In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 02-1743

R. J. CORMAN DERAILMENT SERVICES, LLC,

Plaintiff-Appellant,

v.

INTERNATIONAL UNION OF OPERATING ENGINEERS,

LOCAL UNION 150, AFL-CIO,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 02 C 471—Ruben Castillo, Judge.

____________

ARGUED OCTOBER 18, 2002—DECIDED JULY 10, 2003

____________

Before POSNER, DIANE P. WOOD and EVANS, Circuit

Judges.

DIANE P. WOOD, Circuit Judge. In spite of the fact

that courts sometimes talk about arbitral tribunals as

nothing more than alternative fora in which to resolve

disputes, parties often fight hard either to enforce or to

defeat an alleged agreement to arbitrate. That is what

is happening in this case: plaintiff R. J. Corman Derailment Services takes the position that a former agreement

to arbitrate between Local 150 of the International Union

of Operating Engineers and itself is no longer effective; the

Union says that it is, and that a wage dispute must there-
2 No. 02-1743

fore be arbitrated. Proceedings in the district court came

to an abrupt halt when the court, sua sponte, granted

what it termed judgment on the pleadings under FED. R.

CIV. P. 12(c) to the Union, thereby holding that the arbitration clause in the parties’ expired collective bargaining

agreement (CBA) covered the dispute. Apart from the

fact that FED. R. CIV. P. 12(c) was not the proper vehicle

to use, because the Union had not yet filed its answer to

the complaint and the pleadings were thus not yet closed,

we find that the court acted prematurely in its action.

Judgment under FED. R. CIV. P. 12(b)(6) for the Union

would also have been improper, given the allegations in

Corman’s pleadings, and summary judgment was equally

unavailable without proper notice of conversion under

FED. R. CIV. P. 12(b). We therefore reverse and remand

for further proceedings.

I

Corman provides emergency railroad services across the

country. Starting in January 1992, Local 150 represented

Corman’s Derailment Division employees at its Gary,

Indiana, facility. The parties’ CBA required Corman to

pay bargaining unit members a regular wage rate of

$12.35 per hour, a straight-time wreck rate of $16.25 per

hour, and an overtime wreck rate of $22.65 per hour.

Article IX of the CBA outlines a four-step procedure for

the resolution of grievances. Step one requires an aggrieved

employee orally to notify her union steward and her

supervisor of a grievance within ten working days of the

grievance’s occurrence. If after five additional working

days the grievance is not resolved, step two requires the

employee to submit a signed copy of her grievance in

writing to the Union’s Business Representative and to

Corman or its representative. Corman then has five work-
No. 02-1743 3

ing days to respond in writing to the grievance. If this

additional step fails to resolve the employee’s grievance,

step three provides for submission of the complaint to a

grievance committee. If within ten additional working

days the committee does not resolve the grievance, the

aggrieved employee may proceed to step four and submit

a written demand for arbitration. This written demand

for arbitration must be made within forty-five days of

the initial occurrence.

One month before the CBA’s December 19, 1999, expiration date, Corman and the Union began to negotiate a

new Agreement. These efforts ended when, in early June

2000, Corman took the position that Local 150 had lost

the support of a majority of the employees in the Division and thus could no longer represent them. At the end

of June, Corman closed its Gary facility, laying off all of

those employees. One difficult question on which this case

turns is whether the CBA continued to cover the parties’

relationship during the six months between the formal

expiration of the agreement and the closing of the

facility, or if instead Corman was unilaterally abiding by

the terms of the CBA after it expired in order to comply

with its duty to bargain in good faith. Article XIII of the

CBA sheds some light on this question, through its statement that “[t]his agreement shall be effective as of 12:01

A.M. on December 19, 1996 and continue in effect until

midnight, December 19, 1999 and from year to year thereafter unless either party to this Agreement wishes to

change or terminate the Agreement.” If the CBA remained

in effect, then it is at least possible that the parties were

obliged to arbitrate their dispute.

The dispute that the Union would like to put before

the arbitrators came to light in an unusual way. In July

2000, the Trustees of the Midwest Operating Engineers

Pension and Benefits Funds (the Funds) filed an ERISA

lawsuit in the Northern District of Illinois under 29 U.S.C.
4 No. 02-1743

§§ 1132, 1145, to compel an audit of Corman’s fund contributions and to collect any under-payments revealed by

that audit. (The appeal from this lawsuit is presently before this court in the case of Dugan v. R. J. Corman Derailment Services, LLC, No. 03-1011 (7th Cir. argued June 2,

2003). The parties failed to notify the court that this related case was pending when it came to their attention,

which would have been far better practice. Had it not

been for our independent discovery of the relation

between the two cases, the parties’ failure to call this

later case to our attention would have made it difficult

for this court to ensure consistency in its decisions.) One

year later, in July 2001, the Funds’ auditors issued their

report. Following the issuance of this report, Local 150

contacted Corman in an attempt to “schedule a meeting in

accordance with Article 9, Section A, Step 2” to resolve

what it claimed was a wage dispute under the CBA. The

Union insists that the underlying discrepancy about

which it complained ($11,013.92 in claimed underpaid

wages) was discovered as a result of the Funds’ ERISA

audit. Local 150’s wage discrepancy claim covered wages

that were paid before the CBA expired in December, 1999,

in addition to post-expiration wages that were paid up

until the Gary facility closed six months later. Although

the Union’s complaint was brought to Corman’s attention shortly after the Pension Funds’ audit was completed, this was long after the expiration of the forty-five

day period set forth in Article IX of the CBA for bringing

the wage discrepancy claim. In fact, as Corman points

out in its brief to this court, the Union’s wage discrepancy

claim did not comply with any of the steps that the parties

agreed had to precede arbitration of a dispute.

Following a flurry of correspondence between the Union

and Corman and their lawyers, Local 150 threatened to

invoke Article IX’s arbitration procedures to resolve the

wage dispute. Rather than waiting to see if the Union
No. 02-1743 5

would make good on its threat to arbitrate, Corman filed

a two-count complaint in the District Court. Count I of

the complaint sought a declaratory judgment that the

parties’ dispute was not subject to the CBA’s arbitration

provision. Count II sought a permanent injunction preventing Local 150 from submitting or threatening to

submit its wage discrepancy claim to arbitration. Nearly

one month after Corman filed its complaint, and before

Local 150 filed its answer, Corman filed a motion for a

preliminary injunction that tracked Count II of its complaint. In a footnote in its Reply Memorandum in Support

of Plaintiff’s Motion for Preliminary Injunction, Corman

asked the district court, in the alternative, to treat its

motion as a motion for summary judgment on both counts

of the complaint. Rather than granting Corman the relief

that it sought, the district court denied the motion for

a preliminary injunction. The court also denied Corman’s

alternative request for summary judgment. Instead of

granting Corman the injunctive relief that it sought, the

district court sua sponte entered declaratory judgment

on the pleadings, citing FED. R. CIV. P. 12(c), finding that

the Union’s wage dispute was subject to arbitration. Corman now appeals that ruling.

II

As a general matter, our court reviews a decision to

grant judgment on the pleadings using the same standard that applies to dismissals under FED. R. CIV. P.

12(b)(6) for failure to state a claim on which relief can be

granted. See Gustafson v. Jones, 117 F.3d 1015, 1017 (7th

Cir. 1997). In such cases, judgment may not be granted

against the non-moving party “unless it appears beyond

a doubt that the [non-moving party] cannot prove any

facts that would support his claim for relief.” Id. (internal

quotation marks omitted). We take the facts alleged in the
6 No. 02-1743

complaint in the light most favorable to the non-moving

party, and we review the district court’s decision de novo.

Id. Both FED. R. CIV. P. 12(b)(6) and FED. R. CIV. P. 12(c)

also provide that if, on a motion under the rule, matters

outside the pleadings are presented to and not excluded by

the court, then the motion must be converted to one for

summary judgment under FED. R. CIV. P. 56, and “all

parties shall be given reasonable opportunity to present

all material made pertinent to such a motion by Rule 56.”

FED. R. CIV. P. 12(b), (c). See also Church v. General Motors

Corp., 74 F.3d 795, 798 (7th Cir. 1996).

This case is somewhat unusual, both because no answer

was ever filed, and because it was Corman, not the Union,

which asked for its preliminary injunction motion to be

treated in the alternative as a motion for summary judgment. By granting summary judgment for the Union, the

court in effect created an implied cross-motion for summary

judgment “filed” on behalf of the Union. The existence

of cross-motions for summary judgment does not, however,

imply that there are no genuine issues of material fact. See

generally 10A CHARLES A. WRIGHT, ET AL., FEDERAL PRACTICE & PROCEDURE § 2720 at 327-28 (3d ed. 1998). Parties

have different burdens of proof with respect to particular

facts; different legal theories will have an effect on which

facts are material; and the process of taking the facts in

the light most favorable to the non-movant, first for one

side and then for the other, may highlight the point that

neither side has enough to prevail without a trial. Here,

the district court did rely on materials outside of the

pleadings, because it took into account Corman’s motion

for a preliminary injunction, Local 150’s response to that

motion, and the materials that the Union submitted

along with its response. Because it relied on FED. R. CIV.

P. 12(c) as the basis for its action, however, it never formally converted the proceeding into a summary judgment

motion “filed” on behalf of the Union. This truncated
No. 02-1743 7

procedure created a number of problems, which we now

address.

We consider first whether, taking the allegations of

Corman’s complaint in the appropriate light, the Union

was entitled to judgment as a matter of law under what

should have been FED. R. CIV. P. 12(b)(6). The answer is

an unequivocal no. Corman alleged in ¶ 6 of the complaint that the CBA expired on December 19, 1999; later,

in ¶ 15, it refers to the September 12, 2001, letter as having

been “presented more than 20 months after the 1997

Bargaining Agreement expired . . . .” The complaint also

alleges that the first Corman knew of the wage dispute

was when it read the letter from the Local 150 representative dated September 12, 2001. ¶ 14. The complaint itself says nothing about the way in which Local 150 learned

about any alleged wage dispute; nowhere does it refer to

the Funds or their audit. It merely takes the position that

the wage dispute was not presented to it in a proper or

timely fashion, and thus that it is not subject to arbitration. Taking these facts in the light most favorable to

Corman, we would have to conclude that the agreement

expired according to its own terms, that any wage dispute was not properly presented, and thus that arbitration was not available.

The district court, however, found that the parties had

agreed to extend their CBA. In reaching this conclusion, it

relied on Article XIII of the CBA, which says that the CBA

remains in effect until “December 19, 1999 and from year

to year thereafter unless either party to this Agreement

wishes to change or terminate the Agreement.” The CBA

does not appear to have been appended to the complaint,

although if it had been, it would have been proper for the

court to take its provisions into account. Accepting for the

moment that there was some justification for reviewing

it anyway, we find Article XIII less than conclusive. By its

own language, it says that the CBA will remain in effect
8 No. 02-1743

unless either party wishes to change or terminate it. We

know from the complaint, ¶ 7, that the parties were negotiating over a new CBA, which (in the light most favorable

to Corman) indicates that one or both of them wanted to

change the agreement. A trier of fact could find, therefore,

that Article XIII did not of its own force continue the

agreement. Furthermore, the bare complaint and CBA

do not reveal whether Corman was continuing to abide

by at least the wage terms of the expired CBA because (a)

it believed that there was a new agreement between the

parties, (b) it believed that the old agreement had been

extended, or (c) because as a unilateral matter it was

simply abiding by the old terms in good faith while attempting to negotiate a new agreement. Last, we know

nothing about whether Corman was also abiding by

other terms of the expired CBA, such as the obligation to

make pension contributions at issue in the related Dugan

litigation.

These are significant disputed facts. The fact that

Corman had asked that its own motion for a preliminary

injunction be considered in the alternative as a motion for

summary judgment does not mean that it was on notice

of the fact that a motion the Union never filed might also

be treated as a motion for summary judgment. This lack

of notice means that Corman never had the opportunity

to present facts and argument to the district court in

support of its position. The issue of when the CBA expired is, after all, a central one: if the CBA remained in

effect after December 19, 1999, then Local 150 might have

had a longer period of time in which to assert its wage

discrepancy claim (though the forty-five day period still

might cause trouble for it).

The district court also found as an undisputed fact that

Local 150’s auditors sought Corman’s business and payroll records for the purpose of conducting a wage audit

before the Union brought its grievance. Certainly from the
No. 02-1743 9

point of view of the pleadings alone, and in our view more

generally, the record is devoid of evidence that would

permit a conclusion that the audit was undertaken by

Local 150 or on its behalf. It is at least equally plausible

that the Funds had their own interests in mind when

they instituted the audit for purposes of ensuring that

Corman was not skimping on its contributions; indeed, the

existence of the Dugan litigation conclusively shows that

the Funds have their own ax to grind here. The record does

not establish that the audit’s focus was on wage underpayments, rather than pension and other fringe benefits.

The district court relied heavily on this factual conclusion

in finding that Local 150’s initiation of grievance and

arbitration proceedings was timely as a matter of law. But

if Local 150 is simply piggy-backing on the Funds’ independent and unrelated audit (which may have generated

information about wages as a step along the way to ascertaining whether contribution levels were correct), the

court’s conclusion that the grievance was timely is unsupported. Once again, had Corman known that it was facing a de facto summary judgment motion from the Union,

it would have had the opportunity to contest this fact. It

now insists that if it had known that the district court

was considering this type of resolution of the case, it

would have introduced evidence tending to show that

Local 150 was not entitled to rely on the Funds’ independent audit as a basis for the delay in seeking to arbitrate

its wage dispute.

All of this is by way of prelude to our consideration of the

district court’s finding that the Union was entitled as a

matter of law to have the wage dispute submitted to

arbitration. We have already indicated that this conclusion cannot be drawn from the face of the pleadings, or

the pleadings supplemented by the CBA. The district

court should not have converted Corman’s alternative

motion for summary judgment into a motion brought by
10 No. 02-1743

the Union without notice to the parties. Furthermore, this

error was not harmless. Corman points out that the

court relied on factual conclusions—that the parties

agreed to extend the CBA and that Local 150 undertook

a wage audit—that were unsupported by the scant record that the parties developed, that neither side advanced,

and that Corman lacked an opportunity to refute. We

agree that these points were subject to dispute, and more

fundamentally that Corman never had the opportunity

to which it is entitled to present opposing evidence to the

court. We are also troubled by the district court’s legal

conclusions, which were based on those questionable fact

findings. Specifically, the district court found the parties’

dispute subject to arbitration in this case because it believed that the twenty-one month delay between the

termination of the CBA and the time Local 150 first notified Corman of the wage dispute was reasonable in light

of the fact that the Union did not know the basis for its

wage claim until its audit was completed. Since we do

not know whether Local 150 actually undertook a wage

audit, this conclusion was premature. For that reason, we

do not offer an opinion on the ultimate question of

arbitrability.

On remand, there will be a number of new problems. Most

importantly, the district court must consider whether

Corman has any entitlement to either declaratory or

injunctive relief in light of the prohibitions of the NorrisLaGuardia Act, 29 U.S.C. §§ 101-15, and this court’s

holding in AT&T Broadband LLC v. International Brotherhood of Electrical Workers, 317 F.3d 758 (7th Cir. 2003),

which held that a district court may not enjoin the arbitration of a labor dispute. Id. at 763. Although AT&T may

seem dispositive here, in the interest of fairness to the

parties (who did not have an opportunity to brief the

issue), we leave that question to the district court in the

first instance.
No. 02-1743 11

If there is any life remaining in this case, the parties

will also need on remand to confront another aspect of the

timeliness of Local 150’s grievance. The district court’s

analysis did not take into account the common sense

argument that Corman presses on appeal—that the

wage dispute was discoverable as soon as wages were

paid and therefore regardless of the audit, Local 150’s

grievance was not timely filed. Local 150 makes a weak

waiver argument in response, but a party cannot waive

something that it does not know is at issue. In our view,

Corman’s failure to argue this point below corroborates

its claim of surprise. Once again, the fact that Corman

itself sought summary judgment for different reasons

does not mean that it was fairly apprised of the ultimate

basis for the district court’s reasoning. This is the precise reason why our court has repeatedly explained that

it is appropriate to grant summary judgment sua sponte

only when it is clear that neither side will be disadvantaged or unfairly surprised by the move. See, e.g., Jones

v. Union Pacific R.R. Co., 302 F.3d 735, 740 (7th Cir.

2002) (holding sua sponte summary judgment proper “as

long as the losing party is given notice and an opportunity

to come forward with its evidence”); Goldstein v. Fidelity &

Guar. Ins. Underwriters, Inc., 86 F.3d 749, 751 (7th Cir.

1996) (affirming sua sponte summary judgment because

losing party had adequate notice and no genuine issue of

material fact established). We recently expressed our

disfavor of this procedure, noting that sua sponte awards

of summary judgment “tend to defeat the very purpose

they are designed to serve—judicial efficiency.” Southern

Illinois Riverboat Casino Cruises, Inc. v. Triangle Insulation

& Sheet Metal Co., 302 F.3d 667, 668 (7th Cir. 2002).

Finally, it is important to clarify an additional point.

Although the district court ultimately found the parties’

dispute subject to arbitration as a matter of law, its opinion contains language that suggests that whether this
12 No. 02-1743

particular wage dispute is subject to arbitration is a

procedural question for the arbitrator and not the court

to decide. In reaching this conclusion the judge relied on

a decision of this court that holds that procedural questions concerning the arbitration process itself are to be

decided by the arbitrator. In Beer, Soft Drink, Water, Fruit

Juice, Local Union 744 v. Metropolitan Distributors, Inc.,

763 F.2d 300 (7th Cir. 1985), we held that after a court

ascertains that the subject matter of a particular dispute

is covered by the parties’ arbitration agreement, any

procedural questions—such as whether the arbitration

procedures were properly followed—are reserved for the

arbitrator. Id. at 302-03. The district court read Metropolitan Distributors to mean that whether the parties in

this case must arbitrate the recently-complained-of

wage discrepancy is for the arbitrator to decide. But the

question in this case does not concern the scope of an

arbitration agreement that everyone agrees governs a

general relationship. It is instead the question whether

there is an agreement to arbitrate this subject matter at

all. The Supreme Court has held that it is the court and

not an arbitrator that must decide the question of arbitrability, unless the parties have explicitly provided

otherwise in their agreement. See First Options of Chicago,

Inc. v. Kaplan, 514 U.S. 938, 943-44 (1995); Litton Fin.

Printing Div. v. Nat’l Labor Relations Bd., 501 U.S. 190,

208 (1991). See also Nissan North Am., Inc. v. Jim M’Lady

Oldsmobile, Inc., 307 F.3d 601, 604 (7th Cir. 2002); Air

Line Pilots Ass’n Int’l v. Midwest Express Airlines, Inc., 279

F.3d 553, 555 (7th Cir. 2002). This is especially true

where, as here, grievance procedures are invoked well

after the parties’ collective bargaining agreement has

expired. In Nissan North America, Inc. v. Jim M’Lady

Oldsmobile, Inc., we explained that “courts handling

[cases involving expired fixed-term contracts] must determine not only whether the parties entered an agreement

to arbitrate some issues, but also whether the particular
No. 02-1743 13

dispute in question falls within the scope of the arbitration agreement.” 307 F.3d at 604 (emphasis in original). In

other words, the fact that some post-expiration grievances

remain subject to arbitration does not mean that all such

grievances are arbitrable. Jim M’Lady Oldsmobile made

clear that this latter question must be decided by the

courts before a contested issue may be submitted to arbitration. Id. Cf. Local 703, Int’l Bhd. of Teamsters v.

Kennicott Bros. Co., 771 F.2d 300, 303-04 (7th Cir. 1985)

(affirming district court’s refusal to order arbitration of

post-expiration grievance that occurred six months after

parties’ agreement expired).

Whether Local 150’s wage dispute is subject to arbitration is a question that the district court must decide. We

are not persuaded that the Ninth Circuit’s decision in

Goss Golden West Sheet Metal, Inc. v. Sheet Metal Workers

International Union, Local 104, 933 F.2d 759 (9th Cir.

1991), would support a different result. As the facts in

Goss suggest, that case involved a grievance that arose

during the life of the parties’ agreement that was probably only discoverable post-expiration because of the

employer’s successful cover-up efforts. 933 F.2d at 763 &

n.2. As we have already noted, our case presents a very

different set of facts. On this record, we have no reason to

believe that Local 150 could not have grieved the underpayment of its members’ wages as they occurred. In deciding Goss, the Ninth Circuit did not focus on the question

whether a grievance that arises pre-expiration and that

could have been raised during the life of the parties’

agreement, may nonetheless be raised for the first time

after the agreement has expired.

Finally, we briefly turn to the district court’s decision to

deny Corman’s motion for a preliminary injunction. Corman’s briefs on appeal do not directly question the district court’s analysis of its preliminary injunction motion.

Because no argument was raised on this issue, we find it
14 No. 02-1743

waived and summarily affirm the denial of a preliminary

injunction. Williams v. REP Corp., 302 F.3d 660, 666 (7th

Cir. 2002).

III

Because we agree with Corman that the district court

did not follow the proper procedures here, and thus did

not give Corman the chance to contest the facts on which

it based its de facto summary judgment in the Union’s

favor, we REVERSE and REMAND for further proceedings

consistent with this opinion.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-10-03