The Hershey Company v. Bakery, Confectionery, Tobacco Workers & Grain Millers International Union, Local 464, AFL-CIO
MEMORANDUM (Order to follow as separate docket entry) (eo)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
THE HERSHEY COMPANY,
TOBACCO WORKERS & GRAIN
MILLERS INTERNATIONAL UNION,
LOCAL 464, AFL-CIO,
Hon. John E. Jones III
October 17, 2013
Through the underlying action, Plaintiff seeks vacatur of an arbitration
award issued in favor of Defendant (Count I of the Second Amended Complaint)
and a declaratory judgment that various grievances filed by Defendant are not
arbitrable (Count II of the Second Amended Complaint). Presently, three motions
remain pending before the Court in this matter: Defendant’s Motion for Judgment
on the Pleadings (Doc. 36), Plaintiff’s Motion for Judgment on the Pleadings on
Count I of the Second Amended Complaint (Doc. 40), and Plaintiff’s Motion for
Summary Judgment on Count II of the Second Amended Complaint (Doc. 42).
For the reasons that follow, we will grant Defendant’s motion for Judgment on the
Pleadings in full, and deny Plaintiff’s motions.
The Hershey Company (“Hershey” or the “Company”) and the Bakery,
Confectionery, Tobacco Workers & Grain Millers International Union, Local 464,
AFL-CIO (the “Union”) are parties to a collective bargaining agreement (“CBA”)
executed in 2005. (Doc. 18-1, Ex. A). Relevantly, the CBA includes a grievance
procedure, directing that “[i]f any dispute shall arise between the Employer and the
Union, or its members, there shall be no suspension of work or slowdown on
account of such difference or dispute, but such dispute shall be treated as a
grievance and settled in accordance with the [outlined] procedure. . . .” (Id. ¶ 7(a)).
In light of the Company’s decision to close its manufacturing facility at 19
East Chocolate Avenue, Hershey, and transfer certain operations to its West
Hershey plant, both locations being within the Union’s jurisdiction, the parties also
executed a Memorandum of Agreement (“MOA”) dated May 28, 2010. (Doc. 181, Ex. B). The parties agreed that the MOA and its attachments would “amend,
modify, and in some cases supersede the CBA,” (id. ¶ 1), and “constitute the
complete understanding between the Parties.” (Id. ¶ 6(d)). The parties further
agreed that the MOA would “be enforced pursuant to the grievance and arbitration
For purposes of this Section, in light of the standard of review applicable to motions for
judgment on the pleadings, the facts are derived from the pleadings and exhibits attached thereto.
See Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005).
procedures of the CBA, as amended by this [Memorandum of] Agreement.” (Id. ¶
The MOA incorporated various supplemental agreements, one of which was
entitled Benefits Collaboration and included at Attachment I (“Attachment I”).
(Doc. 18-1, Ex. B). This attachment provided, in general, that the Company would
offer the same benefits plans to its unionized workforce as it does to its salaried
employees, noting that any modification of benefits to salaried workers would also
apply to those covering current and former hourly employees. (Id.). The list of
benefits subject to change included “[e]mployee contributions to include tobaccofree differentials.” (Id.). In addition, the attachment noted various exceptions to
the rule that Hershey would implement a uniform medical benefits plan, namely
that union members’ cost-sharing percentage would not increase more than 2% per
year and would not exceed 30% for the duration of the agreement, and that annual
out-of-pocket maximums for certain medical plans would be capped. (Id.). As to
general premium computation, Attachment I provided for a three-year smoothing
calculation (Murphy Formula) and specified the methodology for determining the
medical trend. (Id.). The attachment also instructed that the pre- and post-65
retiree medical contribution percentages and “frozen” contributions applying to
existing retirees would remain unchanged, except for the overage amount, and that
active employees who are retiree medical eligible and retire while the agreement
remains in effect will pay the same contribution percentage as all salaried pre- and
post-65 retirees, plus an overage amount. (Id.). Significantly, the final clause of
Attachment I directed that “any disputed amendments or changes that fall outside
this Benefits Collaboration agreement will be subject to the grievance process set
forth in paragraph 7 of [the CBA].” (Id.).
Subsequent to the execution of the MOA, in June 2010, Hershey mailed a
flyer to its unionized employees notifying them that they must be tobacco-free by
October 15, 2010. (Doc. 18, ¶ 19).2 On August 24, 2010, Hershey held an update
meeting to discuss benefits plan changes for 2011 with the Union, at which it
presented a document stating that “[t]obacco users will pay [an] additional $25
monthly.” (Id. ¶¶ 20-21). However, later, between October 18 and 20, 2010,
Hershey distributed a 2011 Employee Benefit Guide to union employees, which
explained that “employees who are tobacco-free will be rewarded by receiving a
discount of $25 per month on medical premiums–that’s $300 for the year.” (Id. ¶
22). Open enrollment for the 2011 benefits-plan year commenced on October 27,
2010, and the first payroll deductions for those health plans were levied in January
Prior to May 2010 and continuing thereafter, Hershey had implemented a program as to
its nonunion employees, whereby tobacco users paid a $25 monthly fee in addition to their
medical benefit premium, while non-users did not pay a fee. (Doc. 18, ¶¶ 17-18).
2011. (Id. ¶¶ 23-24). Beginning in 2011, unionized tobacco users were assessed
an additional $25 monthly fee, while non-users were not. (Id. ¶¶ 24-25).
On January 21, 2011, the Union filed a grievance protesting the fee, alleging
that Hershey had misled union members by representing that tobacco-free
employees would be rewarded by receiving a discount of $25 per month. (Id. ¶ 28).
The parties followed the grievance process as set out in the CBA and convened an
arbitration hearing on April 10, 2012. (Id. ¶ 29).
An opinion and arbitration award were issued on August 6, 2012, sustaining
the grievance. (Doc. 18-3, Ex. F). As a preliminary matter, the arbitrator observed
that the grievance disputed “the format of [the tobacco-free differential’s]
introduction as a promise of reduced cost of healthcare premiums[,]” and did not
fundamentally challenge the Company’s “contractual right to create and establish a
tobacco-free differential.” (Id. at 9). Referencing the materials disseminated to
union members in June and October 2010, the arbitrator reasoned that the
Company promoted the differential “as a reward and a discount for tobacco-free
employees,” but that the monthly charge assessed to tobacco users, over and above
base premiums, amounted to a penalty. (Id.). In this regard, he noted that the
premiums were calculated inclusive of claims filed by all insureds – those who
used tobacco and those who did not – concluding that tobacco-free employees, by
paying this rate, were not receiving a reduction as promised. Accordingly, the
arbitrator rejected Hershey’s argument that tobacco-free employees enjoy a
discount by not paying the fee, explaining that “the non-smokers [sic] rate is the
normal rate.” (Id. at 10). The arbitrator additionally noted that Hershey did not
dispute that some union members may have given up their right to use tobacco in
light of the advertised discount, (id. at 8), and also that, by such inducement, the
Company would have enjoyed the benefits of a healthier workforce, resulting in
reduced claims. (Id. at 10).
By way of conclusion, the arbitrator stated that Hershey had violated
Attachment I of the MOA by “establishing and implementing a tobacco-free
differential not in conformity with or consideration of the manner by which
healthcare insurance rates are determined.” (Id.). The arbitrator ordered that
employees who were induced to and did qualify for the reduced premium by
October 15, 2010 “shall be reimbursed by cash or credit, pro-rata, the $300.00
rewarded discount” from the standard rate of the benefit plan selected. (Id. at 11).
Nonetheless, he rejected the claim that tobacco users who paid the fee should be
reimbursed, reasoning that such assessment was within the purview of the
Company pursuant to the contribution differentials clause of Attachment I. (Id. at
The Union thereafter lodged two further grievances pertaining to the
assessment of fees to tobacco users: one filed on September 10, 2012 (“2012
Tobacco-Free Grievance”) and the other on October 23, 2012 (“2013 TobaccoFree Grievance”). (Doc. 18, ¶¶ 43, 50). The first protested a $35 per month
penalty assessed to tobacco users and introduced in plan year 2012, and the second
anticipated the application of a similar fee in plan year 2013. (Id. ¶¶ 44, 51).
These fees were applicable to both union and nonunion employees. (Id. ¶¶ 45, 52).
In 2011, Hershey had distributed an employee benefits guide stating that, as to plan
year 2012, “[i]f you use tobacco you will pay an additional $35 per month for your
medical benefits.” (Id. ¶ 48). Both grievances averred that the penalty violated the
tobacco-free differential of Attachment I and also the August 6, 2012 arbitration
award. (Id. ¶¶ 44, 51).
In addition, the Union filed three other relevant grievances, which did not
pertain to the tobacco-free differential. On October 26, 2011, the Union filed a
grievance challenging certain provisions of Hershey’s 2012 benefits plans (“2012
Healthcare Grievance”), specifically asserting that the plan violated the CBA by
Increas[ing] . . . employee cost-sharing over
and above the limits set forth in the
[Utilizing a]rbitrary and capricious trending
and other methodology in determining the
Failing to provide plan designs for
bargaining unit employees and bargaining
unit retirees as required under the
Violati[ng] . . . terms and conditions
applicable to retirees who are eligible for
(Doc. 18-4, Ex. J). On October 23, 2012, the Union lodged a grievance in protest
of the 2013 benefits plan (“2013 Healthcare Grievance”), which grievance omitted
the claim concerning the Company’s failure to provide appropriate plan designs for
bargaining unit employees and retirees but, otherwise, was similar to the 2012
Healthcare Grievance. (Doc. 18-4, Ex. K).
On February 14, 2012, the Union filed a grievance asserting that Hershey’s
Wellness Program violated Attachment I “by not including all eligible participants”
(“Wellness Program Grievance”). (Doc. 18-4, Ex. L).3
Hershey commenced the present action against the Union on September 5,
2012, by filing a Complaint and Petition to Vacate Arbitration Award (Doc. 1).
This grievance was referred to arbitration, and a decision and award were issued on
March 14, 2013 in favor of the Union. (Doc. 30-3, Ex. 3). The arbitrator observed that, under
Attachment I of the MOA, the Company was required to provide the same benefits to “current
and former hourly employees” as it does to salaried employees and found that the term “former
hourly employee” included retirees under the age of 65 (“pre-65s”) based on the bargaining
history between Hershey and the Union. (Id. at 10). By not providing the same Wellness
Program to pre-65s, the arbitrator concluded, Hershey was violating the MOA. (Id.).
Notably, the arbitrator clarified that the substantive arbitrability of the grievance was not
before him, and accordingly, he declined to address this issue, assuming arbitrability. (Id. at 2).
Hershey filed a First Amended Complaint (Doc. 2) on September 12, 2012, and
with leave of Court, filed a Second Amended Complaint (Doc. 18) on December
21, 2012. That Complaint sought vacatur of the tobacco-free arbitration award
(Count I) and declaratory judgment that the 2012 and 2013 tobacco-free grievances
and the healthcare and wellness program grievances (the “Attachment I
Grievances”) were not subject to arbitration (Count II).
Soon thereafter, the Union filed a Motion to Dismiss (Doc. 19), and, after
full briefing, this Court held oral argument on the motion. Following argument, we
issued an order (Doc. 29), explaining that it would be premature to render a final
ruling at the 12(b)(6) stage, denying the Union’s Motion to Dismiss as moot, and
ordering the Union to file an answer to Hershey’s Second Amended Complaint.
The Union filed an Answer (Doc. 30) on May 13, 2013, and, on July 17,
2013, a Motion for Judgment on the Pleadings (Doc. 36), along with a supporting
brief (Doc. 37). On July 19, 2013, Hershey filed a Motion for Judgment on the
Pleadings on Count I of the Second Amended Complaint (Doc. 40) and a brief in
support (Doc. 41), as well as a Motion for Summary Judgment on Count II of the
Second Amended Complaint (Doc. 42), accompanied by a brief (Doc. 43) and a
Statement of Facts (Doc. 44). At this time, all motions have been fully briefed and
are ripe for review.
STANDARDS OF REVIEW
As to the motions for judgment on the pleadings, Federal Rule of Civil
Procedure 12(c) provides that “[a]fter the pleadings are closed – but early enough
not to delay trial – a party may move for judgment on the pleadings.” FED. R. CIV.
P. 12(c). The moving party must clearly establish that no material issues of fact
exist and that it is entitled to judgment as a matter of law. See Rosenau v. Unifund
Corp., 539 F.3d 218, 221 (3d Cir. 2008) (quoting Jablonski v. Pan Am. World
Airways, Inc., 863 F.2d 289, 290 (3d Cir. 1988)). We consider the facts, as
presented in the pleadings, and the inferences to be drawn therefrom, in the light
most favorable to the nonmovant. See Sikirica v. Nationwide Ins. Co., 416 F.3d
214, 220 (3d Cir. 2005).
Similarly, summary judgment should be granted if the record establishes
“that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute is “genuine”
only if there is a sufficient evidentiary basis for a reasonable jury to find for the
non-moving party, and a fact is “material” only if it might affect the outcome of the
action under the governing law. See Sovereign Bank v. BJ’s Wholesale Club, Inc.,
533 F.3d 162, 172 (3d Cir. 2008) (citing Anderson v. Liberty Lobby, Inc, 477 U.S.
242, 248 (1986)). Unlike in the Rule 12(c) context, a court may consider evidence
outside of the pleadings. See, e.g., FED. R. CIV. P. 12(d) (stating that a motion
styled under Rule12(c) must be treated as a summary judgment motion if “matters
outside the pleadings are presented to and not excluded by the court”). We view
the facts and all reasonable inferences therefrom in the light most favorable to the
nonmoving party. See Montone v. City of Jersey City, 709 F.3d 181, 189 (3d Cir.
2013); see also Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004)
(“In considering a motion for summary judgment, a . . . court may not make
credibility determinations or engage in any weighing of the evidence; instead, the
non-moving party's evidence ‘is to be believed and all justifiable inferences are to
be drawn in his favor.’” (quoting Anderson, 477 U.S. at 255)).
In Count I of the Second Amended Complaint, Hershey petitions for vacatur
of the August 6, 2012 arbitration award on the basis that the arbitrator had
exceeded his powers and that the award, rather than drawing its essence from the
contract, “reflects the arbitrator’s own notions of industrial justice.” Eastern
Assoc’d Coal Corp. v. Mine Workers of Am., Dist. 17, 531 U.S. 57, 62 (2000)
(citation and internal quotation marks omitted). In Count II, Hershey seeks
declaratory judgment that the grievances lodged with respect to its benefits plan
changes and the implementation thereof are substantively nonarbitrable. We
address each of these counts – and the relevant motions – seriatim.
Petition to Vacate Arbitration Award
In support of its Motion for Judgment on the Pleadings, the Union argues
that the arbitration award is supported by the terms of the MOA, observing that the
arbitrator’s opinion referred to the language of Attachment I (e.g., concerning the
calculation of premiums and the smoothing formula), the informational materials
Hershey provided to the Union and its members, and the parties’ bargaining history
in interpreting the phrase “tobacco-free differential.”
Hershey counters that the award was not based on a determination of the
meaning of “tobacco-free differential,” explaining that the grievance, and, hence
the award, was based on communications outside of Attachment I. Hershey
contends that such communications are irrelevant because there was no evidence
than any union member had been induced to cease using tobacco as a result of the
disseminated materials; in fact, the Company asserts, the 2011 enrollment packet
advertising the discount was distributed starting October 18, 2011, which was after
the date employees were required to be tobacco free in order to take advantage of
the benefit. (Doc. 18, ¶ 19) (stating that Hershey mailed union members a circular
in June 2010, indicating that they must be tobacco free by October 15, 2010).
In advancing its own motion on the pleadings, Hershey centrally argues that
the arbitration award, requiring the Company to provide a reimbursement to union
employees which its plans do not require it to provide to nonunion employees,
violates the MOA’s directive that the medical benefits provided to union members
“will be the same” as those in effect for salaried workers. Accordingly, Hershey
contends that the award cannot “in any rational way be derived from the
agreement[.]” United Transp. Union Local 1589 v. Suburban Transit Corp., 51
F.3d 376, 380 (3d Cir. 1995) (quoting Tanoma Mining Co. v. Local Union No.
1269, 896 F.2d 745, 748 (3d Cir. 1990) (emphasis omitted).
By way of response, the Union emphasizes that it is Hershey – not the
arbitrator – that has created an inconsistency by electing not to reimburse tobaccofree salaried workers. Put another way, the Union asserts that “Hershey cannot
simply justify its breach of Attachment I’s terms by relying on what it does with
non-union employees who do not have the benefit of a negotiated collective
bargaining agreement[.]” (Doc. 47, at 13).
In a proceeding to vacate an arbitration award, this Court’s review is
“exceedingly narrow,” and we must affirm where the award has some support in
the record and does not manifestly disregard the law. Eichleay Corp. v. Int’l Ass’n
of Bridge, Structural & Ornamental Iron Workers, 944 F.2d 1047, 1056 (3d Cir.
1991) (citation and footnote omitted). More particularly, an arbitration award must
stand if it “draws its essence from the collective bargaining agreement,” Akers
Nat’l Roll Co. v. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied
Indus. & Service Workers Int’l Union, 712 F.3d 155, 160 (3d Cir. 2013) (quoting
United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 36 (1987)) (internal
quotation marks omitted), that is, “if the interpretation can in any rational way be
derived from the agreement, viewed in the light of its language, its context, and
any other indicia of the parties’ intention.” Id. (quoting Ludwig Honold Mfg. Co.
v. Fletcher, 405 F.2d 1123, 1128 (3d Cir. 1969)). Mindful that the parties have
bargained for an arbitrator’s assessment, the arbitration award should stand, and a
court should not vacate an award based on a differing perception. See Roberts &
Schaefer Co. v. Local 1846, United Mine Workers of Am., 812 F.2d 883, 885 (3d
Cir. 1987). See generally United Steelworkers of Am. v. Enterprise Wheel & Car
Corp., 363 U.S. 593, 596 (1960) (“The refusal of courts to review the merits of an
arbitration award is the proper approach to arbitration under collective bargaining
agreements. The federal policy of settling labor disputes by arbitration would be
undermined if courts had the final say on the merits of the awards.”). Thus, we
have upheld arbitration awards even where they appeared “dubious,” and the court
would have reached a different result. Roberts & Schaefer Co., 812 F.2d at 885
(internal quotation marks omitted).
Bearing this extremely high threshold in mind and attentive to our mandate
to exercise judicial restraint, we cannot conclude that the arbitrator’s award
evidences “a manifest disregard of the agreement, totally unsupported by principles
of contract construction” so as to warrant vacatur. Ludwig, 405 F.2d at 1128. The
award reflects the arbitrator’s determination that, as memorialized in Attachment I,
the Company’s anti-tobacco initiative was promoted and understood as an
incentive and not a penalty-based program. As evidence of the parties’ intent, the
award cites materials circulated by Hershey, announcing that tobacco-free
employees would be rewarded by receiving a discount on monthly premiums.
Because tobacco-free employees were required to pay the full premium rate, the
arbitrator concluded that the Company failed to provide the contemplated reduction
to tobacco-free union members.
As to Hershey’s argument that implementing the arbitrator’s decision would
violate the MOA by providing benefits to union members that are not “the same
as” those provided to salaried employees, we agree with the Union that it is
Hershey’s treatment of salaried employees that would create disparity. Indeed, the
arbitrator’s ruling does not prohibit Hershey from providing a pro-rated, $300
reimbursement to every tobacco-free employee – both union and nonunion – a
course that would resolve the inconsistency that Hershey now attempts to use as a
basis for vacatur. Thus, it appears that it was Hershey’s method of implementing
the award, and not the award itself, which could be conceived to violate the MOA.
We also note Hershey’s position that the arbitrator’s decision was based on
representations made by the Company, extrinsic to the MOA, and not on an
interpretation of Attachment I. However, the opinion and award, in referencing the
parties’ bargaining history and the materials distributed by Hershey to the Union,
evidence that the arbitrator viewed the MOA “in light of its language, its context,
and . . . other indicia of the parties’ intention.” Akers Nat’l Roll Co., 712 F.3d at
160 (quoting Ludwig, 405 F.2d at 1128). Significantly, the Company does not
argue that the term “tobacco-free differential” compels a penalty to tobacco users
or proscribes a discount to non-users; even if Hershey had adopted such position,
after bargaining for the decision of the arbitrator, the Company cannot avoid his
decision merely because it disagrees with the result. See, e.g., Kane Gas Light &
Heating Co. v. Int'l Bhd. of Firemen & Oilers, 687 F.2d 673, 679 (3d Cir. 1982).
Given our analysis, and viewing the facts in the light most favorable to
Hershey, we grant judgment on the pleadings in the Union’s favor and deny
Hershey’s cross motion.
Turning to Count II of the Amended Complaint, pursuant to which Hershey
seeks a declaratory judgment that certain of the Union’s grievances are
nonarbitrable, as noted, the Union advances a motion for judgment on the
pleadings while Hershey argues that it is entitled to summary judgment. We
address the former motion first.
Union’s Motion for Judgment on the Pleadings
In support of its motion, the Union maintains that the final clause of
Attachment I does not remove the Attachment I Grievances from the purview of
the general arbitration clause. It states that the Court should presume arbitrability
based on the breadth of the CBA’s arbitration provision, see Battaglia v.
McKendry, 233 F.3d 720, 725 (3d Cir. 2000), and asserts that the final clause of
Attachment I does not overcome the presumption, as it does not explicitly exclude
the grievances from arbitration. See Lukens Steel Co. v. United Steelworkers of
Am., 989 F.2d 668, 673 (3d Cir. 1993) (citation omitted). In support, the Union
highlights that the Attachment I language is inclusive, permitting that “any
disputed amendments or changes that fall outside this Benefits Collaboration
agreement will be subject to the grievance process.” (Doc. 18-1, Ex. B) (emphasis
added). By way of contrast, the Union notes that Paragraph 5 of the MOA
expressly prohibits the “assert[ion] of any claim, in any form . . . challenging the
Company’s decision to close [the East Hershey plant],” underscoring that the
parties knew how to exclude certain claims when they wanted to. (Doc. 18-1, Ex.
B); see Eichleay Corp., 944 F.2d at 1058 (“The [agreements] do in fact expressly
exclude some issues from arbitration. . . . This indicates that the parties knew how
to remove issues from arbitration when they wanted to.”). As no other evidence
indicates the parties’ intent to exclude the Attachment I Grievances from
arbitration, the Union maintains that they are arbitrable.
Additionally, applying the Attachment I language, the Union contends that
the relevant grievances allege changes to health benefits which violate – i.e., “fall
outside” of – the Benefits Collaboration agreement, bringing the claims within the
CBA’s grievance procedures. The Union explains that the Attachment I
Grievances each allege that Hershey has violated the terms of Attachment I,
requiring a determination of the meaning and application of the agreement’s
provisions. For instance, the Union notes that the 2012 and 2013 Healthcare
Grievances aver that Hershey breached Attachment I’s cost containment limits,
trending and premium calculation requirements, and retiree premium limitations.
It also attributes that the Wellness Program Grievance challenges the Company’s
interpretation of “former hourly employee” as contained in Attachment I, which
grievance, significantly, was sustained by an arbitrator. (Doc. 30-3, Ex. 3); see
supra note 3. In addition, the Union notes that the 2012 and 2013 Tobacco-free
Grievances, among other things, dispute the meaning of “tobacco-free differential.”
“A determination of whether an employer has lived up to the commitments it has
made as embodied in a negotiated agreement,” the Union asserts, “[is] precisely the
type of dispute best and appropriately suited for determination by an arbitrator.”
(Doc. 37, p. 21).
Finally, to conclude that the Attachment I Grievances are not arbitrable, the
Union asserts, would remove from arbitration any claims that company action
violated the terms and conditions of Attachment I, rendering meaningless the rights
for which the Union bargained. The Union clarifies that it is not disputing
Hershey’s authority to design and change benefits plans but, rather, seeking to
enforce the limitations upon the Company’s discretion as memorialized in
Hershey, in opposition, argues that the CBA’s general arbitration procedures
are constrained by the terms of the MOA, interpreting that Attachment I subjects to
grievance procedures only “disputed amendments or changes that fall outside this
Benefits Collaboration agreement.” (Doc. 18, Ex. B). The Company asserts that
the Union’s relevant grievances “fall within” the scope of Attachment I because
they allege violations of express provisions of Attachment I and, thus, are
necessarily excluded from the CBA’s grievance process. Hershey notes, for
example, that the 2011 and 2012 Healthcare Grievances dispute the Company’s
implementation of the provisions contained in Attachment I (concerning, e.g., costsharing, premium calculation, and trending) but that the Union does not contend
that Hershey failed to apply the provisions entirely. As the design and
implementation of benefits plans for all employees is within Hershey’s prerogative,
the Company argues, these matters are not subject to grievance procedures.
Hershey further explains that “the Union acceded to Hershey’s exclusive right to
create plan design, make future changes to the benefits provided, determine the
contributions paid by its employees, and, for Union employees, to apply the
costing limitations set forth in Attachment I,” and, in doing so, gave up its right to
lodge relevant grievances. (Doc. 48, p. 28). To adopt the Union’s position,
Hershey asserts, would be to effectively abnegate the final clause of Attachment I.
Lastly, the Company generally notes that a purpose of Attachment I was to
authorize Hershey to institute uniform benefits plans to its salaried and union
employees in order to control its costs. Such purpose would be defeated, it
maintains, if the Union were permitted to grieve benefits changes in order to
modify union members’ plans alone. The Company also notes that underlying its
decision to expand facilities within the Union’s jurisdiction was an understanding
that it would be able to achieve cost savings through the benefits collaboration
program, stating that, otherwise, it could have relocated elsewhere.4
In determining whether a dispute is subject to grievance procedures, we
generally presume arbitrability where an arbitration clause is drafted expansively.
See Battaglia, 233 F.3d at 725; cf. Local 827, Int’l Bhd. of Elec. Workers v.
Verizon N.J., Inc., 458 F.3d 305, 310 (3d Cir. 2006) (stating that the presumption
of arbitrability does not apply in all circumstances, namely where the arbitration
clause is narrowly written). The presumption may be overcome if the CBA
includes “an express provision excluding a particular grievance from arbitration,”
and, barring that, “only the most forceful evidence of a purpose to exclude the
claim from arbitration can prevail.” United Steelworkers of Am. v. Lukens Steel
Co., 969 F.2d 1468, 1475 (3d Cir. 1992) (quoting AT&T Techs., Inc. v. Commc’ns
Workers of Am., 475 U.S. 643, 650 (1986)) (internal quotation marks omitted).
Accordingly, the Third Circuit has delineated three questions to consider in
determining arbitrability: “(1) Does the present dispute come within the scope of
the arbitration clause?[;] (2) does any other provision of the contract expressly
exclude this kind of dispute from arbitration?[;] and (3) is there any other ‘forceful
Hershey’s opposition brief additionally presents materials outside of the pleadings,
relevantly: (1) the declaration of Steven R. Tilley; (2) the declaration of Debora Robare; and (3)
the transcript of oral argument held before this Court on April 23, 2013. We will exclude these
matters for purposes of considering the Union’s motion. See FED. R. CIV. P. 12(d) (directing that
a motion for judgment on the pleadings be treated as one for summary judgment where matters
outside of the pleadings are presented and not excluded by the Court).
evidence’ indicating that the parties intended such an exclusion?” United
Steelworkers of Am. v. Rohm & Haas Co., 522 F.3d 324, 332 (3d Cir. 2008)
(quoting E.M. Diagnostic Sys., Inc. v. Local 169, Int’l Bhd. of Teamsters, 812 F.2d
91, 95 (3d Cir. 1987)) (internal quotation marks omitted).
Here, the CBA’s general arbitration provision is drafted broadly to
encompass any disputes arising between the Company and the Union or its
members, and, as such, we apply a presumption of arbitrability.
As to whether the final clause of Attachment I constitutes an express
provision excluding a particular grievance from arbitration, we note, significantly,
that the clause is phrased inclusively and permissively. That is, the clause affirms
that grievances that concern “disputed amendments or changes that fall outside this
Benefits Collaboration agreement” are subject to the grievance process. To
interpret the clause as an exception to the CBA’s arbitration provision would
require us to infer that changes that do not fall outside of the Benefits
Collaboration Agreement are not subject to arbitration. That the subject language
requires us to employ such inductive reasoning to construe it as exclusionary
suggests that it does not preclude the Union’s grievances from arbitration. Indeed,
“[a]greements that require us to assume that an issue has been excluded from
arbitration cannot be said to expressly exclude that issue.” Lukens Steel Co., 969
F.2d at 1476 (emphasis in original and footnote omitted). As the parties point to
no other relevant exception to the CBA’s arbitration clause, we cannot say that the
MOA expressly excludes the Union’s grievances from arbitration.
Lastly, we turn to whether Hershey has proffered forceful evidence of the
parties’ intent to exclude the Attachment I Grievances from arbitration. At most,
Hershey has shown that the parties agreed that the Company had the authority to
implement benefits plans that were the same for both union and nonunion
employees. However, we are directed to no evidence leading us to conclude that,
where those changes violate the terms of Attachment I, the parties understood the
Union to have relinquished its rights to enforce the agreement. Importantly, it is
not for this Court to consider the merits of the grievances, but only whether the
parties have agreed that an arbitrator may do so. See Rohm & Haas, 522 F.3d at
331 (citing Lukens Steel Co., 989 F.2d at 672). Also, as a practical matter, to find
in Hershey’s favor would leave the Union no recourse to enforce the MOA.
Accordingly, as no exclusionary term or forceful evidence persuades us
otherwise, we find that the Attachment I grievances are arbitrable and the Union is
entitled to judgment in its favor. In the interest of thoroughness, however, we
address Hershey’s summary judgment motion.
Hershey’s Motion for Summary Judgment
In support of its motion for summary judgment, Hershey additionally
outlines the bargaining process preceding the execution of the MOA. The closure
of the East Hershey plant was part of the Company’s comprehensive program
aimed at improving performance and reducing operating costs. (Doc. 44, ¶ 3-4).
In considering relocating some of its operations to the West Hershey plant, the
Company undertook negotiations with the Union, which represented employees at
both locations. (Id. ¶ 5-6). Discussions began in March of 2010, at which point
Hershey explained to the Union’s Business Manager, Dennis Bomberger, that for
the West Hershey plant to be a competitive option for development, the parties
would need to eliminate an $8 million disadvantage from wages and benefits
presently offered to the Union, and Hershey would require flexible operating
principles and work rules. (Id. ¶ ¶ 9, 11). Hershey specifically communicated to
Bomberger that it wished to implement benefits harmonization, such that all
benefits plans would be the same for all domestic workers – union and non-union.
(Id. ¶ 14). During the course of negotiations, Fred Boltz, the Union president, was
also briefed by Hershey on these matters. (Id. ¶ 17).
On April 21, 2010, the Company presented a proposal for benefits
harmonization, later labeled “Benefits Collaboration,” posing that the benefits plan
would feature one pool of participants and that Hershey would have exclusive
authority to create plan design and make future plan changes. (Id. ¶ ¶ 19-20). At
that time, the Union did not object to Hershey’s exclusive authority to implement
plan changes or raise the right to grieve those changes, but did advance a concern
regarding cost controls. (Id. ¶ ¶ 21-23). Hershey presented a new proposal on
April 23, 2010, among other things, retaining its exclusive right – with minor
limitation – to create benefits plans and implement changes, and restricting cost
impact for Union members. (Id. ¶ 24).
On April 26, 2010, Boltz first questioned whether the Union could grieve
plan design or changes, and Steven R. Tilley, the Company’s Human Resources
Director, explained that the Union would have no such right. (Id. ¶ ¶ 26-27).
Thereafter, on April 30, 2010, Bomberger agreed that Hershey would have
exclusive control to determine plan design and future changes, so long as cost
limitations were included. (Id. ¶ 31). The company acquiesced, incorporating
certain costing methodologies (i.e., the Murphy formula). (Id.).
As to the grievance issue, Bomberger suggested that the Union be permitted
to grieve issues “beyond the scope” of the Benefits Collaboration agreement, and
Hershey advised Bomberger and Boltz that it would agree with the proposal. (Id. ¶
¶ 32-33). Hershey added the relevant language to Attachment I, pertinently stating
that “any disputed amendments or changes that fall outside this Benefits
Collaboration agreement will be subject to the grievance process,” and the parties
entered the MOA on May 28, 2010. (Id. ¶ ¶ 38-39).
Hershey additionally maintains that, at oral argument before this Court, the
Union conceded that the final clause of Attachment I operates to restrict the CBA’s
arbitration provision. (Doc. 44-2, Ex. D., p. 13). Such concession, the Company
argues, should be considered a judicial admission that the arbitration clause does
not apply to the Union’s grievances. Also, the Company contends that all benefits
plan changes applicable to the Union satisfied the cost restrictions set forth in
Attachment I, (Doc. 44, ¶ 68), such that the Union’s only dispute concerned
Hershey’s discretion to implement benefits plan changes.
Even considering this proffer, we find that Hershey has failed to adduce the
requisite forceful evidence to overcome the presumption of arbitrability. Also, to
the extent Hershey attempts to reach the merits of the underlying grievances, in
stating that the Company complied with Attachment I’s cost restrictions, we
decline to, as our role is constrained to determining whether a particular dispute
may be submitted to arbitration. See Rohm & Haas, 522 F.3d at 331 (citing Lukens
Steel Co., 989 F.2d at 672).
For the reasons articulated herein, the Union’s motion for judgment on the
pleadings shall be granted in full, and Hershey’s motions for judgment on the
pleadings and summary judgment shall be denied. An appropriate order shall
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