CWA v. Avaya, Inc. ( 2012 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS September 11, 2012
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
COMMUNICATION WORKERS OF
AMERICA,
Plaintiff – Appellee,
v. No. 11-1470
AVAYA, INC.,
Defendant - Appellant.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:10-CV-02464-LTB-BNB)
Patrick R. Scully (Sarah R. Peace with him on the brief) of Sherman & Howard L.L.C.,
Denver, Colorado, for Defendant – Appellant.
Stanley M. Gosch of Rosenblatt & Gosch, P.L.L.C., Greenwood Village, Colorado, for
Plaintiff – Appellee.
Before KELLY, Circuit Judge, BRORBY, Senior Circuit Judge, and O'BRIEN, Circuit
Judge.
O’BRIEN, Circuit Judge.
I. Introduction
Avaya Inc. (“Avaya”) appeals from the district court’s ruling compelling
arbitration of its labor dispute with the Communication Workers of America (“CWA”)
over the legal status of a class of Avaya employees called “backbone engineers.” The
union views the backbone engineers as non-represented “occupational” employees and
legitimate objects for its organizing campaigns, while Avaya sees them as managers
outside the scope of the company’s labor agreements. CWA contends the parties’
collective bargaining agreement (“CBA”) requires any dispute over the status of
backbone engineers to be resolved in arbitration. Avaya maintains the parties did not
consent to arbitrate the status of its backbone engineers and accuses CWA of trying to
unilaterally enlarge the CBA to encompass disputes over company management. Having
reviewed the CBA and the evidence submitted to the district court, we agree with
Avaya’s position and reverse the district court’s order compelling arbitration.
II. Background
A. The Collective Bargaining Agreement
The CBA between Avaya and CWA governs the employment conditions of Avaya
employees who have elected to be represented by the CWA in labor disputes with
company management. This group, known as the “bargaining unit,” consists of
occupational employees whose titles are listed in the CBA; it does not include
management or non-represented employees, nor does it list backbone engineers among
the represented members. Most important for this appeal are Articles 9 and 10, which lay
out the grievance-and-arbitration process governing labor disputes arising during the term
of the CBA. The procedures described in these articles make up the exclusive process for
resolving “employee disputes” under the CBA. (App. App’x 32.) “If, at any time, a
difference arises between the Company and the Union regarding the true intent and
meaning of a provision under [this Agreement], or a question as to the performance of
any obligation hereunder,” the grievance procedures shall be used to settle the
differences. (App. App’x 35.) A grievance is “a complaint involving the interpretation
or application of any of the provisions of [the CBA], or a complaint that an employee(s)
has in any manner been unfairly treated.” (App. App’x 32.)
The grievance procedure consists of three steps. Each step requires written notice
of the grievance (or, in the later steps, of the grievance appeal) and a meeting to discuss
the grievance involving officials from both the union and the company. The participating
officials become progressively more senior as the process evolves, and by step three the
discussions involve the union’s vice president and the company’s vice president of labor
relations. Only when these steps have been exhausted and no resolution reached can the
parties resort to arbitration, “it being understood that the right to require arbitration
extends only to matters expressly set forth in this Article and which are not otherwise
expressly excluded from arbitration.” (App. App’x 35.)
B. The Neutrality Agreement
Appended to the CBA is a National Memorandum of Understanding (“National
Memorandum”) reflecting a trilateral agreement between Avaya, CWA, and the
International Brotherhood of Electrical Workers (IBEW) and setting forth the parties’
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understandings on issues like wages, hours, pensions, and other terms and conditions of
employment. Over Avaya’s objection, the district court accepted CWA’s invitation to
treat the National Memorandum as a continuation of the CBA. By its terms, the court
observed, the National Memorandum “binds the CWA and its local labor unions, the
IBEW and its affiliated local unions, and Avaya to amend and extend” their collective
bargaining agreements “so as to incorporate the items hereinafter set forth. . . .” (App.
App’x 170.) The National Memorandum “shall become effective as to the CWA . . . only
if ratified by the CWA membership [before July 29, 2009],” and the “amended collective
bargaining agreements between the parties” shall terminate in June 2012. (App. App’x
170.) The record does not reflect whether CWA ratified the National Memorandum
before July 29, 2009, but since both parties recognize the National Memorandum as a live
agreement governing consent elections for unrepresented employees, we assume it was
timely ratified.
Under a subsection relating to union-management relations, the National
Memorandum includes a Neutrality Agreement governing union organizing efforts
directed at unrepresented “non-management” employees. (App. App’x 246.) In
recognition of the union’s goal of growing its membership, the agreement sets forth the
“exclusive means” by which the union will conduct efforts to organize unrepresented
non-management employees. (App. App’x 246.) The organizing and election procedures
are meant to foster a “neutral” organizing environment in which the union is afforded a
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reasonable opportunity to communicate with non-management employees. (App. App’x
246-48.)
Alleged violations of the neutrality provisions are to be “handled via the dispute
resolution process contained in this Agreement.” (App. App’x 250.) Under that process,
disputes arising during the course of an organizing effort will be addressed in the first
place by the parties themselves, preferably at the local level, and in the event good faith
efforts to resolve the matter fail, by a “third party neutral” (TPN) agreed upon by the
parties. Compared to the three-step process prescribed in the CBA, dispute resolution
under the Neutrality Agreement is fluid and informal, the only precondition to arbitration
being a good faith attempt by the parties to resolve the matter. (App. App’x 250.)
C. CWA’s Organizing Drive
In March 2010, CWA commenced an organizing drive directed at Avaya
backbone engineers located in Denver, Colorado. Backbone engineers provide
engineering support for the company’s hardware and software products. They are
classified as management in the corporate title guide and benefits program, and many of
them dispatch and oversee the work of teams of technicians.
In the chain of correspondence following the organizing drive, the parties laid out
their positions on the status of the backbone engineers, the propriety of the organizing
drive, and the appropriate course for resolving what looked by then to be an unavoidable
conflict. Avaya insisted the Neutrality Agreement does not apply to the union’s
organizing campaign, because backbone engineers are management employees outside
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the scope of the Neutrality Agreement. In Avaya’s view, the only method of organizing
the backbone engineers is through the procedures set forth by the National Labor
Relations Board (NLRB). By contrast, CWA maintained that backbone engineers are
non-represented occupational employees who are eligible to be organized under the
consent-election procedures in the Neutrality Agreement.
CWA proposed appointing a TPN to determine whether backbone engineers
qualify as non-management within the meaning of the Neutrality Agreement.
Maintaining the dispute falls outside the scope of the Neutrality Agreement (and
therefore outside the scope of the Neutrality Agreement’s dispute-resolution process),
Avaya refused.
With no hope of a private settlement, CWA filed a formal grievance under the
CBA accusing Avaya of improperly denying access to backbone engineers and then
failing to follow the dispute-resolution procedures in the Neutrality Agreement. The
remedy sought: order Avaya to choose a TPN to resolve the dispute over the status of the
backbone engineers. Avaya rejected the grievance, and CWA appealed to step three of
the CBA’s dispute-resolution process, at which point the parties held a settlement
meeting but ultimately failed to resolve their dispute.
Having exhausted the grievance procedure, CWA notified Avaya that it would be
submitting the grievance to arbitration. Avaya refused arbitration and, in a June 8 letter,
explained its position: the dispute was not arbitrable because the CBA does not apply to
backbone engineers.
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D. CWA’s Suit to Compel Arbitration
On October 8, 2010, four months after Avaya’s June 8 refusal to arbitrate, CWA
filed a complaint to compel arbitration in the District of Colorado. Contending the
parties never agreed to arbitrate disputes over management employees, Avaya moved for
summary judgment. It cited materials showing backbone engineers were classified as
managers and provided benefits commensurate with those received by management. It
also cited documents showing the parties’ understanding that “management” does refer
not to “manager” as that term is defined by the federal labor laws, but rather to the class
of Avaya employees who perform non-occupational duties. CWA submitted only one bit
of evidence refuting Avaya’s designation of backbone engineers as management—an
affidavit from a CWA official expressing his “belief” that backbone engineers are
occupation employees eligible for union representation.
Following cross motions for summary judgment, the district court denied Avaya’s
motion and granted CWA’s. The court concluded the catch-all arbitration clause in the
CBA covers the dispute over whether the backbone engineers’ status is arbitrable under
the Neutrality Agreement. The court addressed Avaya’s contention about backbone
engineers being managers outside the scope of the arbitration agreements, by saying
“such [a] determination is an assessment of the underlying merits before an arbitrator
and, as such, is not before me.”1
1
The district court rejected Avaya’s additional arguments. First, it rejected
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II. Discussion
Avaya challenges the order compelling arbitration on three grounds. It argues the
parties’ dispute is not subject to the CBA’s arbitration clause,2 because Backbone
engineers are neither members of the bargaining unit nor eligible to become members in
the future. They are management, Avaya insists, a class of workers whose terms of
employment are outside the CBA and of no concern to the union. The district court did
not challenge this assertion in concluding the dispute was arbitrable. Rather, it
determined the question of arbitrability—whether the parties agreed to arbitrate the status
of the backbone engineers under the Neutrality Agreement—was itself an arbitrable issue
under the CBA. Avaya contends that this, too, was error: the scope of an arbitration
clause is a matter for judicial resolution, and Avaya maintains the district court was
required to examine the Neutrality Agreement at the outset to determine whether it
Avaya’s argument that the complaint to compel arbitration was untimely because it was
filed more than six months after Avaya first refused arbitration. The court concluded that
the complaint had been filed within six months of Avaya’s refusal to arbitrate, which,
contrary to Avaya’s assertions, came on June 8, shortly after CWA announced it would
be submitting the grievance to arbitration under the CBA. Second, the court rejected
Avaya’s contention that the case belongs before the National Labor Relations Board
rather than a federal court; it explained that questions of contract interpretation, and
particularly questions about the scope of an arbitration clause, are squarely within the
jurisdiction of the federal courts.
2
Avaya also argues (1) the complaint was untimely and should not have been
considered, and (2) the district court lacked jurisdiction because CWA sought to arbitrate
issues within the primary jurisdiction of the National Labor Relations Board. Because we
agree with Avaya that the dispute is not arbitrable and that reversal is proper on that basis
alone, we do not address these alternative arguments.
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covered the dispute over backbone engineers. Had it done so, Avaya continues, the court
would have been compelled to conclude the arbitration clause does not extend to disputes
over employees, like backbone engineers, whom Avaya classifies as managers.
We review a grant of summary judgment without deference, applying the same
legal standard as the district court. Byers v. City of Albuquerque, 150 F.3d 1271, 1274
(10th Cir. 1998). Summary judgment is appropriate if the “movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(c).
Because arbitration is a creature of contract, a party cannot be forced to arbitrate
any issue he has not agreed to submit to arbitration. AT & T Tech., Inc. v. Commc’n
Workers, 475 U.S. 643, 648 (1986); Local 5-857 Paper, Allied-Industrial, Chemical and
Energy Workers Int’l Union v. Conoco, Inc., 320 F.3d 1123, 1126 (10th Cir. 2003). The
Supreme Court has recognized a presumption in favor of arbitration in the labor relations
context. United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582
(1960). Accordingly, where a dispute arises under a collective bargaining agreement, it
must be arbitrated unless “it may be said with positive assurance that the arbitration
clause is not susceptible of an interpretation that covers the asserted dispute.” Id. Where,
as here, the parties have agreed upon an inclusive arbitration clause covering any dispute
arising out of the CBA, the court’s role is limited to determining whether a party is
“making a claim which on its face is governed by the contract.” United Steelworkers v.
Am. Mfg. Co., 363 U.S. 564, 567-68 (1960).
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This case requires reconciling two competing principles governing judicial review
in this area. First, courts (rather than arbitrators) must evaluate the threshold question of
whether the parties consented to submit a particular dispute to arbitration. See AT & T
Tech., 475 U.S. at 649. Second, courts making this determination are not to rule on the
potential merits of the underlying claims. Id. These rules clash in cases where the merits
of the claim are bound up with the question of arbitrability. See, e.g., Int’l Bhd. of Elec.
Workers, Local 1 v. GKN Aerospace N. Am., Inc., 431 F.3d 624, 627 (8th Cir. 2005); Rite
Aid of Penn. v. United Food and Comm. Workers Union, Local 1776, 595 F.3d 128, 141-
42 (3d Cir.), cert denied, 131 S. Ct. 187 (2010). On those occasions, the Supreme Court
tells us, the court’s duty to determine whether the party intended the dispute to be
arbitrable trumps its duty to avoid reaching the merits: “Although ‘doubts should be
resolved in favor of coverage,’ 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.” Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 209 (1991)
(quoting AT&T Tech, 475 U.S. at 560). This is a sensible compromise, not least because
it avoids a situation where arbitrability hinges on what the party seeking arbitration
characterizes as arbitrable.
The federal courts of appeal have been faithful to the principle expressed in Litton.
See, e.g., United Parcel Serv., Inc. v. Union de Tronquistas, Local 901, 426 F.3d 470,
472-74 (1st Cir. 2005); Int’l Bhd. of Elec. Workers, 431 F.3d at 628-29 (“[I]f a court is
entirely blind to the merits of a grievance, then the parties could be forced to arbitrate
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grievances that have no relationship whatsoever to the collective bargaining
agreement.”); see also Rite Aid of Penn., 595 F.3d at 136 (3d Cir. 2010) (“[W]here the
merits and arbitrability questions are inextricably intertwined, a court’s arbitrability
decision may, of necessity, touch incidentally on the merits.”); Indep. Lift Truck Builders
Union v. Hyster Co., 2 F.3d 233, 236 (7th Cir. 1993) (“[A] court cannot address the
arbitrability question without at the same time addressing the underlying merits of the
dispute.”). And consistent with Litton, we have held that facts are more important than
legal labels in determining whether a claim is arbitrable. See Chelsea Family Pharmacy,
PLLC v. Medco Health Solutions, 567 F.3d 1191, 1197-98 (10th Cir. 2009); see also P &
P Indus., Inc. v. Sutter Corp., 179 F.3d 861, 871 (10th Cir. 1999) (“[I]n determining
whether a particular claim falls within the scope of the parties’ arbitration agreement, we
focus on the factual allegations in the complaint rather than the legal causes of action
asserted.”) (quotation marks omitted).
In light of these principles, the district court was wrong to compel arbitration
based on nothing more than CWA’s “belief” that backbone engineers were legitimate
targets for an organizing drive. Concerned about intruding on the province of the
arbitrator, the district court lost sight of its duty to determine whether the parties
consented to arbitrate the dispute in the first place. Without a judicial determination of
arbitrability, the scope of the arbitration clause became subject to the artful pleading of
the union, resulting in CWA having “unilateral and unfettered discretion” to determine
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when and on what basis Avaya had to participate in arbitration. See E.M. Diagnostic Sys.
v. Local 169, Int’l Bhd. of Teamsters, 812 F.2d 91, 95 (3d Cir. 1987).
This case well illustrates the point. Had the court addressed the threshold question
of consent, it would have faced compelling evidence that the parties did not agree to
submit the dispute over the backbone engineers to arbitration. Two key facts strongly
suggest the dispute is not governed by the parties’ labor agreements. First, the parties
understood the Neutrality Agreement, which by its terms applies only to “non-
management employees,” to govern consent elections for occupational workers. This
much was clear from the record, which included an affidavit from Avaya’s Director of
Labor Relations stating that the parties understood ‘management’ to denote “non-
occupational employees.” (App. App’x 381). But it was also clear from the parties’ use
of the term in the CBA and National Memorandum. Although neither agreement defines
“management,” context suggests the term refers not to a legal definition but rather to a
readily identifiable class of non-occupational Avaya employees. In other words,
“management” includes those employees whom Avaya designates as managers.
If “management” meant something else, indeed if it meant anything but the
opposite of “occupational employee,” otherwise straightforward terms governing the day-
to-day dealings between company and union would become vexing and difficult to
comply with. Take the provision about union activity on company premises, which
permits union representatives to “enter upon Company premises after obtaining approval
from a management representative of the Company” (App. App’x 28); or the provision
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requiring starting rates to be granted “based on the Company’s non-management
employee starting wage policy” (App. App’x 46); or the one about layoffs, which “shall
be in inverse order of seniority” except for certain employees who have been “assigned to
a management title” for more than a year prior to returning to the bargaining unit (App.
App’x 48). These provisions presume a familiarity with Avaya management—an ability
to readily distinguish it from non-management, which would be impractical if the parties
had to consult a legal definition each time the meaning of “management” came into
question. This would disrupt labor relations between the parties and turn day-to-day
disputes—entry on company premises, the availability of certain starting rates—into
highly fraught questions of legal interpretation. Given the frequency with which the
undefined term appears in the labor agreements and the practical necessity of having a
working definition, we think it clear from the record that “management” refers to those
employees classified by Avaya as managers.
The second important fact the court would have noticed is this: backbone
engineers are not among the employees classified by the company as “occupational.”
That Avaya held this view is plain from its corporate title guide, which classifies
backbone engineers as management, as well as from its benefits program, which creates
separate plans for managers and occupational employees and specifies that backbone
engineers will participate in only the former. But Avaya also introduced evidence of
CWA sharing the company’s understanding of backbone engineers. Documents from
previous grievance disputes show CWA representatives referring to backbone engineers
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as management employees. In one grievance, CWA complained about backbone
engineers performing dispatching and routing work that should have been reserved for
occupational workers. In a second, the union complained about Avaya unlawfully
shifting bargained-for work to management positions (like backbone engineers) in order
to justify layoffs. Implicit in these grievances is the notion that backbone engineers are
managers who should not be performing work reserved for represented employees—
further support for Avaya’s argument about a mutual understanding—backbone
engineers are managers.
The record provides forceful evidence that parties did not contractually consent to
arbitrate disputes over Avaya’s backbone engineers. The Neutrality Agreement provides
a process for resolving disputes arising from organizing drives directed at “non-
management employees.” If, as the evidence establishes, the parties understood the term
“management” to denote non-occupational employees; and if there is no real dispute
about the classification of backbone engineers as non-occupational; there can be only one
conclusion to draw from the record: the parties did not consent to submit the underlying
dispute to arbitration.
CWA contends the district court had no business evaluating the Neutrality
Agreement because the scope of the agreement was not before the court as a part of
CWA’s motion to compel arbitration. Rather, the question presented to the district court
concerned the scope of the CBA and the arbitrability of the underlying arbitration
dispute; that is, the court was asked to decide whether the parties agreed to arbitrate their
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disagreement over the status of backbone engineers under the Neutrality Agreement. In
CWA’s view, a judicial determination that the parties did not consent to arbitrate the
labor dispute under the Neutrality Agreement would be an answer to a question never
asked.
The inquiry cannot be so easily compartmentalized. While it is true the question
of arbitrability under the Neutrality Agreement was not directly before the court, it was a
question the court was nevertheless required to answer. The presumption favoring
arbitration does not apply when the dispute itself concerns arbitration. Peabody Holding
Co. v. United Mine Workers, 665 F.3d 96, 102 (4th Cir. 2012). Such disputes are to be
resolved by the courts unless the parties have agreed, in “clear and unmistakable” terms,
to submit them to arbitration. Rent-A-Center, W., Inc. v. Jackson, 130 S.Ct. 2772, 2783
(2010).
In this case it is neither “clear” nor “unmistakable” that the parties agreed the
dispute resolution procedures in the CBA would cover arbitration disputes arising under
the Neutrality Agreement. It is not enough for the parties to have an arbitration clause
purporting to sweep up all disputes arising from the labor agreement. See Peabody
Holding Co., 665 F.3d at 102 (“The ‘clear and unmistakable’ standard is exacting, and
the presence of an expansive arbitration clause, without more, will not suffice.”). Yet
that is precisely the type of clause we have here: “[the arbitration provisions] provide the
mutually agreed upon and exclusive forums for resolution and settlement of employee
disputes during the term of this agreement.” Nothing in that sentence suggests the parties
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meant to reserve for the arbitrator disputes about arbitrability, much less disputes arising
under an entirely independent arbitration clause in the Neutrality Agreement.
In the end, the district court had its presumptions backwards: instead of applying
the presumption in favor of arbitration, it should have applied the presumption in favor of
judicial resolution. The court should have begun its analysis by asking whether the
parties did or said anything to rebut the presumption that questions about the arbitrability
of an arbitration dispute will be resolved by the courts. Assuming the answer was no, the
court should have then determined whether there was a fact issue regarding the parties’
consent to submit to arbitration the dispute over the backbone engineers. Any doubts in
this regard could have been resolved in favor of arbitration, see United Steelworkers, 363
U.S. at 582, but as we have already explained, the record leaves no room for doubt: a
plain reading of the Neutrality Agreement confirms Avaya’s assertion that the parties
never agreed to submit the dispute to arbitration. The district court should have denied
CWA’s motion to compel arbitration and dismissed the case.
For the foregoing reasons, we REVERSE the district court’s order compelling
arbitration and REMAND for resolution consistent with this opinion.
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