Lincoln Mills of Alabama v. Textile Workers Union of America, CIO , 230 F.2d 81 ( 1956 )

JONES, Circuit Judge.

Lincoln Mills of Alabama, the defendant below, is a corporation owning and operating a textile mill in Huntsville, Alabama. It is engaged in an industry affecting commerce and hence subject to Federal legislation relating to labor. Textile Workers Union of America, CIO, the plaintiff below, is an unincorporated association and labor organization. We will refer to the parties, for brevity and clarity, as Employer and Union.

In chronological sequence, the facts from which this controversy developed were as follows:

A written collective bargaining agreement between the Union and the Employer was executed June 27, 1953, to continue until July 3, 1954, and for one-year terms thereafter unless written notice of termination should be mailed by either party to the other sixty days prior to the end of the current term, in which event the agreement would terminate at the end of the current term. Article VIII of the agreement set up procedures to be followed in the adjustment of grievances, and provided that if a grievance had not been adjusted by the Article VIII procedures within the time specified, the party presenting the grievance should be governed by the provisions of Article IX(F) of the agreement.

By Article IX of the agreement the parties agreed that the contract grievance procedures were adequate to provide a fair and final determination of all grievances arising under the terms of the agreement. The desire of the parties to avoid strikes and work stoppages was recited. Paragraphs (A) to (E) inclusive of Article IX contained “no-strike” provisions. In Paragraph (F) of Article IX, of the agreement it was provided that any disagreement or dispute, arising from the operation or interpretation of the agreement, pertaining to wages, rates of pay, hours of work or other conditions of employment which had not been satisfactorily adjusted within the time limited, might be submitted to arbitration by the giving of written notice within ten days after the expiration of the applicable time limit. It was further provided that if the parties did not agree upon an arbitrator, the American Arbitration Association should be requested to furnish the names of five qualified arbitrators and the parties should alternately strike one name each from the list until a single name remained and the person so designated should serve.

The Union filed with the Employer seven grievances on June 23, 1954, and three grievances on June 24, 1954, all of which were of the type specified in Article IX (F). The Employer followed the procedures of the agreement up to the point of rejecting the claims, the rejections being made at various dates on and subsequent to July 14, 1954. Pursuant to timely notice given pursuant to its terms, the agreement terminated on July 3, 1954. The Union requested the Employer to submit the grievances to arbitration pursuant to Article IX (F) of the agreement. The Employer refused to do so. Thereafter the Union brought this suit against the Employer asking that the Employer be required to submit the grievances to arbitration and praying for damages. The District Court declined to award damages to the Union, saying that none were proven, hut decreed that the Employer submit the grievances to arbitration as provided in Article IX (F) of the agreement. Jurisdiction was found under § 301 of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 185.

Presented for our consideration are questions which may be substantive as well as procedural. Since there is no diversity of ciizenship apparent we are, at the outset, required to ascertain whether there is a basis for Federal jurisdiction. The Congress has provided that:

“Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce * * xnay be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties”. Sec. 301 (a), Labor Management Relations Act of 1947, 29 U.S.C.A. § 185(a).

This grant has given Federal courts jurisdiction for the consideration and determination of questions such as the one presented in this case. It has given to Federal courts the power to adjudicate, where a violation of a contract is asserted, causes of action between employers and labor organizations and to determine whether or not a cause of action exists in a particular ease. It does not follow, though, from the existence of the judicial power to determine a cause of action or controversy that the right asserted has legal sanction. It does not follow from the grant of jurisdiction to hear a litigant in a Federal forum that rights have been created or remedies provided which are denied to others. That there is a right to seek relief in a Federal court does not mean that the relief sought is necessarily available. More specifically, our question is whether Section 301, taken in context, requires or permits the enforcement of an executory covenant for the submission to arbitration of grievances pursuant to a collective bargaining agreement between a union and an employer.

The provisions of the contract between the parties to this appeal from which spring the problems presented are not novel, yet we do not find that the precise point presented has heretofore been considered by an appellate court. In the absence of statute it is the general rule that executory contracts to submit disputes to arbitration will not be specifically enforced. Red Cross Line v. Atlantic Fruit Co., 1924, 264 U.S. 109, 44 S.Ct. 274, 68 L.Ed. 582. Tejas Development Co. v. McGough Bros., 5 Cir., 1947, 165 F.2d 276. Such is the rule as found by the framers of the Restatement of the Law. Restatement, Contracts, § 550 (1932). The Supreme Court of Alabama, announcing the rule, has said:

“The courts are almost unanimous in declaring that equity will not decree specific performance of a contract to submit a cause to arbitration, while it will, in proper cases, entertain a bill to enforce an award.” Ex parte Birmingham Fire Ins. Co., 1937, 233 Ala. 370, 172 So. 99, 101.

If there be a right to specific performance of an arbitration provision in a collective bargaining agreement we must find it in an act of Congress. The Norris-LaGuardia Act, 29 U.S.C.A. § 101 et seq., does not preclude the granting of the relief sought. Graham v. Brotherhood of Locomotive Firemen and Enginemen, 1949, 338 U.S. 232, 70 S.Ct. 14, 94 L.Ed. 22.

The United States Arbitration Act expressly provides that nothing therein “contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C.A. § 1.

In Section 2 it is said:

“A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” July 30, 1947, c. 392, § 1, 61 Stat. 669, 9 U.S.C.A. § 2.

Section 3 of the Arbitration Act provides :

“If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” 9 U.S. C.A. § 3.

The Arbitration Act also provides that courts of the United States may direct arbitration in accordance with the terras of written agreements. 9 U.S.C.A. § 4.

The Court of Appeals of the Third Circuit has had a number of occasions to consider the application of the Arbitration Act to collective bargaining agreements, and we cannot reconcile its views as expressed in its several opinions. It first held that the stay of proceedings provisions in Section 3 of the Act applied in a class suit for unpaid over-time compensation claimed under the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq. Donahue v. Susquehanna Collieries Co., 3 Cir., 1943, 138 F.2d 3, 149 A.L.R. 271. Section 1 of the Arbitration Act, containing the exclusion clause was set forth in a footnote but was not mentioned in the opinion. The Donahue case, supra, was followed in Watkins v. Hudson Coal Co., 3 Cir., 1945, 151 F.2d 311, certiorari denied 327 U.S. 777, 66 S.Ct. 522, 90 L.Ed. 1005, where it was said that the exclusion clause of Section 1 was not an over-all limitation. On a second appeal of the Donahue case a stay of proceedings was directed pursuant to Section 3 until arbitration was had. Donahue v. Susquehanna Collieries Co., 3 Cir., 1947, 160 F.2d 661. The same result was reached in Evans v. Hudson Coal Co., 3 Cir., 1948, 165 F.2d 970. Before the next consideration of the question by the Third Circuit, Congress had reenacted the United States Arbitration Act and had included in the reenactment the following catch line of Section 1, “ ‘Maritime Transactions’ and ‘Commerce’ Defined; Exceptions to Operation of Title”. Act of July 30, 1947, H.R. 2084, ch. 392, 61 Stat. 669. This, thought the court, in the next case before it, indicated a congressional intent that the exclusion in Section 1 applied to the entire Act, and it was held that collective bargaining agreements were “contracts of employment” within the meaning of the Act. Amalgamated Ass’n, etc. v. Pennsylvania Greyhound Lines, 3 Cir., 1951, 192 F.2d 310. This was followed in Pennsylvania Greyhound Lines v. Amalgamated Ass’n, 3 Cir., 1951, 193 F.2d 327.

In the most recent of the Third Circuit cases which we have noted, it was said by a divided court that a collective bargaining agreement between an employer producing goods for subsequent sale in interstate commerce, as is the employer in the case before us, and a union, is within the meaning of a contract in an “industry affecting commerce” as used in Section 301 of the Labor Management Relations Act of 1947, but that such a contract is not one of “ ‘employment of * * * workers engaged in foreign or interstate commerce’ ” within the exclusion clause of Section 1 of the Arbitration Act. A majority of the court reconciled the decision with the prior holdings by saying that the two Pennsylvania Greyhound Lines cases involved employees engaged in interstate transportation, excluded by Section 1, and that the other earlier cases involved employees producing goods for subsequent resale in commerce, and not covered, said the court, by the exclusion clause. Two of the judges thought that collective bargaining agreements were not “contracts of employment” within the purview of Section 1 of the Arbitration Act, and were of the belief that the Pennsylvania Greyhound Lines cases should be expressly overruled. Two judges dissented. The court directed the granting of a stay pending arbitration. Tenney Engineering, Inc., v. United Electrical R. & M. Workers, 3 Cir., 1953, 207 F.2d 450, 451.

The Fourth Circuit departs from the Third Circuit and has held that the Arbitration Act does not authorize enforcement of arbitration provisions in collective bargaining agreements. Speaking for the Court and referring to Section 1 of the Arbitration Act, Chief Judge Parker has said:

“Art. I of that Act of February 12, 1925, c. 213, as reenacted by the Act of July 30, 1947, c. 392, 9 U.S.C.A. § 1, contains nothing but definitions of ‘maritime transactions’ and ‘commerce’ and an excepting clause; and we think it clear that the excepting clause was intended to apply to the entire act.” International Union, etc., v. Colonial Hardwood Floor Co., 4 Cir., 1948, 168 F.2d 33, 35.

The Colonial Hardwood case was followed in United Electrical R. & M. Workers v. Miller Metal Products, 4 Cir., 1954, 215 F.2d 221.

It seems to us that the Sixth Circuit originally reached the same conclusion as had been pronounced in the Fourth. In a well reasoned opinion by Judge Hamilton wherein the first Donahue case, supra, is criticized, it is said:

“The scope of the exception or proviso in the statute must be gathered from the view of the whole law, and if the language of the exception is in perfect harmony with the general scope of the entire statute, the exclusion is applicable to the whole act. It is clear that the exception here in question was deliberately worded by the Congress to exclude from the National Arbitration Act all contracts of employment of workers engaged in interstate commerce. Section 2 of the Act makes valid and irrevocable all arbitration agreements in writing to submit to arbitration future controversies arising out of the contract of which the arbitration agreement was a part. It would be senseless to say that the exclusion from the Act covers the validity of the contract, but excludes the stay provision of Section 3. The reason for the exclusion is applicable to the entire Act. The language of the exclusion ‘herein contained’ is found in the first section of the Act. This section is made up entirely of definitions and exceptions to the operation of the title. ‘Herein’ as used in legal phraseology is a locative adverb and its meaning is to be determined by the context. It may refer to the section, the chapter or the entire enactment in which it is used. The fact that it was used in the present Act in a section where none of the substantive matter set up in the succeeding sections of the Act appeared must mean that it is to be applied to the whole Act and not to any given section. There can be no doubt that the contract in issue is a contract of employment. Appellant insists that the exception relates only to the subject specified in the title. If we give full weight to appellant’s contention, its argument must fail because the title not only states that its purpose is to make valid arbitration contracts but also to make them enforceable. Section 3 sets up one of the methods of enforcement.” Gatliff Coal Co. v. Cox, 6 Cir., 1944, 142 F.2d 876, 882.

But in a later case from the Sixth Circuit the court notes the conflicts. It adhered to its earlier view that the exclusion proviso of Section 1 of the United States Arbitration Act applies to the entire act, but it held that the collective bargaining agreement before it was a trade agreement and not a “contract of employment” within the exclusion clause. Hoover Motor Express Co. v. Teamsters, Chauffeurs, etc., 6 Cir., 1954, 217 F.2d 49.

As to the effect of the United States Arbitration Act in the case before us, we align ourselves with the Fourth Circuit and hold that the collective bargaining agreement before us is a “contract of employment” within the meaning of the Arbitration Act and as such is excluded from the application of the act by its express terms. The earlier cases and their effect are commented upon in 17 Law and Contemporary Problems 580, and 65 Harv.L.Rev. 1238. Though the Norris-LaGuardia Act does not preclude, the United States Arbitration Act does not authorize the judicial enforcement of a contractual undertaking to submit to arbitration grievances arising under a collective bargaining agreement.

This brings us to the question of whether Section 301(a) of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 185(a), hereinbefore quoted, provides for the enforcement of a provision for arbitration contained in a collective bargaining contract between an employer and a labor organization of employees engaged in producing goods for subsequent sale in interstate commerce. The Court of Appeals of the Tenth Circuit has given us, as dictum perhaps, a succinct answer to the query. It said:

“This statute [29 U.S.C.A. § 185 (a)] is for the purpose only of giving jurisdiction to the federal courts in cases involving labor contracts. It does not give the federal courts any different or additional power than a state court would have if the action had been brought here”. Mercury Oil Refining Co. v. Oil Workers Int. Union, CIO, 10 Cir., 1951, 187 F.2d 980, 983.

In a decision from the Second Circuit it is stated:

“But § 301 * * * created a remedy where none existed before and provided a forum in which to enforce it.” Shirley-Herman Co. v. International Hod Carriers, etc., 2 Cir., 1950, 182 F.2d 806, 809, 17 A.L. R.2d 609.

In the Shirley-Herman case the remedy to which reference was made as being created by the statute was the right to sue a labor union as such and the right of unions to bring and maintain judicial actions. We think it unnecessary to consider other decisions of the Courts of Appeal or enter upon a review of District Court cases, of which there are a number. The answer to this phase of our inquiry is to be found, we think, in the opinions of the Supreme Court in Association of Westinghouse Salaried Employees v. Westinghouse Electric Corp., 1955, 348 U.S. 437, 75 S.Ct. 489, 494, 99 L.Ed. 510.

Perhaps it cannot fairly be said that the ratio decidendi of the Westinghouse case is more than that a Federal District Court does not have jurisdiction under Section 301 over an action brought by a union against an employer under a collective bargaining agreement on behalf of employees for wages which the employer refused to pay and which refusal the union asserted was in violation of the agreement. But in the several opinions we find a guide for our decision. Mr. Justice Frankfurter, with whose views Justices Burton and Minton concurred, found that if the “plain meaning” rule of construction could be applied, then all Section 301 does is to give procedural directions to the Federal courts to treat labor unions as natural or corporate persons in actions involving collective bargaining agreements, and to do so regardless of the amount in controversy and not to require diversity of citizenship. In considering the intent of Congress, Mr. Justice Frankfurter found that its aim was to open the Federal Courts to such suits solely because they were between the union and employers, but without providing any Federal law other than procedural for such suits. “It was evident”, said Mr. Justice Frankfurter, “that the specific desire was to remove procedural obstacles to suit by and against the union.” He quoted Senator Taft, in proposing an amendment approximating § 301, as saying:

“ ‘ * * * All we provide in the amendment is that voluntary associations shall in effect be suable as if they were corporations, and sua-ble in the Federal courts if the contract involves interstate commerce and therefore involves a Federal question.’ ”

A question was raised by Mr. Justice Frankfurter as to whether the construction dictated by the “ ‘plain meaning rule’ ” and by the intent of Congress could be placed within the constitutional restriction of Federal jurisdiction to cases arising under the Constitution and laws of the United States, etc., U.S.Const. Art. III, § 2. It was necessary, thought Mr. Justice Frankfurter, to limit the scope of the Act as “doubtful legislation”. The Court of Appeals, in its consideration of the Westinghóuse case, had proceeded upon the so-called “eclectic theory” that the collective bargaining agreement is not of itself a contract of hiring, that each employee makes with the employer a separate contract of hiring from which stems the obligation to pay wages, and that, while Section 301 creates “a federal substantive right”, there is jurisdiction only of causes of action between a union and an employer. Since the Court of Appeals did not regard a breach of the obligation to pay wages as creating a cause of action in the union, it rejected Federal jurisdiction. Association of Westinghouse Salaried Emp. v. Westinghouse Electric Corp., 3 Cir., 1954, 210 F.2d 623, 625. Mr. Justice Frankfurter disagreed with the Court of Appeals, and indicated his view to be that no new federal law concepts of contractual interpretation were intended by the enactment of Section 301.

Mr. Chief Justice Warren, joined by Mr. Justice Clark, concurred and were of the opinion that it was enough to say that Section 301 was not sufficiently explicit nor its legislative history sufficiently clear to indicate that Congress intended to authorize a union to enforce in a federal court the right of an employee to receive wages; and being of such opinion, they saw no reason to make labor policy or raise constitutional issues. Mr. Justice Reed also concurred in the result. He took the position that it was the intent of Congress to give federal jurisdiction over actions arising from breaches of collective bargaining agreements whether the rules of substantive law are derived from federal or state sources. He concluded, as did the Court of Appeals, that a breach of the duty to pay wages was a violation of an individual employment contract and not of the collective bargaining agreement.

In a dissenting opinion in the Westinghouse ease, Mr. Justice Douglas, with whom Mr. Justice Black concurred, there was disagreement with the majority refusal to permit the Union to bring the suit. The minority did, however, concur in the view of Mr. Justice Reed that Congress “created federal sanctions for collective bargaining agreements, made cases and controversies concerning them justiciable questions for the federal courts, and permitted those courts to fashion from the federal statute, from state law, or from other germane sources, federal rules for the construction and interpretation of those collective bargaining agreements”.

We have, in the case before us, a complaint by the Union that the Employer has breached a provision of a collective bargaining agreement. Out of such complaint arise a case and controversy of which the Federal courts have jurisdiction under the Constitution as implemented by Section 301. And see 28 U.S. C.A. § 1337. But it does not follow that because jurisdiction is given to Federal courts, there is a new federal law concept that authorizes the courts to enforce submission to arbitration. Before such a result is reached, we must find a rule of law derived from state or Federal sources. We do not think it matters whether a right to enforce submission to arbitration is or is not substantive, as was considered in Bernhardt v. Polygraphic Company of America, 2 Cir., 1954, 218 F.2d 948; or whether as said by Mr. Justice Brandéis, there is “the substantive right created by an agreement to submit disputes to arbitration”, which he said “is recognized as a perfect obligation.” Red Cross Line v. Atlantic Fruit Co., 1924, 264 U.S. 109, 44 S.Ct. 274, 277, 68 L.Ed. 582.

Finding nothing of Federal origin or in the laws of Alabama, of either common law or statutory enactment, or from any other source, that requires or permits, or from which we might, in the language of Mr. Justice Douglas, fashion a rule requiring or permitting, the enforcement of the covenant for arbitration of grievances, and concluding that Section 301 does not of itself provide or furnish the source for such a rule, we hold that there is no legal right to the relief sought.

In the determination of the case before us, it was held that, since the grievances arose while the collective bargaining agreement was in effect, the Employer was required to arbitrate such grievances subsequent to the termination date of the agreement. Although unwilling to adopt the most recent conclusions of the Third Circuit in construing the United States Arbitration Act, we are impressed by its views with respect to the effect of the termination of a collective bargaining agreement upon Section 301 procedure. After reciting the giving of notice of termination and the failure of negotiations toward a new contract between an employer and a union, the court said:

“The old contract thereupon terminated pursuant to the permitted election already made manifest by timely notice as provided in the document itself. The obligation not to strike, like the other obligations of the contract ceased to exist. For this reason the complaint was properly dismissed”. Paterson Parchment Paper Co. v. International Brotherhood, 3 Cir., 1951, 191 F.2d 252, 254.

Finding as we do that compliance with a covenant for arbitration in a collective bargaining agreement will not be compelled by a Federal court judgment where the courts of the state would deny such relief, it follows that there was no enforceable right which could have been either retained or lost upon the termination of the agreement. Hence we need not and do not decide whether such a covenant would survive where, under the applicable law, such a provision might have been enforced during the term of the agreement.

It is the view of this Court that the District Court erred in not sustaining the defendant’s motion to dismiss the action because the complaint fails to state a claim against defendant upon which relief can be granted. Therefore, with a direction to sustain the motion to dismiss, the judgment appealed from is

Reversed.