253 F.3d 119 (D.C. Cir. 2001)
Honeywell International, Inc., Petitionerv.National Labor Relations Board, RespondentInternational Union, United Automobile, Aerospace & Agricultural Implement Workers of America, UAW, Local 376, Intervenor
No. 00-1170, & No. 00-1274
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 8, 2001Decided June 29, 2001

On Petitions for Review and Cross-Application for Enforcement of an Order of the  National Labor Relations Board
Philip Allen Lacovara argued the cause for petitioner  Honeywell International, Inc.  With him on the briefs was  Charles P. O'Connor.
Thomas W. Meiklejohn argued the cause and filed the brief  for petitioner United Automobile Workers of America.  Gregg  D. Adler entered an appearance.
David A. Fleischer, Senior Attorney, National Labor Relations Board, argued the cause for respondent.  With him on  the brief were John H. Ferguson, Associate General Counsel,  and Aileen A. Armstrong, Deputy Associate General Counsel. David S. Habenstreit, Attorney, entered an appearance.
Philip Allen Lacovara and Charles P. O'Connor were on  the brief for intervenor Honeywell International, Inc.
Thomas W. Meiklejohn was on the brief for intervenor  United Automobile Workers of America.
Before:  Edwards, Chief Judge, Sentelle and Randolph,  Circuit Judges.
Opinion for the Court filed by Circuit Judge Randolph.
Randolph, Circuit Judge:


1
From 1984 until October 1994,  Textron Corporation operated the United States Army's  Stratford Army Engine plant.  Under contract with the  Army, Textron produced gas turbine engines for helicopters,  airplanes and tanks.


2
The United Auto Workers Union, Local Nos. 376 and 1010,  represented many of the workers at the Stratford Army  Engine plant.  The unions had a collective bargaining agreement with Textron that was set to expire on May 30, 1994. On May 12, 1994, while negotiations for a new collective  bargaining agreement were underway, Textron announced  that it was to be acquired by AlliedSignal.  (AlliedSignal has  since been acquired by Honeywell International, the named  petitioner in this case.)


3
Concerned about the impact of the change in ownership,  the unions demanded that Textron collectively bargain about  the effects of the proposed acquisition.  The ensuing negotiations resulted in three agreements.  On June 19, 1994, the  unions and Textron signed a new collective bargaining agreement which incorporated two other agreements concerning  "conditions and benefits which shall be applicable in the event  that the Company should sell its assets to a third-party  purchaser."  These agreements were known as the Effects  Bargaining Agreement and the Competitiveness Agreement.


4
Understanding the Competitiveness Agreement requires an  understanding of the business at the Stratford plant.  The  plant produced engines for both civilian and military customers in the Army's facility under a dual lease.  For many  years, the plant had focused on producing tank engines for  the military, but the Army was planning no further purchases  of AGT-1500 engines, the plant's main product.


5
Despite this, AlliedSignal found Textron's Stratford business attractive because of likely additional government funding.  A "blue ribbon" defense panel had recommended that  the government maintain the Stratford plant's capacity to  produce tank engines, should they be needed in the future as  well as to continue to make improvements to current engines. The panel also recommended that the Stratford plant continue operations under a dual lease that would allow the plant's  operator to produce both military and civilian engines.  In all,  AlliedSignal anticipated some $30 to $40 million a year in  government support for its operations at the Stratford site.


6
Recognizing this need for continued government support,  the Competitiveness Agreement included the following language:


7
... AlliedSignal intends to make application to appropriate officials of the United States Government for financial arrangements in an amount considered by AlliedSignal to be adequate to support the future of the Stratford Plant by AlliedSignal on a stand-by basis for the production of the AGT1500 engine, if active procurement of the engine should cease.  AlliedSignal and the Union shall exert their best efforts to work together and to coordinate actively in the efforts to obtain such adequate  financial arrangements from either the federal government or some alternative governmental funding source.


8
....


9
After AlliedSignal makes such an application to the Government, if no provision to fund such financial arrangements in the amount sought by AlliedSignal shall be made in the federal budget as thereafter enacted by the Congress of the United States, then at any time after such next enactment of a federal budget, AlliedSignal may terminate this Competitiveness Agreement....


10
Pursuant to the Competitiveness Agreement, AlliedSignal  and the unions worked during the summer of 1994 to obtain  funding for the military's plan to maintain the Stratford  plant's capacity.  In September 1994, shortly before AlliedSignal completed its purchase of the plant, Congress appropriated more than $47 million to the Army to maintain the  plant for fiscal year 1995.


11
In February 1995 the Secretary of Defense recommended  closing the Stratford plant as part of ongoing efforts to  reduce the size of the military.  The recommendation was  taken up by the Defense Base Closure and Realignment  Commission.  See Defense Base Closure and Realignment  Act of 1990, Pub. L. No. 101-510, 104 Stat. 1808 (amended  1992, 1993, 1994, 1995, 1996).  While awaiting the Commission's decision, the Defense Department refused to release  the funds appropriated for the Stratford plant, thinking it  wasteful to spend money to maintain a plant likely to be  closed.  The withheld funds and the ongoing review by the  Commission touched off more lobbying efforts.


12
In April 1995, a coalition consisting of the unions, AlliedSignal and federal, state and local political representatives convinced the Department of Defense to release the funds earmarked for 1995.  Efforts to influence the Commission were  less successful.  On June 23, 1995, the Commission decided in  favor of closing the Stratford facility.  Under the provisions  of the Base Closure and Realignment Act, the Commission's  recommendation was then sent to the President for review. The President accepted the Commission's recommendations and forwarded them to Congress, which had 45 days to  disapprove of the recommendations.  When it did not do so,  the Stratford plant was officially slated to be closed.  On July  15, 1995, the company sent the Stratford employees a letter  explaining the Commissions's decision and saying that it did  not think "an economic case c[ould] be made to remain in  Stratford without the ownership and support of the Army." The unions took this as a signal that AlliedSignal intended to  close the Stratford plant.  On September 29, 1995, AlliedSignal informed the unions that it was terminating the Competitiveness Agreement.  The unions contended that AlliedSignal  could not terminate the Competitiveness Agreement because  the company had received funds for fiscal year 1995.


13
Local 1010 filed two charges against the company stemming from these events.  The first charge accused the company of "fail[ing] to bargain in good faith with the ... UAW by  unilaterally withdrawing the competitiveness agreement, refus[ing] to provide relevent [sic] information and refusing to  bargain the decision and effects of the plant closure."


14
In prosecuting the case before the Board, the General  Counsel claimed that AlliedSignal had violated 8(a)(5) of the  National Labor Relations Act by terminating the contract. See 29 U.S.C. 158(a)(5).  Section 8(a)(5) requires that the  company "bargain collectively with the representatives of his  employees."  29 U.S.C. 158(a)(5).  The Act further indicates that collective bargaining includes the requirement that  "no party to such a contract shall terminate or modify such  contract, unless the party" follows certain procedures not  relevant here.  29 U.S.C. 158(d).  It is an unfair labor  practice for a company to terminate or modify contract  provisions regarding mandatory subjects of bargaining when  the contract's term has not ended.  See Allied Chem. &  Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157,  159 (1971);  UAW v. NLRB, 765 F.2d 175, 1799-80 (D.C. Cir.  1985).  In essence the General Counsel charged that AlliedSignal had violated 8(a)(5) by terminating all of the contract  provisions before the contract's term had expired.


15
The Administrative Law Judge treated the question whether the term of the AlliedSignal contract had ended as a  matter of contract interpretation;  both parties, the ALJ  thought, had reasonable arguments about the meaning of the  termination clause.  See AlliedSignal Aerospace, 330  N.L.R.B. No. 175, slip op. at 12 (NLRB Apr. 12, 2000).  The  ALJ drew on a long line of Board cases holding that, when an  issue is one solely of contract interpretation, it will not decide  the matter if the company had a "sound arguable basis" for  its interpretations and the actions it took pursuant to that  interpretation.  See NCR Corp., 271 N.L.R.B. 1212, 1213  (1984).  The ALJ therefore ruled that AlliedSignal had not  violated the Act.


16
The Board reversed.  To its mind, the "sound arguable  basis" test did not apply because AlliedSignal was "alleged to  have repudiated the CA in its entirety."  AlliedSignal, slip  op. at 4.  To the Board, "the issue of whether the Respondent  could lawfully cancel the CA is more than a mere contract  dispute.  It is situated at the threshold of matters going to  the heart of the collective bargaining relationship...."  Id.  [JA 6] Thus, the Board concluded that AlliedSignal had  violated 8(a)(5) of the Act by refusing to bargain over a  mandatory subject matter.  See 29 U.S.C. 158(a)(5).  Member Hurtgen dissented on the basis that the "sound arguable  basis test" applied because this was a contract dispute.


17
The Board's decision was contrary to its own precedents. It  distorted the nature of the Competitiveness Agreement on  the basis of an arbitrary distinction it had no power to make  in the first place.  As to its precedents, the Board claims that  it has refrained from applying the "sound arguable basis" test  when "the circumstances involved more than a mere matter  of contract interpretation."  Id.  The three cases the Board  cites hold no such thing.  In Trojan Yacht, the Board declined to apply the "sound arguable basis" test because the  dispute centered on a provision of a "side agreement" not  incorporated into the collective bargaining agreement.  319  N.L.R.B. 741, 744 n.5 (1995).  If anything, Trojan Yacht  indicates that the Board forgoes the "sound arguable basis"  test not when a contract provision is central to the collective bargaining relationship--as it claims the Competitiveness  Agreement is here--but when the contract issue is peripheral  to the relationship.  Flatbush Manor is also of no help to the  Board.  In that case, the Board upheld an ALJ's determination that an employer had committed an unfair labor practice  by failing to make contractually-required pension plan payments.  315 N.L.R.B. 15, 21 (1994).  Responding to a "sound  arguable basis" claim, the Board concluded that the payments  had "indisputably accrued" and adopted the ALJ's order.  Id.  at 15 n.1.  The only way to read this is that the Board  rejected the notion that there was even a sound arguable  basis for the company's defense.  This is in marked contrast  to the case at hand, where the ALJ concluded--and the  Board did not dispute--that both parties had reasonable  arguments about the meaning of the contract provisions.


18
Also puzzling is the Board's citation to Oak Cliff-Golman  Baking Company as support for its decision here.  In that  case, one member of the Board indicated that he would affirm  the finding of an unfair labor practice because there was no  sound arguable basis for the employer's contract defense. See 207 N.L.R.B. 1063 (1973), enforced, 505 F.2d 1302 (5th  Cir. 1974).  The other two members said that they would  affirm the ALJ because they did not agree with the policy  underlying the Board's general practice of deferring to contractual arbitration procedures.  See id.


19
The short of the matter is that none of the precedents cited  in the Board's opinion supported its decision regarding the  arguable basis test.  The reason is obvious. The Board's  decision is not consistent with the its past practice.  For  example, in Cement Masons, Local 627, the Board faced the  question whether a short-term collective bargaining agreement had been properly terminated.  See 274 N.L.R.B. 1286,  1286-87 (1985).  The Board invoked the "sound arguable  basis" doctrine and found that both parties had reasonable  interpretations of the agreement's terms.  Therefore no unfair labor practice had occurred.  See id. at 1287-88.  Cement  Masons is indistinguishable from this case.  Without more,  the Board's departure from precedent without a reasoned  analysis renders its decision arbitrary and capricious.  See Wisconsin Valley Improvement Co. v. FERC, 236 F.3d 738,  748 (D.C. Cir. 2001).


20
In any event, this case may fit the Board's newly-devised  "heart of the collective bargaining relationship" distinction  only by distorting its facts.  The Competitiveness Agreement  was but one of three separate agreements between the unions  and the company.  They had also entered into a master  collective bargaining agreement and an Effects Bargaining  Agreement.  It is undisputed that neither of these agreements was terminated when the company decided to terminate the Competitiveness Agreement.  So, it cannot be true  that the company's decision to terminate the Competitiveness  Agreement constituted a repudiation of the entire bargaining  relationship.


21
Factual distortions aside, the Board's approach to this case  flies in the face of this court's clear precedent construing the  Board's power to interpret contracts.  The Board is empowered to interpret collective bargaining agreements when doing so is necessary to determine whether an unfair labor  practice has occurred.  See NLRB v. C & C Plywood Corp.,  385 U.S. 421, 429 (1967).  But the federal courts, not the  Board, are legislatively empowered to be the primary interpreters of contracts.  See Litton Fin. Printing Div. v. NLRB,  501 U.S. 190, 202-03 (1991);  see also 29 U.S.C. 185 (granting federal district courts jurisdiction over breach of contract  claims arising out of collective bargaining contracts).  The  boundaries of the Board's interpretive jurisdiction are  marked in C & C Plywood:  the Board may interpret a  contract "only so far as ... necessary to determine" what  statutory rights the party has given up by agreeing to a  particular contract.  See C & C Plywood, 385 U.S. at 428.


22
This principle is at the root of the "contract coverage"  doctrine.  When an "employer acts pursuant to a claim of  right under the parties' agreement, the resolution of the  refusal to bargain charge rests on an interpretation of the  contract at issue."  NLRB v. United States Postal Serv., 8  F.3d 832, 837 (D.C. Cir. 1993).  And as we have often  reminded the Board, when a contract's terms cover a mandatory subject of bargaining, the contract represents the result  of the union's exercise of its bargaining rights.  See BP  Amoco Corp. v. NLRB, 217 F.3d 869, 872-73 (D.C. Cir. 2000); United States Postal Serv., 8 F.3d at 836;  Connors v. Link  Coal Co., 970 F.2d 902, 905 (D.C. Cir. 1992).  An employer  cannot be deemed to have "refuse[d] to bargain collectively,"  29 U.S.C. 158(a)(5), over a particular subject when it has  bargained over that subject matter and memorialized the  results in a contract.  Once the Board determines that a  contract covers a mandatory subject of bargaining, its interpretive task is at an end.  If the parties wish to enforce their  contract, they may do so pursuant to an arbitration clause or  by bringing suit under 29 U.S.C. 185.


23
The Board in this case made no attempt to determine  whether the contract covers the issue of the conditions precedent to termination.  This is of no moment, as we review the  Board's construction of contracts de novo.  See Litton Fin.  Printing, 501 U.S. at 202-03.  It is inconceivable that the  clause does not cover the conditions under which the agreement can be terminated.  The Competitiveness Agreement  plainly indicates that if certain conditions are met, the company may terminate the contract.


24
The Board's own language demonstrates that this is the  case.  It notes that the "parties do not dispute that section 6  expressly required the Respondent to take certain steps  before it was permissible to cancel the agreement short of its  term."  AlliedSignal, slip op. at 4.  The Board then offered a  protracted analysis of the question whether the conditions  precedent had actually been met.  See id. at 4-5.  Among the  arguments it considered was AlliedSignal's claim that seeking  further funding was futile in light of the fact that the plant  was slated for closure.  See id. at 5.  Futility, of course, is an  age-old contract defense.  See 2 E. Allen Farnsworth, Farnsworth on Contracts  9.5-9.9a (1990).  Likewise, the question whether AlliedSignal made sufficient efforts to fulfill its  end of the bargain is one of contract interpretation.  See id.  9.1a.  By injecting itself into a purely contractual dispute,  the Board assumed a role Congress denied it through 29  U.S.C. 185.


25
The petition for review is granted and the Board's decision  is set aside.


26
So ordered.

