Condere Corporation v. Local Union 303L ( 2000 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-60037
CONDERE CORPORATION,
doing business as Servis Fleet Tire Company,
doing business as Fidelity Tire and Manufacturing Company
Debtor.
------------------------------------------------------------
LOCAL UNION 303L.
Appellant,
v.
CONDERE CORPORATION,
doing business as Servis Fleet Tire Company,
doing business as Fidelity Tire and Manufacturing Company
Appellee.
Appeal from the United States District Court for the
Southern District of Mississippi
(3:97-CV-471)
July 11, 2000
Before REYNALDO G. GARZA, JONES, and EMILIO M. GARZA, Circuit
Judges.
PER CURIAM:*
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
The United Steelworkers of America and its Local Union
303L (collectively, the “Union”) appeal the district court’s
application of judicial estoppel to prevent arbitration of certain
grievances under its collective bargaining agreement with Condere
Corporation (“Condere”). Because the requirements for judicial
estoppel have not been met in this case, we vacate the district
court’s order as to the arbitrability of the Union’s grievances and
remand for further proceedings.
I. BACKGROUND
Until June 1997, Condere Corporation operated a tire
manufacturing facility in Natchez, Mississippi. Local Union 303L
was the collective bargaining representative for the employees at
this plant. On May 13, 1997, Condere filed a Chapter 11 bankruptcy
petition.1 Condere shut down most of its production, and on June
27, it stopped all production and closed the plant.
Contemporaneously, Condere filed a motion under 11 U.S.C. § 1113 to
reject the collective bargaining agreement (“CBA”) between it and
the Union. The reference was withdrawn to the district court under
28 U.S.C. § 157(d) on the court’s motion.
In a hearing on the motion shortly thereafter, the Union
opposed rejection and argued that the court should direct the
parties to continue negotiating a new bargaining agreement. The
1
In re Condere Corporation, 228 B.R. 615 (Bankr. S.D. Miss. 1998).
2
district court so ordered, and in the next few weeks, the parties
were able to resolve most, but not all, outstanding disputes. They
then agreed and stipulated in a conference with the court that the
court had jurisdiction and authority, with the parties’ consent, to
determine the few remaining unresolved issues by rejecting the CBA
on certain stated conditions. These conditions would consist of
the court’s choosing the position of one party over the other,
thereby resolving the remaining issues between them. The district
court complied with the parties’ wishes, issuing an order (the
“Rejection Order”) on August 18, 1998 that denied rejection of the
CBA as to certain disputed items and allowed rejection as to
others.
The Union had initially opposed rejection on grounds that
Condere had violated the CBA after filing its bankruptcy petition
and had thereby forfeited rejection under § 1113. These alleged
violations were detailed in numerous grievances the Union had filed
against Condere. Following the Rejection Order, the Union
attempted to submit these post-petition grievances to arbitration,
in accordance with the grievance and arbitration provisions of the
CBA. Condere responded that the Rejection Order precluded
arbitration of the grievances.
Several more disputes over the interpretation of the
Rejection Order arose between the parties, and they again went
before the district court. On December 21, 1998, the court issued
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an order (the “Clarification Order”), finding, inter alia, that the
Union was judicially estopped from arbitrating post-petition
grievances. Following the court’s rejection of the Union’s motion
to reconsider, the Union filed this appeal challenging the court’s
application of judicial estoppel to bar arbitration of the Union’s
post-petition grievances.2
II. DISCUSSION
Because the decision to invoke judicial estoppel lies
within the court’s discretion, we review the decision to invoke
this doctrine for abuse of discretion. In re Coastal Plains, Inc.,
179 F.3d 197, 205 (5th Cir. 1999); Ergo Science, Inc. v. Martin, 73
F.3d 595, 598 (5th Cir. 1996); Data General Corp. v. Johnson, 78
F.3d 1556, 1565 (Fed. Cir. 1996). A district court abuses its
discretion when it makes an error of law or clearly erroneous
factual findings. Koon v. United States, 518 U.S. 81, 100, 116
S. Ct. 2035 (1996); see also Latvian Shipping Co. v. Baltic Shipping
Co., 99 F.3d 690, 692 (5th Cir. 1996). Because judicial estoppel
was raised in the context of a bankruptcy case, we will apply
federal law here. In re Coastal Plains, 179 F.3d at 205.
2
The Clarification Order was a final decision on a discrete matter in
the larger bankruptcy case, effectively foreclosing any adjudication on the
merits, by arbitration or otherwise, of the Union’s post-petition grievances.
It was therefore a final order within the meaning of 28 U.S.C. § 1291. See
Official Committee of Unsecured Creditors v. Cajun Elec. Power Co-op, Inc., 119
F.3d 349, 353-54 (5th Cir. 1997).
4
Judicial estoppel is a common law doctrine that “prevents
a party from asserting a position in a legal proceeding that is
contrary to a position previously taken in the same or some earlier
proceeding.” Ergo Science, 73 F.3d at 598. The doctrine’s purpose
is to protect the integrity of the judicial process by preventing
the parties from playing “fast and loose with the courts to suit
the exigencies of self-interest.” In re Coastal Plains, 179 F.3d
at 205, quoting Brandon v. Interfirst Corp., 858 F.2d 266, 268 (5th
Cir. 1988). Because the doctrine is intended to protect the
judicial system rather than the litigants, there is no requirement
of detrimental reliance by the opponent of the party against whom
the doctrine is applied. In re Coastal Plains, 179 F.3d at 205.
This circuit applies judicial estoppel circumspectly and
thus requires that (1) the position of the party to be estopped
must be clearly inconsistent with its previous position, and
(2) the party to be estopped must have convinced the court to
accept the previous position. See In re Coastal Plains, 179 F.3d
at 206. In addition, the party to be estopped must have acted
intentionally, not inadvertently. See id.
The district court applied judicial estoppel based on its
belief that the Union could not have stipulated to rejection
without also abandoning its post-petition grievances against
Condere. In its Clarification Order, the court noted that the CBA
could only be rejected in accordance with 11 U.S.C. § 1113 and that
5
§ 1113(f) prohibited Condere from unilaterally terminating or
modifying the CBA before rejection. See In re Alabama Symphony
Ass’n, 211 B.R. 65, 71 (N.D. Ala. 1996)(breach of a CBA constitutes
violation of § 1113(f) precluding rejection). The Union relied on
Alabama Symphony in opposing rejection, precisely because Condere
had allegedly committed post-petition violations of the CBA. When
the Union reversed course and stipulated to rejection the district
court concluded that the Union had “implicit[ly]” abandoned its
position that Condere committed post-petition violations of the
CBA:
From their joint stipulation to rejection, the court
concluded that the parties’ understanding, vis-á-vis
their future relationship, was that by-gones were by-
gones. . . . [T]he court assumed from their conduct and
representation that the parties intended a “fresh start”
in all respects. The court relied on this implicit
representation in rejecting the specific provisions of
the CBA. The court therefore finds that, by voluntarily
stipulating to rejection under § 1113, the Union is
judicially estopped from asserting that Condere engaged
in conduct that precluded rejection of the CBA.
December 21, 1998 Order at 5.
Though the Union raises several objections to this order,
its chief contention -- that the requirements of judicial estoppel
were not met in this case -- is sufficient to do the job. In
particular, the record supports the Union’s assertion that there
was no clear inconsistency between its stipulation to rejection and
its attempt to arbitrate post-petition grievances. Because this
prerequisite of judicial estoppel is not met, we need not discuss
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whether an inconsistency must be factual or whether the Union in
some sense “prevailed” in the rejection proceeding.
In stipulating to the court’s jurisdiction to reject on
conditions, the Union took no position on whether violations of the
CBA had occurred. It never stated, in a hearing or by brief, that
its grievances were not arbitrable or that it was abandoning
arbitration. Rather, by stipulating to rejection, the Union waived
or withdrew its legal argument under Alabama Symphony that certain
violations of the CBA prevented rejection. This change of position
in the context of the rejection proceedings did not necessarily
implicate the Union’s position on the arbitrability of its
grievances. Indeed, the rejection of the CBA under § 1113 is a
different proceeding in bankruptcy court than dealing with post-
petition, pre-rejection breaches of a CBA.3
And even if the district court had been correct in
finding that the Union had implicitly abandoned its grievances by
stipulating to rejection, judicial estoppel was not warranted.
This circuit has never held that judicial estoppel is appropriate
when a party’s change of position is merely implied rather than
3
Moreover, we reject any suggestion on Condere’s part that arbitration
of Union’s grievances is inherently inconsistent with rejection. It was Condere,
after all, which argued in the rejection proceedings that the grievances were
arbitrable and that the CBA should be rejected.
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clear and express.4 Moreover, a recent Supreme Court decision
counsels against overbroad application of judicial estoppel. See
Cleveland v. Policy Management Systems Corp., 526 U.S. 795, 119
S. Ct. 1597 (1999). In Cleveland, the Court reversed a decision
that estopped an individual who had previously filed for social
security disability benefits (“SSDI”) from asserting a claim under
the Americans with Disabilities Act (“ADA”). See Cleveland, 526
U.S. at 807. While the Court noted the apparent conflict existing
in such a case (an SSDI recipient must be unable to work while an
ADA plaintiff must be able to perform essential job functions), the
Court found there was no inherent inconsistency that would justify
a presumption of estoppel. It reasoned that the assertions
required to make claims under SSDI and the ADA are not factual
statements but rather “context-dependent legal conclusion[s]” that
often “comfortably exist side by side” despite apparent conflict.
See id. at 802-03.
While Cleveland does not directly control this case, its
cautious approach to estoppel counsels against extending the
application of judicial estoppel to a party’s implied changes of
legal position. Cleveland lends support to this circuit’s rule
limiting judicial estoppel to cases where a party’s position is
4
See, e.g., Ergo Science, 73 F.3d at 600 (applying judicial estoppel
based on statement made in open court); Hidden Oaks v. City of Austin, 138 F.3d
1036, 1047 (5th Cir. 1998)(same).
8
clearly inconsistent with its previous one.5 To the extent the
district court believed that an implied representation rather than
an express inconsistency could support a finding of judicial
estoppel, it misapprehended the law and abused its discretion.
III. CONCLUSION
In sum, the district court abused its discretion in
applying judicial estoppel to bar arbitration of the Union’s
post-petition grievances. There was no clear inconsistency
between the Union’s position on rejection and its position on
arbitration. Furthermore, the district court misapprehended the
law in finding that anything less than clear inconsistency could
support the application of judicial estoppel.
For the foregoing reasons, the district court’s order
of December 21, 1998 order is VACATED as to the arbitrability of
the Union’s post-petition grievances and REMANDED for further
proceedings. In so doing, we take no position on whether other
considerations might bar the Union’s arbitration of post-petition
grievances.
5
Under some factual circumstances, it may be possible to make a
showing of clear inconsistency on the basis of an implied representation, but
this is not such a case.
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