Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-93-07060/USCOURTS-caDC-93-07060-0/pdf.json

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

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 20, 1994 Decided November 22, 1994

No. 93-7060

COMMUNICATIONS WORKERS OF AMERICA;

LYLE WINGATE,

APPELLEES 

v.

AMERICAN TELEPHONE AND TELEGRAPH COMPANY;

AMERICAN TELEPHONE AND TELEGRAPH PENSION PLAN,

APPELLANTS

Appeal from the United States District Court

for the District of Columbia

(No. 91cv02745)

Marc E. Manly argued the cause for appellants. With him on the briefs was John H. Curley.

Christopher R. Drahozal entered an appearance.

James B. Coppess argued the cause for appellees. With him on the brief was Gerard C. Boyle.

Before: EDWARDS, Chief Judge, GINSBURG and SENTELLE, Circuit Judges.

Opinion for the Court filed by Chief Judge EDWARDS.

EDWARDS, Chief Judge: In this case, we reaffirm the familiar principle that, barring

exceptionalcircumstances, parties aggrieved by decisions of pension plan administrators must exhaust

the administrative remedies available to them under their pension plans before challenging those

decisions in court. We also reaffirm the well-established principle of labor law that disputes subject

to mandatory arbitration under a collective bargaining agreement may not be brought to court in lieu

of contractual arbitration procedures. We consider these principles critical to the orderly

administration of our federal pension and labor laws. Because the District Court did not give proper

weight to these principles, we reverse in part and remand in part.

This case involves a dispute over whether certain former employees of the American

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Telephone and Telegraph Company ("AT&T") were improperly denied pension benefits under the

AT&T Pension Plan ("Plan"). As a result of a business reorganization precipitated by the 1991

merger of AT&T and NCR Corporation ("NCR"), a number of AT&T employees went to work for

NCR. Pursuant to an agreement between AT&T and NCR, appellants AT&T and the Plan

determined that certain employees who left AT&T for NCR would be ineligible to receive pension

benefits under the Plan until after they ceased working for NCR. When Plan administrators refused

to pay pension benefits to several such employees, appellees Communications Workers of America

("CWA"), the employees' collective bargaining representative, and Lyle Wingate ("Wingate"), an

affected employee, brought suit in District Court under section 502 of the Employee Retirement

Income Security Act ("ERISA"), 29 U.S.C. § 1132(a) (1988), and section 301 of the Labor

Management Relations Act ("LMRA"), 29 U.S.C. § 185 (1988), claiming that the denial of benefits

violated the terms of both the Plan and the collective bargaining agreement ("CBA") between CWA

and AT&T.

The District Court denied appellants' motion forsummary judgment and,sua sponte, granted

summary judgment for appellees on both the ERISA and LMRA claims. In so doing, the District

Court found, inter alia, that appellees' failure to exhaust administrative remedies under the Plan was

not a bar to their ERISA claimbecause pursuit ofsuch remedies would have been futile. The District

Court also ruled that appellees'failure to seek arbitration ofthis dispute did not bar their LMRA claim

because the dispute was not subject to mandatory arbitration under the CBA. CWA v. AT&T, 828

F. Supp. 73, 75-77 (D.D.C. 1993).

On appeal, appellantsraise a number of challengesto the District Court'sjudgment. We need

not reach most of these issues, however, for we find two to be dispositive. We first hold that the

District Court abused its discretion by not requiring appellees to exhaust administrative remedies

under the Plan prior to bringing suit under section 502 of ERISA. Contrary to the District Court, we

find no basis for concluding that exhaustion would have been futile. We also hold that the District

Court erroneously found that it was unnecessary for CWA to pursue grievance and arbitration

procedures under the CBA with respect to the employees' breach of contract claim. On this point,

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we find that the contract claimissubject to mandatory and binding arbitration under the parties'CBA;

accordingly, CWA could not pursue this claim under section 301 of the LMRA in lieu of arbitration.

I. BACKGROUND

A. The AT&T Pension Plan and the Collective Bargaining Agreement

At the heart ofthe parties' dispute in this case is a disagreement over the proper interpretation

of both the Plan and the CBA. The Plan is a pension plan for non-management employees of AT&T

and is qualified under section 401 of the Internal Revenue Code, 26 U.S.C. § 401 (1988 & Supp. V

1993). In accordance with ERISA, the Plan provides generally that any employee who satisfies

certain age and service requirements and who elects to "retire[ ] from active service" with AT&T or

its affiliates or subsidiaries shall be eligible to receive a service pension from the Plan. Plan § 4, ¶

1(a),reprinted in Joint Appendix ("J.A.") 204. Under the Plan, however, a pension-eligible employee

who leaves active service with one AT&T companyto accept employment withanother "Participating

Company," or immediate reemployment by a company with which AT&T has an "Interchange

Agreement,"maynot receive pension payments during the period of employment with suchcompany.

Id. § 4, ¶ 6(a), reprinted in J.A. 206. The Plan defines "Interchange Agreement" as an agreement

"among one or more Participating Companies and one or more Former Associated or Allied

Companies or Former Affiliates." Id. § 2, ¶ 10,reprinted in J.A. 189. The terms "Former Associated

or AlliedCompany" and "Former Affiliate" are defined to mean certain former Bellsystemcompanies

and theirsubsidiaries, but do not include NCR. Id. § 2, WW 2, 7, reprinted in J.A. 185, 186-87. The

term "Participating Company," which means AT&T or any AT&T subsidiary which decides to

participate in the Plan, also does not include NCR. See id. § 2, ¶ 16, reprinted in J.A. 191-92.

The CBA between AT&T and CWA containsseveral provisionsrelating to the Plan. Article

19.30 of the CBA provides that AT&T cannot make any "change ... in the Plan which would reduce

or diminish the benefits or privileges provides ... to employees ... without [CWA's] consent." CBA

Art. 19.30,reprinted in J.A. 262. Article 19.40 provided that "[a]ny dispute involving the true intent

and meaning of [Article] 19.30 may be presented as a grievance and ... submitted to ... arbitration....

However, nothing herein shall be construed to subject the ... Plans (or their successors) or their

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administration or the terms of the proposed change(s) in the Plan(s) to arbitration." Id. Art. 19.40,

reprinted in J.A. 262.

Both the Plan and the CBA provide extensive administrative remedies for the resolution of

disputes arising under their respective provisions. The Plan establishes a clear framework for the

determination and appeal of employee benefit claims. See Plan § 3,reprinted in J.A. 194-203. Under

the Plan, an employee whose initial application for benefits is denied, in whole or in part, by Plan

administrators may appeal that decision within sixty days of its receipt to the Employees' Benefit

Committee ("Benefits Committee"), which has "sole and complete discretionary authority" to

determine eligibility for benefits. Id. § 3, ¶ 3(a), reprinted in J.A. 199, 214. The Benefits Committee

must then notify the aggrieved employee of its decision within a certain time period, specifying in

writing the reasons for such decision. See id.

The CBA likewise creates a mandatory, multi-step grievance procedure for the resolution of

disputes between AT&T management and employees. SeeCBAArts. 9-11,reprinted in J.A. 250-61.

Article 10.10 of the CBA provides that "[i]f, at any time, a difference arises between [AT&T] and

[CWA] regarding the true intent and meaning of a provision under this Agreement ..., the grievance

procedures set forth in Article 9 shall be employed in an effort to settle said differences. If the

grievance procedures do not result in settlement ofthe differences, [CWA] may institute [arbitration]

proceedings ... to resolve the dispute in question...." Id. Art. 10.10, reprinted in J.A. 254.

B. The Merger and the AT&T-NCR Interchange Agreement

In 1991, AT&T acquired NCR, which became and continuesto be a wholly owned subsidiary

of AT&T. As part of the merger agreement between AT&T and NCR, most of the computer-related

operations and servicing formerly done at AT&T were shifted to NCR. AT&T employees affected

by the merger were given several options by AT&T management, one of which was that AT&T

would assist such employeesin seeking employment at NCR. While employees choosing this option

were not guaranteed employment at NCR, approximately five hundred employees, including appellee

Wingate, applied to and were hired by NCR.

In effecting the merger, AT&T and NCR purported to execute an "Interchange Agreement"

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("AT&T-NCR Interchange Agreement"), which covers the continued eligibility under the Plan of

former AT&T employees hired byNCR. See AT&T-NCR Interchange Agreement,reprinted in J.A.

215-21. This agreement provides for the portability of pension service credit between the two

companies, which meansthat, upon retirement from NCR, a former AT&T employee will be eligible

to receive whatever AT&T pension the employee had earned as of the date he or she moved from

AT&T to NCR. The agreement treats years of service with NCR as years of service with AT&T for

purposes of determining eligibility to receive a pension under the Plan. Under the AT&T-NCR

Interchange Agreement, however, former AT&T employees hired by NCR cannot begin to receive

any Plan benefits to which they would otherwise be entitled (if they retired or otherwise stopped

working for AT&T and its affiliates) for aslong asthey are employed by NCR. AT&T management

advised such employees of this fact before they left AT&T for NCR.

Approximately seventy of the almost five hundred CWA-represented AT&T employees who

went to NCR, including Wingate, would have been eligible at that time to begin receiving pension

payments from the Plan upon retiring from AT&T and its affiliates. A number of these employees,

but not Wingate, filed initial applications for their pension benefits and were notified by Plan

administrators that, because of the AT&T-NCR Interchange Agreement, they would not be eligible

to receive their pensions while they worked for NCR. At the time this suit was filed, none of these

employees had appealed to the Benefits Committee. As a result, the Plan had made no final

determination regarding the eligibility ofsuch employeesto receive pension benefits while employed

by NCR. In addition, CWA never filed a grievance or sought arbitration under the CBA regarding

any benefits-denial determinations of Plan administrators.

C. The District Court's Decision

On October 25, 1991, appelleessued AT&T and the Plan in District Court under ERISA and

the LMRA. First, appellees sought a determination under section 502 of ERISA that pension-eligible

AT&T employees who went to work for NCR were currently entitled to receive pension benefits

under the Plan. Specifically, appellees claimed that the Plan administrators' determinations that the

AT&T-NCR Interchange Agreement required the suspension of the pension benefits of such

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employees wasimpermissible under the terms ofthe Plan. Second, appellees claimed that the AT&TNCR Interchange Agreement constituted a detrimental "change" in the Plan without CWA's consent

in violation of Article 19.30 of the CBA. Appellees sought to enforce the CBA under section 301

of the LMRA.

After the completion of discovery, appellants moved for summary judgment on several

grounds. First, appellants claimed that CWA lacked standing to sue under section 502 of ERISA,

either in its own right or in its capacity as representative of its members. Appellants also contended

that neither the ERISA claim nor the LMRA claim was properly before the District Court because

appellees had failed to exhaust their administrative remedies under the Plan and because CWA had

failed to pursue the mandatory grievance and arbitration procedures established by the CBA. On the

merits, appellants argued that the denial of benefits at issue resulted from a reasonable interpretation

of the Plan that was entitled to deference under controlling Supreme Court precedent. In particular,

appellants claimed that the AT&T-NCR Interchange Agreement was permissible pursuant to a Plan

provision authorizing Interchange Agreements with parties other than former Bellsystemcompanies.

See Plan § 8, ¶ 1, reprinted in J.A. 208. Appellants also claimed that this interpretation was required

to avoid jeopardizing the Plan's tax-qualified status. Finally, with respect to the LMRA claim,

appellants contended that the AT&T-NCR Interchange Agreement did not constitute a "change" in

the Plan in violation of the CBA.

The District Court rejected all of appellants' summary judgment claims and, sua sponte,

granted summary judgment in favor of appellees. CWA, 828 F. Supp. at 77. The District Court first

held that CWA had representational standing to sue on behalf of its members under section 502 of

ERISA. Id. at 75. Second, with respect to the ERISA claim, the District Court excused appellees'

failure to exhaust administrative remedies under the Plan because such efforts would have been futile.

The court based this determination on the fact that "Plan administrators consistently have interpreted

the Plan to deny [initial] claims such as those raised by [appellees] in this case." Id. Third, the

District Court found that appellees' claim under section 301 of the LMRA was not subject to

mandatory arbitration under the CBA and thus was properly before the court. In this regard, the

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court concluded both that the language in Article 19.40 of the CBA relating to arbitration is

permissive and that additional language in that Article specifically exempts this dispute from

mandatory arbitration. Id. at 75-76. Finally, on the merits, the District Court held that appellants had

improperly determined that the AT&T-NCR Interchange Agreement precluded the pension-eligible

AT&T employees hired by NCR from receiving pension benefits while they worked at NCR. Id. at

76-77. The court did not specifically hold, but appeared to assume, that this determination also

constituted a "change" in the Plan to the detriment of such employees in violation of Article 19.30

of the CBA. The District Court postponed for a further hearing its determination as to what relief

should be granted. Id. at 77-78.

II. ANALYSIS

A. The ERISA Claim

It iswellestablished that, barring exceptionalcircumstances, plaintiffsseeking a determination

pursuant to ERISA of rights under their pension plans "must ... exhaust available administrative

remedies under their ERISA-governed plans before they may bring suit in federal court." Springer

v. Wal-Mart Assocs. Group Health Plan, 908 F.2d 897, 899 (11th Cir. 1990); accord Medina v.

Anthem Life Ins. Co., 983 F.2d 29, 33 (5th Cir.), cert. denied, 114 S. Ct. 66 (1993); Smith v. Blue

Cross &Blue Shield, 959 F.2d 655, 658-59 (7th Cir. 1992); Horan v. Kaiser Steel Retirement Plan,

947 F.2d 1412, 1416 (9th Cir. 1991); Weldon v. Kraft, Inc., 896 F.2d 793, 800 (3d Cir. 1990);

Makar v. Health Care Corp. of Mid-Atlantic, 872 F.2d 80, 82-83 (4th Cir. 1989). Because ERISA

itself does not specifically require the exhaustion of remedies available under pension plans, courts

have applied thisrequirement as a matter ofjudicial discretion. See, e.g., Amato v. Bernard, 618 F.2d

559, 566-68 (9th Cir. 1980); see also Committee of Blind Vendors v. District of Columbia, 28 F.3d

130, 134 (D.C. Cir. 1994) (stating that when claim is not governed by statute requiring exhaustion,

"the exhaustion doctrine applies only "as a matter ofjudicial discretion' " (quoting Darby v. Cisneros,

113 S. Ct. 2539, 2548 (1993))). Much like the exhaustion doctrine in the context of judicial review

of administrative agency action, the exhaustion requirement in the ERISA context serves several

important purposes. By preventing premature judicial interference with a pension plan's

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decisionmaking processes, the exhaustion requirement enables plan administrators to apply their

expertise and exercise their discretion to manage the plan's funds, correct errors, make considered

interpretations of plan provisions, and assemble a factual record that will assist the court reviewing

the administrators' actions. See Amato, 618 F.2d at 567-68. Indeed, the exhaustion requirement may

render subsequent judicial review unnecessary in many ERISA cases because a plan's own remedial

procedures will resolve many claims. See Makar, 872 F.2d at 83.

There is no dispute that appellees failed to exhaust the administrative remedies available to

them under the Plan in this case. While Plan administrators denied the initial applications of some

twenty-three CWA members, at the time this suit was filed not one of those claimants had appealed

to the Benefits Committee, the final arbiter under the Plan. Appellee Wingate had not even filed an

initial claim for benefits. As a result, the Benefits Committee had rendered no final determination as

to appellees' rights under the Plan at the time this suit was filed.

Appellees contend, however, that they were not required to exhaust their administrative

remedies because exhaustion would have been futile. The general rule in this circuit is that the

exhaustion requirement "may be waived in onlyin the most exceptional circumstances." Peter Kiewit

Sons' Co. v. United States Army Corps. of Eng'rs, 714 F.2d 163, 168-69 (D.C. Cir. 1983) (internal

quotations omitted). This court has recognized a discretionary exception to the exhaustion

requirement where resort to administrative remedies " "would be futile because of the certainty of an

adverse decision.' " Committee of Blind Vendors, 28 F.3d at 133 n.5 (quoting Randolph-Sheppard

Vendors of America v. Weinberger, 795 F.2d 90, 105 (D.C. Cir. 1986)). "The futility exception is,

however, quite restricted," id., and has been applied only when resort to administrative remedies is

"clearly useless." Randolph-Sheppard Vendors, 795 F.2d at 105; see also Smith, 959 F.2d at 659

("In order to come under the futility exception, [plaintiffs] must show that it is certain that their claim

will be denied on appeal, not merely that they doubt an appeal will result in a different decision."

(emphasis added)).

The District Court held, and appellees contend, that exhaustion of remedies under the Plan

would have been futile in this case because Plan administrators had consistently interpreted the Plan

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to deny the initial claims of otherwise pension-eligible former AT&T employees who went to work

for NCR. CWA, 828 F. Supp. at 75. Under the same rationale, the District Court excused appellee

Wingate's failure to file even an initial claim with the Plan. Appellees further contend that, because

AT&T management had advised employees leaving AT&T for NCR that they would not be eligible

to receive benefits under the Plan while at NCR, and because the members of the Plan's Benefits

Committee are drawn from AT&T management, it is inconceivable that the Benefits Committee

would have reached a different conclusion from AT&T management. This great unlikelihood,

appellees conclude, also supports the District Court's futility finding.

We disagree. Other than the denial of initial benefits claims, there is nothing in the record that

demonstrates that exhaustion of the Plan's administrative remedies by appellees would have been

futile. Because the Plan's final review authority, the Benefits Committee, never had an opportunity

to render a final determination on appellees' claims, we fail to see any basis for finding that an

unfavorable decision bythat Committee was a foregone conclusion. Even if one were to concede that

an unfavorable decision fromtheBenefitsCommittee was highly likely, that does notsatisfy ourstrict

futility standard requiring a certainty of an adverse decision. Simply put, the denial of initial claims,

which is all the record reveals, is not enough to show futility of internal Plan remedies.

Furthermore, this court will not assume that, merely because members of a pension-plan

review committee are drawn from a company's management, the review committee will never reach

an interpretation of the plan different from that of the company. If futility were established on this

basis alone, exhaustion of internal administrative remedies would be excused in virtually every case

where a pension plan is administered by a company's management and where the company has

expressed a view asto the meaning of the terms of the plan. Cf. Springer, 908 F.2d at 901 (rejecting

argument that exhaustion of internal plan remedies would be futile because plan administrator who

makes initial benefits decisions and trustees who review appeals share common interests or

affiliations). In view of the fact that ERISA specifically contemplates that employers may act as the

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1We also reject appellees' reliance, with respect to their futility argument, on actions taken by

the Benefits Committee after this suit was filed and which were never presented to the District

Court. Entertaining such after-the-fact evidence would entirely undermine the exhaustion

requirement, permitting plaintiffs to bypass administrative remedies, file suit, and then hope for

subsequent events to justify their futility claims. See Kizas v. Webster, 707 F.2d 524, 543, 547

(D.C. Cir. 1983) (rejecting futility argument that was based on agency action taken well after

plaintiffs had filed suit in district court), cert. denied, 464 U.S. 1042 (1984). 

fiduciaries and administrators of employee pension plans,such a result would be anomalous.1See 29

U.S.C. § 1003(a) (1988); Phillips v. Amoco Oil Co., 799 F.2d 1464, 1471 (11th Cir. 1986) ("[T]he

ERISA scheme envisions that employers will act in a dual capacity as both fiduciary to the plan and

employer."), cert. denied, 481 U.S. 1016 (1987).

TheDistrict Court'sfutilitydecisionis also inconsistent withthe exhaustiondoctrine's purpose

of facilitating meaningful judicial review in ERISA cases such as this. The Supreme Court has held

that "a denial of benefits challenged under [section 502 of ERISA] is to be reviewed under a de novo

standard unless the benefit plan gives the administrator ... discretionary authority to determine

eligibility for benefits or to construe the terms of the plan," in which case courts apply an

abuse-of-discretion standard. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)

(emphasis added); accord Block v. Pitney Bowes Inc., 952 F.2d 1450, 1452 (D.C. Cir. 1992).

Therefore, where as here the pension administrator has discretionary authority to construe the terms

of the plan and determine eligibility, see Plan § 3, ¶ 3(a), reprinted in J.A. 199, 214, it is important

for the plan to provide a final, fully considered, and reasoned explanation for the court to evaluate.

However, because the Benefits Committee in this case never rendered a final determination, and thus

never provided a fully reasoned explanation forsuch a decision, the District Court had nothing before

it, except the arguments of counsel, to which it could defer. By permitting appellees' ERISA claim

to proceed before obtaining a final decision fromthe Plan, the District Court left itself unable to apply

properly the Firestone rule of deference.

For the foregoing reasons, we conclude that the District Court abused its discretion by

excusing appellees' failure to exhaust their administrative remedies under the Plan. We therefore

vacate the District Court's judgment with respect to appellees' ERISA claim and remand to the

District Court with instructionsto dismissthat claim without prejudice in order to allow appellees to

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2Once CWA-represented employees have exhausted their administrative remedies under the

Plan, CWA will acquire representational standing to sue on behalf of its members under section

502 of ERISA. 

exhaust their Plan remedies. Alternatively, the District Court may exercise its discretion to maintain

jurisdiction over appellees'ERISAclaimwhile appellees pursue their administrative remedies. If their

appeals to the Benefits Committee are denied, the District Court may properly consider appellees'

ERISA claim at that time.2

B. The LMRA Claim

It is a well-settled rule of labor law that parties to a collective bargaining agreement normally

mustseek to resolve their contract disputes under agreed-upon grievance and arbitration procedures;

and where the parties have agreed to final and binding arbitration, disputes within the scope of the

arbitration clause may not be pursued in a breach of contract action under section 301 of the LMRA

in lieu of arbitration. See Republic Steel Corp. v. Maddox, 379 U.S. 650, 652-53 (1965); see also

DelCostello v. International Bhd. of Teamsters, 462 U.S. 151, 163 (1983); Hines v. Anchor Motor

Freight, Inc., 424 U.S. 554, 562-63 (1976). This requirement reflects the congressional policy that

"[f]inal adjustment by a method agreed upon by the parties is ... the desir[ed] method for settlement

of grievance disputes." 29 U.S.C. § 173(d) (1988). That policy " "can be effectuated only if the

means chosen by the parties for settlement of their differences under a collective bargaining

agreement is given full play.' Courts are not to usurp those functions which collective-bargaining

contracts have properly "entrusted to the arbitration tribunal.' " Hines, 424 U.S. at 562 (quoting

United Steelworkers v. American Mfg. Co., 363 U.S. 564, 566, 569 (1960)).

Notwithstanding this clear requirement, the District Court permitted appellees' section 301

claim to proceed despite their failure to pursue the grievance and arbitration procedures established

under the CBA. The District Court relied on two separate grounds for its conclusion that the parties'

dispute over the interpretation of the AT&T-NCR Interchange Agreement was not subject to

mandatory arbitration. CWA, 828 F. Supp. at 75-76. First, the court found that the relevant CBA

provisions used permissive, not mandatory, language. Article 19.30 of the CBA provides that AT&T

cannot make any "change" in the Plan which would reduce or diminish the benefits of employees

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represented by CWA without the Union's consent. See CBA Art. 19.30, reprinted in J.A. 262. The

first sentence of Article 19.40 provides that "[a]ny dispute involving the true intent and meaning of

[Article] 19.30 may be presented as a grievance and if not resolved by the parties, may be submitted

to ... arbitration." Id. Art. 19.40. Because Article 19.40 appears to use permissive

language"disputes may be submitted to arbitration"the District Court concluded that the dispute

in this case was not subject to mandatory arbitration and that pursuit of arbitration was thus not

required.

The District Court's conclusion misreadsthe CBA and ignores controlling law. Article 10.10

of the CBA expressly requires mandatory, not discretionary, grievance procedures, providing that

"[i]f, at any time, a difference arises between [AT&T] and the Union regarding the true intent and

meaning of a provision under this Agreement ..., the grievance proceduresset forth in Article 9 shall

be employed in an effort to settle said differences." CBA Art. 10.10 (emphasis added), reprinted in

J.A. 254. Thus, Article 19.40's provision that Article 19.30 disputes "may" be presented as a

grievance and "may" be submitted to arbitration means only that such disputes, if they arise, will be

subject to the mandatory grievance and arbitration procedures required by Article 10.10.

Furthermore, even ifthe first sentence in Article 19.40 were ambiguous, federal labor law still

would require arbitration in this case. Federal labor policy establishes a heavy presumption in favor

of mandatory arbitration of disputes under collective bargaining agreements, unless the agreement

expressly provides that arbitration is not the exclusive remedy. See United Steelworkers v. Warrior

&Gulf Navigation Co., 363 U.S. 574, 582-83 (1960). "Use of the permissive "may' does not of itself

reveal a clear understanding between the contracting parties that [disputants] ... are free to avoid the

contract [grievance] procedure.... Any doubts must be resolved against such an interpretation."

Maddox, 379 U.S. at 658-59 (citing Warrior & Gulf, 363 U.S. at 582-83). The District Court thus

erred in finding that the use of the permissive "may" in Article 19.40 exempted Article 19.30 disputes

from the mandatory grievance and arbitration procedures established in Article 10.10.

The District Court'ssecond ground for excusing appellees'failure to pursue arbitration, upon

which appellees exclusively rely, issimilarly flawed. The second sentence of Article 19.40 states that

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"nothing herein shall be construed to subject the ... Plans(or their successors) or their administration

or the terms of the proposed change(s) in the Plan(s) to arbitration." CBA Art. 19.40, reprinted in

J.A. 262. The District Court found, and appellees contend, that this provision also exempts from

compulsoryarbitration the dispute in this case over whether the AT&T-NCR Interchange Agreement

constituted an impermissible "change" in the Plan in violation of Article 19.30. This argument simply

fails. Article 19.30 prohibits changes in the Plan that reduce or diminish employee benefits without

CWA's consent. Article 19.40 allows CWA to grieve and arbitrate over any such changes; and if

such a grievance is sustained, CWA can seek redress from the employer for any lost benefits. The

provision in Article 19.40 that bars CWA from filing a grievance against the Plans or their

administration, and from seeking to alter the terms of the Plans, in no way abrogates the right of

CWA to seek relief from the employer for impermissible changes in the Plans.

Appellees' reading of the second sentence of Article 19.40 would render the first sentence of

Article 19.40 a nullity. The District Court read the second sentence to exempt from mandatory

arbitration any dispute requiring an arbitrator to construe the terms of the Plan for purposes of

determining whetherthe Plan had been changed without CWA's consent. As noted, however, the first

sentence of Article 19.40 specifically subjects Article 19.30 disputes, which necessarily involve

whether or not the Plan has been changed without CWA's consent, to final and binding grievance and

arbitration procedures established by the CBA. It would therefore be absurd to interpret the second

sentence of Article 19.40 as exempting those exact disputesfrommandatory arbitration. We will not

accept a reading of Article 19.40'ssecond sentence that would render the first sentence meaningless,

especially where the two provisions are easily reconciled.

The proper course for appellees is to submit this dispute to arbitration under the CBA. As

appellants conceded at oral argument, an arbitratorsurelywould have authorityto construe the terms

of the Plan for purposes of determining whether the AT&T-NCR Interchange Agreement violated

Article 19.30 by effecting an impermissible change in the Plan without CWA's consent. If it were

determined that such a change was made, the arbitrator could issue an appropriate award based on

his or her construction of the Plan. If AT&T refused to comply with the arbitrator's award, appellees

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at that time could bring suit to enforce the award in district court under section 301 of the LMRA.

Thus, even though the second sentence of Article 19.40 prevents an arbitrator from ordering Plan

administrators to take specific actions, appellees would be able to obtain adequate relief from an

arbitrator's award against AT&T. Accordingly, we reverse the District Court's denial of appellants'

motion to dismiss the section 301 claim as well as its sua sponte grant of summary judgment for

appellees on that claim.

III. CONCLUSION

Because we find no basisfor concluding that exhaustion of administrative remedies under the

Plan in this case would have been futile, the District Court's grant ofsummary judgment for appellees

on the ERISA claim is vacated and remanded with instructions. Furthermore, because appellees

failed to pursue the mandatory grievance and arbitration procedures established under the CBA prior

to bringing their LMRA claim, the District Court's denial of appellants' motion to dismiss that claim

is reversed.

So ordered.

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