Court Opinion

ID: 8897712
Source: CourtListenerOpinion
Date Created: 2022-11-27 00:22:30.787527+00
Date Added: 2024-06-11T17:07:36.578654
License: Public Domain

ROSENN, Circuit Judge
(dissenting):
I respectfully dissent from the majority’s resolution of this case. While I recognize the important role arbitration plays in our national labor policy, I believe that on the facts of this case the Union waived its right to arbitration under the collective bargaining agreement and a remand for arbitration of the damage claim is singularly inappropriate.
I.
My analysis of the case requires a greater explication of the facts than is contained in the majority opinion.
On March 24, 1968, the City of Scranton, Pennsylvania, entered into a collective bargaining agreement with District 128 and Lodge 2305 of the International Association of Machinists and Aerospace Workers, AFL-CIO (Union). The agreement covered a unit composed of “all Department of Public Works employees employed” in five named bureaus, of which the Bureau of Refuse was one. The terms of the contract included the conventional subjects of a collective bargaining agreement. It contained a broad grievance and arbitration article. The contract defined a grievance as “any dispute between the Employer and the Union or between the Employer and any employee concerning the effect, interpretation, application, claim of breach or violation of this Agreement or any other dispute which may arise between the parties,” and established a grievance procedure culminating in final and binding arbitration of any dispute at the instance of either the Union or the employer. The agreement also contained the typical no-strike promise by the Union and a *1333no-lockout promise by the City. In addition, it included a section which stated:
It is the intent that any agreement entered into shall be binding upon the employer and its successors and assigns and all of the terms and obligations herein contained shall not be affected or changed in any respect by any change in the legal status, or management of the Employer (City of Scranton, Pennsylvania).
The agreement was to expire December 31, 1969, and provided for continuation thereafter unless a sixty-day modification notice was served by either party.
In the fall of 1968, Scranton published specifications and solicited bids from private contractors for the collection and disposal of refuse. The specifications contained the requirement that
the Contractor will assume all of the rights and obligations of the City under the . . agreement between the City and the International Association of Machinists and Aerospace Workers insofar as such agreement is applicable to the Bureau of Refuse.
Controlled Sanitation Corporation (Company or Controlled) was formed for the purpose of bidding on the contract. The City awarded the refuse contract to the Company and the two entered into an agreement on November 15, 1968. The Company promised, inter alia, to perform the work in accordance with the published specifications. *
The Company began performance of the refuse contract on November 16, 1968. It hired the employees in the Bureau of Refuse who had been doing the work and who were within the labor unit covered by the Union agreement. Shortly thereafter, the Company developed plans for more efficient performance of its duties. The plans projected a work force reduction from approximately 100 to approximately 55 employees. When the Company explained its new operation plans to the employees, they threatened to go on strike in the event of a layoff.
Nevertheless, Controlled on January 2, 1969, notified 44 men that they were laid off. The work force struck for three days and returned to work only when the Company agreed to reinstate them and reduce the work force only by attrition. The Company further explained that they contemplated again reducing the work force in the summer.
Also in January, the City (for employees still working for it), the Company, and the Union entered into negotiations for improvements in wages and fringe benefits pursuant to a reopener in the collective bargaining agreement. A dispute between Controlled and the Union during the course of these negotiations engendered a second three-day strike against the Company beginning January 15.
A third and final strike against the Company commenced on July 1, 1969. The reason for this strike is not clear from the record. Controlled’s president testified that the Company was about to lay off employees again in order to reduce the work force and that the men were aware of the impending layoff. A Union witness testified that the strike was due to the Union’s inability “to get any negotiations to get a contract. . ” Whatever the cause, the Company continued its operations with replacements.
Under its contract with the City, Controlled was required to furnish the City with a performance and a labor and material bond sixty days prior to the beginning of the second year of the contract. The Company was unable to acquire such a bond in the fall of 1969, and the jury found as a fact that this inability was due to the strike. Majority opinion, n. 2. The City therefore terminated the refuse contract with Controlled. The Company thereupon ceased performance of the refuse contract.1 On the same day, November 15, 1969, the strike ended.
On December 8, 1969, the Company instituted suit against the Union under *1334Section 301 of the Labor Management Relations Act, as amended, 29 U.S.C. § 141 (1971). The complaint sought compensatory and punitive damages, alleging that the strike was in violation of the no-strike clause of the collective bargaining agreement. The Union’s initial response, filed December 17, 1969, was a motion to dismiss on the ground that the labor contract was between the Union and the City, and the Company and the Union had had no agreement. The Union did not seek a stay of proceedings pending arbitration. The district court denied the motion and in its memorandum noted the Union’s failure to seek a stay.
Pursuant to the district court’s direction, the Company filed an amended complaint on September 22, 1970. In its motion to dismiss the amended complaint, filed October 9, 1970, ten months after the institution of the suit, the Union for the first time raised the issue of arbitration, but then only as an alternative defense. The first two paragraphs of the answer continued to deny the existence of a labor contract between the Union and Controlled. Paragraph 3 then stated:
In the alternative, the Defendants move this Court to dismiss the Plaintiff’s complaint, if in fact and/or law it determines that the Administrative Agreement . . . constitutes a valid and subsisting collective bargaining contract between the Plaintiff and Defendants.
The ensuing trial was bifurcated. At the close of the first stage the jury returned a verdict on two interrogatories from the court finding that the Union had agreed to be bound by the provisions of the contract between the City and the Company, including the provisions of the collective bargaining agreement, and that the strike caused the Company’s inability to acquire a bond. As the trial proceeded to the damage phase, the arbitration question was explicitly preserved.
II.
The majority opinion expresses its concern with “certain aspects of unfairness” in permitting the unions vigorously to deny the existence of a valid contract while maintaining its right to arbitration under the contract should the jury decide the issue adversely to them. The majority feels constrained to allow the Union now to enforce the arbitration article after the elapse of a lengthy period of time for the primary reason that arbitration is a federally favored policy under the Labor Management Relations Act, 29 U.S.C. § 141 et seq. (1971).
Federal policy encourages arbitration of labor disputes to further the parties’ common and primary objective “of uninterrupted production under the agreement.” United Steelworkers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). Arbitration serves no such useful purpose in the instant situation because, as the jury found, the last union strike finally and irrevocably terminated the employer-employee relationship between the Company and its work force as well as the refuse contract between the City of Scranton and Controlled. Stability of labor relations and maintenance of production is no longer at stake. The only issue remaining is redress of damages. As a consequence, the conciliatory objectives of the federal policy favoring arbitration cannot be controlling in the circumstances of this case.
The critical factor here, in my view, is the Union’s insistence on contesting in the district court the existence of the collective bargaining agreement with the Company. The record contains no tenable evidence to support the allegation of the non-existence of the contract. Thus, it appears that it was the Union’s litigational strategy initially to test this defense before a court and jury until the result proved unfavorable, and then switch to a different forum. This strategy imposed time and costs on the judicial system and further delayed the resolution of the Company’s claim. It is singularly inappropriate, I believe, to reward this conduct at this late stage with a reversal of the jury’s verdict and a *1335remand for arbitration. A closer examination of the record will reveal the basis of my views.
The contract between the Union and the City clearly stated that it was assignable. The union membership had seen the agreement and was informed of its contents prior to voting on it. The bid specifications incorporated into Controlled’s contract with the City were publicized and explicitly stated that the winning bidder would be subject to the union labor contract. After Controlled took over refuse collection responsibilities in Scranton, the Union insisted on company compliance with its rights under the contract.
In December 1968 the Union entered into negotiations with the City and with the Company pursuant to the wage re-opener provisions of the agreement. A December 27th agreement signed by the union business representative and Controlled’s president stated:
It has been mutually agreed that any agreement reached regarding fringe benefits and wages by the subject parties will be retroactive to January 1, 1969.
The Union was apparently seeking nothing more than additional wages and fringe benefits under the reopener. There is no evidence that any demands were made for recognition or negotiation of a new agreement with Controlled.
The Union sent a letter to the Company informing it that on January 11, 1969, named members would take office and requesting that seniority layoffs be changed in accordance with “our agreement article XIV Sec. 2.”
In February 1969 the Union business representative sent the Company a letter concerning the grievance of an employee. The letter indicates that the Union was using the grievance procedure specified in the contract since it ended with a statement that if a prompt answer was not received at this stage, the Union would proceed to arbitration “in accordance with the existing agreement.”2 (Emphasis supplied.)
Further substantiating the conclusion that the parties recognized and adopted the contract was a grievance report signed by an individual employee who claimed that his discharge was “a violation of our Labor Agreement, Article VII Section B.”
The documentary evidence3 inescapably points to the conclusion that the Union itself believed that the collective bargaining agreement it had signed with the City was effective between it and the Company. However, until it filed its brief in this court, the Union consistently maintained throughout this litigation that it did not have a contract with the Company. When it eventually raised the issue of arbitration, it did so only in the alternative, clearly maintaining its right to present the question of the existence of the contract to the jury. In the light of the above recitation of facts, the Union’s denial of the existence of a contract can be seen only as a litigational ploy.
The Union argues that it is not required to surrender arbitration as the price of claiming that no labor agreement exists. It urges us to follow cases that have “approved defendant’s alternative pleading denying the existence of the contract but otherwise praying for arbitration.” Mogge v. District No. 8, IAM, 387 F.2d 880, 883 (7th Cir. 1968). The Union’s claim is, in general, aceu*1336rate. A party litigant should not be penalized for raising in good faith any claim or defense it may have, however inconsistent with any other claim or defense. Indeed, if the Union had any reasonable basis for contesting the existence of the contract, the tactic it adopted would probably have been acceptable. However, a different situation is presented, when, as here, the record reveals the Union’s claim to be spurious. See Mogge, supra, 387 F.2d at 883.
Allowing the Union the benefit of its alternative plea in circumstances such as these poses several evils. First, it effectively sanctions forum shopping. The Union can try for a favorable result in the district court and then still opt for arbitration if the decision on the existence of the contract goes against it.
Second, it unnecessarily involves the district courts in litigation and misuses their valuable time. Even were the district court ultimately to direct a verdict against a union on the contractual issue, its time would have been consumed in motions, discovery, and hearing evidence.
Thirdly, and most importantly, the procedure the Union urges is prejudicial to the other party. Allowing the case to go to arbitration after a frivolous contractual issue is decided by a jury only further delays resolution of the remaining damage claim issue. Cf. Granny Goose Foods, Inc. v. Teamsters Local No. 70, 88 LRRM 2029, 2034 (N.D.Cal.1974). The jury having heard the evidence and determined the existence of the labor contract, a prompt hearing of the evidence on damages was much more efficient and less time consuming than remanding the matter to arbitration would have been. Considerable time would necessarily have elapsed after the initial special verdict in the selection of the arbitrator, fixing acceptable hearing dates, and for the arbitration decision. Furthermore the arbitrator’s hearing would necessarily duplicate much of the evidence already presented at trial.
The Seventh Circuit had occasion to consider a similar problem in Mogge, supra, a case cited by the Union. There, the employer refused arbitration on the ground that the collective bargaining agreement was invalid. The employee and her union then sued the employer (also a union) who denied the validity of the contract and, in the alternative, requested arbitration. The district court found the contract to be valid, but allowed arbitration, noting that the employer’s plea of invalidity “was not unreasonable.” The Court of Appeals affirmed stating that if the employer’s grounds for contesting the contract “were patently untenable or clearly wrong ... its refusal to arbitrate would of course have waived the arbitration provisions of the contract.” 387 F.2d at 883. The Union here, of course, did not explicitly refuse a demand to arbitrate, but the result of its action is no different. Its failure to seek a stay of the proceedings under the foregoing circumstances constituted a waiver of arbitration.4
III.
The majority holds that the decisions of the Supreme Court in Operating Engineers Local 150 v. Flair Builders, Inc., 406 U.S. 487, 92 S.Ct. 1710, 32 L.Ed.2d 248 (1972), and John Wiley & Sons v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964), compel it to submit the question of whether the Union repudiated the arbitration clause of the contract to arbitration. The majority’s reasoning would apply equally to a finding of waiver. A further question the majority does not consider is what does the arbitrator do if he determines there was repudiation or waiver — remand to the *1337district court or decide the case under a repudiated or waived arbitration clause? The latter result is anomalous and the former generates an unnecessary ping-pong game between the court and the arbitrator. Such a course again is disruptive of the orderly proceedings of the court and indiscreetly abandons the integrity of the court’s jurisdiction to an arbitrator. See Kennecott Copper Corp. v. International Brotherhood of Electrical Workers, 339 F.2d 343, 345 (10th Cir. 1964).
For the foregoing reasons and because, as I have initially stated, the' salutary purposes of arbitration can no longer be achieved under the facts of this case, I believe remand for arbitration is inappropriate. I would affirm the judgment of the district court.

. The Company subsequently went out of business.

. The signer of the letter, resting on the literal assumption that the labor contract was not initially negotiated and signed by the Company, testified at trial that there was no agreement between the Company and the Union.

. Testimony at trial is inconclusive. The company president testified that he frequently spoke to his employees and to union officers and the question of a contract was never raised. Lynn Warren, senior business representative of district 128, testified that he sought negotiations to obtain recognition, but the company president would not meet with him. The only other evidence in the record indicating that the Union and the Company did not have contractual relations was a charge of refusing to bargain collectively filed by the Union with the National Labor Relations Board during the last strike. The Union withdrew the charge.

. An additional circumstance contributing to a finding of waiver is that the Union’s ten-month delay in raising the issue of arbitration hardly constitutes proceeding “with dispatch in seeking arbitration.” Drake Bakeries v. Bakery Workers, 370 U.S. 254, 266, 82 S.Ct. 1346, 8 L.Ed.2d 474 (1962). See E. T. Simmonds Const. Co. v. Local 1330, 315 F.2d 291 (7th Cir. 1963).