R.J. Corman Derailment Services v. Intern. Union

• Decision Date: 10 July 2003
• Docket Number: No. 02-1743.,02-1743.
• Parties: R.J. CORMAN DERAILMENT SERVICES, LLC, Plaintiff-Appellant, v. INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL UNION 150, AFL-CIO, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

335 F.3d 643

R.J. CORMAN DERAILMENT SERVICES, LLC, Plaintiff-Appellant, v. INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL UNION 150, AFL-CIO, Defendant-Appellee.

No. 02-1743.

United States Court of Appeals, Seventh Circuit.

Argued October 18, 2002.

Decided July 10, 2003.

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James D. Helenhouse (argued), Fletcher & Sippell, Chicago, IL, for Plaintiff-Appellant.

Louis E. Sigman (argued), Baum, Sigman, Auerbach, Neuman & Katsaros, Chicago, IL, for Defendant-Appellee.

Before POSNER, DIANE P. WOOD and EVANS, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

In spite of the fact that courts sometimes talk about arbitral tribunals as nothing more than alternative fora in which to resolve disputes, parties often fight hard either to enforce or to defeat an alleged agreement to arbitrate. That is what is happening in this case: plaintiff R.J. Corman Derailment Services takes the position that a former agreement to arbitrate between Local 150 of the International Union of Operating Engineers and itself is no longer effective; the Union says that it is, and that a wage dispute must therefore be arbitrated. Proceedings in the district court came to an abrupt halt when the court, sua sponte, granted what it termed judgment on the pleadings under FED. R. CIV. P. 12(c) to the Union, thereby holding that the arbitration clause in the parties' expired collective bargaining agreement (CBA) covered the dispute. Apart from the fact that FED. R. CIV. P. 12(c) was not the proper vehicle to use, because the Union had not yet filed its answer to the complaint and the pleadings were thus not yet closed, we find that the court acted prematurely in its action. Judgment under FED. R. CIV. P. 12(b)(6) for the Union would also have been improper, given the allegations in Corman's pleadings, and summary judgment was equally unavailable without proper notice of conversion under FED. R. CIV. P. 12(b). We therefore reverse and remand for further proceedings.

I

Corman provides emergency railroad services across the country. Starting in January 1992, Local 150 represented Corman's Derailment Division employees at its Gary, Indiana, facility. The parties' CBA required Corman to pay bargaining unit members a regular wage rate of $12.35 per hour, a straight-time wreck rate of $16.25 per hour, and an overtime wreck rate of $22.65 per hour.

Article IX of the CBA outlines a four-step procedure for the resolution of grievances. Step one requires an aggrieved employee orally to notify her union steward and her supervisor of a grievance within ten working days of the grievance's occurrence. If after five additional working days the grievance is not resolved, step two requires the employee to submit a signed copy of her grievance in writing to the Union's Business Representative and to Corman or its representative. Corman then has five working days to respond in writing to the grievance. If this additional step fails to resolve the employee's grievance, step three provides for submission of the complaint to a grievance committee. If within ten additional working days the committee does not resolve the grievance, the aggrieved employee may proceed to step four and submit a written demand for arbitration. This written demand for arbitration must be made within forty-five days of the initial occurrence.

One month before the CBA's December 19, 1999, expiration date, Corman and the Union began to negotiate a new Agreement. These efforts ended when, in early June 2000, Corman took the position that Local 150 had lost the support of a majority of the employees in the Division and thus could no longer represent them. At the end of June, Corman closed its Gary facility, laying off all of those employees. One difficult question on which this case turns is whether the CBA continued to cover the parties' relationship during the six months between the formal expiration of the agreement and the closing of the facility, or if instead Corman was unilaterally abiding by the terms of the CBA after it expired in order to comply with its duty to bargain in good faith. Article XIII of the CBA sheds some light on this question, through its statement that "[t]his agreement shall be effective as of 12:01 A.M. on December 19, 1996 and continue in effect until midnight, December 19, 1999 and from year to year thereafter unless either party to this Agreement wishes to change or terminate the Agreement." If the CBA remained in effect, then it is at least possible that the parties were obliged to arbitrate their dispute.

The dispute that the Union would like to put before the arbitrators came to light in an unusual way. In July 2000, the Trustees of the Midwest Operating Engineers Pension and Benefits Funds (the Funds) filed an ERISA lawsuit in the Northern District of Illinois under 29 U.S.C. §§ 1132, 1145, to compel an audit of Corman's fund contributions and to collect any under-payments revealed by that audit. (The appeal from this lawsuit is presently before this court in the case of Dugan v. R.J. Corman Derailment Services, LLC, No. 03-1011 (7th Cir. argued June 2, 2003). The parties failed to notify the court that this related case was pending when it came to their attention, which would have been far better practice. Had it not been for our independent discovery of the relation between the two cases, the parties' failure to call this later case to our attention would have made it difficult for this court to ensure consistency in its decisions.) One year later, in July 2001, the Funds' auditors issued their report. Following the issuance of this report, Local 150 contacted Corman in an attempt to "schedule a meeting in accordance with Article 9, Section A, Step 2" to resolve what it claimed was a wage dispute under the CBA. The Union insists that the underlying discrepancy about which it complained ($11,013.92 in claimed underpaid wages) was discovered as a result of the Funds' ERISA audit. Local 150's wage discrepancy claim covered wages that were paid before the CBA expired in December, 1999, in addition to post-expiration wages that were paid up until the Gary facility closed six months later. Although the Union's complaint was brought to Corman's attention shortly after the Pension Funds' audit was completed, this was long after the expiration of the forty-five day period set forth in Article IX of the CBA for bringing the wage discrepancy claim. In fact, as Corman points out in its brief to this court, the Union's wage discrepancy claim did not comply with any of the steps that the parties agreed had to precede arbitration of a dispute.

Following a flurry of correspondence between the Union and Corman and their lawyers, Local 150 threatened to invoke Article IX's arbitration procedures to resolve the wage dispute. Rather than waiting to see if the Union would make good on its threat to arbitrate, Corman filed a two-count complaint in the District Court. Count I of the complaint sought a declaratory judgment that the parties' dispute was not subject to the CBA's arbitration provision. Count II sought a permanent injunction preventing Local 150 from submitting or threatening to submit its wage discrepancy claim to arbitration. Nearly one month after Corman filed its complaint, and before Local 150 filed its answer, Corman filed a motion for a preliminary injunction that tracked Count II of its complaint. In a footnote in its Reply Memorandum in Support of Plaintiff's Motion for Preliminary Injunction, Corman asked the district court, in the alternative, to treat its motion as a motion for summary judgment on both counts of the complaint. Rather than granting Corman the relief that it sought, the district court denied the motion for a preliminary injunction. The court also denied Corman's alternative request for summary judgment. Instead of granting Corman the injunctive relief that it sought, the district court sua sponte entered declaratory judgment on the pleadings, citing FED. R. CIV. P. 12(c), finding that the Union's wage dispute was subject to arbitration. Corman now appeals that ruling.

II

As a general matter, our court reviews a decision to grant judgment on the pleadings using the same standard that applies to dismissals under FED. R. CIV. P. 12(b)(6) for failure to state a claim on which relief can be granted. See Gustafson v. Jones, 117 F.3d 1015, 1017 (7th Cir.1997). In such cases, judgment may not be granted against the non-moving party "unless it appears beyond a doubt that the [non-moving party] cannot prove any facts that would support his claim for relief." Id. (internal quotation marks omitted). We take the facts alleged in the complaint in the light most favorable to the non-moving party, and we review the district court's decision de novo. Id. Both FED. R. CIV. P. 12(b)(6) and FED. R. CIV. P. 12(c) also provide that if, on a motion under the rule, matters outside the pleadings are presented to and not excluded by the court, then the motion must be converted to one for summary judgment under FED. R. CIV. P. 56, and "all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." FED. R. CIV. P. 12(b), (c). See also Church v. General Motors Corp., 74 F.3d 795, 798 (7th Cir.1996).

This case is somewhat unusual, both because no answer was ever filed, and because it was Corman, not the Union, which asked for its preliminary injunction motion to be treated in the alternative as a motion for summary judgment. By granting summary judgment for the Union, the court in effect created an implied cross-motion for summary judgment "filed" on behalf of the Union. The existence of cross-motions for summary judgment does not, however, imply that there are no genuine issues of material fact. See generally 10A CHARLES A. WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE & PROCEDURE § 2720 at 327-28 (3d ed.1998). Parties have different burdens of proof with respect to...