Mason v. Continental Group, Inc.

• Decision Date: 21 June 1985
• Docket Number: No. 83-7479,83-7479
• Citation: 763 F.2d 1219
• Parties: 119 L.R.R.M. (BNA) 3077, 103 Lab.Cas. P 11,545, 6 Employee Benefits Ca 1933 John MASON, III, et al., Plaintiffs-Appellants, v. CONTINENTAL GROUP, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1219

763 F.2d 1219

119 L.R.R.M. (BNA) 3077, 103 Lab.Cas. P 11,545,

6 Employee Benefits Ca 1933

John MASON, III, et al., Plaintiffs-Appellants, v. CONTINENTAL GROUP, INC., et al., Defendants-Appellees.

No. 83-7479.

United States Court of Appeals, Eleventh Circuit.

June 21, 1985.

J. Gusty Yearout, Birmingham, Ala., for plaintiffs-appellants.

Robert H. Stroop, Jr., Jerome A. Cooper, Birmingham, Ala., for United Steelworkers of America, AFL-CIO.

Sydney F. Frazier, Jr., Birmingham, Ala., for Continental Group.

Appeal from the United States District Court for the Northern District of Alabama.

Before RONEY and ANDERSON, Circuit Judges, and MORGAN, Senior Circuit Judge.

RONEY, Circuit Judge:

Plaintiffs, former employees of Continental Can Company, claim the company closed its Alabama plant in order to avoid employment obligations to its employees, after having induced plaintiffs to continue as employees on the representation that the plant would remain in operation. They brought a suit against the company alleging breach of contract, intentional and willful fraud, and breach of state law fiduciary requirements, and against the union alleging a breach of the duty of representation and conspiracy to defraud. Plaintiffs also assert a violation of their statutory rights under the Employee Retirement Income Security Act of 1974 ("ERISA").

The district court, 569 F.Supp. 1241 (D.C.Ala.1983) granted summary judgment for both the employer and the union, holding that plaintiffs' remedy lay in the grievance and arbitration procedures of the collective bargaining agreement, and that failure to exhaust those remedies foreclosed this litigation. We affirm.

The appeal raises issues as to (1) whether the company's alleged conduct is subject to the collective bargaining agreement, (2) if so, whether plaintiffs should be excused from exhausting remedies provided in that agreement; (3) whether the state law cause of action for breach of fiduciary duty is preempted by the National Labor Relations Act; (4) whether ERISA claims are subject to pension plan appeals procedures; and (5) whether Continental Can was a fiduciary under ERISA and subject to the duties imposed by the Act.

The decision of the first two issues turns on the collective bargaining agreement in force at the time. Since we hold that the claims should have been submitted to arbitration, we need not decide the third point, whether the state law breach of duty claim is preempted by the Labor Relations Act. The fourth and fifth points require an analysis of ERISA, but there too, we decide that exhaustion of administrative remedies must precede a court suit.

Plaintiffs, thirty-six employees at Continental Can's Plant No. 411 in Fairfield, Alabama, until the plant was closed on December 21, 1979, were at all times relevant to this case members of the collective bargaining unit represented by the United Steel Workers of America, AFL-CIO, subject to the collective bargaining agreement, insurance agreement, and pension plan entered into between Continental Can and the union. Because of changes in can manufacturing technology, in 1975 Continental Can began planning for gradual transition that would eventually result in the closing of Plant No. 411 in 1979 and the concurrent opening of a new plant in Atlanta, Georgia. Continental Can first announced the closing of Plant No. 411 to the employees in September 1979, two months before the event actually occurred. Layoffs of employees continued over the next two months, and the plant ceased operations on December 21, 1979.

Plaintiffs originally filed this action against Continental Can in state court on November 16, 1980. They claimed damages "for wrongful termination, for the deprivation of employee benefits, pension retirement benefits, comprehensive employee benefits, seniority rights, [and] mental anguish" resulting from the closing of Plant No. 411. They alleged that Continental Can, prior to the closing announcement, had made various fraudulent misrepresentations that they would have continuous employment with Continental Can until they reached retirement age as long as they performed their jobs satisfactorily. They contended that these and other misrepresentations induced them to continue their employment at the plant even though they would have obtained other jobs had they known Continental Can's intentions of closing down the plant and terminating their employment.

Predicating federal jurisdiction on section 301 of the Labor Management Relations Act, 29 U.S.C.A. Sec. 185, Continental Can removed the case to federal district court and moved for summary judgment on the grounds that plaintiffs' grievances were arbitrable under the collective bargaining agreement and that they had made no effort to resolve their claims through the grievance and arbitration procedures provided in that agreement. Plaintiffs subsequently amended their complaint twice. First, plaintiffs added the ERISA claims against Continental Can, alleging that Continental Can had terminated their employment out of a desire to interfere with plaintiffs' attainment of rights and benefits under the comprehensive benefit program administered by Continental Can. Second, plaintiffs added the union as a party defendant, alleging that the union had breached its duty of fair representation owed to the plaintiffs by failing to file and prosecute plaintiffs' claims through the grievance and arbitration procedures, and that the union had conspired with Continental Can to deprive the plaintiffs of their rights under the collective bargaining agreement. The union also moved for summary judgment.

On July 27, 1983, the district court granted both defendants' motions for summary judgment. As to the union, the court held that plaintiffs' claims were barred by the applicable six-month statute of limitations. Plaintiffs do not appeal that decision.

As to the Company, the district court held that notwithstanding the state law fraud claims, the plaintiffs' complaints fell within the scope of the grievance and arbitration provisions. The court determined that it was "incumbent upon plaintiffs to attempt, unless otherwise excused, to present their complaints concerning 'fraud' and breach of some 'contract' other than the collective bargaining agreement through the grievance mechanism...." The court considered and rejected plaintiffs' arguments that they were excused from resorting to those procedures because it would have been futile. The court went on to find that an exhaustion of remedies requirement barred plaintiffs' ERISA claims because they had not invoked the arbitration procedures provided by the pension plan agreement.

Exhaustion of Remedies Under Collective Bargaining Agreement

Employees claiming breach of a collective bargaining agreement or wrongful termination of employment by their employer are bound by that agreement's terms providing a method for resolving disputes between them and their employer. Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 563, 96 S.Ct. 1048, 1055, 47 L.Ed.2d 231 (1976); Vaca v. Sipes, 386 U.S. 171, 184-85, 87 S.Ct. 903, 913-14, 17 L.Ed.2d 842 (1967). When employees asserting an arbitrable grievance have not attempted to utilize the dispute resolution machinery available to them under the agreement, their independent suit against the employer must be dismissed. Republic Steel Corp. v. Maddox, 379 U.S. 650, 652, 85 S.Ct. 614, 616, 13 L.Ed.2d 580 (1965).

It is undisputed that the plaintiffs have never initiated a grievance against Continental Can concerning the closing of Plant No. 411 or any misrepresentations made prior to the announcement of the closing. Plaintiffs contend, however, that their state law fraud claims under the Alabama fraud statute are separate and independent from the collective bargaining agreement. Ala.Code Secs. 6-5-101 to -104 (1977).

In United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960), the Supreme Court provided guidance for determining when disputes are arbitrable under a collective bargaining agreement. The question is whether the reluctant party did agree to arbitrate the grievance. The Court directed that the arbitration provisions of an agreement should be broadly construed to encompass all claims that the employees have been terminated wrongfully and deprived of benefits guaranteed by the agreement unless the subject of the dispute is clearly excluded from the grievance procedure. Id. at 582-83, 80 S.Ct. at 1352-53. Questions of arbitrability are left to the arbitrator if there is a clear demonstration that the parties so intended. Id. at 583 n. 7, 80 S.Ct. at 1353 n. 7.

The grievance and arbitration provisions in the collective bargaining agreement between Continental Can and the union were quite broad:

13.1 Purpose

The purpose of this Article is to provide an opportunity for discussion of any request or complaint and to establish a procedure for the processing and settling of grievances, as defined in Section 13.2.

13.2 Definition

A grievance is defined as any difference between the Local Management and the Union or employees as to the interpretation or application of or compliance with the Agreement respecting wages, hours, or conditions of employment. Any dispute over whether the complaint is subject to these procedures shall be handled as a grievance in accordance with the procedures prescribed herein.

Section 13.2 clearly supports the district court's decision that plaintiffs were required to submit to arbitration the question of whether the definition of "grievance" included a complaint concerning alleged misrepresentations made by Continental Can with regard to the closing of Plant No. 411. Having agreed to such a broad arbitration clause, plaintiffs are bound to submit arguably extrinsic claims, such as fraud, to the grievance and arbitration process. Cf. International Union of Operating Engineers, Local 150 v....