BHS Corrugated - North America, Inc v. International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers (TV3)

Filing 22

MEMORANDUM AND OPINION as set forth in following order. Signed by Chief District Judge Thomas A Varlan on 7/2/13. (ABF)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
BHS CORRUGATED - NORTH AMERICA, INC., )
)
Plaintiff,
)
)
v.
) No.: 3:13-CV-67
)
(VARLAN/GUYTON)
INTERNATIONAL ASSOCIATION OF
)
BRIDGE, STRUCTURAL, ORNAMENTAL AND )
REINFORCING IRON WORKERS (AFL-CIO),
)
SHOPMEN’S LOCAL UNION NO. 812
)
)
Defendant.
)

MEMORANDUM OPINION
Defendant International Association of Bridge, Structural, Ornamental and
Reinforcing Iron Workers (AFL-CIO), Shopmen’s Local Union No. 812 (hereinafter “Local
812” or the “Union”), has moved to dismiss [Doc. 10] this case on the grounds that plaintiff
BHS Corrugated - North America, Inc. (hereinafter “BHS Corrugated” or the “Company”)
failed to exhaust its contractual remedies. Alternatively, Local 812 argues that the Court
should dismiss the case for lack of subject matter jurisdiction because it raises
representational issues within the exclusive jurisdiction of the National Labor Relations
Board (“NLRB”). Local 812 submitted a memorandum in support of the pending motion
[Doc. 11], to which BHS Corrugated has responded [Doc. 15]. Local 812 has filed a reply
[Doc. 16] and the matter is now ripe for determination.

Having carefully considered the pending motion and related pleadings, the defendant’s
Motion to Dismiss [Doc. 10] will be GRANTED.
I.

Relevant Facts1
BHS Corrugated manufactures and services large rolls that are used in producing

corrugated board at a facility in Rutledge, Tennessee [Doc. 3 at ¶ 2]. BHS Corrugated and
Local 812 are parties to a collective bargaining agreement (“CBA”) effective June 23, 2011
through June 23, 2014, which covers certain employees at the Rutledge plant [Id. at ¶¶ 5–6].
Specifically, the CBA applies to “all production and maintenance employees . . . engaged in
the fabrication of iron, steel, metal, and other products, or in maintenance work in or about
the Company’s plant or plants located at Rutledge, Tennessee and vicinity and to work done
by such production and maintenance employees” [Id. at ¶ 6; Doc. 3-1 at p. 5]. The CBA
contains a grievance and arbitration procedure which covers “an alleged violation of any
Section of [sic] Subsection of this Agreement” [Doc. 6-1 at pp. 43– 48].
Last fall, BHS Corrugated notified Local 812 of its intent to cease operations at the
Rutledge location and to open a new facility in the Hardin Valley area of Knoxville,
Tennessee [Doc. 3 at ¶¶ 7–8]. BHS has advised Local 812 of its position that the CBA does
not apply to the Knoxville location, as it applies only to Rutledge and its “vicinity” [Id. at ¶
9]. Local 812 has taken the position that the CBA applies to the new plant and its

1

For the purposes of a motion to dismiss, the Court takes plaintiff’s factual allegations as
true. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (noting that, “when ruling on a defendant’s
motion to dismiss, a judge must accept as true all of the factual allegations contained in the
complaint” (citations omitted)).
2

represented employees are entitled to transfer to the Knoxville plant [Id. at ¶ 11]. Local 812
also claims that BHS Corrugated has violated the CBA by posting open positions for the
Knoxville location and has filed a grievance over the matter [Id. at ¶¶ 12–13; Doc. 3-3].
BHS Corrugated claims that by “attempting to insist that the Company process a grievance
related to actions that are outside of the Rutledge plant and not covered by the Agreement,
the Defendant is breaching the Agreement” [Doc. 4 at ¶ 15]. BHS Corrugated seeks a
declaratory judgment pursuant to § 301(a) of the Labor Management Relations Act
(“LMRA”), 29 U.S.C. § 185(a), and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202,
that the CBA does not apply to the plaintiff’s Knoxville location [Id., Prayer ¶ 2].
II.

Analysis
A.

Standard of Review

Federal Rule of Civil Procedure 8(a)(2) sets out a liberal pleading standard, Smith v.
City of Salem, 378 F.3d 566, 576 n.1 (6th Cir. 2004), requiring only “‘a short and plain
statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the
[opposing party] fair notice of what the . . . claim is and the grounds upon which it rests,’”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.
41, 47 (1957)). Detailed factual allegations are not required, but a party’s “obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions.” Twombly, 550 U.S. at 555. “[A] formulaic recitation of the elements of a
cause of action will not do,” nor will “an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
3

In deciding a Rule 12(b)(6) motion to dismiss, a court must construe the complaint in
the light most favorable to the plaintiff, accept all factual allegations as true, draw all
reasonable inferences in favor of the plaintiff, and determine whether the complaint contains
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at
570; Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citation omitted). “A claim
has facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678. “Determining whether a complaint states a plausible claim for relief will
[ultimately] . . . be a context-specific task that requires th[is Court] to draw on its judicial
experience and common sense.” Id. at 679.
Claims pursuant to § 301(a) of the LMRA must first be pursued through contractual
grievance remedies before seeking relief in federal court. Republic Steel Corp. v. Maddox,
379 U.S. 650, 652-53 (1965); Drake Bakeries, Inc. v. Local 50, Am. Bakery & Confectionary
Workers Int’l, 370 U.S. 254, 266 (1962). The failure to exhaust contractual remedies is a bar
to litigation that results in dismissal pursuant to Rule 12(b)(6). Chapman v. UAW Local
1005, 670 F.3d 677, 681 (6th Cir. 2012), cert. denied, 133 S. Ct. 438 (2012); United Ass’n
of Journeyman & Apprentices of the Plumbing & Pipefitting Indus., Local No. 577 v. Ross
Bros. Constr. Co., 191 F.3d 714, 716-17 (6th Cir. 1999).

4

B.

Whether the Dispute is Subject to Mandatory Arbitration
1.

The Wantz Affidavit

Before addressing the primary issue, i.e., whether this dispute is subject to the
grievance and arbitration provisions of the parties’ CBA, the Court must first address
whether to consider the affidavit of Mr. William Wantz [Doc. 15-2], the Company’s Vice
President of Manufacturing, submitted with BHS Corrugated’s response to the pending
motion.
BHS Corrugated argues that the parties can only be ordered to arbitrate a dispute that
they have specifically agreed to arbitrate and that the CBA is ambiguous as to whether it
applies to grievances by either party or only to grievances by the Union or employee.
Therefore, because the contract language is ambiguous, BHS Corrugated argues that the
Court must examine the parties’ past practice as supported by Mr. Wantz’s affidavit [Doc.
15 at pp. 4–7]. Mr. Wantz’s affidavit states that there are no records indicating that the
Company has ever filed a grievance or brought a claim under the current or preceding CBAs.
Mr. Wantz has never understood the CBA to give the Company any right to initiate a
grievance on its own behalf [Doc. 15-2 at ¶ 5]. Because Mr. Wantz’s affidavit is a document
outside the pleadings for purposes of Rule 12(b)(6), BHS Corrugated has requested that the
Court consider the affidavit and treat the defendant’s motion as a motion for summary
judgment pursuant to Fed. R. Civ. P. 56.

5

In reply, Local 812 urges the Court to decline the Company’s invitation to consider
Mr. Wantz’s affidavit and convert the pending motion to a motion for summary judgment
because the language of the CBA settles the arbitrability issue. Additionally, Local 812
contends that it cannot respond to the factual issues raised by Mr. Wantz’s affidavit without
the benefit of discovery [Doc. 16 at pp. 2–5].
Fed. R. Civ. P. 12(d) provides that if “matters outside the pleadings are presented to
and not excluded by the court” a motion under Rule 12(b)(6) “must be treated as one for
summary judgment under Rule 56.” Further, “[a]ll parties must be given a reasonable
opportunity to present all the material that is pertinent to the motion.” Fed. R. Civ. P. 12(d).
While the Rules expressly provide for the conversion of a motion to dismiss to a motion for
summary judgment, the Sixth Circuit has cautioned that such action “should be exercised
with great caution and attention to the parties’ procedural rights.” Tackett v. M&G Polymers,
USA, LLC, 561 F.3d 478, 487 (6th Cir. 2009). The Sixth Circuit has also held that such
conversion can occur without affirmative action by the district court, i.e., merely by the
failure to exclude the presented outside evidence. See Northville Downs v. Granholm, 622
F.3d 579, 585 (6th Cir. 2010); Max Arnold & Sons, LLC v. W.L. Hailey & Co., 452 F.3d 494,
503 (6th Cir. 2006).
After carefully considering the issues, the Court declines the invitation to convert the
pending motion to a motion for summary judgment and expressly excludes Mr. Wantz’s
affidavit from consideration as to the merits of the motion to dismiss for two reasons. First,
and as discussed more fully infra, the Court finds that the instant dispute is covered by the
6

unambiguous language of the parties’ CBA and therefore resort to extraneous evidence of
the parties’ intent is not necessary. Second, and equally important, conversion of the pending
motion to a motion for summary judgment would thus allow Mr. Wantz’s version of the facts
to be the only, and therefore undisputed, facts in the record regarding the parties’ history of
processing grievances. As suggested by defendant, Local 812 would surely want the
opportunity to depose Mr. Wantz and perhaps other Company officials and to request and
examine records in an effort to determine the accuracy of Mr. Wantz’s testimony.
2.

The Scope of the Grievance and Arbitration Procedures

Local 812 argues that this is a dispute over the interpretation or application of
language in the CBA and therefore BHS Corrugated is required to take it through the
grievance and arbitration procedure. Thus, Local 812 argues that the plaintiff’s failure to
exhaust contractual remedies is a bar to litigation and the case should be dismissed [Doc. 11
at pp. 4–7].
Section 19 of the CBA contains the parties’ grievance procedure and defines a
“grievance or dispute” as “an alleged violation of any Section of [sic] Subsection of this
Agreement” [Doc. 6-1 at p. 43]. The pertinent provision of Section 19(C) then states:
Should a grievance or dispute arise between the Company and the Union in
connection with the application, interpretation, or alleged violation of any
provision of this Agreement, the complaining or aggrieved party shall serve
notice thereof, in writing, on the other no later than five (5) workdays from the
date the grievance or dispute occurred or, exercising reasonable care, comes
to the attention of the complaining or aggrieved party. Such grievances
between the Company and the Union shall be submitted in Step 2 and
processed as provided thereafter.

7

[Id.] Step 2 of the grievance procedure provides in part:
Within nine (9) days after such grievance is presented to be processed in this
Step 2, a representative of the Union, the Shop Committee, with or without the
complaining employee(s) and the Plant Manager or his designated
representative shall meet for the purpose of discussing the facts surrounding
the grievance. If the grievance is not settled during such meeting, the Plant
Manager or his designated representative shall render his decision in writing
within nine (9) days . . . If the written decision of the Plant Manager or his
designated representative is not satisfactory, the grievance shall be submitted
to arbitration in accordance with the arbitration provisions hereinafter . . . .
[Id. at p. 44]. Finally, Section 20 of the CBA contains the arbitration procedure and states
in part:
(A) Any grievance or dispute between the Company and the Union . . . shall,
upon written request of either party to this Agreement, be submitted to
arbitration by an impartial arbitrator to be selected by mutual agreement of the
parties.
[Id. at p. 46].
As noted above, Section 1 of the parties’ CBA provides that the agreement is
“applicable to all production and maintenance employees . . . engaged in the fabrication of
iron, steel, metal, and other products, or in maintenance work in or about the Company’s
plant or plants located at Rutledge, Tennessee and vicinity . . .” [Doc. 6-1 at p. 7]. As also
noted above, the parties dispute whether the Company’s proposed facility in Knoxville is
encompassed by the term “vicinity” in the CBA. Local 812 takes the position that this
disagreement clearly qualifies as a “dispute . . . between the Company and the Union in
connection with the application, interpretation, or alleged violation of any provision of this
Agreement” [Doc. 11 at p. 6]. Local 812 also notes Section 21(B)(2) of the CBA which

8

states, “[t]he Company and the Union [a]gree that the grievance procedures provided herein
are adequate to provide a fair and final determination of all grievances arising under the
terms of this contract” [Doc. 6-1 at p. 49 (emphasis added)].
BHS Corrugated argues that, while Section 19(C) might be interpreted to permit the
Company or the Union to pursue a claim via the grievance procedure, Step 2 contemplates
that the dispute will be brought to the Plant Manager or designated representative who will
issue a written decision if the matter is not resolved. As plaintiff’s response brief states, “[i]t
makes no sense to suggest that a Company representative would issue a written decision
based on the Company’s own grievance” [Doc. 15 at p. 6]. Going a step further, BHS
Corrugated argues that, because Section 19(D) provides that a grievance will be considered
justified if the Company fails to issue a written decision, the literal language of the CBA
would allow the Company to always prevail by submitting a grievance, meeting with the
Union representatives, not reaching an agreement, and then not issuing a written decision
[Id.]. Thus, BHS Corrugated contends that the CBA is ambiguous with respect to whether
the parties agreed to arbitrate violations of the CBA alleged by the Company and therefore
it cannot be compelled to arbitrate such claims.
In reply, Local 812 notes the CBA’s broad definition of grievance, that a
“complaining or aggrieved party” may initiate the grievance process, and that “either party”
may request binding arbitration. Regarding the Company’s argument as to the language of
Step 2, Local 812 suggests that the most reasonable interpretation is that it applies when the

9

union or employee bring a grievance, not that only the union or employee is allowed to bring
a grievance [Doc. 16 at pp. 2–3].
Thus, as outlined above, the parties do not dispute that they have a disagreement as
to an issue of contract interpretation, i.e., the meaning of “Rutledge, Tennessee and vicinity,”
but they do dispute whether that disagreement is subject to the CBA’s grievance and
arbitration procedures. The Court’s function in such matters is “confined to ascertaining
whether the party seeking arbitration is making a claim which on its face is governed by the
contract.” United Steelworkers v. Am. Mfg. Co., 363 U.S. 564, 568 (1960); Paper, Allied
Indus., Chem. & Energy Workers Int’l Union v. Air Prods. & Chems., Inc., 300 F.3d 667,
677 (6th Cir. 2002). “[T]he judicial inquiry . . . must be strictly confined to whether the
reluctant party did agree to arbitrate the grievance . . . . An order to arbitrate the particular
grievance should not be denied unless it may be said with positive assurance that the
arbitration clause is not susceptible of an interpretation that covers the asserted dispute.”
United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960).
Further, “only the most forceful evidence of a purpose to exclude the claim from arbitration
can prevail.” Id. at 585.
Having carefully considered the parties’ positions and the CBA, the Court finds that
the parties’ dispute is subject to the grievance and arbitration procedure to which they have
agreed. The Court notes that the CBA broadly defines “grievance or dispute” as “an alleged
violation of any Section” or subsection of the agreement [Doc. 6-1 at p. 43 (emphasis
added)]. Furthermore, the grievance procedure plainly contemplates the possibility that a
10

grievance may be initiated by either the Company or the Union: “Should a grievance or
dispute arise between the Company and Union in connection with the . . . interpretation . .
. of any provision of this Agreement,” “the complaining or aggrieved party shall serve
notice,” and “grievances between the Company and the Union shall be submitted in Step 2”
[Id.]. There is no language limiting the initiation of a grievance to only the Union or an
employee. While BHS Corrugated correctly notes that Step 2 of the grievance procedure
only addresses the Company’s response to a grievance by the Union or an employee, this
omission does not rise to the level of “forceful evidence” of an intent to exclude grievances
by the Company. The Court cannot ignore the plain language of the rest of Section 19: any
dispute regarding any provision of the CBA may be the subject of a grievance by either party.
Further, the parties agreed that “[a]ny grievance or dispute between the Company and the
Union . . . shall . . . be submitted to arbitration” [Id. at p. 46]. Again, the arbitration provision
does not limit the types of grievances that may be submitted to arbitration nor does it limit
which party may submit a dispute to arbitration. Accordingly, the parties’ dispute as to the
meaning of “Rutledge, Tennessee and vicinity” is a dispute as to the interpretation and
application of the Agreement to the Company’s proposed facility in Knoxville and is subject
to the grievance and arbitration procedures outlined in the parties’ CBA. BHS Corrugated’s
failure to first exhaust its contractual remedies over this dispute is a bar to litigation.
Chapman, 670 F.3d at 681. The defendant’s motion to dismiss [Doc. 10] will be granted.

11

In light of the Court’s ruling on the first issue, the Court need not resolve the
alternative issue, whether the case raises representational issues within the exclusive
jurisdiction of the NLRB.
III.

Conclusion
For the reasons set forth herein, the Court finds that the parties’ dispute is subject to

the mandatory grievance and arbitration provisions of their CBA. The plaintiff’s failure to
exhaust their contractual remedies is fatal to their claim. The defendant’s motion to dismiss
[Doc. 10] pursuant to Fed. R. Civ. P. 12(b)(6) will be GRANTED and this case will be
DISMISSED. An appropriate order will be entered.
ORDER ACCORDINGLY.

s/ Thomas A. Varlan
CHIEF UNITED STATES DISTRICT JUDGE

12