Silgan Containers Corp. v. Sheet Metal Workers International Ass'n, Local Union No. 2 , 820 F.3d 366 ( 2016 )

United States Court of Appeals
For the Eighth Circuit
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No. 15-1956
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Silgan Containers Corporation
lllllllllllllllllllll Plaintiff - Appellee
v.
Sheet Metal Workers International Association, Local Union No. 2
lllllllllllllllllllll Defendant - Appellant
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Appeal from United States District Court
for the Western District of Missouri - Kansas City
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Submitted: January 13, 2016
Filed: April 15, 2016
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Before MURPHY, SMITH, and BENTON, Circuit Judges.
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BENTON, Circuit Judge.
Silgan Metal Containers Manufacturing Corporation sued Sheet Metal Workers
Local No. 2, challenging an arbitration award. The district court granted summary
judgment to Silgan. The Union appealed. Having jurisdiction under 28 U.S.C.
§ 1291, this court affirms in part, reverses in part, and remands.
I.
In 2012, Silgan and the Union began negotiating changes to the collective-
bargaining agreement. Article 36 of the agreement outlines a pension-contribution
program. In the previous agreement, Article 36 required Silgan to pay $1.98 to an
employee’s pension account for each hour worked, up to 2,000 hours. During
negotiations, Silgan and the Union discussed converting the pension program into a
company-wide 401(k) and increasing Silgan’s contribution to $2.00 per hour. They
did not discuss the 2000-hour cap.
On May 2, 2012, the Union proposed significant revisions to Article 36,
omitting the 2000-hour cap. Later that day, Silgan returned the proposal, with some
changes, but still without the cap. After receiving Silgan’s draft, the Union negotiator
asked Silgan’s negotiator to explain how Article 36 would work. Silgan’s negotiator
said, it would “work like it had always worked in the past.” The Union’s negotiators
then decided “to not mention” the removal of the 2000-hour cap. On May 23, Silgan
sent its final and best offer, without the 2000-hour cap. The Union sent this version
to its members for ratification, after which Silgan and the Union proofread the draft.
On June 13, Silgan’s negotiator requested several edits, again without mentioning the
cap. In the final agreement, Silgan contributes $2.00 per hour worked.
The Union pursued a grievance to arbitration, seeking to enforce Article 36 as
written—without a 2000-hour cap. Silgan argued that it did not agree to contribute
for hours worked above 2,000 per year, alleging theories of fraud-in-the-inducement,
unilateral mistake, and mutual mistake. It also challenged the arbitrator’s authority
to hear the dispute. Siding with the Union, the arbitrator directed Silgan to make
pension contributions for each hour worked. Silgan sued to vacate the award and for
a declaratory judgment that the elimination of the 2000-hour cap was the result of
mistake. The Union sought to enforce the arbitration award. Both parties filed for
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summary judgment. The district court granted Silgan’s motion, vacating the award
and rescinding Article 36 because of Silgan’s unilateral mistake.
This court reviews de novo the grant of summary judgment. Torgerson v. City
of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). Summary judgment is
appropriate if there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law. Id.
II.
The Union maintains that the arbitrator had authority under the agreement to
decide Silgan’s claims of mistake. Disagreeing, the district court vacated the
arbitration award. “Unless the parties clearly and unmistakably provide otherwise,
the question of whether the parties agreed to arbitrate is to be decided by the court,
not the arbitrator.” AT&T Techs., Inc. v. Commc’ns Workers, 475 U.S. 643, 649
(1986). A court may order arbitration “only where the court is satisfied that the
parties agreed to arbitrate that dispute.” Granite Rock Co. v. Int’l Brotherhood of
Teamsters, 561 U.S. 287, 297 (2010).
Arbitration is “a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.” AT&T Techs., Inc.,
475 U.S. at 648. See also Sheet Metal Workers Local No. 2 v. Silgan Containers
Mfg. Corp., 690 F.3d 963, 966 (8th Cir. 2012) (“With the exception of ‘matters that
the parties specifically exclude, all of the questions on which the parties disagree
. . . come within the scope of the grievance and arbitration provisions of the collective
agreement.’” (quoting United Steelworkers v. Warrior & Gulf Navigation Co., 363
U.S. 574, 581 (1960))). The agreement grants the arbitrator only limited authority:
Section 32.4 The authority of the arbitrator shall be limited
to the interpretation of this Agreement and to the
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arbitration of grievances and disputes which may arise as
to the meaning and interpretation of this Agreement. The
arbitrator shall, in each case, be bound by the provisions of
this Agreement and shall not have the authority to change,
amend, or modify the provisions of this Agreement.
The arbitrator’s power is thus confined to “the narrow function of interpreting,
construing, and applying whatever provisions of the agreement are conceded by both
parties to be valid. . . .” International Union of Operating Eng’rs, No. 139 v. Carl
A. Morse, Inc., 529 F.2d 574, 579 (7th Cir. 1976) (rejecting the application of this
narrow interpretation to a more broadly-worded agreement—requiring arbitration of
“[a]ll grievances, disputes or complaints of violations of any provisions” of the
agreement). This accords with the general rule that “where the dispute at issue
concerns contract formation, the dispute is generally for courts to decide.” Granite
Rock Co., 561 U.S. at 296.
Silgan challenged the formation of the contract, arguing that Article 36 is
invalid. This question of validity and formation is not within the scope of the
arbitration agreement. Because the arbitrator lacked authority to decide this issue, the
district court did not err in vacating the award.
III.
The Union argues that the district court erred in applying Missouri law and
rescinding Article 36. Federal law applies to suits under § 301 of the Labor
Management Relations Act. Textile Workers Union v. Lincoln Mills, 353 U.S. 448,
456 (1957). This court looks to Missouri law if “compatible with the purposes of the
LMRA.” T.E.A.M. Scaffolding Sys., Inc. v. United Brotherhood of Carpenters &
Joiners, 29 Fed. Appx. 414, 416 (8th Cir. 2002), citing Id at 456-57.
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Freedom of contract is the “fundamental principle” of federal labor law. See
H.K. Porter Co. v. NLRB, 397 U.S. 99, 107 (1970). See also Laborers Dist. Council
of Minn. & N.D. v. NLRB, 688 F.3d 374, 379 (8th Cir. 2012). This means
sophisticated parties have the right “to make a bad bargain, or to relinquish
fundamental rights.” Purcell Tire & Rubber Co. v. Executive Beechcraft, Inc., 59
S.W.3d 505, 508 (Mo. banc 2001). “The character and quality of negotiations do not
vary the terms of a written contract between sophisticated businesses.” Utility
Service & Maintenance, Inc. v. Noranda Aluminum, Inc., 163 S.W.3d 910, 914
(Mo. banc 2005). Missouri courts “have afforded little sympathy to a party who did
not understand the consequences of an act.” Parks v. MBNA Am. Bank, 204 S.W.3d
305, 314 (Mo. App. 2006) (internal quotations omitted).
Silgan argues for rescission based on unilateral mistake. In Missouri,
“rescission on the basis of unilateral mistake . . . is warranted only in exceptional
circumstances.” Nitro Distributing, Inc. v. Dunn, 194 S.W.3d 339, 349 (Mo. banc
2006). A contract may be rescinded if “(1) it would be unconscionable to enforce the
contract, or (2) the other party had reason to know of the mistake.” Parks, 204
S.W.3d at 314 (internal quotations omitted). Silgan does not assert unconscionability.
Rather, it maintains that the Union had reason to know it was mistaken about the
2000-hour cap. According to Silgan, the Union negotiators decided “to not mention”
the removal of the 2000-hour cap after hearing Silgan’s negotiator say the revised
Article 36 would work “like it had always worked in the past.”
However, Silgan’s mistake cannot result “from the want of such care and
diligence as are exercised by persons of reasonable prudence under the same
circumstances.” State ex rel. State Highway Comm’n v. DeMarco, 422 S.W.2d 644,
648 (Mo. 1968). Silgan is a sophisticated party. It knew these were arm’s length
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negotiations.1 Yet, it never complained about the removal of the 2000-hour cap,
despite numerous opportunities to do so. Its own counter-proposal (May 2) did not
include the 2000-hour cap, its final and best offer (May 23) did not include the 2000-
hour cap, and its proofreading edits (June 13) did not mention the 2000-hour cap.
The Union did nothing to prevent Silgan from reading the contract. Cf. State ex rel.
PaineWebber, Inc. v. Voorhees, 891 S.W.2d 126, 130 (Mo. banc 1995) (“Where a
competent contracting party has a reasonable opportunity to know about the contract
by reading it, statements by the other party (that do not prevent reading) are not
usually a basis to void assent to the whole contract.”). At worst, the Union remained
silent about the 2000-hour cap. But, Silgan has provided “no authority for the notion
that [the Union] was under any duty or obligation to assure [Silgan] had knowledge”
of the content of the agreement. Parks, 204 S.W.3d at 314. “Where the mistake has
resulted solely from the negligence or inattention of the party seeking relief, and the
other party is without fault, relief should not be granted. . . .” Id.
The district court erred in granting summary judgment to Silgan and rescinding
Article 36.
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The judgment is affirmed in part, reversed in part, and remanded for
proceedings consistent with this opinion.
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1
Indeed, while negotiating this CBA, Silgan was litigating about a prior CBA
with this very Union in federal court. Sheet Metal Workers Local No. 2, 690 F.3d at
963.
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