Niro v. Fearn Intern., Inc.

• Decision Date: 26 October 1987
• Docket Number: No. 86-2769,86-2769
• Citation: 827 F.2d 173
• Parties: 126 L.R.R.M. (BNA) 2019, 56 USLW 2140, 107 Lab.Cas. P 10,127 Dominic NIRO, Plaintiff-Appellee, v. FEARN INTERNATIONAL, INC., Defendant-Appellant, and Beer, Soft Drink, Water, etc., Local Union 744, I.B.T., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 173

827 F.2d 173

126 L.R.R.M. (BNA) 2019, 56 USLW 2140,

107 Lab.Cas. P 10,127

Dominic NIRO, Plaintiff-Appellee, v. FEARN INTERNATIONAL, INC., Defendant-Appellant and Beer, Soft Drink, Water, etc., Local Union 744, I.B.T. Defendant-Appellee.

No. 86-2769.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 26, 1987.

Decided Aug. 19, 1987.

Rehearing and Rehearing En Banc Denied Oct. 26, 1987.

Terrill E. Pierce, Kovar Nelson & Brittain, Chicago, Ill., for defendant-appellant.

Barry M. Bennett, Asher Pavalon Gittler & Greenfield, Chicago, Ill., for plaintiff-appellee.

Before CUDAHY, RIPPLE and MANION, Circuit Judges.

CUDAHY, Circuit Judge.

This case involves a mutation of a "hybrid" section 301 suit brought by an employee against his union and former employer. See 29 U.S.C. Sec. 185. The variation in this case arises because the union switched sides after a section 301 suit was brought. The union reached an agreement with the former employee to begin pursuing arbitration against the employer rather than defending itself against the employee's charge of a violation of the duty of fair representation. The district court ordered the union and the employer to arbitrate and it dismissed the employee's section 301 suit without prejudice. We affirm.

I.

Dominic Niro worked for Fearn International, Inc. ("Fearn") and was represented in collective bargaining by Local 744 of Beer, Soft Drink, Water, Fruit Juice, Carbonic Gas, Liquor Sales, Drivers, Helpers, Inside Workers, Bottlers, Warehousemen, School, Sightseeing, Charter Bus Drivers, General Promotional Employees of Affiliated Industries, International Brotherhood of Teamsters (the "Union" or "Local 744"). Fearn fired Niro in April 1984 for reporting to work while under the influence of alcohol or drugs. Niro looked to Local 744 for help, and on May 1, 1984, Local 744 filed a grievance protesting Niro's discharge. After negotiations the parties agreed on a settlement pursuant to which Niro was reinstated with Fearn contingent upon his successful completion of an alcohol abuse program. Before completing this program, however, Niro was hospitalized for overdosing on a controlled substance, "PCP." When Fearn officials learned of Niro's use of PCP, they concluded that Niro had breached the settlement agreement and decided to terminate his employment. Fearn apparently reached this decision in mid-May and communicated it to the Local 744 shop steward shortly thereafter. Niro himself was informed of this decision on May 31. Actual termination did not occur until July 20 after Niro completed the substance abuse program. The Union never filed a grievance challenging Fearn's second discharge of Niro.

On December 11, 1984, Niro sued Fearn for wrongful discharge in violation of the collective bargaining agreement. See 29 U.S.C. Sec. 185. In response to Fearn's motion to dismiss, in February 1985 Niro filed an amended complaint adding the Union as a defendant, alleging that the Union had breached its duty of fair representation by failing to challenge his second discharge. In July 1985, Niro and Local 744 sought court approval of a proposed settlement under which Niro would voluntarily dismiss (with prejudice) Local 744 as a defendant in exchange for Local 744's pledge to pursue arbitration to challenge Niro's second discharge. Fearn opposed the settlement and the district court agreed, finding that "fairness and efficiency" required that the settlement be rejected. See Fed.R.Civ.P. 21, 41(a)(2). Thereafter Local 744 brought a cross-claim against Fearn to compel arbitration over the alleged breach of the settlement agreement and over the original discharge. The district court granted the cross-claim in part and denied it in part, ordering arbitration over the alleged breach of the settlement agreement (the second discharge), but concluding that the original discharge was no longer arbitrable.

Fearn appeals the order compelling arbitration of the second discharge, urging that three legal errors require that we reverse the judgment of the district court: (1) the alleged breach of the settlement agreement is not an arbitrable subject; (2) the cross-claim seeking arbitration is not timely; and (3) the court cannot compel arbitration after a hybrid section 301 suit has commenced. As discussed below we disagree and instead affirm the judgment of the district court.

II.

A. Arbitrability of Breach of Settlement Agreement

Fearn's original discharge of Niro was unquestionably an action subject to the grievance and arbitration procedures set forth in the collective bargaining agreement between Fearn and Local 744. ¹ Fearn argues, however, that the settlement agreement that resolved the dispute about Niro's original discharge is not itself subject to the collective bargaining agreement and is thus not arbitrable.

We begin with the axiom that "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." Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960) (part of "Steelworkers Trilogy " at 363 U.S. 564, 80 S.Ct. 1343 and 363 U.S. 593, 80 S.Ct. 1358); AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986). But arbitration is favored and should be ordered "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." Warrior & Gulf Navigation Co., 363 U.S. at 582-83, 80 S.Ct. at 1352-53. It is of course for the court to determine whether a dispute is subject to arbitration, unless the parties have "clearly and unmistakably" established that an arbitrator is to determine issues of arbitrability. AT & T Technologies, Inc., 106 S.Ct. at 1418; see John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546-47, 84 S.Ct. 909, 912-13, 11 L.Ed.2d 898 (1964).

We conclude that a settlement agreement is an arbitrable subject when the underlying dispute is arbitrable, except in circumstances where the parties expressly exclude the settlement agreement from being arbitrated. To hold otherwise could eviscerate the usefulness of settlements reached in grievance and arbitration settings, by complicating what should be a relatively simple and cheap procedure. If parties desire that a settlement agreement should not be arbitrable they may so prescribe. We simply agree with Local 744 that in uncertain situations the presumption should favor arbitrability. Accord Bakers Union Factory No. 326 v. ITT Continental Baking Co., 749 F.2d 350, 356 (6th Cir.1984); L.O. Koven & Bro., Inc. v. Local 5767, United Steelworkers, 381 F.2d 196, 204-05 (3d Cir.1967); International Union of Operating Eng'rs, Local 564 v. Dow Chem. Co., 348 F.Supp. 1149, 1153 (S.D.Tex.1972); Elkouri & Elkouri, How Arbitration Works, 206 n. 257 (4th ed. 1985); cf. also Westinghouse Broadcasting Co. v. Local 804, Int'l Alliance of Theatrical Stage Employees, 616 F.2d 97, 100 (3d Cir.1980) (alleged breach of pension agreement arbitrable); Teamsters Local 284 v. Maremont Corp., 515 F.Supp. 168, 174 (S.D. Ohio 1980) (alleged breach of arbitration decision arbitrable); Kansas City Power & Light Co. v. Local 1464, IBEW, 506 F.Supp. 1151, 1155-56 (W.D.Mo.1981) (alleged breach of agreement supplementing labor contract arbitrable).

Fearn also contends that, even if the alleged breach of the settlement agreement were arbitrable, the district court here erred by failing to recognize that Niro's and Local 744's utter failure to pursue preliminary grievance procedures necessitated a conclusion that no arbitration could be ordered. Fearn essentially argues that if procedural shortcomings are severe enough, they become substantive failings and render the underlying dispute nonarbitrable. The question whether a particular dispute concerns a subject that the parties have agreed to arbitrate is ordinarily a question to be decided by the court. Questions whether a party adequately has abided by procedural requirements of an arbitration agreement, on the other hand, normally are reserved for the arbitrator's judgment. The high hurdle that Fearn fails to clear was first raised by the Supreme Court in John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964). In John Wiley the union sued under section 301 to compel the company to arbitrate pursuant to their collective bargaining agreement. The company argued that the union failed to follow procedural steps set forth in the agreement as preliminary to arbitration, and that a court should determine whether or not those procedural shortcomings precluded arbitration. The Court rejected this dichotomy, stating that "labor disputes of the kind involved here cannot be broken down so easily into their 'substantive' and 'procedural' aspects." 376 U.S. at 556, 84 S.Ct. at 918. The Court's inquiry is more limited:

Once it is determined ... that the parties are obligated to submit the subject matter of a dispute to arbitration, "procedural" questions which grow out of the dispute and bear on its final disposition should be left to the arbitrator.

Id. at 557, 84 S.Ct. at 918.

This court and others have heeded John Wiley and are slow to enter the thicket of deciding whether, under a particular collective bargaining agreement reached by private parties, an alleged violation of the agreement should be characterized as essentially "procedural" or "substantive." Federal courts face sufficiently daunting tasks trying to classify statutory requirements into procedural and substantive categories for purposes of the diversity jurisdiction. The prospect of conducting similar analyses of private labor agreements counsels caution. We agree, therefore, that once it is determined that the underlying dispute concerns a subject matter covered by arbitration provisions, the court's only role is to order arbitration....