Court Opinion

ID: 2973536
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:03:38.920751+00
Date Added: 2024-06-11T11:43:46.305583
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                                     Pursuant to Sixth Circuit Rule 206
                                              File Name: 06a0092p.06

                        UNITED STATES COURT OF APPEALS
                                         FOR THE SIXTH CIRCUIT
                                           _________________

                                                       X
                                                        -
 THE CLEVELAND ELECTRIC ILLUMINATING
                                                        -
 COMPANY; FIRSTENERGY NUCLEAR OPERATING
                                                        -
 COMPANY; FIRSTENERGY GENERATION
                                                        -
                                                            No. 04-3566/3567
 CORPORATION,
                                                        ,
             Plaintiffs-Appellees/Cross-Appellants, >
                                                        -
                                                        -
                                                        -
          v.

 UTILITY WORKERS UNION OF AMERICA, LOCAL 270, -
              Defendant-Appellant/Cross-Appellee, -
                                                        -
                                                       N
                        Appeal from the United States District Court
                       for the Northern District of Ohio at Cleveland.
                       No. 03-02018—John M. Manos, District Judge.
                                            Argued: June 10, 2005
                                    Decided and Filed: March 14, 2006
         Before: NORRIS and DAUGHTREY, Circuit Judges; JORDAN, District Judge.*
                                              _________________
                                                   COUNSEL
ARGUED: Emily A. Tidball, GOLDSTEIN & O’CONNOR, Cleveland, Ohio, for Appellant. Gary
W. Spring, ROETZEL & ANDRESS, Akron, Ohio, for Appellees. ON BRIEF: Emily A. Tidball,
Bryan P. O’Connor, GOLDSTEIN & O’CONNOR, Cleveland, Ohio, for Appellant. Gary W.
Spring, ROETZEL & ANDRESS, Akron, Ohio, for Appellees.
                                              _________________
                                                  OPINION
                                              _________________
        LEON JORDAN, District Judge. The Cleveland Electric Illuminating Company, FirstEnergy
Nuclear Operating Company, and FirstEnergy Generation Corporation, the plaintiffs in this case,
appeal the district court’s enforcement of the arbitrator’s determination that the grievance filed by
defendant Utility Workers Union of America, Local 270, on behalf of retirees was arbitrable. The
defendant cross-appeals the portion of the district court’s ruling requiring the retirees’ consent as
a condition of representation. For the reasons that follow, we affirm the district court’s opinion.

         *
         The Honorable Leon Jordan, Senior United States District Judge for the Eastern District of Tennessee, sitting
by designation.

                                                          1
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                          Utility Workers Union of America

                                                I. BACKGROUND
        On December 2, 2002, the defendant, Utility Workers Union of America, Local 270
(“Union”), filed a grievance on behalf of its members and retirees against the plaintiffs, Cleveland
Electric Illuminating Company, FirstEnergy Nuclear Operating Company, and FirstEnergy
Generation Corporation (collectively “Cleveland Electric”), alleging that Cleveland Electric’s
decision to make changes in health benefits was a violation of the collective bargaining agreement
(“CBA”). The grievance states: “The Company unilaterally and without bargaining changed the
health care provisions and providers including but not limited to Preferred Provider Organizations,
Prescription Coverage, Traditional Plans, and Health Maintenance Organizations for both active and
retired members.” The complaint proceeded through the CBA’s grievance steps to arbitration with
Cleveland Electric contending all along the way that the Union’s grievance was not arbitrable with
respect to the retirees because they were not employees covered by the CBA.
        The parties submitted the issue of arbitrability to the arbitrator for his consideration, and he
determined that the Union was not required to represent       the retirees or to bargain on their behalf
because the retirees were not members of the Union.1 But, since the Union and Cleveland Electric
agreed to include retirees’ benefits in the CBA, the Union had standing to seek arbitration on behalf
of the retirees for benefits that were included in the CBA. Importantly, at arbitration, Cleveland
Electric did not argue that the arbitrator had no authority to decide the issue of arbitrability. Rather,
Cleveland Electric’s argument focused solely on the arbitrability of the retirees’ health benefits.
        Thereafter, pursuant to § 301 of the Labor Management Relations Act, 29 U.S.C. § 185,
Cleveland Electric filed a complaint in federal court seeking to have the arbitrator’s decision
vacated. Cleveland Electric claimed that the arbitrator’s ruling did not derive its essence from the
CBA and was contrary to the CBA’s express terms. Further, in its brief to the district court,
Cleveland Electric questioned for the first time whether the arbitrator had authority to determine the
arbitrability question. The district court found that the parties submitted the issue of arbitrability
to the arbitrator “without reservation” and that Cleveland Electric thereby waived its right to have
the issue decided by the court. On the issue of whether the retirees’ dispute over the changes in their
health care provisions was arbitrable, the district court upheld the arbitrator’s decision that the Union
could represent the retirees in arbitration, but disagreed with the arbitrator’s determination that the
retirees’ consent was not necessary unless evidence submitted in arbitration demonstrated otherwise.
The district court found that the retirees, unlike the active employees, had individual contractual
rights and that they could not be forced to arbitrate their grievance. The district court held that the
retirees must consent to the Union’s representation.
        In its appeal, Cleveland Electric argues that the district court erred: (1) in finding that
Cleveland Electric waived its right to have the court decide the issue of arbitrability and (2) in
upholding the arbitrator’s decision on arbitrability. The Union appeals the portion of the district
court’s opinion requiring the Union to obtain the retirees’ consent before proceeding to arbitration
over the health benefits.
                                              II. ANALYSIS
         A.       Standard of Review
       A district court’s decision that confirms or refuses to vacate an arbitration decision is
reviewed under the same standards as other district court decisions. This court must accept the

         1
          At arbitration, the parties agreed to bifurcate and stay the active employees’ grievance on this matter until the
issue concerning the retirees’ representation was settled.
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                        Utility Workers Union of America

district court’s findings of fact unless they are clearly erroneous, but questions of law are reviewed
de novo. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48 (1995); AK Steel Corp. v.
United Steelworkers, 163 F.3d 403, 407 (6th Cir. 1998).
        B.       Arbitrability of the Retirees’ Grievance
        The framework considered by the Supreme Court in First Options is useful in separating the
issues before this court. There are three issues present in this case: (1) the propriety of Cleveland
Electric’s changes to the health care provisions of the CBA (the merits of the dispute); (2) whether
the Union can force Cleveland Electric to arbitrate the merits related to the retirees’ benefits; and
(3) who has the authority to decide the second matter. See First Options, 514 U.S. at 942. Only the
last two issues are before this court, and the last issue will be considered first.
                 1. Who has the authority to decide arbitrability?
         The question of who, the court or the arbitrator, has the authority in a particular case to
decide the arbitrability of a grievance determines the standard of review of the arbitrator’s decision.
If the parties have agreed to allow the arbitrator to decide arbitrability, the district “court should give
considerable leeway to the arbitrator, setting aside his or her decision only in certain narrow
circumstances.” Id. at 943. On the other hand, if the parties did not agree to submit the arbitrability
question to the arbitrator, then the district court conducts an independent review. Id.
        Cleveland Electric raised the issue of who should decide arbitrability for the first time in its
brief to the district court. It argued that the arbitrator had no authority to determine arbitrability of
the retirees’ grievance and, therefore, that his decision is void ab initio. Citing cases from the
Supreme Court and this court, Cleveland Electric asserts that the question of whether the parties
agreed to arbitrate a certain matter is to be decided by the court, not the arbitrator. See AT&T Techs.
Inc. v. Commc’ns Workers, 475 U.S. 643, 649 (1986) (reaffirming the principle that the court is to
determine whether or not the company was bound to arbitrate, as well as what issues it must
arbitrate, on the basis of the parties’ contract); see also Armco Employees Indep. Fed’n v. AK Steel
Corp., 252 F.3d 854, 859 (6th Cir. 2001) (finding that courts determine substantive arbitrability).
        The Union did not address this issue in the district court because it had not been raised
before, and its brief was filed the same day as Cleveland Electric’s brief. In its brief to this court,
the Union agrees with the general statement of the law set out above but argues that the district court
was correct in its conclusion that the parties “clearly and unmistakably consented to the arbitrator’s
jurisdiction on the issue” and waived the right to have the issue decided by the court.
         In AT&T Technologies, the Supreme Court referenced the “Steelworkers Trilogy,” a series
of cases decided in 1960,2 and reiterated four principles for which these cases stand, one of which
is that the question of arbitrability of a particular dispute is a matter for judicial determination.
AT&T Techs., 475 U.S. at 649. In this circuit, however, although a court is usually the proper venue
for decisions about arbitrability, if the parties “clearly and unmistakably” submit the issue to the
arbitrator “without reservation,” then the parties have waived their right to have a court make the
decision. See Vic Wertz Distrib. Co. v. Teamsters Local 1038, 898 F.2d 1136, 1140 (6th Cir. 1990);
see also Interstate Brands Corp. v. Chauffeurs, Teamsters, Warehousemen & Helpers Local Union
No. 135, 909 F.2d 885, 890 (6th Cir. 1990).

        2
          The “Steelworkers Trilogy” cases are Steelworkers v. American Manufacturing Co., 363 U.S. 564 (1960);
Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960); and Steelworkers v. Enterprise Wheel & Car
Corp., 363 U.S. 593 (1960).
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                       Utility Workers Union of America

        In Interstate Brands, the union filed a grievance related to the dismissal of one of its
members. The company participated in the arbitration proceedings on the issue of arbitrability as
well as the merits, but later complained that the issue of arbitrability was a question for the court.
Interstate Brands, 909 F.2d at 890. The court, relying on Vic Wertz, held that an agreement to have
the arbitrator decide the issue of arbitrability will be implied where the parties did not bring the issue
to the district court in the first place. Id. Thus, the company waived its right to have the court
decide the arbitrability question by participating in the arbitration proceedings. Id.
         In First Options, a case cited by Cleveland Electric in support of its argument, the Supreme
Court held that deference to an arbitrator’s decision on arbitrability is not necessary unless there is
evidence of a clear and unmistakable willingness to arbitrate the issue. First Options, 514 U.S. at
944. However, First Options did not involve a union or a collective bargaining agreement, so there
was no underlying agreement between the parties providing for arbitration. The issue was whether
private parties could be forced to arbitrate the issue of arbitrability just because they filed a brief
with the arbitrator objecting to the arbitrator’s jurisdiction. Id. at 946. The Supreme Court found
that the objecting party (the Kaplans) forcefully opposed the arbitrator deciding whether they had
to arbitrate their dispute, and the arbitrator’s ruling, therefore, was entitled to a court’s independent
review. Id. at 946-47.
        The circumstances in this case are more like those in Interstate Brands than First Options.
Cleveland Electric submitted the question of arbitrability to the arbitrator for his determination, and
we can find nothing in the record to indicate that Cleveland Electric wanted to reserve the question
of arbitrability for the court. The district court found, and this court agrees, that Cleveland Electric
waived the issue of who had the power to decide the arbitrability of the retirees’ grievance by
submitting the matter to arbitration “without reservation.”
                2. Was the decision on arbitrability correct?
        The arbitrator found, and the district court agreed, that the issue of the retirees’ health
benefits was arbitrable. Based on this court’s finding that the parties submitted the issue of
arbitrability to the arbitrator, the arbitrator’s decision is entitled to a deferential review. The
arbitrator’s decision will not be disturbed “unless it fails to ‘draw its essence from the collective
bargaining agreement.’” Vic Wertz, 898 F.2d at 1140 (quoting Eberhard Foods, Inc. v. Handy, 868
F.2d 890, 891 (6th Cir. 1989)).
        Cleveland Electric argues that the district court erred in finding that the issue of the retirees’
health benefits was arbitrable. Cleveland Electric contends that the presumption of arbitrability does
not apply to retirees, and without the presumption, the unambiguous language of the agreement
excludes retiree disputes from the arbitration process. Further, the retirees have remedies in court
that the members of the collective bargaining unit do not, so arbitration of disputes is not necessary.
         In response, the Union argues that the presumption of arbitrability applies to the dispute in
this case, because it was the Union not the retirees who filed the grievance and the dispute is
actually between the Union and Cleveland Electric. Second, the Union argues that the dispute
involves the interpretation or application of a provision of the CBA. The fact that the dispute relates
to retirees’ benefits is not the deciding factor. Third, the language of the CBA is broad enough to
encompass the dispute concerning the retirees’ benefits making the presumption of arbitrability
particularly applicable. Finally, the Union argues that the retirees’ other remedies do not bar
arbitration.
       In addition to the principle of judicial determination of arbitrability discussed above, the
Steelworkers Trilogy also established a “presumption of arbitrability.” Steelworkers v. Warrior &
No. 04-3566/3567      The Cleveland Electric Illuminating Co., et al. v.                         Page 5
                      Utility Workers Union of America

Gulf Navigation Co., 363 U.S. 574, 583 (1960). If the collective bargaining agreement contains an
arbitration clause, the Supreme Court found that it should be presumed that the parties intended to
arbitrate the dispute unless there is “positive assurance” that the arbitration clause does not cover
the matter. Id. “[I]n cases involving broad arbitration clauses the Court has found the presumption
of arbitrability ‘particularly applicable,’ and only an express provision excluding a particular
grievance from arbitration or ‘the most forceful evidence of a purpose to exclude the claim from
arbitration can prevail.’” See United Steelworkers v. Mead Corp., Fine Paper Div., 21 F.3d 128, 131
(6th Cir. 1994) (quoting AT&T Techs., 475 U.S. at 650).
        This court has held that the presumption of arbitrability is particularly applicable where the
arbitration clause provides for arbitration of any controversy involving the interpretation of the
CBA. See Commc’ns Workers v. Mich. Bell Tel. Co., 820 F.2d 189, 193 (6th Cir. 1987); see also
Mead Corp., 21 F.3d at 132. In the agreement before this court, the parties clearly bargained for
retirees’ health benefits. The relevant provisions are found in Article X, section 3, of the CBA. The
grievance procedures are set out in Article V of the CBA. Section 1 of Article V provides that “the
following grievance procedure shall be used by the Union to settle or adjust any disagreement
concerning the interpretation or application of this Agreement.” There follows a set of procedures
beginning with a grievance being filed and ending with arbitration. Nothing in the CBA expressly
excludes retirees’ benefits from arbitration.
        Cleveland Electric argues that the retirees are not part of the collective bargaining unit and
that the grievance procedures do not apply to them. This argument is unavailing. In Allied
Chemical & Alkali Workers, Local Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 159
(1971), the Supreme Court considered whether a midterm modification of retirees’ insurance
benefits was an unfair labor practice. The company sought to modify its contributions to the
retirees’ health benefits because Medicare was enacted. Id. at 161. The National Labor Relations
Board found that the retirees’ benefits were a mandatory subject of collective bargaining. Id. at 162.
The Supreme Court held that the Board’s decision was not supported by law; that the term
“employee” does not include retired workers; that the retired workers are not employees included
in the collective bargaining unit; and that retired workers’ benefits are only a permissive subject of
collective bargaining. Id. at 166-82. Nevertheless, the Supreme Court recognized that a union and
company may agree to bargain for retirees’ benefits, and once these bargained-for benefits are
vested, retired workers may have contract rights under the collective bargaining agreement which
they could enforce pursuant to § 301 of the Labor Management Relations Act if the benefits are
changed. Id. at 181, n. 20.
        In spite of the fact that retirees’ benefits are not a mandatory subject of bargaining, several
courts, including this one, have held that where a union and a company bargain for retirees’ benefits
and include the benefits in their contract, the union has standing to represent the retirees in any
dispute concerning those benefits. For example, in Michigan Bell, we held that the presumption of
arbitrability applied to a dispute over retirees’ benefits brought by the union because the union and
the employer were parties to the contract providing for arbitration. Mich. Bell, 820 F.2d at 192. We
pointed out that the union’s assertion of rights for parties outside the bargaining unit was not
dispositive of the duty to arbitrate. Id.; see also Int’l Union, (UAW) v. Yard-Man, Inc., 716 F.2d
1476, 1486 (6th Cir. 1983) (noting that the union, as a signatory to the contract, could bring an
action for third party beneficiary retirees because it has a direct interest in maintaining the integrity
of the retiree benefits created by the collective bargaining agreement).
        The Eighth Circuit’s opinion in Anderson v. Alpha Portland Industries, Inc., 752 F.2d 1293
(8th Cir. 1985), was cited with approval in Michigan Bell. In Alpha Portland, the individual retirees
were seeking enforcement of their rights in federal court, but the company objected arguing that the
retirees had to exhaust the CBA’s grievance procedures before filing suit in federal court under
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                      Utility Workers Union of America

§ 301. In arriving at its decision that the retirees did not have to exhaust the grievance procedures,
the Eighth Circuit noted that the union would have had standing to represent the retirees rights under
a collective bargaining agreement if it chose to do so, and an employer could not have refused to
arbitrate its contractual obligations with the union. Id. at 1296.
        The panel in Yard-Man relied on the Third Circuit’s opinion in United Steelworkers v.
Canron, Inc., 580 F.2d 77 (3d Cir. 1978). In Canron, the Third Circuit considered a dispute over
retirees’ benefits brought by the union against the employer and noted that the employer was not
required to bargain with the union over benefits of retired employees of its predecessor company.
But, when a company contracts with the union to underwrite the premium costs of retirees’ benefits,
“the union has a legitimate interest in protecting the rights of the retirees and is entitled to seek
enforcement of the applicable contract provisions.” Id. at 80-81. The Canron court held that the
union had standing to represent the retirees in seeking arbitration under its labor contract with the
employer and stated that the arbitrability of the dispute was not to be “calculated by the status of the
grievants but by the nature and duties of the obligations of the parties under the contract.” Id. at 80-
82.
        Cleveland Electric relies on Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364
(1984), to support its argument that the presumption of arbitrability does not apply in this case. In
Schneider, the trustees of an employees’ benefit trust fund brought suit against two companies who
were parties to a multi-employer trust fund and who had not made the contributions to the fund as
required by the trust agreement, as incorporated into the terms of the applicable collective
bargaining agreement. The union was not involved in the case. The Supreme Court rejected the
presumption of arbitrability because nothing in the trust agreement or the collective bargaining
agreements evidenced an intent by the parties to require exhaustion of the arbitration remedies set
out in the collective bargaining agreements. Id. at 372. Nevertheless, the Court recognized that
“[t]he presumption of arbitrability is, of course, generally applicable to any disputes between the
union and the employer.” Id. at 372, n. 14. The obvious distinction between Schneider and the case
before this court is that in Schneider it was the trustees who were seeking to enforce trust
agreements, not the union seeking to enforce provisions of collective bargaining agreements.
        We find that the presumption of arbitrability applies to disputes over retirees’ benefits if the
parties have contracted for such benefits in their collective bargaining agreement and if there is
nothing in the agreement that specifically excludes the dispute from arbitration. Thus, unless there
is “forceful evidence of a purpose to exclude the claim from arbitration,” the arbitrator’s
determination in this case that the dispute is arbitrable must stand.
        Cleveland Electric argues that the retirees have other remedies that the active employees do
not, such as the right to file a § 301 action against the company. See, e.g., Pittsburgh Plate, 404 U.S.
at 182, n. 20 (“The retiree, moreover, would have a federal remedy under § 301 . . . for breach of
contract if his benefits were unilaterally changed.”); Yard-Man, 716 F.2d at 1485 (stating that
“[e]ach retiree has an undisputable and effective remedy against the employer for a breach of
contract under § 301(a)”). The fact that the retirees have an alternative remedy, however, does not
preclude the Union from undertaking to represent the retirees’ interests. We recognized as much
in Yard-Man, when we found that the union would have standing to bring suit on behalf of the
retirees to enforce their bargained-for benefits because the union had a “direct interest in maintaining
the integrity of the retiree benefits created by the collective bargaining agreement,” notwithstanding
the fact that the retirees may choose to deal with the company on their own. Yard-Man, 716 F.2d
at 1486-87.
       We find that the arbitrator’s decision “drew its essence from the CBA.” Therefore, in the
absence of any forceful evidence of a purpose to exclude the dispute over the retirees’ benefits from
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                       Utility Workers Union of America

arbitration, we affirm the district court’s adoption of the arbitrator’s decision as to the arbitrability
of the dispute.
        C. Consent of the Retirees to Union Representation
        The Union has cross-appealed the district court’s decision to require the Union to obtain the
consent of the retirees before taking the grievance to arbitration. The Union argues that because it
has standing to pursue the retirees’ benefits grievance, consent of the retirees is unnecessary; that
a consent requirement contravenes national labor policy; and that the nature and extent of the
consent requirement is ambiguous. Cleveland Electric contends that if the grievance is arbitrable,
the district court was correct in its determination that the Union must secure the consent of the
retirees before proceeding to arbitration.
         The arbitrator recognized that the retirees might have individual rights outside of the CBA,
particularly under ERISA, but he reserved a decision on the need for the Union to obtain the retirees’
consent because it was not clear that the Union’s claims were related to any of the retirees’ statutory
rights. The district court disagreed with the arbitrator’s decision not to require the Union to obtain
the retirees’ consent. Unlike the arbitrator, the district court found that Rossetto v. Pabst Brewing
Co., Inc., 128 F.3d 538 (7th Cir. 1997), applied in this case. In Pabst Brewing, the Seventh Circuit
recognized that a union has standing to arbitrate the meaning of a collective bargaining agreement
that grants rights to third parties simply by virtue of the fact that the union is a party to the contract.
Id. at 539. But this did not end the court’s inquiry. The court held that because the retirees had
statutory rights to the benefits, as well as other types of claims, which they could pursue directly
with the company, the union must obtain the assent of the retirees before purporting to represent
them at arbitration. Id. at 541.
        We agree with the district court on this issue. There are at least two dangers in failing to
require the Union to obtain the retirees’ consent. On the one hand, as pointed out in the Pabst
Brewing decision, the retirees could lose their rights to pursue their claims directly with Cleveland
Electric if the Union obtains an unfavorable arbitration decision. Id. at 540 (stating that if the union
“loses in arbitration, the retirees lose, period”); see also Int’l Union, United Auto., Aerospace &
Agric. Implement Workers v. Acme Precision Prods., Inc., 515 F. Supp. 537, 540 (E.D. Mich. 1981)
(finding that in the absence of a de facto class action, the union’s filing of a grievance or a lawsuit
would preclude retirees from pursuing their claims with the company).
         On the other hand, Cleveland Electric could be faced with numerous retirees’ claims and
lawsuits if a determination is made that the Union was not authorized to act on the retirees’ behalf.
This point was made clear in Meza v. General Battery Corp., 908 F.2d 1262 (5th Cir. 1990). In
Meza, an injured former employee filed suit against his employer for disability and pension benefits
provided for in the collective bargaining agreement. The union had filed a previous lawsuit over
these same benefits and claimed that its intent was to represent all the injured employees. The Fifth
Circuit held that res judicata did not apply to Meza’s suit because he was not a party to the prior suit;
he was not in privity with the union and was not bound by the union’s action; and he had not
expressly or impliedly authorized the union to represent his interests. Id. at 1280. Thus, Meza’s suit
was allowed to go forward notwithstanding the fact that the same issues had been considered in prior
litigation between the union and company.
       The Union argues that if it is required to obtain the retirees’ consent, the district court’s
consent requirement was ambiguous in that it did not set out the exact nature and extent of the
consent to be obtained. Cleveland Electric takes the position that anything short of a 100% yes-or-
no response by the retirees is unacceptable. It is not this court’s responsibility, however, to define
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                      Utility Workers Union of America

the consent requirement for the parties. The arbitrator is in a much better position to establish the
consent guidelines.
        Therefore, we agree with the district court that the arbitrator cannot defer the issue of
whether the Union has received the consent of the retirees. In order to arbitrate a retiree’s benefits,
the Union must obtain the consent of the retiree. It will be the arbitrator’s responsibility to establish
the nature and extent of the consent requirement.
                                        III. CONCLUSION
         For these reasons, we find that the parties submitted the question of arbitrability to the
arbitrator and that the arbitrator correctly decided that the Union has standing to arbitrate the issue
of the retirees’ benefits. The Union’s grievance over the retirees’ benefits is arbitrable, and the
district court’s decision is AFFIRMED.