Briggs & Stratton Corporation v. Local 232, International Union, Allied Industrial Workers of America (Afl-Cio)

CUMMINGS, Circuit Judge,

concurring in part and dissenting in part.

Because the district court’s injunction regarding the Union’s work-to-rule campaign1 lapsed by its own terms upon entry of the *717arbitrator’s decision to dismiss the Union’s grievance concerning the changes in the Large Engine Division, I concur in dismissing the Union’s appeal from the injunction as moot. I must dissent, however, from the majority’s decision to dismiss the Union’s appeal from the denial of its motion for a stay pending arbitration of Briggs & Strat-ton’s damages suit.

The majority’s reasoning regarding this issue is puzzling. The majority first implies — without supporting citation — that Section 3 of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”),2 apples only “[w]hen the parties have commenced an arbitration.” In this case, of course, the parties have not already commenced arbitration of the Company’s entitlement to damages arising out of the work-to-rule campaign, suggesting that — according to the majority’s reasoning — the Union is not entitled under Section 3 to move for a stay. However, the majority later correctly recognizes that Section 3 is not limited to circumstances in which arbitral proceedings have already been initiated. “This is not at all to say that a dispute is ‘referable to arbitration’ only if a party has made a formal demand; ... requests in the course of Itigation may suffice.” Since here the Union clearly made a “request [for arbitration] in the course of Itigation” by moving for a stay of district court proceedings — as precedent from both the Supreme Court and from this Circuit makes clear — the implcation of the majority’s reasoning is that the Union’s motion was properly made under Section 3 of the FAA and that this Court, consequently, has jurisdiction under Section 16 to hear the Union’s appeal.

The majority, unaccountably, does not reach this conclusion. Instead it infers, apparently from the fact that the Union coupled its motion for a stay of proceedings with another motion to dismiss on the merits, that what the Union “really” wants “is not so much arbitration as dismissal of the suit.” It bolsters this conclusion by characterizing counsel’s position at oral argument as “treat[ing] arbitration as a poor cousin.” According to the majority, “[t]he Union put the right caption on its initial motion: it made (and the district court denied) a proper request for dismissal under Rule 12(b)(6),” the denial of which is not interlocutorily appeal-able. From this the majority concludes that the Union never made a proper motion for a stay under Section 3 of the FAA and that this Court, therefore, has no jurisdiction over the appeal.

Such reasoning is untenable. First, the majority is unquestionably correct in its assertion that a formal demand for arbitration is not a prerequisite for making a proper motion under Section 3 of the FAA for a stay of district court proceedings. Second, both Supreme Court precedent and precedent from this Circuit make clear that the Union made an adequate request for arbitration in the course of its motion practice. In particular, coupling a motion to dismiss with a motion for a stay was explicitly recommended by this Court not five years ago for litigants in the Union’s position. Finally, any suggestion that the Union’s counsel did anything at oral argument to undermine the Union’s right to request a stay is completely unsupported.

I. Background

Before considering the legal principles applicable to this ease, it is important to recall the Union’s situation. The majority implies that the Union is somehow derelict in establishing its entitlement to a stay, either because it did not make a formal demand for arbitration prior to moving the district court for a stay of proceedings, or because it coupled its motion for a stay with a motion to dismiss, or because it is willing to arbitrate but, according to the majority, it is not eager — or it is not eager enough. I disagree.

The Union has no current complaint against the Company. Its previous complaint — that the Company had improperly instituted changes in the structure of the Large Engine Division — was the subject of both the work-to-rule campaign and of a grievance brought by the Union and settled by an arbitrator. It is the Company that *718currently has a complaint against the Union, since it is attempting to recover over three million dollars in damages on account of alleged economic losses suffered during the work-to-rule campaign. Under Drake Bakeries, Inc. v. Local 50, American Bakery & Confectionery Workers International, 370 U.S. 254, 82 S.Ct. 1346, 8 L.Ed.2d 474 (1962), if the Company had the right to arbitrate this grievance, then it had the obligation to do so prior to filing suit. See, e.g., Mautz & Oren, Inc. v. Teamsters Local No. 279, 882 F.2d 1117, 1126, 1126 n. 15 (7th Cir.1989) (because under the parties’ agreement in that case the employer “may initiate grievance proceedings,” it was required to exhaust all its arbitral remedies before suing the union).3

As the majority appears to recognize, the Company undoubtedly had the right to arbitrate this grievance. But it did not take its grievance concerning damages arising out of the work-to-rule campaign to arbitration; it instead filed suit in the district court. Following the procedures that we ourselves had suggested in Mautz & Oren, 882 F.2d at 1126, the Union both raised failure to exhaust arbitral remedies as an affirmative defense, R. 7 (Answer) at 9, and moved the district court to stay its proceedings so as to afford the Company an opportunity to arbitrate this dispute if it so desired. R. 8 at 1. According to the majority, however, the Union has not sufficiently demonstrated its commitment to arbitration.

The majority suggests that although a formal demand for arbitration is not required before a defendant may move the court for a stay of proceedings, the Union’s failure to have made such a demand raises the inference that the Union does not “want” to arbitrate. It believes that the Union considers arbitration “a poor cousin.” But why should the Union be any more eager to arbitrate than it is to litigate? The Union had no unresolved complaint prior to the Company’s filing suit, and it has no unresolved complaint against the Company now. It is for the aggrieved party to institute proceedings in the proper forum to ensure its own recovery; it is not the business of one who has no complaint and seeks no recovery to institute proceedings anywhere, whether it be in court or before an arbitrator. Counsel for the Union made clear, both in its motion practice and at oral argument, that the Union will cooperate in any proceeding the Company institutes to resolve the Company’s complaint, so long as that proceeding is in the proper forum. There is no reason for the Union to express any particular enthusiasm for that forum. It has done enough by affording the Company the opportunity to bring its complaint to the proper authority.

Likewise, the Union was entitled under our precedent — indeed, it had been explicitly advised by this Court — to couple its motion to dismiss with a motion for a stay. Mautz & Oren, 882 F.2d at 1126. The majority, however, concludes from the Union’s having carefully followed this Court’s recommendation that what the Union “really” wants is dismissal of Briggs & Stratton’s suit on the merits — for failure to have exhausted arbitral remedies — and not arbitration of the underlying dispute. I see no contradiction in the Union’s wanting both. Why should it not prefer outright dismissal and yet be willing to arbitrate the dispute if, after the Union obtains a stay, the Company chooses to invoke its right to arbitration? There is no reason to believe that the Union, by appealing the denial of its motion for a stay, is “really” sneaking in an appeal of the denial of its motion to dismiss. Many courts have held that an appropriate response to failure to exhaust arbitral remedies is a stay of *719district court proceedings, rather than outright dismissal of the complaint. See, e.g., id. at 1127; American Home Assurance Co. v. Vecco Concrete Construction Co., 629 F.2d 961, 963-964 (4th Cir.1980); International Association of Heat and Frost Insulators v. Leona Lee Corp., 434 F.2d 192, 193-94 (5th Cir.1970). The Union — following the very-tactic we ourselves suggested in Mautz & Oren — legitimately moved the district court for dismissal of the complaint or, in the alternative, for a stay pending arbitration, and now it legitimately appeals that aspect of the district court’s denial that is immediately ap-pealable. 9 U.S.C. § 16.

Under these circumstances the Union’s claim to arbitration does not deserve the short shrift it has gotten from the majority. The majority chides the Union for not having taken action that it had no legal obligation to take, and that it certainly had no good reason to take.4 As will be demonstrated below, the Union has done all that it should to entitle it to a stay of district court proceedings: It had no reason, either legally or prudentially, to make a formal demand for arbitration when it had no current grievance; it made an adequate request in the course of litigation for arbitration of the Company’s grievance; and its position at oral argument was in no way inconsistent with its right to a stay. The Union made a proper motion pursuant to Section 3 of the FAA and this Court, therefore, has jurisdiction over the appeal pursuant to Section 16.

II. Demand

Section 16 of the FAA provides for interlocutory appeals from, among other things, “an order ... refusing a stay of any action under section 3 of this title_” 9 U.S.C. § 16(a)(1)(A). Section 3 of the FAA provides that “If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration,” the court “shall on application of one of the parties stay the trial of the action until such arbitration has been had” unless the applicant for the stay is “in default in proceeding with such arbitration.” 9 U.S.C. § 3.

The majority initially suggests, without supporting citation, that Section 3 applies only when the parties to the lawsuit have already commenced arbitration. This interpretation would significantly narrow the scope of the section. Instead of applying to all issues “referable to arbitration under an agreement in writing,” under this reading the section would apply only to issues previously referred to arbitration. Apparently relying on this interpretation of Section 3, the majority emphasizes that in this case neither party made a formal demand for arbitration, concluding that “because each side has elected not to arbitrate, there is no pending arbi-tral proceeding. There is nothing to wait for, making a stay inappropriate.”

As the majority later appears to recognize, however, such an interpretation of the plain language of the statute is unsupported by caselaw. The cases interpreting the “referable to arbitration” language of Section 3 uniformly agree that “where a court is satisfied that a dispute before it is arbitrable, it must stay proceedings and order the parties to proceed to arbitration.” Progressive Casualty Insurance Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 45 (2d Cir.1993). The sole factors in determining whether a dispute is arbitrable are “whether there is a written agreement to arbitrate; then, whether any of the issues raised are within the reach of that agreement.” Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 754 (5th Cir.1993) (citation and internal quotation marks omitted). Accord, e.g., C.A. Reaseguradora Nacional, 991 F.2d at 45; Pearce v. E.F. Hutton Group, Inc., 828 F.2d 826, 830 (D.C.Cir.1987). These *720cases make no suggestion that Section 3 applies only when an arbitration proceeding has already been instituted. Indeed, the Fifth Circuit, in Midwest Mechanical Contractors, Inc. v. Commonwealth Construction Co., explicitly addressed and rejected the argument, which the majority clearly finds quite appealing, that Section 3 of the FAA applies only when the parties have commenced an arbitration. 801 F.2d 748, 750 (5th Cir.1986); see also Tenneco Resins, Inc. v. Davy International, AG, 770 F.2d 416, 419 (5th Cir.1985); cf. Fujikawa v. Gushiken, 823 F.2d 1341, 1347 (9th Cir.1987), certiorari denied, 487 U.S. 1240, 108 S.Ct. 2913, 101 L.Ed.2d 945 (1988).

While several courts have rejected the notion that an issue is “referable to arbitration” under Section 3 of the FAA only if the parties have commenced arbitration, the cases more commonly address the failure to have invoked arbitration in terms of “default” under Section 3. These cases hold that failure to have invoked arbitration under the contract is not by itself “default” so as to warrant denying a stay. See, e.g., Maxum Foundations, Inc. v. Salus Corp., 779 F.2d 974, 983 (4th Cir.1985); Vecco Concrete, 629 F.2d at 963; Carolina Throwing Co. v. S & E Novelty Corp., 442 F.2d 329, 330 (4th Cir.1971); cf. Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1160-61 (5th Cir.1986) (implied holding); Mogge v. Dist. No. 8, International Association of Machinists, 387 F.2d 880, 883 (7th Cir.1968) (same), certiorari denied, 391 U.S. 936, 88 S.Ct. 1849, 20 L.Ed.2d 855. Such cases note that the issue of “procedural default” — that is, whether the parties have satisfied the contractual requisites for arbitration under their contract — is an issue for the arbitrator, not the court, to determine. See generally John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 555-58, 84 S.Ct. 909, 917-19, 11 L.Ed.2d 898; see also Washington Hospital Center v. Service Employees International Union, 746 F.2d 1503, 1506-08 (D.C.Cir.1984) (collecting cases). The majority is therefore wrong to suggest that the Union “by refusing to submit its own demand [for arbitration], is ‘in default.’ ”

There is simply no support for the majority’s initial position that only when there has been a formal demand for arbitration may a party move the district court for a stay of proceedings under Section 3 of the FAA. It recognizes this by later noting that Section 3 applies not only when a party has previously made a formal demand for arbitration but also when a party makes such a request in the course of litigation. Applicable precedent demonstrates that in this case the Union did make such a request.

III. Motion Practice

Both the Supreme Court and this Circuit have considered and addressed what constitutes a request for arbitration made in the course of litigation. In Drake Bakeries, just as in the case at bar, the employer sued its union to recover damages arising out of an alleged breach of a no-strike clause contained in a collective bargaining agreement. The union thereupon moved the district court for a stay of proceedings pending arbitration pursuant to the collective bargaining agreement between the parties. 370 U.S. at 255-56, 82 S.Ct. at 1347-48. The Court explicitly rejected the employer’s contention that the union was not entitled to a stay “because it [had] not proceeded with dispatch in seeking arbitration.” Id. at 266, 82 S.Ct. at 1353. The Court held that “the first occasion for the union to insist upon its right to arbitrate the employer’s claim for damages” was after the employer filed its suit in the district court. Id. at 267, 82 S.Ct. at 1354. “This it promptly did by moving for a stay in the District Court.” Id.

In the case at bar, as in Drake Bakeries, the first occasion for the Union to insist upon its right to arbitrate the Company’s claim for damages was after the Company made clear, by filing suit, that it had such a claim. In the case at bar, as in Drake Bakeries, the Union signalled its desire to arbitrate by promptly moving the district court for a stay. In Drake Bakeries, making such a motion was considered a sufficient indication of the union’s desire to arbitrate. In the case at bar, however, the majority finds the union’s motion for a stay to be insufficient evidence of its desire to arbitrate.

The majority believes that the Union in this case “really” wants the case dismissed, rather than stayed pending arbitration. It draws this conclusion from the Union’s having combined its motion for a stay with a *721motion to dismiss. This inference is effectively foreclosed by our recent holding in Mautz & Oren, 882 F.2d at 1126, 1127. In that case the defendant union, faced with a damages suit premised on breach of a no-strike clause contained in a collective bargaining agreement, raised failure to arbitrate as an affirmative defense in its answer. It did not, however, move the district court for a stay pending arbitration. Nonetheless, this Court held that on remand the employer’s contract claim should be stayed pending exhaustion of available grievance procedures. Id. at 1127. It noted, however, that the better practice would have been for the defendant both to raise failure to exhaust as an affirmative defense and to move the district court for a stay. Id. at 1126.

In the case at bar, as in Mautz & Oren, the Union raised failure to exhaust arbitral remedies as an affirmative defense in its answer; it also moved the district court to dismiss on that ground. Moreover, it additionally moved the district court for a stay pending arbitration. In Mautz & Oren such a procedure was explicitly approved. In the case at bar, however, the majority considers the Union’s actions to have been fatally equivocal, inferring that the Union is now improperly appealing the denial of its motion to dismiss and not the denial of its motion for a stay.

The majority provides no principled reason for departing from Supreme Court and Circuit precedent on the issue of what constitutes a proper request for arbitration made in the course of litigation. The clear implication of the Union’s motion practice is that it adequately made such a request. The majority, however, avoids this result by asserting that counsel’s performance at oral argument somehow demonstrates the Union’s disinterest in arbitration. To the contrary, counsel’s oral argument was in every way consistent with the Union’s previous litigation posture.

IV. Oral Argument

Perhaps recognizing that the cases (1) do not require that an arbitral proceeding be pending before a stay of district court proceedings will be appropriate, (2) do not treat the failure of the moving party to have invoked arbitration under the contract as per se constituting “default” under Section 3, and (3) are willing to treat a motion for a stay made in the district court as an adequate indication of a desire to arbitrate, the majority falls back on the assertion that in this ease the parties themselves are not interested in arbitrating.

In response to this assertion it suffices merely to set out the precise exchange that took place at oral argument between the Court and the attorney for the Union. It should be noted that at no time prior to oral argument had anyone even suggested that the Union’s failure to have demanded arbitration either legally precluded it from moving for a stay or allowed an inference that it did not desire arbitration.

COURT: Has there been a separate arbitration request for damages made? * * * Well, then what is this a stay in favor of? * * * But no one has, neither the union nor the employer, has asked for any arbitration?

In this context the attorney for the Union responded, apparently considering the holding of Drake Bakeries, 370 U.S. at 267, 82 S.Ct. at 1354 (“promptly ... moving for a stay in the district court” can replace a contractual demand for arbitration), and of Mautz & Oren, 882 F.2d at 1126 (raising failure to have exhausted arbitral remedies as an affirmative defense, even in the absence of a motion for a stay, can replace a contractual demand for arbitration):

COUNSEL: The union has. The union said to the court we would want to arbitrate that ...
COURT: You don’t ask for arbitration by asking it of the court. Have you made a proper demand for arbitration?
COUNSEL: Only indirectly through this stay in saying we are prepared to arbitrate that dispute in an arbitral forum.

A long dialogue ensued regarding what contractual procedures are required in order to invoke arbitration, and whether the Union had an obligation to initiate arbitration after the Company — wrongfully, in the Union’s view — had filed suit in district court. The Union relied on Drake Bakeries and on Mautz & Oren to support its position that because it had no current complaint against the Company, it had no reason to invoke any *722grievance procedures. The Union’s counsel was emphatic, however, that if the Company-decided to pursue its arbitral remedies, the Union would co-operate:

COUNSEL: * * * [In Mautz & Oren] the union let it be known, as we did to the district court, that we are prepared to arbitrate, and that is in the record. That is in the record that the union was prepared to arbitrate this dispute.5 And we simply asked the employer to exhaust its remedies under the contract, and if they want to arbitrate we mil arbitrate the dispute. (Emphasis added.)

Although the majority admits that under Mautz & Oren “moving to dismiss [for] failure to arbitrate may support an inference that the objecting party wants to arbitrate,” it finds that counsel’s oral argument somehow negates that inference. I disagree. The quoted exchange is simply insufficient to negate the inference, otherwise mandated by Drake Bakeries and Mautz & Oren, that the Union by its motion practice made a sufficient request for arbitration. It is clear that the Union will arbitrate any dispute that the Company cares to bring before an arbitrator. The Union correctly believes, however, that because it has no complaint against the Company, it has no obligation to initiate arbitration itself.

Indeed, in my view this exchange does not even demonstrate that the Union considers arbitration to be, in the words of the majority, “a poor cousin.” But suppose it did. What legal effect could this have? Considering arbitration to be a poor cousin is a far cry from waiving one’s right to request it. Oral argument is intended to clarify murky issues of fact or law, not to trap the litigants into making assertions that supposedly undermine their entitlement to the very relief they have been — to all previous appearances — vigorously seeking.

V. Entitlement to a Stay

Because in my view we have jurisdiction to hear this appeal, I must briefly indicate that the Union is entitled to a stay under Section 3 of the FAA. Where a collective bargaining agreement contains an arbitration clause, “[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 1419, 89 L.Ed.2d 648 (1986) (quoting United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 1352-53, 4 L.Ed.2d 1409 (1960)). The collective bargaining agreement at issue here provides that “With the exception of grievances concerning the incentive system outlined in this Contract, all grievances between the two parties shall be deemed arbitrable.” Article IV, Section 2 (emphasis added). The presumption of arbitrability afforded to any particular grievance that arises under a collective bargaining agreement containing an arbitration clause is “particularly applicable where the clause is ... broad,” AT & T Technologies, 475 U.S. at 650, 106 S.Ct. at 1419, and we have already construed a similar agreement between the parties now before us as containing such a broad arbitration clause. Local 232, Allied Industrial Workers of America v. Briggs & Stratton Corp., 837 F.2d 782, 785 (7th Cir.1988). “In such cases, in the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail.” AT & T Technologies, 475 U.S. at 650, 106 S.Ct. at 1419 (quoting Warrior & Gulf, 363 U.S. at 584-85, 80 S.Ct. at 1354). The arbitration clause in the ease at bar broadly covers “all grievances between the two parties,” with one explicit exception not applicable here. Briggs & *723Stratton does not suggest any express provision that would exclude its damages claim from arbitration, nor does it advance a persuasive argument that there is any forceful evidence of a purpose to exclude its claim from arbitration, as required by AT & T Technologies.

Therefore, because this grievance is “referable to arbitration” under Section 3 of the FAA and the Union is not in default in proceeding with the arbitration, a stay of district court proceedings is mandated.

VI. Conclusion

I respectfully dissent from the dismissal of appeal number 94-1484 for want of jurisdiction. This Court should hear the appeal. The decision of the district court should be reversed and the case remanded with instructions to stay proceeding pending arbitration.

Before CUMMINGS, EASTERBROOK, and MANION, Circuit Judges.

. The work-to-rule campaign encouraged members of the Union to enforce every aspect of the collective bargaining agreement and the plant's operating procedures. Briggs & Stratton claims that this campaign really constituted a concerted slow-down forbidden by the collective bargaining agreement.

. I assume, with the majority, that the Union was entitled under Seventh Circuit precedent to move for a stay of district court proceedings pursuant to 9 U.S.C. § 3. This assumption on the part of the majority renders dicta its lengthy discussion of appeals trader 28 U.S.C. § 1292(a)(1) in the post-Gulfstream era, since the FAA contains its own provisions for interlocutory appeals. 9 U.S.C. § 16.

. The majority stresses the permissive aspect of arbitration under the collective bargaining agreement: "[The Union] does not believe that the Employer is required to arbitrate any dispute. Arbitration under this agreement is optional.” (Emphasis in original.) The majority is correct that the collective bargaining agreement does not require the aggrieved party to pursue arbitration, since it provides that if the Company and the Union cannot negotiate a resolution of any grievance, "either party may submit such grievance or grievances to arbitration....” (Emphasis added.) But while the Company is not required by the contract to arbitrate its complaint against the Union — it is free at any time to drop its attempt to recover damages from the Union — if it wants to pursue relief in the district court it must first have exercised its right, under the contract, to arbitrate its grievance. Cf. Mautz & Oren, 882 F.2d at 1126. In the exhaustion context, if the aggrieved party may take its dispute to arbitration, then it must take its dispute to arbitration prior to filing suit.

. The majority cites Hartford Steam Boiler Inspection and Insurance Co. v. Quantum Chemical Corp., 968 F.2d 631 (7th Cir.1992), in support of the proposition that "Section 16 of the Arbitration Act does not authorize an interlocutory appeal when there is no arbitration in prospect.” On the contrary, in Hartford Steam Boiler the appellant — "neither a party to any arbitration nor fettered by its outcome,” which had "no contractual right to arbitrate anything with anyone” — had moved the district court to direct arbitration between the appellee and third parties that were strangers to the litigation. 968 F.2d at 633-34. We noted that "[a]Ithough an order denying such a request is appealable under § 16, such a request is foredoomed." Id. at 634. Clearly there was "no arbitration in prospect” in Hartford Steam Boiler, and yet this Court explicitly acknowledged its jurisdiction over the appeal.

. Counsel's assessment of the record is correct. In addition to its motion practice, discussed above, the Union explicitly informed the district court that it would arbitrate the damages issue if the Company so desired. See, e.g., R. 25 (Tr.Vol. 1) at 6 (Mr. Loebel, counsel for the Union: “|T|he union's position is ... that the company should be pursuing its contractual remedies. We ■will arbitrate that dispute with the company if it seeks to_"); id. at 20-21 (“The company is essentially suing now for a breach of contract. ... And we’re willing to arbitrate that issue.”).