Before GOODRICH, McLAUGHLIN and HASTIE, Circuit Judges.
HASTIE, C. J.: For some fifteen years the terms and conditions of employment of engineering personnel at Radio Corporation of America, hereinafter called RCA, have been the subject of a series of labor contracts between RCA and Association of Professional Engineering Personnel, a labor union. The present controversy arises under a labor contract between these parties which was effective throughout 1957 and until July 1, 1958.
The contract in question, like its predecessors, outlined a proceeding for granting periodic "merit increases" to engineering personnel. In April 1958, the union, dissatisfied with the employer's administration of the merit increase system, filed a written grievance complaining that RCA had violated the contract by improperly lowering the average level of merit increases and by considering improper factors in determining their amount. RCA replied that the amount of merit increases was neither grievable nor arbitrable under the contract and that, in any event, the grievance was not timely. The union then submitted the matter to the American Arbitration Association and, over the employer's objection, that organization instituted arbitration proceedings.
RCA countered by filing the present complaint in the United States District Court for the District of New Jersey seeking under Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, and the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, an authoritative adjudication that the union's stated grievance is not arbitrable. The union then filed a counterclaim asking that RCA be ordered to arbitrate the grievance. After full hearing, the court entered final judgment in favor of the employer permanently restraining the union from taking its grievance to arbitration and dismissing the union's counterclaim.
Because of the wording of Section 301 of the Labor Management Relations Act, it is necessary to resolve a preliminary question of jurisdiction. That section creates federal jurisdiction over "suits for violation of contracts between an employer and a labor organization. . . ." In its counterclaim the union asserts that the refusal of RCA to arbitrate a certain grievance constitutes a breach of their collective bargaining agreement. This is the type of "violation" which Section 301 most obviously covers. Indeed, it is now established that such a proceeding to compel arbitration, alleged to be required by a labor contract, presents a cause of action which is created by as well as federally cognizable under Section 301. Textile Workers Union v. Lincoln Mills, 1957, 353 U.S. 448.
It is less clear that the employer's complaint against the union, seeking an adjudication that the stated grievance is not arbitrable under the collective bargaining agreement, is a "suit for violation of a contract" within the meaning of Section 301. However, we think that in the context of Section 301 the more reasonable reading of "suits for violation of contracts" includes a proceeding by a party who seeks to determine by declaratory judgment whether his own conduct in refusing to arbitrate is a violation of a labor contract. This Court and at least one other have assumed as much in cases where the issue of jurisdiction was present but was not raised by the parties. International Tel. & Tel. Corp. v. Local 400, 3d Cir. 1960, 286 F.2d 329; Boston Mutual Life Ins. Co. v. Insurance Agents Int'l Union, 1st Cir. 1958, 258 F.2d 516. One district court has squarely so held, stating the argument for its position persuasively:
"But 301 should not be read literally and with stress on the word 'violation'. Congressman Hartley, who was the coauthor and sponsor of the Labor Management Relations Act, 29 U.S.C.A. § 141 et seq ., in responding to an interpellation by Congressman Barden, construed the language which became § 301 as contemplating not only ordinary lawsuits for damages and equitable relief, but also 'proceedings . . . brought by employers, the labor organizations, or interested individual employees under the Declaratory Judgments Act in order to secure declarations from the Court of legal rights under the contract.' 93 Cong. Rec. 3656-3657. This enlargement of the letter of § 301 has gained the apparent approval of the Supreme Court and has been used as an essential link in its chain of reasoning in Textile Workers Union of America v. Lincoln Mills, 353 U.S. 448, 455-456, 77 S. Ct. 912, 1 L. Ed. 2d 972.See also 353 U.S. at page 521, 77 S. Ct. at page 952. This enlargement corresponds with the general policy which Congress adopted in the Labor Management Relations Act, - a policy of strengthening labor contracts by using the federal courts to award damages for breaches of those contracts."
New Bedford Defense Products Division v. Local 1113, D. Mass. 1958, 160 F. Supp. 103, 109, aff'd 1st Cir., 258 F.2d 522; accord Armstrong Norwalk Rubber Corp. v. Local 283, D. Conn. 1958, 167 F. Supp. 817. But cf. Mengel Co. v. Nashville Paper Products and Specialty Workers Union, 6th Cir. 1955, 221 F.2d 644.
We conclude that both the employer's present claim and the union's counterclaim arise under Section 301 of the Labor Management Relations Act and also that the claim is cognizable under the Declaratory Judgment Act.
We come now to the merits of the demand for arbitration which must be determined in the light of the provisions of the controlling labor contract. That contract defines "grievances" as meaning "disputes or differences . . . with respect to the interpretation or application of any provision of this Agreement." It then spells out in detail the procedures to be followed in the presentation and disposition of "grievances." The first step embraces the formal submission of a grievance by the union to the employer and the ensuing efforts of the parties to adjust the matter between themselves. If this fails, the second prescribed step is arbitration pursuant to a written demand by either party. In providing for arbitration the contract stipulates that the "authority of the Arbitrator shall be limited to determining questions involving the interpretation or application of the terms of this Agreement or the applicable Area Agreement. He shall have no authority to add to, subtract from, or to change any of the terms of this Agreement or any Area Agreement, to change an existing wage rate, or to establish a new wage rate."
The present dispute concerns merit increases. This subject is covered by the following provisions of the contract:
"Paragraph 5.07 MERIT INCREASES: The performance of employees shall be reviewed for merit increases. The merit increase eligibility dates of employees shall be determined in accordance with the following schedule:
the schedule which appears at this point provides intervals of 8 to 13 months between merit increase eligibility dates according to occupational categories.
"Each employee shall be informed on the designated increase eligibility date of his status of eligibility for a merit increase, and shall at that time receive a dated written notice signed by the Company, that there has been compliance with this provision. The employee shall sign two copies of ...