Luden's Inc. v. Local Union No. 6 of Bakery, Confectionery and Tobacco Workers' Intern. Union of America

Decision Date20 July 1994
Docket NumberNo. 92-1982,92-1982
Citation28 F.3d 347
Parties146 L.R.R.M. (BNA) 2586, 63 USLW 2008, 128 Lab.Cas. P 11,137 LUDEN'S INC., Appellee, v. LOCAL UNION NO. 6 OF the BAKERY, CONFECTIONERY AND TOBACCO WORKERS' INTERNATIONAL UNION OF AMERICA; American Arbitration Association, Bakery, Confectionery and Tobacco Workers' International Local Union 6, Appellant.
CourtU.S. Court of Appeals — Third Circuit

Bernard N. Katz (argued), Lynne P. Fox, Meranze and Katz, Philadelphia, PA, for appellant.

Dana S. Scaduto (argued), McNees, Wallace & Nurick, Harrisburg, PA, for appellee.

Before BECKER, ALITO, and ROTH, Circuit Judges.

OPINION OF THE COURT

EDWARD R. BECKER, Circuit Judge.

Luden's Inc. ("Luden's"), the manufacturer of a well-known brand of cough drops, among other products, commenced this action in the United States District Court for the Eastern District of Pennsylvania against Local Union No. 6 of the Bakery, Confectionery, and Tobacco Workers' International Union of America (the "Union") and the American Arbitration Association ("AAA"). It sought a declaratory judgment and an injunction to prevent the Union from submitting to arbitration before AAA a dispute between Luden's and the Union concerning the retroactivity of wages under the terms of a lapsed collective bargaining agreement ("CBA"). 1 The parties presented the district court with stipulated facts and documents, and then by agreement filed cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. The district court granted Luden's motion and denied the Union's, thereupon permanently enjoining the scheduled arbitration proceedings. See Luden's, Inc. v. Local Union No. 6 of Bakery, Confectionery & Tobacco Workers' Int'l Union, 805 F.Supp. 313, 327 (E.D.Pa.1992).

The Union appealed. For the reasons that follow, we conclude that the parties' duty to arbitrate survived Luden's termination of their CBA effective July 3, 1992 as a term of an "implied-in-fact CBA" which was formed on that date. We will therefore vacate the injunction entered by the district court, and will remand with instructions to direct the parties to proceed to arbitrate the retroactive wage grievance.

I. FACTS AND PROCEDURAL HISTORY

The parties stipulated to all the relevant facts. Luden's, the plaintiff in the underlying action and the appellee here, owns and operates a manufacturing plant in Reading, PA. The Union represents some of Luden's employees at that plant. AAA, which has an office located in Philadelphia, provides, among other services, arbitrators to hear and resolve disputes arising out of the administration of CBAs.

On May 1, 1988, Luden's and the Union jointly executed a CBA (the "1988 CBA") governing the terms and conditions of employment for certain employees whom the Union represents at Luden's Reading plant. Stip. of Facts p 1. Article XXIX of the agreement, the centerpiece of this litigation, was entitled "Duration of Agreement" and provided in its entirety:

This Agreement shall be and remain in full force and effect for a period of three (3) years until and including April 29, 1991, and thereafter, until a new agreement, the wage clause of which shall be retroactive to the above given date, has been consummated and signed, or until this Agreement, upon sixty (60) days notice in writing, has been terminated by the Union with the sanction of the Bakery, Confectionery and Tobacco Workers' International Union of America or has been terminated by the Company.

Stip. of Facts, Exh. A. As will become apparent, the unartful and imprecise drafting of the retroactive wage clause is the raison d'etre for this litigation.

Like most CBAs, the 1988 CBA incorporated a tiered grievance procedure in Article XVI to facilitate the amicable resolution of grievances arising between employees and management in the course of their intimate employment relationship. 2 The fifth and final step of that procedure permitted either party to submit unresolved grievances to final and binding arbitration; the parties were to select the arbitrator cooperatively from a short list provided by AAA. Stip. of Facts, Exh. A.

The 1988 CBA by its terms was scheduled to expire on or after April 29, 1991, the exact date being triggered by either sixty days notice of either party or the parties' joint execution of a replacement CBA. In a letter dated February 14, 1991, the Union by its President Joseph Rauscher provided Luden's Plant Manager Donald B. Watson with the required sixty days notice that the Union intended to "change, modify or terminate" the 1988 CBA (pursuant to Article XXIX thereof). Stip. of Facts p 2 & Exh. B. The letter included a "Notice to Mediation Agencies," signed by the Union's President, designating April 29, 1991 as the contract termination date. Id. Soon thereafter, on March 11, 1991, the parties began negotiations on a new CBA. Of the fifteen separate negotiating sessions the parties eventually met for, nine took place prior to the arranged April 29, 1991 termination date for the 1988 CBA. Stip. of Facts p 3. At the last of the pre-April 29 meetings, Luden's extended three separate written contract offers. The Union rejected each of these offers but verbally proposed counteroffers, each of which, in turn, Luden's rejected. None of these offers or counteroffers clarified the issue of the retroactive application of the new wage clause according to the terms of Article XXIX. Stip. of Facts p 4 & Exhs. C-E.

By memorandum dated April 29, 1991, Luden's Plant Manager Donald B. Watson advised Union employees of the general status of contract negotiations, and specifically reported that Luden's and the Union had "agreed to disregard the deadline of April and [to] continue operating under the terms of the current contracts." Stip. of Facts p 5 & Exh. F. A few days later, however, in a letter dated May 3, 1991, Luden's disclosed a changed strategy. On that occasion, Watson notified the Union's business representative Francis Ryan that Luden's wished to terminate the 1988 CBA "effective 12:01 a.m. Monday, May 13, 1991" (about ten days later). In addition, the letter contained both a "comprehensive offer" for a new CBA and an attempt by Luden's to condition its payment of wages according to the new wage scale retroactively to April 29, 1991 on the Union's timely acceptance of the enclosed proposal. Stip. of Facts p 6 & Exh. G. The Union's negotiating committee promptly rejected Watson's offer. Stip. of Facts p 7.

Over the course of the next few months, the parties continued their negotiations, each submitting various offers or counteroffers. Stip. of Facts pp 8, 10. During this time Luden's sent or distributed several letters directly to its employees to familiarize them with its bargaining position and to entreat them to accept its contract offers at their Union's contract ratification meetings. 3 Stip. of Facts p 11 & Exh. O. Each of these letters reported that Luden's would pay retroactive wages to April 29, 1991 if the Union and its membership accepted Luden's offer in its entirety. 4 Despite Luden's efforts, though, the membership rejected each of Luden's offers which the Union submitted to it for approval (specifically, the offers of May 16 and June 20, 1991). Stip. of Facts pp 9, 12.

On November 1, 1991, during a negotiation session, Luden's proposed what was, from the Union's perspective, a superior agreement, but one which was silent with respect to the retroactivity of wages. Stip. of Facts p 18 & Exh. Q. The following day the Union submitted certain terms and conditions of that proposal to its membership, tallying a vote in favor of approval. Stip. of Facts p 19. Luden's thereafter posted a notice enumerating the terms it thought comprised the proposal that the Union membership had ratified and also undertook to memorialize the agreement by drafting a document reflecting its understanding of the terms of the membership's vote. Stip. of Facts p 21.

Luden's posted notice and its written proposal both indicated an effective date of November 4, 1991 for the new wage scale. The Union dissented from this aspect of the writings, and took the position that the retroactivity provision of the old Article XXIX mandated retroactive application of the new pay scale to May 1, 1991. Stip. of Facts p 22 & Exhs. R, S, T. Faced with this major disagreement between the parties, the Union on January 17, 1992 invoked the grievance procedure of the 1988 CBA (quoted supra at 350 n. 2) and requested AAA to provide a list of arbitrators to resolve the conflict over the retroactivity provision of Article XXIX. Stip. of Facts p 24. AAA reserved September 15 and 16, 1992 for the arbitration of the dispute. Stip. of Facts p 25.

On March 6, 1992, Luden's initiated the instant action against the Union and AAA, seeking a declaratory judgment that the dispute between the parties regarding the retroactivity of wages under the "lapsed" 1988 CBA was not arbitrable. 5 Moreover, Luden's prayed for an injunction against the arbitration proceeding which the Union had scheduled with AAA. Stip. of Facts pp 24-25. The parties submitted stipulated facts and documents to the district court and agreed to submit the issues for resolution upon cross-motions for summary judgment based solely and exclusively thereon. Stip. of Facts pp 29-31. After ordering the parties to supply supplemental motions addressing the intervening decision in Litton Financial Printing Division v. NLRB, 501 U.S. 190, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991), the district court granted Luden's motion and denied the Union's. See 805 F.Supp. at 315 n. 1, 327. In granting the relief requested by Luden's, the district court permanently enjoined the arbitration slated for mid September. As of the date of oral argument before this Court, their minds had not yet met, and the plant operated without a signed CBA. Stip. of Facts p 23.

II. THE...

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