Case Name: Stanley BOKUNEWICZ and Joseph Bell, v. PUROLATOR PRODUCTS, INC. Appeal of PUROLATOR PRODUCTS, INC. Appeal of Stanley BOKUNEWICZ and Joseph Bell
Court: United States Court of Appeals for the Third Circuit
Jurisdiction: United States
Decision Date: 1990-07-11
Citations: 907 F.2d 1396
Docket Number: Nos. 89-1894, 89-1950
Parties: Stanley BOKUNEWICZ and Joseph Bell, v. PUROLATOR PRODUCTS, INC. Appeal of PUROLATOR PRODUCTS, INC. Appeal of Stanley BOKUNEWICZ and Joseph Bell.
Judges: Before COWEN, NYGAARD and ALDISERT, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 907
Pages: 1396–1407

Head Matter:
Stanley BOKUNEWICZ and Joseph Bell, v. PUROLATOR PRODUCTS, INC. Appeal of PUROLATOR PRODUCTS, INC. Appeal of Stanley BOKUNEWICZ and Joseph Bell.
Nos. 89-1894, 89-1950.
United States Court of Appeals, Third Circuit.
Argued May 24, 1990.
Decided July 11, 1990.
Kurt Denke (argued), Margolis, Edel-stein, Scherlis, Sarowitz & Kraemer, Philadelphia, Pa., for appellees-cross-appellants Stanley Bokunewitz and Joseph Bell.
Lee F. Hutton (argued), Duvin, Cahn & Barnard, Cleveland, Ohio, for appellant cross-appellee Purolator Products, Inc.
Before COWEN, NYGAARD and ALDISERT, Circuit Judges.

Opinion:
OPINION OF THE COURT '
ALDISERT, Circuit Judge.
Purolator Products, Inc. appeals at No. 89-1894 from the judgment of the district court after a non-jury trial, awarding damages in favor of Joseph Bell and Stanley Bokunewicz (employees). Bell and Boku-newicz appeal at No. 89-1950 from the denial of a request for penalties, costs and counsel fees.
The Purolator appeal presents the question whether a previous award by an arbitrator was final and binding, thereby precluding the district court from considering the Bell and Bokunewicz claims. We must also decide whether employees' claims for disability retirement benefits ripened prior to execution of an agreement relating to the closing of a Purolator plant and whether Purolator was a proper party to the employees' lawsuit. In the cross-appeal we must determine whether the district court erred when it declined to award attorneys' fees and costs to the employees.
Jurisdiction in the trial court was proper based on 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291. This appeal was timely filed. Rule 4(a), F.R. A.P.
Our review of the district court's decision as to the binding effect of the labor arbitration and the applicability of the Labor Management Relations Act, 29 U.S.C. § 185, is plenary. See York Bank and Trust Co. v. Federal Savings & Loan Ins. Corp., 851 F.2d 637 (3d Cir.1988), cert. denied, 488 U.S. 1005, 109 S.Ct. 785, 102 L.Ed.2d 777 (1989). To review the decision as to when the employees' pension rights vested, we must separate the issue into its respective parts, applying the clearly erroneous standard to the factual component and the plenary standard to the legal component. Ram Constr. Co. v. American States Ins. Co., 749 F.2d 1049, 1053 (3d Cir.1984). Finally, we review the district court's denial of attorneys' fees and costs under the clearly erroneous standard. See Baker Indus., Inc. v. Cerberus, Ltd., 764 F.2d 204, 209-10 (3d Cir.1985).
Because the facts in the district court proceedings are not in dispute, we will summarize the findings of the court.
I.
Employees were injured while working at Purolator's Ringtown plant and ordinarily would have qualified for disability pensions. Before they could complete the process necessary to receive the pensions, however, Purolator closed its Ringtown plant and entered into a closure agreement with the Independent Union of Purolator Employees, Inc. The closure agreement provided that all "pending claims" against Purolator were to be extinguished. Purolator's position was that the term "pending claims" included the disability pensions sought by Bell and Bokunewicz. Employees, however, took the position that their pensions were not subject to the closure agreement because their rights were vested and that, in any case, the closure agreement was never intended to apply to their claims.
Since 1973, the union has represented employees at the Ringtown plant. During that time, the union and Purolator entered into a series of collective bargaining agreements, the last of which was to be effective from May 27, 1983 to May 26, 1986. In this agreement, Purolator contracted to provide a pension plan for its employees, the terms of which were set out in documents for the Ringtown Hourly Paid Employees' Pension Plan. The parties stipulated that the appellees satisfied the requirements for disability pensions and would have received them had the plant not closed.
On November 16, 1983, Purolator announced its intention to terminate the operations at Ringtown. The next day, Boku-newicz sustained injuries in the course of his employment. On November 18, Bell also sustained work-related injuries.
During November and December of 1983, Purolator and the union met to negotiate a closure agreement. The plant was closed in March, 1984 without a closure agreement. An agreement was finally reached in July, 1984, which provided that excess funds in the pension plan would be distributed to the pensioners. In exchange, the union agreed that the agreement "represented] a final and complete disposition of all claims or disputes, known or unknown, which the Union or Individuals had, has or may have with the Company...." Opinion of June 20, 1989, at 3.
In May and September, 1985, the union informed Purolator that Bell and Bokunew-icz had received Social Security Award Certificates and were, therefore, entitled to pensions. Purolator, however, claimed it was not required to provide the pensions because of the closure agreement. The union filed a grievance and the parties went to arbitration. The arbitrator decided that he lacked jurisdiction. Following the arbitrator's decision, the employees filed separate suits in the Pennsylvania Court of Common Pleas which were removed to the district court as issues under section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, the Employment Retirement Security Act of 1974 (ERISA), as amended, 29 U.S.C. § 1001-1461 and contract law. The district court held that Bell and Bokunewicz were entitled to disability pensions, but denied penalties, costs and attorneys' fees. These appeals followed.
II.
We are satisfied that the district court was correct when it determined that the award of the arbitrator did not preclude consideration of the employees' claims in federal court. The arbitrator identified the issues before him as "(1) Are the grievances arbitrable?; (2) If the grievances are arbitrable, are the grievants entitled to disability retirement benefits?; and, (3) If the grievants are entitled to disability retirement benefits, what shall the remedies be?" The arbitrator then concluded that "the grievances are not arbitrable. The substantive issues presented in the grievances are therefore beyond the authority of the arbitrator." Opinion of June 20, 1989, at 14.
Purolator asserts that the arbitrator's award, denying employees benefits is final and binding. It argues that there is a strong national policy favoring resolution of labor disputes through arbitration as was first announced in the Steelworkers' Trilogy: United Steelworkers of Am. v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers of Am. v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960); the parties in this case voluntarily sought an alternative form of dispute resolution through arbitration; even questions ordinarily reserved for the courts, including arbitrability, may be submitted to arbitration if the parties consent, Johnson v. UFCW, Local No. 23, 828 F.2d 961, 964 (3d Cir.1987); the arbitrator determined the issue of substantive arbitrability in favor of Purolator when it discussed and decided the substantive issues of the case; the arbitrator then rendered an informed opinion dismissing employees' claims for disability retirement benefits; the parties are, therefore, bound by this decision.
Purolator next asserts that even if we agree with the district court's conclusion that it was not precluded from reviewing the effect of the closure agreement, we must reverse that part of the decision pertaining to the issue of vesting of the employees' rights. Purolator argues that: "the mere fact that arbitrable'and not arbi-trable issues co-exist is insufficient to confer [the district court] with jurisdiction over the entire dispute," Opinion of June 19, 1989, at 17; and that the district court did not overcome the presumption of arbitration in its rationale supporting the decision to hear the vesting issue.
III.
We disagree. The arbitrator said that "the grievances are not arbitrable. The substantive issues presented in the grievances are therefore beyond the authority of the arbitrator." It is difficult to perceive language more clear and free from ambiguity than that contained in the official decision of the arbitrator. He said that he was not deciding the case because the grievances (1) are not arbitrable and (2) are beyond his authority tq decide. He decided that he was without jurisdiction. It is true that having admitted lack of jurisdiction, he went off on an obiter dictum frolic of his own and volunteered some obseryations on the merits. But everything after denial of jurisdiction by the arbitrator, including the discussion of substantive issues, was dicta, pure and simple. We agree with the district court:
[T]he arbitrator did stray briefly into the merits, but despite some careless wording, he certainly did not intend to decide anything other than jurisdiction. The decision cannot fairly be read as an endorsement of [Purolator's] position.
Opinion of June 20, 1989, at 14-15; see Daigle v. Gulf State Utilities Co., Local No. 2286, 794 F.2d 974, 977 (5th Cir.), cert. denied, 479 U.S. 1008, 107 S.Ct. 648, 93 L.Ed.2d 704 (1986).
Purolator's argument that this court has held that issues normally adjudicated by the courts, including arbitrability, may be • decided by an arbitration if the parties consent, does not convince us otherwise. See Johnson, 828 F.2d 961. To be sure, in Johnson, we said that "the parties .: may agree to submit the question of arbitrability to an arbitrator." 828 F.2d at 964 (citing Warrior & Gulf Navigation Co., 363 U.S. 574, 583 n. 7, 80 S.Ct. 1347, 1353 n. 7). But a Johnson issue arises only when a party who originally agreed to arbitration seeks to renege on the agreement after the arbitrator in fact determines that he or she has jurisdiction. Johnson prevents a party from going to court for a "second opinion" on jurisdiction after the parties agree to let the arbitrator decide the issue and the arbitrator decides that the issue is arbitrable. Johnson is of no help to Purolator here because the arbitrator found that the issue was not arbitrable.
The relationship between the courts and the arbitrator in labor matters is well settled. In 1960, the Supreme Court made reference to this relationship in Steelworkers' Trilogy, supra. The issue was revisited in John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964); Nolde Bros. Inc. v. Local No. 358, Bakery & Confectionery Workers' Union, 430 U.S. 243, 97 S.Ct. 1067, 51 L.Ed.2d 300 (1977); and AT & T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). It is now labor-management doctrine that the question of arbitrability is generally a question for the court, not the arbitrator. See AT & T, 475 U.S. at 649, 106 S.Ct. at 1418. There are no circumstances here, as were present in Johnson, to depart from this important general precept of labor law.
IV.
Moreover, we acknowledge the force of the policy that honors those grievance and arbitration procedures required by a collective bargaining agreement. See Viggiano v. Shenango China Div. of Anchor Hocking Corp., 750 F.2d 276, 279 (3d Cir.1984) (court stayed ERISA claims seeking health benefits pending arbitration of whether benefits were provided for by agreement); Nolde Bros., 430 U.S. 243, 97 S.Ct. 1067 (even when a collective bargaining agreement has terminated, disputes subject to arbitration before termination must be arbitrated). However, the closure agreement here, which was in force at the time the grievance was filed, did not provide for binding arbitration. The closure agreement was the successor to the collective bargaining agreement. Because this agreement did not provide for arbitration and the arbitrator found he was without jurisdiction to hear the dispute, we do not frustrate federal policy when we permit judicial intervention in this case.
Finally, we are satisfied with the district court's rationale supporting its determination that it had jurisdiction:
In this case, the dispute first worked its way through the defendant's office, then proceeded to arbitration and only then reached the litigation stage. Over five years have passed since the plaintiffs were injured. The Union, which under the collective bargaining agreement was to play a pivotal role in the arbitration process, no longer exists. It would be odd to conclude that the Union not only intended the agreement to arbitrate to survive contract termination, but also to survive the Union's demise. Second, one of the primary reasons for arbitration is that it assumed that because arbitration is faster than litigation, parties prefer it. Nolde, 430 U.S. at 254, 97 S.Ct. at 1073. However, sending the vesting issue to arbitration while retaining jurisdiction over the question of interpreting the closure agreement can only delay resolution of this case. For these reasons, I hold that this Court, not an arbitrator, has jurisdiction to hear all pending issues.
Opinion of June 20, 1989, at 19. We hold that under the facts of this case, the decision of the arbitrator does not preclude judicial consideration of the merits.
V.
We also hold that this action is not barred by section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. Purolator argues that this dispute brings into issue both questions of contract and union representation in a hybrid section 301 suit, therefore, "[a]n employee must demonstrate that he did not receive fair representation from the Union," as well as breach of contract to succeed on the merits, Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967); Findley v. Jones Motor Freight, 639 F.2d 953 (3d Cir.1981). However, the requirement that an employee bring suit against the union for breach of the duty of fair representation before suing the employer is designed to foster the grievance and arbitration procedure of the LMRA. We have held that here there was no grievance or arbitration procedure available to the employees. Therefore, section 301 does not apply. See Daigle, 794 F.2d at 977.
VI,
Two issues in Purolator's appeal remain. First, whether the employees' rights to benefits had vested at the time of the closure agreement. If the rights were vested, the union and Purolator were without power to bargain those benefits away. Allied Chem. & Alkali Workers of Am., Local No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 181 n. 20, 92 S.Ct. 383, 398 n. 20, 30 L.Ed.2d 341 (1971). If the rights were not vested, we must decide a second issue: whether Purolator and the union intended to bargain the employees' rights away.
A.
Purolator asserts that the 1983 collective bargaining agreement clearly provided that vesting of a disability benefit did not occur until employees applied for, and qualified for, Social Security benefits. Purolator argues that under the terms of the pension plan:
Disability means, with respect to an Employee, that he is disabled by any physical or mental impairment which can be expected to either be of indefinite duration or result in death, as determined by the Plan administrator, and that such Employee is eligible for a disability insurance benefit under the Social Security Act....,
App. at 472; Purolator further argues that the 1983 collective bargaining agreement clearly and unambiguously supplements this language, providing, "Disability Retirement will be paid the first of the month following initial Social Security Disability payment,'' app. at 357, 255; employees in the instant case did not apply for Social Security benefits until after the plant closed and the closure agreement was executed; therefore, employees' disability pension benefits were not vested until after the closure agreement was executed.
The district court determined that the relevant documents relating to the question of vesting were the 1983 collective bargaining agreement and the pension plan, but "the documents [were] ambiguous, that they are reasonably susceptible of different constructions and capable of being understood in more than one sense." Opinion of August 17, 1989, at 7-8. Accordingly, the court then considered parol evidence, including the past practices of Purolator, noting its treatment of another employee, Arthur Hartzell. Hutchinson v. Sunbeam Coal Corp., 513 Pa. 192, 201, 519 A.2d 385, 390 (1986) (the determination of ambiguity is a matter for the court and once that determination is made, parol evidence is admissible). The court found that it was Purolator's policy to pay disability benefits retroactively and, therefore, rejected Puro-lator's position that the company did not consider disability pension plans vested until the first payment is made. The court, therefore, determined that the employees' disability pensions were vested before the closure agreement was signed and that the closure agreement had no effect on the pensions.
B.
We are convinced that the instant case is analogous to the facts facing the Ninth Circuit in Music v. Western Conference of Teamsters Pension Trust Fund, 712 F.2d 413 (9th Cir.1983). In that case, an employee who was injured was entitled to disability benefits contingent upon his acquiring a Certificate of Disability from the Social Security Administration. Between the date the employee was injured and the date he received the Certificate of Disability, a new collective bargaining agreement, with diminished benefits, was executed. The question presented in Music, as in the instant case, was when the benefits vested. The court held:
In our view, where a plan participant satisfies the other eligibility requirements for a disability pension, including the age, length of service, and employer contribution requirements, that participant has a right to receive a disability pension which vests immediately when that participant becomes permanently disabled. It may be that commencement of benefits to which a disabled participant has earned the right can reasonably be delayed for five months after the date of the disabling injury. Nevertheless, it is the occurrence of the disabling injury which ultimately and fundamentally establishes the participant's rights to the disability benefits which are ultimately paid.
712 F.2d at 419 (emphasis supplied).
It is not clear from the 1983 collective bargaining agreement and pension plan when employees' benefits vested. The contract may have contemplated that benefits vest when the employee was injured, as in Music, or when the employee received the first payment from the pension, as was urged by Purolator. Accordingly, the district court was correct when it looked to parole evidence to determine when employees' benefits vested. That evidence indicates that it was Purolator's practice to award benefits retroactively, therefore, the district court did not err in deciding benefits vested when the employee was injured. Accordingly, we do not fault the district court's analysis and affirm.
C.
As an alternate independent ground for its decision the district court determined that the closure agreement was never intended to cover the claims of the employees:
[Employees] were entitled to disability pensions under the 1983 collective bargaining agreement. Unless there was a meeting of the minds to divest the [employees'] rights, they are entitled to their pensions. I find that there was no meeting of the minds to extinguish the [employees'] pensions. Consequently, the closure agreement had no effect on the [employees'], and their disability pension benefits are governed by the 1983 collective bargaining agreement.
Opinion of August 17, 1989, at 13. We affirm the court on this alternate basis as well.
VII.
Finally, Purolator argues that it was not a proper party to the litigation and that, instead, the employees should have sued the trustees of the pension plan. We agree with the district court's disposition of this issue:
This defense should have been pled in [Purolator's] answer. Fed.R.Civ.P. 8(c). A failure to do so is a waiver of the defense unless leave of court is granted to amend under Fed.R.Civ.P. 15. Albee Homes, Inc. v. Lutman, 406 F.2d 11 (3d Cir.1969); Transport Trailer Service, Inc. v. Upjohn, 506 Fed.Supp. 442 (E.D.Pa.1981). Amendment is permitted under Rule 15(b) even after the close of the evidence, but only if the issue has been explicitly or implicitly tried by the parties. The issue was not tried in this case. Nor am I inclined to grant the defendant leave to amend under Rule 15(a) which provides that amendments are to "be freely given when justice so requires." There is no justice in allowing Purolator to amend their answer to assert that they are not the proper party to this suit. Purolator signed the closure agreement which terminated the pension plan and thereby damaged the [employees]. It fought this case through arbitration in the courts for close to five years. Closing argument is simply too late a time to interpose a dubious, technical argument about the proper party in interest. Accordingly, the court will not consider [Pu-rolator's] argument.
Opinion of August 17, 1989, at 14.
VIII.
In their cross appeal, Bell and Boku-newicz request that we remand these proceedings for a determination of an award of costs and counsel fees under Section 1132(g) of ERISA. They argue that the district court improperly stated that "ERISA doesn't cover this type of benefit" and "I don't see any relief for you" with respect to penalties under ERISA.
We are persuaded that there was no error here. First, the employees did not state a pure ERISA claim; they relied on other grounds for relief as well. They did not name the trustees of the fund as defendants as is the procedure in the typical ERISA proceeding, but named only the company. Moreover, the court found that the appellees "were entitled to disability pensions under the 1983 collective bargaining agreement" and that "the closure agreement had no effect on the plaintiffs, and their disability pension benefits are governed by the 1983 collective bargaining agreement." Employees predicated their section 301 case on a triad of interrelated concepts: section 301 of the LMRA, ERISA and contract law. Under these circumstances, we do not believe that the district court erred in refusing to award the employees penalties, costs and counsel fees.
IX.
We have considered the contentions of all parties on both the appeal and cross-appeal in this matter. The judgment of the district court will be affirmed in all respects.