Robert Yeftich v. Navistar, Inc. , 722 F.3d 911 ( 2013 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 12-2964
R OBERT Y EFTICH, et al.,
Plaintiffs-Appellants,
v.
N AVISTAR, INC., and
INDIANAPOLIS C ASTING C ORP.,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:09-cv-01045—Sarah Evans Barker, Judge.
A RGUED F EBRUARY 27, 2013—D ECIDED JUNE 18, 2013
Before F LAUM and S YKES, Circuit Judges.Œ
S YKES, Circuit Judge. We review here the dismissal of
a complaint filed by a group of unionized workers at
a Navistar engine plant in Indianapolis, Indiana. The
Œ
Circuit Judge John Daniel Tinder recused himself and did
not participate in the decision of this appeal, which is being
resolved by a quorum of the panel. See 28 U.S.C. § 46(d).
2 No. 12-2964
plaintiffs alleged that they were laid off by Navistar
and not rehired as work became available because
the company had actually subcontracted their work to
nonunion plants in contravention of the governing
collective-bargaining agreement. The workers brought
this action against Navistar under section 301 of the
Labor Management Relations Act (“LMRA”) for breach
of the collective-bargaining agreement.
A successful section 301 claim requires not only a
breach of contract by the employer but also a breach by
the plaintiffs’ union of its duty of fair representation.
The latter is required because the union is responsible
for representing its members’ interests and addressing
their complaints pursuant to whatever grievance pro-
cess is set up by the relevant collective-bargaining agree-
ment. Only when the union fails to carry out that
duty may union members pursue section 301 litigation
against their employer. To satisfy this requirement, the
plaintiffs alleged that they filed grievances challenging
Navistar’s subcontracting of work but the union inten-
tionally failed to process the grievances in breach of its
duty of fair representation. The district court held that
the complaint lacked enough factual content to plead
a plausible claim for breach of the duty of fair representa-
tion and therefore dismissed the LMRA claim.
We affirm. The complaint identifies the elements of
a duty-of-fair-representation claim and contains allega-
tions that each element is satisfied. But we agree with
the district court that because the allegations are almost
all conclusory, the complaint lacks the necessary factual
No. 12-2964 3
content to state a plausible claim under section 301 of
the LMRA.
I. Background
The plaintiffs are union members who worked for
Navistar, Inc., and its wholly owned subsidiary Indi-
anapolis Casting Corp. (collectively, “Navistar”), at its
engine-manufacturing plant in Indianapolis. They were
represented for collective-bargaining purposes by the
United Auto Workers, Local Union Nos. 98 and 226, and
their employment was subject to the terms of a collective-
bargaining agreement and related letters of agreement
and other contract documents (collectively, the “CBA”).
The plaintiffs alleged that on unidentified dates they
were laid off from their jobs at the plant, ostensibly
for lack of available work, but Navistar actually sub-
contracted their work to nonunion plants in contra-
vention of the CBA. They also alleged that Navistar
failed to recall them as work became available, also in
contravention of the CBA. They claim to have filed hun-
dreds of grievances with the union and were assured
by unnamed union officials that the grievances were
being processed. Instead, the grievances were actually
diverted or stalled. On January 27, 2009, Navistar in-
formed the union that it would be closing the Indiana-
polis plant; the plaintiffs allegedly heard this news at
some point after the union did. By August 2009 the
plant was closed.
The plaintiffs filed suit against Navistar under
section 301 of the LMRA, 28 U.S.C. § 185, alleging breach
4 No. 12-2964
of the CBA. When union members sue their employer
for breach of contract under section 301 of the LMRA,
they must also state a prerequisite claim of breach of
their union’s duty of fair representation. See Vaca v. Sipes,
386 U.S. 171, 186-87 (1967); Thomas v. United Parcel Serv.,
Inc., 890 F.2d 909, 914-16 (7th Cir. 1989). This is because
ordinarily, union members must first use the grievance
procedures specified in the CBA rather than directly
sue the employer; only when the union has breached
its duty to fairly represent the union members in that
grievance process may the union members bring a
claim against their employer. See, e.g., DelCostello v. Int’l
Bhd. of Teamsters, 462 U.S. 151, 163-64 (1983). In other
words, a section 301 suit is a “hybrid” claim consisting
of both a breach-of-fair-representation element and a
breach-of-contract element. Id. at 163-65. The breach-of-
fair-representation requirement applies whether or not
the plaintiffs name the union as a defendant in their
LMRA suit.
The district court dismissed the LMRA claim for
failure to state a claim, reasoning that the plaintiffs
had failed to adequately plead sufficient facts re-
garding the prerequisite element of the union’s breach
of its duty to fairly represent its members. The court
explained that most of the plaintiffs’ allegations in this
respect were conclusory, and the closest thing to a
specific factual allegation—that an unnamed union
official told the plaintiffs that their claims were being
processed when this was not true—was insufficient to
state a claim that the union breached its duty of fair
representation. A separate interference-with-benefits
No. 12-2964 5
claim under the Employment Retirement Income Security
Act of 1994 (“ERISA”), 29 U.S.C. §§ 1001, et seq., was later
resolved by summary judgment in favor of Navistar.
The plaintiffs appealed, initially seeking review of the
court’s orders on both the LMRA and ERISA claims.
Since then, 14 of the 43 plaintiffs abandoned their
appeal; we granted their counsel’s motion to withdraw
and dismissed their appeal for failure to prosecute.
The remaining plaintiffs press only the LMRA claim,
focusing specifically on the union’s failure to fairly repre-
sent them, so that is the sole issue we address here. Be-
cause our resolution of the duty-of-fair-representa-
tion issue is dispositive, we do not address Navistar’s al-
ternative arguments for affirmance, including failure
to state a breach-of-contract claim and failure to
exhaust administrative remedies.
II. Analysis
We review a Rule 12(b)(6) dismissal de novo,
construing the complaint in the light most favorable to
the plaintiffs, accepting as true all well-pleaded facts
and drawing reasonable inferences in the plaintiffs’ fa-
vor. F ED. R. C IV. P. 12(b)(6); Tamayo v. Blagojevich,
526 F.3d 1074, 1081 (7th Cir. 2008). However, we need
not accept as true statements of law or unsupported
conclusory factual allegations. McCauley v. City of
Chicago, 671 F.3d 611, 616 (7th Cir. 2011). To survive a
motion to dismiss under Rule 12(b)(6), the complaint
must “state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
6 No. 12-2964
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the rea-
sonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). “Where a complaint pleads facts that are ‘merely
consistent with’ a defendant’s liability, it ‘stops short of
the line between possibility and plausibility of entitle-
ment to relief.’ ” Id. (quoting Twombly, 550 U.S. at 557)
(internal quotation marks omitted). In such a case, the
inference of liability is merely speculative. “[W]here the
well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct, the com-
plaint has alleged—but it has not ‘show[n]’—’that the
pleader is entitled to relief.’ ” Id. at 679 (quoting FED. R.
C IV. P. 8(a)(2)).
Here, the district court held that the plaintiffs failed to
state a section 301 claim against their employer because
they had not adequately alleged the prerequisite breach
by the union of its duty of fair representation. “When a
labor organization has been selected as the exclusive
representative of the employees in a bargaining unit, it
has a duty . . . to represent all members fairly.” Marquez
v. Screen Actors Guild, Inc., 525 U.S. 33, 44 (1998).
This duty exists through the negotiation of a collective-
bargaining agreement and during the administration of
the agreement, see, e.g., Thomas, 890 F.2d at 917-18, 922;
Schultz v. Owens-Ill. Inc., 696 F.2d 505, 514 (7th Cir. 1982),
and the union’s obligation throughout is “to serve the
interests of all members without hostility or discrimina-
tion toward any, to exercise its discretion with complete
good faith and honesty, and to avoid arbitrary conduct,”
Vaca, 386 U.S. at 177. A union has wide latitude in per-
No. 12-2964 7
forming this obligation, however. “A breach of the statu-
tory duty of fair representation occurs only when a
union’s conduct toward a member of the collective bar-
gaining unit is arbitrary, discriminatory, or in bad faith.”
Id. at 190. “Each of these possibilities must be considered
separately in determining whether or not a breach has
been established.” Neal v. Newspaper Holdings, Inc., 349
F.3d 363, 369 (7th Cir. 2003). For example, declining to
pursue a grievance as far as a union member might
like isn’t by itself a violation of the duty of fair repre-
sentation. Rather, “[t]o prevail on a claim that his
union violated its duty of representation by dropping
a grievance, a plaintiff-member must show that the
union’s decision was arbitrary or based on discrimina-
tory or bad faith motives.” Trnka v. Local Union No. 688,
UAW, 30 F.3d 60, 61 (7th Cir. 1994).
The plaintiffs focus on bad faith and arbitrariness,
arguing that the allegations in their complaint are suf-
ficient to give rise to an inference that the union
arbitrarily and in bad faith treated their grievances per-
functorily or not at all. The complaint generally alleges
that the union knew that Navistar had acted in contra-
vention of the CBA and also contains the following super-
ficially more specific allegations: the plaintiffs filed hun-
dreds of grievances about Navistar’s actions “in a con-
tinuous and continuing basis through to the present”; the
union “intentionally mis[led] the [p]laintiffs as to the
status of the grievances when in fact the [u]nion[] invidi-
ously diverted, stalled, and otherwise terminated and
abandoned the grievances”; the union “mis[led] the
[p]laintiffs by telling them that hundreds of such griev-
8 No. 12-2964
ances filed over a period of years await further action
by high [u]nion officials when in fact, upon information
and belief, none have been processed and all are dead”;
and the union refused to give the plaintiffs copies of
the CBA.
Against the Twombly/Iqbal plausibility standard, these
allegations are insufficient to state a claim for breach of
the duty of fair representation. Although the plaintiffs
generally allege that the union is guilty of bad faith
because it “diverted, stalled, and otherwise terminated”
their grievances, the complaint lacks the factual
specificity required to state a plausible breach-of-fair-
representation claim.
“Whether or not a union’s actions are . . . in bad faith
calls for a subjective inquiry and requires proof that
the union acted (or failed to act) due to an improper
motive.” Neal, 349 F.3d at 369. Bare assertions of the
state of mind required for the claim—here “bad
faith”—must be supported with subsidiary facts. See
Iqbal, 556 U.S. at 680-83. The plaintiffs offer nothing to
support their claim of bad faith apart from conclusory
labels—that the unnamed union officials acted “invidi-
ously” when they failed to process the grievances, or
simply that the union’s actions were “intentional, willful,
wanton, and malicious.” They supply no factual detail
to support these conclusory allegations, such as (for
example) offering facts that suggest a motive for the
union’s alleged failure to deal with the grievances. De-
ceptive actions can be evidence of bad faith, see
Humphrey v. Moore, 375 U.S. 335, 348 (1964) (suggesting
No. 12-2964 9
that “fraud, deceitful action or dishonest conduct” can
be evidence of bad faith), but the plaintiffs have not
gone beyond their conclusory state-of-mind allegations.
Nor do the plaintiffs offer plausible allegations of
arbitrariness. “Whether a union’s actions are arbitrary
calls for an objective inquiry.” Neal, 349 F.3d at 369. “[T]he
arbitrary prong of the fair representation analysis is
very deferential . . . because Congress did not intend
courts to interfere with the decisions of the employee’s
chosen bargaining representative.” Ooley v. Schwitzer
Div., Household Mfg. Inc., 961 F.2d 1293, 1302 (7th Cir.
1992). “A union’s actions are arbitrary ‘only if . . . the
union’s behavior is so far outside a wide range of reason-
ableness’ as to be irrational.” Filippo v. N. Ind. Pub. Serv.
Corp., 141 F.3d 744, 749 (7th Cir. 1998) (quoting Air Line
Pilots Ass’n, Int’l v. O’Neill, 499 U.S. 65, 67 (1991) (omission
in original) (citation and quotation marks omitted)).
While “a union may not arbitrarily ignore a meritorious
grievance or process it in perfunctory fashion,” Vaca,
386 U.S. at 191, it “has discretion to act in considera-
tion of such factors as the wise allocation of its own
resources, its relationship with other employees, and its
relationship with the employer,” Neal, 349 F.3d at 369.
“The union must provide some minimal investigation
of employee grievances, but the thoroughness of this
investigation depends on the particular case, and only
an egregious disregard for union members’ rights con-
stitutes a breach of the union’s duty.” Garcia v. Zenith
Elecs. Corp., 58 F.3d 1171, 1176 (7th Cir. 1995) (internal
quotation marks and citations omitted).
10 No. 12-2964
The plaintiffs generally allege an arbitrary failure to
act on their grievances (“upon information and belief,
none have been processed and all are dead”), but factual
detail in support of this otherwise conclusory allegation
is entirely missing. For example, the plaintiffs do not
identify who filed the grievances, give dates or even a
time frame across which grievances were filed, or other-
wise describe the contents of the grievances. They do
not identify which union officials told which plaintiffs
that their grievances were being processed, nor do
they specify when these conversations occurred. And
perhaps most importantly, they do not explain how
long they waited after filing a grievance before con-
cluding that it had been abandoned, or how they knew
that such a wait time was an abnormal and arbi-
trary delay. Without at least some background factual
content, the complaint’s allegations about “abandoned”
or “dead” grievances are wholly conclusory.
The complaint does allege that the union lied to the
plaintiffs, saying that the grievances were being pro-
cessed when in fact they weren’t. Dishonesty can be
evidence of bad faith, and a lack of action on grievances
can be evidence of arbitrariness. But absent some specific
factual detail to color these bare conclusory allegations,
the complaint does not plausibly state a claim under
section 301 of the LMRA. It bears repeating that the
union enjoys substantial discretion in fulfilling its duty
of fair representation. See Neal, 349 F.3d at 369. Against
this backdrop principle, the complaint’s skeletal allega-
tions simply mirroring the elements of a section 301 bad-
faith claim are not enough to take the plaintiffs’ complaint
No. 12-2964 11
over the line from a “possible” to a plausible claim of
entitlement to relief. See Iqbal, 556 U.S. at 678; Twombly,
550 U.S. at 557, 570. The district court properly granted
Navistar’s motion to dismiss.
A FFIRMED.
6-18-13