this Court's view, an intent to continue the terms of the prior contract.⁶ "As with any other contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 626, 105 S.Ct. 3346, 3354, 87 L.Ed.2d 444 (...