Intl Union v. Cummins Engine Co ( 2006 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 06a0022p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
Plaintiffs-Appellees, -
INTERNATIONAL UNION et al.,
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No. 05-3190
v.
,
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CUMMINS, INC., -
Defendant-Appellant. -
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Appeal from the United States District Court
for the Northern District of Ohio at Toledo.
No. 04-07125—James G. Carr, Chief District Judge.
Argued: December 9, 2005
Decided and Filed: January 18, 2006
Before: DAUGHTREY, GILMAN, and SUTTON, Circuit Judges.
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COUNSEL
ARGUED: Gregory J. Utken, BAKER & DANIELS, Indianapolis, Indiana, for Appellant. Joan
Torzewski, HARRIS, RENY & TORZEWSKI, Toledo, Ohio, for Appellees. ON BRIEF: Gregory
J. Utken, Dustin D. Stohler, BAKER & DANIELS, Indianapolis, Indiana, for Appellant. Joan
Torzewski, HARRIS, RENY & TORZEWSKI, Toledo, Ohio, for Appellees.
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OPINION
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RONALD LEE GILMAN, Circuit Judge. In this labor arbitration dispute, the primary issue
is whether the suit to compel arbitration filed by International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America, and its Local 336 (collectively, the Union) was
barred by the statute of limitations. This appeal also raises issues as to whether the underlying
dispute was arbitrable and whether the Union’s suit was barred by laches.
The Union was the recognized collective bargaining agent for employees at the Atlas
Crankshaft Factory in Fostoria, Ohio for many years. Cummins, Inc. owned the Atlas plant until
1999, when it was sold to Krupp Hoesch Automotive of America, Inc. The Union and Cummins
negotiated a Plant Sale Agreement (PSA) that obligated Cummins to fund “Plan B,” a pension plan
benefitting former hourly employees who had worked at the Atlas plant and hourly employees who
would continue to work there after the sale to Krupp. The PSA provided that Plan B was not to be
amended or terminated without the mutual consent of the Union and Cummins. In late 1999,
Cummins determined that Plan B was underfunded, and it notified the Union that it was considering
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No. 05-3190 Int’l Union et al. v. Cummins Page 2
merging Plan B into Cummins’s well-funded Plan A for its other employees. This merger occurred
in October of 2001. In December of 2001, the Union notified Cummins that, in its view, the merger
violated the “no termination/no amendment” clause of the PSA, and it filed a grievance.
Over the next two-and-a-half years, the Union and Cummins corresponded regarding the
arbitrability of the grievance, culminating in the Union filing suit to compel arbitration in March of
2004. The district court granted summary judgment in favor of the Union, holding that the Union’s
action to compel arbitration was timely, that the dispute was arbitrable, and that Cummins’s laches
defense was inapplicable. For the reasons set forth below, we AFFIRM the judgment of the district
court and REMAND the case for referral to arbitration.
I. BACKGROUND
Article 5 of the PSA requires Cummins to sponsor and fund Plan B, and further provides
that “[t]he plan shall not be amended or terminated except by mutual agreement between the
Company and the Union except as may be required by law or regulation.” On the other hand,
Article XIX of Plan B outlines the benefits that the employees are to receive “[i]n the case of any
merger or a consolidation with, or transfer of assets or liabilities to, any other plan.” Finally,
Cummins and the Union agreed in Article 16 of the PSA to arbitrate any alleged breaches of the
PSA.
Cummins determined in 1999 that Plan B was underfunded. It then notified the Union that
it wanted to merge Plan B into Plan A, the pension plan covering Cummins’s salaried employees
and executives. Ken Lortz, the Union’s Assistant Regional Director, requested information about
the merger from Hudnall Pfeiffer, Cummins’s counsel, and suggested that the parties arrange a
conference call to discuss the potential merger. Lortz and Pfeiffer corresponded over the next few
months, with Lortz asking for information about the details of the merger and Pfeiffer submitting
information regarding the funding methods, assets, and liabilities of Plan B.
In August of 2000, Cummins’s employee David Wright told Lortz that Cummins was no
longer interested in merging the plans. But Cummins had filed a Notice of Plan Merger with the IRS
in 1999 and never in fact abandoned the proposed merger. David Price, a Cummins employee, first
notified Lortz in November of 2001 that the merger had taken place the prior month.
On December 3, 2001, the Union filed a Notice of Intent to Arbitrate, claiming that the
merger violated Article 5 of the PSA, which provides that Plan B is not to be amended or terminated
without the Union’s consent. The parties communicated over the next two-and-a-half years
concerning the alleged breach of the PSA. A summary of their relevant conversations and
correspondence is set forth below:
February 14, 2002: Telephone call between Pfeiffer and Lortz
! Lortz accuses Pfeiffer of acting in bad faith and asks Pfeiffer to send him information
concerning the merger.
February 20, 2002: Letter from Pfeiffer to Lortz
! Claims that the merger discussions with Lortz got “bogged down.”
! Indicates that the PSA contemplated a merger and that the merger did not require amending
or terminating the plan.
March 14, 2002: Letter from Pfeiffer to Lortz
! Attaches a “redlined” copy of Plan B, but states that none of the changes are relevant to the
merger.
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June of 2003: Lortz and Dave Glover, a Cummins executive, mutually select an arbitrator to hear
the case.
June 9, 2003: Letter from Lortz to Pfeiffer
! Acknowledges that the grievance is still unresolved.
! Notifies Pfeiffer that Cummins and the Union have mutually selected an arbitrator.
! Offers to contact the arbitrator in order to set up mutually acceptable dates for a hearing.
June 23, 2003: Letter from Pfeiffer to Lortz
! States that he is “surprised” that the Union is still pursuing the arbitration and that he had
assumed the Union had dropped the matter.
! Reminds Lortz of an earlier conversation when Cummins explained that the plan was not
“amended” when the merger occurred.
! Reiterates that the company is responsible for funding the plan and that the merger saved the
plan from underfunding.
! Claims that the employees are actually better off after the merger.
! Reminds Lortz of his promise to have Sharon Meadows, counsel for the Union, contact
Pfeiffer and “once again request[s]” the Union to forward him “any legal authority or other
basis to support its conclusion that Cummins should have amended the plan.”
! Claims that the grievance is not arbitrable because the PSA prohibits amending the plan, but
does not prohibit failing to amend the plan. So, if the Union’s position is that Cummins
should have amended the plan, there is no breach.
June 26, 2003: Letter from Lortz to Pfeiffer
! “[T]akes exception” with Cummins’s “twist[ed]” characterization of the Union’s position.
! Argues that whether an issue is arbitrable is for the arbitrator to decide.
! Claims that the Union’s position—that Cummins’s decision to unilaterally amend the plan
violated the PSA—has not changed.
! States that the Union “intend[s] to move forward to arbitration” unless it reaches an
agreement with Cummins.
July 9, 2003: Letter from Pfeiffer to Lortz
! Claims that whether the plan was amended was not in dispute.
! Cites caselaw holding that the issue of arbitrability is one for the court, rather than the
arbitrator, to decide.
! Argues that the merger benefitted, rather than harmed, the bargaining-unit employees.
! Suggests that “it is time to move on.”
August 1, 2003: Telephone call between Lortz and Pfeiffer
! Pfeiffer informed Lortz that the grievance is not arbitrable and requested again that the
Union forward him the legal basis for its position.
August 20, 2003: Letter from Pfeiffer to Lortz
! States that the attempt to schedule a conference call was fruitless.
! Requests that the Union provide Pfeiffer with a statement of its position and supporting legal
authority.
September 3, 2003: Letter from Joan Torzewski (counsel to the Union) to Pfeiffer
! Articulates the Union’s position that “a merger constitutes an amendment.”
! States that “[n]either the collective bargaining agreement nor applicable case law” requires
the Union to provide legal support for its position, because a party does not have to establish
the underlying merits of a claim before arbitration.
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! Blames Cummins for the “inordinate delay” and states: “We would like to ask the arbitrator
for dates. If you are refusing to arbitrate this matter please advise within the next ten (10)
days so that the Union may begin the appropriate litigation to compel arbitration.”
September 16, 2003: Letter from Pfeiffer to Torzewski
! Claims that the Union voluntarily agreed to provide Cummins with authority for the Union’s
position.
! Urges Torzewski to reconsider her position in light of this background and again requests
information regarding legal authority.
October 15, 2003: Letter from Torzewski to Pfeiffer
! Clarifies that the Union’s position is not that Cummins should have amended the plan, but
that the merger constituted a unilateral amendment.
! Claims that it is up to the arbitrator to determine whether Cummins breached the agreement.
! Hopes that the parties will “promptly progress to arbitration.”
February 12, 2004: Letter from Torzewski to Pfeiffer
! Notes that Pfeiffer did not respond to her October 15th letter.
! Asks if the arbitration should proceed on the briefs or with a hearing.
March 4, 2004: Letter from Pfeiffer to Torzewski
! Claims that the Union has never pointed to specific language in the plan that constitutes an
amendment.
! States that Cummins “continue[s] to believe that there is no dispute under the Plant Closing
Agreement that is arbitrable.”
Following Pfeiffer’s last letter, the Union filed suit to compel arbitration on March 17, 2004.
The district court granted summary judgment in favor of the Union, rejecting Cummins’s argument
that the suit was barred by the statute of limitations and laches. Because the parties agreed to
arbitrate “alleged breaches of the [Plant Sale] [A]greement,” the district court determined that the
grievance was arbitrable. This timely appeal followed.
II. ANALYSIS
A. Standard of review
The district court’s grant of summary judgment is reviewed de novo. Minadeo v. ICI Paints,
398 F.3d 751, 756 (6th Cir. 2005). Summary judgment is proper where there exists no genuine issue
of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c). In considering a motion for summary judgment, the district court must construe the evidence
and draw all reasonable inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The central issue is “whether the evidence
presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that
one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52
(1986).
B. Statute of limitations
The Union and Cummins agree that the present suit is governed by the six-month statute of
limitations established by Section 10(b) of the National Labor Relations Act (NLRA). See
DelCostello v. Int’l Bhd. of Teamsters et al., 462 U.S. 151, 169 (1983) (applying the six-month
statute of limitations from the NLRA to claims made against employers or unions pursuant to 29
U.S.C. § 165). As applied to this case, the period begins to run “when the employer takes an
No. 05-3190 Int’l Union et al. v. Cummins Page 5
unequivocal position that it will not arbitrate.” McCreedy v. Local Union No. 971 et al., 809 F.2d
1232, 1237 (6th Cir. 1987) (holding that the six-month statute of limitations barred the employees’
claim). Because the Union filed its action to compel arbitration on March 17, 2004, the question
is whether Cummins unequivocally communicated its refusal to arbitrate before September 17, 2003.
The Union believed that Cummins’s refusal was equivocal until March 4, 2004, just 11 days
before the Union filed its suit in the district court. Cummins argues, however, that it unequivocally
communicated its refusal to arbitrate in June, July, and August of 2003. In the June 23, 2003 letter
from Pfeiffer to Lortz, Pfeiffer claims that he was “surprised” that the Union was still pursuing the
grievance because he assumed that the Union had dropped the matter. Pfeiffer also stated that the
grievance was not arbitrable, and he requested that the Union provide him with legal authority for
its position. In his July 9, 2003 letter to Lortz, Pfeiffer suggested that the Union “move on.”
Finally, in the telephone calls and letters exchanged between Pfeiffer and Lortz in August of 2003,
Pfeiffer both stated that the grievance was not arbitrable and requested that the Union explain its
position and the authority on which that position rested. Cummins bases its statute-of-limitations
defense on these communications in the summer of 2003.
The cases on which Cummins relies to support the claim that its refusal to arbitrate was
unequivocal, however, are easily distinguishable. Cummins first draws an analogy with
Communications Workers of America v. Western Electric Co., 860 F.2d 1137 (1st Cir. 1988) (CWA)
(holding that the union’s suit was barred by the six-month statute of limitations). In CWA, the First
Circuit held that the company’s refusal to arbitrate was “immediate, blunt, and to the point” because
it flatly refused to arbitrate despite four requests from the union. Id. at 1145. Cummins’s responses
to the Union in the present case, in contrast, were not immediate, blunt, or to the point. Although
the company in CWA immediately notified the union that it was refusing to arbitrate, Cummins and
the Union in the present case mutually selected an arbitrator in June of 2003, just days before
Cummins claims that its refusal to arbitrate was unequivocal. Far from being blunt, Cummins
“respectfully suggest[ed]” that the Union “move on,” and it repeatedly asked for clarification of the
Union’s position. Although Cummins did state that the grievance was not arbitrable, its refusal was
peppered with other comments indicating that it was willing to negotiate. Cummins, moreover,
failed to respond to the Union’s September 3, 2003 letter that specifically asked Cummins to
indicate whether it was refusing to arbitrate the grievance. After ignoring the Union’s direct request,
Cummins cannot now claim that its refusal to arbitrate was unequivocal in the summer of 2003.
The second case on which Cummins relies is International Union v. Michigan Plastics
Products Co., No. G89-10608, 1990 WL 482463 (W.D. Mich. Oct. 22, 1990) (unpublished) (holding
that the union’s case was barred by the six-month statute of limitations). This case is also
inapposite. In Michigan Plastics, as in CWA, the company promptly refused to arbitrate without
ever indicating otherwise. Id. at *1. Cummins, however, repeatedly asked the Union to clarify its
position, suggesting that it did not understand the Union’s argument. As the district court stated,
“If [Cummins] did not understand the issue and the claim—and it admitted as much in its letters—it
could not have unequivocally refused to arbitrate the dispute.”
Cummins attempts to undermine the district court’s reasoning by asserting that “[p]ublic
policy is better served by a rule that permits the declining party to at least listen to the other party’s
attempt to change its mind during the limitations period.” This argument, however, is not supported
by the caselaw. The applicable standard requires that the refusal be unequivocal, which implies that
any negotiation must occur before the company refuses to arbitrate and the statute of limitations
begins to run. In CWA, for example, the court stated that there is ample time for informal
negotiation before the employer unequivocally refuses to arbitrate, and that “a suit to compel
arbitration will be necessary only when more casual processes of dispute resolution have
irretrievably collapsed.” 860 F.2d at 1144. Although the labor laws encourage the parties to “listen”
to each other, the unequivocal refusal to arbitrate required by the caselaw suggests that the employer
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must essentially determine that negotiation or persuasion is not feasible before the statute of
limitations will begin to run.
Cases from other circuits support this conclusion. In Aluminum Brick and Glass Workers
International Union v. AAA Plumbing Pottery Corp., 991 F.2d 1545 (11th Cir. 1993), for example,
the Eleventh Circuit held that the union’s motion to compel arbitration was not barred by the six-
month statute of limitations period because the company’s statements that “I’m sure you will agree
that the matter is closed” and “I . . . would be interested to see what the Union’s position is” were
not unequivocal refusals to arbitrate. Id. at 1548; see also Indep. Coca-Cola Employees’ Union of
Lake Charles v. Coca-Cola Bottling Co. United Inc., 114 F. App’x 137, 142 (5th Cir. 2004)
(unpublished) (distinguishing Aluminum Brick because “there is no record evidence that Coca-Cola
engaged in any conduct subsequent to its . . . letter that could be seen as casting doubt on its stated
position.”); Int’l Ass’n of Machinists v. Caribe, 913 F. Supp. 105, 109 (D. P.R. 1996) (holding that
a letter from the company to the union requesting clarification of the union’s position was not an
unequivocal refusal to arbitrate because it “suggest[ed] that perhaps the disagreement between the
parties involved a misunderstanding, and not a difference of opinions about which no compromise
could be reached”), aff’d in pertinent part, 108 F.3d 422 (1st Cir. 1997). Similarly, the district court
in the present case held that “[g]iven [Cummins’s] repeated requests for counter-argument,” the
refusal to arbitrate was deemed equivocal until March of 2004.
But Cummins argues that the district court’s conclusion that the refusal was equivocal until
March of 2004 is illogical because the company’s letter that month stated that “[Cummins] continues
to believe” that the dispute is not arbitrable. (Emphasis added.) According to Cummins, the use of
the word “continues” proves that its refusal was unequivocal long before the March 2004 letter.
This argument, however, ignores the broader context of the discussions between Cummins and the
Union. Although Cummins did state in June of 2003 that the grievance was not arbitrable, its
subsequent conduct, discussed above, suggested that it was still open to negotiating with the Union.
Because the March 4, 2004 letter was the only one that stated the grievance was not arbitrable
without requesting further information from the Union, we believe that this is the date when
Cummins’s refusal to arbitrate became unequivocal.
Finally, Cummins argues that the Union promised to provide authority for its position but
repeatedly refused to do so. The brief answer to this argument is: So what? Even if the Union had
agreed to enlighten Cummins with legal authority, Cummins does not claim that the Union was
legally required to do so. If Cummins’s refusal was truly unequivocal before March of 2004,
moreover, it would have been unpersuaded regardless of the Union’s position. We therefore agree
with the district court’s holding that the six-month statute of limitations does not bar the Union’s
suit.
C. The arbitrability of the grievance
Cummins also argues on appeal that the district court erred in concluding that the parties had
agreed in the PSA to arbitrate the type of dispute in question. Whether a dispute is arbitrable is
governed by four principles set forth in AT&T Technologies, Inc. v. Communications Workers, 475
U.S. 643, 648-51 (1986) (holding that arbitrability is for the court, rather than the arbitrator, to
decide). The four principles have been summarized by this court as follows:
1) a party cannot be forced to arbitrate any dispute that it has not obligated itself by
contract to submit to arbitration; 2) unless the parties clearly and unmistakably
provide otherwise, whether a collective bargaining agreement creates a duty for the
parties to arbitrate a particular grievance is an issue for judicial determination; 3) in
making this determination, a court is not to consider the merits of the underlying
claim; and 4) where the agreement contains an arbitration clause, the court should
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apply a presumption of arbitrability, resolve any doubts in favor of arbitration, and
should not deny an order to arbitrate unless it may be said with positive assurance
that the arbitration clause is not susceptible of an interpretation that covers the
asserted dispute.
United Steelworkers of Am. v. Mead Corp., 21 F.3d 128, 131 (6th Cir. 1994) (holding that the
dispute was subject to arbitration where the company failed to produce any forceful evidence to
suggest that the grievance should be excluded from arbitration) (citation and quotation marks
omitted). In cases involving broad arbitration clauses, moreover, this court has “found the
presumption of arbitrability ‘particularly applicable,’” and arbitration will be denied only if an
express provision excludes a particular grievance from that forum. Id.
Although Cummins acknowledges that the PSA prohibits amendment or termination of Plan
B without mutual consent, Cummins claims that Plan B was not amended or terminated because the
plan gives Cummins the option of funding the plan by merging it with another plan. It also disagrees
with the district court’s determination that “the Union does not need to show breach; it merely needs
to allege it.”
Cummins’s arguments, however, would require us to consider the underlying merits of the
claim, an inquiry prohibited by both AT&T, 475 U.S. at 648-51, and Mead, 21 F.3d at 131. As the
district court held:
The courts . . . have no business weighing the merits of the grievance, considering
whether there is equity in a particular claim, or determining whether there is
particular language in the written instrument which will support the claim. The
agreement is to submit all grievances to arbitration, not merely those which the court
will deem meritorious.
(quoting from United Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564, 567-68 (1960)). The PSA
clearly states that the parties agree to arbitrate any “alleged breach.” Here, the Union alleges that
Cummins breached the agreement by amending Plan B without its consent, and whether the Union
is correct is for the arbitrator to decide. See AT&T, 475 U.S. at 648-51. We therefore agree with the
district court’s holding that the issue is arbitrable.
D. Cummins’s laches defense
Cummins’s final argument is that the Union’s suit is barred by laches. The district court
disagreed, holding that “the delay was caused by the failure of the parties to communicate their
respective positions,” and that Cummins could not raise the defense when its failure to fully respond
to the Union’s September 3, 2003 letter was a significant cause of the delay.
Laches is an equitable defense to arbitration that is properly considered by the court rather
than by the arbitrator. Amalgated Clothing Workers of Am. v. Ironall Factories Co., 386 F.2d 586,
591-92 (6th Cir. 1967) (holding that the union’s suit was barred by laches). The laches inquiry
consists of two elements: (1) whether there was unwarranted delay, and (2) whether the delay was
detrimental to the party raising the defense. See id. at 592. In Ironall, the court held that the union’s
claim was barred by laches where it failed to notify the company of the dispute until over one year
after the dispute arose and six months after the company sold its assets, and where the union waited
eleven months after its initial notification before requesting arbitration. Id. Because Ironall had sold
its assets and “exist[ed] in name alone,” the court held that the union’s delay caused “serious
impediments” to Ironall’s ability to present a proper defense. Id.
The delay in the present case, though substantial, was not unwarranted. The Union first
learned in November of 2001 that the pension plans had been merged. It filed a Notice of Intent to
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Arbitrate just one month later. Over the next two-and-a-half years, the Union and Cummins
exchanged many letters and telephone calls regarding the dispute and, as discussed above, the Union
reasonably thought that Cummins was amenable to negotiating when Cummins not only participated
in selecting an arbitrator in June of 2003, but also continued to ask the Union to clarify its position.
In September of 2003, when the Union specifically asked Cummins to “advise within the next ten
days” if it was refusing to arbitrate, Cummins ducked the inquiry and instead responded with yet
another request for legal authority to support the Union’s position. Cummins then failed to further
communicate with the Union until March of 2004, despite two attempts by the Union (with letters
dated October 15, 2003 and February 12, 2004) to determine if Cummins was willing to arbitrate
the dispute.
The delay on the Union’s part was therefore excusable under the circumstances. Because
Cummins cannot satisfy the first element of the laches defense, we need not consider the prejudice
element. See Ironall, 386 F.2d at 592. We therefore agree with the district court’s holding that
laches does not bar the Union’s claim.
III. CONCLUSION
For all of the reasons set forth above, we AFFIRM the judgment of the district court and
REMAND the case for referral to arbitration.