McLeod, Leon v. Arrow Marine Trans ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 01-1060
Leon A. McLeod, Randy Sanders,
Don Newman, et al.,
Plaintiffs-Appellants,
v.
Arrow Marine Transport,
Incorporated,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 655--John W. Darrah, Judge.
Argued May 14, 2001--Decided July 12, 2001
Before Bauer, Rovner, and Diane P. Wood,
Circuit Judges.
Bauer, Circuit Judge. Plaintiffs-
appellants (or "drivers"), ten former
semitrailer tractor truck drivers for
Arrow Marine Transport, Inc. ("AMT"),
brought a hybrid breach of contract/duty
of fair representation action under sec.
301 of the Labor Management Relations
Act, 29 U.S.C. sec. 185(a) against AMT
for failure by their exclusive bargaining
agent, the Chauffeurs, Teamsters and
Helpers Union Local No. 301 ("union"),
who had entered into a collective
bargaining agreement ("CBA") on their
behalf with AMT, to fairly resolve their
grievances. After several adverse rulings
by the district court, the drivers
appeal. We affirm.
BACKGROUND
AMT, an Illinois trucking corporation,
hauls goods between locales for various
construction and manufacturing companies.
Arrow Specialized Carriers ("ASC"), a
non-unionized company also in Illinois,
provides broker services in that it finds
available haul jobs and hires other
trucking companies to do them. Michael
Trinski is president and co-owner of both
AMT and ASC. ASC often hired AMT to
perform the jobs it found.
Plaintiffs-appellants all, at one time
and in some capacity, worked for AMT.
Leon McLeod, Randy Newman, Rick Sturm,
William Lama, and Joe LaFlamme were
owner-drivers, meaning that they drove
their own tractors when hauling goods for
AMT. Willis Rushing, George Kwapniewski,
Jason Clavey, and Brian Cusker were
employee-drivers hired to drive AMT
trucks. Randy Sanders started his employ
as an employee-driver and eventually
became an owner-driver. Each of the
drivers left AMT as follows: (1) Sturm
prior to 1997; (2) Sanders on March 17,
1997; (3) Newman on April 17, 1997; (4)
McLeod on April 28, 1997; (5) Lama on
September 6, 1997; (6) Kwapniewski and
Clavey on January 8, 1998; (7) Rushing on
January 15, 1998; (8) Cusker on January
19, 1998; and (9) LaFlamme on January 24,
1998.
According to Article 8, Section 4 of the
CBA, all employees were to be paid either
hourly or on a percentage basis. All of
the plaintiffs-appellants earned a
percentage of the gross revenue paid to
AMT per haul. Accordingly, their salary
varied with each job, so, in order to
assure the drivers that they were being
paid the right amount, Article 17,
Section 2 of the CBA promised that
"[d]etailed statements will be furnished
by companies to owner-drivers/employees
at least once a month, designating all
owner-drivers/employees full gross income
and expenses for the month. Any money due
at this time must be paid."
The CBA also detailed the procedure for
employees to follow if they had a
grievance. As per Article 15, Section
1(A), a grievance had to be raised with
the Foreman by the employee alone or with
a union representative within five days
of its occurrence; if it was not
resolved, the employee, either alone or
with a union representative, would speak
to the Plant Supervisor and then to a
member of management; if still not
resolved, the union referred the
grievance to the Permanent Labor
Committee ("PLC"), a four-member body
which would hold a hearing and vote on a
resolution; and if still unresolved, on
to arbitration.
This elaborate grievance procedure could
be bypassed in certain limited
circumstances. Article 15, Section 2
created an exception to the procedure for
any "willful or flagrant violations of
the wage or overtime provisions . . . ."
Article 18, Section 1 declared:
"Authorized representatives of the Union
shall have access to the Employer’s
establishment at all reasonable times for
the purpose of . . . ascertaining
compliance with this Agreement (which
shall include the right to inspect and
audit payroll records, time cards and
work sheets)." Furthermore, Article 18,
Section 2 instructed: "Should a Certified
Public Accountant, designated by the
Union, certify in writing specifically
that an Employer is violating the wage
scale . . . based upon the records for an
audit . . . , then the grievance
procedure shall have no application . . .
and the Union shall be permitted all
legal and economic recourse . . . ."
From here, the facts become dense
because, despite an attempt by the
drivers to unify themselves and obscure
unattractive facts, we are really dealing
with three distinct sets of plaintiffs-
appellants. The first set includes
McLeod, Sanders, Newman, Sturm, and Lama.
These drivers filed a grievance in late
1997, months after they left AMT. The
second set encompasses Kwapniewski,
Clavey, and Cusker, whose grievance was
timely filed, heard, and resolved by the
PLC. Third and finally there is Rushing
and LaFlamme, who never filed a grievance
but joined this suit. Thus, for clarity’s
sake, we reserve further factual
narrative until we address the issues
specific to each set of drivers.
The drivers raise four issues on appeal,
which are that the district court erred
in: (1) granting summary judgment for AMT
against Kwapniewski, Cusker, and Clavey;
(2) granting summary judgment for AMT
against Rushing and LaFlamme; (3)
striking parts of their brief and fact
statement; and (4) dismissing the claims
of McLeod, Sanders, Newman, Lama, and
Sturm.
While these four issues presented in
their appellate brief seem
straightforward, all of the drivers’
arguments are infused with an overarching
contention, and a rather serious one at
that. They assert that Trinski formed and
used ASC to funnel money away from AMT
and into his own pocket. They believe
that AMT paid ASC a broker fee for
finding AMT jobs, jobs that AMT could
have procured on its own, and that the
broker fee was being skimmed off the top
of the gross revenue AMT earned for each
haul job, thereby reducing the amount
from which the drivers’ percentages were
calculated. They believe that this wage-
skimming scheme would have been
discovered if the union had conducted a
proper audit in resolution of their
grievances. Therefore, they claim that
through this scheme AMT breached the CBA
and that the union breached its duty to
fairly represent its members by failing
to perform an audit by which this breach
would have been discovered.
The drivers’ theory is not one to take
lightly, but, given the factual landscape
(the nature of the drivers’ grievances)
and legal landscape (our standard of
review) of this case, it is simply not
one we may take at all. In other words,
the drivers’ theory did not come to
fruition until discovery in this lawsuit
was well under way, which is common in
many cases; however, under the law
governing this hybrid suit, we look at
whether the union acted arbitrarily given
the facts known at the time it acted. At
the time the union acted there was not a
hint of this theory--not in the drivers’
grievances, not in the minutes from the
hearing for the grievance filed by one
set of drivers, and for that matter,
hardly even in the complaint or amended
complaint. Given this, the foundation of
the drivers’ appeal is swept away. As the
union was unaware of this theory at the
time it handled the drivers’ grievances,
it cannot be faulted for only addressing
the particular issues raised.
DISCUSSION
"National labor policy has been built on
the premise that by pooling their
economic strength and acting through a
labor organization freely chosen by the
majority, the employees of an appropriate
unit have the most effective means of
bargaining . . . ." NLRB v. Allis-
Chalmers Mfg. Co., 388 U.S. 175, 180
(1967). However, as always when
individuals join together, "[t]he
complete satisfaction of all who are
represented is hardly to be expected."
Id. Nevertheless, each employee is bound
by the union’s decisions because that is
what they bargained for. See id. To help
balance the power bestowed upon the union
to exclusively represent all employees in
employment disputes, "’a concomitant duty
of fair representation [is owed] to each
of its members.’" Garcia v. Zenith Elecs.
Corp., 58 F.3d 1171, 1176 (7th Cir. 1995)
(quoting Cleveland v. Porca Co., 38 F.3d
289, 295 (7th Cir. 1994)); see Marquez v.
Screen Actors Guild, Inc., 525 U.S. 33,
44 (1998).
The type of case filed by the drivers is
referred to as a hybrid suit because it
is comprised of two causes of action that
are "inextricably interdependent." See
DelCostello v. Int’l Bhd. of Teamsters,
462 U.S. 151, 164-65 (1983). To prevail,
"[a]n employee must establish that the
union breached its duty of fair
representation to maintain an actionable
sec. 301 claim against the employer."
Filippo v. Northern Ind. Pub. Serv. Corp.
Inc., 141 F.3d 744, 748 (7th Cir. 1998);
see McKelvin v. E.J. Brach Corp., 124
F.3d 864, 869 (7th Cir. 1997). "A union
breaches its duty to fairly represent its
members where its conduct toward one of
its members is ’arbitrary,
discriminatory, or in bad faith.’" Crider
v. Spectrulite Consortium, Inc., 130 F.3d
1238, 1243 (7th Cir. 1997) (quoting Vaca
v. Sipes, 386 U.S. 171, 190 (1967)); see
Marquez, 525 U.S. at 44. The drivers’
sole argument is that the union acted
arbitrarily in how it conducted the
audit./1 We examine the objective
adequacy of the union’s actions in
determining whether they were arbitrary.
See Trnka v. Local Union No. 688, 30 F.3d
60, 63 (7th Cir. 1994).
"The doctrine of fair representation is
an important check on the arbitrary
exercise of union power, but it is a
purposefully limited check . . . ."
United Steelworkers of Am. v. Rawson, 495
U.S. 362, 374 (1990). "[T]he test for
determining whether particular conduct is
arbitrary can be quite forgiving."
Garcia, 58 F.3d at 1176. "[A] union’s
actions are arbitrary only if, in light
of the factual and legal landscape at the
time of the union’s actions, the union’s
behavior is so far outside a wide range
of reasonableness, ’as to be irrational.’"
Porca, 38 F.3d at 295 (quoting Air Line
Pilots Ass’n, Int’l v. O’Neill, 499 U.S.
65, 67 (1991)); see Marquez, 525 U.S. at
45; Ooley v. Schwitzer Div. Household
Mfg. Inc., 961 F.3d 1293, 1302 (7th Cir.
1992). "This ’wide range of
reasonableness’ gives the union room to
make discretionary decisions and choices,
even if those judgments are ultimately
wrong." Marquez, 525 U.S. at 45-46. A
course of action may be considered
irrational only when it is "without a
rational basis or explanation." Id. at
46. "The union must provide ’some minimal
investigation of employee grievances,’
but the thoroughness of this
investigation depends on the particular
case, and ’only an egregious disregard
for union members’ rights constitutes a
breach of the union’s duty.’" Garcia, 58
F.3d at 1176 (quoting Castelli v. Douglas
Aircraft Co., 752 F.2d 1480, 1483 (9th
Cir. 1985)).
As noted, the CBA sets forth a grievance
procedure to settle disputes over its
interpretation. Generally, courts are
reluctant to usurp the union’s function
of construing a CBA, and therefore we are
"highly deferential" in reviewing a
union’s actions, O’Neill, 499 U.S. at 78,
and will not "’substitute [our] judgment
for that of the union, even if, with the
benefit of hindsight, it appears that the
union could have made a better call,’"
Garcia, 58 F.3d at 1176 (quoting Ooley,
961 F.2d at 1302).
A. McLeod, Sanders, Newman, Lama, and Sturm
McLeod, Sanders, Newman, Lama, and Sturm
contend that the district court erred in
granting AMT’s motion to dismiss their
claim for failure to state one. We review
the district court’s grant of a motion to
dismiss de novo, accepting as true all
well-pleaded facts and drawing all
reasonable inferences in the nonmoving
party’s favor; however, we are not
obliged to accept as true conclusory
statements of law or unsupported
conclusions of fact.
In late 1997, plaintiffs-appellants’
counsel and counsel for the union
exchanged a series of letters. In a
letter dated December 1st, plaintiff’s
counsel, on behalf of McLeod, Sanders,
Sturm, Newman, and Lama, requested that
statements per Article 17, Section 2 of
the CBA be provided to them because they
believed they may have been "underpaid by
various amounts." Counsel asked that the
letter be treated as a formal grievance.
Counsel for the union responded that
since these drivers had not been employed
by AMT for some time, their grievance was
untimely under the five day rule in
Article 15, Section 1(A). Although agree
ing that the five day window had closed,
plaintiffs-appellants’ counsel replied
that since their grievance constituted a
"willful or flagrant violation of the
wage or overtime provisions" under
Article 15, Section 2, the five day rule
was inapplicable. The union disagreed and
held to its decision that the five day
rule applied to this grievance.
The district court concluded that the
union did not act arbitrarily because it
was not wholly irrational for the union
to have classified this grievance as one
covered by the five day rule. The court
reasoned that the generalized nature of
the grievance did not present a complaint
"so egregious that it was irrational for
the union to decide that they were not
’willful or flagrant violations.’" The
district court went on to state that
"[r]egardless of whether the court agrees
with the union’s interpretation, it was
not completely unreasonable for the union
to perceive . . . the absence of income
statements . . . as [a] smaller issue[ ]
of the type that the parties had agreed
to grieve under the CBA." Therefore, the
court dismissed their claim because they
could not sustain that the union had
breached its duty of fair representation.
We agree. It was not arbitrary for the
union to conclude that this grievance
regarding possible discrepancies in
payment and failure to receive monthly
statements was subject to the normal
grievance procedure. It was rational at
the time for the union to conclude that
there was nothing "willful or flagrant"
being charged. The crux of the drivers’
argument is that the wage-skimming scheme
constitutes a "willful or flagrant"
violation. This may well be true, but the
union was not apprised of this
possibility in late 1997 when this
grievance was raised.
This brings us to another of the
drivers’ overarching contentions. They
surmise that it is unfair to expect them
to have presented their wage-skimming
theory to the union when they lodged
their grievances because they could not
have discovered that this scheme was at
work. This point is well taken since
under Article 18, Section 1 of the CBA,
the union is given the power to
investigate these sorts of matters, not
the employees. However, the drivers’
collective cry of unfairness is a bit
distorted. They postulate that the union
ought to have undertaken an audit of AMT
as soon as an allegation of possible
underpayment was raised by the drivers.
However, the separate allegations then
raised by the drivers did not state
clearly their theory as it is presently
described. There is nothing in the
letter-grievance that indicates anything
approaching a "willful or flagrant"
violation (although neither the CBA nor
the union offers a clear definition of
this phrase). And, in light of this, we
cannot say that the union’s understanding
of the matter at the time was irrational.
B. Kwapniewski, Cusker, and Clavey
The drivers argue that the district
court’s grant of AMT’s summary judgment
motion was improper given that the
evidence showed that the union breached
its duty of fair representation.
On January 16, 1998, Kwapniewski,
Cusker, and Clavey filed a detailed
grievance, which raised nine concerns,
the last being phrased as follows:
Article 15, Section 2
In the case of willful or flagrant
violations of the wage or overtime
provisions, the union will not be
required to go through the grievance
procedure[.] Request Company billing
sheets to be shown for all jobs paid the
percentage rate.
Prior to the PLC hearing, the President
of Local 301, Robert Haffner (also the
person who helped write and negotiate the
CBA) spoke with these drivers about their
grievances both on the phone and in
person. On February 9th, they aired their
grievances before the PLC. With regard to
their grievance under Article 15, Section
2, the minutes of the hearing reveal that
Kwapniewski, Cusker, and Clavey
specifically asked to be afforded the
opportunity to examine the billing sheets
from J.W. Peters, one of AMT’s customers,
because they had "only [Trinski’s] word
as to how much the gross revenue of the
truck actually is for the day." At the
close of the hearing, Kwapniewski,
Cusker, Clavey, and Trinski confirmed
that they felt they had received a fair
and impartial hearing. After
deliberation, the PLC concluded that this
particular grievance would be "[r]esolved
with a Union audit."
Soon thereafter, Haffner conducted an
audit of the billing sheets of J.W.
Peters in accordance with the PLC’s
directive. Haffner went to Trinski’s
office and was given a stack of J.W.
Peters’ billing sheets. He chose
approximately ten randomly, reviewed them
and made calculations. After about half
an hour, Haffner concluded that AMT had
paid the drivers in compliance with the
CBA. In his deposition, Haffner recounted
that he may also have examined check
stubs and bills of lading, but did not
request to examine any other documents.
The district court granted summary
judgment against Kwapniewski, Cusker, and
Clavey because given the facts known at
the time, Haffner was only directed to
look at the billing sheets of J.W.
Peters. He followed this dictate and
found nothing extraordinary that would
have led him to believe that further
investigation was warranted. There was no
reason for him to have wandered off in
hopes of unearthing a wage-skimming
scheme.
Yet, the drivers maintain their claim
that the union’s audit was a "sham"
because it did not discover the wage-
skimming scheme and because it should
have hired a certified public accountant
to perform the audit. We entertain high
hopes that if any hint of a wage-skimming
scheme had been presented to the union it
would have fulfilled its obligation to
all of its members by thoroughly
investigating under Article 18, Section
2. But this is not the situation here.
The PLC was presented with a request for
an examination of billing sheets,
specifically those of J.W. Peters. That
was the sole purpose of the audit. The
scope of the audit might not have been as
comprehensive as the drivers now wish,
but the drivers themselves limited its
scope by their request. Based on the
nature of the grievance filed and hearing
held, we agree with the district court
that the audit performed was not
arbitrarily done and did not breach the
union’s duty to fairly represent its
members.
C. Rushing and LaFlamme
Generally, an employee must exhaust the
CBA’s grievance procedures before
pursuing judicial remedies, however, an
employee may be excused from doing so if:
(1) resorting to the grievance procedure
would be futile; (2) the employer through
its conduct repudiated the grievance
procedure itself; or (3) the union
breached its duty of fair representation.
See Hammer v. Int’l Union, United Auto.,
Aerospace, & Agric. Implement Workers of
Am., 178 F.3d 856, 858 (7th Cir. 1999);
Roman v. United States Postal Serv., 821
F.2d 382, 388 (7th Cir. 1987); Bailey v.
Bicknell Minerals, Inc., 819 F.2d 690,
692 (7th Cir. 1987).
The district court granted summary
judgment for AMT against Rushing and
LaFlamme because neither had filed a
grievance as required by the CBA. Rushing
and LaFlamme argued that this decision
was in error because exhaustion of the
grievance procedures would have been
futile given the "perfunctory audit" that
the union conducted on behalf of the
grievance filed by Kwapniewski, Cusker,
and Clavey. The district court rejected
this argument.
The district court concluded that
Rushing and LaFlamme could not have been
dissuaded from grieving based on any
arbitrary action or decision by the union
in handling the Kwapniewski, Cusker, and
Clavey grievance. The court so found
because that grievance had been filed on
January 16, 1998 and not resolved until a
month later, and Rushing had left AMT on
January 15th, and LaFlamme on January
24th; therefore, the PLC hearing and
audit had taken place over a month after
they were gone, and since they had only
five days to file a grievance per the
CBA, their chance to file any grievance
expired five days after they left, well
before the "perfunctory audit" by the
union could have dissuaded them from
following the grievance procedure. The
court noted that Rushing and LaFlamme’s
futility plea was further belied by the
fact that they, along with the other
drivers, filed the complaint in this suit
(and on May 29th filed an amended
complaint) some six days before the PLC
hearing on the Kwapniewski grievance in
which an audit was granted. We agree with
the district court.
In addition, Rushing and LaFlamme assert
a new futility theory before this Court.
They claim that in light of how the union
handled the McLeod grievance, filing
their own would have been futile. While
this argument was waived, we take a
moment to say that it would not have been
futile for Rushing and LaFlamme to file a
timely grievance based upon the handling
of the McLeod grievance because it was
not disposed of by the union on the
merits, rather it was disregarded as
untimely. Furthermore, both the
Kwapniewski and McLeod grievances raised
the issue of possible underpayment, but
neither presented anything approaching
the serious wage-skimming allegation now
raised; therefore, it would not have been
futile for someone to have raised the
issue; it had yet to be squarely raised,
or even hinted at. Lastly, the assertions
of futility by Rushing and LaFlamme are
little more than that--assertions. See
Douglas v. American Info. Technologies,
Corp., 877 F.2d 565, 574 (7th Cir. 1989)
(finding that failure to exhaust
grievance procedure was not excused
because plaintiff’s "mere unsupported
assertion of futility was insufficient to
raise the issue properly"). Summary
judgment was, therefore, proper.
D. Motion to Strike
The drivers contend that the district
court erred in granting AMT’s motion to
strike parts of their brief in response
to AMT’s summary judgment motion and
statement of additional facts. The
stricken parts of the brief and fact
statement pertained to the drivers’ claim
that AMT breached the CBA. AMT argued
that the drivers’ facts and allegations
on this issue were irrelevant to the
summary judgment motion because the only
issue before the court was whether the
union breached its duty; the issue of
whether AMT breached the CBA would arise
only after that portion of the case had
been established by the drivers. The
district court agreed.
"We review the decision to grant or deny
a motion to strike under an abuse of
discretion standard." Whitted v. General
Motors Corp., 58 F.3d 1200, 1203 (7th
Cir. 1995). "Decisions that are
reasonable, i.e., not arbitrary, will not
be questioned under this standard." Id.
The drivers argue that it is illogical
to analyze whether the union breached its
duty without examining the severity of
AMT’s breach of the CBA against which the
union ought to have been representing its
members. The drivers argue that since
they are required to prove both elements
as part of the hybrid claim they should
have been permitted to present both.
Specifically, they say that "only when
the depth of defendant’s malfeasance is
understood, does the breach of the
Teamsters’ duty to fairly represent their
members comes into full focus."
As we have instructed, a claim that an
employer breached a CBA will not succeed
unless the employee can also demonstrate
that the union violated its duty of fair
representation. The drivers had to
establish that the union breached its
duty before the issue of whether AMT
breached the CBA would be entertained.
AMT submitted a motion for summary
judgment arguing that there was no
genuine issue of material fact as to
whether or not the union breached its
duty. As this was the sole issue before
the district court, it was far from an
abuse of discretion for it to strike the
information about any AMT breach of the
CBA as irrelevant to the issue then under
consideration. Since the facts and
allegations that the drivers sought to
add to the mix were not before the union
at the time relevant to this lawsuit, it
would have added nothing to the drivers’
claim except clutter. And, as we have
considered the drivers’ additional facts
and allegations as part of our de novo
review, we are all the more at ease in
holding that the district court properly
exercised its discretion in striking
these items.
CONCLUSION
We Affirm all of the district court’s
rulings. The request for class
certification, denied by the district
court, needs no further consideration.
FOOTNOTES
/1 In their brief, plaintiffs-appellants superfi-
cially assert that the union acted in "bad faith"
(by writing that the "audit was absurdly defi-
cient as to indicate an intentional cover-up,"
that the audit was a "sham," and that the union’s
"aimless and misguided review of AMT’s records
was, at best, a whitewash, and, more likely,
undertaken in bad faith to find nothing"). Since
they have not substantiated this assertion, we
decline to address it.