Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-02263/USCOURTS-ca10-88-02263-0/pdf.json

Nature of Suit Code: 720
Nature of Suit: Labor Management Relations Act
Cause of Action: 

---

• ., 

fl LED 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

Uoitcd States Court of Appeals 

Tenth Circuit 

APR 2 0 1QQO 

&OBERT L. HOECKER 

TEAMSTERS LOCAL UNION NO. 17, Clerk 

Plaintiff-Appellant, 

v. 

BOULDER-DENVER TRUCK LINES, LTD. and 

OVERLAND MOTOR EXPRESS, INC., 

Defendants-Appellees. 

No. 88-2263 

(D.C. No. 87-A-1207) 

(Dist. of Colo.) 

ORDER AND JUDGMENT* 

Before McKAY and BARRETT, Circuit Judges, and O'CONNOR*, District 

Judge. 

* The Honorable Earl E. O'Connor, Chief Judge, United States 

District Court for the District of Kansas, sitting by designation. 

Plaintiff, Teamsters Local Union No. 17 (the Union) appeals 

the district court's Order and Judgment entered in favor of 

Boulder-Denver Truck Line, Ltd. and Overland Motor Express, Inc. 

(Boulder-Denver) dismissing the Union's action seeking a 

declaration that Boulder-Denver had breached its collective 

bargaining agreement with the Union when it laid off or discharged 

three employees. The district court refused to order BoulderDenver to reinstate those three employees with full backpay and 

* This Order and Judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 1 
every other incident of their seniority, and concluded that the 

Union failed to prove, by a preponderance of the evidence, that 

Boulder-Denver had violated the parties' collective bargaining 

agreement. Further, the district court concluded that the Union's 

failure to exhaust contractual grievance procedures was a complete 

defense to its claim based on an alleged violation of Article 46, 

Section 1 of the parties' collective bargaining agreement. 

FACTS 

Boulder-Denver is a motor vehicle common carrier licensed by 

the Colorado Public Utilities Commission (PUC) to engage in that 

business within Colorado and by the Interstate Commerce Commission 

(ICC) to engage in that business in interstate commerce. Pursuant 

to statutory authority, Colo. Rev. Stat. § 40-10-110, the PUC 

requires 

specific 

common 

amounts 

carriers, 

of public 

such as Boulder-Denver, to maintain 

liability and property damage 

insurance. The public liability coverage currently required by 

the PUC is $25,000 per person, $100,000 per accident, and $10,000 

for property damage. The PUC has authority to revoke operating 

authorities of carriers that fail to maintain required insurance 

filings, and regularly does so. 

The ICC requires insurance coverage in amounts established by 

the Department of Transportation (DOT) under 49 C.F.R. 387.7-9. 

For carriers which may carry hazardous property, such as BoulderDenver, the DOT regulations currently require $1,000,000 of public 

liability insurance. Violators of that regulation can incur a 

civil penalty of not more than $10,000 per violation. 

-2-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 2 
At all times relevant, Boulder-Denver had been insured by the 

Farmers Insurance Group (Farmers). Farmers had standards of 

acceptability by which it determined whether to continue to insure 

individual motor carriers like Boulder-Denver. Among these 

criteria are an insured's willingness to restrict from driving 

those employees who have a certain number and/or type of driving 

convictions during the past three years. 

Annually, Farmers required it's insureds, including BoulderDenver, to submit a list of it's drivers. Farmers then obtained 

driving record information on those drivers from the Colorado 

Department of Revenue. 

After reviewing the driving record information it obtained, 

Farmers notified Boulder-Denver by letter dated February 10, 1987, 

that the three employees involved herein, Don Samuelson 

(Samuelson), James Dalton (Dalton), and Alfred Scott (Scott), 

among others, "do not meet the acceptability standards for Farmers 

Insurance Group." Farmers enclosed forms to be signed by BoulderDenver which relieved Farmers of all liability for losses 

sustained while any of Boulder-Denver's insured vehicles were 

driven or operated by any of the employees so designated. 

Boulder-Denver's president met with a Farmer's representative 

and attempted to persuade him to reduce the requirements as to 

certain employees. These efforts were successful as to some of 

the employees under review, but were unsuccessful as to Samuelson, 

Dalton, and Scott. 

By letter dated March 17, 1987, Farmers repeated its demand 

for the exclusion agreements, stating: "If we do not receive 

-3-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 3 
these signed driver restrictions soon, we will have no alternative 

but to cancel your entire policy on the next renewal date (10/1/ 

87)." (Appellant's Brief at p. 5). At trial, Ken Laubhan, a 

commercial underwriter with Farmers, testified that Farmers would 

not have refused to renew Boulder-Denver's insurance policy if the 

three employees involved herein were restricted from driving by 

August 1, 1987. However, Boulder-Denver was not informed of this 

actual deadline. 

By letter of March 25, 1987, Boulder-Denver advised the Union 

that Samuelson, Dalton, and Scott had been excluded from its 

insurance policy effective March 30, 1987, and that those 

employees would be laid-off until further notice. On March 27, 

1987, Boulder-Denver notified those three drivers orally and in 

writing that they were laid-off until further notice, effective at 

the end of their shift that day, because Farmers refused to insure 

them as drivers for the company. 

On March 27, 1987, Boulder-Denver executed the abovereferenced restriction forms requested by Farmers. Subsequently, 

Boulder-Denver contacted other insurance companies, but found none 

that would voluntarily insure the drivers in question at standard 

rates. Under regulations of the Colorado Insurance Department, 

however, through an "assigned risk'' requirement, insurance 

companies are required to insure companies otherwise uninsurable. 

"Assigned risk" premiums could be thirty-five percent higher than 

standard premiums. However, no evidence was offered concerning 

the conditions under which assigned risk coverage could be 

obtained, nor whether an assigned risk company would be willing to 

-4-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 4 
comply with the PUC and DOT regulations concerning the insurance. 

Further, the parties did not investigate whether a change to an 

assigned risk insurance could be accomplished without a hiatus in 

coverage. 

No provision of the collective bargaining agreement refers to 

layoffs for failure to meet insurance company requirements, 

although around April, 1985, during the course of collective 

bargaining negotiations with the Union, Boulder-Denver proposed 

that if a driver became uninsurable, he could be discharged. The 

Union rejected that contract proposal, indicating that it would 

not negotiate a contract situation where a discharge could be a 

result of uninsurability. 

By a letter dated April 3, 1987, the Union advised BoulderDenver that insurability is the responsibility of the company and 

the employees' rights under the collective bargaining agreement 

between the Union and Boulder-Denver must prevail. The Union 

claims that liability and property damage insurance premiums are 

the responsibility of Boulder-Denver, and that Boulder-Denver has 

no expectation that its employees or their union will directly 

bear the burden of any rate increase. 

The evidence at trial established that the Union had been 

informed, before March 25, 1987, that some employees might be laid 

off because of uninsurability. The evidence further established 

that there were no non-driving jobs available in defendant's 

business at the time the three drivers were laid off. Therefore, 

-5-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 5 
there were no openings in which the three employees could work in 

other capacities. 

Two of the drivers, Messrs. Samuelson and Scott, have been 

called back to work by Boulder-Denver. The insurance restrictions 

have been lifted by Farmers, and they are now included in the 

insurance coverage. 

In the action in the district court, the Union sought an 

order declaring that Boulder-Denver had breached its collective 

bargaining agreement with the Union when it laid off or discharged 

the three employees in question. The district court concluded 

that the Union failed to prove that Boulder-Denver had violated 

the collective bargaining agreement. Furthermore, the district 

court concluded that the Union failed to exhaust contractual 

grievance procedures, thereby precluding judgment for the Union 

under that portion of the parties' collective bargaining agreement 

that deals with discharges. The Union now appeals the district 

court's decision. 

ISSUES 

The Union proffers the following issues on appeal: 

I. Whether the district court committed reversible error 

when it concluded that the Union's claim that Boulder-Denver 

violated Article 58, Section 1 of the collective bargaining 

agreement has no substance or validity. 

II. Whether the district court committed reversible error 

when it effectively disregarded and/or failed to give sufficient 

weight to a stipulation that made it clear that Boulder-Denver 

-6-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 6 
could have secured insurance for the three employees in question 

and thus had no reason to "lay them off." 

III. Whether the district court committed reversible error 

when it effectively disregarded and/or failed to give sufficient 

weight to a stipulation that made it clear that Boulder-Denver had 

no reason whatever to "lay off" those three employees before 

August 1, 1987. 

IV. Whether the district court committed reversible error 

when it concluded that the Union's alleged failure to exhaust 

contractual grievance procedures was a complete defense to its 

claim based on the alleged violation of Article 46, Section 1, of 

the collective bargaining agreement. 

DISCUSSION 

The relevant portions of the collective bargaining agreement 

are as follows: 

Article 58, Section 1: 

Layoff and Recall 

(a) When it becomes necessary to reduce the work force 

the last employee hired shall be laid off first and when 

the force is again increased, the employees shall be 

returned to work in the reverse order in which they were 

laid off. Such layoff notice shall be in writing with a 

copy to the Local Union. This does not apply to day-today layoffs. 

(b) A laid off employee shall be given written 

notice of recall by certified mail addressed to his last 

known address on file with the Employer with a copy to 

the Local Union. Such employee must respond to such 

notice within three (3) days after receipt thereof and 

actually report to work within seven (7) addition days. 

If an employee fails to comply with these recall 

provision, he shall lose all seniority rights unless 

otherwise agreed to in writing on a case by case basis 

by the Employer, the Local Union and the particular 

employee involved. The copy of the recall notice sent 

to the Local Union need not be sent by certified mail, 

and proof of mailing to the employee shall be sufficient 

-7-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 7 
to justify the loss of seniority if the employee fails 

to comply with these recall provisions. 

(R., Vol. I, Doc. 1, Amended Complaint, Exhibit B). 

Article 46, Section 1: 

Id. 

Subject to the provisions of Article 8 of the National 

Agreement the Employer shall not discharge nor suspend 

any employee without just cause, but in respect to 

discharge or suspension shall give at least one (1) 

warning notice of the complaint against such employee to 

the employee in writing, and a copy of the same to the 

Local Union affected: except that no warning notice need 

be given to an employee before he is suspended or 

discharged if the cause of such suspension or discharge 

is (a) Dishonesty: (b) Drunkenness: (c) Recklessness 

resulting in a serious accident while on duty: (d) The 

carrying of unauthorized passengers: (e) Unprovoked 

physical assault on a supervisory employee: (f) Selling, 

transporting or use of illegal narcotics while in the 

employment of the Employer: (g) Willful, wanton or 

malicious damage to the Employer's property: (h) 

Negl igence resulting in serious equipment damage while 

on duty. 

The pertinent parts of the Grievance Procedure, as contained 

in the Boulder-Denver Truck Line, Teamsters Local 

Supplemental Agreements provide: 

No. 

GRIEVANCE PROCEDURE. Section I. All questions, 

disputes and controversies arising under the Master 

Agreement or any Supplement thereto, or between the 

parties as to Employer-employee relations covered by 

this Agreement, shall be adjusted and settled in the 

manner outlined below. 

Step 1: A grievance of an employee shall first be taken 

up between such employee and his immediate 

supervisor. 

Step 2: Failing settlement under Step 1, such 

grievance shall be taken up between a 

representative of the Local Union and the 

Employer. 

Step 3: Failing settlement under Step 2, such 

grievance, and any question, dispute or 

controversy that is not of the kind that is 

- 8-

17 

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 8 
Id. 

subject to Steps 1 and 2, shall be reduced 

to writing and be referred to and taken up 

between the Secretary or other authorized 

representative of the Local Union and the 

authorized bargaining representative of the 

Employer. 

Step 4: Failing settlement under Step 3, the dispute 

shall be referred for settlement or decision to 

a committee to be made up of three (3) 

representatives of the Companies and three (3) 

representatives of the Union. If the Joint 

Committee, by a majority vote, settles or 

decides the dispute, such decision shall be 

final and binding on both parties. Deadlocked 

cases may be submitted to umpire handling if a 

majority of the Joint Committee determined to 

submit such matter to an umpire for decision. 

Otherwise, either party shall be permitted all 

legal or economic recourse, provided approval 

of Joint Council 3. 

Section 2. Grievance Machinery. The Union and the 

Employers agree that there shall be no strike, lockout, 

tie-up or legal proceedings without first using all 

possible means of settlement as provided for in this 

agreement. (Emphasis added). 

In 1985, the Union and Boulder-Denver engaged in collective 

bargaining negotiations which resulted in the relevant collective 

bargaining agreement. (Appellant's Brief at p. 10). At that time 

they bargained about the issue of layoffs. In the course of those 

negotiations, Boulder-Denver proposed that if a driver became 

"uninsurable" the company would have the right to discharge that 

employee. Id. The Union rejected that proposal, indicating that 

it would not negotiate a contract situation where a discharge 

could result from uninsurability. Therefore, an uninsurability 

clause was not included in the resulting contract. However, the 

parties did arrive at an agreement whereby an employee could be 

-9-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 9 
discharged or laid off. The foregoing Articles are the provisions 

governing when employees may be laid off or discharged. Id. 

In this case, the clear purpose and scope of these parties' 

collective bargaining agreement with regard to layoffs was to 

limit Boulder-Denver's right to layoff or discharge employees. 

Specifically, Article 58, Section 1 provides that Boulder-Denver 

is permitted to layoff employees by order of seniority when there 

is a reduction in force. Article 46, Section 1 allows BoulderDenver to discharge or lay off an employee for just cause after 

giving a "warning'' notice of the "complaint." 

Boulder-Denver and the Union agree that there was no 

reduction in force as contemplated by the collective bargaining 

agreement. The district court found that no reduction in force 

occurred when Boulder-Denver laid off Messrs. Samuelson, Dalton, 

and Scott, and that the Union's "claim of violation of [Article 

58, Section 1) has no substance or validity." (R., Vol. I, Doc. 

5, Memorandum Opinion and Order, at p. 9). We agree. 

The Union contends that the district court committed 

reversible error when it concluded that the Union's alleged 

failure to exhaust contractual grievance procedures was a complete 

defense to its claim based on the alleged violation of Article 46, 

Section 1 of· the collective bargaining agreement. We disagree. 

The grievance procedure specifically states the process which 

must be followed by an employee with a grievance against the 

company. This grievance procedure is unequivocal as to the steps 

which must be taken before an employee may seek relief in court. 

-10-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 10 
The Union did not follow the mandates of this process and thereby 

failed to exhaust the contractual grievance procedure. 

No grievance was filed or claimed based on an alleged 

violation of Article 46, Section 1. Article 46, Section 1 was not 

mentioned or referred to in the Union's letter claim of April 3, 

1987 or in the grievance hearings held on May 4, 1987. The Union, 

in those grievance proceedings, challenged only Boulder-Denver's 

actions in discharging those three employees under Article 5, 

Article 43, Section 1, and Article 58, Section l(a). In fact, the 

Union concedes that it did not follow the grievance procedure with 

respect to the Article 46, Section 1 claim, and did not raise this 

grievance until the Amended Complaint was filed on March 30, 1988. 

(R., Vol. II, Tr. pp. 54-56). 

The general rule of law is that a party wishing to assert a 

breach of labor contract must first use the contract grievance 

procedure agreed upon as the mode of redress. Republic Steel 

Corp. v. Maddox, 379 U.S. 650 (1965). This requirement is based 

upon sound considerations of public policy which benefit the Union 

and its members, as well as the employer. 

Congress has expressly approved contract grievance 

procedures as a preferred method for settling disputes 

and stabilizing the 'common law' of the plant. LMRA § 

203(d), 29 u.s.c. § 173(d); §20l(c), 29 U.S.C. § 17l(c) 

(1958 ed.). Union interest in prosecuting employee 

grievances is clear. Such activity complements the 

union's status as exclusive bargaining representative by 

permitting it to participate actively in the continuing 

administration of the contract. In addition, 

conscientious handling of grievance claims will enhance 

the union's prestige with employees. Employer 

interests, for their part, are served by limiting the 

choice of remedies available to aggrieved employees. 

And it cannot be said, in the normal situation, that 

-11-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 11 
contract grievance procedures are inadequate to protect 

the interest of an aggrieved employee until the employee 

has attempted to implement the procedures and found them 

so. (Emphasis added). 

A contrary rule which would permit an individual 

employee to completely sidestep available grievance 

procedures in favor of a lawsuit has little to commend 

it. In addition to cutting across the interests already 

mentioned, it would deprive employer and union of the 

ability to establish a uniform and exclusive method for 

orderly settlement of employee grievances. If a 

grievance procedure cannot be made exclusive, it loses 

much of its desirability as a method of settlement. A 

rule creating such a situation 'would inevitably exert a 

disruptive influence upon both the negotiation and 

administration of collective agreements.' Teamsters 

Local v. Lucas Flour Co., 369 U.S. 95, 103. 

Id. at 653. 

The Union argues, however, that an exception to the general 

rule of exhaustion of contractual grievance procedures occurs when 

the employer repudiates the contract and its grievance machinery. 

Citing Vaca v. Sipes, 386 U.S. 171 (1966), the Union contends that 

when exhaustion would be futile, exhaustion is excused. 

However, the Union has failed to proffer any evidence or otherwise 

demonstrate that it would have been futile to use the grievance 

procedure or that Boulder-Denver had either repudiated the 

contract or taken the position that contractual grievance remedies 

were not available to these drivers. Quite the contrary. 

Boulder-Denver attended and fully participated in the grievance 

hearing of these employees and did not challenge the grievance 

procedure at any time. Union officials filed the grievances, 

attended the grievance hearing and gave testimony and arguments in 

support of the drivers. In all respects but one, the Union fully 

represented the drivers against the company. The single exception 

was that the Union failed to list Article 46, Section 1 among the 

-12-

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 12 
• 

grievances it sought to have heard. The reason it did not list 

Article 46, Section 1 as a claim had nothing whatsoever to do with 

Boulder-Denver's repudiation of the grievance procedure nor with 

any futility in attempting to use the grievance procedure. The 

reason that Article 46, Section 1 was not listed as a claim was 

that the Union did not think of it until after this litigation was 

commenced. (R., Vol. II, Tr. at p. 79). 

The Supreme Court in Vaca, 386 U.S. at 184, made it clear 

that "it is settled that the employee must at least attempt to 

exhaust exclusive grievance and arbitration procedures established 

by the bargaining agreement." In the instant case, the Union 

failed to exhaust exclusive grievance procedures. 

The Union also argues that Boulder-Denver contended that no 

discharges were involved and that consequently it would have been 

futile for the Union to exhaust grievance procedures challenging 

Boulder-Denver's right to discharge these 

these employees were not discharged. 

employees. 

In fact, two 

However, 

of the 

employees, Messrs. Samuelson and Scott, have been called back to 

work by Boulder-Denver. As the district court stated: "[t]he 

three drivers involved were not 'discharged,' their seniority 

not broken, and each maintains his respective seniority." 

was 

( R. , 

Vol. I, Doc. 5, Memorandum Opinion and Order, at p. 9). hold 

that the Union's Article 46, Section 1 claim was 

dismissed for failure to exhaust the contractual 

procedures. 

-13-

We 

properly 

grievance 

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 13 
.. 

We also hold that there is no merit to the Union's remaining 

contentions. 

AFFIRMED. 

- 14-

Entered for the Court: 

James E. Barrett, 

Senior United States 

Circuit Judge 

Appellate Case: 88-2263 Document: 01019971936 Date Filed: 04/20/1990 Page: 14