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ATKINSON ET AL. v. SINCLAIR REFINING CO.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT.
Argued April 18, 1962.
Decided June 18, 1962.
1. Under 301 of the Labor Management Relations Act, 1947, an employer sued an international union and its local union in a Federal District Court for damages for a strike or work stoppage caused by them in violation of a collective bargaining agreement. The agreement provided for grievance procedures culminating, if requested by the union, in compulsory, final and binding arbitration of employee grievances regarding wages, hours and working conditions, and the union promised not to strike over such matters. The defendants moved to dismiss the complaint on various grounds and to stay the action, for the reasons that (1) all of the issues in the suit were referable to arbitration under the contract, and (2) important issues in the suit were also involved in certain grievances filed by employees and said to be in arbitration under the contract. Held: This count of the complaint should not be dismissed or stayed. Pp. 241-245.
290 F.2d 312, affirmed in part and reversed in part.
Gilbert A. Cornfield argued the cause for petitioners. With him on the briefs were Gilbert Feldman and William E. Rentfro.
George B. Christensen argued the cause for respondent. With him on the briefs were Fred H. Daugherty and Richard W. Austin.
J. Albert Woll, Theodore J. St. Antoine and Thomas E. Harris filed a brief for the American Federation of Labor and Congress of Industrial Organizations, as amicus curiae, urging reversal.
MR. JUSTICE WHITE delivered the opinion of the Court.
The respondent company employs at its refinery in East Chicago, Indiana, approximately 1,700 men, for whom the petitioning international union and its local are bargaining agents, and 24 of whom are also petitioners here. In early February 1959, the respondent company docked three of its employees at the East Chicago refinery a total of $2.19. On February 13 and 14, 999 of the 1,700 employees participated in a strike or work stoppage, or so the complaint alleges. On March 12, the company filed this suit for damages and an injunction, naming the international and its local as defendants, together with 24 individual union member-employees.
Count I of the complaint, which was in three counts, stated a cause of action under 301 of the Taft-Hartley Act (29 U.S.C. 185) against the international and its local. It alleged an existing collective bargaining agreement between the international and the company containing, among other matters, a promise by the union not to strike over any cause which could be the subject of a grievance under other provisions of the contract. It was [370 U.S. 238, 240] alleged that the international and the local caused the strike or work stoppage occurring on February 13 and 14 and that the strike was over the pay claims of three employees in the amount of $2.19, which claims were properly subject to the grievance procedure provided by the contract. The complaint asked for damages in the amount of $12,500 from the international and the local.
Count II of the complaint purported to invoke the diversity jurisdiction of the District Court. It asked judgment in the same amount against 24 individual employees, each of whom was alleged to be a committeeman of the local union and an agent of the international, and responsible for representing the international, the local, and their members. The complaint asserted that on February 13 and 14, the individuals, "contrary to their duty to plaintiff to abide by said contract, and maliciously confederating and conspiring together to cause the plaintiff expense and damage, and to induce breaches of the said contract, and to interfere with performance thereof by the said labor organizations and the affected employees, and to cause breaches thereof, individually and as officers, committeemen and agents of the said labor organizations, fomented, assisted and participated in a strike or work stoppage . . . ."
Count III of the complaint asked for an injunction but that matter need not concern us here since it is disposed of in Sinclair Refining Co. v. Atkinson, ante, p. 195, decided this day.
The defendants filed a motion to dismiss the complaint on various grounds and a motion to stay the action for the reasons (1) that all of the issues in the suit were referable to arbitration under the collective bargaining contract and (2) that important issues in the suit were also involved in certain grievances filed by employees and said to be in arbitration under the contract. The District Court denied the motion to dismiss Count I, dismissed Count II, and denied the motion to stay (187 F. Supp. [370 U.S. 238, 241] 225). The Court of Appeals upheld the refusal to dismiss or stay Count I, but reversed the dismissal of Count II (290 F.2d 312), and this Court granted certiorari ( 368 U.S. 937 ).
We have concluded that Count I should not be dismissed or stayed. Count I properly states a cause of action under 301 and is to be governed by federal law. Local 174 v. Lucas Flour Co., 369 U.S. 95, 102 -104; Textile Workers Union v. Lincoln Mills, 353 U.S. 448 . 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. "The Congress . . . has by 301 of the Labor Management Relations Act, assigned the courts the duty of determining whether the reluctant party has breached his promise to arbitrate. For 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." United Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 . See also United Steelworkers v. American Mfg. Co., 363 U.S. 564, 570 -571 (concurring opinion). We think it unquestionably clear that the contract here involved is not susceptible to a construction that the company was bound to arbitrate its claim for damages against the union for breach of the undertaking not to strike.
While it is quite obvious from other provisions of the contract 1 that the parties did not intend to commit all [370 U.S. 238, 242] of their possible disputes and the whole scope of their relationship to the grievance and arbitration procedures established in Article XXVI, 2 that article itself is determinative of the issue in this case since it precludes arbitration boards from considering any matters other than employee grievances. 3 After defining a grievance as "any difference regarding wages, hours or working conditions between the parties hereto or between the Employer and an employee covered by this working agreement," Article XXVI provides that the parties desire to settle employee grievances fairly and quickly and that therefore a stated procedure "must be followed." The individual employee is required to present his grievance to his foreman, and if not satisfied there, he may take his grievance to the plant superintendent who is to render a written decision. There [370 U.S. 238, 243] is also provision for so-called Workmen's Committees to present grievances to the local management. If the local superintendent's decision is not acceptable, the matter is to be referred for discussion between the President of the International and the Director of Industrial Relations for the company (or their representatives), and for decision by the Director alone. If the Director's decision is disputed, then "upon request of the President or any District Director" of the international, a local arbitration board may be convened and the matter finally decided by this board.
Article XXVI then imposes the critical limitation. It is provided that local arbitration boards "shall consider only individual or local employee or local committee grievances arising under the application of the currently existing agreement." There is not a word in the grievance and arbitration article providing for the submission of grievances by the company. Instead, there is the express, flat limitation that arbitration boards should consider only employee grievances. Furthermore, the article expressly provides that arbitration may be invoked only at the option of the union. At no place in the contract does the union agree to arbitrate at the behest of the company. The company is to take its claims elsewhere, which it has now done.
The union makes a further argument for a stay. Following the strike, and both before and after the company filed its suit, 14 of the 24 individual defendants filed grievances claiming reimbursement for pay withheld by the employer. The union argues that even though the company need not arbitrate its claim for damages, it is bound to arbitrate these grievances; and the arbitrator, in the process of determining the grievants' right to reimbursement, will consider and determine issues which also underlie the company's claim for damages. Therefore, it is said that a stay of the court action is appropriate.
We are not satisfied from the record now before us, however, that any significant issue in the damage suit [370 U.S. 238, 244] will be presented to and decided by an arbitrator. The grievances filed simply claimed reimbursement for pay due employees for time spent at regular work or processing grievances. Although the record is a good deal less than clear and although no answer has been filed in this case, it would appear from the affidavits of the parties presented in connection with the motion to stay that the grievants claimed to have been disciplined as a result of the work stoppage and that they were challenging this disciplinary action. The company sharply denies in its brief in this Court that any employee was disciplined. In any event, precisely what discipline was imposed, upon what grounds it is being attacked by the grievants, and the circumstances surrounding the withholding of pay from the employees are unexplained in the record. The union's brief here states that the important issue underlying the arbitration and the suit for damages is whether the grievants instigated or participated in a work stoppage contrary to the collective bargaining contract. This the company denies and it asserts that no issue in the damage suit will be settled by arbitrating the grievances.
The District Court must decide whether the company is entitled to damages from the union for breach of contract. The arbitrator, if arbitration occurs, must award or deny reimbursement in whole or in part to all or some of the 14 employees. His award, standing alone, obviously would determine no issue in the damage suit. If he awarded reimbursement to the employees and if it could be ascertained with any assurance 4 that one of his subsidiary findings was that the 14 men had not participated in a forbidden work stoppage - the critical issue according to the union's brief - the company would nevertheless not be foreclosed in court since, even if it were [370 U.S. 238, 245] bound by such a subsidiary finding made by the arbitrator, it would be free to prove its case in court through the conduct of other agents of the union. In this state of the record, the union has not made out its case for a stay. 5
For the foregoing reasons, the lower courts properly denied the union's motion to dismiss Count I or stay it pending arbitration of the employer's damage claim.
We turn now to Count II of the complaint, which charged 24 individual officers and agents of the union with breach of the collective bargaining contract and tortious interference with contractual relations. The District Court held that under 301 union officers or members cannot be held personally liable for union actions, and that therefore "suits of the nature alleged in Count II are no longer cognizable in state or federal courts." The Court of Appeals reversed, however, ruling that "Count II stated a cause of action cognizable in the courts of Indiana and, by diversity, maintainable in the District Court."
We are unable to agree with the Court of Appeals, for we are convinced that Count II is controlled by federal law and that it must be dismissed on the merits for failure to state a claim upon which relief can be granted. [370 U.S. 238, 246]
Under 301 a suit for violation of the collective bargaining contract in either a federal or state court is governed by federal law (Local 174 v. Lucas Flour Co., 369 U.S. 95, 102 -104; Textile Workers Union v. Lincoln Mills, 353 U.S. 448 ), and Count II on its face charges the individual defendants with a violation of the no-strike clause. After quoting verbatim the no-strike clause, Count II alleges that the 24 individual defendants "contrary to their duty to plaintiff to abide by" the contract fomented and participated in a work stoppage in violation of the no-strike clause. The union itself does not quarrel with the proposition that the relationship of the members of the bargaining unit to the employer is "governed by" the bargaining agreement entered into on their behalf by the union. It is universally accepted that the no-strike clause in a collective agreement at the very least establishes a rule of conduct or condition of employment the violation of which by employees justifies discipline or discharge (Mastro Plastics Corp. v. Labor Board, 350 U.S. 270, 280 & n. 10; Labor Board v. Rockaway News Co., 345 U.S. 71, 80 ; Labor Board v. Sands Mfg. Co., 306 U.S. 332 ; Labor Board v. Draper Corp., 145 F.2d 199 (C. A. 4th Cir.); United Biscuit Co. v. Labor Board, 128 F.2d 771 (C. A. 7th Cir.); see R. R. Donnelley & Sons Co., 5 Lab. Arb. 16; Ford Motor Co., 1 Lab. Arb. 439). The conduct charged in Count II is therefore within the scope of a "violation" of the collective agreement.
As well as charging a violation of the no-strike clause by the individual defendants, Count II necessarily charges a violation of the clause by the union itself. The work stoppage alleged is the identical work stoppage for which the union is sued under Count I and the same damage is alleged as is alleged in Count I. Count II states that the individual defendants acted "as officers, committeemen and agents of the said labor organizations" in breaching [370 U.S. 238, 247] and inducing others to breach the collective bargaining contract. Count I charges the principal, and Count II charges the agents for acting on behalf of the principal. Whatever individual liability Count II alleges for the 24 individual defendants, it necessarily restates the liability of the union which is charged under Count I, since under 301 (b) the union is liable for the acts of its agents, under familiar principles of the law of agency (see also 301 (e)). Proof of the allegations of Count II in its present form would inevitably prove a violation of the no-strike clause by the union itself. Count II, like Count I, is thus a suit based on the union's breach of its collective bargaining contract with the employer, and therefore comes within 301 (a). When a union breach of contract is alleged, that the plaintiff seeks to hold the agents liable instead of the principal does not bring the action outside the scope of 301. 6
Under any theory, therefore, the company's action is governed by the national labor relations law which Congress commanded this Court to fashion under 301 (a). We hold that this law requires the dismissal of Count II for failure to state a claim for which relief can be granted - whether the contract violation charged is that of the union or that of the union plus the union officers and agents.
When Congress passed 301, it declared its view that only the union was to be made to respond for union [370 U.S. 238, 248] wrongs, and that the union members were not to be subject to levy. Section 301 (b) has three clauses. One makes unions suable in the courts of the United States. Another makes unions bound by the acts of their agents according to conventional principles of agency law (cf. 301 (e)). At the same time, however, the remaining clause exempts agents and members from personal liability for judgments against the union (apparently even when the union is without assets to pay the judgment). The legislative history of 301 (b) makes it clear that this third clause was a deeply felt congressional reaction against the Danbury Hatters case (Loewe v. Lawlor, 208 U.S. 274 ; Lawlor v. Loewe, 235 U.S. 522 ), and an expression of legislative determination that the aftermath (Loewe v. Savings Bank of Danbury, 236 F. 444 (C. A. 2d Cir.)) of that decision was not to be permitted to recur. In that case, an antitrust treble damage action was brought against a large number of union members, including union officers and agents, to recover from them the employer's losses in a nationwide, union-directed boycott of his hats. The union was not named as a party, nor was judgment entered against it. A large money judgment was entered, instead, against the individual defendants for participating in the plan "emanating from headquarters" ( 235 U.S., at 534 ), by knowingly authorizing and delegating authority to the union officers to do the acts involved. In the debates, Senator Ball, one of the Act's sponsors, declared that 301, "by providing that the union may sue and be sued as a legal entity, for a violation of contract, and that liability for damages will lie against union assets only, will prevent a repetition of the Danbury Hatters case, in which many members lost their homes" (93 Cong. Rec. 5014). See also 93 Cong. Rec. 3839, 6283; S. Rep. No. 105, 80th Cong., Ist Sess. 16.
Consequently, in discharging the duty Congress imposed on us to formulate the federal law to govern [370 U.S. 238, 249] 301 (a) suits, we are strongly guided by and do not give a niggardly reading to 301 (b). "We would undercut the Act and defeat its policy if we read 301 narrowly" (Lincoln Mills, 353 U.S., at 456 ). We have already said in another context that 301 (b) at least evidences "a congressional intention that the union as an entity, like a corporation, should in the absence of agreement be the sole source of recovery for injury inflicted by it" (Lewis v. Benedict Coal Corp., 361 U.S. 459, 470 ). This policy cannot be evaded or truncated by the simple device of suing union agents or members, whether in contract or tort, or both, in a separate count or in a separate action for damages for violation of a collective bargaining contract for which damages the union itself is liable. The national labor policy requires and we hold that when a union is liable for damages for violation of the no-strike clause, its officers and members are not liable for these damages. Here, Count II, as we have said, necessarily alleges union liability but prays for damages from the union agents. Where the union has inflicted the injury it alone must pay. Count II must be dismissed. 7
The case is remanded to the District Court for further proceedings not inconsistent with this opinion.
[ Footnote 2 ] Article XXVI is set out in full infra, at p. 250, as an Appendix.
[ Footnote 3 ] We do not need to reach, therefore, the question of whether, under the contract involved here, breaches of the no-strike clause are "grievances," i. e., "difference[s] regarding wages, hours or working conditions," or are "grievances" in the more general sense of the term. See Hoover Express Co. v. Teamsters Local, No. 327, 217 F.2d 49 (C. A. 6th Cir.). The present decision does not approve or disapprove the doctrine of the Hoover case or the Sixth Circuit cases following it (e. g., Vulcan-Cincinnati, Inc., v. United Steelworkers, 289 F.2d 103; United Auto Workers v. Benton Harbor Indus., 242 F.2d 536). See also cases collected in Yale & Towne Mfg. Co. v. Local Lodge No. 1717, 299 F.2d 882, 883-884 n. 5, 6 (C. A. 3d Cir.). In Drake Bakeries, Inc., v. Local 50, post, p. 254, decided this day, the question of arbitrability of a damages claim for breach of a no-strike clause is considered and resolved in favor of arbitration in the presence of an agreement to arbitrate "all complaints, disputes or grievances arising between them [i. e., the parties] involving . . . any act or conduct or relation between the parties."
[ Footnote 4 ] Arbitrators generally have no obligation to give their reasons for an award. United Steelworkers v. Enterprise Corp., 363 U.S. 593, 598 ; Bernhardt v. Polygraphic Co., 350 U.S. 198, 203 . The record of their proceedings is not as complete as it is in a court trial. Ibid.
[ Footnote 5 ] The union also argues that the preemptive doctrine of cases such as San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 , is applicable and prevents the courts from asserting jurisdiction. Since this is a 301 suit, that doctrine is inapplicable. Local 174 v. Lucas Flour Co., 369 U.S. 95, 101 n. 9.
We put aside, since it is unnecessary to reach them, the questions of whether the employer was excused from arbitrating the damage claim because it was over breach of the no-strike clause (see Drake Bakeries, Inc., v. Local 50, post, p. 254, decided this day) and whether the underlying factual or legal determination, made by an arbitrator in the process of awarding or denying reimbursement to 14 employees, would bind either the union or the company in the latter's action for damages against the union in the District Court.
[ Footnote 6 ] Swift & Co. v. United Packinghouse Workers, 177 F. Supp. 511 (D. Colo.). Contra, Square D Co. v. United E., R. & M. Wkrs., 123 F. Supp. 776, 779-781 (E. D. Mich.). See also Morgan Drive Away, Inc., v. Teamsters Union, 166 F. Supp. 885 (S. D. Ind.), concluding, as we do, that the complaint should be dismissed because of 301 (b) and 301 (e), but for want of jurisdiction rather than on the merits. Our holding, however, is that the suit is a 301 suit; whether there is a claim upon which relief can be granted is a separate question. See Bell v. Hood, 327 U.S. 678 .
[ Footnote 7 ] In reaching this conclusion, we have not ignored the argument that Count II was drafted in order to anticipate the possible union defense under Count I that the work stoppage was unauthorized by the union, and was a wildcat strike led by the 24 individual defendants acting not in behalf of the union but in their personal and nonunion capacity. The language of Count II contradicts the argument, however, and we therefore do not reach the question of whether the count would state a proper 301 (a) claim if it charged unauthorized, individual action. [370 U.S. 238, 254]