Teamsters Local Union No. 89 v. Kroger Co.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0263p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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Plaintiff-Appellee, -

TEAMSTERS LOCAL UNION NO. 89,

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No. 09-5534

v.

,

>

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Defendant-Appellant, -

THE KROGER CO.,

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INTERNATIONAL BROTHERHOOD OF -

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Counterclaim Defendant. -

TEAMSTERS,

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Appeal from the United States District Court

for the Western District of Kentucky at Louisville.

No. 07-00351—Thomas B. Russell, Chief District Judge.

Argued: August 3, 2010

Decided and Filed: August 25, 2010

Before: COLE and McKEAGUE, Circuit Judges; MAYS, District Judge.*

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COUNSEL

ARGUED: Timothy P. Reilly, TAFT STETTINIUS & HOLLISTER LLP, Cincinnati,

Ohio, for Appellant. Frederick Perillo, PREVIANT, GOLDBERG, UELMAN, GRATZ,

MILLER & BRUEGGEMAN, Milwaukee, Wisconsin, for Appellee. ON BRIEF:

Timothy P. Reilly, John B. Nalbandian, Daniel J. Hoying, TAFT STETTINIUS &

HOLLISTER LLP, Cincinnati, Ohio, for Appellant. Frederick Perillo, Nathan D.

Eisenberg, PREVIANT, GOLDBERG, UELMAN, GRATZ, MILLER &

BRUEGGEMAN, Milwaukee, Wisconsin, for Appellee.

*

The Honorable Samuel H. Mays, Jr., United States District Judge for the Western District of

Tennessee, sitting by designation.

1

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 2

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OPINION

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COLE, Circuit Judge. Plaintiff-Appellee Teamsters Local Union No. 89 (“Local

89” or “the Union”) represents employees in a Kentucky warehouse operated by

Defendant-Appellant The Kroger Co. (“Kroger”). The parties negotiated a collective

bargaining agreement governing labor relations at that warehouse. Local 89 filed two

grievances alleging that Kroger violated this agreement by subcontracting out operations

to third parties employing non-Local 89 members. Kroger refused to arbitrate these

grievances, and Local 89 filed suit to compel arbitration. The district court granted

Local 89 summary judgment on its claim to compel arbitration. Kroger appeals that

decision. We AFFIRM the judgment of the district court.

I. BACKGROUND

A. The Parties and the Master Agreement

Local 89 is a local affiliate of the Counterclaim Defendant International

Brotherhood of Teamsters (“IBT”) and represents warehouse and transportation

employees at Kroger’s warehouse facility in Louisville, Kentucky, known as the

Kentucky Distribution Center (“the KDC”). Kroger and the Teamsters Kroger National

Negotiating Committee, which represented Local 89 and five other local IBT affiliates,

negotiated a collective bargaining agreement governing the industrial relations between

the unions and Kroger (“the Master Agreement”), which by its terms is in effect from

September 11, 2005, through September 10, 2011. Pursuant to the Master Agreement,

Kroger and Local 89 also executed a supplemental agreement to govern specific issues

at the KDC (“the Local Supplement”), which runs concurrently with the Master

Agreement.

The Master Agreement specifically addresses arbitration, subcontracting, and

termination of the contract. Article 8 establishes dispute-resolution procedures, which

culminate in binding arbitration. These grievance procedures, including the final step

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 3

of arbitration, cover “any grievance[,] dispute[,] or complaint over the interpretation or

application of the contents of [the Master] Agreement” raised by “any employee.”

(District Court Record Entry (“R.E.”) 65-3, at 15.)

Article 25 of the Master Agreement addresses subcontracting. Under Section

25.1, Kroger has the right to subcontract work assigned to the collective bargaining unit

but is prohibited from subcontracting such work “for the purpose of circumventing the

terms and provisions” of the Master Agreement to an outside company that does not

provide similar wages and conditions of employment. Section 25.3, entitled “Continuity

of Employment,” provides that if Kroger decides to contract out its entire KDC

warehouse or transportation operations, or both, during the term of the agreement, “then

a condition of such subcontract shall be offers of employment to eligible employees (as

defined in Appendix I), by the new employer, provided that the new employer requires

that number or more to perform such services.” (R.E. 65-4 at 4.) Appendix I, which

outlines additional job-security provisions, defines “eligible employees” as “all

employees who have continuously been on a regular seniority list for at least three

(3) years as of December 12, 2005.” (Id. at 12.) This appendix also requires Kroger to

offer comparable employment at the nearest similar facility covered by the Master

Agreement to any eligible employee “who is permanently laid-off before September 11,

2011, as a direct result of [Kroger] transferring, subcontracting or closing all or part of

any distribution center or manufacturing plant operation covered by a Local Supplement

to this Agreement.” (Id.) Appendix I explicitly subjects disputes over its interpretation

and application to the arbitration provisions in the Master Agreement.

Finally, Article 36 of the Master Agreement addresses contract termination.

Section 36.1, entitled “Effective Dates,” states that the agreement “is effective from

September 11, 2005 through September 10, 2011 and year to year thereafter,” unless one

of the parties—through its designated negotiating committee—notifies the other party

of its desire to terminate or modify the agreement in writing at least 120 days before

September 10, 2011. (Id. at 11.) Section 36.2, entitled “Notice to Terminate or

Modify,” requires that if either party wishes to terminate or modify the Local

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 4

Supplement, that party must give the other party notice ninety days prior to September

11, 2011.

B. Kroger Subcontracts to Transervice and Zenith

In October 2006, Kroger announced that it would subcontract out its KDC

warehouse and transportation operations. Kroger contracted with Transervice Logistics

Inc. (“Transervice”) for transportation operations and with Zenith Logistics Inc.

(“Zenith”) for warehouse operations. On February 15, 2007, Kroger transferred the

transportation operations to Transervice, and Transervice hired all of Kroger’s KDC

transportation employees. On February 22, 2007, Kroger transferred the warehouse

operations to Zenith, and Zenith hired all of Kroger’s KDC warehouse employees. Since

that date, Kroger has not directly employed any members of Local 89.

Following Kroger’s October 2006 announcement, Local 89 entered into

negotiations with Transervice, Zenith, and Kroger, respectively. In April 2007, Local

89’s negotiations regarding new collective bargaining agreements with Transervice and

Zenith broke down, and Local 89 struck Transervice and Zenith on April 18 and 19.

Subsequently, Local 89 and Kroger entered into an agreement (“the Letter of

Understanding”), which was to go into effect only if Local 89 entered into ratified labor

agreements with Transervice and Zenith and which, like the Master Agreement, is set

to expire on September 10, 2011. Local 89 subsequently entered into separate collective

bargaining agreements with Transervice and Zenith.

C. The Letter of Understanding

The Letter of Understanding addresses outstanding grievances under the Master

Agreement, the provision of retiree health benefits, and future changes to Kroger’s

subcontracting policies at the KDC. In regards to grievances, Local 89 agreed to

withdraw several outstanding grievances, including ones it had filed alleging that

Kroger’s subcontracting to Transervice and Zenith violated the subcontracting

provisions included in Article 25 of the Master Agreement. Also, Kroger agreed to

make certain pension contributions and pay settlements based on specified past

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 5

grievances. Finally, the parties agreed that “Kroger will meet with Teamsters Local 89

and either resolve any outstanding grievances resulting from their employment with

Kroger or permit the grievance to proceed through the Kroger Master Grievance

Process.” (R.E. 65-12, at 2.) The Letter of Understanding does not address future

grievances explicitly.

Regarding retiree health benefits, Kroger agreed to require any successors to

Transervice and Zenith to provide retiree health coverage to employees (and their

eligible dependants) who retire before September 10, 2011, comparable to the coverage

provided under the Master Agreement. Kroger also “agree[d] to continue the current

practice of providing retiree health care for already retired former employees from the

operations that were transferred.” (Id. at 1.)

Finally, in regards to future changes to Kroger’s KDC subcontracting

arrangements, the Letter of Understanding states:

If between the date of this Agreement and September 10, 2011, Kroger

determines to terminate either of its agreements with Transervice or

Zenith and to retransfer or subcontract the work then being performed in,

at or from the [KDC] including without limitation all inside or driving

work to any third party different from Transervice or Zenith, then Kroger

will require that all terms of this Letter of Understanding and the job

security provisions of the [Transervice and Zenith labor agreements] . . .

shall be a condition of the retransfer or resubcontracting to any third

parties. . . . Such retransfer or resubcontracting shall not take place

absent the assumption of the terms of this Letter of Understanding by

such third parties. If at any time Kroger should decide to discontinue the

subcontracting or transfer of all or any portion of the work subject to this

Agreement and reassume such operations as the employer, Kroger agrees

to directly employ all bargaining unit members then performing the

reassumed work. Such employees shall be covered by the Kroger Master

Agreement bargaining unit. The terms and conditions of their

employment will be governed by the Master Agreement, and the Local

89 Supplement covering such employees.

(Id. at 1-2.)

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 6

D. Grievances Regarding Further Subcontracting

Sometime after the Letter of Understanding was executed, Local 89 discovered

that Kroger was subcontracting out work previously done by Local 89 members to

companies other than Transervice and Zenith, who were not subject to a collective

bargaining agreement. On May 9, 2007, Local 89 filed a formal class-action grievance

alleging that Kroger violated Article 25 of the Master Agreement and a provision

included in a side agreement attached as an addendum to the Local Supplement that

addresses which drivers are given priority when extra deliveries are needed. The

grievance alleges that Kroger is violating these provisions “by subcontracting work to

third party drivers while bargaining unit drivers and mechanics are available.” (R.E. 1-

4.) Kroger responded in a letter dated May 14, 2007, refusing to process the grievance.

The letter stated that, “Kroger and Local 89 no longer have a collective bargaining

relationship or a grievance procedure. Local 89 does not represent any Kroger

employees.” (R.E. 1-5.) Further, because the alleged violations took place after the

transfer of operations to Transervice, Kroger claimed that they “cannot constitute a

violation by Kroger of the Master Agreement or local supplement.” (Id.) On August 24,

2007, Local 89 filed a second class-action grievance, stating that the it had learned that

“Kroger was subcontracting bid runs and wheel runs to a[n] outside carrier that [is] head

hauling loads out of the [KDC] to different stores in the region.” (R.E. 25-1.) Local 89

alleged that this violated the same provisions of the Master Agreement and Local

Supplement. Kroger again responded by letter, dated August 27, 2007, refusing to

process the grievance and stating that “the matters complained about in the August 24,

2007 grievance are not subject to the grievance and arbitration provisions of the Master

Agreement or local supplement.” (R.E. 25-2.)

E. Procedural History

On July 6, 2007, after only the first grievance and response had been sent, Local

89 filed a complaint in district court to compel arbitration under the U.S. Arbitration Act,

9 U.S.C. § 1 et seq., and Section 301 of the Labor Management Relations Act, 29 U.S.C.

§ 185. On August 6, 2007, Kroger filed counterclaims against Local 89 and IBT,

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 7

alleging breach of contract and violation of the secondary boycott law, 29 U.S.C.

§ 158(b)(4)(ii)(B). On September 20, 2007, Local 89 filed an amended complaint

seeking to compel arbitration of both grievances or, in the alternative, award Local 89

damages based on Kroger’s alleged breach of contract.

Cross-motions for summary judgment were filed on all of the claims. The district

court concluded that the Letter of Understanding fell within the scope of the Master

Agreement’s arbitration clause, and therefore compelled arbitration of Local 89’s claims.

Accordingly, the district court declined to analyze Local 89’s alternative argument that

Kroger breached the Letter of Understanding by hiring subcontractors other than

Transervice and Zenith. As for Kroger’s secondary-boycott counterclaims, the court

found that Kroger had put forth sufficient evidence to survive summary judgment as to

Local 89, but granted IBT summary judgment.

Following the district court’s summary-judgment order, Kroger filed a motion

for entry of partial judgment under Federal Rule of Civil Procedure 54(b) on Local 89’s

claims to compel arbitration. On August 13, 2009, the district court granted Kroger’s

motion for entry of partial judgment under Rule 54(b), permitting Kroger to appeal the

arbitration decision without waiting for the secondary-boycott counterclaim against

Local 89 to be resolved. We have jurisdiction over Kroger’s appeal under 28 U.S.C.

§ 1291.

II. ANALYSIS

A. Standard of Review

This Court reviews de novo the district court’s grant of summary judgment.

United Steelworkers of Am. v. Cooper Tire & Rubber Co., 474 F.3d 271, 277 (6th Cir.

2007). “Similarly, we review de novo the district court’s decision to compel arbitration

of a particular dispute.” Id. (citing Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d

306, 311 (6th Cir. 2000)). In this context, “[w]e must determine whether the dispute is

arbitrable, meaning that a valid agreement to arbitrate exists between the parties and that

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 8

the specific dispute falls within the substantive scope of the agreement.” Landis v.

Pinnacle Eye Care, Inc., 537 F.3d 559, 561 (6th Cir. 2008).

B. Arbitrability of Dispute

Kroger argues that the district court erred in compelling arbitration of Local 89’s

grievances because the employer-employee relationship between Kroger and the Local

89 members terminated in February 2007 when it subcontracted its operations to

Transervice and Zenith and, therefore, those employees are not eligible to invoke the

Master Agreement grievance procedures. Kroger also argues that the Letter of

Understanding is evidence that the Master Agreement’s grievance procedures have

ceased to apply and that any grievances arising under the Letter of Understanding fall

outside the scope of the Master Agreement’s arbitration provision. We do not find any

of these arguments to be persuasive and conclude that Kroger has failed to overcome the

presumption in favor of arbitrability.

1. Scope of arbitration clause and presumption of arbitrability

In United Steelworkers of America v. Mead Corp., Fine Paper Division, 21 F.3d

128 (6th Cir. 1994), this Court noted the well-established principles for determining

whether a grievance is subject to compulsory arbitration:

(1) a party cannot be forced to arbitrate any dispute that it has not

obligated itself by contract to submit to arbitration; (2) unless the parties

clearly and unmistakably provide otherwise, whether a collective

bargaining agreement creates a duty for the parties to arbitrate a

particular grievance is an issue for judicial determination; (3) in making

this determination, a court is not to consider the merits of the underlying

claim; and (4) where the agreement contains an arbitration clause, the

court should apply a presumption of arbitrability, resolve any doubts in

favor of arbitration, and should not deny an order to arbitrate “unless it

may be said with positive assurance that the arbitration clause is not

susceptible of an interpretation that covers the asserted dispute.”

Id. at 131 (quoting AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650

(1986)). Elsewhere, this Court has stated that, “[i]n deciding the arbitrability of a

dispute, we begin with the presumption that national labor policy favors arbitration.”

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 9

Cooper, 474 F.3d at 277. “The presumption favoring arbitration is based on a policy

recognizing arbitration as a substitute for industrial strife and on the belief that

arbitrators, more so than the courts, possess the proper experience and expertise to

resolve labor disputes.” Id. at 278 (citation and internal quotation marks omitted).

“Moreover, in cases involving broad arbitration clauses the [Supreme] Court has found

the presumption of arbitrability ‘particularly applicable,’ and only an express provision

excluding a particular grievance from arbitration or ‘the most forceful evidence of a

purpose to exclude the claim from arbitration can prevail.’” Mead, 21 F.3d at 131

(quoting AT&T, 475 U.S. at 650).

The arbitration clause included in the Master Agreement is broad, and therefore

we apply a strong presumption of arbitrability in evaluating Local 89’s grievances.

Section 8.1 applies the grievance procedures, including arbitration if necessary, to “any

grievance[,] dispute[,] or complaint over the interpretation or application of the contents

of this Agreement” raised by “any employee.” (R.E. 65-3, at 15.) This Court has

interpreted similar provisions as “broad” arbitration clauses particularly subject to the

presumption in favor of arbitrability. See Int’l Ass’n of Machinists and Aerospace

Workers v. ISP Chems., Inc., 261 F. App’x 841, 846 (6th Cir. 2008) (finding a clause

providing for arbitration of “any difference of opinion or dispute . . . regarding

interpretation or application of any provision of this Agreement,” but with three specific

issues excepted, to be broad); Cooper, 474 F.3d at 279 (finding a provision providing

for arbitration of “any dispute . . . as to the interpretation or application of this

Agreement” to be broad); Cleveland Elec. Illuminating Co. v. Util. Workers Union of

Am., 440 F.3d 809, 814-15 (6th Cir. 2006) (finding a clause providing for arbitration of

“any disagreement concerning the interpretation or application of this Agreement” to be

broad); Mead, 21 F.3d at 132 (finding a clause providing for arbitration of “grievances

charging that the Company has violated this Agreement and involving the interpretation

of, or compliance with, this Agreement” to be broad). Moreover, there are no issues

excepted from the arbitration provision in the Master Agreement, the Local Supplement,

or the Letter of Understanding. Further, the grievances concern an

issue—subcontracting—specifically addressed in the Master Agreement and the Letter

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 10

of Understanding. Thus, Kroger can prevail in its attempt to exclude these grievances

from arbitration only by presenting “the most forceful evidence of a purpose to exclude

the claim[s] from arbitration.” United Steelworkers of Am. v. Warrior & Gulf

Navigation Co., 363 U.S. 574, 585 (1960).

A comparison to the facts of Warrior & Gulf, one of the Steelworkers Trilogy

cases,1 is instructive. In that case, the employer refused to arbitrate a grievance filed by

the union after union members were laid off because the employer began contracting out

maintenance work previously done by union employees. Id. at 575. The arbitration

clause at issue specifically excluded “matters which are strictly a function of

management.” Id. at 576. The employer argued that its decision to contract out work

was strictly a management function and therefore not subject to arbitration. Id. at 584.

The Supreme Court disagreed, stating that “[c]ontracting out work is the basis of many

grievances; and that type of claim is grist in the mills of the arbitrators.” Id. at 584. The

Court also noted that a specific collective bargaining agreement or a written collateral

agreement could exclude subcontracting claims from the grievance procedures or

arbitration, but because there were no such exclusions, and the employer made no

showing that contracting out fit within the management-function exception, the

grievance was arbitrable. Id. at 584-85; see also id. at 583 (holding that “[d]oubts” about

whether a grievance is covered by an arbitration clause “should be resolved in favor of

coverage”).

Kroger briefly argues that the presumption in favor of arbitrability does not apply

because (1) only the Master Agreement, and not the Letter of Understanding, contains

an arbitration provision and (2) the policy reasons underlying the presumption are not

applicable here because the Local 89 members are no longer Kroger employees. Neither

of these arguments is persuasive. In Cooper, this Court rejected the argument that the

presumption “is not applicable to side agreements that . . . do not contain a separate

1

“In 1960, the Supreme Court issued three decisions designed to end the federal courts’ hostility

to labor-arbitration awards.” Mich. Family Res., Inc. v. Serv. Employees Int’l Union Local 517M, 475 F.3d

746, 750 (6th Cir. 2007) (en banc). These cases later became known as the Steelworkers Trilogy. See id.

at 750-51.

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 11

arbitration clause.” Cooper, 474 F.3d at 278 n.8. This Court found that a dispute that

“involve[d] whether [the main collective bargaining agreement that contained an

arbitration clause] creates a duty for the parties to arbitrate their dispute over the [side

agreement]” was “exactly the type of dispute where the presumption favoring

arbitrability is to be applied; the fact that the grievance is over a side letter is of little

consequence.” Id. Moreover, on their face, the grievances that Local 89 seeks to

arbitrate allege violations of the Master Agreement and Local Supplement, not the Letter

of Understanding. The Cooper employer also argued that the policy reasons

undergirding the presumption in favor of arbitration—that arbitration is a substitute for

industrial strife and that arbitrators have special expertise regarding labor disputes—did

not apply because all of the class members of the lawsuit were non-union member

retirees and survivors. Id. at 281. This Court rejected this argument as well, concluding

that even though none of the class members were current employees, “the Union still has

an interest in resorting to economic weapons in order to maintain the integrity of the

bargaining process.” Id.; see also Cleveland, 440 F.3d at 815-16.

Based on this analysis, we conclude that the Master Agreement’s arbitration

provision is broad, and the presumption in favor of arbitrability is particularly applicable

to Local 89’s grievances. Thus, Kroger must present “the most forceful evidence of a

purpose to exclude the claim from arbitration” to prevail. Warrior & Gulf, 363 U.S. at

585. Based on the following analysis, we further conclude that Kroger has failed to meet

this burden.

2. Effect of subcontracting to Transervice and Zenith

Kroger presents a series of arguments claiming that Local 89’s grievances are not

subject to arbitration because when Kroger subcontracted out all of its KDC operations

in February 2007, the arbitration provision “ceased to apply.” (See, e.g., Kroger Br. 22.)

To the extent that Kroger’s argument is coterminous with an argument that the parties’

agreement to arbitrate has expired or has been terminated, it fails because “where the

dispute turns not on whether the parties ever agreed to arbitrate, but rather whether an

agreement to arbitrate has expired or terminated, the question of termination is for the

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 12

arbitrator.” Int’l Ass’n of Bridge, Structural, and Ornamental Iron Workers, Local

Union No. 44 v. J & N Steel & Erection Co., 8 F. App’x 381, 386 (6th Cir. 2001); cf.

Cooper, 474 F.3d at 280 (“[T]he Supreme Court has recognized that a party’s obligation

to arbitrate does not automatically cease upon termination of the collective bargaining

agreement.” (internal quotation marks omitted)). “The reason an arbitrator, not the

court, should decide whether an arbitration agreement has expired or terminated is

because resolution of the issue involves examining and interpreting the termination

provisions of the agreement.” J & N, 8 F. App’x at 386.

However, Kroger attempts to distinguish its position, stating that it is not arguing

that the Master Agreement (or the arbitration provision) has expired or terminated, but

rather that no Local 89 members can invoke its provisions because they are no longer

employees of Kroger. In making this argument, Kroger relies chiefly upon Fraser v.

Magic Chef-Food Giant Markets, Inc., 324 F.2d 853 (6th Cir. 1963). In that case, the

employer and the union were one year into a three-year collective bargaining agreement

when the employer notified the union that it would be closing the plant where the union

members worked within two months “because of its inability to obtain adequate profits.”

Id. at 855 (internal quotation marks omitted). The covered employees filed suit to obtain

the wages that they would have received had the plant continued to operate throughout

the duration of the contract. Id. This Court refused to read into the contract an

affirmative duty on behalf of the employer to stay in business or to treat the collective

bargaining agreement as an employment contract because “[r]ights of employees under

a collective bargaining agreement presuppose an employer-employee relationship” that

a collective bargaining agreement does not create. Id. at 856. Further, this Court stated

that “[e]mployees’ rights under such a contract do not survive a discontinuance of

business and a termination of operations.” Id.

Unfortunately for Kroger, Fraser does not apply here. First, Fraser did not

involve arbitration. The former employees in Fraser did not sue to compel arbitration,

they sued to collect contract damages as if the collective bargaining agreement was an

employment contract. Therefore, Fraser addressed the merits of the employees’ contract

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 13

claims against their employer. Here, in contrast, our role is to determine whether the

Master Agreement’s arbitration clause is susceptible to an interpretation whereby it

would cover Local 89’s grievances. Fraser is best understood as standing for the

proposition that employment contracts are distinct from collective bargaining agreements

and the latter cannot be enforced as if they were the former, an issue irrelevant to the

case before us. Second, even if Fraser’s holding were applicable here, it is factually

distinguishable. The employer in Fraser closed the entire plant covered by the collective

bargaining agreement, while Kroger simply subcontracted out its operations at the KDC

to other companies. See Heheman v. E.W. Scripps Co., 661 F.2d 1115, 1123 (6th Cir.

1981) (distinguishing Fraser because the employees’ terminations were precipitated by

the merger of their employer with another company, not because their employer went

out of business). Further, the collective bargaining agreement in Fraser did not address

cessation of operations at the plant, while the Master Agreement specifically addresses

the possibility of Kroger contracting out its KDC operations. Nowhere in the Master

Agreement, the Local Supplement, or the Letter of Understanding does it state that

Kroger’s subcontracting out of its KDC operations limits the applicability of the

arbitration provision.

Moreover, an examination of the job-security provisions included in the Master

Agreement further demonstrates the untenability of Kroger’s position. Under Section

25.3, if Kroger subcontracts all of its warehouse or transportation operations during the

term of the agreement, “then a condition of such subcontract shall be offers of

employment to eligible employees . . . by the new employer, provided that the new

employer requires that number or more to perform such services.” (R.E. 65-4, at 4.)

Under Appendix I, Kroger is required to offer a “comparable job at the nearest like

facility” covered by the Master Agreement to any employee “permanently laid-off”

because Kroger subcontracted out all or part of its KDC operations. (Id. at 12.) These

provisions provide protections to former Kroger employees who lost their positions at

Kroger because Kroger subcontracted out its KDC operations. To hold that these

employees are ineligible to grieve complaints about Kroger subcontracting out its KDC

operations because they are no longer employed by Kroger requires a circular logic.

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 14

Further, such a holding essentially would create a blanket exception of subcontracting-

related claims from the Master Agreement’s arbitration provision because, once the

subcontracted-out employees were off Kroger’s payroll, there would be no one eligible

to file a grievance. This Court has no authority to write such a sweeping exception into

the Master Agreement when, by its terms, the arbitration provision covers “any

grievance[,] dispute[,] or complaint over the interpretation or application of the contents

of [the Master] Agreement.” (R.E. 65-3, at 15.) Finally, even if we were to find that

there was no particular Local 89 member eligible to grieve Kroger’s subcontracting

activities, the Union itself has an interest in enforcing the terms of the Master Agreement

“in order to maintain the integrity of the bargaining process.” Cooper, 474 F.3d at 281;

cf. Cleveland, 440 F.3d at 816 (finding dispute over retiree benefits was arbitrable

because the union specifically had bargained for such benefits and despite the fact that

retirees had other remedies available).

3. Effect of Letter of Understanding

Kroger also argues that the parties’ execution of the Letter of Understanding

demonstrates their intent to exclude any subsequent grievances from the Master

Agreement’s arbitration provisions. Kroger notes that the Letter of Understanding

specifically provides for arbitration of outstanding grievances under the Master

Agreement (but not subsequent grievances) and that Local 89 included provisions

specifically providing for arbitration of subsequent grievances in earlier draft

agreements. Further, Kroger argues that the Letter of Understanding is not a “side letter”

or “side agreement” under Cooper and that, even if it is, Local 89’s grievances fall

outside of the scope of the arbitration provision because they have not been brought by

current Kroger employees. We similarly are unpersuaded by this set of arguments.

First, given the presumption in favor of arbitrability, the fact that the Letter of

Understanding addresses the arbitrability of outstanding grievances but is silent as to

subsequent grievances should not be read as excluding such grievances from the

arbitration provisions. To hold otherwise would be to reverse the presumption. See

Mead, 21 F.3d at 131 (holding that courts “should not deny an order to arbitrate ‘unless

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 15

it may be said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute’”). Similarly, the fact that earlier proposed

agreements drafted by Local 89 specifically provided for arbitration of subsequent

grievances is not strong enough evidence to rebut the presumption of arbitrability.

Notably, the arbitration provisions in these proposed agreements do not just provide that

grievances arising from the agreement will be subject to the Master Agreement’s

grievance procedures, they provide that such grievances will be subjected to an

expedited arbitration process. Therefore, the absence of such a provision in the Letter

of Understanding can just as easily support the implication that both parties understood

subsequent grievances would be subject to the Master Agreement’s arbitration provision,

but that they ultimately agreed not to subject such grievances to expedited arbitration.

Given the presumption in favor of arbitration, the fact that the agreement is susceptible

to a reading that provides for arbitration controls.

Kroger also argues that disputes over the Letter of Understanding are not

arbitrable because it is not a side agreement and, even if it were, disputes arising under

the Letter of the Agreement fall outside of the scope of the Master Agreement’s

arbitration provision.2 In Cooper, this Court adopted the “scope test,” also applied by

the Third, Seventh, and Ninth Circuits, to determine whether a dispute over a side

agreement without an arbitration clause is subject to an arbitration clause included in the

main collective bargaining agreement. Cooper, 474 F.3d at 279. Under this test, “unless

the parties indicate otherwise, disputes over a side agreement are arbitrable if the subject

matter of the side agreement is within the scope of the [collective bargaining

agreement’s] arbitration clause.”3 Id. at 278-79. Our inquiry under the scope test

2

We note that the two grievances that Local 89 seeks to compel to be arbitrated in its amended

complaint do not allege violations of the Letter of Understanding; they allege violations of the Master

Agreement and Local Supplement. Thus, the question of whether disputes arising under the Letter of

Understanding are arbitrable is of questionable relevance. However, although they are not referenced in

Local 89’s amended complaint, there are similar, subsequently filed grievances in the record alleging that

Kroger has violated the Letter of Understanding. Further, Local 89 argues in its brief that its grievances

invoke the Letter of Understanding, in addition to the Master Agreement and Local Supplement.

3

Under the “collateral test,” employed by the Second, Fourth, and Eighth Circuits, “courts

consider the similarity of the side agreement’s subject matter to the subject matter of the [collective

bargaining agreement].” Cooper, 474 F.3d at 278. If the subject matter is dissimilar, the side agreement

is deemed collateral to the collective bargaining agreement, and therefore not arbitrable. “However, where

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 16

“focuses on the breadth of the arbitration clause, thereby permitting parties to reference

the plethora of case law interpreting arbitration clauses . . . . Simply put, ‘the general

arbitration clause will apply to a dispute over a side agreement to the same extent it

would govern any other disagreement between the parties.’” Id. at 280 (quoting

Inlandboatmens Union of the Pac. v. Dutra Group, 279 F.3d 1075, 1081 (9th Cir.

2002)).

Applying the scope test in Cooper, this Court noted that the side agreement

“concern[ed] retirement healthcare contribution caps,” and while the main collective

bargaining agreement did not address this narrow issue, “references to medical benefits

generally, and healthcare coverage of retired employees, [we]re replete” throughout the

main agreement. Id. at 279. Given that the main agreement contained a broad

arbitration clause and neither it nor the side agreement contained any exceptions from

arbitrability, this Court concluded that the side agreement “clearly falls within [the

arbitration clause’s] scope.” Id. at 280. The Cooper opinion also set forth how parties

can ensure that potential side-agreement disputes do not become subject to arbitration:

Should a party intend not to arbitrate disputes over a particular side

agreement, language to that effect may be included within the side

agreement. Moreover, if the parties wish to restrict the [collective

bargaining agreement’s] arbitration clause from applying to side

agreements, they can provide for such within the language of the

[collective bargaining agreement].

Id.

Kroger first argues that the Letter of Understanding does not qualify as a “side

agreement.” Kroger notes that, unlike that side agreement in Cooper, the Letter of

Understanding was not negotiated simultaneously with the Master Agreement and was

never appended to the Master Agreement. However, Cooper imposes no such

requirements in order to consider a particular contract to be a side agreement, nor does

the side agreement is ‘integral’ to the [collective bargaining agreement], courts permit arbitration of

disputes over its provisions.” Id. In declining to adopt the collateral test, this Court stated that it “creates

uncertainty because parties have no gauge as to when a side agreement is similar or dissimilar to the

underlying [collective bargaining agreement].” Id. at 280.

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 17

Kroger provide any other authority for such a rule. More generally, Kroger argues that

the Letter of Understanding was negotiated to wrap up the relationship between it and

Local 89 rather than further clarify an ongoing collective bargaining relationship

between the two parties. But the Letter of Understanding nowhere states that the Master

Agreement or its grievance procedures no longer apply, nor does it comply with the

contract termination or modification requirements set forth in the Master Agreement.

Further, the fact that it addresses Kroger’s ongoing duties and obligations under the

Master Agreement is evidence to the contrary.

Kroger next argues that, even if the Letter of Understanding is a side agreement,

disputes concerning it do not qualify for arbitration under the scope test. Under that test,

we first must look to the arbitration provision, and then “[w]ith the scope of the

arbitration clause in mind, . . . look to the subject matter of the side agreement to

determine if it falls within the clause’s intended coverage.” Id. at 279. As noted above,

the scope of the arbitration provision is broad and there is no language in the Letter of

Understanding excluding any types of grievances from arbitration. Likewise, there is

nothing in the Master Agreement’s grievance procedures that limits their applicability

to side agreements. Further, the Letter of Understanding deals almost exclusively with

issues falling within the scope of the Master Agreement. To the extent that Local 89 has

grievances arising out of the Letter of Understanding, they concern subcontracting,

addressed specifically in Article 25 of the Master Agreement. Given the broadness of

the arbitration clause, there is no question that grievances concerning subcontracting fall

within its scope.

In sum, we find that neither Kroger’s subcontracting to Transervice and Zenith

(and the consequent fact that Kroger no longer directly employs Local 89 members) nor

the parties’ execution of the Letter of Understanding demonstrates an intent to exclude

Local 89’s subcontracting grievances from arbitration under the Master Agreement. We

conclude that Kroger has failed to rebut the presumption in favor of arbitrability and the

district court correctly compelled arbitration.

No. 09-5534 Teamsters Local Union No. 89 v. The Kroger Co. Page 18

III. CONCLUSION

Based on the foregoing analysis, we AFFIRM the judgment of the district court.