1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-17-1996

Local Union 735-S v. N Amer Directory II

Precedential or Non-Precedential:

Docket 96-7089

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Recommended Citation

"Local Union 735-S v. N Amer Directory II" (1996). 1996 Decisions. Paper 51.

http://digitalcommons.law.villanova.edu/thirdcircuit_1996/51
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 

 No. 96-7089 

 ___________ 

 GRAPHIC COMMUNICATIONS INTERNATIONAL 

 UNION, LOCAL 735-S, 

 Appellant 

 vs. 

 NORTH AMERICAN DIRECTORY CORPORATION II 

 ___________ 

 

 Appeal from the United States District Court 

 for the Middle District of Pennsylvania 

 (D.C. Civ. No. 93-cv-01991) 

 ___________ 

 

 Argued 

 August 6, 1996 

 Before: MANSMANN, SCIRICA and WEIS, Circuit Judges. 

 (Filed October 17, 1996) 

 ___________ 

Ira H. Weinstock, Esquire 

Jason M. Weinstock, Esquire (ARGUED) 

Ira H. Weinstock, P.C. 

800 North 2nd Street 

Suite 100 

Harrisburg, PA 17102 

 COUNSEL FOR APPELLANT 

Steven R. Semler, Esquire (ARGUED) 

Semler & Pritzker 

5301 Wisconsin Avenue, N.W. 

Suite 610 

Washington, D.C. 20015 

 COUNSEL FOR APPELLEE 

 ___________ 

 OPINION OF THE COURT 

 __________ 

MANSMANN, Circuit Judge. 

 Today we determine if the normally favored "presumption 
of arbitrability," in section 301 labor relation cases, has been 

overcome by language in a collective bargaining agreement 

circumscribing the jurisdiction of a dispute resolution body. 

Here the union filed a grievance before the Peer Review Panel 

over the extent of health insurance benefits. 

 Because we find that the union, in essence, seeks to 

have the Peer Review Panel effectuate a change in benefits, a 

matter expressly reserved from its jurisdiction in the collective 

bargaining agreement, we will affirm the judgment of the district 

court entered in favor of the company. 

 I. 

 North American Directory Corporation II, ("NADCO"), 

produces telephone directories. At the time of this litigation, 

its Hazelton, Pennsylvania, plant employed approximately 200 

production and maintenance employees who were represented by 

Local 735-S of the Graphic Communications International Union. 

 NADCO and the union entered into a collective 

bargaining agreement effective December 1, 1992 to November 30, 

1995. During the negotiation period, the concept of "peer 

review" was introduced by NADCO as an alternative to the 

traditional arbitration system. Under this peer review system, 

employee grievances are brought before a 5-person panel dominated 

by non-managerial members (3 employees/2 management). Despite 

some initial skepticism, the union agreed to accept the Peer 

Review Panel as the decision maker in certain workplace 

situations. 

 The description of the Peer Review Panel process at 

NADCO is found in Article 26 of the parties' collective 

bargaining agreement. The procedure for the filing of 

grievances, abbreviated for our purposes, is as follows: 

 Article 26.1 A grievance is defined and restricted to 

 an allegation that the employer has violated a specific 

 provision of the collective bargaining agreement. A 

 grievance as defined herein, shall be processed as 

 follows: 

 STEP 1: A grievance shall be brought to the 

 attention of the grievant's supervisor within 

 five (5) working days of the act or omission 

 being grieved . . . . The supervisor must

 answer the grievance within three (3) working 

 days of the presentation. 

 STEP 2: If agreement is not reached at the 

 Step 1 discussion, the grievant shall have

 three (3) working days thereafter in which to 

 file a written grievance with his/her 

 department head (or designated Company 

 representative) . . . . The department head 

 (or designated Company representative) must 

 answer the grievance in writing within five 

 (5) working days of its presentation or any 

 meeting. 
 STEP 3: If the grievance is not settled at 

 Step 2, the grievant shall have three (3) 

 working days from receipt of the Step 2 

 answer in which to appeal the Step 2 decision 

 in writing, by submitting the grievance to 1) 

 a Peer Review Panel, or 2) the Plant Manager 

 (Senior Management), whose decision(s) will 

 be final and binding on the grievant, 

 management and the Union. . . . The Peer 

 Review Panel or Plant Manager shall have five 

 (5) working days after meeting in which to

 answer the grievance in writing. 

 * * * 

 The Panel will not have the authority to 

 render a decision which will add to, subtract 

 from, or change the meaning of specific 

 provisions of the contract; nor shall the 

 Panel have any authority to change Company or 

 plant policy, pay rates, benefits, work rules 

 or to determine future contract terms. 

 Details of the peer review procedure were finalized by 

a joint committee of union members and NADCO management and were 

incorporated into the collective bargaining agreement. The 

addendum reads in relevant part: 

 INTRODUCTION: 

 The company and the union recognize that from 

 time to time an associate may encounter a 

 problem, question or complaint that, if left 

 unresolved, could affect job satisfaction and 

 work performance. . . . 

 * * * 

 [W]hen an associate is faced with a situation 

 that has not been satisfactorily resolved by 

 traditional means, the PEER REVIEW procedure 

 may be used. Peer Review is a formal problem 

 solving system designed to ensure that each 

 associate's concerns are given careful 

 consideration and conflicts are resolved 

 quickly and fairly. 

 SCOPE OF AUTHORITY: 

 A Peer Review Panel will hear grievances that 

 have not been resolved at an earlier step of 

 the Grievance Procedure. In other words, 

 peer panels may review management's actions 

 to ensure that the application of the 
 contract was followed correctly and fairly. 

 If they find otherwise, they have the 

 authority to rectify the situation consistent 

 with contract provisions, company practices 

 and/or policies. 

(Emphasis added.) 

 The Peer Review Panel can not change contract 

 provisions, company policy, work rules, wage 

 scales, or benefits. When a promotion is 

 grieved, the panel can determine whether or 

 not the job was filled in accordance with 

 Article 16.0 of the contract. If the Peer

 Review panel decides it was not done 

 properly, the panel can require the process 

 be re-done in accordance with the contract. 

(Emphasis in original.) The addendum further delineates the 

selection process for the members of the panel and describes the 

format of its meetings. 

 The mechanics of the grievance procedure were invoked 

when a dispute arose under the provision of the collective 

bargaining agreement which obligates NADCO to provide health 

insurance coverage. Article 17.1 succinctly states: "NADCO will 

provide Health Insurance benefits, including dental, as described 

12/22/92, subject to employee copay of 10% of prevailing premium 

rate." No further written elucidation of the benefits exists and 

the parties join issue over the particulars of the agreed-upon 

coverage. 

 The parties do agree, however, that the insurance 

coverage changed under the new agreement. Facts not in dispute 

are that, effective February 1, 1993, NADCO increased its payment 

of existing premiums from 85% to 90% and that the annual major 

medical deductible payments were increased from $100 to $200 per 

individual and from $200 to $400 per family. There is no such 

mutual understanding, however, concerning other changes to the 

package. Particularly, the union disputes its acceptance of the 

portion of the insurance program which includes a deductible and 

an employee across-the-board 20% copay of the first $2,000 in 

covered medical bills. Previously, with the exception of major 

medical costs, employees had been afforded first dollar coverage 

(no deductible and no copay) for these expenses. 

 Union members began complaining to their supervisors 

regarding reduced coverages and voiced their concerns that these 

changes were not bargained for in the new agreement. Their 

objections culminated in August 1993 by a written filing of a 

Step 2 grievance. The union expressed its complaint as follows: 

 The health plan currently in effect at NADCO 

 is not the plan we agreed to implement in 

 negotiations which took place on 12/22/92. 

 Our understanding was the plan we had was to 

 remain the same except that the deductible

 would change from $100.00 single/$200.00 
 family to $200.00 single/$400.00 family. 

 Also the copay of 15% would decrease 5% to

 10% copay. We also agreed the carrier would 

 remain the same. (Blue Cross/Blue Shield of 

 Northeast Pa. Wilkes-Barre) The Major 

 Medical portion of the plan would be 80/20 of 

 the next $2,000.00 dollars after the 

 deductible is met. Instead we now pay 80/20 

 of all charges up to $2,000.00. . . . The

 coverage by Blue Shield has also changed. 

 (ex. Surgical Services) 

 The union then requested the following relief: 

 Remedy: We want the same Blue Cross/Blue Shield plan 

 provided by NADCO to it's [sic] employees as we 

 understood it to be on 12/22/92. This plan is the same 

 plan the employees had prior to signing the contract 

 with the following exceptions: 

 1. $200.00 single/$400.00 family 

 2. Copay at 10% 

 This plan will be provided by Blue Cross/Blue 

 Shield of Northeast Pa. Wilkes-Barre, Pa. 

 Also, All employees who had to use the other 

 plan will be reimbursed for any payment they 

 may have made that should have been covered. 

 NADCO rejected the grievance, citing two reasons -- one 

procedural, that the grievance was untimely filed, and one 

substantive, that the benefits provided are the benefits as 

bargained for and agreed upon. The denial further stated: 

 Finally, while we expect the above 

 explanation will amicably resolve this 

 grievance, I want to point your attention to 

 Step 4 of the Grievance Procedure, which, 

 among other things, precludes the peer review 

 mechanism from changing benefits. 

By this language NADCO implicitly precluded appeal to the Step 3 

level, the convocation of the Peer Review Panel. 

 Following this denial, the union filed a complaint in 

the district court under Section 301 of the Labor Relations 

Management Act of 1947, as amended, 29 U.S.C. § 185, to compel 

NADCO to accept the grievance for peer review adjudication. 

After discovery, both parties filed motions for summary judgment. 

 The district court granted NADCO's motion, holding that 

the union grievance sought to impose a change in the health 

insurance benefits, a matter strictly precluded from the 

jurisdiction of the Peer Review Panel: "The [collective 

bargaining agreement] limitation is expansive and unambiguous -- 

a peer review panel cannot reach a decision that requires the 

Company to provide benefits different from those benefits which 

the Company believes it is obligated to pay under the CBA." 
Graphic Communications International Union, Local 735-S v. North 

American Directory Corporation II, No. 93-CV-1991, slip op. at 12 

(M.D. Pa. filed Jan. 12, 1996). The union filed a timely 

appeal. 

 

 II. 

 The dispositive issue is whether adjudication of the 

union's grievance falls within the jurisdictional purview of the 

Peer Review Panel. 

 We recognize initially that the question of whether the 

union's grievance is arbitrable is one for the court to decide. 

AT&T Technologies Inc. v. Communication Workers of America, 475 

U.S. 643, 649 (1986). Second, we acknowledge the general 

presumption favoring arbitrability of labor matters. The Supreme 

Court's decisions in the Steelworkers Trilogy firmly established 

these principles and AT&T Technologies revalidated arbitration's 

special status: 

 [W]here the contract contains an arbitration 

 clause, there is a presumption of 

 arbitrability in the sense that "[a]n order 

 to arbitrate the particular grievance should 

 not be denied unless it may be said with 

 positive assurance that the arbitration 

 clause is not susceptible of an 

 interpretation that covers the asserted 

 dispute. Doubts should be resolved in favor 

 of coverage." Warrior & Gulf, 363 U.S. 582- 

 83. . . . "In the absence of any express 

 provision excluding a particular grievance

 from arbitration, we think only the most 

 forceful evidence of a purpose to exclude the 

 claim from arbitration can prevail." Warrior 

 & Gulf, supra, at 584-85. 

475 U.S. at 650. 

 Finally, we refer to the Court's caution that since 

arbitration is a contractual matter, there must be agreement to 

submit the dispute to arbitration before the obligation arises. 

Id. at 649, citing John Wiley & Sons, Inc. v. Livingston, 376 

U.S. 543, 546-47 (1964). 

 Of course, this deference is to be afforded only when 

the grievance at issue is properly before the arbitral body. As 

we noted, federal labor policy is well disposed toward congenial 

labor/management relations and will liberally apply contract law 

in favor of the existence of a collective bargaining agreement. 

Ludens, 28 F.3d at 359. Yet it is essential that the dispute 

falls within the purview of the arbitration clause. Trap Rock, 

982 F.2d at 888. We thus turn immediately to the collective 

bargaining agreement. 

 The language in the collective bargaining agreement 

before us allows generally for access to the grievance procedure 

where there is an allegation that the employer has violated a 

provision of the agreement. Because the union's present 

grievance asserts that NADCO has not provided health insurance 
coverage in conformity with Article 17.1, the complaint facially 

appears amendable to the Peer Review Panel process. 

 We next inquire whether the parties intended, by either 

"express exclusion or other forceful evidence," AT&T 

Technologies, 475 U.S. at 652, to bar the Peer Review Panel from 

resolving this dispute. By the terms of the contract, the Peer 

Review Panel is empowered to evaluate management actions. If it 

determines that management has not acted in conformity with the 

collective bargaining agreement, the Panel is commissioned to 

rectify the problem in light of the contract and company 

practices. Exclusionary language, however, confines the 

decisionmaking role of the panel: it "can not change contract 

provisions, company policy, work rules, wage scales, or 

benefits." (Emphasis in original.) 

 Here, the union's grievance presented to the panel 

requested a direct remedy -- implementation of the medical 

insurance plan as the union understood it. Despite its demand, 

the union characterizes the grievance as requesting only an 

interpretation of the Article 17 description of the health care 

package. We note that the substance, not the phrasing, of the 

grievance governs its arbitrability. Morristown Daily Record v. 

Graphics Communications Union, Local 8N, 832 F.2d 31, 34 (3d Cir. 

1987). 

 The union then asserts that the language limiting the 

jurisdiction of the Panel serves to define its role as a "rights" 

and not an "interest" arbitrator. In interest arbitration, it is 

within the province of the decisionmaker to "set new terms and 

conditions of employment. . . ." Lodge 802, International 

Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, 

Forgers and Helpers, AFL-CIO v. Pennsylvania Shipping Company, 

835 F.2d 1045, 1046 (3d Cir. 1987). Rights arbitrators, on the 

other hand, "resolve disputes involving the interpretation or 

application of terms and conditions of employment." Id. at 1047. 

 The asserted similarity to the rights arbitration 

depicted in Lodge 802 does not exist here. In that case, there 

was a clear intent to establish a rights only arbitration system. 

While the arbitrator was authorized to adjudicate differences as 

to "meaning, application or interpretation of any terms and 

conditions of this Agreement," he was specifically denied the 

"power to alter or modify" the terms and conditions of the 

collective bargaining agreement. Id. 

 In the present dispute, the Peer Review Panel's 

authority is not couched in terms limiting its function to an 

interpretative one. Nor are its powers unfettered. Instead, a 

hybrid body has been established by the collective bargaining 

agreement. The Panel is authorized to review certain management 

actions, and, when appropriate, dictate relief. Having granted 

such license, however, the agreement then clearly restrains it. 

Paramount to this case, the Peer Review Panel cannot change 

benefits. 

 The union's claim that it is seeking an interpretation 

of the contract is belied by its request for a specific remedy 

calling for direct action. The present grievance can only be 

understood as an attempt to effectuate a change in the medical 
benefits provided under the collective bargaining agreement, a 

matter forbidden of consideration by the Peer Review Panel. 

 We have also considered the hollow result which would 

necessarily follow. If the Peer Review Panel decided that the 

health care package actually provided by NADCO was not that 

bargained for on 12/22/92, a change in benefits would be 

mandated. The union does not, and could not, argue that any 

reading of its contract with NADCO permits such action be taken 

by the Panel. Such an outcome is not contemplated by the policy 

favoring arbitration or the basic integrity of the contract here. 

 We therefore conclude that the presumption of 

arbitrability has been overcome by express exclusion. A 

presumption, by its very definition, is an attitude dictated by 

probability. There is no need to presume anything here where the 

intent is expressly stated. 

 III. 

 We will affirm the order of the district court awarding 

judgment to NADCO. 

Graphic Communications International Union, Local 735-S v. North 

American Director Corporation II, No. 96-7089 

_________________________________________________________________ 

WEIS, Circuit Judge, Dissenting. 

 The majority carefully explains that the dispute 

between the parties is limited to whether the phrase in the 

health benefits portion of the collective bargaining agreement 

"as described 12/22/92" imposes increases in deductible and copayment provisions. The union asserts that the increases are not 

"as described 12/22/92," and the employer says they are. The 

disagreement then is straightforward and focuses on the meaning 

to be given the cryptic statement, "as described 12/22/92." 

 The union contends that the dispute is an appropriate 

subject for a grievance, defined by the collective bargaining 

agreement as "an allegation that the employer has violated a 

specific provision of the collective bargaining agreement." 

According to the union, the employer's insistence that employees 

pay an increased deductible and co-payment for hospital and 

surgical expenses violates the health benefits provision in the 

collective bargaining agreement. 

 Although it disagrees with the union's version of what 

was "described 12/22/92," the employer sidesteps that issue and, 

instead, maintains that the peer review panel, as the final step 

of the grievance procedure, lacks the authority to resolve the 

issue. The employer points out that the collective bargaining 

agreement states: "The peer review panel can not change contract 

provisions, company policy, work rules, wage scales or benefits," 

and argues that the union seeks to "change" the benefits 

provisions. 

 In its brief, the employer makes it clear that, in its 
view, "change" refers to the benefits that have "indisputably . . 

. been in effect for six and one [half] months before the subject 

grievance was filed." Appellee Brief at 21. That statement is 

based on the facts that the collective bargaining agreement was 

signed on January 9, 1993, and, on February 1, 1993, the employer 

began to impose the deductible and co-payment provisions. 

Despite grumbling by employees beginning at that time, the union 

did not file a formal grievance until August 16, 1993. 

 When it attacks the peer review panel's authority to 

"change" benefits, the employer focuses on those benefits in 

existence at the time the grievance was filed -- not necessarily 

those due under the collective bargaining agreement. The 

employer's contention is that its action in putting lesser 

benefits into effect sets the standard, which the peer review 

panel may not "change." 

 Assuming arguendo that the union's position on the 

understanding of 12/22/92 is correct and that the increases in 

deductibles and co-payments were not included, it follows that 

using management's approach would result in denying the peer 

review panel the authority to remedy the employer's violation of 

the collective bargaining agreement. Adopting such an 

interpretation of the panel's authority makes the description of 

benefits in the collective bargaining agreement irrelevant when 

the employer unilaterally imposes a different health insurance 

program before the grievance occurs. 

 Indeed, had the collective bargaining agreement 

explicitly provided that no deductibles or co-payments would be 

applicable, under the employer's interpretation, the peer review 

panel would still lack power to alter the benefits program 

implemented on February 1, 1993, even though the employer acted 

unilaterally. In sum, according to its view, the employer may 

circumvent peer review simply by adopting a new benefit, wage 

scale or work rule despite collective bargaining provisions to 

the contrary. 

 It seems to me that the district court misapprehended 

the parties' positions when it stated that "the remedy sought by 

the Union is to change benefits provided by the Company under the 

terms of the CBA that went into effect on December 1, 1992." 

Actually, the union seeks to reinstate, not change, the benefits 

it says were provided by the collective bargaining agreement. 

 Of course, the parties to a collective bargaining 

agreement are free to adopt a wide range of methods for resolving 

disputes over contract interpretation, including a veto power. 

In this case, however, the employer did not retain the 

nullification right it now claims. 

 The peer review procedure adopted by the parties 

provides that "peer panels may review management's actions to 

ensure that the application of the contract was followed 

correctly and fairly. If they find otherwise, they have the 

authority to rectify the situation consistent with contract 

provisions, company practices and/or policies." That section 

clearly sets out the provisions of the collective bargaining 

agreement as the basis for determining if management's action's 

are correct and fair. 
 In deciding whether a ruling of a peer review panel is 

a "change," therefore, the point of reference is the collective 

bargaining agreement -- not a practice instituted by the employer 

after the agreement was adopted. The employer's insistence that 

the peer review panel cannot act in the circumstances here is 

simply inconsistent with the provisions of the peer review 

agreement. 

 Even if there were a conflict or ambiguity between 

various provisions of the peer review agreement, the Court is 

required to adopt an interpretation favoring the means of dispute 

resolution provided in the collective bargaining agreement. "An 

order to arbitrate the particular grievance should not be denied 

unless it can be said with positive assurance that the 

arbitration clause is not susceptible of an interpretation that 

covers the asserted dispute. Doubts should be resolved in favor 

of coverage." United Steelworkers of America v. Warrior & Gulf 

Navigation Co., 363 U.S. 574, 582-83 (1960). See also 5 

Theodore Kheel, Labor Law § 23.07[2] (1995) (presumption of 

arbitrability compels arbitration even when parties do not 

clearly evidence a contractual intention to do so.)

 The employer's proposed construction of the peer review 

panel's authority not only guts the dispute resolution procedure 

set up by the collective bargaining agreement, but is in conflict 

with basic tenets of labor law. When there are gaps in a 

contract, it is generally within the purview of the arbitrator to 

resolve them. Price v. Internal Board of Teamsters, 457 F.2d 

605, 610 (3d Cir. 1972). See also United Steelworkers of America 

v. Lukens Steel Co., 969 F.2d 1468 (3d Cir. 1992) (where 

collective bargaining agreement does not state who decides if 

grievance is valid, it is left to the arbitrator.). 

 I would reverse the judgment of the district court and 

remand with instructions to direct the parties to submit the 

dispute for resolution by a peer review panel.