RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 10a0263p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellee, -
TEAMSTERS LOCAL UNION NO. 89,
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No. 09-5534
v.
,
>
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Defendant-Appellant, -
THE KROGER CO.,
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INTERNATIONAL BROTHERHOOD OF -
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Counterclaim Defendant. -
TEAMSTERS,
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Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 07-00351—Thomas B. Russell, Chief District Judge.
Argued: August 3, 2010
Decided and Filed: August 25, 2010
Before: COLE and McKEAGUE, Circuit Judges; MAYS, District Judge.*
_________________
COUNSEL
ARGUED: Timothy P. Reilly, TAFT STETTINIUS & HOLLISTER LLP, Cincinnati,
Ohio, for Appellant. Frederick Perillo, PREVIANT, GOLDBERG, UELMAN, GRATZ,
MILLER & BRUEGGEMAN, Milwaukee, Wisconsin, for Appellee. ON BRIEF:
Timothy P. Reilly, John B. Nalbandian, Daniel J. Hoying, TAFT STETTINIUS &
HOLLISTER LLP, Cincinnati, Ohio, for Appellant. Frederick Perillo, Nathan D.
Eisenberg, PREVIANT, GOLDBERG, UELMAN, GRATZ, MILLER &
BRUEGGEMAN, Milwaukee, Wisconsin, for Appellee.
*
The Honorable Samuel H. Mays, Jr., United States District Judge for the Western District of
Tennessee, sitting by designation.
1
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 2
_________________
OPINION
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COLE, Circuit Judge. Plaintiff-Appellee Teamsters Local Union No. 89 (“Local
89” or “the Union”) represents employees in a Kentucky warehouse operated by
Defendant-Appellant The Kroger Co. (“Kroger”). The parties negotiated a collective
bargaining agreement governing labor relations at that warehouse. Local 89 filed two
grievances alleging that Kroger violated this agreement by subcontracting out operations
to third parties employing non-Local 89 members. Kroger refused to arbitrate these
grievances, and Local 89 filed suit to compel arbitration. The district court granted
Local 89 summary judgment on its claim to compel arbitration. Kroger appeals that
decision. We AFFIRM the judgment of the district court.
I. BACKGROUND
A. The Parties and the Master Agreement
Local 89 is a local affiliate of the Counterclaim Defendant International
Brotherhood of Teamsters (“IBT”) and represents warehouse and transportation
employees at Kroger’s warehouse facility in Louisville, Kentucky, known as the
Kentucky Distribution Center (“the KDC”). Kroger and the Teamsters Kroger National
Negotiating Committee, which represented Local 89 and five other local IBT affiliates,
negotiated a collective bargaining agreement governing the industrial relations between
the unions and Kroger (“the Master Agreement”), which by its terms is in effect from
September 11, 2005, through September 10, 2011. Pursuant to the Master Agreement,
Kroger and Local 89 also executed a supplemental agreement to govern specific issues
at the KDC (“the Local Supplement”), which runs concurrently with the Master
Agreement.
The Master Agreement specifically addresses arbitration, subcontracting, and
termination of the contract. Article 8 establishes dispute-resolution procedures, which
culminate in binding arbitration. These grievance procedures, including the final step
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 3
of arbitration, cover “any grievance[,] dispute[,] or complaint over the interpretation or
application of the contents of [the Master] Agreement” raised by “any employee.”
(District Court Record Entry (“R.E.”) 65-3, at 15.)
Article 25 of the Master Agreement addresses subcontracting. Under Section
25.1, Kroger has the right to subcontract work assigned to the collective bargaining unit
but is prohibited from subcontracting such work “for the purpose of circumventing the
terms and provisions” of the Master Agreement to an outside company that does not
provide similar wages and conditions of employment. Section 25.3, entitled “Continuity
of Employment,” provides that if Kroger decides to contract out its entire KDC
warehouse or transportation operations, or both, during the term of the agreement, “then
a condition of such subcontract shall be offers of employment to eligible employees (as
defined in Appendix I), by the new employer, provided that the new employer requires
that number or more to perform such services.” (R.E. 65-4 at 4.) Appendix I, which
outlines additional job-security provisions, defines “eligible employees” as “all
employees who have continuously been on a regular seniority list for at least three
(3) years as of December 12, 2005.” (Id. at 12.) This appendix also requires Kroger to
offer comparable employment at the nearest similar facility covered by the Master
Agreement to any eligible employee “who is permanently laid-off before September 11,
2011, as a direct result of [Kroger] transferring, subcontracting or closing all or part of
any distribution center or manufacturing plant operation covered by a Local Supplement
to this Agreement.” (Id.) Appendix I explicitly subjects disputes over its interpretation
and application to the arbitration provisions in the Master Agreement.
Finally, Article 36 of the Master Agreement addresses contract termination.
Section 36.1, entitled “Effective Dates,” states that the agreement “is effective from
September 11, 2005 through September 10, 2011 and year to year thereafter,” unless one
of the parties—through its designated negotiating committee—notifies the other party
of its desire to terminate or modify the agreement in writing at least 120 days before
September 10, 2011. (Id. at 11.) Section 36.2, entitled “Notice to Terminate or
Modify,” requires that if either party wishes to terminate or modify the Local
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 4
Supplement, that party must give the other party notice ninety days prior to September
11, 2011.
B. Kroger Subcontracts to Transervice and Zenith
In October 2006, Kroger announced that it would subcontract out its KDC
warehouse and transportation operations. Kroger contracted with Transervice Logistics
Inc. (“Transervice”) for transportation operations and with Zenith Logistics Inc.
(“Zenith”) for warehouse operations. On February 15, 2007, Kroger transferred the
transportation operations to Transervice, and Transervice hired all of Kroger’s KDC
transportation employees. On February 22, 2007, Kroger transferred the warehouse
operations to Zenith, and Zenith hired all of Kroger’s KDC warehouse employees. Since
that date, Kroger has not directly employed any members of Local 89.
Following Kroger’s October 2006 announcement, Local 89 entered into
negotiations with Transervice, Zenith, and Kroger, respectively. In April 2007, Local
89’s negotiations regarding new collective bargaining agreements with Transervice and
Zenith broke down, and Local 89 struck Transervice and Zenith on April 18 and 19.
Subsequently, Local 89 and Kroger entered into an agreement (“the Letter of
Understanding”), which was to go into effect only if Local 89 entered into ratified labor
agreements with Transervice and Zenith and which, like the Master Agreement, is set
to expire on September 10, 2011. Local 89 subsequently entered into separate collective
bargaining agreements with Transervice and Zenith.
C. The Letter of Understanding
The Letter of Understanding addresses outstanding grievances under the Master
Agreement, the provision of retiree health benefits, and future changes to Kroger’s
subcontracting policies at the KDC. In regards to grievances, Local 89 agreed to
withdraw several outstanding grievances, including ones it had filed alleging that
Kroger’s subcontracting to Transervice and Zenith violated the subcontracting
provisions included in Article 25 of the Master Agreement. Also, Kroger agreed to
make certain pension contributions and pay settlements based on specified past
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 5
grievances. Finally, the parties agreed that “Kroger will meet with Teamsters Local 89
and either resolve any outstanding grievances resulting from their employment with
Kroger or permit the grievance to proceed through the Kroger Master Grievance
Process.” (R.E. 65-12, at 2.) The Letter of Understanding does not address future
grievances explicitly.
Regarding retiree health benefits, Kroger agreed to require any successors to
Transervice and Zenith to provide retiree health coverage to employees (and their
eligible dependants) who retire before September 10, 2011, comparable to the coverage
provided under the Master Agreement. Kroger also “agree[d] to continue the current
practice of providing retiree health care for already retired former employees from the
operations that were transferred.” (Id. at 1.)
Finally, in regards to future changes to Kroger’s KDC subcontracting
arrangements, the Letter of Understanding states:
If between the date of this Agreement and September 10, 2011, Kroger
determines to terminate either of its agreements with Transervice or
Zenith and to retransfer or subcontract the work then being performed in,
at or from the [KDC] including without limitation all inside or driving
work to any third party different from Transervice or Zenith, then Kroger
will require that all terms of this Letter of Understanding and the job
security provisions of the [Transervice and Zenith labor agreements] . . .
shall be a condition of the retransfer or resubcontracting to any third
parties. . . . Such retransfer or resubcontracting shall not take place
absent the assumption of the terms of this Letter of Understanding by
such third parties. If at any time Kroger should decide to discontinue the
subcontracting or transfer of all or any portion of the work subject to this
Agreement and reassume such operations as the employer, Kroger agrees
to directly employ all bargaining unit members then performing the
reassumed work. Such employees shall be covered by the Kroger Master
Agreement bargaining unit. The terms and conditions of their
employment will be governed by the Master Agreement, and the Local
89 Supplement covering such employees.
(Id. at 1-2.)
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 6
D. Grievances Regarding Further Subcontracting
Sometime after the Letter of Understanding was executed, Local 89 discovered
that Kroger was subcontracting out work previously done by Local 89 members to
companies other than Transervice and Zenith, who were not subject to a collective
bargaining agreement. On May 9, 2007, Local 89 filed a formal class-action grievance
alleging that Kroger violated Article 25 of the Master Agreement and a provision
included in a side agreement attached as an addendum to the Local Supplement that
addresses which drivers are given priority when extra deliveries are needed. The
grievance alleges that Kroger is violating these provisions “by subcontracting work to
third party drivers while bargaining unit drivers and mechanics are available.” (R.E. 1-
4.) Kroger responded in a letter dated May 14, 2007, refusing to process the grievance.
The letter stated that, “Kroger and Local 89 no longer have a collective bargaining
relationship or a grievance procedure. Local 89 does not represent any Kroger
employees.” (R.E. 1-5.) Further, because the alleged violations took place after the
transfer of operations to Transervice, Kroger claimed that they “cannot constitute a
violation by Kroger of the Master Agreement or local supplement.” (Id.) On August 24,
2007, Local 89 filed a second class-action grievance, stating that the it had learned that
“Kroger was subcontracting bid runs and wheel runs to a[n] outside carrier that [is] head
hauling loads out of the [KDC] to different stores in the region.” (R.E. 25-1.) Local 89
alleged that this violated the same provisions of the Master Agreement and Local
Supplement. Kroger again responded by letter, dated August 27, 2007, refusing to
process the grievance and stating that “the matters complained about in the August 24,
2007 grievance are not subject to the grievance and arbitration provisions of the Master
Agreement or local supplement.” (R.E. 25-2.)
E. Procedural History
On July 6, 2007, after only the first grievance and response had been sent, Local
89 filed a complaint in district court to compel arbitration under the U.S. Arbitration Act,
9 U.S.C. § 1 et seq., and Section 301 of the Labor Management Relations Act, 29 U.S.C.
§ 185. On August 6, 2007, Kroger filed counterclaims against Local 89 and IBT,
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 7
alleging breach of contract and violation of the secondary boycott law, 29 U.S.C.
§ 158(b)(4)(ii)(B). On September 20, 2007, Local 89 filed an amended complaint
seeking to compel arbitration of both grievances or, in the alternative, award Local 89
damages based on Kroger’s alleged breach of contract.
Cross-motions for summary judgment were filed on all of the claims. The district
court concluded that the Letter of Understanding fell within the scope of the Master
Agreement’s arbitration clause, and therefore compelled arbitration of Local 89’s claims.
Accordingly, the district court declined to analyze Local 89’s alternative argument that
Kroger breached the Letter of Understanding by hiring subcontractors other than
Transervice and Zenith. As for Kroger’s secondary-boycott counterclaims, the court
found that Kroger had put forth sufficient evidence to survive summary judgment as to
Local 89, but granted IBT summary judgment.
Following the district court’s summary-judgment order, Kroger filed a motion
for entry of partial judgment under Federal Rule of Civil Procedure 54(b) on Local 89’s
claims to compel arbitration. On August 13, 2009, the district court granted Kroger’s
motion for entry of partial judgment under Rule 54(b), permitting Kroger to appeal the
arbitration decision without waiting for the secondary-boycott counterclaim against
Local 89 to be resolved. We have jurisdiction over Kroger’s appeal under 28 U.S.C.
§ 1291.
II. ANALYSIS
A. Standard of Review
This Court reviews de novo the district court’s grant of summary judgment.
United Steelworkers of Am. v. Cooper Tire & Rubber Co., 474 F.3d 271, 277 (6th Cir.
2007). “Similarly, we review de novo the district court’s decision to compel arbitration
of a particular dispute.” Id. (citing Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d
306, 311 (6th Cir. 2000)). In this context, “[w]e must determine whether the dispute is
arbitrable, meaning that a valid agreement to arbitrate exists between the parties and that
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 8
the specific dispute falls within the substantive scope of the agreement.” Landis v.
Pinnacle Eye Care, Inc., 537 F.3d 559, 561 (6th Cir. 2008).
B. Arbitrability of Dispute
Kroger argues that the district court erred in compelling arbitration of Local 89’s
grievances because the employer-employee relationship between Kroger and the Local
89 members terminated in February 2007 when it subcontracted its operations to
Transervice and Zenith and, therefore, those employees are not eligible to invoke the
Master Agreement grievance procedures. Kroger also argues that the Letter of
Understanding is evidence that the Master Agreement’s grievance procedures have
ceased to apply and that any grievances arising under the Letter of Understanding fall
outside the scope of the Master Agreement’s arbitration provision. We do not find any
of these arguments to be persuasive and conclude that Kroger has failed to overcome the
presumption in favor of arbitrability.
1. Scope of arbitration clause and presumption of arbitrability
In United Steelworkers of America v. Mead Corp., Fine Paper Division, 21 F.3d
128 (6th Cir. 1994), this Court noted the well-established principles for determining
whether a grievance is subject to compulsory arbitration:
(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 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.”
Id. at 131 (quoting AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650
(1986)). Elsewhere, this Court has stated that, “[i]n deciding the arbitrability of a
dispute, we begin with the presumption that national labor policy favors arbitration.”
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 9
Cooper, 474 F.3d at 277. “The presumption favoring arbitration is based on a policy
recognizing arbitration as a substitute for industrial strife and on the belief that
arbitrators, more so than the courts, possess the proper experience and expertise to
resolve labor disputes.” Id. at 278 (citation and internal quotation marks omitted).
“Moreover, in cases involving broad arbitration clauses the [Supreme] Court has found
the presumption of arbitrability ‘particularly applicable,’ and only an express provision
excluding a particular grievance from arbitration or ‘the most forceful evidence of a
purpose to exclude the claim from arbitration can prevail.’” Mead, 21 F.3d at 131
(quoting AT&T, 475 U.S. at 650).
The arbitration clause included in the Master Agreement is broad, and therefore
we apply a strong presumption of arbitrability in evaluating Local 89’s grievances.
Section 8.1 applies the grievance procedures, including arbitration if necessary, to “any
grievance[,] dispute[,] or complaint over the interpretation or application of the contents
of this Agreement” raised by “any employee.” (R.E. 65-3, at 15.) This Court has
interpreted similar provisions as “broad” arbitration clauses particularly subject to the
presumption in favor of arbitrability. See Int’l Ass’n of Machinists and Aerospace
Workers v. ISP Chems., Inc., 261 F. App’x 841, 846 (6th Cir. 2008) (finding a clause
providing for arbitration of “any difference of opinion or dispute . . . regarding
interpretation or application of any provision of this Agreement,” but with three specific
issues excepted, to be broad); Cooper, 474 F.3d at 279 (finding a provision providing
for arbitration of “any dispute . . . as to the interpretation or application of this
Agreement” to be broad); Cleveland Elec. Illuminating Co. v. Util. Workers Union of
Am., 440 F.3d 809, 814-15 (6th Cir. 2006) (finding a clause providing for arbitration of
“any disagreement concerning the interpretation or application of this Agreement” to be
broad); Mead, 21 F.3d at 132 (finding a clause providing for arbitration of “grievances
charging that the Company has violated this Agreement and involving the interpretation
of, or compliance with, this Agreement” to be broad). Moreover, there are no issues
excepted from the arbitration provision in the Master Agreement, the Local Supplement,
or the Letter of Understanding. Further, the grievances concern an
issue—subcontracting—specifically addressed in the Master Agreement and the Letter
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 10
of Understanding. Thus, Kroger can prevail in its attempt to exclude these grievances
from arbitration only by presenting “the most forceful evidence of a purpose to exclude
the claim[s] from arbitration.” United Steelworkers of Am. v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 585 (1960).
A comparison to the facts of Warrior & Gulf, one of the Steelworkers Trilogy
cases,1 is instructive. In that case, the employer refused to arbitrate a grievance filed by
the union after union members were laid off because the employer began contracting out
maintenance work previously done by union employees. Id. at 575. The arbitration
clause at issue specifically excluded “matters which are strictly a function of
management.” Id. at 576. The employer argued that its decision to contract out work
was strictly a management function and therefore not subject to arbitration. Id. at 584.
The Supreme Court disagreed, stating that “[c]ontracting out work is the basis of many
grievances; and that type of claim is grist in the mills of the arbitrators.” Id. at 584. The
Court also noted that a specific collective bargaining agreement or a written collateral
agreement could exclude subcontracting claims from the grievance procedures or
arbitration, but because there were no such exclusions, and the employer made no
showing that contracting out fit within the management-function exception, the
grievance was arbitrable. Id. at 584-85; see also id. at 583 (holding that “[d]oubts” about
whether a grievance is covered by an arbitration clause “should be resolved in favor of
coverage”).
Kroger briefly argues that the presumption in favor of arbitrability does not apply
because (1) only the Master Agreement, and not the Letter of Understanding, contains
an arbitration provision and (2) the policy reasons underlying the presumption are not
applicable here because the Local 89 members are no longer Kroger employees. Neither
of these arguments is persuasive. In Cooper, this Court rejected the argument that the
presumption “is not applicable to side agreements that . . . do not contain a separate
1
“In 1960, the Supreme Court issued three decisions designed to end the federal courts’ hostility
to labor-arbitration awards.” Mich. Family Res., Inc. v. Serv. Employees Int’l Union Local 517M, 475 F.3d
746, 750 (6th Cir. 2007) (en banc). These cases later became known as the Steelworkers Trilogy. See id.
at 750-51.
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 11
arbitration clause.” Cooper, 474 F.3d at 278 n.8. This Court found that a dispute that
“involve[d] whether [the main collective bargaining agreement that contained an
arbitration clause] creates a duty for the parties to arbitrate their dispute over the [side
agreement]” was “exactly the type of dispute where the presumption favoring
arbitrability is to be applied; the fact that the grievance is over a side letter is of little
consequence.” Id. Moreover, on their face, the grievances that Local 89 seeks to
arbitrate allege violations of the Master Agreement and Local Supplement, not the Letter
of Understanding. The Cooper employer also argued that the policy reasons
undergirding the presumption in favor of arbitration—that arbitration is a substitute for
industrial strife and that arbitrators have special expertise regarding labor disputes—did
not apply because all of the class members of the lawsuit were non-union member
retirees and survivors. Id. at 281. This Court rejected this argument as well, concluding
that even though none of the class members were current employees, “the Union still has
an interest in resorting to economic weapons in order to maintain the integrity of the
bargaining process.” Id.; see also Cleveland, 440 F.3d at 815-16.
Based on this analysis, we conclude that the Master Agreement’s arbitration
provision is broad, and the presumption in favor of arbitrability is particularly applicable
to Local 89’s grievances. Thus, Kroger must present “the most forceful evidence of a
purpose to exclude the claim from arbitration” to prevail. Warrior & Gulf, 363 U.S. at
585. Based on the following analysis, we further conclude that Kroger has failed to meet
this burden.
2. Effect of subcontracting to Transervice and Zenith
Kroger presents a series of arguments claiming that Local 89’s grievances are not
subject to arbitration because when Kroger subcontracted out all of its KDC operations
in February 2007, the arbitration provision “ceased to apply.” (See, e.g., Kroger Br. 22.)
To the extent that Kroger’s argument is coterminous with an argument that the parties’
agreement to arbitrate has expired or has been terminated, it fails because “where the
dispute turns not on whether the parties ever agreed to arbitrate, but rather whether an
agreement to arbitrate has expired or terminated, the question of termination is for the
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 12
arbitrator.” Int’l Ass’n of Bridge, Structural, and Ornamental Iron Workers, Local
Union No. 44 v. J & N Steel & Erection Co., 8 F. App’x 381, 386 (6th Cir. 2001); cf.
Cooper, 474 F.3d at 280 (“[T]he Supreme Court has recognized that a party’s obligation
to arbitrate does not automatically cease upon termination of the collective bargaining
agreement.” (internal quotation marks omitted)). “The reason an arbitrator, not the
court, should decide whether an arbitration agreement has expired or terminated is
because resolution of the issue involves examining and interpreting the termination
provisions of the agreement.” J & N, 8 F. App’x at 386.
However, Kroger attempts to distinguish its position, stating that it is not arguing
that the Master Agreement (or the arbitration provision) has expired or terminated, but
rather that no Local 89 members can invoke its provisions because they are no longer
employees of Kroger. In making this argument, Kroger relies chiefly upon Fraser v.
Magic Chef-Food Giant Markets, Inc., 324 F.2d 853 (6th Cir. 1963). In that case, the
employer and the union were one year into a three-year collective bargaining agreement
when the employer notified the union that it would be closing the plant where the union
members worked within two months “because of its inability to obtain adequate profits.”
Id. at 855 (internal quotation marks omitted). The covered employees filed suit to obtain
the wages that they would have received had the plant continued to operate throughout
the duration of the contract. Id. This Court refused to read into the contract an
affirmative duty on behalf of the employer to stay in business or to treat the collective
bargaining agreement as an employment contract because “[r]ights of employees under
a collective bargaining agreement presuppose an employer-employee relationship” that
a collective bargaining agreement does not create. Id. at 856. Further, this Court stated
that “[e]mployees’ rights under such a contract do not survive a discontinuance of
business and a termination of operations.” Id.
Unfortunately for Kroger, Fraser does not apply here. First, Fraser did not
involve arbitration. The former employees in Fraser did not sue to compel arbitration,
they sued to collect contract damages as if the collective bargaining agreement was an
employment contract. Therefore, Fraser addressed the merits of the employees’ contract
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 13
claims against their employer. Here, in contrast, our role is to determine whether the
Master Agreement’s arbitration clause is susceptible to an interpretation whereby it
would cover Local 89’s grievances. Fraser is best understood as standing for the
proposition that employment contracts are distinct from collective bargaining agreements
and the latter cannot be enforced as if they were the former, an issue irrelevant to the
case before us. Second, even if Fraser’s holding were applicable here, it is factually
distinguishable. The employer in Fraser closed the entire plant covered by the collective
bargaining agreement, while Kroger simply subcontracted out its operations at the KDC
to other companies. See Heheman v. E.W. Scripps Co., 661 F.2d 1115, 1123 (6th Cir.
1981) (distinguishing Fraser because the employees’ terminations were precipitated by
the merger of their employer with another company, not because their employer went
out of business). Further, the collective bargaining agreement in Fraser did not address
cessation of operations at the plant, while the Master Agreement specifically addresses
the possibility of Kroger contracting out its KDC operations. Nowhere in the Master
Agreement, the Local Supplement, or the Letter of Understanding does it state that
Kroger’s subcontracting out of its KDC operations limits the applicability of the
arbitration provision.
Moreover, an examination of the job-security provisions included in the Master
Agreement further demonstrates the untenability of Kroger’s position. Under Section
25.3, if Kroger subcontracts all of its warehouse or transportation operations during the
term of the agreement, “then a condition of such subcontract shall be offers of
employment to eligible employees . . . by the new employer, provided that the new
employer requires that number or more to perform such services.” (R.E. 65-4, at 4.)
Under Appendix I, Kroger is required to offer a “comparable job at the nearest like
facility” covered by the Master Agreement to any employee “permanently laid-off”
because Kroger subcontracted out all or part of its KDC operations. (Id. at 12.) These
provisions provide protections to former Kroger employees who lost their positions at
Kroger because Kroger subcontracted out its KDC operations. To hold that these
employees are ineligible to grieve complaints about Kroger subcontracting out its KDC
operations because they are no longer employed by Kroger requires a circular logic.
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 14
Further, such a holding essentially would create a blanket exception of subcontracting-
related claims from the Master Agreement’s arbitration provision because, once the
subcontracted-out employees were off Kroger’s payroll, there would be no one eligible
to file a grievance. This Court has no authority to write such a sweeping exception into
the Master Agreement when, by its terms, the arbitration provision covers “any
grievance[,] dispute[,] or complaint over the interpretation or application of the contents
of [the Master] Agreement.” (R.E. 65-3, at 15.) Finally, even if we were to find that
there was no particular Local 89 member eligible to grieve Kroger’s subcontracting
activities, the Union itself has an interest in enforcing the terms of the Master Agreement
“in order to maintain the integrity of the bargaining process.” Cooper, 474 F.3d at 281;
cf. Cleveland, 440 F.3d at 816 (finding dispute over retiree benefits was arbitrable
because the union specifically had bargained for such benefits and despite the fact that
retirees had other remedies available).
3. Effect of Letter of Understanding
Kroger also argues that the parties’ execution of the Letter of Understanding
demonstrates their intent to exclude any subsequent grievances from the Master
Agreement’s arbitration provisions. Kroger notes that the Letter of Understanding
specifically provides for arbitration of outstanding grievances under the Master
Agreement (but not subsequent grievances) and that Local 89 included provisions
specifically providing for arbitration of subsequent grievances in earlier draft
agreements. Further, Kroger argues that the Letter of Understanding is not a “side letter”
or “side agreement” under Cooper and that, even if it is, Local 89’s grievances fall
outside of the scope of the arbitration provision because they have not been brought by
current Kroger employees. We similarly are unpersuaded by this set of arguments.
First, given the presumption in favor of arbitrability, the fact that the Letter of
Understanding addresses the arbitrability of outstanding grievances but is silent as to
subsequent grievances should not be read as excluding such grievances from the
arbitration provisions. To hold otherwise would be to reverse the presumption. See
Mead, 21 F.3d at 131 (holding that courts “should not deny an order to arbitrate ‘unless
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 15
it may be said with positive assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute’”). Similarly, the fact that earlier proposed
agreements drafted by Local 89 specifically provided for arbitration of subsequent
grievances is not strong enough evidence to rebut the presumption of arbitrability.
Notably, the arbitration provisions in these proposed agreements do not just provide that
grievances arising from the agreement will be subject to the Master Agreement’s
grievance procedures, they provide that such grievances will be subjected to an
expedited arbitration process. Therefore, the absence of such a provision in the Letter
of Understanding can just as easily support the implication that both parties understood
subsequent grievances would be subject to the Master Agreement’s arbitration provision,
but that they ultimately agreed not to subject such grievances to expedited arbitration.
Given the presumption in favor of arbitration, the fact that the agreement is susceptible
to a reading that provides for arbitration controls.
Kroger also argues that disputes over the Letter of Understanding are not
arbitrable because it is not a side agreement and, even if it were, disputes arising under
the Letter of the Agreement fall outside of the scope of the Master Agreement’s
arbitration provision.2 In Cooper, this Court adopted the “scope test,” also applied by
the Third, Seventh, and Ninth Circuits, to determine whether a dispute over a side
agreement without an arbitration clause is subject to an arbitration clause included in the
main collective bargaining agreement. Cooper, 474 F.3d at 279. Under this test, “unless
the parties indicate otherwise, disputes over a side agreement are arbitrable if the subject
matter of the side agreement is within the scope of the [collective bargaining
agreement’s] arbitration clause.”3 Id. at 278-79. Our inquiry under the scope test
2
We note that the two grievances that Local 89 seeks to compel to be arbitrated in its amended
complaint do not allege violations of the Letter of Understanding; they allege violations of the Master
Agreement and Local Supplement. Thus, the question of whether disputes arising under the Letter of
Understanding are arbitrable is of questionable relevance. However, although they are not referenced in
Local 89’s amended complaint, there are similar, subsequently filed grievances in the record alleging that
Kroger has violated the Letter of Understanding. Further, Local 89 argues in its brief that its grievances
invoke the Letter of Understanding, in addition to the Master Agreement and Local Supplement.
3
Under the “collateral test,” employed by the Second, Fourth, and Eighth Circuits, “courts
consider the similarity of the side agreement’s subject matter to the subject matter of the [collective
bargaining agreement].” Cooper, 474 F.3d at 278. If the subject matter is dissimilar, the side agreement
is deemed collateral to the collective bargaining agreement, and therefore not arbitrable. “However, where
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 16
“focuses on the breadth of the arbitration clause, thereby permitting parties to reference
the plethora of case law interpreting arbitration clauses . . . . Simply put, ‘the general
arbitration clause will apply to a dispute over a side agreement to the same extent it
would govern any other disagreement between the parties.’” Id. at 280 (quoting
Inlandboatmens Union of the Pac. v. Dutra Group, 279 F.3d 1075, 1081 (9th Cir.
2002)).
Applying the scope test in Cooper, this Court noted that the side agreement
“concern[ed] retirement healthcare contribution caps,” and while the main collective
bargaining agreement did not address this narrow issue, “references to medical benefits
generally, and healthcare coverage of retired employees, [we]re replete” throughout the
main agreement. Id. at 279. Given that the main agreement contained a broad
arbitration clause and neither it nor the side agreement contained any exceptions from
arbitrability, this Court concluded that the side agreement “clearly falls within [the
arbitration clause’s] scope.” Id. at 280. The Cooper opinion also set forth how parties
can ensure that potential side-agreement disputes do not become subject to arbitration:
Should a party intend not to arbitrate disputes over a particular side
agreement, language to that effect may be included within the side
agreement. Moreover, if the parties wish to restrict the [collective
bargaining agreement’s] arbitration clause from applying to side
agreements, they can provide for such within the language of the
[collective bargaining agreement].
Id.
Kroger first argues that the Letter of Understanding does not qualify as a “side
agreement.” Kroger notes that, unlike that side agreement in Cooper, the Letter of
Understanding was not negotiated simultaneously with the Master Agreement and was
never appended to the Master Agreement. However, Cooper imposes no such
requirements in order to consider a particular contract to be a side agreement, nor does
the side agreement is ‘integral’ to the [collective bargaining agreement], courts permit arbitration of
disputes over its provisions.” Id. In declining to adopt the collateral test, this Court stated that it “creates
uncertainty because parties have no gauge as to when a side agreement is similar or dissimilar to the
underlying [collective bargaining agreement].” Id. at 280.
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 17
Kroger provide any other authority for such a rule. More generally, Kroger argues that
the Letter of Understanding was negotiated to wrap up the relationship between it and
Local 89 rather than further clarify an ongoing collective bargaining relationship
between the two parties. But the Letter of Understanding nowhere states that the Master
Agreement or its grievance procedures no longer apply, nor does it comply with the
contract termination or modification requirements set forth in the Master Agreement.
Further, the fact that it addresses Kroger’s ongoing duties and obligations under the
Master Agreement is evidence to the contrary.
Kroger next argues that, even if the Letter of Understanding is a side agreement,
disputes concerning it do not qualify for arbitration under the scope test. Under that test,
we first must look to the arbitration provision, and then “[w]ith the scope of the
arbitration clause in mind, . . . look to the subject matter of the side agreement to
determine if it falls within the clause’s intended coverage.” Id. at 279. As noted above,
the scope of the arbitration provision is broad and there is no language in the Letter of
Understanding excluding any types of grievances from arbitration. Likewise, there is
nothing in the Master Agreement’s grievance procedures that limits their applicability
to side agreements. Further, the Letter of Understanding deals almost exclusively with
issues falling within the scope of the Master Agreement. To the extent that Local 89 has
grievances arising out of the Letter of Understanding, they concern subcontracting,
addressed specifically in Article 25 of the Master Agreement. Given the broadness of
the arbitration clause, there is no question that grievances concerning subcontracting fall
within its scope.
In sum, we find that neither Kroger’s subcontracting to Transervice and Zenith
(and the consequent fact that Kroger no longer directly employs Local 89 members) nor
the parties’ execution of the Letter of Understanding demonstrates an intent to exclude
Local 89’s subcontracting grievances from arbitration under the Master Agreement. We
conclude that Kroger has failed to rebut the presumption in favor of arbitrability and the
district court correctly compelled arbitration.
No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 18
III. CONCLUSION
Based on the foregoing analysis, we AFFIRM the judgment of the district court.