Refinery Employees Union v. Continental Oil Co.

• Citation: 268 F.2d 447
• Decision Date: 25 June 1959
• Docket Number: No. 17344.,17344.
• Parties: REFINERY EMPLOYEES UNION OF LAKE CHARLES AREA, Appellant, v. CONTINENTAL OIL COMPANY, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

268 F.2d 447 (1959)

REFINERY EMPLOYEES UNION OF LAKE CHARLES AREA, Appellant, v. CONTINENTAL OIL COMPANY, Appellee.

No. 17344.

United States Court of Appeals Fifth Circuit.

June 25, 1959.

George W. Liskow, Lake Charles, La., Liskow & Bond, Lake Charles, of counsel, for appellant.

William R. Tete, Lake Charles, La., Keith W. Blinn, Houston, Tex., Jones, Kimball, Harper, Tete & Wetherill, Lake Charles, La., of counsel, for appellee.

Before HUTCHESON, Chief Judge, and BROWN and WISDOM, Circuit Judges.

WISDOM, Circuit Judge.

This appeal concerns the interpretation of an arbitration clause in a collective bargaining agreement. Two questions are raised. (1) Does the Court have authority to determine arbitrability and in so doing limit the scope of the arbitrable issue to be referred to the arbitrator? (2) Was it the intention of the parties, as expressed in the contract, to submit to arbitration the determination of the remedy for a breach of contract, including authority to award damages for misassigned overtime, contrary to management policy of paying only for work performed?

The Refinery Employees Union of the Lake Charles Area, plaintiff-appellant, and the Continental Oil Company, defendant-appellee, are parties to a collective bargaining agreement. The Union sued for specific performance of the arbitration provision, under Section 301 of the Labor Management Relations Act of 1947, 61 Stat. 156, 29 U.S.C.A. § 185.¹ Both parties and the trial judge treated the action as a suit for a declaratory judgment.

I.

The agreement regulates, among other matters, observance of craft lines separating the duties of employees in a particular job classification from the duties of employees in another job classification.² One of the purposes of job classification is to provide a basis for the equable distribution of overtime, because of the premium pay that makes overtime work attractive to employees.

During a night shift at the Lake Charles refinery, March 3, 1957, a dispute arose between the Company's shift foreman and the Union's representative over the foreman's assignment of an employee to work four hours overtime in a job that did not fit into his permanent classification, to the detriment of another employee who was allegedly entitled to that particular overtime assignment because of his job classification. March 13, after discussions in which the Company agreed that the foreman had made a mistake, the Union representative filed a formal grievance, requesting four hours pay for the aggrieved employee, "since his four hours were taken away from him and given to another classification".

March 18 the Company replied, "regretting the error" and promising to make every effort to see that this type of mistake would not be repeated but refusing to pay anything to the aggrieved employee, because "it is the policy of the Company to pay only for work performed."

A number of letters were then exchanged between the Company and the Union. The Company changed its position from admitting having made a mistake to arguing that the terms of the agreement referring to permanent or temporary assignment are vague, that the shift foreman was confronted with an emergency, that anyway he tried to call an employee in the proper classification who was off duty, thereby showing good faith, and that the employee who did perform the work received premium pay. But the Company insisted on maintaining its policy of no work — no pay. The Union charged that the Company was guilty of "a deliberate violation of the terms of our signed agreement" and that the improper work assignment was one of a long series of such violations; "management says `we are sorry', and the infractions continue". There were more letters. The Company offered to make concessions in order to end the dispute. It was willing to give the aggrieved employee "four hours overtime work as Cat Reformer Controlman 1st * * * to be `made work', not vacation or sick relief * * * so that his assignment will not reduce any overtime conceivably worked by another employee". Still the Company would not budge from its policy of paying only for work performed.

The proposed solution was unsatisfactory. The Union invoked arbitration. The Company agreed to arbitration, "provided, however, that the arbitrator's decision shall be limited to a determination of whether such violation occurred and if the arbitrator shall determine that such violation occurred, the remedy shall be the subject of negotiation between the company and the union". The Union rejected the Company's proposed limitation on the arbitration. The Union called it "an attempt in very bad faith by the company to avoid coming to grips with the real problem". The real problem, said the Union, was "difference of opinion as to the award rather than a difference of opinion as to the error committed". The Union stated that:

"It is our position that the question of whether or not the arbitrator has the right to make an award is a matter of interpretation of the contract to be made by the * * * arbitrator. * * * The interpretation of the contract is a matter to be left to the arbitrator."

As a last "effort to find an amicable basis for settlement * * * the Company offered to permit the aggrieved employee to work four hours any time selected by him at the applicable rate of pay". The Company "refused to arbitrate on the question of pay for work not performed, since it related neither to the interpretation nor performance of the contract". The Union then filed a suit for specific performance of the arbitration clause.

It is apparent on the face of these letters that there was never any serious dispute as to the underlying problem of whether the Company's shift foreman had violated the work assignment provisions of the agreement. Moreover, the Company was willing to make the aggrieved party whole by giving him additional work at the equivalent pay and classification. The serious dispute was whether the Company should pay what in effect is a penalty and is contrary to its policy against payment for work not performed, in the absence of a provision in the contract awarding damages or requiring payment for work not performed.

The Union contends that determination of the remedy, including payment of damages, is implicit in arbitrating grievances; that this is a matter for arbitrators, not courts, the power to arbitrate an underlying problem carrying with it the power to dispose of the whole problem. The Union asserts that the district court went into the merits of the grievance, foreclosed any independent decision by an arbitrator, and put the Union in a position of having a right without a remedy.

The district court held that "the determination of whether the disputed issues is arbitrable is inescapably for the court". 160 F.Supp. 733. It could "find nothing in the terms of the carefully drawn agreement to warrant a conclusion that the parties to it agreed therein to submit to arbitration the question of a penalty or of an award". The district court held that although the Union was entitled to an order requiring the Company to proceed with arbitration of the issue of work assignment, "the arbitrator's authority will be limited to a determination of that issue alone and shall not extend to the formulation of any penalty or the fixing of damages". We affirm.

II.

The Union now concedes, contrary to its position in the district court, that arbitrability of a grievance, meaning the underlying problem, is a preliminary question within the province of the court. The Union contends however that the court may go that far and no farther; that in this case the court could not restrict the arbitration to a decision as to whether there was a violation of the contract and could not prohibit the arbitrators from awarding damages; an arbitrator's authority is for arbitrators to decide.

This amounts to saying that a court may order parties to arbitrate, but cannot tell the arbitrator what to arbitrate.

We cannot accept such a proposition. Private arbitration fits in well with responsible industrial self-government and is favored by the courts.³ But whether an issue is an arbitrable one is a legal question for the court rather than for the arbitrator. Lodge No. 12, Dist. No. 37, International Association of Machinists v. Cameron Iron Works, 5 Cir., 1958, 257 F.2d 467, certiorari denied 358 U.S. 880, 79 S.Ct. 120, 3 L.Ed.2d 110; Engineers Association v. Sperry Gyroscope Co., 2 Cir., 1953, 251 F.2d 133; International Union, United Automobile Aircraft v. Benton Harbor Malleable Industries, 6 Cir., 1957, 242 F.2d 536; Local No. 149, American Federation of Technical Engineers (A. F. L.) v. General Electric Company, 1 Cir., 1957, 250 F.2d 922, certiorari denied, 1958, 356 U. S. 938, 78 S.Ct. 780, 2 L.Ed.2d 813; United Steelworkers of America v. American Manufacturing Co., 6 Cir., 264 F.2d 624. The power to determine arbitrability carries with it the power to define and limit the arbitrable issue. See Council of Western Electric Technical Employees v. Western Electric Company, 2 Cir., 1956, 238 F.2d 892, and Boston Mutual Life Insurance Co. v. Insurance Agents International Union, 1 Cir., 1958, 258 F.2d 516. Even giving the "broadest liberalities" to private arbitration, parties to a contract cannot be forced to arbitrate an issue they did not agree to arbitrate. "When one of the parties needs the aid of a court, and asks the court for a decree ordering specific performance of a contract to arbitrate, we think that the court, before rendering such a decree, has the inescapable obligation to determine as a preliminary matter that the defendant has contracted to refer such issue to arbitration, and has broken this promise." Local No. 149, American Federation of Technical Engineers (A. F. L.) v. General Electric Co., 1 Cir., 1957, 250 F.2d 922, 927, certiorari denied 1958, 356 U.S. 938, 78 S.Ct. 780, 2 L.Ed.2d 813.⁴

The process of deciding just what the...