Olson v. Bemis Co.

• Decision Date: 25 August 2015
• Docket Number: No. 14–3563.,14–3563.
• Citation: 800 F.3d 296
• Parties: Steven OLSON, Plaintiff–Appellant, v. BEMIS COMPANY, INCORPORATED, and United Steel, Paper and Forestry, Rubber Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL–CIO/CLC Local 2–0148, Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

800 F.3d 296

Steven OLSON, Plaintiff–Appellant

v.BEMIS COMPANY, INCORPORATED, and United Steel, Paper and Forestry, Rubber Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL–CIO/CLC Local 2–0148, Defendants–Appellees.

No. 14–3563.

United States Court of Appeals, Seventh Circuit.

Argued May 18, 2015.

Decided Aug. 25, 2015.

Peter J. Culp, Attorney, Dempsey Law Firm, LLP, Oshkosh, WI, for Plaintiff–Appellant.

Kevin J. Kinney, Attorney, Mark A. Johnson, Attorney, Ogletree Deakins, Frederick Perillo, Attorney, Previant Law Firm, S.C., Milwaukee, WI, Amanda M. Fisher, Attorney, United Steelworkers of America Legal Department, Pittsburgh, PA, for Defendants–Appellees.

Before KANNE and SYKES, Circuit Judges, and ELLIS, District Judge.^*

Opinion

SYKES, Circuit Judge.

Steven Olson worked for Bemis Company, Inc., at its factory in Neenah, Wisconsin, and was a member of the Local 2–0148, an affiliate of the United Steel, Paper and Forestry, Rubber Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL–CIO/CLC (“the Union”). He was injured on the job and later fired. The Union filed a grievance on Olson's behalf as permitted under its collective bargaining agreement (“CBA”), and Bemis and the Union ultimately entered into a settlement under which Bemis agreed to pay Olson $20,000 in exchange for a waiver of all legal claims he had against the company. Olson didn't like the terms of the deal, so he sued Bemis and the Union in federal court, challenging both his discharge and the legitimacy of the settlement. He lost on summary judgment.

Olson later filed a second suit against Bemis and the Union, this time in state court, arguing that if the settlement was a valid contract, then he was entitled to the $20,000 payout. Theremoved the case, and the district court held that it had federal-question jurisdiction over Olson's state-law claims because they were preempted by § 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185(a). The court then dismissed the complaint for failure to state any valid claim.

We affirm. Olson breached the waiver-of-claims clause in the settlement agreement by filing his first suit against Bemis, so the company had no obligation to pay him.

I. Background

Olson worked as a machine operator at a plastics packaging factory in Neenah owned and operated by Bemis. On January 5, 2012, he injured his back while lifting one end of a 130–pound shaft. Bemis investigated the incident and concluded that Olson had violated its worker safety code. It wasn't his first breach of safety protocol, so the company terminated his employment.

The Union is empowered under the CBA to file grievances against the company on behalf of its members, a process that culminates in binding arbitration. It filed a grievance on Olson's behalf alleging that he was wrongfully discharged without cause. After looking into the accident more closely, however, the Union determined that an arbitrator would be unlikely to order Olson's reinstatement or provide any compensation, so it proceeded to negotiate a settlement: Olson wouldn't get his job back, but Bemis agreed to pay a lump sum of $20,000 in exchange for a waiver of any legal claims he might have against the company. The offer was good only until May 8, 2012; if it wasn't accepted by then, the grievance would be sent to arbitration.

Olson retained private counsel and made a counteroffer to Bemis, which the company rejected. On May 7, the day before the settlement offer expired, Union representatives went to Olson's house. They told him that the settlement was more generous than what he could expect from an arbitrator and then informed Olson that they had decided to accept the deal on his behalf (in fact, they had already signed it). Olson refused to consent. Bemis signed the agreement later that same day. One week later, the company mailed Olson a $20,000 check.

Olson didn't immediately cash the check. Instead he filed a “hybrid” § 301 suit against Bemis and the Union. Section 301 of the LMRA permits individual employees to sue their employers for violating a CBA. See Rutherford v. Judge & Dolph Ltd., 707 F.3d 710, 714 (7th Cir.2013). But “as a practical matter, an employee often cannot go straight to federal court with such a claim because many CBAs ... have mandatory provisions that require the employee, represented by his union, to pursue his grievances through arbitration.” Id. Unions have broad discretion to decide how to resolve employees' grievances. See Titanium Metals Corp. v. NLRB, 392 F.3d 439, 448 (D.C.Cir.2004) (“[T]he union is empowered to bind the individual employee to the result obtained through the grievance process.” (quoting Plumbers & Pipefitters Local Union No. 520 v. NLRB, 955 F.2d 744, 753 (D.C.Cir.1992) )) (alterations omitted). Therefore, in order for an employee to prevail in a suit against his employer, he must also prove that “the union representing the employee in the grievance/arbitration procedure act[ed] in such a discriminatory, dishonest, arbitrary, or perfunctory fashion as to breach its duty of fair representation.” DelCostello v. Int'l Bhd. of Teamsters, 462 U.S. 151, 164, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983).¹ If he can't, then the grievance adjudication is final.

The district judge held that no reasonable jury could find that the Union had failed to represent Olson fairly. See Olson v. Bemis Co., Inc.

(“Olson I ”), No. 12–C–1126, 2014 WL 1576786, at *18 (E.D.Wis. Apr. 17, 2014). In so holding, the judge confirmed that the Union had the authority to settle the grievance over Olson's objection and that the settlement was effective as of the date it was signed: May 7, 2012. Id. at *9, *15. The judge accordingly entered summary judgment for the defendants. Id. at *18.

Olson didn't appeal that decision. He did, however, try to cash the settlement check—but Bemis had put a stop on the funds. Olson then filed another lawsuit, this time in Wisconsin state court. His complaint again named Bemis and the Union as codefendants and alleged four state-law causes of action arising out of Bemis's failure to pay him the $20,000: (1) breach of a written contract; (2) breach of an oral contract; (3) equitable estoppel; and (4) promissory estoppel.²

The defendants removed the case to federal court, where it was assigned to the same judge who presided in Olson I . Olson moved to remand, challenging the district court's jurisdiction. The judge held that Olson's claim for breach of a written contract was preempted by § 301 of the LMRA and that his other claims were, at minimum, within the scope of its supplemental jurisdiction.

The defendants moved to dismiss for failure to state a claim. See Fed.R.Civ.P. 12(b)(6). The judge took judicial notice of Olson I , the hybrid § 301 suit, and held that “in light of his earlier action against Bemis and the Union,” Olson had repudiated the settlement agreement and had no right to enforce its terms. The judge granted the defendants' motion to dismiss, and this appeal followed.

II. Discussion

A. Subject–Matter Jurisdiction

Although the parties did not brief the issue of jurisdiction, “federal courts have an independent ‘obligation at each stage of the proceedings to ensure that they have subject matter jurisdiction over the dispute.’ ” Crosby v. Cooper B–Line, Inc., 725 F.3d 795, 800 (7th Cir.2013) (quoting Ne. Rural Elec. Membership Corp. v. Wabash Valley Power Ass'n, Inc., 707 F.3d 883, 890 (7th Cir.2013) ) (alteration omitted). Here, Olson filed suit in state court asserting contract and estoppel claims arising out of Bemis's alleged breach of the grievance settlement. The defendants removed the case to federal court, relying on federal-question jurisdiction and arguing that § 301 of the LMRA preempted the state-law claims. Olson moved to remand, but the judge concluded that Olson's claims were preempted by § 301, giving rise to federal-question jurisdiction.

Ordinarily “[a] disagreement about whether parties to a settlement have honored their commitments is a contract dispute. Suits for breach of contract ... arise under state law. They cannot be adjudicated in federal court unless there is an independent basis of subject-matter jurisdiction....” Jones v. Ass'n of Flight Attendants–CWA, 778 F.3d 571, 573 (7th Cir.2015) (citation omitted); see also Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381–82, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). An independent jurisdictional basis exists, however, when the substance of a plaintiff's state-law claim is “inextricably intertwined with consideration of the terms of [a] labor contract.”

Allis–Chalmers Corp. v. Lueck, 471 U.S. 202, 213, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985). In those circumstances, § 301 of the LMRA, codified at 29 U.S.C. § 185(a), completely preempts the state-law cause of action. Id. at 209–10, 105 S.Ct. 1904. “Once an area of state law has been completely pre-empted, any claim purportedly based on that preempted state law is considered, from its inception, a federal claim, and therefore arises under federal law.” Caterpillar, Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).

Section 301(a) of the LMRA states: “Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce ... may be brought in any district court of the United States having jurisdiction of the parties....” 29 U.S.C. § 185(a). State-law suits of this sort are completely preempted because “[t]he subject matter of § 301(a) is peculiarly one that calls for uniform law.... The possibility that individual contract terms might have different meanings under state and federal law would inevitably exert a disruptive influence upon both the negotiation and administration of collective agreements.” Allis–Chalmers, 471 U.S. at 210, 105 S.Ct. 1904 (quoting Local 174, Teamsters v. Lucas Flour Co., 369 U.S. 95, 103, 82 S.Ct. 571, 7 L.Ed.2d 593 (196...