Troy Chemical Corp. v. Teamsters Union Local No. 408, 93-5638

• Decision Date: 30 September 1994
• Docket Number: No. 93-5638,93-5638
• Citation: 37 F.3d 123
• Parties: 147 L.R.R.M. (BNA) 2441, 129 Lab.Cas. P 11,189 TROY CHEMICAL CORPORATION, Appellant, v. TEAMSTERS UNION LOCAL NO. 408, Appellee.
• Court: U.S. Court of Appeals — Third Circuit

Page 123

37 F.3d 123

147 L.R.R.M. (BNA) 2441, 129 Lab.Cas. P 11,189

TROY CHEMICAL CORPORATION, Appellant, v. TEAMSTERS UNION LOCAL NO. 408, Appellee.

No. 93-5638.

United States Court of Appeals Third Circuit.

Argued June 7, 1994.

Decided Sept. 30, 1994.

Harry N. Turk (argued), Epstein, Becker & Green, New York City, for appellant.

Kenneth I. Nowak (argued), Zazzali, Zazzali, Fagella & Nowak, Newark, NJ, for appellee.

Before: MANSMANN, ALITO, and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

This appeal presents an interesting question concerning the authority of a federal district court to preliminarily decide procedural issues as well as the arbitrability of a labor grievance where the union party seeks arbitration. Troy Chemical Corporation (Troy Chemical) and the Teamsters Union Local No. 408 (the Union) are parties to a collective bargaining agreement (CBA). On April 23, 1991, Troy Chemical discharged four employees for theft of company property and immediately notified the union shop steward of the discharges. No grievances were filed by the Union or the individuals pursuant to the CBA.

On January 28, 1993, the Union notified the New Jersey State Board of Mediation that a dispute existed over the discharge of one of the four employees, and requested that an arbitrator be selected. On May 14, 1993, the mediation board advised the parties that an arbitrator had been selected and a hearing was scheduled for October 20, 1993. On May 24, 1993, Troy Chemical commenced an action in the United States District Court for the District of New Jersey seeking a declaratory judgment that any disputes over the discharged four employees were not arbitrable because the Union had not complied with the grievance procedure. ¹

The parties filed cross-motions for summary judgment. The district court denied Troy Chemical's motion and granted the Union's motion for summary judgment, holding that the parties had modified by past practice the CBA provision pertaining to the grievance procedure for discharges and that the grievances regarding the four employees were arbitrable. Troy Chemical appealed. We reverse.

I.

The Union represents production and maintenance employees of Troy Chemical's Newark, New Jersey specialty chemicals manufacturing facility. Article 11 of the CBA ² provides that no grievance shall be accepted for consideration unless reduced to writing and presented within two working days of the occurrence of the incident causing the grievance. The only exception to this requirement is grievances involving payroll calculations. Step two of the grievance procedure requires a conference between representatives of Troy Chemical and the Union within three days of the incident giving rise to the grievance. If there is no settlement of the dispute after the completion of these two steps, then the matter may be submitted to arbitration. Paragraph A of article 11 states, "[t]he dispute referred to herein shall include, but shall not be limited to disputes concerning the discharge of an employee." Paragraph C of article 11 provides that, "the procedure established in this Agreement for the adjustment of said dispute shall be the exclusive means for its determination." Article 11 has remained unchanged in the more than 15 years of successive three year collective bargaining agreements between the parties.

The district court acknowledged that express contract language made it "abundantly clear that a written grievance is to be submitted ... for all disputes concerning discharged employees." Nevertheless, the court found that the parties had historically acquiesced in the waiving of the grievance procedure in connection with discharges. Relying on New Jersey law, the court held that the parties had modified the CBA by their practice of ignoring steps 1 and 2 of the grievance procedure in connection with discharges, and therefore, the grievances regarding the four employees were arbitrable. In his opinion, the arbitrator repeatedly noted that he was bound by the district court's legal and factual conclusions that the grievance was procedurally and substantively arbitrable.

On appeal, Troy Chemical contends that the district court erred in ruling on matters of procedural arbitrability and in holding that parties had modified the express terms of the CBA by disregarding the grievance procedure provisions pertaining to employee discharge. The Union takes the position that the district court correctly found a waiver of the grievance procedure steps based on the past practices of the parties.

II.

This court exercises plenary review over a grant of summary judgment, and we apply the same test the district court should have utilized initially. Oritani Sav. and Loan Ass'n v. Fidelity and Deposit Co., 989 F.2d 635, 637 (3d Cir.1993). Summary judgment is appropriate only when it is demonstrated that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-32, 106 S.Ct. 2548, 2552-57, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). An issue of material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In deciding a motion for summary judgment, all reasonable inferences must be drawn in favor of the non-movant. Oritani, 989 F.2d at 638. We therefore conclude that the appropriate standard of review is plenary, rather than clearly erroneous, as suggested by the Union.

The law governing the proper forum for determining various issues of arbitrability is set forth by the United States Supreme Court in John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964). In that case, a dispute arose between the employer and the union over whether the contract covered the merged employees of the successor company, and whether the union's failure to follow the grievance procedure foreclosed arbitration. The Court stated that the first issue was a matter of substantive arbitrability to be decided by the court, but that the issue of whether the failure to adhere to the grievance mechanism barred arbitration was a procedural question for the arbitrator. The Court explained:

It would be a curious rule which required that intertwined issues of "substance and procedure" growing out of the same facts had to be carved up between two different forums, one deciding after the other. Neither logic nor considerations of policy compel such a result.

Id. at 557, 84 S.Ct. at 918. The Court concluded:

Once it is determined, as we have, 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.

Several years later, the Supreme Court reiterated its view that procedural arbitrability should be resolved by arbitrators, not the courts. In International Union of Operating Engineers v. Flair Builders, Inc., 406 U.S. 487, 92 S.Ct. 1710, 32 L.Ed.2d 248 (1972), the company opposed arbitration on the grounds that the union's long delay in filing for arbitration constituted laches. The court of appeals upheld the district court's ruling that the issue of whether laches existed was one to be decided by the court, not the arbitrator. The Supreme Court disagreed, observing that the contract between the parties stated that the grievance and arbitration procedure should be applied to "any difference" that arose between the parties, and the question whether the arbitration was barred by laches was "a difference" to be decided by the arbitrator. 406 U.S. at 491, 92 S.Ct. at 1712-13. Relying on Wiley, the Court emphasized that a court should determine in the first instance whether the parties had in fact agreed to arbitrate the subject matter, "[b]ut once a court...