United Steel Paper v. Trimas Corporation ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-1688
UNITED STEEL, PAPER AND FORESTRY, RUBBER,
MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND
SERVICE WORKERS INTERNATIONAL UNION,
Plaintiff-Appellee,
v.
TRIMAS CORPORATION,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Indiana, Fort Wayne Division.
No. 06 C 32—Theresa L. Springmann, Judge.
____________
ARGUED NOVEMBER 29, 2007—DECIDED JULY 3, 2008
____________
Before CUDAHY, POSNER, and EVANS, Circuit Judges.
CUDAHY, Circuit Judge. The defendant TriMas Corpora-
tion (TriMas) owns a number of heavy manufacturing
plants in the Midwest. In July 2003, it signed a neu-
trality agreement with an organization whose name is a
“mouthful”—the United Steel, Paper and Forestry, Rub-
ber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union (Union). In essence, TriMas
agreed to cooperate with Union efforts to organize its
workforce, at least within certain parameters. The agree-
2 No. 07-1688
ment specified that any disputes regarding the terms of
the agreement would be settled by arbitration.
In 2005, the Union informed TriMas of its intention to
organize the Rieke plant, a TriMas facility in Auburn,
Indiana. The Union believes that the Rieke plant is a
“covered workplace” subject to the provisions of the
agreement requiring neutrality. TriMas, however, re-
fused to accord neutrality to the Union. TriMas claimed
that the plain language of the neutrality agreement was
not controlling because the neutrality agreement had
been modified by an oral side agreement. The modified
agreement applied to only three or four plants, it argued,
and the Rieke plant was not one of them. When the
Union insisted that they submit the dispute to arbitration,
TriMas again refused. It characterized the dispute as one
involving the “scope” of the agreement itself and so
claimed that it had no duty to submit it to arbitration.
The Union then brought this action in federal court to
compel arbitration under the Labor-Management Rela-
tions Act (LMRA). See 29 U.S.C. § 185(a). The parties
filed cross-motions for summary judgement, and the
district court granted the Union’s motion. TriMas now
appeals, claiming that the district court “ignored” the
extrinsic evidence that would have established the exis-
tence of the side agreement. We believe that the district
court was correct in finding that the dispute was
covered by the language of the arbitration clause and in
leaving consideration of the extrinsic evidence to the
arbitrator.
I.
Heartland Industrial Partners (Heartland) is an invest-
ment banking fund that was set up to facilitate invest-
No. 07-1688 3
ments in the heavily unionized “smokestack” industries
of the Midwest. Heartland’s president, David Stockton,
wanted to foster a positive relationship with the Union
and sought an early agreement on neutrality with respect
to organizing matters. Stockman met with Ron Bloom,
the Special Assistant to the President of the Union,
whom Stockman knew from the days when they both
worked as investment bankers. On November 27, 2000,
Heartland signed a neutrality agreement with the Union
(Heartland Agreement), which actually consisted of a
long letter from Stockman to Union President Leo Girard
as well as a framework agreement. Heartland agreed to
remain neutral during union organizing efforts and to
recognize a union if a majority of employees signed
cards authorizing the Union to represent them. The
Heartland Agreement also provided that it would be
binding on business enterprises that Heartland owned,
directed or controlled.1 Heartland also agreed that,
when new companies came under Heartland control,
Heartland would direct them to execute their own neutral-
ity agreements with the Union. For example, when Heart-
land acquired control of a company called Metaldyne
Corporation (Metaldyne), Metaldyne immediately exe-
cuted its own neutrality agreement with the Union.
1
We speak roughly here; the provisions in the Heartland
Agreement are more precise. A “covered business enterprise”
is defined as “any business enterprise in which Heartland,
directly or indirectly: (1) owns more than 50 percent of the
common stock; (ii) controls more than 50 percent of the
voting power, or (iii) has the power, based on contracts, con-
stituent documents or other means, to direct the manage-
ment and policies of the enterprise.”
4 No. 07-1688
In early 2002, the Union launched a campaign to
organize workers at a Metaldyne plant in Hamburg,
Michigan. Although the drive was ultimately successful,
it left a bitter feeling on both sides. The Union claimed
that Metaldyne had not cooperated during its organizing
efforts, while Metaldyne complained that the Union had
not given it proper warning before beginning the cam-
paign. If it had been given proper warning, Metaldyne
claimed, it could have warned the Union that sentiment
at the Hamburg plant was more staunchly anti-union than
at other plants.
In late September 2002, Stockman and Bloom began
discussing ways to avoid a repetition of the Hamburg
debacle. They reached an informal agreement regarding
the “sequencing” of future organizing drives in order
to ensure that the plants targeted for organizing were
amenable to such efforts. A series of meetings and con-
ference calls followed. Stockman sent a memorandum
that outlined the sequencing arrangement to key offi-
cials throughout his company. Stan Johnson, then the
Director of Organizing for the Union, also sent out a
memorandum to his colleagues. On October 31, 2002, the
key players met at the Detroit Airport to finalize these
plans. In preparation for the meeting, Stockman had
composed a memorandum that reflected his under-
standing of the agreements made with Bloom (Airport
Memorandum). The memorandum was distributed to all
the parties at the airport meeting. The union never
signed it, however, and no other written agreement was
executed as a result of the meeting. As we shall see, the
parties dispute the precise nature of the agreement
reached at the Detroit Airport. TriMas claims that the
parties agreed to narrow the application of the Heartland
No. 07-1688 5
Agreement to a short list of plants, while the Union claims
that the parties agreed informally on the order in which
the first plants would be organized.
TriMas Corporation was created as a spin-off from
Metaldyne shortly before the airport meeting, which
TriMas President Grant Beard attended. TriMas is a
subsidiary of Heartland and, on July 11, 2003, more than
eight months after the airport meeting, TriMas and
the Union executed a neutrality agreement. The TriMas
Neutrality Agreement consisted of two complimentary
agreements: the “Framework for a Constructive Bar-
gaining Relationship” (Framework Agreement) and a
side letter agreement (Side Letter). The text of this agree-
ment is similar to the Heartland Agreement. It includes
an arbitration clause that reads, in relevant part, as follows:
“Any alleged violation or dispute involving the terms of
this Framework Agreement may be brought to [arbitra-
tion].” Like the Heartland Agreement, it also contains
an integration clause that forbids oral modifications to
the contract.
But things did not go smoothly. In the summer of 2004,
the parties had a dispute over the applicability of the
TriMas Agreement to a TriMas plant in Frankfort, Indi-
ana. TriMas refused to cooperate with Union efforts to
organize the plant. The parties also disagreed in Septem-
ber 2004 about the Agreement’s applicability to a TriMas
plant in Houston, Texas. The Union filed a grievance
under the dispute resolution provisions of the Agreement
but TriMas refused to go to arbitration. TriMas insisted
that the TriMas Agreement applied only to the three
plants agreed upon at the airport meeting (Goshen, Wood
Dale and Longview) and one plant agreed upon at a later
date (Frankfort). TriMas asserted that it had no duty to
6 No. 07-1688
arbitrate the applicability of the agreement to other plants.
The Frankfort suit was settled on April 7, 2005, al-
though both parties still clung to their own interpreta-
tions of the Neutrality Agreement.
TriMas owned a subsidiary, Rieke Corporation, which
operated a manufacturing facility in Auburn, Indiana. The
Union tried to get assurances from TriMas that it would
remain neutral during the effort at Rieke, but TriMas
officials refused. TriMas also refused to submit the dispute
to arbitration.
On February 1, 2006, the Union filed the present action
under § 301 of the LMRA to compel TriMas to submit to
arbitration. Both parties filed motions for summary judg-
ment on November 14, 2006. On February 22, 2007,
the district court denied TriMas’s motion for summary
judgment and granted the Union’s motion for sum-
mary judgment. This appeal follows.
II.
TriMas appears to concede that the plain language of
the arbitration clause applies to the dispute whether the
Rieke plant is a “covered workplace” under the agree-
ment. Nevertheless, TriMas argues that the plain language
of the clause should not control because the agreement
in which the clause is embedded was modified by an oral
side agreement. This oral side agreement, which was
allegedly reached at the October 21, 2002 meeting at the
Detroit Airport, supposedly narrowed the agreement’s
application to only four plants: Goshen, Wood Dale,
Longview and Frankfort. Thus, TriMas claims that it
should not be required to arbitrate the applicability of
the agreement to the Rieke plant. The district court,
No. 07-1688 7
however, refused to consider any evidence relating to the
alleged side agreement and instead issued an order
compelling arbitration.
We review a district court’s decision to compel arbitra-
tion de novo. See Int’l Broth. of Elec. Workers, Local 21
v. Illinois Bell Tel. Co., 491 F.3d 685, 688 (7th Cir. 2007).
Before we compel arbitration, we first must determine
whether TriMas has agreed to arbitrate this particular
dispute, for a duty to arbitrate can arise only by agree-
ment. See United Steelworkers of America v. Warrior & Gulf,
363 U.S. 574, 582, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960).
Whether a party has agreed to arbitrate a particular dis-
pute is a question for the courts to decide. See AT&T
Techs., Inc. v. Communc’ns Workers of America, 475 U.S. 643,
649, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986).
We must remain mindful, however, of the limited role
we play at this stage. As we have previously explained,
our role in deciding arbitrability is essentially that of a
“gatekeeper.” See Air Line Pilots Ass’n, Int’l v. Midwest
Express Airlines, Inc., 279 F.3d 553, 558 (7th Cir. 2002)
(Ripple, J., concurring in part and dissenting in part). We
are responsible only for the question of arbitrability. We
will not “rule on the potential merits of the underlying
case” unless it is absolutely necessary. AT&T Techs., 475
U.S. at 649, 106 S. Ct. 1415, 89 L. Ed. 2d 648. If the parties
have in fact agreed to arbitrate their dispute, then they
have bargained for the arbitrator’s interpretation of their
contract—not ours. “[P]utting . . . matters in the hands
of specialists rather than judges or jurors is one attraction
of arbitration.” Sphere Drake Ins. Ltd. v. All American Ins.
Co., 256 F.3d 587, 592 (7th Cir. 2001). If we were to weigh
in on the merits of their case, we would be denying
them the benefit of that bargain.
8 No. 07-1688
The question we must answer, then, is narrow. We must
determine whether the Union is making a claim that is, “on
its face,” governed by the TriMas Agreement. United
Steelworkers of America v. American Mfg. Co., 363 U.S. 564,
568, 80 S. Ct. 1343, 4 L. Ed. 2d 1403 (1960). We will com-
pel arbitration “unless it may be said with positive assur-
ance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.” Warrior &
Gulf, 363 U.S. at 582-83, 80 S. Ct. 1347, 4 L. Ed. 2d 1409.
Where the arbitration clause is broad, there is a presump-
tion in favor of arbitrability. AT&T Techs., 475 U.S. at 650,
106 S. Ct. 1415, 89 L. Ed. 2d 648. Any “ambiguities as to the
scope of the arbitration clause are resolved in favor of
arbitration.” Volt Info. Sci., Inc. v. Board of Trs. of Leland
Stanford, Jr. Univ., 489 U.S. 468, 475-76, 109 S. Ct. 1248,
103 L. Ed. 2d 488 (1989).
Although TriMas complains that the district court
“ignored” critical evidence, we think the district court
was correct to do so. The evidence TriMas offered was
irrelevant to the question of arbitrability because it did
not concern the interpretation of the arbitration clause
itself. The scope of the arbitration clause is established
by the text of the arbitration clause itself; because there
is no evidence that the parties modified that clause, the
scope of arbitrability remains the same. One does not
remove issues from arbitration simply by changing
the scope of the underlying agreement. The ultimate
dispute between the parties concerns the applicability
of the neutrality provisions of the TriMas Agreement to
the Rieke plant. Because this dispute is covered by the
plain language of the arbitration clause and by nothing
else, it should be submitted to arbitration.
No. 07-1688 9
A.
We begin with the text of the arbitration clause. See
Illinois Bell, 491 F.3d at 688. We interpret arbitration clauses
according to their plain meaning and, in construing
language, we strive for a commonsense result. See Air Line
Pilots, 279 F.3d at 556. General principles of contract
interpretation inform our analysis but only to the extent
that they comport with the federal policy in favor of
arbitration. See American Mfg. Co., 363 U.S. 564, 80 S. Ct.
1343, 4 L. Ed. 2d 1403; Warrior & Gulf, 363 U.S. at 578, 80
S. Ct. 1347, 4 L. Ed. 2d 1409. We turn, then, to the clause
at issue.
The arbitration clause, which is found in Section G of the
Framework Agreement, provides that “[a]ny alleged
violation or dispute involving the terms of this Framework
Agreement may be brought to [arbitration].” This is a
standard arbitration clause. It applies both to “[a]ny
alleged violation” and to “[any alleged] dispute.” “Any”
alleged violation or dispute, in this case, means “all”
alleged violations and disputes. Further, the alleged
violation or dispute need only “involv[e]” the terms of
the Agreement, and the phrase “terms of the Agreement”
is broad enough to encompass the entire agreement. The
Agreement does not exclude any category of disputes
from the reach of the arbitration clause. The parties
could have provided that “legal issues” or “issues pertain-
ing to the scope of the agreement” were not subject to the
arbitration requirement but they did not. It is thus clear
that we are dealing with an extremely broad arbitration
clause.
It is equally clear that the present dispute is, on its face,
covered by the arbitration clause. See American Mfg. Co.,
363 U.S. at 568, 80 S. Ct. 1343, 4 L. Ed. 2d 1403. The
10 No. 07-1688
Union alleges a “violation” of the TriMas Agreement since
the Union claims that TriMas refused to accord neutrality
to the Union even though it had an obligation to do so. In
essence, the parties ultimately dispute whether the Rieke
plant is covered by the TriMas Agreement. But the TriMas
Agreement itself defines what is or is not a “covered
workplace.” A “covered workplace” is, according to the
agreement, “any workplace which is: (i) controlled by
the Company, as the Company is defined in Section E
herein; and (ii) employs or intends to employ employees
who are eligible to be represented by a labor organization
in any unit(s) appropriate for bargaining.” The Union
claims that the Rieke plant is a “covered workplace” under
the agreement, and thus this dispute is a dispute over
the “terms” of the agreement.2
TriMas argues that a dispute over the scope of the
agreement somehow transcends the meaning of the
“terms” of the agreement—an issue which is arbitrable. But
such an argument is unavailing in this case because the
parties explicitly addressed the intended scope of the
agreement in their contract, the terms of which are arbitra-
ble. Put simply, “scope” is a term of the agreement and,
as such, is subject to arbitration. It makes no difference
that the TriMas Agreement does not list the specific
2
TriMas claims that “no listing of plants covered were [sic]
included in the document, as the parties had already agreed to
the arrangements at the Airport Memorandum.” This ignores
the fact that the parties included a provision concerning
“covered workplaces.” TriMas responds that this language
was “boilerplate” transplanted from the Heartland Neutrality
Agreement. But plain language contained in the agreement
cannot be avoided by characterizing it as “boilerplate.”
No. 07-1688 11
plants that it covers; it provides arbitrable criteria by
which that determination can be made. The Union claims
that the Rieke plant satisfies these criteria, so the arbitra-
tion clause is certainly “susceptible to an interpretation”
that covers the dispute. “Nothing more is required to
establish the arbitrability of the dispute.” Air Line Pilots,
279 F.3d at 555.
B.
There is thus a presumption of arbitrability in this
case. TriMas can rebut this presumption only if it can
produce “the most forceful evidence of a purpose to
exclude the claim from arbitration.” See AT&T Techs., 475
U.S. at 650, 106 S. Ct. 1415, 89 L. Ed. 2d 648. Of course,
TriMas believes it has such evidence. Specifically, it
points to deposition testimony from Stockman and Beard
stating that the scope of the agreement was narrowed at
the airport meeting. It offers copies of memoranda dis-
tributed before and after the airport meeting by both
Stockman and Bloom, which it claims suggest that the
agreement was modified; it is also prepared to offer
expert testimony from John Toner to the effect that oral
side agreements are common in labor contracts. The dis-
trict court, however, refused to consider the evidence
that TriMas pressed upon it. It reasoned that “[e]ven if
the parties modified their original Neutrality Agreement
with an oral side agreement, . . . there is no evidence that
they took steps to narrow the reach of the arbitration
clause.” We agree with the district court’s analysis.
The evidence offered by TriMas is inadequate as a mat-
ter of law because it does not purport to show that the
arbitration clause itself means something other than
12 No. 07-1688
what it appears to mean on its face. See Air Line Pilots, 279
F.3d at 556. As a matter of federal law, arbitration clauses
are “ ‘separable’ from the contracts in which they are
embedded,” at least when there is no indication that the
parties have intended otherwise. Prima Paint Corp. v. Flood
& Conklin Mfg. Co., 388 U.S. 395, 402, 87 S. Ct. 1801, 18 L.
Ed. 2d 1270 (1967). Thus, to avoid arbitration, TriMas
needed to show that the alleged modification was “directed
to the arbitration clause itself.” Id. at 402, 87 S. Ct. 1801.
This distinction may seem “puzzling” but it simply reflects
the limited role we play in deciding questions of
arbitrability. Matterhorn, Inc. v. NCR Corp., 763 F.2d 866,
868-69 (7th Cir. 1985). If the rule were otherwise, it
would be relatively easy to manufacture a dispute over
arbitability by raising extrinsic attacks on the contract in
which the arbitration clause is embedded. We would
then be required to interpret the substantive provisions
of the agreement and become entangled in the merits of
the dispute—a result we try to avoid. See AT&T Techs.,
475 U.S. at 649, 106 S. Ct. 1415, 89 L. Ed. 2d 648.
Application of the “separability” rule is dispositive in
this case. TriMas has presented no evidence that the
parties agreed at the airport meeting to limit the scope of
the arbitration clause itself. The evidence does not sug-
gest, for example, that disputes over whether a particular
plant was a “covered workplace” would no longer be
subject to arbitration. Indeed, the evidence does not
suggest that arbitration was ever discussed at that
meeting. The evidence offered by TriMas is therefore
irrelevant to the question of arbitrability, although it may
turn out to be relevant to the question of scope itself. We
leave that to the arbitrator.
Things would be different if TriMas denied the very
existence of the contract containing the arbitration clause.
No. 07-1688 13
For “a party who contests the making of a contract con-
taining an arbitration provision cannot be compelled to
arbitrate the threshold issue of the existence of an agree-
ment to arbitrate.” Three Valleys Mun. Water Dist. v E.F.
Hutton & Co., 925 F.2d 1136, 1140-41 (9th Cir. 1991). TriMas,
however, does not dispute that it is a party to this agree-
ment and that it is bound by it. Once the existence of the
agreement to arbitrate is established, questions about the
enforceability of the underlying contract are left to the
arbitrator, even when a party attempts to rescind or
avoid the contract in which the arbitration clause is em-
bedded. See Three Valleys, 925 F.2d at 1140. This is certainly
true when a side agreement is alleged to preclude the
enforcement of the contract at issue. See American Mfg.,
363 U.S. at 564, 80 S. Ct. 1343, 4 L. Ed. 2d 1403; Air Line
Pilots, 279 F.3d at 556-57. In American Mfg., one of the
seminal cases in this area of the law, the employer
claimed that a dispute that, on its face, was covered by
a collective bargaining agreement had been removed
from the agreement’s scope by a separate settlement
agreement. The Court held, however, that the effect of
the side agreement on the collective bargaining agree-
ment was for the arbitrator to decide. See American Mfg.,
363 U.S. at 564, 80 S. Ct. 1343, 4 L. Ed. 2d 1403. We have
reached similar results. See, e.g., Air Line Pilots, 279 F.3d at
556-57. As the Fourth Circuit has succinctly explained,
“[e]ven if we assume that the parties did attempt to
settle [an] issue, otherwise arbitrable, by agreement, any
disagreement as to the existence or effect of that settle-
ment agreement would itself be a matter for the arbitrator
to decide.” Norfolk & Western Rwy. Co. v. Employees Protec-
tive Ass’n, 571 F.2d 185, 193 (4th Cir. 1977); accord Sphere
Drake, 256 F.3d at 592 (“Whether an extrinsic ambiguity is
so vital as to preclude enforcement is exactly the sort of
14 No. 07-1688
question that an arbitrator is supposed to handle”). Be-
cause TriMas does not dispute the existence of the TriMas
Agreement, questions about its scope are properly left
to the arbitrator.
In sum, this dispute is essentially over whether the Rieke
plant is a “covered workplace” under the TriMas Agree-
ment. This dispute is arbitrable under the plain language
of the arbitration clause. TriMas has presented no evid-
ence that the scope of the arbitration clause was itself
narrowed to exclude disputes over the meaning of the
term “covered workplace.” The presumption of arbitrabil-
ity has not been rebutted, and the district court was
correct to send this case to arbitration.3
III.
For the reasons discussed above, the decision of the
district court to compel arbitration is affirmed. TriMas
shall bear the costs of this appeal.
3
TriMas also argues that the agreement made at the airport
meeting was a novation of the Heartland Agreement. This is a
rather strange argument because the airport meeting actually
preceded the formation of the TriMas Agreement, which is the
contract at issue in this case. In any case, we express no opin-
ion on this issue for the reasons explained above. Whether the
TriMas Agreement survived a subsequent agreement is a
question for the arbitrator to decide. See Sphere Drake, 256
F.3d at 592; Norfolk & Western, 571 F.2d at 193.
USCA-02-C-0072—7-3-08