Luden's, Inc. v. Local Union No. 6, Bakery, Confect'ryTobacco Wrkrs Internat'l

Opinions of the United

1994 Decisions States Court of Appeals

for the Third Circuit

6-16-1994

Luden's, Inc. v. Local Union No. 6, Bakery,

Confect'ry;Tobacco Wrkrs Internat'l

Precedential or Non-Precedential:

Docket 92-1982

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UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_______________________

NO. 92-1982

_______________________

LUDEN'S INC.,

Appellee

v.

LOCAL UNION NO. 6 OF THE BAKERY, CONFECTIONERY AND

TOBACCO WORKERS INTERNATIONAL UNION OF AMERICA;

AMERICAN ARBITRATION ASSOCIATION,

Bakery, Confectionery and Tobacco Worker's

International Local Union 6,

Appellant

_________________________________________________

On Appeal From the United States District Court

For the Eastern District of Pennsylvania

(D.C. Civ. No. 92-01545)

_________________________________________________

Argued: June 24, 1993

Before: BECKER, ALITO, and ROTH, Circuit Judges.

(Filed June 17, 1994)

BERNARD N. KATZ, Esquire

(ARGUED)

LYNNE P. FOX, Esquire

Meranze and Katz

12th Floor, Lewis Tower

Bldg.

Philadelphia, PA 19102

Attorneys for

Appellant

DANA S. SCADUTO, Esquire

(ARGUED)

McNees, Wallace & Nurick

100 Pine Street

P.O. Box 1166

Harrisburg, PA 17108-1166

Attorney for Appellee

2

_________________________________

OPINION OF THE COURT

_________________________________

BECKER, Circuit Judge.

Luden's Inc. ("Luden's"), the manufacturer of a

well-known brand of cough drops, among other products, commenced

this action in the United States District Court for the Eastern

District of Pennsylvania against Local Union No. 6 of the Bakery,

Confectionery, and Tobacco Workers International Union of America

(the "Union") and the American Arbitration Association ("AAA"). It

sought a declaratory judgment and an injunction to prevent the Union

from submitting to arbitration before AAA a dispute between Luden's

and the Union concerning the retroactivity of wages under the terms

of a lapsed collective bargaining agreement ("CBA").0 The parties

presented the district court with stipulated facts and documents,

and then by agreement filed cross-motions for summary judgment

pursuant to Federal Rule of Civil Procedure 56. The district court

granted Luden's motion and denied the Union's, thereupon permanently

enjoining the scheduled arbitration proceedings. See Luden's, Inc.

v. Local Union No. 6 of Bakery, Confectionery & Tobacco Workers

Int'l Union, 805 F. Supp. 313, 327 (E.D. Pa. 1992).

The Union appealed. For the reasons that follow,

we conclude that the parties' duty to arbitrate survived Luden's

termination of their CBA effective July 3, 1992 as a term of an

"implied-in-fact CBA" which was formed on that date. We will

0

AAA did not actively participate in the disposition of the

controversy on the merits, and agreed to be bound by its resolution.

Stip. of Facts ¶¶ 32-33 & Exh. J.

3

therefore vacate the injunction entered by the district court, and

will remand with instructions to direct the parties to proceed to

arbitrate the retroactive wage grievance.

I. FACTS AND PROCEDURAL HISTORY

The parties stipulated to all the relevant facts.

Luden's, the plaintiff in the underlying action and the appellee

here, owns and operates a manufacturing plant in Reading, PA. The

Union represents some of Luden's employees at that plant. AAA,

which has an office located in Philadelphia, provides, among other

services, arbitrators to hear and resolve disputes arising out of

the administration of CBAs.

On May 1, 1988, Luden's and the Union jointly

executed a CBA (the "1988 CBA") governing the terms and conditions

of employment for certain employees whom the Union represents at

Luden's Reading plant. Stip. of Facts ¶ 1. Article XXIX of the

agreement, the centerpiece of this litigation, was entitled

"Duration of Agreement" and provided in its entirety:

This Agreement shall be and remain in full force

and effect for a period of three (3) years until and

including April 29, 1991, and thereafter, until a new

agreement, the wage clause of which shall be retroactive

to the above given date, has been consummated and signed,

or until this Agreement, upon sixty (60) days notice in

writing, has been terminated by the Union with the

sanction of the Bakery, Confectionery and Tobacco Workers'

International Union of America or has been terminated by

the Company.

Stip. of Facts, Exh. A. As will become apparent, the unartful and

imprecise drafting of the retroactive wage clause is the raison

d'être for this litigation.

4

Like most CBAs, the 1988 CBA incorporated a tiered

grievance procedure in Article XVI to facilitate the amicable

resolution of grievances arising between employees and management in

the course of their intimate employment relationship.0 The fifth and

final step of that procedure permitted either party to submit

unresolved grievances to final and binding arbitration; the parties

were to select the arbitrator cooperatively from a short list

provided by AAA. Stip. of Facts, Exh. A.

The 1988 CBA by its terms was scheduled to expire

on or after April 29, 1991, the exact date being triggered by either

sixty days notice of either party or the parties' joint execution of

a replacement CBA. In a letter dated February 14, 1991, the Union

by its President Joseph Rauscher provided Luden's Plant Manager

0

Article XVI, entitled "Settlement of Grievances and Arbitration,"

provided in pertinent part:

Step I. Any employee who believes that he has a

grievance which involves only him shall discuss the griev-

ance with his or her Department Supervisor within three,

(3), days of the time the alleged grievance became known

to the employee.

. . .

Step V. Where the parties have been unable to

reach a mutually satisfactory resolution of the grievance

at Step IV, either party may request the American Arbi-

tration Association to submit a list of arbitrators for

the consideration of the parties. Thereafter, the matter,

unless settled, shall be processed [through] arbitration

in accordance with the rules and procedures of the AAA.

The decision of the Arbitrator shall be final and

binding upon the parties, provided, however, the

Arbitrator shall have no authority to alter, amend or

modify the terms and conditions of the collective

bargaining agreement or to substitute his judgment for

that of the parties or either of them with respect to any

matter he is not expressly authorized to resolve whether

by the terms of the Agreement or by mutual request of the

parties.

Stip. of Facts, Exh. A.

5

Donald B. Watson with the required sixty days notice that the Union

intended to "change, modify or terminate" the 1988 CBA (pursuant to

Article XXIX thereof). Stip. of Facts ¶ 2 & Exh. B. The letter

included a "Notice to Mediation Agencies," signed by the Union's

President, designating April 29, 1991 as the contract termination

date. Id. Soon thereafter, on March 11, 1991, the parties began

negotiations on a new CBA. Of the fifteen separate negotiating

sessions the parties eventually met for, nine took place prior to

the arranged April 29, 1991 termination date for the 1988 CBA.

Stip. of Facts ¶ 3. At the last of the pre-April 29 meetings,

Luden's extended three separate written contract offers. The Union

rejected each of these offers but verbally proposed counteroffers,

each of which, in turn, Luden's rejected. None of these offers or

counteroffers clarified the issue of the retroactive application of

the new wage clause according to the terms of Article XXIX. Stip.

of Facts ¶ 4 & Exhs. C-E.

By memorandum dated April 29, 1991, Luden's Plant

Manager Donald B. Watson advised Union employees of the general

status of contract negotiations, and specifically reported that

Luden's and the Union had "agreed to disregard the deadline of April

[29] and [to] continue operating under the terms of the current

contracts." Stip. of Facts ¶ 5 & Exh. F. A few days later,

however, in a letter dated May 3, 1991, Luden's disclosed a changed

strategy. On that occasion, Watson notified the Union's business

representative Francis Ryan that Luden's wished to terminate the

1988 CBA "effective 12:01 a.m. Monday, May 13, 1991" (about ten days

later). In addition, the letter contained both a "comprehensive

6

offer" for a new CBA and an attempt by Luden's to condition its

payment of wages according to the new wage scale retroactively to

April 29, 1991 on the Union's timely acceptance of the enclosed

proposal. Stip. of Facts ¶ 6 & Exh. G. The Union's negotiating

committee promptly rejected Watson's offer. Stip. of Facts ¶ 7.

Over the course of the next few months, the parties

continued their negotiations, each submitting various offers or

counteroffers. Stip. of Facts ¶¶ 8, 10. During this time Luden's

sent or distributed several letters directly to its employees to

familiarize them with its bargaining position and to entreat them to

accept its contract offers at their Union's contract ratification

meetings.0 Stip. of Facts ¶ 11 & Exh. O. Each of these letters

reported that Luden's would pay retroactive wages to April 29, 1991

if the Union and its membership accepted Luden's offer in its

entirety.0 Despite Luden's efforts, though, the membership rejected

0

The Union, distressed over the letters Luden's sent to its

employees, filed concurrently with the ongoing negotiations an

unfair labor charge against Luden's with the National Labor

Relations Board ("NLRB"), which charge it later amended. Stip. of

Facts ¶ 13, 14. The amended charge accused Luden's both of

"violat[ing] its obligation to bargain in good faith by both threat-

ening improper actions and by undermining and bypassing the

bargaining representatives of the employees" and also of engaging in

"surface bargaining behavior by having preconceived inflexible

positions," but did not bring the disagreement over the meaning of

the retroactive wage clause before the Board. Stip. of Facts, Exhs.

K, L. The Regional Director of the NLRB, Peter Hirsch, rejected the

Union's contentions on August 20, 1991 and declined to issue a

complaint. Stip. of Facts ¶ 15 & Exh. M. On October 18, 1991 the

NLRB's General Counsel denied the Union's appeal from that decision.

Stip. of Facts ¶¶ 16, 17 & Exh. P. For a more thorough discussion

of these collateral proceedings, see 805 F. Supp. at 317-18.

0

The relevant portions of the letters to the Union and/or members

stated:

I have enclosed a comprehensive offer . . . . Should it be

accepted we will pay retroactive wages to Monday April 29,

1991.

7

each of the Luden's offers which the Union submitted to it for

approval (specifically, the offers of May 16 and June 20, 1991).

Stip. of Facts ¶¶ 9, 12.

On November 1, 1991, during a negotiation session,

Luden's proposed what was, from the Union's perspective, a superior

agreement, but one which was silent with respect to the retroactivi-

ty of wages. Stip. of Facts ¶ 18 & Exh. Q. The following day the

Union submitted certain terms and conditions of that proposal to its

membership, tallying a vote in favor of approval. Stip. of Facts ¶

19. Luden's thereafter posted a notice enumerating the terms it

thought comprised the proposal that the Union membership had

ratified and also undertook to memorialize the agreement by drafting

a document reflecting its understanding of the terms of the member-

ship's vote. Stip. of Facts ¶ 21.

Stip. of Facts, Exh. G (Letter from Watson, Luden's Plant Manager,

to Ryan, Union's Business Representative (May 3, 1991)).

Wages will be paid retroactive to April 29, 1991 should

this entire package be accepted by Mon. evening May 20,

1991.

Stip. of Facts, Exh. H (Offer by Luden's to the Union (May 16,

1991)).

Wages will be paid retroactive to April 29 should this

package be accepted by the membership.

Stip. of Facts, Exh. I (Offer by Luden's to the Union (June 20,

1991)).

Wages will be paid retroactive to April 29, 1991, should

you accept revised language for Article XXIX . . . .

Stip. of Facts, Exh. J (Letter from Watson, Luden's Plant Manager,

to Luden's Employees (July 15, 1991)).

8

Luden's posted notice and its written proposal both

indicated an effective date of November 4, 1991 for the new wage

scale. The Union dissented from this aspect of the writings, and

took the position that the retroactivity provision of the old

Article XXIX mandated retroactive application of the new pay scale

to May 1, 1991. Stip. of Facts ¶ 22 & Exhs. R, S, T. Faced with

this major disagreement between the parties, the Union on January

17, 1992 invoked the grievance procedure of the 1988 CBA (quoted

supra at Error! Bookmark not defined. n.Error! Bookmark not

defined.) and requested AAA to provide a list of arbitrators to

resolve the conflict over the retroactivity provision of Article

XXIX. Stip. of Facts ¶ 24. AAA reserved September 15 and 16, 1992

for the arbitration of the dispute. Stip. of Facts ¶ 25.

On March 6, 1992, Luden's initiated the instant

action against the Union and AAA, seeking a declaratory judgment

that the dispute between the parties regarding the retroactivity of

wages under the "lapsed" 1988 CBA was not arbitrable.0 Moreover,

Luden's prayed for an injunction against the arbitration proceeding

which the Union had scheduled with AAA. Stip. of Facts ¶¶ 24-25.

The parties submitted stipulated facts and documents to the district

court and agreed to submit the issues for resolution upon cross-

motions for summary judgment based solely and exclusively thereon.

Stip. of Facts ¶¶ 29-31. After ordering the parties to supply

supplemental motions addressing the intervening decision in Litton

Financial Printing Division v. NLRB, 501 U.S. 190, 111 S. Ct. 2215

0

Luden's places a great deal of stock in what it regards as the

consequential distinction between an expired and a terminated CBA.

To avoid confusion on this issue, we will utilize "lapsed" herein to

denote either an expired or a terminated CBA.

9

(1991), the district court granted Luden's motion and denied the

Union's. See 805 F. Supp. at 315 n.1, 327. In granting the relief

requested by Luden's, the district court permanently enjoined the

arbitration slated for mid September. As of the date of oral

argument before this Court, their minds had not yet met, and the

plant operated without a signed CBA. Stip. of Facts ¶ 23.

II. THE DISTRICT COURT'S DECISION AND THE ISSUES ON APPEAL

In resolving the summary judgment motions, the

district court reached a number of conclusions which neither party

challenges on appeal. The district court subdivided its analysis

into two sections, first considering the issue of the termination of

the 1988 CBA and only then addressing the arbitrability of the post-

termination dispute. In the first section of its opinion, the

district court concluded that it, not an arbitrator, was to decide

the issue of the arbitrability of the dispute;0 that either party

could unilaterally terminate the 1988 CBA according to Article XXIX

thereof on or after April 29, 1991 with sixty days notice; that,

because of the parties' subsequent arrangement to continue honoring

the 1988 CBA, the Union's letter of February 14, 1991 did not

actually terminate the Agreement; that Luden's May 3, 1991 letter

(which specified May 13, 1991 as Luden's intended termination date)

operated to terminate the Agreement, but not until sixty days after

its receipt (on July 2, 1991); and that the Agreement's arbitration

clause (Article XVI) was inclusive enough to encompass grievances

0

See A T & T Technologies, Inc. v. Communications Workers, 475 U.S.

643, 649, 106 S. Ct. 1415, 1418 (1986) (holding that "[u]nless 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").

10

over the application of the retroactivity provision of Article XXIX.

See 805 F. Supp. at 320-25.

We do not pass judgment on these rulings and, for

purposes of this appeal, treat them as correct in all respects.

Although the Union in its brief approaches the issue from several

discrete angles, in substance it challenges on appeal only the

second half of the district court's decision. In that portion of

its opinion, the court held that the construction and effect of the

retroactive wage provision of the 1988 CBA was not subject to

arbitration because, by the time the parties settled on a tentative

new agreement, there was no longer an arbitration provision in

effect between the parties. See 805 F. Supp. at 323-27.

In reaching this conclusion, the district court

read Litton and Nolde Brothers, Inc. v. Local No. 358, Bakery &

Confectionery Workers Union, 430 U.S. 243, 97 S. Ct. 1067, reh'g

denied, 430 U.S. 988, 97 S. Ct. 1689 (1977) to hold that it could

order the parties to arbitrate their post-termination dispute only

if it first determined that the dispute arose under the CBA. 805 F.

Supp. at 326. The court then construed the 1988 CBA to determine

whether under the three-prong test announced by Litton the instant

dispute arose under that agreement.0 See infra at Error! Bookmark

0

The district court apparently did not consider why Luden's was not

obliged to arbitrate the retroactivity question at least with

respect to wages earned before July 2, 1991, the effective

termination date of the 1988 CBA. See 805 F. Supp. at 326-27. We

can speculate that, having already concluded, in the course of

construing the 1988 CBA to determine if it should order arbitration

for the period after July 2, 1991, that the retroactivity clause was

never activated (a conclusion upon which we decline to pass judg-

ment), the court perhaps reasoned that it would be pointless to send

the same issues to an arbitrator, since the Union might have been

collaterally estopped from advocating a different contruction of the

relevant provision. Of course, since we will vacate the court's

11

not defined. n.Error! Bookmark not defined.. Conscious of the fact

that in the process of applying the Litton test it had construed the

provisions of the 1988 CBA, the court justified its approach by

reference to Litton, which had instructed courts to determine

"whether the parties intended to arbitrate the dispute, even if it

requires the court to interpret a provision of the expired

agreement." Id. at 327 (citing Litton, 111 S. Ct. at 2227). The

court, at bottom, held that Luden's did not have to arbitrate the

dispute.

The district court exercised jurisdiction over the

claim brought under the Declaratory Judgment Act, see 28 U.S.C.A. §§

2201-02 (1982 & Supp. 1993), pursuant to § 301(a) of the Labor

Management Relations Act ("LMRA"), 29 U.S.C.A. § 185(a) (1978),

which grants district courts jurisdiction over suits to enforce the

terms of CBAs. See Mack Trucks, Inc. v. International Union, UAW,

856 F.2d 579, 583-90 (3d Cir. 1988), cert. denied, 489 U.S. 1054,

109 S. Ct. 1316 (1989); Huettig & Schromm, Inc. v. Landscape

Contractors Council, 790 F.2d 1421, 1425-26 (9th Cir. 1986). We

have jurisdiction over an appeal from a final judgment of a United

States district court. See 28 U.S.C.A. § 1291 (1993).

We exercise plenary review over a district court's

grant of summary judgment. See Wheeler v. Towanda Area Sch. Dist.,

950 F.2d 128, 129 (3d Cir. 1991). In doing so, we employ the same

test the district court initially should have employed. See Public

Interest Research Group v. Powell Duffryn Terminals, Inc., 913 F.2d

64, 76 (3d Cir. 1990), cert. denied, 498 U.S. 1109, 111 S. Ct. 1018

judgment, collateral estoppel will not bar the arbitrator from

reconsidering afresh the district court's ruling.

12

(1991). Since the parties stipulated to all material facts, we need

not concern ourselves with conflicting affidavits; nonetheless,

where we must draw inferences from the stipulated facts, we still

must resolve them against the moving party and in favor of the

nonmoving party. See Goodman v. Mead Johnson & Co., 534 F.2d 566,

573 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 97 S. Ct. 732

(1977); Erie Telecommunications, Inc. v. City of Erie, Pa., 853 F.2d

1084, 1093 (3d Cir. 1988).

III. THE PARTIES' DUTY TO ARBITRATE ISSUES UNDER A LAPSED CBA

A. Introduction

Resolution of this appeal within the framework of

the parties' initial briefs would have required us to modulate Nolde

and Litton, two Supreme Court decisions which are in tension and

which therefore breed uncertainty in the sphere of labor law. In

Nolde the Supreme Court held that courts are not to reach the merits

of the dispute, but instead are to order arbitration if the lapsed

CBA arguably creates the obligation at the center of the grievance.0

0

See Nolde, 430 U.S. at 249, 97 S. Ct. at 1071 ("Of course, in

determining the arbitrability of the dispute, the merits of the

underlying claim for severance pay are not before us." (emphasis

supplied)); AT & T Technologies, Inc. v. Communications Workers, 475

U.S. 643, 649-50, 106 S. Ct. 1415, 1419 (1986) (holding that "in

deciding whether the parties have agreed to submit a particular

grievance to arbitration, a court is not to rule on the potential

merits of the underlying claims" (emphasis supplied)); cf. United

Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582-83, 80 S.

Ct. 1347, 1353 (1960), quoted infra at 28; United Steelworkers v.

Enterprise Wheel & Car Corp., 363 U.S. 593, 596, 80 S. Ct. 1358,

1360 (1960) ("The refusal of courts to review the merits of an

arbitration award is the proper approach to arbitration under

collective bargaining agreements."); United Steelworkers v. American

Mfg. Co., 363 U.S. 564, 568, 80 S. Ct. 1343, 1346 (1960) ("The

courts . . . have no business weighing the merits of the grievance,

considering whether there is equity in a particular claim, or

13

In particular, the Court held that the need to construe the lapsed

agreement to determine if the grievance has merit -- even if the

necessary interpretation involves answering the query whether the

asserted right vested under the CBA or survived its termination --

is enough to require arbitration. See Nolde, 430 U.S. at 249-52, 97

S. Ct. at 1071-72.

The problem is that Litton is at odds with Nolde in

terms of the court's duty to reach the merits of a dispute relating

to a lapsed CBA on the one hand, and Litton's disavowal that it was

overruling Nolde on the other hand. See Litton, 111 S. Ct. at 2219,

2225; id. at 2228-29 (Marshall, J., dissenting); id. at 2232

(Stevens, J., dissenting); John F. Corcoran, Note, The Arbitrability

of Labor Grievances that Arise After the Expiration of the

Collective Bargaining Agreement, 43 SYRACUSE L. REV. 1073, 1085 & n.87

(1992) [hereinafter Arbitrability of Labor Grievances]. In

contradistinction to Nolde, Litton held that a court has the duty to

reach the merits of the claim, and can order arbitration only if it

concludes that the lapsed CBA in fact creates the right or

obligation at issue. See Litton, 111 S. Ct. at 2227.0

As far as we can tell, other courts have uniformly

resolved this tension by reading Litton as having impliedly

determining whether there is particular language in the written

instrument which will support the claim." (footnote omitted)).

0

The Court, moreover, took this prescription quite seriously, for, as

Justice Marshall pointed out in his dissent, it was debatable wheth-

er the obligation at issue in Litton arose under the expired CBA or

not. Compare Litton, 111 S. Ct. at 2227 (construing the qualified

seniority provision as not having vested) with id. at 2230-31

(Marshall, J., dissenting) (contra) and Corcoran, Arbitrability of

Labor Grievances, supra, 43 SYRACUSE L. REV. at 1086-88 (agreeing with

Justice Marshall's dissent). Cf. Litton, 111 S. Ct. at 2232

(Stevens, J., dissenting) (declining to address the merits of the

dispute).

14

overruled the portion of Nolde holding that a court answering the

arbitrability question is not to look to the merits of the

underlying claim.0 Being reluctant to follow their course, and

having conscientiously reviewed this case after oral argument, we

requested the parties to file supplemental memoranda setting forth

their views as to whether, under the federal common law of CBAs,

this Court should recognize an implied-in-fact CBA which arose by

virtue of the parties' conduct after the lapse of the 1988 CBA.0 If

we were to do so, we would not need to confront the tension between

Nolde and Litton, since the duty to arbitrate would stem from the

implied-in-fact CBA (albeit derived in part from the lapsed CBA)

rather than directly from the lapsed contract, and the question

whether the right at issue accrued, if at all, under the lapsed

contract or during the interim period before Luden's implementation

of the November 4, 1991 near "agreement" would be mooted. Because

we conclude that Luden's contractual duty to arbitrate grievances

never lapsed completely, this avenue provides the route whereby we

0

See Cincinnati Typographical Union No. 3, Local 14519 v. Gannett

Satellite Info. Net., Inc., 17 F.3d 906, 910-11 (6th Cir. 1994);

International Bhd. of Teamsters, Local Union 1199 v. Pepsi-Cola Gen.

Bottlers, Inc., 958 F.2d 1331, 1333-34 (6th Cir. 1992); Cumberland

Typographical Union No. 244 v. Times & Alleganian Co., 943 F.2d 401,

404-05 (4th Cir. 1991); Winery, Distillery & Allied Workers, Local

186 v. Guild Wineries & Distilleries, 812 F. Supp. 1035, 1037-38

(N.D. Cal. 1993); Amalgamated Clothing Workers Union v. Stanbury

Uniforms, Inc., 811 F. Supp. 464, 467-69 (E.D. Mo. 1992); New York

Newspaper Printing Pressmen's Union No. 2 v. New York Times Co., No.

91-Civ.-5937, 1991 WL 206290, at *2-*3 (S.D.N.Y. Oct. 2, 1991),

aff'd, 953 F.2d 635 (2d Cir. 1991); cf. Independent Lift Truck

Builders Union v. Hyster Co., 2 F.3d 233, 236-37 (7th Cir. 1993)

(concluding that "the rule that courts must decide the arbitrators'

jurisdiction takes precedence over the rule that courts are not to

decide the merits of the underlying dispute").

0

Both parties fully briefed the question of law presented, and

neither party requested to supplement the stipulated facts for

purposes of their cross-motions for summary judgment.

15

may avoid addressing the uncertain interplay between Nolde and

Litton, though we express hope that the Supreme Court will take on

that challenge itself.

B. Implied-in-Fact Contracts and Their Application

to Lapsed Collective Bargaining Agreements

To settle the question whether the duty to

arbitrate arose as a term of an implied-in-fact CBA between Luden's

and the Union in light of the facts before us, we need to consult

the federal common law of CBAs. Section 301 of the LMRA, as Litton

stated, "authorizes federal courts to fashion a body of federal law

for the enforcement of [CBAs]." 111 S. Ct. at 2223 (quoting Textile

Workers Union v. Lincoln Mills of Ala., 353 U.S. 448, 451, 77 S. Ct.

912, 915 (1957)) (emphasis and internal quotation omitted). As to

the substantive content of this federal common law, traditional

rules of contract interpretation provide a plenteous resource, but

will be mined only when compatible with federal labor policy. See

Local 174, Teamsters v. Lucas Flour Co., 369 U.S. 95, 102-04, 82 S.

Ct. 571, 576-77 (1962); John Wiley & Sons, Inc. v. Livingston, 376

U.S. 543, 548, 84 S. Ct. 909, 914 (1964) ("State law may be utilized

so far as it is of aid in the development of correct principles or

their application in a particular case, but the law which ultimately

results is federal." (citation omitted)); Mack Trucks, 856 F.2d at

591-92 (holding that we look to "federal labor relations law, not

state contract law," to ascertain if a contract has formed, as "[i]n

the field of labor relations, the technical rules of contract law do

not determine the existence of an agreement"). Implied-in-fact CBAs

encompassing arbitration clauses, then, will have their surest

16

footing if both "ordinary" contract law and federal labor policy

sanction them.0

General contract law recognizes and enforces

"implied-in-fact" contracts. Section 4 of the Restatement (Second)

of Contracts, which employs the rubric "inferred from fact" to

discuss that brand of contract, provides that "[a] promise may be

stated in words either oral or written, or may be inferred wholly or

partly from conduct." Cf. REST.2D CONTRACTS § 19(1) (1981) ("The

manifestation of assent may be made wholly or partly . . . by . . .

acts or by failure to act."). Comment a to that section explains:

Contracts are often spoken of as express or implied. The

distinction involves, however, no difference in legal

effect, but lies merely in the mode of manifesting assent.

Just as assent may be manifested by words or other

conduct, sometimes including silence, so intention to make

a promise may be manifested in language or by implication

from other circumstances, including course of dealing or

usage of trade or course of performance.

REST.2D CONTRACTS § 4 cmt. a (1981). Professor Corbin, whose treatise

ventures nearer the precise issue we confront, writes that "if the

parties at the expiration of a written contract of employment,

0

Of course, an implied-in-fact CBA suffices to confer jurisdiction

under § 301 because it preserves and advances the statutory

objectives of labor peace and stability. See, e.g., International

Bhd. of Boilermakers -- Local 1603 v. Transue & Williams Corp., 879

F.2d 1388, 1392 (6th Cir. 1989) (holding that jurisdiction under §

301 does not require an actual written CBA because the Supreme Court

has broadly interpreted "`contract' to include any `agreement

between employers and labor organizations significant to the mainte-

nance of labor peace between them'" (quoting Retail Clerks Int'l

Ass'n, Local Unions Nos. 128 & 633 v. Lion Dry Goods, 369 U.S. 17,

28, 82 S. Ct. 541, 548 (1962))); United Paperworkers Int'l Union v.

International Paper Co., 920 F.2d 852, 859 (11th Cir. 1991) (same);

Smith v. Kerrville Bus Co., 709 F.2d 914, 920 (5th Cir. 1983)

(holding that §301 "must be broadly construed to encompass any

agreement, written or unwritten, formal or informal, which functions

to preserve harmonious relations between labor and management"),

appeal after remand, 799 F.2d 1079 (5th Cir. 1986); cf. Garrett R.R.

Car & Equip., Inc. v. NLRB, 683 F.2d 731, 737 (3d Cir. 1982).

17

continue as before without a new express agreement, it will be

inferred that the service and the compensation are the same as

before." 2 CORBIN ON CONTRACTS § 504, at 717 (1963). Other treatises

issue comparable pronouncements.0

Thus general principles of contract law teach us

that when a contract lapses but the parties to the contract continue

to act as if they are performing under a contract, the material

terms of the prior contract will survive intact unless either one of

the parties clearly and manifestly indicates, through words or

through conduct, that it no longer wishes to continue to be bound

thereby, or both parties mutually intend that the terms not survive.

The rationale for this rule is straightforward: when parties to an

ongoing, voluntary, contractual relationship, especially a

relationship which by its nature generally implies that some

mutually agreed upon rules govern its configuration, continue to

behave as before upon the lapse of the contract, barring contrary

indications, each party may generally reasonably expect that the

0

See 2 WILLISTON ON CONTRACTS § 6.42, at 452 (4th ed. Lord ed. 1990)

("When a contract of employment for a definite time has been made,

and the employee's services are continued after the expiration of

the definite time without objection, the inference is ordinarily

that the parties have assented to another contract for a term of the

same length with the same salary and conditions of service

. . . ."); CHARLES G. BAKALY, JR. & JOEL M. GROSSMAN, MODERN LAW OF EMPLOYMENT

CONTRACTS §§3.1.1, 3.1.4 (1985 Supp.) ("In the employment context, an

implied offer may arise when an employer has previously retained an

employee. The employer may ask the former employee to perform a new

job without mentioning that the employee will receive compensation

for it. . . . If a reasonable person would have inferred from the

employer's request that he intended to pay for the services, then

the employer's request will be deemed an offer.") ("[A]cceptance

need not always be formal or explicit, but may be implied from the

circumstances. For instance, an employee may accept an offer of

employment merely by showing up for work, even if he has never

formally notified the employer of his acceptance."); see also 1

WILLISTON ON CONTRACTS §§ 1:6, 4:2, 4:20; 2 id. §6:42.

18

lapsed agreement's terms remain the ones by which the other party

will abide.

While this rationale loses some of its cogency in

situations where the contract lapses because one party terminates it

(rather than because the contract expires of its own force), it does

retain most of its persuasiveness because the party's motive for

terminating the contract in a continuing relationship will often be

to change just a few of its terms. In the present context of labor

arbitration clauses, for example, we think that a party's termina-

tion of a CBA generally does not signify that the party wishes to

abandon arbitration in the future, for the parties' "interest in

obtaining a prompt and inexpensive resolution of their disputes by

an expert tribunal," Nolde, 430 U.S. at 254, 97 S. Ct. at 1073, does

not dissipate the moment the contract lapses.0 Indeed, although we

have not been made privy either to the Union's or to Luden's motives

in moving to terminate the 1988 CBA, neither evidence nor reason

suggests that discontent with the arbitration procedure was a

contributing factor.

Consistent with that observation is the fact that

neither party clearly notified the other -- whether by an express0 or

0

We say "generally" because the events leading up to the termination

of a CBA may reveal clearly to the other party that the terminating

party is fed up with the arbitration provision and that this

dissatisfaction is the basis for its termination or otherwise

clearly transmit an intent to be rid of the arbitration provision.

In context of this opinion, clear cases of implicit repudiation nor-

mally fall within the domain of what we denote as disavowals or

repudiations.

0

On this basis it is apparent that, even if the retroactive wage

provision were subject to inclusion in an implied-in-fact CBA, it

would not be encompassed by the implied-in-fact CBA which arose

between Luden's and the Union. Luden's in its May 3, 1991 letter to

the Union specifically explained that, if the Union rejected its

comprehensive offer (which the Union proceeded to do), Luden's would

19

clearly implicit disavowal, see supra at Error! Bookmark not

defined. n.Error! Bookmark not defined., or by clearly incompatible

conduct, see infra at Error! Bookmark not defined. n.Error! Bookmark

not defined. -- that it was unilaterally revoking or repudiating the

arbitration provision so well established between the parties. Cf.

International Bhd. of Boilermakers -- Local 1603 v. Transue &

Williams Corp., 879 F.2d 1388, 1390, 1393 (6th Cir. 1989)

(emphasizing that the employer did not explicitly inform the union

it wished "to revoke the parties' agreement as to the grievance

procedures" and that there was "no evidence to indicate a dispute

over the terms of the grievance and arbitration provisions" before

finding an implied-in-fact contract arose after expiration of the

parties' CBA); United Paperworkers Int'l Union Local No. 200 v.

Wells Badger Indus., Inc., 835 F.2d 701, 702-04 (7th Cir. 1987)

(same). In fact, Luden's November 7, 1992 memorialization of the

parties' near "agreement" contains a grievance and arbitration

procedure virtually identical to the one the 1988 CBA contained. In

short, the record does not reveal that the parties disagreed about

the continuation of the arbitration procedure during the interim

bargaining period in any meaningful way or that both parties

make "no retroactive payments." Letter from Donald P. Watson, Plant

Manger, to Frances Ryan, Business Representative (May 3, 1991).

While we do not consider the effect of this statement on Luden's

obligation to pay retroactive wages, it being an issue reserved for

an arbitrator to rule on, we think the letter clearly and expressly

evinces Luden's intention not to be bound by that clause in the

implied-in-fact CBA.

We briefly note, too, that Luden's letter went on

to state that, even if the Union rejected its offer, "we agree to

continue normal operations," id., a fact which in a case (unlike

this one) presenting conflicting evidence of the parties' intent

would be of relevance to the survival of the arbitration clause in

an implied-in-fact CBA.

20

actually intended for the arbitration clause not to endure, the

occurrence of either of which would have excluded that term from the

implied-in-fact CBA, but instead indicates that Luden's kept the

doors to its business open, invited its employees to enter, and

conducted business as usual.

In context of these facts, we think that the

Union's membership was working under the reasonable presumption that

it was entitled to arbitrate grievances rather than be forced to

turn to the less efficient and more expensive mechanism of

litigating them. The employer's uninterrupted fidelity to the

arbitration provision stood as the implied consideration for the

employees' continued diligent and loyal service. Even had Luden's

entertained a subjective desire to end its obligation to arbitrate

grievances, since the record does not show the Union to have shared

that desire, the objective terms of the implied-in-fact CBA

controlling the parties' relationship would not have changed. See

Mack Trucks, 856 F.2d at 592 ("The parties' objective intent to

create a contract is relevant -- not their subjective beliefs.").

Had Luden's demonstrably disavowed that provision, the union

employees could have consciously chosen whether or not to continue

working diligently for their employer (that is, they could have

elected, based on their employer's decision to refuse arbitration,

whether to quit, strike, engage in a boycott, work slow-down, or

work stoppage, or to continue to execute their job responsibilities

faithfully).0 But Luden's did not do so, and its employees were thus

0

We cannot provide a recipe for conduct which suffices to preclude

the formation or annul the existence of an implied-in-fact

arbitration provision, and leave that question for later devel-

opment. We can provide some guidance now, though. Since the

21

deprived of the potential to make an informed choice. Throughout

the relevant period, Luden's reaped benefits from its union

employees' loyal service, and now it must accept the consequences.0

peaceful continuation of the contractual relationship is the linch-

pin of our decision, we note that resort to ultimate economic

weapons (either a lock-out or a strike) would usually manifest an

intent to repudiate the arbitration provision of the implied-in-fact

CBA. Needless to say, the quid pro quo for arbitration clauses is

typically a promise not to strike or lock-out. See United Steelwor-

kers v. American Mfg. Co., 363 U.S. 564, 567, 80 S. Ct. 1343, 1346

(1960) (stating that a no-strike clause is the quid pro quo for a

grievance clause); Indiana & Mich. Elec. Co., 284 N.L.R.B. 53, 58

(1987) ("an agreement to arbitrate is a product of the parties'

mutual consent to relinquish economic weapons, such as strikes or

lockouts, otherwise available under the [National Labor Relations]

Act to resolve disputes"); Hilton-Davis Chem. Co., 185 N.L.R.B. 241,

242 (1970) (same); cf. International Bhd. of Teamsters, Local Union

1199 v. Pepsi-Cola Gen. Bottlers, Inc., 958 F.2d 1331, 1335 (6th

Cir. 1992) (holding that while "[t]he existence of a labor contract

may be shown by conduct manifesting an intention to abide by agreed-

upon terms," the fact that the union called a strike after the

employer implemented its final pre-impasse offer "demonstrates that

[the union] did not believe that an implied agreement incorporating

all the undisputed terms of the old [CBA] existed"); International

Union, United Mine Workers v. Big Horn Coal Co., 916 F.2d 1499, 1502

(10th Cir. 1990) (holding that the union's strike after the employer

instituted its final offer showed an implicit "rejection of the

employer's offer"), cert. denied, 112 S. Ct. 1172 (1992); Transue &

Williams Corp., 879 F.2d at 1394 (highlighting the fact that "[a]t

all relevant times [after the expiration of the CBA], the parties

refused to marshal economic weapons and adhered to the grievance and

arbitration provisions of their contract"). Accordingly, such

conduct would probably send a clear message that the acting party no

longer wishes to be bound by an implied-in-fact arbitration provi-

sion. Cf. Carpenters S. Cal. Admin. Corp. v. J.L.M. Constr. Co.,

809 F.2d 594, 598 (9th Cir. 1987) ("[A]n employer can repudiate [an

agreement] . . . by engaging in conduct so overtly inconsistent with

contractual obligations that it is sufficient to put the union on

notice of the employer's intent to repudiate."), vacated and reh'g

granted, 840 F.2d 723 (9th Cir. 1988), vacated as moot, 872 F.2d 930

(9th Cir. 1989).

0

Luden's asserts that its May 3, 1991 letter "constituted an `express

indication' of its intention to abrogate all contractual terms."

Suppl. Br. of Appellee at 16. We are unpersuaded, however, not only

because the contractual employment relationship continued, but

because we do not believe that Luden's genuinely wished to abrogate,

for example, its employee's obligations to clean and maintain their

uniforms, to work specified shifts, or to notify security of

22

Having looked only to ordinary principles of

contract interpretation, we are inclined at this juncture to

recognize an implied-in-fact CBA incorporating the arbitration

provision from a lapsed CBA. We cannot do so, however, unless an

implied-in-fact CBA incorporating a duty to arbitrate is also

compatible with federal labor policy. We think that it is.

As a general matter, implied-in-fact CBAs are

compatible with federal labor law and advance the goals of federal

labor policy. We have intimated that an employer and a union may

adopt an enforceable labor contract without reducing the agreement

to writing, and that what really is crucial is "conduct manifesting

an intent to be bound by agreed-upon terms." Mack Trucks, 856 F.2d

at 592; cf. John Wiley & Sons, 376 U.S. at 551, 84 S. Ct. at 915.

In this result we find ourselves sharing company with many courts of

appeals who have concluded that a union may (impliedly) accept a

tardinesses or absences, or the Union's obligation to submit copies

of notices to it for inspection before posting them on the company

bulletin board, all of which were part of the 1988 CBA. Indeed, for

all we can tell, Luden's expected its employees to continue abiding

by the gamut of rules of employment which Luden's had imposed prior

to its termination of the 1988 CBA. It is precisely the ambiguity

and unfairness resulting from a selective and sub rosa continuation

of only those contractual arrangements which in hindsight are

beneficial to one party, a selectivity which will consistently breed

discontent and disharmony, that the implied-in-fact contract theory

helps eject from the labor arena.

This discussion sheds some light on a critical

dissimilarity between arbitration provisions and many other terms of

agreement between parties to a CBA. For many terms and conditions

of employment, it is patently obvious if either party elects to

reject it. For example, had the employees been dissatisfied with

their obligation to wear uniforms, they would have shown up for work

in regular street clothes, and Luden's would immediately have known

of its employees' intent not to abide by that expired condition of

employment. Not so with an arbitration provision, whose subjective

unilateral rejection will not be apparent until a dispute erupts

unless either party clearly and objectively expresses or indicates

its views on the matter.

23

"unilateral offer" made when an employer implements its final offer

after reaching a bargaining impasse by the ordinary act of entering

the employer's open doors, a view with which we now concur.0

0

See Cumberland Typographical Union No. 244 v. Times & Alleganian

Co., 943 F.2d 401, 405 (4th Cir. 1991); United Paperworkers Int'l

Union v. International Paper Co., 920 F.2d 852, 854, 855, 858 (11th

Cir. 1991); International Union, United Mine Workers v. Big Horn

Coal Co., 916 F.2d 1499, 1502 (10th Cir. 1990), cert. denied, 112 S.

Ct. 1172 (1992); Transue & Williams Corp., 879 F.2d at 1393, 1392;

Bobbie Brooks, Inc. v. International Ladies' Garment Workers Union,

835 F.2d 1164, 1168 (6th Cir. 1984); United Paperworkers Int'l

Union, 835 F.2d at 704; Capitol-Husting Co. v. NLRB, 671 F.2d 237,

243 (7th Cir. 1982); Maxwell Macmillan Co. v. District 65, UAW, 790

F. Supp. 484, 485-86 (S.D.N.Y. 1992); cf. Chicago Typographical

Union No. 16 v. Chicago Sun-Times, Inc., 935 F.2d 1501, 1510 (7th

Cir. 1991) (contrasting the view that an employer's unilateral

implementation of its final offer cannot give rise to a contract

because the offer is "unilateral; the whole point is that the

employer is implementing an offer that the union has not accepted"

with the view that "the union might accept the offer, arbitration

clause and all, by conduct rather than by express words," but

refusing to pick sides (emphasis in original)); Chauffeurs, Team-

sters & Helpers, Local Union 238 v. C.R.S.T., Inc., 795 F.2d 1400,

1402, 1404 (8th Cir. 1986) (en banc) (holding that an employer's

past refusal to arbitrate grievances under unilaterally instituted

terms and conditions of employment as well as its implementation of

a new grievance procedure limited to only one specific type of

dispute manifested an objective intent by the employer not to be

bound by the expired agreement's arbitration provision), cert.

denied, 479 U.S. 1007, 107 S. Ct. 647 (1986); Taft Broadcasting Co.,

WDAF AM-FM-TV v. NLRB, 441 F.2d 1382, 1384-85 (8th Cir. 1971)

(holding that a letter by the employer telling the union it would

comply with a draft agreement gave rise to an interim agreement to

abide by the draft agreement when the union continued to work); see

also Intermountain Rural Elec. Ass'n v. NLRB, 984 F.2d 1562, 1568

(10th Cir. 1993) ("[A]n uninterrupted and accepted custom [estab-

lished during the life-span of an expired CBA] may become an implied

term and condition of employment by mutual consent of the parties.

Once an implied term is established, a unilateral change regarding

the term is unlawful." (citation omitted)); Franklin Elec. Co. v.

International Union, UAW, 886 F.2d 188, 192 (8th Cir. 1989) (holding

in context of an employer's voluntary submission to an arbitrator

for the arbitrator to decide the arbitrability of a dispute that

"[c]onsent to arbitrate may be implied from the parties' conduct");

Smith v. Kerrville Bus Co., 709 F.2d 914, 920 (5th Cir. 1983)

(holding that an employees' manual may become an implied term of a

CBA if accepted by both parties and "significant to the maintenance

of labor peace"); 1 WILLISTON ON CONTRACTS § 4:20, at 473-75 (4th ed.

24

Similarly, the employer may make an (implied) offer simply by

leaving the shop doors open for its unionized employees,0 especially

when there has been sixty days notice of intent to terminate prior

to the termination of the CBA and the employer is at liberty to keep

its doors shut, see 29 U.S.C.A. § 158(d)(4) (1973) (prohibiting

lock-outs unless 60 days notice of termination was provided and the

CBA has expired).

Turning now specifically to arbitration clauses, we

think that federal labor policy condones their incorporation into an

Lord ed. 1990). But see United Food & Commercial Workers Int'l

Union Local 7 v. Gold Star Sausage Co., 897 F.2d 1022, 1024, 1026

(10th Cir. 1990).

0

See NLRB v. Haberman Constr. Co., 641 F.2d 351, 355-57 (5th Cir.

1981) (en banc) (affirming the Board's finding that "the Company

manifested an intent to abide by the [national] contract," although

it was not a signatory thereto, "by enjoying its benefits and

abiding by its provisions," and thereupon concluding that the

company was bound by the terms of the national contract) ("It is

well settled that a union and employer's adoption of a labor con-

tract is not dependent on the reduction to writing of their inten-

tion to be bound. Instead, what is required is conduct manifesting

an intention to abide by the terms of an agreement." (footnote and

citations omitted)); BAKALY & GROSSMAN, MODERN LAW OF CONTRACTS, supra, §

3.1.1 at 22 ("In the employment context, an implied offer may arise

when an employer has previously retained an employee. The employer

may ask the former employee to perform a new job without mentioning

that the employee will receive compensation for it. . . . If a

reasonable person would have inferred from the employer's request

that he intended to pay for the services, then the employer's

request will be deemed an offer."); 1 HOWARD A. SPECTER & MATTHEW W.

FINKIN, INDIVIDUAL EMPLOYMENT LAW AND LITIGATION §§ 1.01, 1.02 (1989) ("[An

employment contract] may be expressed in words or arise by

implication from the conduct of the parties.") ("[A]n offer may be

implied from the employer's actions or practices.") ("Acceptance [of

an employment contract] may be made orally, in writing, or by

commencement or continuing performance."); I FARNSWORTH ON CONTRACTS

§3.15a, at 242 (1990) ("occasionally both the employer's offer and

the employee's acceptance are implied-in-fact from their conduct"

(citing, inter alia, Novosel v. Nationwide Ins. Co., 721 F.2d 894,

902-03 (predicting Pennsylvania law regarding the creation of an

implied contractual "just cause" provision), reh'g denied, 721 F.2d

903 (3d Cir. 1983)))).

25

implied-in-fact CBA.0 First, federal labor policy, insofar as it is

solicitous of peaceful labor relations, favors the existence of

CBAs, and we will generally apply contract law liberally in order to

recognize a CBA which lessens strife and fosters congenial relations

between employees and management. See John Wiley & Sons, Inc. v.

Livingston, 376 U.S. at 550, 84 S. Ct. at 914-15 ("[A]lthough the

duty to arbitrate . . . must be founded on a contract, the

impressive policy considerations favoring arbitration are not wholly

overborne by the fact that [the employer] did not sign the contract

being construed."); Eastern Air Lines, Inc. v. Air Line Pilots

Ass'n, Int'l, 861 F.2d 1546, 1550 (11th Cir. 1988); see also Smith

0

The general contract treatises maintain that if an employment

contract for a fixed term expires and the parties continue their

relationship, "another contract by implication of fact would arise

for another similar period." See 1 WILLISTON ON CONTRACTS § 39, at 121

(3d ed. 1959) (emphasis supplied); accord 1 WILLISTON ON CONTRACTS §

4:20, at 456 (4th ed. Lord ed. 1990); 1 CORBIN ON CONTRACTS § 18, at 43.

But federal labor law does not support that specific result; rather,

under the circumstances of this case, federal labor policy just

favors the formation of an implied-in-fact CBA terminable at will by

either party. Incorporating the duration provision of the lapsed CBA

would in most if not all instances substantially interfere with

collective bargaining because, depending on what other terms are

incorporated into the implied-in-fact CBA, it might leave nothing to

bargain over. Perhaps more problematically, when an arbitration

clause in particular is incorporated into the implied-in-fact CBA,

inclusion therein also of a duration clause could prevent the

parties from marshaling their economic weapons during negotiations

"if no agreement can [otherwise] be achieved." Hilton-Davis Chem.

Co., 185 N.L.R.B. 241, 242 (1970). Yet the Board impliedly found

such a result contrary to federal labor policy when it ruled that

arbitration procedures are exempted from the general prohibition

against pre-impasse unilateral changes to terms subject to mandatory

collective bargaining. See ibid.; cf. Indiana & Mich. Elec. Co.,

284 N.L.R.B. 53, 55-56, 58 (1987). Allowing either party to

terminate the arbitration provision of the implied-in-fact CBA at

will, of course, eliminates any conflict with federal labor policy,

because resort to ultimate economic weapons alone will generally

signal an intent to terminate the implied-in-fact arbitration

provision. See supra at Error! Bookmark not defined. n.Error!

Bookmark not defined..

26

v. Evening News Ass'n, 371 U.S. 195, 199, 83 S. Ct. 267, 270 (1962)

("[Section] 301 is not to be given a narrow reading.").

Second, to effectuate the federal labor policy

favoring the resolution of employee grievances by "a method agreed

upon by the parties," 29 U.S.C.A. § 173(d) (1978), the Supreme Court

has established a strong presumption favoring arbitrability of

disputes between parties who include arbitration provisions in their

CBAs. The Supreme Court explained the basis for this policy in

Nolde:

The labor arbitrator is usually chosen because of the

parties' confidence in his knowledge of the common law of

the shop [-- the practices of the industry and the shop

--] and their trust in his personal judgment to bring to

bear considerations which are not expressed in the

contract as criteria for judgment. . . . The ablest judge

cannot be expected to bring the same experience and

competence to bear upon the determination of a grievance,

because he cannot be similarly informed.

Nolde, 430 U.S. at 253, 97 S. Ct. at 1073 (quoting United

Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582, 80 S.

Ct. 1347, 1352-53 (1960)).0

0

See AT & T Technologies, 475 U.S. at 650, 106 S. Ct. at 1419

(observing that "[t]h[e] presumption of arbitrability for labor

disputes recognizes the greater institutional competence of arbitra-

tors in interpreting collective-bargaining agreements, `furthers the

national labor policy of peaceful resolution of labor disputes and

thus best accords with the parties' presumed objectives in pursuing

collective bargaining'" (quoting Schneider Moving & Storage Co. v.

Robbins, 466 U.S. 364, 371-72, 104 S. Ct. 1844, 1849-50 (1984));

CLARENCE M. UPDEGRAFF, ARBITRATION AND LABOR RELATIONS 21-22 (1978) (enumerat-

ing the advantages of arbitration over litigation); FRANK EKLOURI &

EDNA ASPER ELKOURI, HOW ARBITRATION WORKS 7-9 (4th ed. 1985) (same). See

generally Archibald Cox, The Legal Nature of Collective Bargaining

Agreements, 57 MICH. L. REV. 1 (1958). For a practiced labor

arbitrator versed in the singular, byzantine universe of labor

relations, it is quite likely that the retroactivity provision at

issue here has a relatively clear meaning because it evinces a

recognizable intent. Arbitrators are accustomed to settling disputes

"that require for their solution knowledge of the custom and

practices of a particular factory or of a particular industry as

27

Applying that policy, the Supreme Court in Nolde

held that "`[a]n order to arbitrate [a] 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. Doubts should be resolved in favor of

coverage.'" Nolde, 430 U.S. at 255, 97 S. Ct. at 1074 (quoting

United Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582-

83, 80 S. Ct. 1347, 1353 (1960)); see Lukens Steel Co. v. United

Steelworkers, 989 F.2d 668, 672-73 (3d Cir. 1993). Even "where the

dispute is over a provision of the expired agreement, the

presumptions favoring arbitrability must be negated expressly or by

clear implication." Nolde, 430 U.S. at 255, 97 S. Ct. at 1074.

Litton reiterated the fact that the duty to arbitrate can outlive

the CBA and reaffirmed the centrality of the pro-arbitration policy

to federal labor relations law. See Litton, 111 S. Ct. at 2226.0

reflected in particular agreements." United Steelworkers v.

Enterprise Wheel & Car Corp., 363 U.S. 593, 596, 80 S. Ct. 1358,

1360 (1960). Not so for a federal court of general (albeit limited)

jurisdiction steeped (at best) in the world of ordinary contract

interpretation, a fact which Luden's may be banking on. Besides the

other obvious benefits in prompt and inexpensive dispositions, it is

in part the arbitrator's capacity -- a capacity derived from

extensive experience, specialization, and submersion in the "common

law of the shop" -- to locate and discern meaning and intent where

judges can unearth only ambiguity and doubt that renders arbitration

such a popular dispute resolution technique in CBAs.

0

The salience of an arbitration provision to both parties as well as

its weighty stature under federal labor law is further demonstrated

by its membership in the set of mandatory subjects of collective

bargaining. See, e.g., United Elec. Workers v. NLRB, 409 F.2d 150,

156 n.9 (D.C. Cir. 1969); NLRB v. Davison, 318 F.2d 550, 557 (4th

Cir. 1963) (dicta); NLRB v. Montgomery Ward & Co., 133 F.2d 676, 685

(9th Cir. 1943); NLRB v. Boss Mfg. Co., 118 F.2d 187, 189 (7th Cir.

1941); Indiana & Mich. Elec. Co., 284 N.L.R.B. 53, 58 (1987); see

also NLRB v. United Nuclear Corp., 381 F.2d 972, 976-978 (10th Cir.

1967) (grievance procedure); Industrial Union of Marine &

Shipbuilding Workers v. NLRB, 320 F.2d 615, 620 (3rd Cir. 1963)

(same), cert. denied, 375 U.S. 984, 84 S. Ct. 516 (1964).

28

Luden's objects, however, that our recognition that

an implied-in-fact CBA arises despite an employer's announcement of

its intent to terminate a CBA would render the announcement nugatory

and "would altogether eliminate the significance of contract

expiration or termination." Suppl. Br. of Appellee at 12-13. We

disagree. First, termination of the CBA will effectively terminate

those terms with respect to which both parties intend that result,

and furthermore termination still empowers either party to repudiate

the implied-in-fact terms unilaterally at any time afterwards

without providing the notice required were the CBA still in effect.

See supra at Error! Bookmark not defined. n.Error! Bookmark not

defined.. We only hold that the termination of a CBA, standing

alone, does not objectively manifest the clear, particularized

intent to disavow its terms needed to prevent certain of the lapsed

CBA's provisions from being instantaneously revived as part of an

implied-in-fact CBA.

Either party may renege on the term at any time by

clearly disavowing -- whether by word, pen, or deed -- the arbitra-

tion provision of the implied-in-fact CBA.0 Of course, repudiation

would affect only future disputes arising after such notice,

whenever it may come, and such a termination could certainly not

affect disputes involving pre-termination facts, accrued rights, or

persisting rights (as measured with respect to the lapsed or the

0

Obviously either party may prevent the implied-in-fact terms from

arising altogether by repudiating them concurrently with, or in some

instances before, see supra at Error! Bookmark not defined. n.Error!

Bookmark not defined., its termination of the CBA. Just as

obviously, a term will never arise as part of an implied-in-fact CBA

if both parties consciously do not intend for that term to survive

the lapse of the CBA.

29

implied-in-fact CBA).0 That is to say, an implied-in-fact arbitration

provision is in its legal effect indistinguishable from that of the

standard written and undersigned one.

Second, a lapsed CBA opens the door for collective

bargaining and allows the employer, once it has in good faith

bargained to impasse with the union, to institute unilateral changes

(in conformity with prior offers) to those terms and conditions of

employment subject to the Katz prohibition against unilateral

changes. See NLRB v. Katz, 369 U.S. 736, 745, 82 S. Ct. 1107, 1112-

13 (1962).0 Finally, the term of the implied-in-fact CBA we

0

In Litton the Supreme Court enumerated three types of disputes

which, albeit flaring up post-expiration, could "arise under the

[lapsed] contract:"

A postexpiration grievance can be said to arise under the

contract only [(1)] where it involves facts and occurrenc-

es that arose before expiration, [(2)] where an action

taken after expiration infringes a right that accrued or

vested under the agreement, or [(3)] where, under normal

principles of contract interpretation, the disputed con-

tractual right survives expiration of the remainder of the

agreement.

111 S. Ct. at 2225 (the "pre-expiration facts," "accrued rights,"

and "persisting rights" prongs, respectively).

There is no need to consider whether any of these

three Litton prongs applies to the facts of this case because our

conclusion that the duty to arbitrate never came to rest clearly

compels the result that the dispute must proceed to arbitration.

The parties' duty to arbitrate was never discharged because during

the interim period between July 2 and November 4, 1991 it survived

in the implied-in-fact CBA and thereafter as part of the near

"agreement." The three Litton prongs, of course, apply only to

disputes surfacing after the parties have been relieved of their

contractual duty to arbitrate; while the duty to arbitrate is

operative, the strong presumption favoring arbitration governs. See

Nolde, 430 U.S. at 255, 97 S. Ct. at 1074, quoted supra at 28.

0

Section 8(a)(5) of the National Labor Relations Act, 29 U.S.C.A. §

158(a)(5) (1973), imposed on Luden's the statutory duty to continue

operating according to certain existing terms and conditions of

employment until the parties reached a good faith bargaining

impasse, see Katz, 369 U.S. at 741-43, 82 S. Ct. at 1110-11, even

30

recognize here is restricted to an arbitration provision; it may

well be that the implied-in-fact CBA does not incorporate all, or

any other, of the terms of the lapsed CBA. Cf. General Warehousemen

& Employees Union Local No. 636 v. J.C. Penney Co., 484 F. Supp.

130, 134 (W.D. Pa. 1980) ("Even though employees continue to work

under the compensation arrangements of an old contract, the court

cannot imply that the entire contract was extended." (emphasis

supplied)). We cannot foretell what other, if any, terms of the

lapsed agreement would similarly generally survive. But see supra at

Error! Bookmark not defined. n.Error! Bookmark not defined.. But

since it is the case that the implied-in-fact CBA will incorporate

at most those terms of the lapsed CBA which have not clearly been

disavowed in some way and whose inclusion is compatible with federal

labor policy, we can mention some potential considerations.

We do not doubt that the particulars of federal

labor law affect whether or not a party may have a reasonable

expectation that the other party's continued adherence to a

provision of a lapsed CBA means that the other party has consented

to the continuation of the provision. Although arbitration is a

subject of mandatory bargaining, the Supreme Court has deferred to

the Board's ruling that a party may effect unilateral changes to an

arbitration provision when the CBA lapses. See Litton, 111 S. Ct.

at 2221-22; cf. Indiana & Mich. Elec. Co., 284 N.L.R.B. 53, 58

(1987). We have said above with respect to arbitration provisions

that, as both parties are free to modify the arbitration clause

unilaterally after the lapse of the CBA, the absence of contrary

where, as here, the parties were negotiating a new agreement after

the expiration of the previous one, see Litton, 111 S. Ct. at 2221.

31

indications generally gives rise to a reasonable presumption that

the silent party has agreed to continue in effect the arbitration

provision of the lapsed CBA. See supra at 21.

On this basis, arbitration differs markedly from

most other mandatory topics of collective bargaining, the unilateral

modification of which would run afoul of the National Labor

Relations Act ("NLRA") and amount to an unfair labor practice. As

to those terms and conditions of employment, one party's failure

clearly to disavow them is logically attributable to its statutory

duty preventing it from doing so and requiring it instead to

maintain the status quo. Thus, the other party can not generally

reasonably presume that silence and maintenance of the status quo is

due to the first party's voluntary election not to institute unila-

teral changes.0

The Board's primary jurisdiction over unfair labor

practices also counsels against the inclusion in an implied-in-fact

CBA of a term or condition which is a memberof the group of items

subject to mandatory bargaining but not subject to a party's

unilateral modification. See 29 U.S.C.A. § 160(a) (1973); e.g.,

Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 83, 102 S. Ct. 851, 859

(1982) ("The Board is vested with primary jurisdiction to determine

what is or is not an unfair labor practice. As a general rule,

0

Thus although we acknowledge and appreciate the dissent's concern

that in some circumstances "the employer's post-termination conduct

may have been based on its understanding of its statutory

obligations under the [NLRA]," infra at X (dissenting opinion at 2),

because arbitration clauses have definitively been excluded from the

ban against unilateral modification of mandatory subjects of bar-

gaining, we do not agree that this potential ambiguity is realized

when the term incorporated into the implied-in-fact CBA is an

arbitration clause.

32

federal courts do not have jurisdiction [under § 301] over activity

which is arguably subject to § 7 or § 8 of the [NLRA], and they must

defer to the exclusive competence of the . . . Board." (internal

quotations omitted)). But since under the NLRA it is not an unfair

labor practice to abandon an arbitration provision unilaterally

after the lapse of a CBA without first having bargained to impasse,

our recognition of an implied-in-fact CBA incorporating the lapsed

CBA's arbitration provision does not undermine the NLRB's primary

jurisdiction over unfair labor practices.

Moreover, despite the fact that the Union likely

could have brought its grievance before the Board packaged as an

unfair labor practice charge,0 our recognition of an implied-in-fact

arbitration provision respects the Board's turf, because it

0

There can be little doubt but that retroactive wages fall within the

scope of what §§ 8(a)(5), (d), and 9(a) mandate the parties must

bargain over, as "[t]he categories `rates of pay' and `wages' have

been given a broad construction by the Board and the courts to cover

most of the common forms of compensation for labor performed, as

well as most types of agreements to protect standards of

compensation." I CHARLES J. MORRIS, THE DEVELOPING LABOR LAW 864 (3d ed.

Patrick Hardin ed. 1992); see 29 U.S.C.A. §§ 158(a)(5), (d), 159(a)

(1973); Capitol Roof & Supply Co., 217 N.L.R.B. 1004 (1975); cf.

Local Union No. 47, Int'l Bhd. of Elec. Workers v. NLRB, 927 F.2d

635, 640-41 (D.C. Cir. 1991). Consequently, Luden's was under the

statutory duty not to modify the wages its employees were earning on

July 2, 1991 (when Luden's termination of the 1988 CBA became effec-

tive) unilaterally, unless, of course, it first bargained with the

Union to impasse (or the Union consented). This probably did not

happen prior to Luden's November 4 institution of the new wage

scale. It therefore would appear that the Union could have had the

NLRB interpret Article XXIX of the 1988 CBA to determine what the

wages were on July 2, but in fact it did not ask the NLRB to do so

(although it did unsuccessfully bring an unfair labor practices

charge against Luden's on other counts, see supra at Error! Bookmark

not defined. n.Error! Bookmark not defined.). See, e.g., Derrico v.

Sheehan Emergency Hosp., 844 F.2d 22, 26 (2d Cir. 1988) ("The terms

of an expired agreement . . . retain legal significance because they

define the status quo" from which neither party may depart before

bargaining to impasse.).

33

implicates primarily the interpretation and application of the 1988

and the implied-in-fact CBAs, over which § 301 grants federal courts

jurisdiction, not the interpretation and application of the NLRA,

over which the Board maintains special expertise. See, e.g., Smith

v. Evening News Ass'n, 371 U.S. 195, 197-98, 83 S. Ct. 267, 268-69

(1962) (holding courts and the Board exercise concurrent jurisdic-

tion over breaches of CBAs that amount to an unfair labor practice).

In appreciation of this distinction, the Board itself has adopted a

system of prearbital deferral which exalts the parties' agreed-upon

method to resolve a dispute above Board proceedings. See Collyer

Insulated Wire, 192 N.L.R.B. 837 (1971). See generally II CHARLES J.

MORRIS, THE DEVELOPING LABOR LAW 1016-49 (3d ed. Patrick Hardin ed. 1992).

We highlight these observations because the same might not be true

for subjects of mandatory bargaining whose unilateral modification

does constitute an unfair labor practice.0

Luden's also contends that an implied-in-fact

contract approach is incompatible with Litton's concentration on the

contractual moorings of the duty to arbitrate. Suppl. Br. of

Appellee at 8-13. In Litton the Court announced firmly that under

the NLRA "arbitration is a matter of consent, and . . . will not be

imposed upon parties beyond the scope of their agreement." 111 S.

Ct. at 2222. Our analysis complies with that principle, contrary to

Luden's supposition, for we recognize that it generally is the

parties' actual (albeit implied-in-fact) agreement to continue in

effect the arbitration term of the lapsed CBA absent contrary

0

We deem it notable also that our decision will not threaten to

inundate the federal courts with § 301 suits which should by statu-

tory design proceed as unfair labor practice charges before the

Board.

34

indications.0 Because the duty to arbitrate we recognize is rooted

0

The dissent suggests that we may be employing a quasi-contract

rather than an implied-in-fact contract approach. See infra at X

(dissenting opinion at 3-4). As the preceding discussion should

make clear, such is not the case. Our approach only recognizes that

the parties, by not clearly disavowing or otherwise repudiating an

arbitration clause, objectively manifested their intent to continue

the arbitration clause in effect; either party is entitled, however,

to reject the arbitration provision at any time. See supra at 29.

The same would not be true were we to tread down

the quasi-contract path, as such a "contract" is not predicated "on

the apparent intention of the parties to undertake the performances

in question." REST.2D CONTRACTS § 4 cmt. b (1981); accord 1 CORBIN ON

CONTRACTS § 19, at 44 (defining a quasi-contract as "an obligation

that is created by the law without regard to expression of assent by

either words or acts"); 1 WILLISTON ON CONTRACTS § 1:6, at 25 (4th ed.

Lord ed. 1990) ("Quasi contractual obligations are imposed by the

courts for the purpose of bringing about a just result without

reference to the intention of the parties."). While the boundary

line between contract and quasi contract may be "wavering and

blurred," 1 CORBIN ON CONTRACTS § 19, at 44, the difference is real.

Instead, our conclusion is based on the "objective"

in lieu of the "subjective" theory of contract formation. The

subjective theory has been roundly rejected by courts, commentators,

and, of greatest moment, by this Court, in favor of the objective

one. See Mack Trucks, 856 F.2d at 592 (holding in context of a CBA

that "[t]he parties' objective intent to create a contract is

relevant -- not their subjective beliefs"); e.g., Warehousemen's

Union Local No. 206 v. Continental Can Co., 821 F.2d 1348, 1350-51

(9th Cir. 1987); REST.2D CONTRACTS § 19(3) (1981) ("The conduct of a

party may manifest assent even though he does not in fact assent.

In such cases a resulting contract may be voidable because fraud,

duress, mistake, or other invalidating cause."); id. § 2 cmt. b

("The phrase `manifestation of intent' adopts an external or

objective standard for interpreting conduct; it means the external

expression of intention as distinguished from undisclosed

intention."); I FARNSWORTH ON CONTRACTS § 3.6 (1990); 1 WILLISTON ON

CONTRACTS § 3:5 (4th ed. Lord ed. 1990); Randy E. Barnett, A Consent

Theory of Contract, 86 COLUM. L. REV. 269 (1986); Clare Dalton, An

Essay in the Deconstruction of Contract Doctrine, 94 YALE L.J. 997,

1042-45 (1985). A famed, if hyperbolic, depiction of the objective

theory was made by Judge Learned Hand:

A contract has, strictly speaking, nothing to do with the

personal, or individual, intent of the parties. A con-

tract is an obligation attached by the mere force of law

to certain acts of the parties, usually words, which

ordinarily accompany and represent a known intent. If,

however, it were proved by twenty bishops that either

party, when he used the words, intended something else

35

in an implied-in-fact CBA, a contractual agreement which like any

other is predicated on the parties' manifest intent and not on any

statutory or legal duty, cf. Indiana & Mich. Elec. Co., 284 N.L.R.B.

at 57, our decision does not run afoul of Litton's teachings that a

court must decide whether an issue is arbitrable, and that it must

do so on the basis of the parties' contractual consent thereto, see

Litton, 111 S. Ct. at 2222, 2226, 2227.

IV. CONCLUSION

For the foregoing reasons, we hold that in a

continuing employment relationship an arbitration clause may survive

than the usual meaning which the law imposes upon them, he

would still be held, unless there was some mutual mistake,

or something else of that sort.

Hotchkiss v. National City Bank of N.Y., 200 F. 287, 293 (S.D.N.Y.

1911), aff'd, 201 F. 664 (2d Cir. 1912), aff'd, 231 U.S. 50, 34 S.

Ct. 20 and 231 U.S. 60, 34 S. Ct. 22 (1913).

The dissent correctly points out that the record

does not disclose the parties' subjective understanding of the

implied-in-fact CBA. See infra at X (dissenting opinion at 2).

Since we are proceeding under an objective theory of contract

formation, and since the record does not disclose that both parties

in fact intended for the arbitration clause to cease existing, the

natural result is to give effect to the parties' objective mani-

festations of intent. The formation of the implied-in-fact CBA

would not be defeated just because one party was not sure whether a

right under a term of the the lapsed CBA continued in effect;

parties often have doubts about the precise contours of their rights

and obligations, even under well-drafted written agreements, and

such uncertainty does not negative the right. Assuming an objective

manifestation of intent by both parties necessary for the formation

of an implied-in-fact CBA, a term may be included as a part of the

CBA unless both parties subjectively intended that it not be.

The burden to come forward with evidence that no

implied-in-fact CBA arose because both parties intended it not to

arise naturally rests on the party attempting to avoid being bound

by its objective manifestations. The same holds true for any

particular term which the implied-in-fact CBA would otherwise

incorporate.

36

the expiration or termination of a CBA intact as a term of a new,

implied-in-fact CBA unless (i) both parties in fact intend the term

not to survive, or (ii) under the totality of the circumstances

either party to the lapsed CBA objectively manifests to the other a

particularized intent, be it expressed verbally or non-verbally, to

disavow or repudiate that term. This result injects substantially

more stability and certainty into labor law, and promotes the

primary statutory objectives of peaceful and stable labor relations

underpinning the NLRA, at the slight cost of a notice requirement

forcing a party to make clear its wish no longer to abide by the

arbitration clause.

In the circumstances of this case, where neither

party in any palpable way challenged the continued vitality of the

arbitration provision in particular (as opposed to the CBA as a

whole) before the dispute erupted, and where no evidence shows that

both the parties in fact intended their obligation to arbitrate

grievances to be discharged, we think that the parties' duty to

arbitrate grievances according to the terms of their 1988 CBA was

never totally discharged. In other words, Luden's general,

undifferentiated termination of the 1988 CBA effective July 2, 1992

merely transmuted the parties' duty to arbitrate into a term of an

implied-in-fact CBA which the parties formed on that date.

Accordingly, we will vacate the order and

injunction entered by the district court, and will remand with

instructions to direct the parties to proceed to arbitrate the

retroactive wage grievance. The parties shall bear their own costs.

37

38

Luden's Inc. v. Bakery, Confectionery and Tobacco Worker's

International Local Union 6

No. 92-1982

ALITO, Circuit Judge, dissenting.

I would affirm the decision of the district court.

For essentially the reasons explained by that court (see Luden's

Inc. v. Local Union No. 6, 805 F. Supp. 313, 323-27 (E.D. Pa.

1992)), I would hold that the union's grievance concerning the

retroactivity of the proposed wage increase was not subject to the

arbitration provision of the terminated 1988 collective bargaining

agreement.

I would not reach the theory on which the court's

decision is based, i.e., that the parties, upon the termination of

the 1988 agreement, entered into an implied-in-fact agreement

containing an arbitration requirement similar to that in the 1988

agreement. The union did not advance this theory in the district

court or in its brief in our court. Indeed, the union does not

appear to have relied on the theory of an implied agreement until

after this court requested the parties to submit post-argument

memoranda addressing this subject. Under these circumstances, I do

not think that it is necessary or appropriate to reach this theory,

which may have considerable precedential importance.

While I am not willing, without the benefit of full

briefing and argument, to express any conclusive views concerning

39

the court's theory, I will say that I have reservations about the

correctness of the court's analysis. At the outset, I am uncertain

that the parties reached any implied-in-fact agreement

after the 1988 agreement was terminated. I agree that a party's

conduct following the expiration of a contract may manifest assent

to be bound by a new, tacit contract, but I am not sure that the

conduct of Luden's in this case manifested such assent. After all,

Luden's took pains to terminate the 1988 collective bargaining

agreement. While it appears to be true that "Luden's kept the doors

to its business open, invited its employees to enter, and conducted

business as usual" (Maj. typescript 19), I am not sure that this

conduct should be interpreted as a manifestation of assent to a new,

tacit contract, particularly since federal labor law placed

limitations on Luden's ability to engage in a different course of

conduct. See Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 198-

99 (1991) (concerning an employer's unilateral changes in terms and

conditions of employment); Stokely-Van Camp, Inc., 186 N.L.R.B. 440

(1970) (concerning pre-impasse lock-outs).

Even assuming for the sake of argument that the

parties entered into some type of implied agreement, I am not

certain that this agreement also contained an arbitration

requirement. The rules set out in section 201 of the Restatement

(Second) of Contracts seem potentially applicable. That provision

states:

(1) Where the parties have attached the same meaning to a

promise or agreement or a term thereof, it is interpreted

in accordance with that meaning.

(2) Where the parties have attached different meanings to

a promise or agreement or a term thereof, it is

40

interpreted in accordance with the meaning attached by one

of them if at the time the agreement was made

(a) that party did not know of any different meaning

attached by the other, and the other knew the meaning

attached by the first party; or

(b) that party had no reason to know of any different

meaning attached by the other, and the other had reason to

know the meaning attached by the first party.

(3) Except as stated in this Section, neither party is

bound by the meaning attached by the other, even though

the result may be a failure of mutual assent.

Under the these rules, the meaning attached by each

of the parties is important, but in this case the record does not

disclose what meaning either party attached to the implied agreement

when it was formed. In particular, the record does not contain any

stipulation or affidavit indicating that either party believed that

the implied contract contained an arbitration requirement.

Consequently, I find it difficult to see how the court can hold at

this juncture that the implied contract included such a requirement.

On the assumption that the issue of an implied-in-fact contract is

properly before us, I am inclined to think that the most that the

court could do is to reverse the award of summary judgment for

Luden's and remand for further proceedings (and perhaps for a trial)

on the question whether the implied-in-fact contract contained an

arbitration agreement.

Because the court does not seem to be concerned

about the meaning that the parties attached to their putative

agreement, the court's decision does not appear to be based on a

contract that is implied in fact, that is, "an agreement . . .

founded upon a meeting of minds, which, although not embodied in an

2

express contract, is inferred, as a fact, from conduct of the

parties showing, in the light of the surrounding circumstances,

their tacit understanding." Baltimore & Ohio R.R. v. United States,

261 U.S. 592, 597 (1923). Rather, the court's decision seems to be

based on "an agreement `implied in law,' more aptly termed a

constructive or quasi contract, where, by fiction of law, a promise

is imputed to perform a legal duty." Id. The court summarizes its

holding as follows:

[W]e hold that in a continuing employment relationship an

arbitration clause may survive the expiration or

termination of a CBA intact as a term of a new, implied-

in-fact CBA unless either or both parties in fact intend

the term not to survive, or under the totality of the

circumstances either party to the lapsed CBA objectively

manifests to the other a particularized intent, be it

expressed verbally or non-verbally, to disavow or

repudiate that term.

Maj. typescript at 34. This flat rule is suggestive of an

obligation that arises by operation of law, not one based on an

actual, albeit tacit, agreement between two particular parties.

If this interpretation of the court's decision is

correct, I have serious reservations whether that decision is

consistent with the Supreme Court's refusal in Litton, 501 U.S. at

200-01, to recognize a legal duty to arbitrate disputes arising

after a collective bargaining agreement expires. In Litton, the

Court "reaffirm[ed] . . . that under the NLRA arbitration is a

matter of consent, and that it will not be imposed upon parties

beyond the scope of their agreement." Id. at 201.

For these reasons, I am not willing at this point

to endorse the court's analysis, and I therefore respectfully

dissent.

3