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Rossetto v. Pabst Brewing Company

October 17, 1997




Appeal from the United States District Court for the Eastern District of Wisconsin.

No. 96 C 1086--William E. Callahan, Magistrate Judge.

Before BAUER, EASTERBROOK and RIPPLE, Circuit Judges.

BAUER, Circuit Judge.

ARGUED MAY 28, 1997


Pabst Brewing Co., Inc. and District 10 of the International Association of Machinists and Aerospace Workers AFL-CIO ("District 10") are parties to a long line of collective bargaining agreements. The most recent collective bargaining agreement ("the CBA"), which is the subject of this appeal, covered the period from June 1, 1993 to June 1, 1995. Article VII of the CBA provided death benefits for retired employees and health benefits for retired employees and their dependents.

During negotiations in June 1995 for a successor agreement to the CBA, Pabst proposed the elimination of retiree benefits from Article VII. District 10 rejected the proposal. A little over a year later, Pabst announced that retiree medical, dental, prescription and death benefits would terminate as of September 1, 1996. Pabst advised retired employees of the impending termination by letter dated August 1, 1996; Pabst did not notify District 10. District 10 was not aware of Pabst's termination of retiree benefits until the Director of District 10 was so informed by a retiree who received a copy of the letter.

On August 12, 1996, District 10 filed a grievance alleging that Pabst breached the CBA by unilaterally eliminating retiree benefits. On September 19, 1996, Plaintiffs *fn1 filed an action in the district court seeking reinstatement of the terminated retiree benefits. Count I of the complaint alleged that Pabst breached the CBA in violation of sec. 301 of the Labor Management Relations Act (LMRA), and Count II alleged that Pabst's refusal to pay retiree health and life benefits constituted a violation of sec. 502 of the Employee Retirement Income Security Act (ERISA).

By agreements dated November 1 and December 6, 1996, Pabst reinstated the disputed benefits. The parties also extended all of the terms of the expired CBA until January 31, 1997. On January 30, 1997, District 10 served Pabst with a notice of appeal to arbitration of its August 1996 grievance. The arbitration provision in the CBA provides for appeal to arbitration of "all grievances or misunderstandings between the Company and its employees" (Art. XI, sec. 1) that "cannot be satisfactorily settled" by the grievance process outlined in section 1 (Art. XI sec. 2). Pabst refused to arbitrate.

On February 13, 1997, Plaintiffs filed an amended complaint that realleged Counts I and II and added Count III, which sought an order compelling arbitration of District 10's grievance and a status quo injunction pending resolution of the grievance. Pabst moved to dismiss the amended complaint for failure to state a claim upon which relief could be granted. Evidentiary hearings were held March 4-6, 1997 before a magistrate judge, sitting by consent of the parties. On March 6, 1997, the magistrate judge granted Plaintiffs' motion to compel arbitration and enjoined Pabst from terminating retiree benefits subject to a final ruling by an arbitrator.

Pabst filed an appeal to this Court on March 12, 1997. Pabst argues that the district court erred in granting Plaintiffs' motion to compel arbitration because (1) the court erroneously applied a presumption of arbitrability, (2) the court's interpretation of Article XI of the CBA was flawed, and (3) the court erroneously failed to consider certain evidence proffered by Pabst regarding Article XI. Pabst also challenges the court's issuance of an injunction. Despite their extensive briefing of these issues, neither Pabst nor District 10 has addressed a critical threshold question--whether District 10 has standing to pursue the retirees' grievance to arbitration. We find that the resolution of this issue precludes our subject-matter jurisdiction over the merits of this appeal.

The standing issue was raised by the panel at oral argument. In response to the panel's probing, District 10 insisted that it has standing to pursue the retirees' grievance to arbitration because "it's the Union's contract and the Union's right to arbitrate." In other words, District 10 was a party to the CBA--it negotiated the retiree benefits in Article VII and the grievance/arbitration procedure in Article XI--and, therefore, it is entitled to enforce the CBA's terms. As a general principle, a union has standing under Article III of the Constitution to arbitrate the meaning of a collective bargaining agreement that grants rights to third parties (in this case, retirees) simply by virtue of the fact that the union is a party to the contract. But this does not end our inquiry.

Article XI of the CBA provides for arbitration of "grievances" that cannot be settled through the grievance process. When Pabst and District 10 arbitrate a grievance, District 10 serves as the grievants' representative. See Bowen v. United States Postal Serv., 459 U.S. 212, 225 (1983). The grievants in this case, however, are retirees, and therein lies the problem.

A union's power to negotiate with management derives from the fact that the union is the exclusive bargaining representative of a group of people. Labor jurisprudence is clear that retirees cannot be part of this group or "bargaining unit." In Allied Chem. & Alkali Workers of Am., Local Union No. 1 v. Pittsburgh Plate Glass Co., the Supreme Court held that retirees are not "employees" within the meaning of the collective bargaining obligations of the NLRA and cannot be "employees" included in a bargaining unit. 404 U.S. 157, 172 (1971). This is so even in a case where an employer modifies benefits that were originally established through collective bargaining. Id. at 183-88. *fn2 Because District 10 is not the exclusive bargaining representative of the forty-one retirees that make up the class, any claims for benefits here belong to the retirees individually, and the retirees may deal directly with Pabst in pursuing such claims. See Meza v. General Battery Corp., 908 F.2d 1262, 1270 (5th Cir. 1990) ("[A]n ex-employee/ex-union member is free to pursue his own claims and make his own settlements with the ...

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