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SCHNEIDER MOVING & STORAGE CO. v. ROBBINS ET AL.

SUPREME COURT OF THE UNITED STATES


decided*fn*: April 18, 1984.

SCHNEIDER MOVING & STORAGE CO
v.
ROBBINS ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT.

Powell, J., delivered the opinion for a unanimous Court.

Author: Powell

[ 466 U.S. Page 365]

 JUSTICE POWELL delivered the opinion of the Court.

The issue presented in these two cases is whether the trustees of two multiemployer trust funds may seek judicial enforcement of the trust terms against a participating employer without first submitting to arbitration an underlying dispute over the meaning of a term in the employer's collective-bargaining agreement.

[ 466 U.S. Page 366]

     I

Respondents are the trustees of two multiemployer trust funds, the Central States, Southeast and Southwest Areas Pension Fund and the Central States, Southeast and Southwest Areas Health and Welfare Fund (Trust Funds).*fn1 Petitioners are two employers -- Prosser's Moving & Storage Co. (Prosser's) and Schneider Moving & Storage Co. (Schneider) -- who have agreed to participate in the trust funds. Respondents filed separate complaints against petitioners in the United States District Court for the Eastern District of Missouri, claiming that petitioners had failed to meet their contribution requirements and had refused to allow an audit of their payroll records. Respondents requested the District Court to order an accounting and immediate payment of all sums thereby determined to be due. They alleged federal subject-matter jurisdiction under § 301(a) of the Labor Management Relations Act (LMRA), 29 U. S. C. § 185(a), and § 502 of the Employee Retirement Income Security Act (ERISA), 29 U. S. C. § 1132.*fn2 Petitioners defended on the ground that respondents' complaints raised disputed interpretations under the collective-bargaining agreements that first must be submitted to the applicable arbitration procedures.*fn3 The District Court agreed with petitioners and

[ 466 U.S. Page 367]

     dismissed the suits pending arbitration. It held that although arbitration is not a prerequisite for "simple collection matters" in which the employer's liability under the collective-bargaining agreement is clear, arbitration is required in claims such as these where interpretation of the collective-bargaining agreement is at issue.

A three-judge panel for the Court of Appeals for the Eighth Circuit reversed and held that arbitration was not a prerequisite to federal suit in these two cases. Robbins v. Prosser's Moving & Storage and Schneider Moving & Storage, Nos. 80-2116, 80-2117 (CA8, Mar. 24, 1982) (per curiam). An en banc court of the Eighth Circuit agreed with the panel. After examining competing considerations under the federal labor laws and under the federal laws governing employee trust funds, the court held that the relevant agreements indicated no intent on the part of the parties to require the arbitration of contractual disputes between the trustees and the employers and thus that failure to arbitrate could not bar respondents' suits. The en banc court, therefore, reversed the decision of the District Court and remanded for further proceedings. 700 F.2d 433 (1983). We granted certiorari in view of an apparent conflict among the Circuits on this issue.*fn4 464 U.S. 813 (1983). We now affirm.

[ 466 U.S. Page 368]

     II

As resolved by the Court of Appeals, these cases present a narrow question of contract interpretation. The en banc court considered only whether the parties to the collective-bargaining agreements and the trust agreements intended to require the arbitration of disputes between the trustees and the employer before the trustees could exercise their contractual right to sue in federal court.*fn5 Because of its resolution of this issue, the Court of Appeals did not reach respondents' argument that requiring the trustees to submit their disputes with the employer to the applicable arbitration procedures was prohibited as a matter of law. If we agree with the Court of Appeals that the parties did not provide for such an arrangement, we also need not address that argument. We turn first, therefore, to an analysis of the relevant agreements.

Petitioners entered into collective-bargaining agreements with Local 610 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America

[ 466 U.S. Page 369]

     (Union). These agreements required petitioners to participate in the two multiemployer trust funds, and incorporated the terms of the two trust agreements by reference.*fn6 The trust agreements*fn7 required petitioners to contribute to the funds according to the applicable terms of their separate collective-bargaining agreements.*fn8 To ensure compliance with the contribution requirements, the trust agreements gave the trustees the authority to examine petitioners' payroll records.*fn9 If the trustees determined that petitioners were not complying with their contribution requirements, they had the authority under the trust agreements to initiate legal proceedings to enforce those requirements:

"The Trustees . . . shall have the power to demand and collect the contributions of the Employers to the Fund. [The] Board of Trustees shall take such steps, including the institution and prosecution of, and intervention in, any legal proceedings as the Trustees in their discretion deem in the best interest of the Fund to effectuate the collection or preservation of contributions . . . which may be owed to the Trust Fund, without prejudice, however,

[ 466 U.S. Page 370]

     to the rights of the Union to take whatever steps which may be deemed necessary for such purpose." Pension Fund Agreement, Art. III, Sec. 4., App. 22.

The relevant terms of the two collective-bargaining agreements at issue here are substantially identical. Both required weekly payments to the funds for "each regular Employee." No contributions were required for employees who worked "either temporarily or in cases of emergency."*fn10 Each collective-bargaining agreement also contained an arbitration clause that required the arbitration of any "differences . . . between the Company and the Union or any employee of the Company as to the meaning or application of the provisions of [the collective-bargaining] agreement." Id., at 55. Arbitration could be demanded by either the Union or the Company in the case of Prosser's collective-bargaining agreement, or by the Union alone in the case of Schneider's collective-bargaining agreement. No other parties were given access to the arbitration process.

III

A

Petitioners argue that as third-party beneficiaries of the collective-bargaining agreements, the trustees are bound by the arbitration clauses provided therein to the same extent the Union would be if it were seeking judicial enforcement of those agreements. They rely on the general rule that the promisor may assert against the beneficiary any defense that he could assert against the promisee if the promisee were suing on the contract. See Restatement (Second) of Contracts § 309, Comment b (1981); S. Williston, Contracts § 395 (3d ed. 1959); 4 A. Corbin, Contracts § 819 (1951). That rule, however, is merely a rule of construction useful in determining contractual intent. It should not be applied so inflexibly

[ 466 U.S. Page 371]

     as to defeat the intention of the parties. Where the language of the contract, or the circumstances under which it was executed, establish that the parties have provided that the right of the beneficiary is not to be affected by any defenses that the promisor might have against the promisee, the rule is inapplicable.*fn11 Restatement (Second) of Contracts § 309, Comment b (1981). See also 4 A. Corbin, Contracts §§ 818, 819 (1951). Thus, the question is whether the parties to the agreements at issue here intended to condition the trustees' contractual right to seek judicial enforcement of the trust agreements on exhaustion of the arbitration procedures set forth in the collective-bargaining agreements.

B

Before attempting to ascertain the parties' intent from the relevant agreements, we must determine whether the presumption in favor of arbitrability applied in the Steelworkers Trilogy*fn12 is applicable here. That presumption is an accepted rule of construction in determining the applicability of an arbitration clause to disputes between the union and the employer. Such a presumption furthers the national labor policy of peaceful resolution of labor disputes and thus best accords with the parties' presumed objectives in pursuing

[ 466 U.S. Page 372]

     collective bargaining. See Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578, 582-583 (1960). There is, however, less to commend the presumption in construing the applicability of arbitration clauses to disputes between the employer and the trustees of employee-benefit funds.

Arbitration promotes labor peace because it requires the parties to forgo the economic weapons of strikes and lockouts. Because the trustees of employee-benefit funds have no recourse to either of those weapons, requiring them to arbitrate disputes with the employer would promote labor peace only indirectly, if at all.*fn13 We conclude, therefore, that the presumption of arbitrability is not a proper rule of construction in determining whether arbitration agreements between the union and the employer apply to disputes between trustees and employers, even if those disputes raise questions of interpretation under the collective-bargaining agreements.*fn14

C

Without the presumption of arbitrability, the agreements at issue here evidence no intent on the part of the parties to require arbitration of disputes between the trustees and the employers. Neither the terms of the trust agreements nor those of the collective-bargaining agreements contain any such requirement, and the circumstances surrounding the

[ 466 U.S. Page 373]

     execution of each suggest that none should be inferred. We discuss each agreement in turn.

Under the terms of the trust agreements, the trustees have broad authority to initiate " any legal proceedings [that they] in their discretion deem in the best interest of the Fund to effectuate the collection or preservation of contributions."*fn15 Nowhere in the trust agreements is the exercise of that authority expressly conditioned on the exhaustion of any contractual remedies that might be found in the collective-bargaining agreements of individual employers. Nor have petitioners successfully identified any evidence that supports their argument that the parties nevertheless intended such a condition. This is not surprising. These are multiemployer trust funds.*fn16 Each of the participating unions and employers has an interest in the prompt collection of the proper contributions from each employer. Any diminution of the fund caused by the arbitration requirements of a particular employer's collective-bargaining agreement would have an adverse effect on the other participants.*fn17 The enforcement mechanisms established in the trust agreements protect the collective interests of the parties from the delinquency of individual employers by allowing the trustees to seek prompt judicial enforcement of the contribution requirements. It

[ 466 U.S. Page 374]

     is unreasonable to infer that these parties would agree to subordinate those mechanisms to whatever arbitration procedures might be required by a particular employer's collective-bargaining agreement.*fn18 In the absence of evidence to the contrary, therefore, we will not infer that the parties to the two multiemployer trust funds intended to condition the trustees' enforcement authority on the arbitration procedures contained in petitioners' separate collective-bargaining agreements.

Even if we assume that the parties to the collective-bargaining agreements could negate by their agreement the powers conferred on the trustees by the broader group of parties to the trust agreements, we find no attempt to do so here. The arbitration clauses found in these collective-bargaining agreements contain no suggestion that either the petitioners or the Union intended to require arbitration of disputes between the trustees and the employers. Under the terms of those agreements, arbitration is required only of "differences that arise between the Company and the Union or any employee of the Company as to the meaning or application of the provisions of this agreement." App. 55 (emphasis added). Although petitioners concede that neither clause expressly requires the arbitration of disputes between the trustees and the employers, they argue that we should infer such a requirement. We see no justification for doing so.

[ 466 U.S. Page 375]

     As petitioners concede, the collective-bargaining agreements permit only the Union or the employer to invoke the arbitration process. It is unreasonable to infer that the parties to these agreements, or to the trust agreements, intended the trustees to rely on the Union to arbitrate their disputes with the employer. Because arbitration may be expensive,*fn19 there is no reason to assume, without more persuasive evidence than is presented here, that the Union intended to incur such expenses at the request of the trustees and without any requirement that the trustees provide reimbursement. It is even less likely that the parties to the trust agreements intended to agree to such complete reliance on the Union.*fn20 If the Union disagreed with the trustees' construction of the agreement, it could refuse to arbitrate the claim, or compromise the trustees' position in arbitration. The outcome of any subsequent judicial proceeding could be predetermined by the outcome of arbitration.*fn21 We find particularly implausible petitioners' further argument that a duty of fair representation may be implied, and that this should compel the Union to pursue the trustees' uncompromised

[ 466 U.S. Page 376]

     claims through arbitration. There simply is no evidence that the Union owes any statutory or contractual duty of fair representation to the trustees.*fn22 In the absence of such evidence, we will not engage the unlikely inference that the parties to these agreements intended to require the trustees to rely on the Union to arbitrate their disputes with the employer.*fn23 Without that inference, as petitioners' concede, there is no basis for assuming that the parties intended to require arbitration of disputes between the trustees and the employer.

IV

We hold that neither the trust agreements nor the collective-bargaining agreements at issue here evidence any intent to condition the contractual right of the trustees to seek judicial enforcement of the trust provisions on exhaustion of the arbitration procedures contained in petitioners' collective-bargaining agreements. We, therefore, affirm the judgment of the Court of Appeals and remand both cases for further proceedings.

It is so ordered.

Disposition

700 F.2d 433, affirmed and remanded.


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