Opinion ID: 429477
Heading Depth: 2
Heading Rank: 3

Heading: Exhaustion of Arbitration Procedures.

Text: 20 We must also decide whether the employees' ERISA claims are barred for failure to exhaust their contractual remedies. The Union's August 13, 1981 grievance (second grievance) has not reached a final disposition. Continental maintains that the employees' section 510 claim is barred by this failure to exhaust contractual remedies. The question is not whether the employees have exhausted their contractual claims, but whether they must do so prior to bringing a section 510 claim. Section 502 of ERISA, 29 U.S.C. Sec. 1132, which provides for civil enforcement of the Act, is silent on the exhaustion doctrine being a prerequisite to an ERISA action. 21 Continental offers two principal arguments to support its position that section 510 claims may not be pursued until all contractual claims have been fully resolved. It first contends that the employees are taking a contractual dispute and masking it as a statutory claim to gain access to the federal courts. 6 We have already rejected this argument. 22 Continental next argues that judicial interpretation of ERISA requires exhaustion of contractual remedies when the claim arises from an alleged breach of contract. 7 We have decided this claim does not specifically arise from a breach of contract. Cf. Amato v. Bernard, 618 F.2d 559, 568 (9th Cir.1980) (exhaustion required in claim for declaration of rights under a plan). We construe this argument to address the situation where the same essential facts give rise to both a section 510 claim and a contractual grievance. See Kross v. Western Electric Co., Inc., 701 F.2d 1238 (7th Cir.1983). 23 In this argument Continental relies on the Seventh Circuit decision in Kross, a factually similar case, which expressly adopts the exhaustion of remedies doctrine. The Kross court concluded that the strong federal policy expressed in case law, encouraging private resolution of ERISA-related disputes, mandates the application of the exhaustion doctrine in this case. Id. at 1244. In reaching this conclusion, that court relied heavily on its decision in Challenger v. Local Union No. 1 of International Bridge, 619 F.2d 645 (7th Cir.1980) and our decision in Amato, 618 F.2d 559 (9th Cir.1980). 24 Challenger involved a claim under section 401 of ERISA, 29 U.S.C. Sec. 1104, concerning a dispute regarding provisions of a pension plan. The plan mandated final and binding arbitration of any disputes. Section 503 of ERISA, 29 U.S.C. Sec. 1133, requires all plans to have an internal appeal procedure. The court relied on this internal appeal procedure requirement of section 503 in its conclusion that the plaintiff must first exhaust his available remedies. The court in Challenger reasoned that [t]o make every claim dispute into a federal case would undermine the claim procedure contemplated by the Act. Id. at 649. See Kross, 701 F.2d at 1244 (quoting Challenger ). 25 In Amato we enforced the exhaustion requirement in an action for a declaration of the parties' rights and duties under a pension plan. Amato, 618 F.2d at 561. Like Challenger, the pension plan in Amato contained the internal appeal procedure required by section 503. Our decision was based on the required section 503 administrative remedies and on the assistance the courts receive by pension plan trustees interpreting their plans. Id. at 568 (emphasis added). 26 Both Challenger and Amato, the cases relied on by Kross, dealt with the rights of a party under a pension plan that falls within ERISA coverage. Both cases contained internal appeal procedures, congressionally mandated by section 503, that were designed to hear the claims presented in those cases. 8 We are faced solely with an alleged violation of a protection afforded by ERISA. There is no internal appeal procedure either mandated or recommended by ERISA to hear these claims. Furthermore, there is only a statute to interpret. That is a task for the judiciary, not an arbitrator. Alexander, 415 U.S. at 57, 94 S.Ct. at 1024. Therefore, a primary reason for the exhaustion requirement, Amato, 618 F.2d at 568; see Kross, 701 F.2d at 1245 (quoting Amato ), is not present in this case. Accordingly, we find Kross to be based on a flawed premise, and we refuse to follow it. 27 We instead are persuaded by the reasoning in Alexander and Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981). Kross did not discuss these decisions. While these cases deal with statutes other than ERISA, they do concern situations analogous to the one here. In Alexander, the Supreme Court held that a prior arbitration decision did not foreclose a Title VII action. 9 In Barrentine, the Supreme Court extended this holding beyond Title VII to a case involving the Fair Labor Standards Act (FLSA), 29 U.S.C. Sec. 201 et seq. 28 Continental argues these cases are distinguishable. Title VII and the FLSA deal with statutes that give non-waivable rights not subject to the collective bargaining process. See Alexander, 415 U.S. at 51, 95 S.Ct. at 1021; Barrentine, 450 U.S. at 740, 101 S.Ct. at 1444. We do not accept this distinction. In enacting ERISA, Congress intended that minimum standards be provided assuring the equitable character of such plans.... Section 2 of ERISA, 29 U.S.C. Sec. 1001(a) (emphasis added). We do not believe Congress intended that these minimum standards could be eliminated by contract. ERISA is intended to protect the interests of the pension plan participants by improving the equitable character ... of such plans by requiring them to [meet certain standards].... Section 2 of ERISA, 29 U.S.C. Sec. 1001(c) (emphasis added). Congress did not intend section 510 of ERISA to be waivable. 29 We are persuaded by the Supreme Court's willingness in Barrentine to extend the Alexander doctrine to statutory claims other than those arising under the Civil Rights Act. This indicates the Supreme Court's reasoning is based not on the type of non-waivable statutory right involved, but rather on placing realistic limits on the arbitration process when it is in tension with non-waivable statutory rights. Judicial procedures are more capable of safeguarding individual statutory rights than are arbitral procedures. See n. 3, supra. Arbitrators very often are powerless to grant the aggrieved employees as broad a range of relief, Barrentine, 450 U.S. at 745, 101 S.Ct. at 1447, as is available under ERISA. See 29 U.S.C. Sec. 1132. 30 We conclude that a participant or a beneficiary within the meaning of section 3 of ERISA, 29 U.S.C. Sec. 1002(7) and (8), is not required to exhaust grievance or arbitration procedures prior to bringing an action under Section 510 of ERISA. In so holding, we are mindful of the potential effects of this decision on the dockets of the courts. A trial court can stay any statutory claim that arises out of substantially the same facts present in an ongoing administrative or arbitral proceeding. Cf. Leyva v. Certified Grocers of California, Ltd., 593 F.2d 857 (9th Cir.), cert. denied, 444 U.S. 827, 100 S.Ct. 51, 62 L.Ed.2d 34 (1979) (trial court may stay FLSA claim pending resolution of independent procedures that bear upon the case). The stay should be premised upon: (1) receipt of satisfactory assurances that the arbitration is proceeding with diligence and efficiency, Leyva, 593 F.2d at 864; and (2) a determination that the relief available under section 502 of ERISA, 29 U.S.C. Sec. 1132, will not be jeopardized by the stay. In some cases it may be necessary to grant immediately an injunction or other equitable relief, available under section 502, to avoid irreparable harm to a party. 10 31 If a court does stay the statutory claim, it must nonetheless consider the employee's [statutory] claim de novo. Alexander, 415 U.S. at 60, 95 S.Ct. at 1025. The findings of the arbitrator on factual matters may be admitted as evidence and accorded such weight as the court deems appropriate. Id. In its consideration of the weight to be given the arbitrator's decision, the court should consider the adequacy of the record with respect to the section 510 claim, the procedures used in the arbitral forum, and the significance of new evidence that has been produced through pretrial discovery. Cf. Alexander, 415 U.S. at 60 n. 21, 95 S.Ct. at 1025 n. 21 (factors to consider in exercising discretion to accept arbitral findings in Title VII case). In the end, the court must exercise its discretion based on the circumstances of each individual case, while keeping in mind that the courts are the forum that must ultimately decide these statutory claims. Id.