Court Opinion

ID: 2998277
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:42:22.285263+00
Date Added: 2024-06-11T11:45:36.137265
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 04-2482
R.J. CORMAN DERAILMENT SERVICES, LLC,
                                                 Plaintiff-Appellee,
                                 v.

INTERNATIONAL UNION OF OPERATING ENGINEERS,
LOCAL UNION 150, AFL-CIO,
                                            Defendant-Appellant.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
              No. 02 C 0471—Ruben Castillo, Judge.
                          ____________
 ARGUED NOVEMBER 10, 2004—DECIDED SEPTEMBER 2, 2005
                   ____________

 Before POSNER, WOOD, and EVANS, Circuit Judges.
  WOOD, Circuit Judge. We return in this appeal to the
dispute between R.J. Corman Derailment Services, LLC,
and Local 150 of the International Union of Operating
Engineers over the arbitrability of certain wage grievances
that arose under an expired collective bargaining agree-
ment. When the case was last here, we found that the
district court’s entry of judgment on the pleadings compel-
ling arbitration was premature, because Local 150 had not
yet filed its answer to Corman’s complaint. See R.J.
Corman Derailment Servs. v. Int’l Union of Operating
Eng’rs, Local 150, 335 F.3d 643 (7th Cir. 2003) (Corman I).
2                                               No. 04-2482

On remand, the district court ultimately found that Local
150’s attempt to invoke arbitration was untimely and
therefore that the parties’ dispute was not arbitrable. We
affirm.

                             I
  Corman provides emergency services for railroads and
industries that operate their own railroad facilities. Its
services include removing derailed cars, repairing damaged
sections of track and cleaning up any hazardous spills
caused by a derailment. Between derailments, Corman’s
employees work at its facilities, where it stores and main-
tains equipment used at the derailment sites. From 1992
through 1999, Local 150 served as the exclusive bargaining
representative for Corman’s employees at its Gary, Indiana,
facility. During this time, Corman and Local 150 were
parties to three collective bargaining agreements (CBAs),
the last of which was in effect from December 19, 1996,
through December 19, 1999. Although the parties began
negotiations for a new agreement, these efforts ended
without success in early June 2000. At the end of June,
Corman closed its Gary facility and terminated those
employees.
  According to Local 150, the disputes it wishes to submit to
arbitration came to its attention during the negotiations for
a successor agreement. In February 2000, Corman provided
the Union with payroll records listing bargaining unit
employees at the company from late December 1998
through late December 1999. After reviewing these docu-
ments, Dave Fagan, Local 150’s Organizer and Business
Representative, suspected that Corman had not complied
with the wage provisions of the 1996 CBA. The CBA
obligated Corman to pay bargaining unit members accord-
ing to a three-tiered hourly wage schedule that varied by
type of work: the regular wage rate was $12.35; the
No. 04-2482                                                3

straight-wreck work rate was $16.25; and the overtime
wreck rate was $22.65. This schedule did not, however,
apply to “casual employees,” which the CBA defined as
“employees hired for a specific customer project.” While
the CBA did not ban casual employees from future em-
ployment on customer projects, no casual employee could be
employed to reduce, or prevent an increase in, the
hours worked of any bargaining unit employee or as a
means to prevent an increase in the number of such
employees. An employee lost the status of a casual em-
ployee if she was retained for work that could be performed
only by a regular employee. In that case, Corman was
required to pay the former casual worker according to the
CBA’s wage provisions. From the payroll records, Fagan
believed that Corman had underpaid certain employees by
improperly classifying them as casual employees.
  At the time that Fagan discovered these wage discrepan-
cies, no employee had complained about them to the Union
or filed a grievance with Corman. A particularly alert
employee might have done so, given the fact that Corman
paid its employees either weekly or bi-weekly and a pay
stub detailing the number of hours worked and the total
amount paid accompanied each paycheck. Fagan informed
Steve Cisco, Local 150’s Secretary, of his suspicions, but
he did not file a grievance at that time. Instead, on Feb-
ruary 22, 2000, with Cisco’s authorization, Fagan requested
that a wage audit be conducted in conjunction with the
fringe benefits audit the Trustees of the Midwest Operating
Engineers Pension and Benefits Funds (The Funds) had
already initiated. (The Funds suspected that Corman had
failed to make the required contributions to its ERISA plan,
again by manipulating who was a “casual” employee and
who was regular; they sued to recover the alleged shortfalls.
See Dugan v. R.J. Corman R.R. Co., 344 F.3d 662 (7th Cir.
2003).) On July 25, 2001, the auditor issued its report,
which confirmed Fagan’s belief that certain employees had
4                                                No. 04-2482

been classified improperly as casual employees and thus
had been underpaid.
  As we noted in Corman I, Article IX of the 1996 CBA
provides a four-step procedure for filing 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 represen-
    tative. Corman then has five working days to respond
    in writing to the grievance. If this additional step fails
    to resolve the employee’s grievance, step three provides
    for the 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 must be
    made within forty-five days of the initial occurrence.
335 F.3d at 645-46.
  On September 12, 2001, Local 150 sent a letter to Corman
stating that it was invoking step two of the grievance
procedure for wage underpayments of certain employees.
Corman responded a week later, asserting that it was not
obligated to entertain or respond to any claimed grievance
because there was no agreement in effect between the
parties. It also alleged that Local 150 had not followed the
CBA’s grievance procedure and that the letter was “ineffec-
tive to initiate the long-expired grievance process.” On
October 30, Local 150 formally demanded arbitration
pursuant to step four of the grievance procedure. Corman
responded on November 7, refusing to arbitrate the dispute
because the grievance was untimely and the Union did not
follow the grievance procedures. On January 18, 2002,
No. 04-2482                                                   5

Corman filed this action in district court under Section 301
of the Labor Management Relations Act, 29 U.S.C. § 185 et
seq., seeking declaratory and injunctive relief from Local
150’s demand for arbitration. Before Local 150 filed its
answer to the complaint, the court granted judgment on the
pleadings in favor of Local 150. Corman appealed, and we
concluded that the judgment ordering arbitration was
premature. See Corman I, 335 F.3d at 649. We identified a
number of issues that had to be resolved in order to deter-
mine whether the dispute was arbitrable: whether the CBA
remained in effect during the parties’ negotiations for a new
agreement, whether the Union could have filed a grievance
during the life of the agreement, and most importantly,
whether the grievances were timely. Id. at 649-51.
   On remand, the district court granted summary judgment
in favor of Corman. It found that although the events
triggering the grievances occurred before the CBA expired
(which standing alone supported arbitrability), the dispute
was nonetheless not arbitrable because Local 150 did not
file the grievances within a reasonable time after the
expiration of the agreement. Critically, Local 150 failed to
present evidence showing that the employees did not know
of the underpayments at the time they were paid. Alterna-
tively, even if the employees could not have grieved the
wage discrepancies as they arose, Local 150 could have filed
the grievances in February 2000, when Fagan reviewed
Corman’s payroll records. Finally, the court reasoned that
even if it was rational for Local 150 to delay the filing of the
grievances until after the wage audit report, the two-month
wait failed to comply with the timing requirements set forth
in the CBA. Under the CBA, the parties intended a request
for arbitration to be brought within 45 days after discovery
of the grievance. Any way one looked at the matter, the
district court concluded, Local 150 waited too long.
6                                               No. 04-2482

                             II
  We review the district court’s grant of summary judgment
de novo. See Int’l Bhd. of Elec. Workers, Local 176 v.
Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir.
2002). Both parties had moved for summary judgment; to
the extent that Local 150 challenges the court’s decision to
grant Corman’s motion, we construe the record in the light
most favorable to the Union. To the extent that Local 150
asserts that the court erred in refusing to grant its own
motion, we view the record in the light most favorable to
Corman. Id. The duty to arbitrate is “a creature of the
collective-bargaining agreement and [a] party cannot be
compelled to arbitrate any matter in the absence of a
contractual obligation to do so,” Nolde Bros., Inc. v. Local
No. 358, Bakery & Confectionary Workers Union, 430 U.S.
243, 250-51 (1977). Nevertheless, a party’s obligation to
arbitrate can survive the expiration of the contract in
limited circumstances. Id at 251. In Nolde, the Supreme
Court held that “where the dispute is over a provision of
[an] expired agreement, the presumptions favoring
arbitrability must be negated expressly or by clear implica-
tion.” Id. at 255. This rule also applies to an action that
“involves facts and occurrences that arose before expiration,
where an action taken after expiration infringes a right that
accrued or vested under the agreement, or where, under
normal principles of contract interpretation, the disputed
contractual right survives expiration of the remainder of
the agreement.” Litton Fin. Printing Div. v. NLRB, 501 U.S.
190, 206 (1991).
  Local 150 argues that a court’s inquiry into the
arbitrability of a post-expiration grievance begins and ends
with Litton. The rule in its view is simple: where the
dispute arises under the agreement, it is presumed to be
subject to the agreement’s arbitration provision. At that
point, everything else is for the arbitrator to decide. In
particular, Local 150 argues that the question whether a
No. 04-2482                                               7

grievance is timely is a procedural question within the
arbitrator’s competence. Thus, it concludes, the district
court erred as a matter of law when it found that the
underlying dispute was not arbitrable because it was not
filed within a reasonable amount of time.
  In Nolde, the Supreme Court hinted at the possibility that
the untimely assertion of a post-expiration grievance
extinguishes the presumption of arbitrability. 430 U.S. at
255 n.8 (“[W]e need not speculate as to the arbitrability of
post-termination contractual claims which, unlike the one
presently before us, are not asserted within a reasonable
time after the contract’s expiration.”). This court has also
recognized the potential importance of the time factor in
determining whether a post-expiration dispute is arbitrable.
See Local 703, Int’l Bhd. of Teamsters v. Kennicott Bros.
Co., 771 F.2d 300, 303 (7th Cir. 1985). In Kennicott, we
faced the question whether a post-contract discharge and
severance pay dispute that arose more than six months
after an agreement had expired were subject to arbitration
and concluded that they were not. Id. at 304. In so ruling,
we declined to “read the Nolde presumption of arbitrability
to persist indefinitely after expiration.” Id. at 303. As we
explained, “[a]lthough it may be reasonable to presume that
parties intend to arbitrate grievances arising shortly after
the expiration of a contract, the presumption weakens as
the time between expiration and grievance events in-
creases.” Id.
   Local 150 contends that Kennicott is inapplicable because
it involved a grievance that was triggered by events occur-
ring after the contract’s expiration whereas here, the wage
underpayments occurred during the life of the contract. It
argues that we should follow the Ninth Circuit’s decision in
Goss Golden W. Sheet Metal, Inc. v. Sheet Metal Workers
Int’l Union, Local 104, 933 F.2d 759 (9th Cir. 1991), which
involved a grievance that arose during the life of the
contract but was initiated after the expiration of the
8                                                No. 04-2482

agreement. In Goss, the employer appealed the arbitration
panel’s award on the ground that the grievance was un-
timely. The Union alleged that the employer had engaged
in a cover-up to prevent it from learning of the employer’s
breach. Id. at 763 n.2. Concerned that requiring a grievance
to be filed within a certain time after a contract’s expiration
would allow an employer to evade its contractual obliga-
tions by engaging in cover-up efforts, the court held that the
issue of timeliness was governed by the terms of the CBA.
Id. at 763. (“To reach any other conclusion would allow
parties to breach with impunity collective bargaining
agreements during the agreements’ terms as long as they
successfully covered their tracks so that the discovery of
any breach was postponed until after the expiration of the
particular agreement.”).
  This is a valid concern. Requiring a grievance to be
asserted within a set time after the contract’s expiration
could lead to inequitable results if one party acted to make
it difficult for the other to discover the breach of the
contract until after the prescribed time period had run out.
It would also be inconsistent with Nolde, which was meant
to prevent a party from evading its contractual obligation to
arbitrate by terminating the contract before a grievance
could be filed. Nolde, 430 U.S. at 253. Nonetheless, it
remains true that at some point—two years? five years? ten
years?—beyond the expiration of the CBA, it would be
utterly unreasonable to presume that the parties still had
an agreement to arbitrate CBA-based grievances that had
grown musty with age. As we noted in Kennicott, the Nolde
presumption of arbitrability does not persist indefinitely.
771 F.2d at 303. The real question is whether one party had
taken action to abuse the process in the way the Ninth
Circuit described.
  In the absence of evidence of abuse (which we do not see
here), we conclude that a post-expiration grievance must be
asserted within a reasonable time after its discov-
No. 04-2482                                                 9

ery—within a time, as we put it in Kennicott, when it is still
logical to apply the Nolde presumption. One factor that
sheds some light on the time period that is reasonable is the
language of the CBA itself. Collective bargaining agree-
ments generally call for grievances to be brought within a
limited time period. The 1996 CBA between Local 150 and
Corman is no exception: it establishes a 45-day period in
which to invoke the grievance process, starting with the
date when the events triggering the grievance occurred. The
parties did not intend an unlimited time to file a grievance
during the life of the contract. It would be incongruous if
the same grievance were not subject to any time limitations
simply because it came to light after the contract had
expired.
  Understood in this light, the district court’s inquiry into
the timeliness of the grievances was not a usurpation of the
arbitrator’s role. It was instead part of the process of
determining whether there was an agreement to arbitrate
this set of grievances at all. This distinguishes the present
case from Howsam v. Dean Witter Reynolds, Inc., 537 U.S.
79 (2002), in which the Supreme Court held that the
question whether a grievance is brought within the time
period permitted by an agreement to arbitrate is one for the
arbitrator. The question here is how long the expired
agreement to arbitrate survived. Only if the parties had
agreed to allow the arbitrator to decide that threshold
question would the district court have been compelled to
order arbitration. But, as the Supreme Court held in First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)
(quoting AT & T Technologies, Inc. v. Communication
Workers, 475 U.S. 643, 649 (1986)), unless there is “‘clea[r]
and unmistakeabl[e]’ evidence” that the parties have agreed
to let the arbitrator decide arbitrability, a party cannot be
forced to “‘arbitrate the arbitrability issue.’” Litton, 501
U.S. at 208 (quoting AT & T, 475 U.S. at 651). Here, we do
not have the clear evidence called for by First Options. It
10                                               No. 04-2482

was therefore up to the court to decide whether the dispute
was arbitrable, and that question in turn required an
inquiry into the question whether it was brought too long
after the CBA’s expiration.
  On the ultimate question of what time period is reason-
able here, the parties offer only extreme positions. Corman
urges us to apply the 45-day period set by the grievance
procedure in the agreement itself, and it would prefer that
we find that the period began running at the time the
employees were paid. Local 150 counters that the Illinois
limitation period for breach of written contracts, see 735
ILCS 5/13-206, providing for a 10-year period, should apply.
  We find neither of these positions persuasive. Accepting
Corman’s position would require a court to delve too deeply
into questions of the parties’ compliance with the terms
of the agreement, which are more properly for the arbi-
trator. See John Wiley & Sons, Inc. v. Livingston, 376 U.S.
543, 557-58 (1964); Beer, Soft Drink, Water, Fruit Juice,
Carbonic Gas, Liquor Sales Drivers, Helpers, Inside Work-
ers, Bottlers, Warehousemen, School, Sightseeing, Charter
Bus Drivers, General Promotional Employees of Affiliated
Industries, Local Union 744 v. Metro. Distrib., Inc., 763 F.2d
300, 303 (7th Cir. 1985). Local 150’s reliance on Illinois
contract law is unsatisfactory because it ignores the strong
federal policy favoring the prompt resolution of labor
policies. See DelCostello v. Int’l Bhd. of Teamsters, 462 U.S.
151, 171 (1983); United Food & Commercial Workers Local
100A v. John Hofmeister & Son, Inc., 950 F.2d 1340, 1346-
48 (7th Cir. 1991). In Hofmeister, in the context of an
ongoing CBA, we rejected Illinois’ 10-year limitations period
and found that it was appropriate to borrow the six-month
statute of limitations from § 10(b) of the National Labor
Relations Act, 29 U.S.C. § 160(b), for actions brought to
compel arbitration under that CBA. 950 F.2d at 1348.
  In the context of an expired CBA, as we have already
No. 04-2482                                                11

said, there are powerful reasons to avoid a rigid limitations
period and to require only action within a reasonable time.
Nonetheless, the fact that both the CBA and labor law in
general favor prompt resolution of labor disputes provides
guidance about what would be reasonable.
  Corman contends that the employees could have brought
the grievances as they occurred because it was relatively
straightforward to calculate their wage rates from the
pay stubs. In order to prevail, however, it was up to Corman
to show that casual employees would have known that they
were entitled to be paid at a higher wage rate. Their pay
stubs allowed them only to check the wages they were paid
against the wages Corman had promised to pay them as
casual employees. The fact that they were not members of
the Union meant that they did not have access to the CBA
or to Union representatives and could not have known that
Corman had classified them improperly. And without that
knowledge, the employees could not have ascertained that
they were being underpaid solely from their paychecks.
  Local 150 argues that the time period should start to run
from July 25, 2001, the date when the auditor issued its
report confirming Fagan’s suspicions about the wage
underpayments. It urges that it would have been irresponsi-
ble to file a grievance any sooner, without confirming that
the problem existed. The district court rejected this argu-
ment and noted that there was “no reason why Local 150,
armed with payroll information in February 2000, could not
have initiated the grievance process at that time and put
Corman on notice that it was seeking redress for alleged
wage underpayments.” We agree. The fact that the payroll
records might not have been enough to prove conclusively
that the contract was violated does not excuse Local 150’s
delay; in fact, even the audit report did not go that far. The
payroll records more than sufficed to put the Union on
notice of the possible violation: they contained the wage
rates, hours worked and wages paid for each employee in
12                                           No. 04-2482

1999. The wage audit report provided the same information,
except that it also included the first eight months from
2000.

                           III
  Because Local 150 filed these grievances on September
12, 2001, more than 18 months after their discovery in
February 2000 and long after the expiration of the CBA
containing the agreement to arbitrate, we find that the
delay was unreasonable. We therefore AFFIRM the judgment
of the district court.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit

                   USCA-02-C-0072—9-2-05