     Case: 18-50798      Document: 00515053580         Page: 1    Date Filed: 07/29/2019




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                        United States Court of Appeals
                                                                                 Fifth Circuit

                                                                               FILED
                                      No. 18-50798                         July 29, 2019
                                                                          Lyle W. Cayce
COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO,                                    Clerk


              Plaintiff - Appellant

v.

SOUTHWESTERN BELL TELEPHONE COMPANY; AT&T SERVICES,
INCORPORATED; DIRECTTV, L.L.C.,

              Defendants - Appellees




                   Appeal from the United States District Court
                        for the Western District of Texas
                             USDC No. 1:17-CV-1221


Before JOLLY, HO, and ENGELHARDT, Circuit Judges.
PER CURIAM:*
       The Communications Workers of America (the Union) brought suit
under section 301 of the Labor-Management Relations Act of 1947 (LMRA)
against Southwestern Bell Telephone Company, AT&T Services, Inc., and
DirectTV, LLC (collectively “Southwestern Bell”) alleging violations of a
longstanding Collective Bargaining Agreement (CBA) arising out of



       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
    Case: 18-50798    Document: 00515053580     Page: 2    Date Filed: 07/29/2019



                                 No. 18-50798
Southwestern Bell’s decision to lay off over seven hundred Union employees
and contract out many of these jobs. The district court dismissed the Union’s
complaint for lack of subject matter jurisdiction because it found that the
dispute was covered by the CBA’s arbitration provision and the Union failed to
exhaust the remedies provided by the CBA. From this final judgment, the
Union appeals. For the reasons that follow, we affirm the district court’s
judgment dismissing the case for lack of subject matter jurisdiction.
                                       I.
      In December 2017, Southwestern Bell notified a union representative
that it intended to lay off 713 union employees starting in January 2018 due
to reduced workload. Southwestern Bell and the Union have a longstanding
bargaining relationship governed by the CBA.         The CBA consists of two
relevant components. First is the Departmental Agreement, which covers, as
applicable to this appeal, layoffs, force reductions, and contracting out jobs.
The Department Agreement provides that:
      If, during the term of this Agreement, with respect to the 2017
      Department Agreement . . . a difference shall occur, between the
      Union and the Company . . . , regarding:
            a. the true intent and meaning of any specific provision or
            provisions thereof . . ., or
            b. the application of any provision or provisions thereof to
            any employee or group of employees . . . ,
      then in any such event, either the union or management may
      submit the issue of any such matter to arbitration for final decision
      ....
The second component of the CBA is the Agreement of General Application,
which contains the following provision, titled Article VIII Responsible Union-
Company Relationship:
      The Company and the Union recognize that it is in the best
      interests of both parties, the employees, and the public that all
      dealings between them continue to be characterized by mutual
                                       2
    Case: 18-50798          Document: 00515053580        Page: 3     Date Filed: 07/29/2019



                                       No. 18-50798
      responsibility and respect. To ensure that this relationship
      continues and improves, the Company and the Union and their
      respective representatives at all levels will apply the terms of this
      Agreement fairly and in accord with its intent and meaning and
      consistent with the Union’s status as exclusive bargaining
      representative of all employees in the Bargaining Unit.
This provision is not subject to the CBA’s mandatory arbitration provision.
      In response to the layoffs, the Union did not pursue the grievance and
arbitration procedures set out in the CBA. Instead, it filed suit in federal court
under section 301 of the LMRA 1 alleging that Southwestern Bell’s layoffs
violated the promise of “respectful and fair dealings” contained in Article VIII
of the Agreement of General Application (“fair dealing provision”), which is not
subject to the CBA’s arbitration provision. In its complaint, the Union argued
that Southwestern Bell violated the fair dealing provision by denying the
Union’s request to delay the layoff, providing false reasons for the layoffs, and
hiring contractors to fill the positions of the laid off workers—all with the
motivation of reducing the Union’s bargaining strength. To remedy these
harms, the Union sought an injunction “requiring the Company to reinstate to
their former positions all employees laid off or otherwise removed from their
positions, and requiring the Company to make whole all such employees for
lost earnings, lost service credit, lost seniority, and lost benefits of every kind
and character” as well as a declaratory judgment declaring Southwestern Bell
breached the CBA. Southwestern Bell responded by moving to dismiss under


      1   Section 301 provides:
               Suits for violation of contracts between an employer and a labor
               organization representing employees in an industry affecting commerce
               as defined in this chapter, or between any such labor organizations,
               may be brought in any district court of the United States having
               jurisdiction of the parties, without respect to the amount in controversy
               or without regard to the citizenship of the parties.
      29 U.S.C. § 185(a).

                                               3
    Case: 18-50798     Document: 00515053580         Page: 4   Date Filed: 07/29/2019



                                 No. 18-50798
Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction
and, in the alternative, for judgment on the pleadings or to compel arbitration.
Southwestern Bell argued that the Union’s complaint was covered by the
arbitration provision of the CBA and the court lacked jurisdiction because the
Union did not exhaust the grievance and arbitration process contained in the
CBA.
       The district court referred the complaint and motion to dismiss to a
magistrate judge. The magistrate analyzed the Union’s complaint and found
that the conduct complained of—layoffs, contracting out labor—and relief
requested by the Union—reinstatement of jobs, declaration that Southwestern
Bell violated the CBA—were unambiguously governed by the CBA’s
Departmental Agreement and therefore subject to the mandatory arbitration
procedures. The magistrate further found that the Union’s attempt to portray
the lawsuit as alleging a violation of the fair dealing provision and not the
Department Agreement, and thus not subject to arbitration, was artful
pleading. The magistrate concluded that the Union’s complaint is “clearly and
unambiguously challenging the Defendants’ decision to lay off employees and
replace those workers with subcontractors, all of which are matters expressly
addressed in the Departmental Agreement” and thus recommended that the
lawsuit should be dismissed for lack of subject matter jurisdiction because the
Union failed to exhaust grievance and arbitration procedures before filing the
federal   complaint.      The   district     court    accepted    the   magistrate’s
recommendation, over the Union’s objection, and dismissed the complaint for
lack of subject matter jurisdiction. The Union appeals this judgment.
                                       II.
       On appeal, the Union argues that the district court erred because its
claim is brought under the CBA’s fair dealing provision, which is not subject to
the arbitration clause.    Further, the Union argues, its allegation that
                                       4
    Case: 18-50798    Document: 00515053580      Page: 5   Date Filed: 07/29/2019



                                 No. 18-50798
Southwestern Bell violated the fair dealing provision was not artful pleading
to avoid arbitration, but an attempt to vindicate a substantive right to require
respect from the company, a right granted in the CBA.
      Southwestern Bell responds that the plain text of the CBA subjects layoff
and contracting disputes to arbitration and this dispute undeniably concerns
layoffs and contracting. Southwestern Bell further argues that even if the
court finds the CBA ambiguous on the point, the presumption of arbitrability
in the labor context can only be overcome by the “most forceful evidence” and
doubts should be resolved in favor of arbitration. Southwestern Bell further
asserts that the true nature of the Union’s claim becomes apparent by looking
to the conduct complained of (layoffs and contracting) and the relief requested
(reversal of the layoffs). To grant this relief, the court would have to resolve
the merits of the layoff and contracting questions, which are indisputably
submitted to arbitration under the CBA. Southwestern Bell thus contends
that the district court properly rejected the Union’s attempt at artful pleading
to avoid arbitration. It follows, Southwestern Bell argues, that the district
court was correct to dismiss the case for lack of subject matter jurisdiction. We
will thus proceed to address these respective issues.
                                       III.
      “This court reviews motions to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(1) de novo.” Archbold-
Garrett v. New Orleans City, 893 F.3d 318, 321 (5th Cir. 2018) (citing Moran v.
Kingdom of Saudi Arabia, 27 F.3d 169, 171 (1994)). To resolve this appeal we
must first determine whether the dispute here is covered by the CBA’s
arbitration provisions, as the district court held. If the dispute is covered by
the CBA’s arbitration provision, we next consider whether the district court
correctly dismissed the suit for lack of subject matter jurisdiction.


                                        5
    Case: 18-50798     Document: 00515053580      Page: 6    Date Filed: 07/29/2019



                                  No. 18-50798
                                        A.
      We turn first to the district court’s finding that the dispute here is subject
to the CBA’s arbitration provisions. We start with recognizing the “greater
institutional competence of arbitrators in interpreting collective-bargaining
agreements.” AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643,
650 (1986). “[W]here the contract contains an arbitration clause, there is a
presumption of arbitrability.” Id. Furthermore, “[d]oubts should be resolved
in favor of coverage” and “only the most forceful evidence of a purpose to
exclude the claim from arbitration can prevail.”         See id. (quoting United
Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83,
584–85 (1960)); see also Commc’ns Workers of Am. v. Sw. Bell Tel. Co., 415 F.2d
35, 39 (5th Cir. 1969). Furthermore, in the context of this same collective
bargaining relationship, we have held that arbitration, not Article III
adjudication, is the mandatory course if the dispute is “arguably arbitrable”
because “[w]here a pubic utility is concerned, the public policy of favoring
arbitration to resolve industrial strife is even stronger.” Sw. Bell Tel. Co. v.
Commc’ns Workers of Am., AFL-CIO, 454 F.2d 1333, 1336–37 (5th Cir. 1971).
      Presumption or not, this dispute is clearly covered by the arbitration
provision. To recap, the Union’s federal complaint identifies two areas of
conduct that are covered by the arbitration provision: Southwestern Bell’s plan
to lay off Union employees and Southwestern Bell’s plan to contract out their
jobs. Furthermore, the relief the Union requests is reinstatement of the laid
off Union employees and a declaration that Southwestern Bell’s layoffs and
contracting out violated the CBA.       In short, notwithstanding the Union’s
framing of its case, the resolution of the Union’s lawsuit is impossible without
resolving the merits of issues that are plainly within the CBA’s agreement to
arbitrate. See Nat’l Football League Players Ass’n v. Nat’l Football League, 874
F.3d 222, 227 (5th Cir. 2017) (“[W]here the contract provides grievance and
                                         6
    Case: 18-50798       Document: 00515053580         Page: 7     Date Filed: 07/29/2019



                                     No. 18-50798
arbitration procedures, those procedures must first be exhausted and courts
must order resort to the private settlement mechanisms without dealing with
the merits of the dispute.” (quoting United Paperworkers Int’l Union, AFL-CIO
v. Misco, Inc., 484 U.S. 29, 37 (1987))). Accordingly, the magistrate was correct
in finding that the Union’s lawsuit is “clearly and unambiguously challenging”
conduct covered by the CBA’s grievance and arbitration provisions. See United
Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 599 (1960)
(“[T]he question of interpretation of the collective bargaining agreement is a
question for the arbitrator.       It is the arbitrator’s construction which was
bargained for; and so far as the arbitrator’s decision concerns construction of
the contract, the courts have no business overruling him because their
interpretation of the contract is different from his.”).
                                            B.
      Now that we have found that the basis of the Union’s lawsuit is covered
by the CBA’s arbitration agreement, we look to see whether the district court
was correct to dismiss the suit for lack of subject matter jurisdiction. Under
section 301 of the LMRA, “the exhaustion of remedies is a jurisdictional
prerequisite to bring an action alleging a breach of a collective bargaining
agreement.” Nat’l Football League Players Ass’n, 874 F.3d at 227. 2 The Union



      2

             There are three exceptions to the exhaustion requirement: (1) the union
             wrongfully refuses to process the employee’s grievance, thus violating
             its duty of fair representation; (2) the employer’s conduct amounts to a
             repudiation of the remedial procedures specified in the contract; or (3)
             exhaustion of contractual remedies would be futile because the
             aggrieved employee would have to submit his claim to a group which is
             in large part chosen by the employer and union against whom his real
             complaint is made.
      Nat’l Football League Players Ass’n, 874 F.3d at 228 (internal quotation marks
      omitted) (quoting Rabalais v. Dresser Indus., Inc., 566 F.2d 518, 519 (5th Cir. 1978)).
      The Union’s sole argument here is that the dispute is not subject to mandatory
                                             7
    Case: 18-50798       Document: 00515053580          Page: 8     Date Filed: 07/29/2019



                                      No. 18-50798
concedes that, before bringing this action, it did not attempt to utilize the
grievance and arbitration procedures set out in the CBA. Thus, the district
court did not err in holding that it was without subject matter jurisdiction
under section 301 because the Union failed to exhaust the CBA’s mandatory
grievance and arbitration procedures in this covered dispute. See id. at 226
(“[F]ederal courts lack subject matter jurisdiction ‘to decide cases alleging
violations of a collective bargaining agreement . . . by an employee against his
employer unless the employee has exhausted contractual procedures for
redress.’” (quoting Meredith v. La. Fed’n of Teachers, 209 F.3d 398, 402 (5th
Cir. 2000))).
                                            IV.
      For the foregoing reasons, the district court’s final judgment dismissing
the suit for lack of subject matter jurisdiction is
                                                                               AFFIRMED.




      arbitration—it does not assert that even if the dispute is subject to arbitration, one of
      the three exceptions applies.

                                              8
