in foreign or interstate commerce,' 9 U.S.C. § 1, but the federal courts have often looked to the Act for guidance in labor arbitration cases, especially in the wake of the holding that § 301 of the [LMRA] empowers the federal courts to fashion rules of federal common law to govern 'suits for violation of contracts between an employer and a labor organization' under the federal labor laws."); American Postal Workers Union v. United States Postal Service, 52 F.3d 359, 362, 311 U.S. App. D.C. 210 (D.C. Cir. 1995) (Arbitration Act provides "guidance in fashioning federal common law governing suits for breach of contract ... under § 301 of the [LMRA]").
More importantly, the logic behind Prima Paint and its progeny applies to labor arbitration cases as well as Arbitration Act cases. Matterhorn explained that Prima Paint's distinction "between attacking the whole contract and just the arbitration clause" makes sense because "if the agreement of one party to arbitrate disputes is fully supported by the other party's agreement to do likewise, there is no need to look elsewhere in the contract for consideration for the agreement to arbitrate; so objections to other parts of the contract, based on fraud or unconscionability or mistake or whatever, need not spill over to the arbitration clause." Matterhorn, 763 F.2d at 869. This statement makes as much sense in the labor arbitration context as it does in other arbitration contexts. We therefore see no reason not to put stock in Colfax's statement that the Prima Paint principle applies here.
Finally, Colfax's rule that parties whose contract contains a valid arbitration provision must arbitrate any disputes arising under the contract is supported by the well-established policy favoring arbitration of labor disputes. The Supreme Court has long supported the use of arbitration rather than adjudication to resolve labor disputes, such that "when [a] collective bargaining agreement contains an arbitration clause ... there is a presumption of arbitrability that may only be overcome by 'forceful evidence' of an intent to exclude the [particular] claim [from arbitration]." Oil, Chemical and Atomic Workers International Union, Local 7-1 v. Amoco Oil Co., 883 F.2d 581, 587 (7th Cir. 1989) (quoting United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 585, 4 L. Ed. 2d 1409, 80 S. Ct. 1347 (1960)). Colfax's extension of Prima Paint is in accord with this long-standing national policy because it has the effect of increasing the number of disputes settled by arbitrators rather than courts.
The fact that Johnson did not apply the severability rule but only asked whether the contract before it was patently ambiguous does not persuade us to reject the severability rule. When one considers that the Johnson court made no effort to explain its apparent departure from Colfax's dictum and in fact cited Colfax for a proposition that was the exact opposite of what Colfax actually said,
it is clear that the court did not pause to analyze the issue. Therefore, Johnson offers us no convincing reason to depart from Colfax.
In sum, we conclude that arbitration clauses in collective bargaining agreements are severable; that is, that where a valid arbitration clause exists any disputes concerning the remainder of the parties' agreement should be submitted to the arbitrator, even if one party asserts that the contract should be rescinded. Because the contract between Castle and USWA had a valid arbitration clause, the dispute between them over the 401(k) Plan must be heard by an arbitrator.
II. Count II: Violation of NLRA Section 302
Count II of Castle's complaint alleges that its contract with USWA violates § 302 of the LMRA. That section was designed "to prevent employers from bribing union officers and union officers from extorting money from employers," while at the same time permitting employer-employee agreements for pension plans and other benefits. Tyson v. International Brotherhood of Teamsters, Local 710 Pension Fund, 811 F.2d 1145, 1149 (7th Cir. 1987); see also Toth v. USX Corp., 883 F.2d 1297, 1300-01 (7th Cir.), cert. denied, 493 U.S. 994, 107 L. Ed. 2d 541, 110 S. Ct. 544 (1989); Roark v. Boyle, 141 U.S. App. D.C. 390, 439 F.2d 497, 505 (D.C. Cir. 1970). Thus § 302 prohibits employers or their agents from paying or loaning any "thing of value" to (inter alia) labor organizations that represent or seek to represent its employees unless the payments or loans fall within carefully delineated exceptions. 29 U.S.C. § 186. One of these exceptions permits employers to contribute funds to pension and other benefit plans if the payments are held in trust for the employees. 29 U.S.C. § 186(c)(5). Castle claims that the 401(k) Plan violates § 302 because (a) CIGNA is an agent of USWA; (b) the Plan requires Castle to contribute funds to CIGNA; and (c) the Plan is not set up as a trust.
USWA does not respond to count II on the merits, but instead argues that the § 302 issue is not ripe for disposition because until an arbitrator concludes that the parties have agreed to USWA's 401(k) plan, Castle will make no payments prohibited by § 302.
We agree with USWA. "The basic rationale of the ripeness doctrine is to prevent courts from entangling themselves in abstract disagreements and to protect government from 'judicial interference until a ... decision has been formulated and its effects felt in a concrete way by the challenging parties.'" Oriental Health Spa v. City of Fort Wayne, 864 F.2d 486, 489 (7th Cir. 1988) (quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 148, 18 L. Ed. 2d 681, 87 S. Ct. 1507 (1967)). As explained above, determining the meaning of the 401(k) Plan provision -- including whether the provision contains a latent ambiguity and should be rescinded -- is a task for the arbitrator, not the court. Until she completes that task we do not know what the contract means, so we cannot declare it void under § 302. Even Castle admits that count II "is an alternative pleading that presumes an agreement to adopt the Steelworkers 401(k) plan in the configuration put forth by the Steelworkers. " Castle Resp. at 11 (emphasis added). The arbitrator could easily find that the parties agreed to something else, in which case Castle's § 302 argument would disappear. Because "this court cannot entertain a claim which is based upon "'contingent future events that may or may not occur as anticipated, or indeed may not occur at all,"'" we refuse to consider count II here. Oriental Health Spa, 864 F.2d at 489 (quoting Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 580-81, 87 L. Ed. 2d 409, 105 S. Ct. 3325 (1985) (in turn, quoting 13A Charles A. Wright et al., Federal Practice and Procedure § 3532 (2d ed. 1984))).
III. Counts III and IV: Fraud and Negligent Misrepresentation
Count III of Castle's complaint alleges that USWA fraudulently induced it to agree to the 401(k) Plan by representing that the Plan would require Castle only to make payroll deductions, when in fact the company would be saddled with considerable responsibility. Count IV mirrors count III, except that it states a claim for negligent misrepresentation rather than fraud. USWA argues that under Colfax the allegations in counts III and IV must be submitted to arbitration. Castle responds only that its claims for fraud and negligent misrepresentation are pendent state claims arising out of the same operative facts as its federal claims and therefore are within the supplemental jurisdiction of the court.
Castle's position is unresponsive because USWA is not arguing that the court lacked jurisdiction under 28 U.S.C. § 1367.
Setting this point aside, however, we still rule in USWA's favor. Drawing on Prima Paint, Colfax stated that "a contract dispute is arbitrable even if one party argues that the contract should be rescinded because it does not express an actual agreement of the parties, for example because it was induced by fraud." 20 F.3d at 755. Colfax explicitly mentioned fraudulent inducement, but its rule necessarily applies to negligent misrepresentation claims as well, since negligent misrepresentation is merely a weaker relative of fraud. Therefore, counts III and IV must be submitted to the arbitrator.
IV. Count V: Breach of Contract
Count V of Castle's complaint alleges that USWA breached the parties' agreement concerning the 401(k) Plan by refusing to allow Castle to customize the Plan for its employees and refusing to honor the agreement's covenant that employees could make participation decisions only once a year. USWA argues that even if Castle's allegations are true (which USWA denies), the breach of contract claim must be arbitrated. Castle responds that because the collective bargaining agreement does not provide for grievances initiated by the company, the parties did not agree to submit such grievances to arbitration, so Castle is not required to arbitrate its claim.
There is some merit to Castle's position. While doubts about whether to arbitrate a dispute under a collective bargaining agreement should be resolved in favor of arbitration, Warrior & Gulf, 363 U.S. at 582-83, "it remains the rule that parties are bound to arbitrate only those disputes which, under a fair construction of their collective bargaining agreement, they have bound themselves to arbitrate." Faultless Division v. Local Lodge No. 2040 of District 153 International Association of Machinists and Aerospace Workers, 513 F.2d 987, 990 (7th Cir. 1975). In other words, USWA cannot force Castle to arbitrate unless the collective bargaining agreement mandates such a resolution.
Castle raises what the Third Circuit has called a "recurring issue" in collective bargaining cases: "whether the company is required to bring its claims to an arbitrator when the collective bargaining agreement establishes procedures which limit the initiation of arbitration solely to the union." Lehigh Portland Cement Co. v. Cement, Lime, Gypsum, and Allied Workers Division, International Brotherhood of Boilermakers, Blacksmiths, Iron Ship Builders, Forgers and Helpers, 849 F.2d 820, 822 (3d Cir. 1988). In such cases, courts hold that "where some ambiguous language appears in the contract and the contract can be read to provide for the employer initiating arbitration, ... the strong presumption in favor of arbitration requires that the employer must arbitrate his grievance." Id. On the other hand, "when a contract contains no language [that] explicitly contemplates or permits the employer to initiate arbitration procedures, and the grievance structure is designed solely to afford the union the right to arbitrate, ... an employer ... is not bound to assert its claims before an arbitrator." Id.; see also Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241-44, 8 L. Ed. 2d 462, 82 S. Ct. 1318 (1962); Faultless, 513 F.2d at 989-94.
This rule is fairly straightforward, but Lehigh sends mixed signals about how to apply it. Although the Lehigh court was confronted with facts very similar to those of Eberle Tanning Co. v. Section 63L, FLM Joint Board, Allegheny Division, United Food and Commercial Workers International Union, 682 F.2d 430 (3d Cir. 1982), and relied on Eberle for its statement of the controlling law, it reached the opposite conclusion without distinguishing Eberle or explaining the departure.
The grievance procedures in the Castle-USWA agreement closely resemble those at issue in Lehigh,14 which suggests that we should follow the Third Circuit's lead. But should we do as Lehigh said or do as it did? Fortunately, we can resolve this case without deciding whether Eberle or Lehigh contains the better result. Even if we followed Lehigh, as Castle urges, we would still rule in USWA's favor because the cases make an exception when the issues raised by the company have already been raised by the union in a grievance and are pending before an arbitrator (or soon will be). The exception makes sense because if the issues the company seeks to resolve in court will be arbitrated anyway, there is little reason for the court to address them -- especially when the arbitrator's decision may well be binding upon the court. Thus both the Supreme Court and the Seventh Circuit have suggested that in such cases, the court can either dismiss the claim entirely or stay litigation pending resolution by the arbitrator. Atkinson, 370 U.S. at 243-45; Faultless, 513 F.2d at 994; see also Summer Rain v. The Donning Company/Publishers, Inc., 964 F.2d 1455, 1461 (4th Cir. 1992) (where arbitrator's decision on arbitrable issues could render district court's ruling on nonarbitrable issues unnecessary, "litigation on the non-arbitrable issues should be stayed pending arbitration"); Transcaribbean Motors Transport, Inc. v. Union de Tronquistas de P.R., Local 901, 553 F. Supp. 362, 364 (D.P.R. 1982) (where "the issues presented to the arbitrator could obviate the need for future litigation," court action must in some cases be dismissed without prejudice).
Count V falls within the scope of the exception. USWA has already filed a grievance with Castle concerning the parties' obligations under the 401(k) Plan provision in the collective bargaining agreement -- the very issue Castle raises in count V -- and that grievance will be arbitrated. Thus count V also must be submitted to arbitration. We dismiss it, granting Castle leave to refile if for some reason arbitration does not cover the issues it presents.
We turn, finally, to USWA's motions for sanctions under Rule 11 and § 301 of the LMRA. Rule 11 permits sanctions against parties or their attorneys "when they sign a pleading, motion, or other paper that, after reasonable inquiry, is not well grounded in fact and is not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law" or when they "bring legal action for any improper purpose, such as to harass or needlessly increase the cost of litigation." National Wrecking Co. v. International Brotherhood of Teamsters, Local 731, 990 F.2d 957, 963 (7th Cir. 1993). Similarly, sanctions may be awarded under § 301 to a party whose opponent's suit is meritless or frivolous, that is, "brought in bad faith to harass rather than to win." Chrysler Motors Corp. v. International Union, Allied Industrial Workers of America, 959 F.2d 685, 689 (7th Cir.), cert. denied sub nom. Chrysler Corp. v. International Union, Allied Industrial Workers, 121 L. Ed. 2d 227, 113 S. Ct. 304 (1992).
In light of the very difficult legal question presented by this case, we can find no basis for describing Castle's position as frivolous or asserted in bad faith, nor can we find any evidence that the company intended to harass USWA. We therefore find sanctions wholly inappropriate.
USWA's motion for summary judgment is granted. Its motions for sanctions are denied.
JAMES B. MORAN,
Chief Judge, U.S. District Court
July 20, 1995.
JUDGMENT IN A CIVIL CASE
Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED that the court enters summary judgment in favor of the defendant, UNITED STEELWORKERS OF AMERICA and against the plaintiff, A.M. CASTLE & CO.
July 20, 1995