On June 24, 2010, the U.S. Supreme Court issued a pro-employer opinion in Granite Rock, Inc. v. International Brotherhood of Teamsters, et al., (pdf) providing valuable guidance on the arbitrability of disputes over the timing of the formation of collective bargaining agreements.

The Court (7-2) held that the question of exactly when the parties formed an agreement to arbitrate certain disputes was not itself subject to resolution through arbitration. The Court also declined to recognize Granite Rock’s cause of action under Section 301 of the Labor Management Relations Act (LMRA) against the International Brotherhood of Teamsters’ (IBT) for tortious interference with a collective bargaining agreement. The Court remanded the case to the lower court to allow Granite Rock to proceed against the International on the theory that the local union was acting as the IBT’s agent when it refused to abide by the no-strike clause of the parties’ collective bargaining agreement.

The underlying dispute involved a June 2004 strike initiated by Teamsters Local 287 to force Granite Rock to accept its demands for a new labor contract. On July 2, 2004, while the strike was ongoing, the parties agreed on the terms of a new collective bargaining agreement. Local 287 submitted the new agreement to its membership for ratification that day.

Despite the new agreement, Local 287 continued its strike activities, insisting that Granite Rock waive its right to take action against individual employees for their misconduct during the strike. Granite Rock refused to agree to hold the strikers harmless and informed the union that the continuation of the strike was in violation of the new contract’s no-strike provision. At the direction of the IBT, the local union refused to end its strike. Granite Rock then sought an injunction in federal court, adding a claim for tortious interference with the collective bargaining agreement against the IBT under section 301 of the LMRA, based on the International’s support of the strike and continued financial and legal support to Local 287. In response, the union asserted that the new agreement was not effective until it held a second ratification vote on August 22, 2004, after which the union finally called off the strike, and the employees returned to work. The union claimed that the no-strike clause of the new contract did not prevent its ongoing strike activity between July 2 and August 22. Moreover, the union argued that the dispute over the effective date of the contract should be submitted to arbitration per the agreement’s arbitration clause.

During the trial phase in the U.S. District Court for the Northern District of California, a number of Granite Rock employees came forward to testify that the union had in fact submitted the agreement to its membership for ratification on July 2. The district court agreed, finding the agreement to be in effect as of July 2.

The district court dismissed Granite Rock’s claim of tortious interference on the basis that Section 301 only recognizes a cause of action for breach of a labor agreement, and the IBT was not a signatory to the agreements in question. The Ninth Circuit affirmed the district court on the tortious interference claim. The Ninth Circuit reversed the district court, however, on the issue of whether the effective date of the collective bargaining agreement was subject to arbitration. The court ruled that this issue was subject to arbitration and should not have been decided by the district court. The court reasoned that the dispute over the agreement’s effective date was bound and related to the dispute over the union’s strike (which was itself subject to arbitration), and cited the “national policy favoring arbitration” where ambiguities exist as to the scope of an agreement to arbitrate.

The Supreme Court agreed with Granite Rock and overruled the Ninth Circuit, holding that contract formation and the date on which it occurred is properly decided by the court, not the arbitrator. The decision reinstates the unanimous jury verdict that the collective bargaining agreement containing a no-strike clause was ratified on July 2, and was in place when Local 287 resumed its strike. On the second issue, the Court declined under the circumstances of the case to hold that a federal cause of action for tortious interference could be brought against the IBT. The Court remanded the case, however, in order to allow Granite Rock to proceed against the IBT on the theory that the local union was acting as the IBT’s agent (or alter ego) when it disavowed the collective bargaining agreement. As a result, Granite Rock still has the opportunity to proceed on a cause of action against the international union for interfering with the collective bargaining agreement between the local union and the employer.

This entry was written by Jack Lambremont.

For more information on this decision and its implications, see Littler's ASAP:  U.S. Supreme Court Rules that Contract Formation Issues Are for Court Determination and Provides Guidance for Litigation Against International Union by Garry Mathiason, Alan Levins, Adam J. Peters and Rachelle Wills.