Stevens Construction Corp. v. Chicago Regional Council of Carpenters , 464 F.3d 682 ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-4468
STEVENS CONSTRUCTION CORP.,
Plaintiff/Counter-Defendant-Appellee,
v.
CHICAGO REGIONAL COUNCIL OF CARPENTERS,
UNITED BROTHERHOOD OF CARPENTERS
& JOINERS OF AMERICA,
Defendant/Counter-Plaintiff-Appellant.
____________
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 04-C-1144—Thomas J. Curran, Judge.
____________
ARGUED MAY 30, 2006—DECIDED SEPTEMBER 19, 2006
____________
Before POSNER, KANNE, and WOOD, Circuit Judges.
WOOD, Circuit Judge. Stevens Construction Corpora-
tion was, for a number of years, a member of the Associated
General Contractors of Greater Milwaukee, Inc., (AGC), one
of several employers’ associations that bargain collectively
with the Chicago Regional Council of Carpenters. In 2003,
prior to the expiration of a 1999-2004 agreement between
the AGC and the Carpenters (the “1999 CBA”), Stevens
withdrew from the AGC. The AGC subsequently negotiated
2 No. 05-4468
a new agreement with the Carpenters for the years 2004-
2008 (the “2004 CBA”). The union requested that Stevens
give its assent to be covered by this new agreement, but the
company refused.
After the new agreement went into effect, the Carpenters
filed a grievance against Stevens, alleging that it was
violating the 2004 CBA with regard to certain carpentry
work done by its employees. In response, Stevens filed
suit in federal court, seeking a declaratory judgment that it
was not covered by the 2004 agreement and an injunction
prohibiting the union from pursuing its grievance in
arbitration. After a bench trial, the district court granted
judgment for Stevens, concluding that since the company
had properly terminated the 1999 CBA, it was not bound by
the 2004 agreement. In this appeal, the Carpenters contend
that the district court erred by deciding the termination
question instead of requiring Stevens to arbitrate the issue.
Finding no error in the district court’s judgment, we affirm.
I
In January 1999, Stevens gave written authority to the
AGC to negotiate a collective bargaining agreement on its
behalf with the Carpenters. The resulting agreement, the
1999 CBA, covered commercial carpentry work in Milwau-
kee, Waukesha, Washington, and Ozaukee counties in
southeastern Wisconsin. In March 2003, while the 1999
CBA still remained in force, Stevens canceled its AGC
membership. Stevens did not, however, notify the Carpen-
ters of its withdrawal from the AGC at this time.
On February 10, 2004, the AGC provided notice to the
Carpenters of its intention to negotiate a new collective
bargaining agreement. (The 1999 CBA required a party who
wished to terminate the agreement to give notice to the
other side before February 28, 2004.) On March 4, 2004, the
Allied Construction Employers Association (ACEA), another
No. 05-4468 3
signatory to the agreement, sent a letter to the union listing
the companies for whom the ACEA and the AGC held
bargaining authorization. The letter also noted that the
associations no longer held bargaining authority for some
companies who had given authorization during the 1999 to
2004 contract period and specifically listed those companies,
including Stevens.
On June 1, 2004, the Carpenters and the employer
associations reached a new agreement. The geographic
scope of the agreement was expanded to cover Racine and
Kenosha counties. On June 7, 2004, the Carpenters sent
Stevens a letter requesting that it agree to be bound by
the new 2004 CBA. The company declined to do so.
In October 2004, the Carpenters filed a grievance against
Stevens, claiming that work it was doing in Caledonia,
Wisconsin (which is in Racine County), violated the 2004
CBA. In response to the grievance, Stevens filed this suit,
seeking a declaration that “it is not bound by the 2004 CBA,
had no obligation to arbitrate the Grievance or to partici-
pate in any grievance-arbitration matters arising under or
relating to the 2004 CBA,” and a permanent injunction
prohibiting the Carpenters from arbitrating the grievance.
The Carpenters filed two counterclaims, seeking either to
compel Stevens to arbitrate the termination of the 1999
agreement or, in the alternative, a declaratory judgment
that Stevens was bound by the 2004 CBA based on its
failure to terminate the 1999 agreement. The district court
ruled for Stevens, and this appeal followed.
II
The Carpenters’ sole contention before this court is that
the district court erred by reaching and deciding the
termination issue rather than requiring Stevens to submit
this question to arbitration. The union does not contest
4 No. 05-4468
the district court’s resolution of the termination issue on
the merits.
Section 301(a) of the Labor Management Relations Act of
1947, provides federal jurisdiction over “[s]uits for violation
of contracts between an employer and a labor organization
representing employees in an industry affecting commerce
. . . without respect to the amount in controversy or without
regard to the citizenship of the parties.” 29 U.S.C. § 185(a).
As a general matter, § 301(a) applies only to “suits that
claim a contract has been violated,” not to “suits that claim
a contract is invalid.” Textron Lycoming Reciprocating
Engine Div., Avco Corp. v. United Automobile, Aerospace,
Agricultural Implement Workers of America, Int’l. Union,
523 U.S. 653, 657-58 (1998). There is an exception to this
general rule, however, for situations in which, “in the
course of deciding whether a plaintiff is entitled to relief for
the defendant’s alleged violation of a contract, the defen-
dant interposes the affirmative defense that the contract
was invalid.” Id. at 658. In such cases, “a declaratory
judgment plaintiff accused of violating a collective-bargain-
ing agreement may ask a court to declare the agreement
invalid.” Id.
The theory behind the Carpenters’ grievance was that, by
operation of the 1999 CBA’s rollover provisions, Stevens’s
failure to terminate the 1999 agreement resulted in the
company’s automatically being bound by the 2004 CBA. The
provisions of the 1999 CBA on which the Carpenters rely
stated:
Section 25.1. This Agreement shall be binding upon the
parties, their successors and assigns, and shall continue
in full force and effect until May 31, 2004 provided,
however, that written notice of the proposed termina-
tion or modification of the contract, by the party desir-
ing to terminate or modify the contract, shall be served
upon the other party, on or before February 28th prior
to the expiration date. . . .
No. 05-4468 5
Section 25.2. Upon failure to meet with the other
party for the purpose of collective bargaining upon
service of the written notice referred to in Section 25.1,
the party so failing to meet is to be deemed to have
conceded the changes desired by the party present with
respect to wage rates and conditions of employment for
the new contract year.
The 1999 agreement also contained a dispute settlement
provision stating that “in case of any disagreements
between [the] parties over terms of this Agreement, the
same shall be submitted to a Board of Arbitration.” Based
on this provision, the Carpenters argue that any dispute
over whether or how the 1999 CBA’s rollover provisions
apply to Stevens must be settled in arbitration rather
than in court.
Although we reiterate that the Carpenters do not chal-
lenge the merits of the district court’s resolution of
the termination issue, we note that we are somewhat
mystified by the argument underlying the union’s position.
Even if the Carpenters were to prevail before an arbitrator
on the factual question whether Stevens properly termi-
nated the 1999 CBA, the only remedy the 1999 agreement
appears to provide would be to bind Stevens to any contrac-
tual changes in “wage rates and conditions of employment.”
There is no suggestion that Stevens’s failure to terminate
would bind it to all the provisions of a new contract. Since
the work that is the subject of the Carpenters’ grievance is
in Racine County, a location not covered by the 1999 CBA,
it is unclear what relief an arbitrator could give the union.
On the assumption that there is some nuance we are
missing, however, we return to the subject at hand. The
district court disagreed with the Carpenters on both the
question of the court’s authority to decide the termination
question and the merits of that issue. As to its authority,
the court explained that since “[b]oth sides agree that
6 No. 05-4468
arbitration [of the union’s grievance] is a matter of con-
tract,” the court was thus required “to determine whether
or not there was a valid contract.” The resolution of this
question, of course, turned on whether Stevens was bound
to the 2004 CBA by the rollover provisions of the 1999 CBA.
Addressing the merits of this issue, the court concluded that
there was no valid 2004 contract between the Carpenters
and Stevens, because the Carpenters “became aware that
[Stevens] would not be bound by whatever negotiations led
to a new CBA” before the negotiations for the new agree-
ment started. In reaching this conclusion, the court empha-
sized Stevens’s cancellation of its AGC membership, the
ACEA’s March 4, 2004, notice to the Carpenters stating
that the AGC did not hold bargaining authority for Stevens,
and the Carpenters’ own June 7, 2004, letter requesting
that Stevens assent to the 2004 CBA. The court took the
June 7 letter as “an indication that the carpenters did not
consider that they had a binding contract with the plain-
tiff.”
In contesting the district court’s authority to decide the
termination issue on appeal, the Carpenters rely heavily on
the Supreme Court’s decision in AT&T Techs., Inc. v.
Commc’ns Workers of Am., 475 U.S. 643 (1986). There the
Court said that “in deciding whether the parties have
agreed to submit a particular grievance to arbitration, a
court is not to rule on the potential merits of the underlying
claims,” and that, more generally, “where the contract
contains an arbitration clause, there is a presumption of
arbitrability.” Id. at 649-50. Based on these and similar
statements by the Supreme Court in a series of cases known
as the Steelworkers Trilogy, see id. at 648, the union
contends that “the district court in this case committed
reversible error when it encroached on the jurisdiction of
the Board of Arbitration by deciding the issue of whether
Stevens terminated the 1999 CBA according to its terms.”
No. 05-4468 7
One difficulty with the Carpenters’ argument is that the
“underlying claim” in the union’s grievance against Stevens
was not that the company failed to terminate the 1999 CBA,
but that the company was not complying with the substance
of the 2004 agreement. This is clear when one looks at the
actual grievance notice, which said that “[i]t is the Union’s
position that Stevens Construction Corporation is in
violation of the entire 2004-2008 Commercial Carpenters &
Floor Coverers Agreement, to which you are bound.”
Although the Carpenters’ counterclaims sought to compel
Stevens to arbitrate the termination issue under the 1999
CBA, there is no mention in the record of any grievance
based on the 1999 CBA that Stevens could have been
ordered to arbitrate. For the same reason, the Carpenters’
attempt to recharacterize their claim as a “post-expiration
grievance”—that is, a “dispute [that], although governed by
the contract, arises after its termination,” Nolde Bros., Inc.
v. Local No. 358, Bakery & Confectionery Workers Union,
AFL-CIO, 430 U.S. 243, 244 (1977)—is unavailing. A post-
expiration grievance must be a grievance based on an
agreement that has expired; the Carpenters filed no such
grievance here.
It is of course true that the district court had to interpret
the termination provisions of the 1999 CBA in order to
decide whether the Carpenters’ grievance was arbitrable
under the 2004 agreement, and that this necessity created
some tension with the presumption of arbitrability. But the
rule that a court should not rule on the merits of a claim
when deciding a question of arbitrability is not as absolute
as the union would have us believe. As the Supreme Court
explained in Litton Fin. Printing Div. v. NLRB, 501 U.S.
190 (1991),“[a]lthough doubts should be resolved in favor of
coverage [by a contract’s arbitration provisions], we must
determine whether the parties agreed to arbitrate this
dispute, and we cannot avoid that duty because it requires
us to interpret a provision of a bargaining agreement.” Id.
8 No. 05-4468
at 209 (quotation and citation omitted). We have inter-
preted this statement to mean “that the rule that courts
must decide arbitrators’ jurisdiction takes precedence over
the rule that courts are not to decide the merits of the
underlying dispute.” Indep. Lift Truck Builders Union v.
Hyster Co., 2 F.3d 233, 236 (7th Cir. 1993) (“If the court
must, to decide the arbitrability issue, rule on the merits, so
be it.”). In a case like this one, where “[the] court’s decision
on arbitrability collapses into the same inquiry as [the]
decision on the merits,” BCS Ins. Co. v. Wellmark, Inc., 410
F.3d 349, 352 (7th Cir. 2005) (quotation marks omitted), a
court may need to touch on the merits of an issue that
ordinarily would be decided in arbitration.
In sum, the Carpenters’ grievance raised the issue of the
arbitrability of the 2004 CBA. Therefore, despite the law’s
general presumption of arbitrability, the district court did
not err by deciding the question whether Stevens had
terminated the 1999 CBA, where this was necessary in
order to resolve the question of the arbitrability of the
grievance under the 2004 agreement.
III
The district court’s judgment is AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—9-19-06