202 F.3d 965 (7th Cir. 2000)
INDEPENDENT LIFT TRUCK BUILDERS UNION,    Plaintiff-Appellee/Cross-Appellant,v.NACCO MATERIALS HANDLING GROUP, INC.,     Defendant-Appellant/Cross-Appellee.
Nos. 99-1251 & 99-1306
In the  United States Court of Appeals  For the Seventh Circuit
Argued September 29, 1999Decided January 27, 2000

Appeals from the United States District Court   for the Central District of Illinois.  No. 98-2111--Michael P. McCuskey, Judge.
Before HARLINGTON WOOD, JR., MANION, and EVANS,  Circuit Judges.
HARLINGTON WOOD, JR., Circuit Judge.


1
Plaintiff-  appellee Independent Lift Truck Builders Union  ("the Union") is the representative union for the  employees of defendant-appellant NACCO Materials  Handling Group, Inc., ("NACCO"). In May 1998, the  Union filed this suit against NACCO seeking a  court order requiring NACCO to arbitrate a  dispute over NACCO's right to make unilateral  changes to retiree medical benefits. The district  court ordered arbitration, and NACCO appeals. The  Union cross-appeals, arguing that the district  court erred in denying its request for Fed. R.  Civ. P. 11 sanctions against NACCO, and asks this  court to award further sanctions against NACCO  pursuant to Fed. R. App. P. 38.

I.  BACKGROUND

2
In October 1997, the Union filed a grievance on  behalf of current employees seeking to retire in  the near future protesting a 600% increase in  health care premiums for NACCO retirees. The  Union alleged that NACCO's unilateral change of  the retiree benefits plan violated the collective  bargaining agreement ("CBA") in place between the  Union and NACCO. The CBA contained an express  grievance procedure which culminated in  arbitration and provided "[a]ll disputes are  subject to arbitration." NACCO, however, refused  to arbitrate the October 1997 grievance,  asserting that the CBA covered only current  employees and not retirees. The Union then filed  its complaint in the present case, seeking an  order compelling NACCO to arbitrate the  grievance.


3
The present case is not the first dispute  between these parties on this issue. In1992, the  Union filed a complaint in the United States  District Court for the Central District of  Illinois against NACCO's predecessor, Hyster  Company, seeking an order compelling Hyster  Company to arbitrate a grievance brought on  behalf of three retired employees and a current  employee contemplating retirement. The 1992  grievance alleged that Hyster Company violated  the collective bargaining agreement then in place  by unilaterally changing the benefits plan as it  related to medical benefits for certain retirees.  The district court granted summary judgment in  favor of the Union and ordered Hyster Company to  arbitrate the grievance. Independent Lift Truck  Builders Union v. Hyster Co., 803 F. Supp. 1367,  1371-72 (C.D. Ill. 1992). Hyster Company  appealed. While this appeal was pending, the  parties proceeded to arbitration before  arbitrator Thomas F. Levak. An arbitration  hearing was held on January 25, 1993. Following  that hearing, arbitrator Levak, in an eighteen-  page opinion issued May 10, 1993, found the  collective bargaining agreement in question  clearly and unambiguously covered only employees  and not retirees. Levak therefore held that  Hyster Company did not violate the collective  bargaining agreement "when it unilaterally  modified health and welfare benefits for current  and future retirees" and denied the Union's  grievance.


4
Meanwhile, Hyster Company's appeal of the  district court order was argued before the  Seventh Circuit on April 5, 1993. The appellate  opinion was issued on August 17, 1993.  Independent Lift Truck Builders Union v. Hyster  Co., 2 F.3d 233 (7th Cir. 1993). The panel found  "the district court properly ordered [Hyster]  Company to arbitrate the grievance insofar as it  was brought on behalf of the current employee."  Id. at 234. However, the court concluded that,  with respect to the claims of the retired  employees, the district court erroneously ordered  arbitration without first determining whether the  dispute was arbitrable, that is whether the  collective bargaining agreement applied to  retired employees. Id. at 236-37. The matter was  affirmed in part, reversed in part, and remanded  to the district court for a determination as to  whether the parties intended the collective  bargaining agreement to apply to retired  employees. Id. at 237. On remand, the district  court, upon advice of the parties, dismissed the  case as moot.


5
In the present case, the parties filed cross-  motions for summary judgment, and each party also  filed a motion for sanctions under Fed. R. Civ.  P. 11. In its summary judgment motion, NACCO  argued the Union's suit was barred by issue  preclusion based on the 1992 arbitration and the  CBA's finality clause which states: "The decision  of the arbitrator shall be final and binding upon  the parties." In its cross-motion for summary  judgment, the Union asserted that, based on the  Seventh Circuit opinion in the 1992 Hyster Co.  case, it clearly was entitled to arbitrate  grievances on behalf of current employees  contemplating retirement and, furthermore, that  the preclusive effect of a prior arbitrator's  decision was itself a question for an arbitrator.  The district court granted summary judgment in  favor of the Union and denied both parties'  requests for sanctions. NACCO appeals the  district court's grant of summary judgment. The  Union cross-appeals, challenging the district  court's denial of its request for Rule 11  sanctions. The Union also has filed a motion  asking this court to award sanctions against  NACCO pursuant to Fed. R. App. P. 38.

II.  ANALYSIS
A.  Summary Judgment

6
We review the district court's grant of summary  judgment de novo. Gorbitz v. Corvilla, Inc., 196  F.3d 879, 881 (7th Cir. 1999). Summary judgment  is appropriate "if the pleadings, depositions,  answers to interrogatories, and admissions on  file, together with the affidavits, if any, show  that there is no genuine issue as to any material  fact and that the moving party is entitled to a  judgment as a matter of law." Fed. R. Civ. P.  56(c).


7
The facts of the present case are undisputed,  so we turn to an analysis of the relevant law. It  is well-established that the determination as to  "[w]hether a particular bargaining agreement  creates a duty to arbitrate is a matter for  judicial determination." Local Union 1393 Int'l  Bhd. of Elec. Workers v. Utilities Dist. of W.  Indiana, 167 F.3d 1181, 1183 (7th Cir. 1999).  However, it is equally well-established that "the  preclusive effect of the first arbitrator's  decision is an issue for a later arbitrator to  consider." Brotherhood of Maintenance of Way  Employees v. Burlington Northern R.R. Co., 24  F.3d 937, 940 (7th Cir. 1994) (citing W.R. Grace  & Co. v. United Rubber Workers, 461 U.S. 757, 765  (1983)); see also Production Employees' Local 504  v. Roadmaster Corp., 916 F.2d 1161, 1162 (7th  Cir. 1990) ("Whether more than one arbitrator can  take a crack at interpreting the contract is  itself a question of contractual  interpretation."). As previously noted, the CBA  included an arbitration clause which stated that  "[a]ll disputes are subject to arbitration." By  including this clause in the CBA, the parties  agreed to have their disputes concerning  construction of the CBA, including its finality  provision, resolved by an arbitrator rather than  the courts. W.R. Grace, 461 U.S. at 764. As we  noted in Roadmaster, under such circumstances,  "the union is entitled to an order compelling  arbitration even if the doctrine of claim  preclusion in federal law might forbid successive  litigation had the first arbitrator been a  judge." Roadmaster Corp., 916 F.2d at 1163.


8
The CBA clearly requires arbitration of  grievances brought on behalf of current NACCO  employees, the only group at issue here. See  Independent Lift Truck Builders Union v. Hyster  Co., 2 F.3d at 234. NACCO concedes in its reply  brief that the present grievance was arbitrable  on its face. The district court was correct in  ordering NACCO to submit to arbitration. Contrary  to NACCO's assertions, this decision need not  result in a "perpetual state of disagreement"  over changes in retiree benefits. In holding that  arbitration is appropriate, we do not address the  merits of NACCO's preclusion argument, but rather  recognize that the preclusive effect of an  arbitrator's decision is an issue for a  subsequent arbitrator to decide. NACCO can argue  the preclusive effect of arbitrator Levak's  decision based on the CBA's finality clause  before the second arbitrator.

B.  Sanctions

9
On cross-appeal, the Union contends that the  district court erred in failing to award  sanctions against NACCO under Fed. R. Civ. P. 11  and asks us to remand the case for an award of  fees. We review the district court's decision  regarding Rule 11 sanctions for abuse of  discretion, Cooter & Gell v. Hartmarx Corp., 496  U.S. 384, 405 (1990), giving great deference to  the district court's decision. Kennedy v.  National Juvenile Detention Ass'n, 187 F.3d 690,  696 (7th Cir. 1999), petition for cert. filed  (U.S. Dec. 20, 1999) (No. 99-1053). The Union  asserts the district court abused its discretion  by employing an erroneous legal standard in  determining whether sanctions were appropriate.  The Union further argues that the district  court's order denying Rule 11 sanctions should be  reversed because it was "so conclusory that this  court cannot review the substance of [the]  decision."


10
The Union based its request for Rule 11  sanctions on allegations that NACCO continued to  litigate despite being advised of two controlling  decisions adverse to its position, citing  Roadmaster, 916 F.2d at 1163. The district court  denied sanctions, holding that NACCO's "arguments  were not totally baseless and, in fact, had some  logical and practical appeal." The district court  concluded that NACCO's arguments were "colorable  enough to avoid sanctions for frivolity." A court  may impose Rule 11 sanctions for arguments "that  are frivolous, legally unreasonable, without  factual foundation, or asserted foran improper  purpose." Fries v. Helsper, 146 F.3d 452, 458  (7th Cir. 1998). A frivolous argument "is one  that is 'baseless or made without a reasonable  and competent inquiry.'" Id. (citing Townsend v.  Holman Consulting Corp., 929 F.2d 1358, 1362 (9th  Cir. 1990) (en banc)). Despite the district  court's failure to expressly address the  Roadmaster case cited in the Union's request for  sanctions, the district court's denial of  sanctions was not based on an erroneous legal  standard. Furthermore, the district court  provided sufficient explanation to allow for  meaningful appellate review. Given our  deferential standard of review, we see no reason  to disturb the district court's denial of the  Union's request for Rule 11 sanctions.


11
The Union has filed a motion in this court for  sanctions pursuant to Fed. R. App. P. 38, seeking  reasonable attorney's fees and costs in defending  the present appeal. Rule 38 allows a court of  appeals to award sanctions against an appellant  if the court determines an appeal is "frivolous."  Rule 38 is permissive; the court of appeals may  "decline to impose sanctions even if the appeal  is frivolous." Mars Steel Corp. v. Continental  Bank, 880 F.2d 928, 938 (7th Cir. 1989) (en  banc). This exercise of discretion, however, is  not left to the court's inclination but must be  based on judgment guided by sound legal  principles. Id. (citations omitted). "An appeal  is 'frivolous' when the result is foreordained by  the lack of substance to the appellant's  arguments." Id. (citing cases).


12
The Union argues that sanctions are appropriate  because NACCO based its appeal solely on  arguments which this court rejected and  sanctioned in Roadmaster without arguing that  Roadmaster should be overturned and, further,  because NACCO refused to recognize the  controlling precedent of W.R. Grace. While NACCO  failed to address Roadmaster or W.R. Grace in its  initial brief on appeal, it does attempt to  distinguish these cases in its reply brief.  NACCO's argument was not completely lacking in  substance, and we decline to award Rule 38  sanctions on appeal.

III.  CONCLUSION

13
The decision of the district court is affirmed.  The Union's motion for sanctions pursuant to Fed.  R. App. P. 38 is denied.

