Butchers' Union Local 229 v. Cudahy Packing Co. , 66 Cal. 2d 925 ( 1967 )

McCOMB, J.

I dissent. I would affirm the order denying the petition to compel arbitration for the reasons expressed by Mr. Justice Coughlin in the opinion prepared by him for the Court of Appeal, Fourth Appellate District, Division One, which is quoted in full below:

Appellant, a trades union, and respondent, a meat packing company, entered into a Collective Bargaining Agreement dated May 28, 1960, containing provisions respecting pension benefits for the employees represented by the Union; and also containing a provision for arbitration of any “disagreement arising within the terms of” the Agreement. Previously, viz, on December 3, 1926, the Company had executed a Trust Agreement providing a pension fund for its emnlovees, and on January 1, 1927, had caused the adoption of Rules and Regulations for the administration of this fund by a Pension Board consisting of the trustees acting under the trust agreement. The pension plan applied to all employees of the company. The Collective Bargaining Agreement was made on behalf of members of the Union, and excluded “Drivers, Timekeepers, Watchmen, Engineers,” and “Foremen, not to exceed sixteen (16)” employed by the Company. The provisions respecting pensions declared among other things: “The Company agrees that during the life of this Agreement pension benefits set up under the pension plan of the Company now in effect and as hereby amended will not be reduced, and eligibility requirements stated in the pension plan, as hereby amended, will not be changed, except as indicated in Appendix I of this Agreement. ’ ’

Appendix I, so far as pertinent to the case at hand, declared: “The following is a description of the changes to be made, ... in the Rules and Regulations governing the Employees’ Pension Fund of the Cudahy Packing Company, as last amended, effective January 1, 1957, . . . in-so-far as said Rules and Regulations apply to employees who are within the Bargaining Unit covered by the Agreement, of which this Appendix I forms a part. Except as provided herein, all provisions of said Rules and Regulations as amended January 1, 1957, shall remain in effect. The foregoing, however, shall not be construed as precluding the Company from amending said Rules and Regulations to extend the following changes to other groups of employees of the Company.

C (

“7. Vested Pensions

“An employee who is covered by the Agreement and whose employment is terminated with the Company under circumstances which entitle him to separation pay at the time when he has

“(A) attained age 55, and

“(B) completed 25 or more years of credited service

“will be entitled to a pension upon his attaining age 65. . . . ’’ Under Section 7 the employee is given the privilege of electing to accept a pension in lieu of separation pay, providing he exercises such election in writing within 18 months after termination of his employment.

Following execution of the Collective Bargaining Agreement the Rules and Regulations governing the Company’s retirement program were amended, effective as of January 1, 1960, to comply with the provisions of Appendix I of that Agreement. The Rules and Regulations in effect at the time the Agreement was executed provided, among other things, that: “The decision of the Pension Board upon any question of fact, interpretation, definition or administration under the plan shall be conclusive and, without limiting the generality of the foregoing, the Pension Board is specifically empowered to determine at its discretion -what constitutes continuous service and substantially full time employment hereunder. . . .’’ This provision was retained in the amended Rules and Regulations.

In 1961, as an incident to closing its San Diego plant, the Company terminated the employment of a member of the Union named Saunders, who had been in its employ in excess of 25 years, and who within six working days from termination of his employment would have attained age 55. Thereafter, by a letter directed to the Pension Board, dated October 24, 1961, the Union requested and demanded a pension be paid to Saunders in accord with Section 7 of Appendix I; set forth the facts heretofore noted; and stated that should the Pension Board not agree with the claim asserted on behalf of Mr. Saunders, it was the desire of the Union the matter be taken through the grievance procedure set out in the Collective Bargaining Agreement, “and if necessary, ultimately to arbitration.” The grievance procedure referred to was that set forth in Section 19 of the Collective Bargaining Agreement which provides, in the event of “a disagreement arising within the terms of this Agreement, the question in dispute” shall be considered by the parties in a designated manner and if no agreement is reached, they “shall submit the matter to an Arbitrator” whose decision “shall be final and binding on the parties hereto.” Section 19 also provides: “This procedure shall apply to all disputes, including those arising in relation to suspension or discharge of employees, provided, however, that with the exception of matters relating to suspension or discharge of employees, other prerogatives vested in Management by Section 13 shall not be affected by this clause.” The Pension Board rejected Saunders’ claim upon the ground he was not age 55 at the time of termination of his employment. Thereupon the Union directed a demand to the Company asserting the existence of a disagreement respecting their contention that Saunders was entitled to a pension under Section 7 of Appendix I, and for arbitration under Section 19 of the Collective Bargaining Agreement in the event the Company disagreed with its contention. The Company replied that the matter in question was not subject to arbitration under Section 19, and also that Saunders was not entitled to a pension under the Rules and Regulations governing the administration of the Pension Fund. In due course the Union petitioned the trial court for an order directing arbitration ; its petition was denied; and it appealed.

The primary issue on appeal is whether the dispute described in the petition to compel arbitration is subject to arbitration under Section 19 of the Collective Bargaining Agreement.

The Company, as found by the court, was engaged in interstate commerce. As a consequence, federal rules control. (Posner v. Grunwald-Marx, Inc., 56 Cal.2d 169, 175 [14 Cal.Rptr. 297, 363 P.2d 313].)

In Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241 [8 L.Ed.2d 462, 465, 82 S.Ct. 1318, 1320], the court said: "Under our decisions, whether or not the company was bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered into by the parties.” (In accord: John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546-547 [11 L.Ed.2d 898, 902-903, 84 S.Ct. 909, 912-913]; United, Steelworkers of America v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 [4 L.Ed.2d 1409, 1417, 80 S.Ct. 1347, 1353].)

A resolution of the issue at hand does not involve any question about the applicable principles of law, which are settled, but is limited to an interpretation of the agreement in light of those principles. In determining the scope of an arbitration provision the court will consider the agreement containing such as a whole. (McCarroll v. Los Angeles County etc. Carpenters, 49 Cal.2d 45, 67 [315 P.2d 322] ; Smith v. Superior Court, 202 Cal.App.2d 128, 133 [20 Cal.Rptr. 512].)

The Union’s petition to compel arbitration under Section 19 is directed to a dispute which it claims involves an interpretation of Section 7 of Appendix I of the Collective Bargaining Agreement and Saunders’ claim to pension rights conferred through that agreement. These pension rights are premised upon the continued existence of the Company’s pension program and its administration under the Rules and Regulations approved by the Collective Bargaining Agreement. The Union’s demand and the ensuing dispute concern a pension under this pension program payable from the existing pension fund. The provisions of Appendix I prescribe changes to be made in the Rules and Regulations governing ‘‘The Employees’ Pension Fund of the Cudahy Packing Company, ’ ’ one of which was that set forth in Section 7; establish that the pension benefits to which the Collective Bargaining Agreement is directed are those provided by the Company’s pension program; adopt the Rules and Regulations as part of the pension benefit provisions of the Agreement; and provide that, except as stated, ‘‘all provisions of said Rules and Regulations, . . . shall remain in effect.” The Company has complied with Appendix I by effecting the changes therein prescribed. Among the Rules and Regulations remaining in effect and adopted by the Agreement was that which provides for a determination by the Pension Board of all disputes respecting pension eligibility. In substance, the Board is made the arbiter of all disputes involving pension matters. Thus, the Collective Bargaining Agreement, when considered as a whole, contains an arbitration provision governing general disagreements arising within its terms and another analogous provision governing specific disagreements respecting pension eligibility. Under settled principles the latter controls the former. (Code Civ. Proc., § 1859; Autry v. Republic Productions, Inc., 30 Cal.2d 144, 151 [180 P.2d 888].) We conclude the parties did not intend pension eligibility disputes should be settled by the arbitration method prescribed in Section 19 of the Agreement. Corroborating this conclusion is the fact a different method of arbitration also is expressly provided for disputes respecting the physical ability of an employee to continue in his employment after reaching age 68, which demonstrates it was not the intention of the parties that Section 19 should apply to all disputes.

Even assuming, for the sake of argument, that the Rules and Regulations governing the administration of the Company’s pension fund and program were not incorporated as part of the Collective Bargaining Agreement, nevertheless, the pension benefits conferred through the Agreement are predicated upon the existence and maintenance of the Company's pension fund and program; the administration of that fund and program are governed by the Pension Fund Trust Agreement and the Rules and Regulations; any disagreement respecting eligibility for a pension under the program arises out of the Trust Agreement and the Rules and Regulations rather than “within the terms” of the Collective Bargaining Agreement; and, as a consequence, such a disagreement is not subject to arbitration under Section 19 of the latter.

The general arbitration provisions of the Collective Bargaining Agreement concerned only disputes between the Union and the Company as related to the employees for whom the Agreement was executed. The Company’s pension fund and pension program were created and are maintained for the benefit of all of its employees. If the Union’s contentions were accepted, one type of arbitration would apply to pension claims by Union member employees and a different type of arbitration for non-Union member employees. In light of this fact, the interpretation of the Collective Bargaining Agreement excluding pension claims from the arbitration provisions in Section 19 thereof is more reasonable. It is fundamental that an interpretation of a contract which will make it reasonable, fair and just should be accepted over an equally consistent interpretation which would make it unreasonable, unfair and unjust. (Cohn v. Cohn, 20 Cal.2d 65, 70 [123 P.2d 833] ; Straus v. North Hollywood Hospital, Inc., 150 Cal.App.2d 306, 311 [309 P.2d 541].)

It is proper to note that our conclusion involves only a determination that the dispute asserted by the Union in this proceeding is not a dispute subject to the arbitration provisions in Section 19 of the Collective Bargaining Agreement. Not involved is a determination that the dispute under consideration is not subject to arbitration because, as judicially determined, no dispute exists in light of the clear meaning of the Agreement. Thus, the situation here is not similar to that considered in Posner v. Grunwald-Marx, Inc., supra, 56 Cal.2d 169, cited by the Union in support of its position. The dispute under consideration in this proceeding does not concern a claim that Saunders is entitled to a pension from the Company other than through its pension program administered by the trustees of the Pension Fund acting as the Pension Board under the Rules and Regulations agreed upon by the parties. A dispute as to such a claim, even though without merit under the express provisions of the Agreement,¹ would be subject to arbitration under the rule stated and applied in Posner v. Grunwald-Marx, Inc., supra, 56 Cal.2d 169.

Also it should be noted, our conclusion does not involve a determination respecting the merits of Saunders’ claim; the obligation of the trustees of the Pension Fund or the Pension Board; the question whether the discretion of the board in acting under the Rules and Regulations is limited by equitable considerations attendant upon the administration of a trust; nor the further question whether the exercise of its discretion is subject to judicial review.

A secondary issue is raised by the Union’s contention the general arbitration provisions in question required arbitration of a disagreement respecting their scope. In McCarroll v. Los Angeles County etc. Carpenters, supra, 49 Cal.2d 45, 66, the court said: "Whatever the merits of the procedure, we think it sufficiently outside the usual understanding of the relations of court and arbiter and their respective functions to assume that the parties expected a court determination of the arbitrability unless they have clearly stated otherwise. ’ ’ The Collective Bargaining Agreement does not clearly express an intention of the parties that the scope of the arbitration provisions in Section 19 is a subject for determination by arbitration. To the contrary, by expressly providing several methods of determining disputes, one of which specifically encompasses the dispute under consideration, the parties obviously intended a judicial determination respecting the applicability of a particular arbitration method.

1 The Agreement provides: "The company’s liability with respect to pension benefits shall be limited to its obligation to make contributions to the fund as provided herein. ’ ’