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United Steelworkers of America v. Canron Inc.

argued: February 16, 1978.



Seitz, Chief Judge, Rosenn and Garth, Circuit Judges.

Author: Rosenn


ROSENN, Circuit Judge.

The Supreme Court recently decided that an employer may be required to arbitrate a dispute over severance pay even though the dispute, governed by the arbitration article of a collective bargaining agreement, arises after the contract's expiration. Nolde Brothers v. Bakery & Confectionery Workers Union, 430 U.S. 243, 51 L. Ed. 2d 300, 97 S. Ct. 1067 (1977). This case presents a converse situation. The principal issue presented on this appeal is whether an employer may be required to arbitrate a dispute over medical and health insurance premium payments for retirees pursuant to its existing collective bargaining agreement even though such retirees had not been employed by the employer, but by a predecessor company, and had retired before the employer had entered into a collective bargaining agreement with their union representative.


On April 24, 1970, Canron, Inc., ("Canron") acquired certain property and assets of Shahmoon Industries, Inc., ("Shahmoon"), now known as Shire National Corporation, which Shahmoon had used in its Warren Pipe & Foundry Division in Phillipsburg, New Jersey. Shahmoon was not dissolved but continues to exist as a separate, ongoing business enterprise with substantial assets and operations in other locations in New Jersey. At the time of the sale to Canron, Shahmoon was a party to an existing collective bargaining agreement with the United Steelworkers of America, AFL-CIO ("the union") for Shahmoon's Phillipsburg plant. The agreement, effective August 1, 1969, for a term of three years, required Shahmoon to provide certain health and life insurance coverage for employees of the Warren Pipe and Foundry Division who retired before Shahmoon terminated its Phillipsburg operation.*fn1

Following the expiration of the 1969 collective bargaining agreement, Canron negotiated a three year labor contract with the union for employees at its recently acquired Phillipsburg plant effective August 1, 1972. This agreement was virtually identical to Shahmoon's 1969 collective bargaining agreement for its Warren Foundry Division and the language of sections 15A-6 and 15(c) pertaining to health and life insurance coverage for retirees remained precisely the same. During the period between April 24, 1970, when Canron acquired Shahmoon's assets and July 31, 1972, Canron honored the terms and provisions of Shahmoon's unexpired 1969 labor agreement except for the health and life insurance obligations.*fn2 As to these, Shahmoon continued to pay the health and life insurance premiums for those employees who had retired before the sale to Canron until it gave written notice to its retirees on July 1, 1974, that it would no longer continue to do so. Upon learning of this action, the union responded by letter dated July 24, 1974, demanding that Shahmoon comply with the 1969 labor agreement and gave notice that it intended to hold the company "liable for the payment of health and life insurance premiums for retirees under the August 1, 1969" labor contract. When the union ascertained that Shahmoon would not comply, it immediately made demand upon Canron to pay the premiums. Canron replied by telegram that it did not intend to underwrite the cost of the medical and life insurance benefits for Shahmoon's retired employees "since these employees were never employees of Canron, Inc." The union thereupon submitted a grievance to Canron requesting expedited arbitration of the dispute under section 8 of the existing collective bargaining agreement with Canron.*fn3

Section 8 is a common type of grievance clause providing for adjustment of differences between the employer and the union as to the meaning and application of the provisions of the contract terminating with arbitration. By letter dated August 2, 1974, Canron rejected the union's demand for arbitration because the grievance did not fall within the terms of the arbitration clause, the retirees never having been Canron's employees. Canron suggested that the grievance be directed to Shahmoon. The union thereupon instituted an action against Canron under section 301 of the Labor Management Relations Act, 29 U.S.C. ยง 185 ("LMRA") in the United States District Court for the District of New Jersey to compel arbitration.

Each of the parties filed motions for summary judgment. The district court granted the plaintiff-union's motion, denied the defendants' motion and accordingly entered judgment in favor of the plaintiff. Defendant's appeal followed.*fn4 We affirm the district court.


The plaintiff's theory in the district court and on this appeal is that the current collective bargaining agreement between the parties obligates the incumbent employer, Canron, to arbitrate the dispute. Judge Barlow, in an unreported letter opinion, correctly perceived the district court's role to be limited to merely determining whether the issue was arbitrable. He concluded, citing our decision in Amalgamated Meat Cutters and Butcher Workmen v. Cross Brothers Meatpackers, 518 F.2d 1113 (3d Cir. 1975), that the dispute required an interpretation of the existing labor contract between the parties and therefore was arbitrable.*fn5

On appeal, Canron levels a twofold attack at the district court's decision. First, it argues that the district court lacked subject matter jurisdiction because section 301 of the Act clearly limits federal jurisdiction to suits for violations of contracts between an employer and a labor organization. Canron asserts that because it never employed the Shahmoon retirees, nor ever contracted to provide any benefits to them, they have no contractual rights to assert against Canron. Moreover, the arbitration provisions of the 1972 collective bargaining agreement is limited by its terms to the interpretation and application of the provisions of that agreement and could not properly, Canron avers, "be held to apply to claims on behalf of Shahmoon's retirees." Second, Canron contends that under Allied Chemical and Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157, 30 L. Ed. 2d 341, 92 S. Ct. 383 (1971), the union ...

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