Local Union No. 721, United Packinghouse, Food and Allied Workers v. Needham Packing Company/Opinion of the Court

This case, which was brought here from the Supreme Court of Iowa, 374 U.S. 826, 83 S.Ct. 1867, 10 L.Ed.2d 1050, presents a problem concerning the relationship between an arbitration clause and a no-strike clause in a collective bargaining agreement.

Although this case comes to us on the pleadings and some disputed questions of fact are still to be resolved, we accept as true the following facts for the purposes of our decision. The petitioner, Local Union No. 721, United Packinghouse, Food and Allied Workers, AFL-CIO, and the respondent, Needham Packing Co., had an agreement which included provisions of both kinds, set out hereafter. On May 11, 1961, Needham discharged Anton Stamoulis, an employee represented by the union. In response, on the same day about 190 other employees left work. During the next few days Needham advised the employees to return to work, stating that if they did not their employment would be regarded as terminated and that the discharge of Stamoulis would be treated under the grievance procedures of the collective bargaining agreement. The employees did not return to work.

On July 5, 1961, the union presented to Needham written grievances on behalf of Stamoulis and the other employees, asserting that they had been 'improperly discharged' and requesting their reinstatement with full seniority rights and pay for lost time. By letter dated July 11, 1961, Needham refused to process the grievances. The letter stated that the union and its members had by their conduct 'repudiated and terminated the labor agreement' with the company. In addition, Needham stated that it would not have further dealings with the union and did not recognize the union as majority representative of Needham employees.

This suit by the union under § 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a), to compel arbitration of the two grievances followed. Needham alleged as a defense that the union and its members had struck on May 11, 1961, and that this breach of the no-strike clause of the collective bargaining agreement had been and was treated by Needham as having terminated its obligations under the agreement. In addition, Needham filed a counterclaim, alleging that it had been damaged in the amount of $150,000 by the union's breach of the no-strike clause. The union denied such breach. At the close of the pleadings, in accordance with Iowa procedure, Needham moved for a ruling on points of law and a final order denying the union's petition to compel arbitration. Deciding solely on the basis of matters raised in the pleadings as to which there was no dispute, the trial court ruled in Needham's favor and issued an order against the union. The union obtained an appeal. The Supreme Court of Iowa affirmed the holding below that 'the Union had waived its right to arbitrate the grievances filed by its walkout.' 254 Iowa 882, 887, 119 N.W.2d 141, 143.

In the present posture of this case, we must answer the question whether acts of the union relieved Needham of its contractual obligation to arbitrate almost entirely on the basis of the agreement itself. We think it plain that, seen from that perspective, the judgment below must be reversed.

The two controlling provisions of the collective bargaining agreement are written in comprehensive terms. The nostrike clause provides:

'It is agreed that during the period of this agreement the     employees shall not engage in and the Union shall not call or      sanction any slow down, work stoppage or strike *  *  * .'

The grievance provisions include typical procedures for the resolution of a dispute preliminary to arbitration. They then provide:

'In the event a dispute shall arise between the Company and     the Union with reference to the proper interpretation or      application of the provisions of this contract and such      dispute cannot be settled by mutual agreement of the parties,      such dispute shall be referred to a board of arbitration upon      the request of the Union.'

It is evident from the above as well as other provisions of the agreement that the grievance procedures were intended largely, if not wholly, for the benefit of the union.

A state court exercising its concurrent jurisdiction over suits under § 301(a) applies federal substantive law. Charles Dowd Box Co., Inc., v. Courtney, 368 U.S. 502, 82 S.Ct. 519, 7 L.Ed.2d 483. The law which controls the disposition of this case is stated in Drake Bakeries Inc. v. Local 50, American Bakery & Confectionery Workers International, AFL- CIO, 370 U.S. 254, 82 S.Ct. 1346, 8 L.Ed.2d 474. In that case, the employer had filed an action for damages under § 301(a), alleging that the union had 'instigated and encouraged its members to strike or not to report for work,' in violation of a no-strike clause. Id., at 256 of 370 U.S., at 1348 of 82 S.Ct., 8 L.Ed.2d 474. The collective bargaining agreement contained a broad arbitration clause covering 'all complaints, disputes or grievances arising between * *  * (the parties) involving questions of interpretation or application of any clause or matter covered by this contract or any act or conduct or relation between the parties hereto, directly or indirectly.' Id., at 257 of 370 U.S., at 1348 of 82 S.Ct., 8 L.Ed.2d 474.

The employer argued that the promise not to strike was so basic to the collective bargain and breach of the no-strike clause so completely inconsistent with the provision for arbitration that the employer's duty to arbitrate was excused by the union's breach. This argument, which is essentially that of Needham here, was rejected on grounds fully applicable to this case. Although the Court relied in part on the employer's apparent intention not to terminate the contract altogether, more central to its conclusion was the view that there was no 'inflexible rule rigidly linking no-strike and arbitration clauses of every collective bargaining contract in every situation.' Id., at 261 of 370 U.S., at 1351 of 82 S.Ct., 8 L.Ed.2d 474. (Footnote omitted.) We said:

' * *  * (U)nder this contract, by agreeing to arbitrate all      claims without excluding the case where the union struck over      an arbitrable matter, the parties have negatived any      intention to condition the duty to arbitrate upon the absence      of strikes. They have thus cut the ground from under the     argument that an alleged strike, automatically and regardless      of the circumstances, is such a breach or repudiation of the      arbitration clause by the union that the company is excused      from arbitrating, upon theories of waiver, estoppel, or      otherwise. Arbitration provisions, which themselves have not     been repudiated, are meant to survive breaches of contract, in many contexts, even total      breach; and in determining whether one party has so      repudiated his promise to arbitrate that the other party is      excused the circumstances of the claimed repudiation are      critically important. In this case the union denies having     repudiated in any respect its promise to arbitrate, denies      that there was a strike, denies that the employees were bound      to work on January 2 and asserts that it was the company      itself which ignored the adjustment and arbitration      provisions by scheduling holiday work.' Id., at 262-263 of      370 U.S., at 1351 of 82 S.Ct., 8 L.Ed.2d 474. (Footnotes     omitted.)

Continuance of the duty to arbitrate is, if anything, clearer here than it was in Drake Bakeries, where one of the issues was whether an alleged strike was within the intended scope of the arbitration clause. There is no question in this case that the union's claim of wrongful discharge is one which Needham agreed to arbitrate. Nothing in the agreement indicates an intention to except from Needham's agreement to arbitrate disputes concerning the 'interpretation or application' of the agreement any dispute which involves or follows an alleged breach of the no-strike clause. That the no-strike clause does not itself carry such an implication is the holding of Drake Bakeries.

The fact that the collective bargaining agreement does not require Needham to submit its claim to arbitration, as the employer was required to do in Drake Bakeries, and indeed appears to confine the grievance procedures to grievances of the union, does not indicate a different result. Needham's claim is the subject of a counterclaim in the Iowa courts; nothing we have said here precludes it from prosecuting that claim and recovering damages. That Needham asserts by way of defense to the union's action to compel arbitration the same alleged breach of the no-strike clause which is the subject of the counterclaim does not convert the union's grievance into Needham's different one.

Nor do we believe that this case can be distinguished from Drake Bakeries on the ground that that case involved only a 'one-day strike,' id., at 265 of 370 U.S., at 1353 of 82 S.Ct., 8 L.Ed.2d 474. Whether a fundamental and long- lasting change in the relationship of the parties prior to the demand for arbitration would be a circumstance which, alone or among others, would release an employer from his promise to arbitrate we need not decide, since the undeveloped record before us reveals no such circumstance. Compare Drake Bakeries, supra, at 265 of 370 U.S., at 1353 of 82 S.Ct., 8 L.Ed.2d 474. The passage of time resulting from Needham's refusal to arbitrate cannot, of course, be a basis for releasing it from its duty to arbitrate.

Needham's allegations by way of defense and counterclaim that the union breached the no-strike clause, supported by such facts as were undisputed on the pleadings, did not release Needham from its duty to arbitrate the union's claim that employees had been wrongfully discharged. On that basis, we reverse and remand to the Iowa Supreme Court for further proceedings. It is so ordered.

Reversed and remanded.