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General Warehousemen & Employees Union 636 v. American Hardware Supply Co.


March 25, 1964


Author: Kalodner

Before MCLAUGHLIN, KALODNER and GANEY, Circuit Judges.

KALODNER, C. J.: Plaintiff ("Union") commenced this proceeding against the employer ("Company") pursuant to Section 301(a) of the Labor Management Relations Act, 61 Stat. 156, 29 U.S.C. ยง 185(a)*fn1 to compel arbitration. The District Court denied Company's motion for summary judgment and granted that of Union; resulting in the instant appeal.

Company maintained its warehouse and office in Allegheny County, Pennsylvania. By a contract between Company and Union, effective September 8, 1960 and until July 1, 1963, union was recognized as the exclusive bargaining agent for Company's employees at its warehouse located in Allegheny County, except management and supervisory personnel, sales representative, office employees, janitors and watchmen.

The contract provided in Article II, that management of Company, direction of its working force and company operations, the right to introduce, alter or abolish methods and facilities and the right to establish and maintain rules of operation and working practices shall be vested in Company. It also provided that "should any dispute arise concerning this Article, it shall be processed through the grievance procedure."

The contract contained a "no strike, no lock out" provision, subject to the agreement for arbitration. Article III of the contract set out a detailed grievance procedure with provision for arbitration, the Article being applicable to "Differences and disputes . . . as to the meaning and application of, or compliance with, the provisions of this Agreement." Article VI provided for seniority.*fn2 Article XII*fn3 provided that when, in the judgment of the company, it decided to discontinue operation of any portion of its warehouse, a severance allowance was payable to an employee permanently terminated unless the Company offered, and the employee affected elected to accept, a job in a job classification to which his seniority and ability qualified him.

On January 27, 1961, Company notified Union that it planned to remove its warehouse to Butler County, Pennsylvania, in November, 1961, when construction of a proposed warehouse there would be complete. Union, by letter of its counsel, asked Company whether it proposed to permit its present warehouse employees to follow the warehouse operation. Receiving no reply, counsel again wrote to Company stating that if no reply was forthcoming, the assumption would be made that the Company did not intend to afford its warehouse employees the opportunity to follow their work, and arbitration was therefore requested under Article III of the collective bargaining contract. Company replied refusing arbitration on the grounds that Union's representation under the contract was limited to employees of Company employed in Allegheny County and that Company had the right of severance set forth in Article XII.

In June, 1961, Company gave its warehouse employees at the Allegheny County warehouse notice of the advancement of the completion of its Butler County construction to September, 1961. Union, in August, by telegram to Company, took notice of the fact that Company had employed new personnel in the Butler County warehouse, referred a telephone request that laid-off employees of the Allegheny County warehouse be given preference under the seniority clause of the contract, which request was not answered, reiterated the request and further sought arbitration under the contract. Company replied by referring to its previous letter to Union's counsel.

Thereafter, Company terminated the employment of approximately 68 of its warehouse employees in groups at the Allegheny County warehouse. It presented to each employee a check which included his weekly pay, pro rata vacation pay, and severance allowance. These checks were received under protest, with demand for separate checks for the several items included by Company in the single check. Many of the employees had previously applied for employment in the new Butler County warehouse, but were refused.

The District Court held that an arbitrable issue was presented since Union contended that Company did not have the right, during the contract period, to bring about the discharge of the covered employees by removing their work to another warehouse where new employees were hired, and Company contended that it had the right under the contract to discontinue operations. Accordingly, it granted Union's motion for summary judgment.

We are of the opinion that the District Court was entirely correct.

Company contends that an arbitrable issue is presented only when the language of the agreement is not plain on the merits of the controversy. But arbitration is a contractural procedure. In the light of such cases as United Steelworkers of America v. American Mfg. Co . 363 U.S. 564 (1960); United Steelworkers of America v. Warrior & Gulf Navigation Co ., 363 U.S. 574 (1960); and United Steelworkers of America v. Enterprise Wheel & Car Corp ., 363 U.S. 593 (1960), we think it would be error to succumb to the enticing temptation to determine at the outset whether the asserted controversy is palpably unfounded on its merits. If the parties, for their own good reasons, have bargained for determination of controversies by arbitration rather than by a court, such agreement must prevail. The grievance procedure is a part of the continuous collective bargaining process, and in effectuation of that process the court has the duty only to determine whether the reluctant party has breached its promise to arbitrate.

Here, the Company agreed to arbitrate all "differences and disputes as to the meaning and application of, or compliance with, the provisions of the agreement." Even matters reserved to management were subject to the grievance procedure. Neither these clauses nor the "no strike clause" contained an exception. The case is, therefore, within the decision of the Supreme Court in the American Mfg. Co . case.

There, the Court rejected the proposition advanced by Company in this case, that if the meaning of the provision of the contract sought to be arbitrated is beyond dispute there is nothing to arbitrate. Said the Court, 363 U.S., at pages 567-569:

"The collective agreement calls for the submission of grievances in the categories which it describes, irrespective of whether a court may deem them to be meritorious. In our role of developing a meaningful body of law to govern the interpretation and enforcement of collective bargaining agreements, we think special heed should be given to the context in which collective bargaining agreements are negotiated and the purpose which they are intended to serve. . . . The function of the court is very limited when the parties have agreed to submit all questions of contract interpretation to the arbitrator. It is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract. Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator. In these circumstances the moving party should not be deprived of the arbitrator's judgment, when it was his judgment and all that it connotes that was bargained for.

"The courts, therefore, have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is a particular language in the written instrument which will support the claim. The agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious. The processing of even frivolous claims may have therapeutic values of which those who are not a part of the plant environment may be quite unaware. . . . When the judiciary undertakes to determine the merits of a grievance under the guise of interpreting the grievance procedure of collective bargaining agreements, it usurps a function which under that regime is entrusted to the arbitration tribunal."

Here, Company insists that an employee lost his seniority under Article VI when his employment was permanently terminated under Article XII, and under that Article Company, in its sole discretion, could terminate the employment when it decided to discontinue operation of any portion of its wholesale house. Union contends that Company violated the contract and its intent by farming out or transferring a substantial portion of its warehousing to another county, without giving its employees the right to follow the work. Plainly, there is a dispute between the parties as to the "meaning, and application of, or compliance with" the contract.

In preservation of the unfettered arbitration agreed upon by Company and Union, it behooves us to refrain from developing the arguments presented in their respective briefs for the purpose of demonstrating that the issues presented are above suspicion as mere frivolous claims.

Company contends that Union is late in commencing this proceeding, and that the acceptance of the severance pay terminated the employment so that no right to ask for arbitration remained.

In the light of the admonition against "preoccupation with ordinary contract law," 363 U.S. at page 567, we agree with the District Court that these contentions may be appropriately asserted by Company in the arbitration proceedings. They do not affect the essential conclusion that Company and Union have committed themselves to arbitration with respect to persons who were employees while the contract was in effect and when the demand for arbitration was made, where, as here, the subject of the dispute concerns the "meaning and application of, and compliance with" the contract.

For the reasons stated the judgment of the District Court will be affirmed.

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