Sound Check, Inc. v. American Federation ( 2000 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 98-3807
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Sound Check, Inc., *
*
Plaintiff - Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
American Federation of Television *
and Radio Artists, *
*
Defendant - Appellant. *
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Submitted: October 20, 1999
Filed: February 28, 2000
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Before WOLLMAN, Chief Judge, LAY and LOKEN, Circuit Judges.
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LOKEN, Circuit Judge.
The American Federation of Television and Radio Artists (“AFTRA”) is a
national labor union representing radio and television performers. Advertising agencies
and production companies -- referred to in this case as producers -- hire AFTRA
members to make radio and television commercials. Some producers contract with
independent payroll companies to provide administrative services, including the
payment of wages and benefits to performing artists who are working under the
direction of the producer. This case involves a dispute between AFTRA and Sound
Check, Inc., over whether Sound Check is a producer or a payroll company for
purposes of the applicable collective bargaining agreements. Sound Check commenced
this action under the federal labor laws and the Federal Arbitration Act to compel
arbitration of the dispute under the collective bargaining agreements’ broad arbitration
clauses. See 9 U.S.C. § 4. AFTRA now appeals the district court’s1 order compelling
arbitration, arguing that producer status is a non-arbitrable, pre-contract-formation issue
reserved for the union’s unilateral determination. We affirm.
1. The Collective Bargaining Context. AFTRA negotiates nationwide
collective bargaining agreements. The relevant agreements in this case are the
Television Recorded Commercials Contract and the Radio Recorded Commercials
Contract (the “Commercials Contracts”). The full Commercials Contracts are not in
the record; indeed, the employer parties to these Contracts are not identified. But it is
uncontested that the various Commercials Contracts, like most collective bargaining
agreements, contain broad arbitration clauses. Specifically, the Commercials Contracts
for the years at issue provide:
All disputes and controversies of every kind and nature whatsoever
between any Producer and the Union or between any Producer and any
performer arising out of or in connection with this Contract . . . as to the
existence, validity, construction, meaning, interpretation, performance,
nonperformance, enforcement, operation, breach, continuance, or
termination of this Contract . . . shall be submitted to arbitration . . . .
A producer wishing to hire AFTRA members to produce television or radio
commercials must agree to be bound by the applicable Commercials Contract. If the
producer uses an independent payroll company, that company must agree to pay
collectively bargained wages and benefits to AFTRA performers and to the union’s
1
The HONORABLE JAMES M. ROSENBAUM, United States District Judge
for the District of Minnesota.
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benefit funds. AFTRA obtains these commitments by having producers and payroll
companies submit Letters of Adherence by which they agree to be bound by the terms
and conditions of the applicable Commercials Contract. The Letter of Adherence is a
standard form bearing the union’s preprinted signature which AFTRA distributes to
producers, payroll companies, and other interested employers.
One AFTRA policy is that its members should not deal with non-union
producers. This policy would be frustrated if a non-union producer could hire AFTRA
members for some jobs by relying on its payroll company’s Letter of Adherence.
Therefore, the standard Letter of Adherence form asks the employer whether it is
signing as a producer or a payroll company. Because only producer status gains the
employer access to hiring AFTRA members, there is an incentive for a payroll company
to falsely claim producer status. Therefore, the AFTRA Letter of Adherence includes
the following provision:
AFTRA reserves the right to review executed Letters of Adherence to
determine if [] Producer is a bona fide Producer . . . under the . . .
Commercials Contract. AFTRA reserves the right to reject the signatory
status of any company that is not a legitimate Producer of . . . Recorded
Commercials.
2. The Sound Check/AFTRA Relationship. Sound Check styles itself a
“professional employer organization.” It offers a variety of services to its clients in the
television and radio recording industry. In the ten years prior to this dispute, Sound
Check signed and submitted to AFTRA a number of Letters of Adherence, most of
which identified Sound Check as a producer of radio and television commercials. In
the summer of 1997, AFTRA sent Sound Check a questionnaire regarding its producer
status. Sound Check did not respond. On December 8, 1997, Sound Check submitted
Letters of Adherence for the new 1997-2000 Commercials Contracts, again identifying
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itself as a producer. In January 1998, AFTRA sent Sound Check another questionnaire
regarding its producer activities. Again, Sound Check did not respond.
Though Sound Check’s failure to respond and AFTRA’s own investigation
raised doubts as to the company’s producer bona fides, AFTRA continued to do
business as usual with Sound Check until July 22, 1998. On that day, the Union sent
Sound Check a letter demanding the requested information by August 14 and advising
that “Sound Check will be accepted as a signator only if it complies with AFTRA’s
requirements and AFTRA determines that it is an appropriate signator based on its
status as a producer.” When Sound Check did not provide the requested information,
AFTRA declared that it was rejecting Sound Check’s signator status effective
December 8, 1997. Sound Check demanded arbitration of this decision under the
Commercials Contracts. AFTRA refused to arbitrate on the ground that Sound Check
had been rejected as a signator to those Contracts. This lawsuit followed.
3. Analysis. “[A]rbitration 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.”
AT&T Tech., Inc. v. Communications Workers, 475 U.S. 643, 648 (1986). Despite
the “presumption of arbitrability for labor disputes,” id. at 650, AFTRA contends this
dispute is not arbitrable because it unilaterally rejected Sound Check as a signator to
the Commercials Contracts, which thereby deprived Sound Check of status to compel
arbitration. Like the district court, we disagree.
AFTRA’s argument that its dispute with Sound Check cannot be arbitrable
because no contract with Sound Check ever came into existence is plainly unsound.
“As counterintuitive as it may seem, under Prima Paint [v. Flood & Conklin Mfg. Co.,
388 U.S. 395 (1967),] a dispute over the making of a contract can arise out of that same
contract, and thus be subject to arbitration.” Houlihan v. Offerman & Co., 31 F.3d
692, 695 (8th Cir. 1994). Here, we know the Commercials Contracts exist. They call
for arbitration of “[a]ll disputes and controversies of every kind and nature whatsoever
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between any Producer and the Union . . . arising out of or in connection with this
Contract,” including disputes over “the existence” of the contract. The parties dispute
whether Sound Check is a producer “in connection with” the Commercials Contracts.
AFTRA has not put the full Commercials Contracts into the record or even identified
the other contracting parties. For all we know, Sound Check is a member of multi-
employer organizations that negotiated the Commercials Contracts, and the Contracts
give Sound Check the right to sign Letters of Adherence. In that case, the dispute
would not be over the existence of a contract, but only whether this employer should
be given producer or payroll company status. Moreover, though AFTRA now contends
there is no contract, it permitted Sound Check to perform under the 1997-2000
Commercials Contracts for some eight months before attempting to deny signator status
retroactively. Performance is evidence that a party intended to enter into a contract.
See Rabouin v. NLRB, 195 F.2d 906, 909-10 (2d Cir. 1952); Daniel Const. Co. v.
Teamsters Local Union No. 991, 364 F. Supp. 731, 736-38 (S.D. Ala. 1973). On this
record, given the breadth of the arbitration clauses and the presumption of arbitrability,
we conclude the dispute is arbitrable, even if it may include the question of whether a
contract now exists.
In opposing arbitration, AFTRA emphasizes the provision in the Letters of
Adherence in which AFTRA “reserves the right to review executed Letters of
Adherence . . . [and] reserves the right to reject the signatory status of any company
that is not a legitimate Producer.” But the Letters of Adherence also provide that the
parties are bound by the terms of the Commercials Contracts, and they mention
specifically the arbitration clauses. The reservation provision does not negate this
agreement to arbitrate. Thus, AFTRA’s claim that it reserved the unilateral right to
determine Sound Check’s producer status is a question for the arbitrator to resolve, at
least in the first instance.
AFTRA has demonstrated it has a legitimate interest in differentiating between
producers and payroll companies for collective bargaining purposes. The parties to
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AFTRA collective bargaining agreements may of course agree that AFTRA should
unilaterally determine whether a particular employer is a producer, and they may
exempt this determination from the otherwise comprehensive arbitration clauses. The
question is whether they did so in the 1997-2000 Commercials Contracts. On the
skimpy record before us, we agree with the district court that the dispute is arbitrable.
Therefore, the scope and effect of the reservation of rights provision in the Letters of
Adherence must be initially determined by the arbitrator.
The judgment of the district court is affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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