Kroger Limited Partnership I (KLPI) is appealing a district court's decision that granted a motion for judgment on the pleadings in favor of United Food and Commercial Workers, Local 1995 (the Union). This case involves an arbitration dispute concerning a collective bargaining agreement (CBA) between KLPI and the Union, which represents all full-time and part-time employees at KLPI’s grocery stores in the Nashville Division, including Nashville and the greater Knoxville area.
The Union has historically represented employees across various retail formats operated by KLPI. However, tensions arose when the Kroger Company opened the Knoxville Local Fulfillment Center, a warehouse that processes orders for Walgreens pharmacies. The Union filed a grievance asserting that employees at this facility—termed "pickers" and "drivers"—were performing work akin to that of unionized retail employees and therefore should receive union benefits. KLPI contended that the fulfillment center operates independently as part of Kroger's supply chain and is not covered by the CBA, leading to its refusal to address the Union's grievance.
The appellate court, led by Circuit Judge Siler, upheld the district court's ruling, affirming the decision in favor of the Union. Judge Larsen provided a separate dissenting opinion.
The Union initiated arbitration proceedings based on Article VII. D of their Collective Bargaining Agreement (CBA), which addresses grievances related to the interpretation or application of the CBA. KLPI declined to engage in arbitration, prompting the Union to file a lawsuit against The Kroger Company to compel arbitration and subsequently add KLPI as a defendant in an amended complaint. Both The Kroger Company and KLPI responded to the lawsuit. The Union then moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The district court found the Union's claim arbitrable under the CBA but denied the motion regarding The Kroger Company, as it had denied being a party to the agreement. However, the court granted the motion against KLPI and ordered arbitration, leading KLPI to appeal this partial judgment.
The review of a Rule 12(c) motion is conducted de novo, applying the same standards as a Rule 12(b)(6) motion, with the distinction that when the plaintiff moves for judgment, the court assesses the complaint by disregarding allegations denied in the defendant's answer. Well-pleaded allegations in the answer are accepted as true, while those in the complaint are accepted only to the extent they do not conflict with the answer. Legal conclusions and unwarranted inferences are not accepted blindly. The court can only grant the motion if the plaintiff is clearly entitled to judgment after considering the pleadings and any referenced exhibits.
To evaluate the Union’s arbitration claim, the court follows a specific framework to determine both the existence of a valid arbitration agreement and whether the grievance falls within its scope.
Article VII. D of the Collective Bargaining Agreement (CBA) contains a mandatory arbitration clause applicable to grievances regarding the interpretation or application of the CBA. While the district court expressed concerns about the mandatory nature of arbitration, this specific issue was not raised on appeal. The primary focus is on whether the Union's grievance fits within the arbitration agreement's scope. The grievance asserts that KLPI must acknowledge the Union as the representative for employees at the Knoxville Local Fulfillment Center, claiming that this center is part of the Kroger Company under Article 3. A of the CBA, which designates the Union as the exclusive bargaining agent for all employees there.
The grievance is deemed to fall within the arbitration agreement's scope, as it pertains to the interpretation of Article 3. A. Consequently, a presumption of arbitrability applies, which favors arbitration unless it can be definitively determined that the arbitration clause does not cover the matter. KLPI must demonstrate either an express exclusion of the grievance from arbitration or compelling evidence of intent to exclude it; however, KLPI fails to provide either.
KLPI argues that three provisions in the CBA exclude the grievance from arbitration. It claims that Article 3. A designates the Union as the representative only for the grocery stores of The Kroger Company, not for the Knoxville Local Fulfillment Center, which is under the Kroger Supply Chain Division. The Union counters this by asserting that if employees are under the Supply Chain Division, KLPI violated Article 3. A by opening a warehouse instead of a grocery store. KLPI also references a provision limiting "bargaining unit work" to retail establishments, asserting it excludes the grievance since the Knoxville Local Fulfillment Center is a warehouse, not a retail setting.
KLPI argues that a provision in the collective bargaining agreement (CBA) restricts product stocking to union members and implies that employees within the Kroger distribution system, including warehouse employees, are not covered by the CBA. Consequently, KLPI contends that the Union's grievance should be excluded from arbitration. The Union counters that the Fulfillment Center operates similarly to a Kroger store by receiving and selling Kroger products, thereby falling under the CBA's purview. KLPI's cited provisions lack clear language that would exclude the Union's grievance from arbitration. The arbitration clause remains open to interpretations that could encompass the dispute, necessitating resolution in favor of arbitration. KLPI asserts that the provisions it references actually address the merits of the grievance rather than the arbitration obligation. It compares its situation to a previous case where a grievance concerning a supervisor was not arbitrable due to explicit CBA exclusions, noting that no such exclusion exists for the Union's grievance. KLPI also claims to have presented strong evidence suggesting the grievance should be excluded from arbitration, referencing a Third Circuit case where a union's claim related to store access was denied arbitration due to lack of a legitimate CBA interpretation question. However, the document argues that a detailed interpretation of the provisions should have been left to the arbitrator, as per the parties' agreement.
The court upheld the decision to grant the Union’s motion for arbitration, rejecting KLPI's argument that discovery was necessary to determine the applicability of the Collective Bargaining Agreement (CBA) to the Knoxville Local Fulfillment Center. KLPI's claims, primarily articulated by its attorneys, asserted that the CBA was inapplicable because employees at the fulfillment center were employed by Vitacost.com and that the labor structure of Kroger's Supply Chain Division differs entirely from that of KLPI’s grocery stores. However, these assertions were not included in KLPI's initial pleadings, which the court noted must be the focus when evaluating a motion for judgment on the pleadings. The court maintained that the arbitration clause in the CBA should be enforced unless it can be definitively shown that the clause does not cover the dispute. Despite dissenting opinions regarding the interpretation of the term "store" in the CBA and its implications for arbitrability, the majority concluded that KLPI's allegations did not negate the Union's grievance, which falls within the scope of the arbitration agreement. The court emphasized that its role is limited to determining whether the claim presented for arbitration is governed by the CBA, reaffirming the presumption of arbitrability in this context.
The Union alleges that KLPI violated Article 3. A of the Collective Bargaining Agreement (CBA) by opening a warehouse through the Supply Chain Division instead of a grocery store, implying that KLPI was required to employ warehouse workers. The grievance centers on the interpretation of the CBA, asserting that the warehouse should be classified as a "store." While the dissent suggests that The Kroger Company, not KLPI, is responsible for this classification, an arbitrator must still interpret the CBA regarding the Union's grievance, which is considered arbitrable despite being potentially frivolous.
The parties agreed to arbitrate the issue, and the court recognizes concurrent jurisdiction over some disputes with the Board. However, KLPI contends that the Union's claim is "primarily representational," which would negate concurrent jurisdiction. A claim is classified as primarily representational if the Board has already addressed it or if it forces an initial representation decision under the National Labor Relations Act (NLRA). Since the Board has not intervened in this grievance, the court must determine if resolving the claim necessitates such a decision.
KLPI argues that an arbitrator must establish whether the Union represents warehouse employees under the NLRA and whether these employees can be included in the same bargaining unit as those at grocery stores. Conversely, the Union frames its grievance as a breach-of-contract claim under section 301(a) of the Labor Management Relations Act (LMRA), focusing solely on whether the CBA applies to warehouse employees. If the Union's characterization is accurate, the court may retain jurisdiction, as it holds concurrent authority over matters primarily involving contract interpretation, even if they touch on representational issues. The Union cites a precedent case, Air Products Chemicals, Inc., to support its contractual claim and the court's jurisdiction.
The Union filed a grievance to assert employees' seniority rights at a newly opened facility, which the employer dismissed. The Union then sought to compel arbitration, framing the claim as contractual based on a collective bargaining agreement (CBA) that includes a “new-store” clause, ensuring recognition of the Union as the bargaining agent for employees at current and future stores. The dispute differs from a prior case, Air Products, Chemicals, Inc., where the sole issue was whether the CBA covered employees at a new facility, without contesting the Union's representation. In the current case, the parties dispute both the applicability of the CBA to the Knoxville Local Fulfillment Center and the Union's representation of its employees there.
The Union's grievance hinges on the interpretation of the CBA’s “new-store” clause, which affords rights to represent employees in future locations. The Union asserts that its representation extends to the Knoxville facility under the CBA's provision for the Kroger Company stores. The court maintains jurisdiction over the arbitration claim as it relates primarily to contract interpretation regarding the CBA’s provisions. In contrast to a previous case, DHSC, LLC v. California Nurses Ass’n, where the arbitration claim involved a representational issue due to a lack of agreement on CBA terms, the current situation does not raise such representational questions since KLPI acknowledges the obligation to arbitrate grievances under the CBA, albeit disputing the specific grievance presented. The court also distinguishes this case from International Brotherhood of Boilermakers v. Olympic Plating Industries, where the issue involved union disaffiliation and recognition by the employer, which is not relevant here.
The claim was deemed "primarily representational," requiring the court to identify the authorized exclusive collective bargaining representative between two unions. Unlike previous cases, the arbitrator does not need to assess if the Union’s bargaining unit includes employees at the Knoxville Local Fulfillment Center since this has been answered affirmatively via a “new-store” clause in the collective bargaining agreement (CBA). Parties in a collective bargaining arrangement can define the scope of their bargaining unit by mutual agreement, allowing them to resolve representational issues contractually rather than through court intervention.
The “new-store” clause indicates that the employer waives its right to a Board-ordered election, meaning that while alternative methods of proving employee support for the union are permitted, the employees in the new store must still elect the Union. The Union's grievance asserted that the employer failed to engage with it before opening the new facility and did not introduce the employees to a Union representative, arguing that the Knoxville Local Fulfillment Center qualifies as a “new store” under the CBA.
Although the employer acknowledges the Union's representation of employees at new stores, it is contended that they violated established practices. The Union seeks arbitration to prove its right to access new stores to solicit membership based on past customs. If there remains uncertainty about employee representation during arbitration, the National Labor Relations Board (NLRB) can be involved at any time. The enforcement of the arbitration clause does not diminish the NLRB's jurisdiction over the dispute, leaving any potential conflict between the arbitrator’s decision and the Board's authority as merely speculative.
The district court's conclusion that the claim is not preempted by the NLRB is affirmed, along with the order compelling the employer to arbitrate the Union’s grievance. In dissent, Judge Larsen argues that the majority’s conclusion necessitates assuming KLPI's claims are valid, which undermines the Union's motion for judgment on the pleadings.
The dissenting opinion emphasizes that, while the court has jurisdiction over the case, the district court's decision to grant the Union's motion for judgment on the pleadings should be reversed. The core issue is the Union's grievance regarding KLPI's refusal to include employees from the Knoxville Local Fulfillment Center under the Nashville Division’s collective bargaining agreement (CBA). KLPI asserts it has no employment relationship with Fulfillment Center employees, claiming they are employed by Kroger's supply chain division. Accepting KLPI's factual assertions as true, the dissent argues that the CBA does not apply to Fulfillment Center employees, as the CBA specifically covers only KLPI employees in its stores. Consequently, the Union cannot compel KLPI to arbitrate the grievance. The dissent critiques the majority's handling of KLPI's denials, highlighting that mere denials in the pleadings are sufficient to contest the Union's claims under Federal Rule of Civil Procedure 12(c). Therefore, the dissent concludes that the arbitration provision of the CBA is not applicable, as it does not cover the unrelated Fulfillment Center employees, nor does it extend to other entities like a newly built Target or a Kroger in a different state.
The majority opinion indicates that the Union's assertion of the Fulfillment Center workers as KLPI employees is false, supported by KLPI's explanation in a letter attached to the Union’s amended complaint stating no relationship exists. Consequently, the judgment on the pleadings favoring the Union is deemed improper. The presumption of arbitrability does not alter this conclusion; rather, it applies after establishing a contract to arbitrate. The interplay between the Rule 12(c) standards, which favor KLPI in this case, and the presumption, which favors the Union, complicates the arbitration analysis.
Four principles govern arbitration in collective bargaining agreements: (1) arbitration is contractual, requiring mutual agreement to arbitrate; (2) arbitrability is determined by courts unless clearly delegated to arbitrators; (3) courts should not assess the merits of underlying claims, even if they appear frivolous; and (4) a presumption of arbitrability exists unless it can be clearly shown that the arbitration clause does not cover the dispute. This presumption is particularly strong with broad arbitration clauses. The conflict arises when these principles intersect, necessitating careful consideration to determine the appropriate application of arbitration provisions.
The arbitrability of the dispute hinges on whether the Fulfillment Center employs KLPI employees; if so, arbitration is mandatory and the Union likely prevails on the merits. Conversely, if there is no connection to KLPI, arbitration is not required and the Union would likely lose. The Supreme Court's ruling in Litton Financial Printing Division v. National Labor Relations Board emphasizes that courts must interpret the underlying agreement to resolve questions of arbitrability, even if this interpretation inadvertently addresses the merits of the case. In Litton, the Court determined that disputes arising from actions occurring after the expiration of a collective-bargaining agreement could still be arbitrable if they related to the agreement. Despite arguments that such merits should be resolved by an arbitrator, the Court maintained that the determination of arbitrability is a judicial responsibility. Furthermore, the presumption of arbitrability is acknowledged, particularly with broad arbitration clauses, but the court still must ascertain whether the parties agreed to arbitrate the specific dispute at hand. Litton thus provides guidance on navigating conflicts between resolving arbitrability questions and abstaining from the merits, permitting courts to interpret agreements as necessary. This principle is consistently supported by case law, as illustrated by a related case involving the International Brotherhood of Electrical Workers, where the court recognized the intertwined nature of merits and arbitrability while applying the Litton framework.
The judicial responsibility to determine arbitrability supersedes the general rule to avoid addressing the merits of a grievance. The court's inquiry hinges on whether an arbitrator could rule in favor of a supervisor without altering the clear terms of the agreement. In a cited case, it was established that an arbitrator could not rule for the plaintiff, as he was not an employee covered by the agreement; hence, the dispute did not arise under the agreement and was not subject to arbitration.
In Communication Workers of America v. Avaya, Inc., the Tenth Circuit assessed whether certain employees were classified as managers, who were excluded from the collective bargaining agreement (CBA). The court emphasized the necessity of determining whether the parties had agreed to submit the dispute to arbitration, even if this consideration involved examining the merits. The court concluded that the designation of "management" was unambiguous and that there was no real dispute regarding the classification of the employees involved, leading to the conclusion that the parties did not consent to arbitrate.
The Seventh Circuit similarly upheld that the obligation to assess arbitrators' jurisdiction takes precedence over avoiding the merits of the dispute. If resolving the arbitrability issue requires addressing the merits, the court is compelled to do so. The Third Circuit case of Rite Aid of Pennsylvania, Inc. v. United Food, Commercial Workers Union, Local 1776 mirrored this case, where despite a broad arbitration provision, the court found no compelling evidence that the parties intended for the dispute regarding newly acquired stores to be arbitrable. Consequently, the CBA did not extend to these new stores, as the union did not represent their employees.
The court determined that the plaintiff's interpretation was insufficiently plausible to warrant arbitration of the dispute. The majority disagreed with Rite Aid's position and found the dissent's argument more compelling, resulting in a divergence from four other circuits and conflicting with prior decisions within the same circuit. Citing United Steelworkers of America, Local No. 1617 v. General Fireproofing Co., the dissent noted that an arbitration provision covering disputes over a collective bargaining agreement (CBA) did not permit sending a grievance to arbitration for a non-employee. The majority distinguished General Fireproofing by claiming that the arbitration clause there explicitly excluded certain grievances, concluding that the current CBA lacks such exclusions. However, the dissent argued that the "Dispute Procedure" section of the CBA only allows arbitration for disputes involving KLPI employees, thus suggesting that the current dispute falls outside arbitration's scope. The dissent emphasized that an arbitrator could not adjudicate the Union's claim without altering the CBA's explicit terms, and that KLPI did not consent to arbitrate this matter, leading the dissent to propose reversing the district court’s decision and remanding for further proceedings.
