                                                                                                                           Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-17-1996

Local Union 735-S v. N Amer Directory II
Precedential or Non-Precedential:

Docket 96-7089




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"Local Union 735-S v. N Amer Directory II" (1996). 1996 Decisions. Paper 51.
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                  UNITED STATES COURT OF APPEALS
                      FOR THE THIRD CIRCUIT
                           ___________

                                No. 96-7089
                                ___________

         GRAPHIC COMMUNICATIONS INTERNATIONAL
         UNION, LOCAL 735-S,

                                   Appellant

                          vs.

         NORTH AMERICAN DIRECTORY CORPORATION II
                           ___________

          Appeal from the United States District Court
             for the Middle District of Pennsylvania
                   (D.C. Civ. No. 93-cv-01991)
                           ___________

                               Argued
                           August 6, 1996
       Before:   MANSMANN, SCIRICA and WEIS, Circuit Judges.

                      (Filed October 17, 1996)
                            ___________


Ira H. Weinstock, Esquire
Jason M. Weinstock, Esquire (ARGUED)
Ira H. Weinstock, P.C.
800 North 2nd Street
Suite 100
Harrisburg, PA 17102

  COUNSEL FOR APPELLANT

Steven R. Semler, Esquire (ARGUED)
Semler & Pritzker
5301 Wisconsin Avenue, N.W.
Suite 610
Washington, D.C. 20015

  COUNSEL FOR APPELLEE
                                ___________

                          OPINION OF THE COURT
                               __________


MANSMANN, Circuit Judge.
         Today we determine if the normally favored "presumption
of arbitrability," in section 301 labor relation cases, has been
overcome by language in a collective bargaining agreement
circumscribing the jurisdiction of a dispute resolution body.
Here the union filed a grievance before the Peer Review Panel
over the extent of health insurance benefits.
         Because we find that the union, in essence, seeks to
have the Peer Review Panel effectuate a change in benefits, a
matter expressly reserved from its jurisdiction in the collective
bargaining agreement, we will affirm the judgment of the district
court entered in favor of the company.

                                I.
         North American Directory Corporation II, ("NADCO"),
produces telephone directories. At the time of this litigation,
its Hazelton, Pennsylvania, plant employed approximately 200
production and maintenance employees who were represented by
Local 735-S of the Graphic Communications International Union.
         NADCO and the union entered into a collective
bargaining agreement effective December 1, 1992 to November 30,
1995. During the negotiation period, the concept of "peer
review" was introduced by NADCO as an alternative to the
traditional arbitration system. Under this peer review system,
employee grievances are brought before a 5-person panel dominated
by non-managerial members (3 employees/2 management).    Despite
some initial skepticism, the union agreed to accept the Peer
Review Panel as the decision maker in certain workplace
situations.
         The description of the Peer Review Panel process at
NADCO is found in Article 26 of the parties' collective
bargaining agreement. The procedure for the filing of
grievances, abbreviated for our purposes, is as follows:
         Article 26.1 A grievance is defined and restricted to
         an allegation that the employer has violated a specific
         provision of the collective bargaining agreement. A
         grievance as defined herein, shall be processed as
         follows:

         STEP 1: A grievance shall be brought to the
         attention of the grievant's supervisor within
         five (5) working days of the act or omission
         being grieved . . . . The supervisor must
         answer the grievance within three (3) working
         days of the presentation.

         STEP 2: If agreement is not reached at the
         Step 1 discussion, the grievant shall have
         three (3) working days thereafter in which to
         file a written grievance with his/her
         department head (or designated Company
         representative) . . . . The department head
         (or designated Company representative) must
         answer the grievance in writing within five
         (5) working days of its presentation or any
         meeting.
         STEP 3: If the grievance is not settled at
         Step 2, the grievant shall have three (3)
         working days from receipt of the Step 2
         answer in which to appeal the Step 2 decision
         in writing, by submitting the grievance to 1)
         a Peer Review Panel, or 2) the Plant Manager
         (Senior Management), whose decision(s) will
         be final and binding on the grievant,
         management and the Union. . . . The Peer
         Review Panel or Plant Manager shall have five
         (5) working days after meeting in which to
         answer the grievance in writing.

                               * * *

         The Panel will not have the authority to
         render a decision which will add to, subtract
         from, or change the meaning of specific
         provisions of the contract; nor shall the
         Panel have any authority to change Company or
         plant policy, pay rates, benefits, work rules
         or to determine future contract terms.

         Details of the peer review procedure were finalized by
a joint committee of union members and NADCO management and were
incorporated into the collective bargaining agreement. The
addendum reads in relevant part:
         INTRODUCTION:

         The company and the union recognize that from
         time to time an associate may encounter a
         problem, question or complaint that, if left
         unresolved, could affect job satisfaction and
         work performance. . . .

                               * * *

         [W]hen an associate is faced with a situation
         that has not been satisfactorily resolved by
         traditional means, the PEER REVIEW procedure
         may be used. Peer Review is a formal problem
         solving system designed to ensure that each
         associate's concerns are given careful
         consideration and conflicts are resolved
         quickly and fairly.

         SCOPE OF AUTHORITY:

         A Peer Review Panel will hear grievances that
         have not been resolved at an earlier step of
         the Grievance Procedure. In other words,
         peer panels may review management's actions
         to ensure that the application of the
         contract was followed correctly and fairly.
         If they find otherwise, they have the
         authority to rectify the situation consistent
         with contract provisions, company practices
         and/or policies.

(Emphasis added.)

         The Peer Review Panel can not change contract
         provisions, company policy, work rules, wage
         scales, or benefits. When a promotion is
         grieved, the panel can determine whether or
         not the job was filled in accordance with
         Article 16.0 of the contract. If the Peer
         Review panel decides it was not done
         properly, the panel can require the process
         be re-done in accordance with the contract.

(Emphasis in original.) The addendum further delineates the
selection process for the members of the panel and describes the
format of its meetings.
         The mechanics of the grievance procedure were invoked
when a dispute arose under the provision of the collective
bargaining agreement which obligates NADCO to provide health
insurance coverage. Article 17.1 succinctly states: "NADCO will
provide Health Insurance benefits, including dental, as described
12/22/92, subject to employee copay of 10% of prevailing premium
rate." No further written elucidation of the benefits exists and
the parties join issue over the particulars of the agreed-upon
coverage.
         The parties do agree, however, that the insurance
coverage changed under the new agreement. Facts not in dispute
are that, effective February 1, 1993, NADCO increased its payment
of existing premiums from 85% to 90% and that the annual major
medical deductible payments were increased from $100 to $200 per
individual and from $200 to $400 per family. There is no such
mutual understanding, however, concerning other changes to the
package. Particularly, the union disputes its acceptance of the
portion of the insurance program which includes a deductible and
an employee across-the-board 20% copay of the first $2,000 in
covered medical bills. Previously, with the exception of major
medical costs, employees had been afforded first dollar coverage
(no deductible and no copay) for these expenses.
         Union members began complaining to their supervisors
regarding reduced coverages and voiced their concerns that these
changes were not bargained for in the new agreement. Their
objections culminated in August 1993 by a written filing of a
Step 2 grievance. The union expressed its complaint as follows:
         The health plan currently in effect at NADCO
         is not the plan we agreed to implement in
         negotiations which took place on 12/22/92.
         Our understanding was the plan we had was to
         remain the same except that the deductible
         would change from $100.00 single/$200.00
         family to $200.00 single/$400.00 family.
         Also the copay of 15% would decrease 5% to
         10% copay. We also agreed the carrier would
         remain the same. (Blue Cross/Blue Shield of
         Northeast Pa. Wilkes-Barre) The Major
         Medical portion of the plan would be 80/20 of
         the next $2,000.00 dollars after the
         deductible is met. Instead we now pay 80/20
         of all charges up to $2,000.00. . . . The
         coverage by Blue Shield has also changed.
         (ex. Surgical Services)
         The union then requested the following relief:
         Remedy: We want the same Blue Cross/Blue Shield plan
         provided by NADCO to it's [sic] employees as we
         understood it to be on 12/22/92. This plan is the same
         plan the employees had prior to signing the contract
         with the following exceptions:

         1.   $200.00 single/$400.00 family

         2.   Copay at 10%

         This plan will be provided by Blue Cross/Blue
         Shield of Northeast Pa. Wilkes-Barre, Pa.
         Also, All employees who had to use the other
         plan will be reimbursed for any payment they
         may have made that should have been covered.

         NADCO rejected the grievance, citing two reasons -- one
procedural, that the grievance was untimely filed, and one
substantive, that the benefits provided are the benefits as
bargained for and agreed upon. The denial further stated:
         Finally, while we expect the above
         explanation will amicably resolve this
         grievance, I want to point your attention to
         Step 4 of the Grievance Procedure, which,
         among other things, precludes the peer review
         mechanism from changing benefits.

By this language NADCO implicitly precluded appeal to the Step 3
level, the convocation of the Peer Review Panel.
         Following this denial, the union filed a complaint in
the district court under Section 301 of the Labor Relations
Management Act of 1947, as amended, 29 U.S.C. § 185, to compel
NADCO to accept the grievance for peer review adjudication.
After discovery, both parties filed motions for summary judgment.
         The district court granted NADCO's motion, holding that
the union grievance sought to impose a change in the health
insurance benefits, a matter strictly precluded from the
jurisdiction of the Peer Review Panel: "The [collective
bargaining agreement] limitation is expansive and unambiguous --
a peer review panel cannot reach a decision that requires the
Company to provide benefits different from those benefits which
the Company believes it is obligated to pay under the CBA."
Graphic Communications International Union, Local 735-S v. North
American Directory Corporation II, No. 93-CV-1991, slip op. at 12
(M.D. Pa. filed Jan. 12, 1996). The union filed a timely
appeal.

                               II.
         The dispositive issue is whether adjudication of the
union's grievance falls within the jurisdictional purview of the
Peer Review Panel.
         We recognize initially that the question of whether the
union's grievance is arbitrable is one for the court to decide.
AT&T Technologies Inc. v. Communication Workers of America, 475
U.S. 643, 649 (1986). Second, we acknowledge the general
presumption favoring arbitrability of labor matters. The Supreme
Court's decisions in the Steelworkers Trilogy firmly established
these principles and AT&T Technologies revalidated arbitration's
special status:
         [W]here the contract contains an arbitration
         clause, there is a presumption of
         arbitrability in the sense that "[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." Warrior & Gulf, 363 U.S. 582-
         83. . . . "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." Warrior
         & Gulf, supra, at 584-85.

475 U.S. at 650.
         Finally, we refer to the Court's caution that since
arbitration is a contractual matter, there must be agreement to
submit the dispute to arbitration before the obligation arises.
Id. at 649, citing John Wiley & Sons, Inc. v. Livingston, 376
U.S. 543, 546-47 (1964).
          Of course, this deference is to be afforded only when
the grievance at issue is properly before the arbitral body. As
we noted, federal labor policy is well disposed toward congenial
labor/management relations and will liberally apply contract law
in favor of the existence of a collective bargaining agreement.
Ludens, 28 F.3d at 359. Yet it is essential that the dispute
falls within the purview of the arbitration clause. Trap Rock,
982 F.2d at 888. We thus turn immediately to the collective
bargaining agreement.
         The language in the collective bargaining agreement
before us allows generally for access to the grievance procedure
where there is an allegation that the employer has violated a
provision of the agreement. Because the union's present
grievance asserts that NADCO has not provided health insurance
coverage in conformity with Article 17.1, the complaint facially
appears amendable to the Peer Review Panel process.
         We next inquire whether the parties intended, by either
"express exclusion or other forceful evidence," AT&T
Technologies, 475 U.S. at 652, to bar the Peer Review Panel from
resolving this dispute. By the terms of the contract, the Peer
Review Panel is empowered to evaluate management actions. If it
determines that management has not acted in conformity with the
collective bargaining agreement, the Panel is commissioned to
rectify the problem in light of the contract and company
practices. Exclusionary language, however, confines the
decisionmaking role of the panel: it "can not change contract
provisions, company policy, work rules, wage scales, or
benefits." (Emphasis in original.)
         Here, the union's grievance presented to the panel
requested a direct remedy -- implementation of the medical
insurance plan as the union understood it. Despite its demand,
the union characterizes the grievance as requesting only an
interpretation of the Article 17 description of the health care
package. We note that the substance, not the phrasing, of the
grievance governs its arbitrability. Morristown Daily Record v.
Graphics Communications Union, Local 8N, 832 F.2d 31, 34 (3d Cir.
1987).
         The union then asserts that the language limiting the
jurisdiction of the Panel serves to define its role as a "rights"
and not an "interest" arbitrator. In interest arbitration, it is
within the province of the decisionmaker to "set new terms and
conditions of employment. . . ." Lodge 802, International
Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths,
Forgers and Helpers, AFL-CIO v. Pennsylvania Shipping Company,
835 F.2d 1045, 1046 (3d Cir. 1987). Rights arbitrators, on the
other hand, "resolve disputes involving the interpretation or
application of terms and conditions of employment." Id. at 1047.
         The asserted similarity to the rights arbitration
depicted in Lodge 802 does not exist here. In that case, there
was a clear intent to establish a rights only arbitration system.
While the arbitrator was authorized to adjudicate differences as
to "meaning, application or interpretation of any terms and
conditions of this Agreement," he was specifically denied the
"power to alter or modify" the terms and conditions of the
collective bargaining agreement. Id.
         In the present dispute, the Peer Review Panel's
authority is not couched in terms limiting its function to an
interpretative one. Nor are its powers unfettered. Instead, a
hybrid body has been established by the collective bargaining
agreement. The Panel is authorized to review certain management
actions, and, when appropriate, dictate relief. Having granted
such license, however, the agreement then clearly restrains it.
Paramount to this case, the Peer Review Panel cannot change
benefits.
         The union's claim that it is seeking an interpretation
of the contract is belied by its request for a specific remedy
calling for direct action. The present grievance can only be
understood as an attempt to effectuate a change in the medical
benefits provided under the collective bargaining agreement, a
matter forbidden of consideration by the Peer Review Panel.
         We have also considered the hollow result which would
necessarily follow. If the Peer Review Panel decided that the
health care package actually provided by NADCO was not that
bargained for on 12/22/92, a change in benefits would be
mandated. The union does not, and could not, argue that any
reading of its contract with NADCO permits such action be taken
by the Panel. Such an outcome is not contemplated by the policy
favoring arbitration or the basic integrity of the contract here.
         We therefore conclude that the presumption of
arbitrability has been overcome by express exclusion. A
presumption, by its very definition, is an attitude dictated by
probability. There is no need to presume anything here where the
intent is expressly stated.

                               III.
         We will affirm the order of the district court awarding
judgment to NADCO.



Graphic Communications International Union, Local 735-S v. North
American Director Corporation II, No. 96-7089
_________________________________________________________________


WEIS, Circuit Judge, Dissenting.
         The majority carefully explains that the dispute
between the parties is limited to whether the phrase in the
health benefits portion of the collective bargaining agreement
"as described 12/22/92" imposes increases in deductible and co-
payment provisions. The union asserts that the increases are not
"as described 12/22/92," and the employer says they are. The
disagreement then is straightforward and focuses on the meaning
to be given the cryptic statement, "as described 12/22/92."
         The union contends that the dispute is an appropriate
subject for a grievance, defined by the collective bargaining
agreement as "an allegation that the employer has violated a
specific provision of the collective bargaining agreement."
According to the union, the employer's insistence that employees
pay an increased deductible and co-payment for hospital and
surgical expenses violates the health benefits provision in the
collective bargaining agreement.
         Although it disagrees with the union's version of what
was "described 12/22/92," the employer sidesteps that issue and,
instead, maintains that the peer review panel, as the final step
of the grievance procedure, lacks the authority to resolve the
issue. The employer points out that the collective bargaining
agreement states: "The peer review panel can not change contract
provisions, company policy, work rules, wage scales or benefits,"
and argues that the union seeks to "change" the benefits
provisions.
         In its brief, the employer makes it clear that, in its
view, "change" refers to the benefits that have "indisputably . .
. been in effect for six and one [half] months before the subject
grievance was filed." Appellee Brief at 21. That statement is
based on the facts that the collective bargaining agreement was
signed on January 9, 1993, and, on February 1, 1993, the employer
began to impose the deductible and co-payment provisions.
Despite grumbling by employees beginning at that time, the union
did not file a formal grievance until August 16, 1993.
         When it attacks the peer review panel's authority to
"change" benefits, the employer focuses on those benefits in
existence at the time the grievance was filed -- not necessarily
those due under the collective bargaining agreement. The
employer's contention is that its action in putting lesser
benefits into effect sets the standard, which the peer review
panel may not "change."
         Assuming arguendo that the union's position on the
understanding of 12/22/92 is correct and that the increases in
deductibles and co-payments were not included, it follows that
using management's approach would result in denying the peer
review panel the authority to remedy the employer's violation of
the collective bargaining agreement. Adopting such an
interpretation of the panel's authority makes the description of
benefits in the collective bargaining agreement irrelevant when
the employer unilaterally imposes a different health insurance
program before the grievance occurs.
         Indeed, had the collective bargaining agreement
explicitly provided that no deductibles or co-payments would be
applicable, under the employer's interpretation, the peer review
panel would still lack power to alter the benefits program
implemented on February 1, 1993, even though the employer acted
unilaterally. In sum, according to its view, the employer may
circumvent peer review simply by adopting a new benefit, wage
scale or work rule despite collective bargaining provisions to
the contrary.
         It seems to me that the district court misapprehended
the parties' positions when it stated that "the remedy sought by
the Union is to change benefits provided by the Company under the
terms of the CBA that went into effect on December 1, 1992."
Actually, the union seeks to reinstate, not change, the benefits
it says were provided by the collective bargaining agreement.
         Of course, the parties to a collective bargaining
agreement are free to adopt a wide range of methods for resolving
disputes over contract interpretation, including a veto power.
In this case, however, the employer did not retain the
nullification right it now claims.
         The peer review procedure adopted by the parties
provides that "peer panels may review management's actions to
ensure that the application of the contract was followed
correctly and fairly. If they find otherwise, they have the
authority to rectify the situation consistent with contract
provisions, company practices and/or policies." That section
clearly sets out the provisions of the collective bargaining
agreement as the basis for determining if management's action's
are correct and fair.
         In deciding whether a ruling of a peer review panel is
a "change," therefore, the point of reference is the collective
bargaining agreement -- not a practice instituted by the employer
after the agreement was adopted. The employer's insistence that
the peer review panel cannot act in the circumstances here is
simply inconsistent with the provisions of the peer review
agreement.
         Even if there were a conflict or ambiguity between
various provisions of the peer review agreement, the Court is
required to adopt an interpretation favoring the means of dispute
resolution provided in the collective bargaining agreement. "An
order to arbitrate the particular grievance should not be denied
unless it can 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." United Steelworkers of America v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 582-83 (1960). See also 5
Theodore Kheel, Labor Law § 23.07[2] (1995) (presumption of
arbitrability compels arbitration even when parties do not
clearly evidence a contractual intention to do so.)
         The employer's proposed construction of the peer review
panel's authority not only guts the dispute resolution procedure
set up by the collective bargaining agreement, but is in conflict
with basic tenets of labor law. When there are gaps in a
contract, it is generally within the purview of the arbitrator to
resolve them. Price v. Internal Board of Teamsters, 457 F.2d
605, 610 (3d Cir. 1972). See also United Steelworkers of America
v. Lukens Steel Co., 969 F.2d 1468 (3d Cir. 1992) (where
collective bargaining agreement does not state who decides if
grievance is valid, it is left to the arbitrator.).
         I would reverse the judgment of the district court and
remand with instructions to direct the parties to submit the
dispute for resolution by a peer review panel.
