Carpenters Local Union 2832 et al v. Eggers Industries Inc

Filing 35

ORDER granting 6 Motion to Compel, signed by Judge William C. Griesbach on 07/15/2011. The Unions motion to compel arbitration is granted, and the Clerk is directed to enter judgment in favor of the Unions directing Eggers to submit to arbitration the grievances concerning the increased premiums for health insurance. See Decision for full detail. (cc: all counsel) (Griesbach, William)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
CARPENTERS LOCAL UNION 2832,
CARPENTERS LOCAL UNION 1349,
Plaintiffs,
v.

Case No. 11-C-0252

EGGERS INDUSTRIES INC.,
Defendant.

DECISION AND ORDER

This is an action to compel arbitration under separate collective bargaining agreements
between Eggers Industries (“Eggers”) and the two unions representing employees at Eggers’ two
separate plants. The Unions filed a grievance challenging the increase in the employee share of the
premium that its members were required to pay for health insurance coverage under the Company’s
self-funded Health and Disability Benefits Plan. When the initial steps in the grievance process failed
to resolve the matter to their satisfaction, the Unions requested arbitration. Eggers initially offered
to proceed to a bifurcated arbitration, but insisted that the grievance was not procedurally or
substantively arbitrable and indicated an intent to reserve its right to have the issues decided de novo
by a federal court. Viewing Eggers’ reservation of rights as a refusal to arbitrate, the Unions
commenced this action to compel arbitration pursuant to the United States Arbitration Act, 9 U.S.C.
§ 1, et seq., and § 301 of the Labor-Management Relations Act of 1947, as amended, 29 U.S.C. § 185.
Although it initially denied that its reservation of rights amounted to a refusal to arbitrate, Eggers now
takes the position that it has no duty to proceed to arbitration since the matter in dispute is not

arbitrable. The issue has been fully briefed and argued, and is ripe for decision. For the reasons that
follow, the Unions motion will be granted.

BACKGROUND
Eggers is a manufacturer of architectural wood products for the commercial construction
industry. It operates two plants in Wisconsin: one plant in Neenah and the other in Two Rivers.
Eggers’ Neenah employees are represented by Local 2832, and its Two Rivers employees are
represented by Local 1349.
Eggers offers health insurance to its union and non-union employees and their families under
a self-insured plan (“the Plan”) covered by the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1001, et seq. Eggers is the Plan Sponsor, Administrator, and named Fiduciary
for the Plan. Eggers retains the services of a third party benefits administrator to process claims and
handle other duties for the Plan. The employer assumes sole responsibility for funding the Plan
benefits out of general assets. Employees help cover some of the costs of covered benefits, however,
through regular deductions from the employees’ paychecks, deductibles, co-pays and Plan
Participation amounts as described in the Schedule of Benefits.

“All claim payments and

reimbursements are paid out of the general assets of the employer and there is no separate fund that
is used to pay promised benefits.” (Eggers Industries Inc Group Health Benefit Plan Summary of
Benefit Plan Description, Decl. of Ann Duebner, Ex. 2, pg. 1.)
Under the respective collective bargaining agreements with the Unions representing employees
at its Neenah and Two Rivers plants, Eggers agreed to pay a percentage of the monthly premium for
the health plan for each employee. The percentage the Company promised to pay varied depending
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on the coverage, and corresponding deductible, the employee selected. Article 21 of the Local 2832
CBA reads as follows:
Effective May 15, 2008, the Company will pay 70% of the monthly premium of the
(Gold) $250/$750 deductible plan, 80% of the monthly premium of the (Silver)
$500/$750 deductible plan and 90% of the monthly premium for the (Bronze)
$1,000/$2,000 deductible plan. Each January 1st thereafter, new rates may be
established based on increases or decreases in the plans’ cost.
(Coenen Dcl. Exh. A, Article 21.1 (b).) The relevant portion of the Local 1349 CBA, Article XIV,
Section 3, reads as follows:
The Company agrees to pay 80% of the premium for a Red Plan and 90% of the
premium for a White Plan.
(Coenen Dcl. Exh. F, Article XIV Section 3.)
Each of the CBAs also contains a grievance procedure for resolving disputes that arise
thereunder culminating in arbitration. In its CBA with Local 2832, Eggers agreed to arbitrate “any
dispute or grievance involving the interpretation or application of this agreement” that was not
resolved through the initial steps of the procedure. (Coenen Decl., Ex. A, at 32.) The Arbitration
Clause in Eggers’ agreement with Local 1349 appears more narrow. It provides for arbitration
covering wages (as defined in the agreement), hours, working conditions and seniority. (Coenen
Decl., Ex. F, at 7.)
In early 2011, Eggers announced increases in the rates for the Health and Disability Plan at its
two plants. The Unions filed grievances alleging that the increases were in violation of the provisions
of the CBAs governing the employer share of the premium for health coverage. Local 2832 alleged
that the new rates were in violation of Article 21 of the CBA, and Local 1349 alleged that employees
are overpaying for their healthcare coverage in violation of Article XIV. (Coenen Decl., Exs. H and

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J.) The Company denied the grievances on the grounds that they were untimely, and that setting the
premium for health insurance was a management function and thus not a valid subject for a grievance.
(Coenen Decl., Ex. I.) The Unions thereupon requested arbitration, and when Eggers insisted on
reserving its right to judicial review of the issue of whether the grievance was arbitrable, the Unions
commenced this action.

ANALYSIS
The Supreme Court made clear in the Steelworkers Trilogy that arbitration is the preferred
method of resolving labor disputes. See Steelworkers v. American Mfg. Co., 363 U.S. 564 (1960);
Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960); Steelworkers v. Enterprise
Wheel & Car Corp., 363 U.S. 593 (1960). In furtherance of this policy, a duty to arbitrate is imposed
whenever a collective bargaining agreement “can be reasonably interpreted to impose such a duty.”
Graphic Communications Union v. Chicago Tribune Company, 794 F.2d 1222, 1225 (7th Cir. 1986).
In other words, there is a presumption in favor of arbitrability such that “[a]n 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.” Warrior &
Gulf Navigation Co., 363 U.S. at 582–83.
On the other hand, the duty to arbitrate is purely a creation of contract; courts are not
authorized to compel a party to arbitrate in the absence of an agreement to do so. Gateway Coal Co.
v. United Mine Workers, 414 U.S. 368, 374 (1974). “[A]rbitrators derive their authority to resolve
disputes only because the parties have agreed in advance to submit such grievances to arbitration.”
AT&T Technologies, Inc. v. Communication Workers of America, 475 U.S. 643, 648-49 (1986). The
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question of arbitrability – whether a collective-bargaining agreement creates a duty for the parties to
arbitrate the particular grievance – is undeniably an issue for judicial determination. “Unless the
parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to
arbitrate is to be decided by the court, not the arbitrator.” Warrior & Gulf, 363 U.S. at 582-583.
The language of the arbitration clauses of the two CBAs must form the basis of the Court’s
analysis. Karl Schmidt Unisia, Inc. v. International Union, United Auto., Aerospace, 628 F.3d 909,
913 (7th Cir. 2010). The language of Eggers’ CBA with Local 2832 is broad. Article 21 of the CBA
defines a grievance as “any difference between the Company and an employee covered by this
agreement as to any matter involving interpretation or application of any of the provisions of this
agreement.” (Coenen Decl., Ex. A at 31.) The Local 2832 CBA further provides that any dispute or
grievance that is not resolved in the first two steps of the grievance process shall be submitted to
arbitration. (Id. Art. 20.2.) This language is sufficiently broad to give rise to a presumption in favor
of arbitrability.
Eggers’ CBA with Local 1349 is ambiguous and less clear. Article II to the Local 1349 CBA
states:
It is mutually agreed that this agreement contains a provision for the complete
disposition of disputes which may arise between the parties, including arbitration, and
that therefore, during the term of this agreement the union shall not call and employees
shall not participate in any strike (including but not limited to sympathy strikes),
slowdowns, stay-ins, work stoppage, walkouts, sit-down strikes, and the Company
shall not impose a lock-out. In case either party violates this section of the contract,
the other party shall have the option of declaring this contract null and void . . . ..
(Coenen, Ex. F.) This language suggests that any disputes between the parties over the application
or interpretation of the CBA are to be resolved by arbitration. It is for that reason that both of the
parties are foregoing more costly measures such as strikes and lockouts. See International Broth. of
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Elec. Workers, Local 21 v. Illinois Bell Telephone, 491 F.3d 685, 689 (7th Cir. 2007) (“Arbitration
provisions are generally considered reciprocity for no-strike provisions.”).
The Local 1349 CBA provides that “[w]hen any dispute or misunderstanding arises as to
wages, or wage standard, hours, working conditions, lay-offs, transfers and promotions, rehiring or
discharge of individual employees affected by this agreement, such dispute or misunderstanding will
be considered a grievance . . . .” (Coenen Decl. Ex. F. at 6.) The CBA goes on to say that if the
grievance is not resolved at one of the earlier steps outlined in the grievance procedure, “the Union
or the Company may request that the matter be submitted to arbitration per Article IV, except as may
be noted elsewhere in this Agreement.” (Id.) Article IV sets forth the procedure for selecting an
arbitrator “[u]pon written demand of either the Company or the Union for arbitration covering wages
(by wages is meant only individual disputes or complaints relative to hourly job evaluations as set
forth in Article XIII Section 2 (b) and not other increases), hours, working conditions and seniority.”
(Id., Ex. F. at 7.) While the Company’s contribution for employee health care is not listed as one of
the items for which arbitration can be requested, nowhere in the CBA is there any language excluding
that item from the grievance process or arbitration.
In Printing Specialties and Paper Products Union Local 680 v. Nabisco Brands the Seventh
Circuit found a nearly identical arbitration clause that read, “any grievance or misunderstanding
involving wages, hours or working conditions” to be broad because it contained no language
indicating the list was exclusive. 833 F.2d 102, 104 (7th Cir. 1987). Even if it is not facially broad,
the arbitration clause is at least ambiguous concerning its coverage, and where the terms of an
arbitration clause are ambiguous, doubts must be resolved in favor of allowing arbitration. See
Granite Rock Co. v. Int’l Brotherhood of Teamsters, 130 S. Ct. 2847, 2857 (2010) (“The first principle
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is that where, as here, parties concede that they have agreed to arbitrate some matters pursuant to an
arbitration clause, the law's permissive policies in respect to arbitration counsel that any doubts
concerning the scope of arbitral issues should be resolved in favor of arbitration.”) (internal quotes
omitted).
Eggers argues, however, that any presumption of arbitrability that would otherwise apply is
overcome in this case. The presumption of arbitration can only be overcome in one of two ways: by
showing an express provision excluding the particular grievance from arbitration or by presenting “the
most forceful” evidence of a purpose to exclude a certain type of claim from arbitration. Warrior &
Gulf, 363 U.S. at 584-85. Here, Eggers has failed to make either showing.
No express provision excludes arbitration of the particular issue for which the Court is
compelling arbitration. Eggers states that it has reserved all management rights not listed in the CBAs.
But such a general reservation does not expressly exclude from arbitration a dispute over whether the
Company is paying the stated percentage of the predetermined premium for the coverage.
Eggers also attempts to overcome the presumption of arbitrability by putting forth purported
“most forceful evidence” that the parties meant to exclude the grievance at issue from arbitration.
Warrior & Gulf, 363 U.S. at 584-85. Eggers suggests that its course of dealing with the Unions
demonstrates the parties’ intent not to arbitrate disputes over health care costs. Eggers notes the lack
of grievances for this issue over the past thirty years. It also points out that the parties have disputed
the total amount of the premiums in the past without arbitration. Even if the Court were to consider
the prior dealings relevant, they do not rise to the level of “most forceful evidence” of an intent
between the parties to not arbitrate this issue. The Seventh Circuit has held that “bargaining history
may properly be considered.” Oil, Chem. & Atomic Workers Int'l Union, Local 7-1 v. Amoco Oil Co.,
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883 F.2d 581, 587 (7th Cir. 1989). In Amoco, the Court determined that 30 years of failed attempts
to negotiate a particular phrase was most forceful evidence that the parties had not agreed to arbitrate
an issue. That is not the case with Eggers and the Unions – their dispute is more recent. Also, unlike
the union in Amoco, the Unions here are not attempting to obtain through arbitration something they
tried but failed to secure through collective bargaining negotiations.
Eggers relies on a number of cases regarding its “most forceful evidence” argument. First, it
avers that Printing Specialties is on point. But the CBA at issue in Nabisco was devoid of any specific
plan term; the CBA simply indicated that Nabisco would maintain a plan. The disputed terms were
in a completely separate agreement. Id. In contrast, Eggers’ CBAs do contain specific agreements
between the company and the Unions about how the cost of the premium is to be apportioned – indeed
the CBAs even lay out the specific percentages. Unlike the CBAs at issue in Nabisco, the CBAs in
the instant case do contain terms at issue. If anything, the analysis in Nabisco supports arbitration
where, as here, the CBAs contain specific provisions regarding percentage split of health care costs.
The situation in Local 232, Allied Industrial Workers v. Briggs & Stratton Corp., 837 F.2d 782
(7th Cir. 1988), is similarly distinguishable. Briggs & Stratton held that a CBA with a passing
reference to an ERISA plan does not incorporate the arbitration process of the CBA into the SPD.
Here, in contrast, the disputed terms are directly located in the CBAs between Eggers and the Unions.
As such, Briggs & Stratton is not controlling. Key to both of these distinguished cases is the lack of
explicit terms or promises in the CBA regarding the disputed facets of the program in question. In the
case before the Court, the CBA clearly sets forth the disputed terms. The CBAs state that Eggers is
to pay a specific percentage of the premium charged for the coverage selected by the employee. It is

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the parties’ dispute over the interpretation and application of this language that the arbitrator is asked
to decide.
Eggers contends that in effect the Unions’ grievances amount to a challenge to the Plan
Administrator’s determination of the 2011 Plan Premium for their members’ health coverage. For the
Court to grant the Unions’ motion, Eggers contends, “it would have to conclude that the parties agreed
in their CBAs to allow the arbitrator to: (1) assume the role of an ERISA-fiduciary; (2) substitute his
or her judgment for that of the Plan Administrator; and (3) literally determine what the 2011 Plan
Premium should have been.” (Br. In Opp. at 2.) The parties never agreed to grant the arbitrator such
authority, Eggers argues. Rather, the right and ERISA-governed fiduciary duty to determine the
premium rests with, and is expressly and exclusively reserved to, the Plan Administrator alone.
Because it never agreed to arbitrate the amount of the Plan Premium, Eggers argues that the Unions’
motion to compel arbitration should be denied and its action dismissed.
But in holding that the dispute between the parties is arbitrable, this court is reaching no
conclusion about what the arbitrator will do. To go further would involve the Court in the merits of
the dispute, something that is expressly forbidden once a court determines that the dispute falls within
the arbitration clause of the CBA. AT & T Techs, 475 U.S. at 650. What the Court has decided is that
the parties agreed that their dispute over the meaning and application of the provisions of their CBAs
setting out the employer share of the premium is among those issues that would be decided by an
arbitrator if they could reach agreement themselves. In Karl Schmidt Unisia, Inc. v. International
Union, United Auto., Aerospace, the Seventh Circuit held that where the parties have negotiated the
benefit language of an ERISA Plan at issue directly into the CBA, disputes over the meaning and
application of that language are arbitrable. 628 F.3d at 615. Given the self-funded character of the
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Plan and the fact that all claim payments and reimbursements are paid out of Eggers’ general assets
and there is no separate fund that is used to pay promised benefits, it is not even clear on this record
what the term “premium” means. The meaning of the term and whether Eggers is paying its promised
share are the subject of the dispute. Nothing in the CBAs indicates that disputes over these provisions
are outside the scope of the arbitration clauses.
Several issues remain and require only brief mention. Eggers’ contention that the Unions’
grievances are untimely under the CBAs is likewise subject to arbitration. See Howsam v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (“Thus ‘procedural’ questions which grow out of the
dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to
decide.”) (internal quotes omitted). Eggers request for a jury trial under the Federal Arbitration Act
will be denied because “[t]he question whether the parties have submitted a particular dispute to
arbitration, i.e., the ‘question of arbitrability,’ is ‘an issue for judicial determination [u]nless the parties
clearly and unmistakably provide otherwise.’” Howsam, 537 U.S. at 83.
Finally, the Unions’ request for attorneys fees will also be denied. “Normally when no statute
authorizes the award of attorney's fees . . . the prevailing party is entitled to attorney's fees only if his
opponent's . . . defense was frivolous, which our cases define to mean brought in bad faith – brought
to harass rather than to win.” Miller Brewing Co. v. Brewery Workers Local Union No. 9, 739 F.2d
1159, 1167 (7th Cir. 1984). This initial standard has evolved to an objectively reasonable test where
a finding of bad faith is not essential. Local 879, Allied Indus. Workers of Am., v. Chrysler Marine
Corp., 819 F.2d 786, 791 (7th Cir. 1987); see Brown v. National Bd. of Medical Examiners, 800 F.2d
168, 171 (7th Cir.1986). Here attorneys’ fees are not appropriate because Eggers’ position is not
objectively unreasonable and does not appear to be advanced for any improper purpose.
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Accordingly, and for the reasons set forth above, Eggers has failed to overcome the
presumption in favor or arbitration. The Unions’ motion to compel arbitration is granted, and the
Clerk is directed to enter judgment in favor of the Unions directing Eggers to submit to arbitration the
grievances concerning the increased premiums for health insurance.
Dated this

15th

day of July, 2011.

s/ William C. Griesbach
William C. Griesbach
United States District Judge

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