Kropfelder v. Snap-On Tools Corp.Kropfelder v. Snap-On Tools Corp.
Plaintiff began working for defendant Snap-on in 1979 as a stockroom warehouseman in defendant’s Baltimore area warehouse which received and sent goods from and into interstate commerce. According to Snap-on’s 1993 letter to shareholders,
1
“the foundation of Snap-on [Tools]” is “direct sales [of tools] to professional technicians in automotive service” through mobile dealer vans. In 1986, plaintiff was promoted to warehouse manager and signed an employment agreement with defendant. That
Any controversy or dispute out of or relating to this Agreement or breach thereof, including but not limited to its termination, ... shall be submitted to final and binding arbitration as the sole and exclusive remedy for any controversy or dispute.
No agreement was signed by the parties in relation to the year 1993.
During 1992, a series of thefts occurred in defendant’s Baltimore warehouse where plaintiff was the manager. On March 4, 1993, defendant questioned plaintiff about his knowledge of the thefts. Plaintiff asserts that defendant’s questioning led plaintiff to suffer severe emotional trauma and that as a result plaintiff became unable to work. Plaintiff received short-term disability leave beginning on July 27, 1993, and has not returned to work since that date. In this ease, plaintiff contends that he is entitled to receive benefits under defendant’s severance plan, which is governed by ERISA, because the Baltimore warehouse, in which he worked, closed on September 3, 1993, resulting in the elimination of his position. Defendant contends that plaintiff was not discharged as a result of the closing and is therefore not entitled to benefits under the plan. In addition, defendant claims that the said dispute is subject to arbitration in accord with the 1992 employment agreement. In response, plaintiff states that because he did not sign an employment contract in 1993, he is not bound to arbitrate the within dispute. Further, plaintiff contends that he falls within the exclusionary language of section 1 of the Federal Arbitration Act (“FAA”),
“In determining whether parties should be compelled to arbitrate, courts ‘perform a two-step inquiry ... ‘First, the court must determine whether the parties agreed to arbitrate the dispute_ [Then] it must consider whether any federal statute or policy renders the claims nonarbitrable.’ ”
Weston v. ITT-CFC,
AGREEMENT TO ARBITRATE
The general presumptions governing arbitration disputes under the FAA are set forth by Judge Russell in
Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co.,
Of course, ‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ Nonetheless, it is well settled that there exists a ‘healthy regard for the federal policy favoring arbitration.’ Indeed, the heavy presumption of arbitrability requires that when the scope of the arbitration clause is open to question, a court must decide the question in favor of arbitration. Thus ‘[a]n order to arbitrate the particular grievance should not be denied unless it may be said ■with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.’
Id. at 812 (emphasis added) (citations omitted).
In
Luden’s Inc. v. Local Union No. 6 of the Bakery,
[G]eneral 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 lapsed agreement’s terms remain the ones by which the other party will abide.
Id. at 355-56. 4
Herein, plaintiff argues that none of his employment contracts with defendant contain
In this case, the failure to sign a new agreement, without any explanation by either party, would not appear enough to rebut the presumption favoring extension of the terms of definite contracts with specific arbitration clauses — especially in the light of the strong federal policy favoring arbitration. Moreover, it appears that plaintiff has received disability benefits pursuant to the 1992 contract, past the date of expiration of that contract. Such payment and acceptance of benefits indicates, in this Court’s view, an intent to continue the terms of the prior contract.
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“[A]s with any other contract, the parties’ intentions control, but those intentions are generously construed as to issues of arbitrability.”
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
CONTRACTS OF EMPLOYMENT AND THE FAA
That brings us to the question of whether the parties are required to arbitrate pursuant to the FAA. Plaintiff claims that he is
“Since the FAA’s enactment, circuit courts have split over whether th[e] exception applies to
all
employment contracts, or only those contracts involving a class of workers actually engaged in interstate commerce.”
Crawford v. West Jersey Health Systems,
Although the Supreme Court has not decided the issue, several circuit courts have. “Courts have generally limited [the exception in § 1] to employees, unlike appellant [a stock broker], involved in, or closely related to,
the actual movement of goods in interstate commerce.” Dickstein v. du Pont,
Although at first glance it might seem likely that Congress would have intended ‘commerce’ to have the same meaning throughout the Act, the reference to ‘workers engaged in foreign or interstate commerce’ in § 1 would be surplusage if it were simply coextensive with Congress’ powers under the commerce clause. Under Southland Corp. [v. Keating,465 U.S. 1 ,104 S.Ct. 852 ,79 L.Ed.2d 1 (1984) ], § 2 gives the Act as a whole the same reach as Congress’ commerce clause power. Therefore, if Congress had wanted to excluded [sic] all employment contracts from the Act, it could simply have said ‘employment contracts’ and left it at that. Any workers beyond the reach of the commerce clause would not be covered by the Act in the first place. The language of § 1 also reinforces this view; the reference to ‘seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,’ suggests that Congress intended to refer to workers engaged in commerce in the same way that seamen and railroad workers are. 9
The Fourth Circuit last spoke directly to this issue almost forty years ago in
United Electrical, Radio & Mach. Workers v. Miller Metal Products, Inc.,
What we decide, and all we decide, is that the arbitration clause in the collective bargaining agreement here does not cover the matter of damages arising out of violation of the no-strike clause and that the provisions of the United States Arbitration Act may not be relied on to stay proceedings in a suit brought on a collective bargaining agreement entered into by workers engaged in interstate commerce as those here were engaged. 10
Id. at 224. Judge Parker expressly distinguished arbitration agreements in individual employment contracts from those in collective bargaining agreements:
It appears that the exclusion clause of the Arbitration Act was introduced into the statute to meet an objection of the Seafarers International Union; and certainly such objection was directed at including collective bargaining agreements rather than individual contracts of employment under the provisions of the statute. The terms of the collective bargaining agreement become terms of the individual contracts of hiring made subject to its provisions and the controversies as to which arbitration would be appropriate arise in almost all instances, not with respect to the individual contracts of hiring, but with respect to the terms engrafted on them by the collective bargaining agreement. It is with respect to the latter that objection arises to the compulsory submission to arbitration which the Arbitration Act envisages. No one would have serious objection to submitting to arbitration the matters covered by the individual contracts of hiring divorced from the provisions grafted on them by the collective bargaining agreements. 11
Id.
(emphases added). Thus, it would appear that the Fourth Circuit, in 1954, approved of the submission of disputes arising under individual employment contracts to ar
In the within case this Court must decide whether our plaintiff is excluded from the coverage of the FAA because of the nature of his work. In the light of the time which has passed since the Miller Metal decision, 13 the strong federal policy in favor of arbitration, and the great weight of circuit court authority, this Court is of the view that the Fourth Circuit would not, as of this date, apply the words used in Miller Metal so as to exclude § l’s application in all non-collee-tive bargaining contexts, and would instead apply the views expressed by a majority of courts that as to non-collective bargaining contracts the FAA exclüdes only those workers involved in the interstate transportation of goods.
The bulk of the decided eases which discuss the reach of § 1 relate to workers who were clearly not involved in a transportation industry. 14 The facts in the within case pose a much tougher question because plaintiffs work is closely related to interstate commerce. Plaintiff has stated in an affidavit filed in this case that his “primary function was to receive products which were trucked to the warehouse from various manufacturers, including Snap-on’s manufacturing facility in Kenosha, Wisconsin, and other manufacturers in various other states. The warehouse then stored these products until Snap-on’s dealers and industrial sales representatives ordered them from the warehouse. When an order was received in the warehouse, I was responsible for seeing that the, order was pulled, packaged for the dealer, labeled, and loaded onto trucks which delivered it to the dealers.... I actually loaded and unloaded these trucks.” Since defendant provides no factual evidence to the contrary, and does not contest plaintiffs said statement, this Court accepts the factual picture as so described by plaintiff.
Unlike seamen or railroad employees, however, plaintiff is not within a class of employees who “as to which special arbitration legislation already existed” at the time the FAA was enacted.
Tenney,
Notes
. That letter is attached to plaintiff's memorandum and is filed as an exhibit in this case.
. Plaintiff has filed as an exhibit his 1989 contract with defendant. Accordingly, it would appear that plaintiff did sign a contract with defendant in that year.
. Justice Kennedy has commented that arbitration provisions in collective bargaining agreements governed by the National Labor Relations Act may survive expiration of the agreement where, "under normal principles of contract interpretation, the disputed contractual right survives expiration of the remainder of the agreement.”
Litton Financial Printing Div. v. NLRB,
. In the within case, the employment agreement provides that "the laws of the State of Wisconsin shall govern” the interpretation of the agreement. With certain exceptions, "the parties to a contract may agree as to the law which will govern their transaction, even as to issues going to the validity of the contract.”
Kronovet v. Lipchin,
. It remains a matter of dispute between plaintiff and defendant whether any such contracts were signed in 1987 and 1988. Neither party has produced contracts covering those years.
. Plaintiff contends that he did not ask for disability benefits to be paid to him pursuant to the 1992 contract, but rather received the same at the suggestion of the branch manager. However, the manager's alleged offer to plaintiff of disability benefits at least evidences some intent on the part of defendant to abide by the terms of the 1992 agreement.
. If as plaintiff asserts, defendant purposely did not offer employees 1993 contracts in order to convert their employment into at-will employment, it is in any event to be noted that defendant would appear bound by its representations and arguments in this case that the 1992 contracts — in their entirety — extend into 1993, and that defendant would not be able to reap the benefits of the extended contracts in some respects and not in others.
. Although the parties do not address or contest the issue, statutory ERISA claims are subject to arbitration under the FAA.
See Pritzker v. Merrill Lynch, Pierce, Fenner & Smith,
. Judge Maris in Tenney noted that the only reference in the legislative history to the exclusion in § 1 came from a representative of the seamen’s union, which took " 'the position that seamen's wages came within admiralty jurisdiction and should not be subject to an agreement to arbitrate.’ " Id. at 452 (quoting H.R.Rep. No. 96, 68th Cong., 1st Sess., p. 1). In Tenney, Judge Maris wrote:
In exempting [seamen] the draftsmen excluded also railroad employees, another class of workers as to whom special procedure for the adjustment of disputes had previously been provided. Both these classes of workers were engaged directly in interstate or foreign commerce. To these the draftsmen of the Act added 'any other class of workers engaged inforeign or interstate commerce.’ We think that the intent of the latter language was, under the rule of ejusdem generis, to include only those other classes of workers who are likewise engaged directly in commerce, that is, only those other classes of workers who are actually engaged in the movement of interstate or foreign commerce or in work so closely related thereto as to be in practical effect part of it. The draftsmen had in mind the two groups of transportation workers as to which special arbitration legislation already existed and they rounded out the exclusionary clause by excluding all other similar classes of workers.
Id. at 452-453 (emphasis added) (footnotes omitted).
. The Fourth Circuit has subsequently affirmed that "we have consistently recognized that the FAA does not apply to disputes stemming from collective bargaining agreements."
Domino Sugar v. Sugar Workers Local 392,
. In Miller Metal, Judge Parker stated that, at least with regard -to collective bargaining agreements, the Fourth Circuit was not “impressed by the argument that the excepting clause of the statute should be construed as not applying to employees engaged in the production of goods for interstate commerce as distinguished from workers engaged in transportation in interstate commerce, as held by the majority in Tenney." Id. at 224. That statement was made in the context of arbitration agreements contained in collective bargaining agreements.
.
See also
Judge Parker’s earlier opinion in
International Union United Furniture Workers v. Colonial Hardwood Flooring Co.,
. Judge Shoob noted that the Fourth Circuit's distinction in
Miller Metal,
with regard to § l’s application, between workers involved in transportation, on the one hand, and those, on the other hand, involved in manufacturing "dates from a period when arbitration remained a somewhat disfavored means of dispute resolution.”
Hydrick v. Management Recruiters Int'l, Inc.,
.See Erving,