Sixth Circuit Affirms Dismissal of Defamation and Hybrid §301/Fair Representation Claims Against Chillicothe Employer

On Friday, the Sixth Circuit Court of Appeals affirmed a summary judgment entered in favor of a Chillicothe employer on defamation and hybrid §301/fair representation claims brought by a terminated union employee. Blesedell v. Chillicothe Telephone Co., No. 15-354 (6^th Cir. 1-22-16).   In that case, the plaintiff had been terminated after an investigation revealed potential misconduct and then an attempted cover-up by the employee (as well as additional allegations).  His union ultimately decided not to pursue arbitration of the decision after its own investigation.  The plaintiff challenged the termination and also alleged defamation based on what the Human Resources Manager allegedly told the union and the sheriff’s office.  The trial court granted summary judgment because the union did not breach its duty of fair representation and because the statements made by the HR Manager could not be proven to be false and/or were protected by a qualified privilege.   Although the employee provided the union with written statements from witnesses (who were not interviewed by the union) and was prevented from attending grievance meetings, he could not show unfair representation by the union.    The Court of Appeals affirmed.

According to the Court’s opinion, the employer frequently recorded conversations between employees and with customers.  The plaintiff was suspected of shirking work and falsifying his time card on December 4.  An investigation could not substantiate that he had performed the work he claimed on his time card to have performed on the afternoon in question.  After he was questioned, he requested another employee to modify a work ticket to reflect that he had performed certain work recorded on December 9 on December 4.  However, there were recorded conversations about the December 9 work which called that version into question.  Then, the employee claimed that he had performed the work on both dates. 

Then, a caller reported that the plaintiff had performed work on their property on December 4 (and later substantiated that with a written statement).  However, after listening to a recording of that conversation, the employer and union believed that the plaintiff was the caller.  Then, the plaintiff reported to the union that he had performed a third work request on that afternoon as well.   A union officer attempted to recreate the plaintiff’s version of events, but found it to be physically impossible to have occurred as he had described.  For instance, it believed that he would have had to have driven his truck to have gotten all of the work done as described, but the GPS showed that his truck never moved that afternoon.   In the meantime, another employee accused him of inappropriate conduct, and of trading company equipment for illegal drugs.   The Company decided to terminate his employment and the grievance process ensued.  The plaintiff was awarded unemployment compensation, but the union officers voted to not pursue arbitration of his claim because they believed that it would be fruitless and never provided the employer with written statements it had obtained from the plaintiff or his alleged witnesses. 

Finally, the plaintiff reported to the Sheriff’s office that he had been threatened by the co-worker who had accused him of inappropriate conduct and taking illegal drugs.   A deputy contacted the HR manager and wrote down that she was told that the plaintiff had been fired because there had been allegations that he was trading parts for illegal drugs.  The plaintiff filed suit claiming that he had been terminated without just cause under the bargaining agreement (the §301 claim), that the union had failed to fairly represent him, and that the HR manager had defamed him by statements made to the union and to the deputy sheriff.  The trial court granted summary judgment to the employer.

In order to prevail on his hybrid claim against the employer and the union, the plaintiff was required to prevail on both his §301 claim and his fair representation claim.  Because the plaintiff could not prevail on his fair representation claim, the court never addressed whether his termination had been for “just cause” under the bargaining agreement.   “A plaintiff may prove breach of duty by showing that ‘the union’s actions or omissions during the grievance process were arbitrary, discriminatory, or in bad faith.’”   With respect to a union acting arbitrarily, a plaintiff must prove that the union’s “conduct “is so far outside a wide range of reasonableness as to be irrational.”  Because the union here had conducted its own investigation, reviewed and reasonably weighed the evidence and consulted with the international union, its actions could not be deemed arbitrary.  Its internal investigation need only be reasonable, not perfect.  “[U]nion agents are not lawyers,” and “mere negligence or poor judgment” alone is not sufficient to prove breach of duty.  The union had requested and reviewed all of the employer’s evidence, attempted its own re-creation of the alleged events and reasonably determined that the plaintiff’s version was not credible even if supported by written witness statements and even if the union did not personally interview those witnesses.   There was no evidence that a more thorough investigation by the union would have changed its decision. 

The Court also rejected the plaintiff’s argument that he was unfairly excluded from the grievance process.  The union’s policy was to exclude grievants from the step 3 meetings and the employer refused to permit him back onto its property after his termination.   Otherwise, the grievant was kept informed of the process and was regularly updated.  In any event, a “union’s mere negligence in keeping the grievant informed about the grievance process was not enough to prove breach of duty.”

The union’s refusal to contest more vigorously the employer’s evidence was also not inappropriate.  The recordings of the telephone conversations which attempted to substantiate the plaintiff’s version of events reasonably “posed an insurmountable hurdle” to prevailing in any arbitration.  It was not irrational to believe that none of the evidence provided by the plaintiff would have caused the employer to reconsider its decision.  

There was also no evidence that the union’s actions were motivated by discrimination or that he was treated differently than substantially similar grievants.  The Court also rejected the bad faith argument even though the plaintiff had been removed as a union steward because of a belief that he was undermining the union’s business manager.  The Court also found that the union officer’s desire for a non-union management position at the employer was insufficient evidence of bad faith in the absence of proof of personal animosity. 

As for the defamation claims, the court found that the alleged statements to the deputy sheriff by the HR Manager could not be defamatory because the plaintiff himself had relayed substantially similar information to the deputy approximately 30 minutes earlier.  “A plaintiff may therefore prove defamation only if the third party receiving the publication understands its defamatory meaning.”  Because the deputy could not have understood the statements to be defamatory after hearing much the same information earlier from the plaintiff, the alleged statement is not actionable.   Further, it was true that allegations about drug use had been made against the plaintiff and there is no indication that the HR Manager conveyed that he believed those allegations to be true or that he simply conveyed that the plaintiff had been trading company equipment for drugs.  Instead, he relayed that such allegations had been made.  

In addition, the HR Manager’s statements to the union officers during the grievance meetings about the plaintiff’s alleged misconduct were protected by qualified privilege.  In any event, playing recordings for the union officers – of the co-worker’s allegations about inappropriate conduct and trading company equipment for drugs --  is not actionable as a defamatory statement.   The HR Manager never indicated that he believed the allegations, but was simply informing the union that the allegations had been made.  

Finally, telling the union officers that the plaintiff falsified a company record was protected by a qualified privilege because the HR Manager – while probably incorrect – had interviewed a couple of employees to determine if someone else had amended the work ticket to reflect that the work had been performed on December 4 instead of or in addition to the work performed on December 9. “Ohio extends a privilege to statements made in good faith, where ‘an interest [is] to be upheld, [the] statement [is] limited in its scope to this purpose, [there is] a proper occasion, and publication [is] in a proper manner and to proper parties only.’”  In this case, his “statement about the ticket was published only to necessary parties, the Union officers in charge of the grievance.  Finally, [his] statement was limited in scope because it was couched as a “belief.”  The plaintiff could not overcome this privilege without evidence of actual malice, i.e., evidence that the HR manager knew or recklessly disregarded that the information was false.  

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Union Can Challenge RIF and Non-Recall of Employees Except Where Employees Signed Release

Last week, the Sixth Circuit Court of Appeals reversed a summary judgment in favor of an employer against a union which challenged the layoff and non-recall of five union employees during a reduction in force.  International Union, UAW v. General Motors LLC, No. 12-2327 (6^th Cir. 7-10-13). The plaintiffs had been laid off out of order of seniority purportedly because they were not capable of performing work being performed after a reorganization.  They were not recalled to work in inverse order of seniority for the same reason.  The Court found that the union raised a material issue of fact about whether the employees were qualified to perform work that was being performed in the factory after the reorganization and by less senior employees who were recalled to work.   However, because two of the employees had signed a release in connection with their separation which waived their right to challenge their termination and any right to future employment, their individual claims were barred.

The union introduced four pieces of evidence which contradicted the employer’s position that the employees were incapable of performing work that remained in the factory.  First, it was undisputed that the employees were competent and performed their former jobs acceptably prior to the reorganization.   Second, the union proffered an affidavit by a line-employee stating that work previously performed by the five employees was still being performed, other than that all employees had to learn a new computer program.   The Court found the district court erred in excluding his testimony on the grounds that he was not a “supervisor” and was unqualified to explain whether any jobs consisted solely of novice-level work.  Third, the employer had recalled novice-level employees with less seniority. While the union might have been incorrect, that was an issue of credibility.  Finally, the union disputed the employer’s characterization of the employees’ qualifications since they were rated higher than the employer now claimed.  While the union might have been utilizing outdated information, that argument again went to credibility and weight instead of materiality.

Two of the five employees received severance pay in exchange for signing a release of claims that contained, in part, language that barred all:

 “claims, grievances, lawsuits, demands and causes of action, whether known or unknown . . . in any way relating to [the] employment and/or separations from General Motors Corporation . . .  .  “I understand that GM does not intend for me to be eligible at any time in the future for reemployment by GM . . . .”

The Court rejected the argument that the releases could not waive post-termination claims because the employees were aware of their recall rights at the time they signed the release and were aware that they were signing away their right to future employment.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Supreme Court: When the Contract Was Formed is Disputable and Not Arbitrable Even If It Seems Inconsistent

There's nothing like inconsistency to keep lawyers employed. On Friday, the Supreme Court issued yet another arbitration decision in which it reversed the Ninth Circuit (which uncharacteristically found the dispute to be subject to the arbitration clause). Granite Rock Co. v. International Brotherhood of Teamsters, No. 08-1214 (6/24/10). However, despite what the Court harped on last week in Rent-a-Center (that objections to the contract as a whole cannot prevent arbitration), in this case, the Court found that a dispute involving when the contract was formed had to be decided by the trial court instead of the arbitrator because the dispute was not arbitrable under the union's theory, but was arbitrable under the employer's. In other words, disputes over the formation of the arbitration clause (and the contract as a whole) may be decided by the trial court instead of the arbitrator. Moreover, the scope the arbitration clause did not include disputes over whether a contract was even formed. Finally, the Court rejected the employer's attempt to create a federal cause of action for tortious interference with contract under § 301.

According to the Court's opinion, the employer's CBA with the local union expired on April 30 and, following an impasse in negotiations, the union went on strike in June until July 2 when the members ratified a new CBA. The new CBA contained arbitration and no-strike provisions and required the employees to return to work on July 5. Prior to the ratification vote, the local's business manager requested the employer to consider a return-to-work agreement which would hold harmless any union member who was responsible for any damages incurred during the strike and picketing. The employer refused. The international union had advised the local union during negotiations and the strike and had objected to the members' returning to work without a back to work agreement protecting the members and the local union from damages caused during the strike. Thus, the international union convinced the local union to continue the strike beyond July 5, expanded the strike beyond the single facility at issue and informed the employer that it would permit the employees to return to work only after the employer agreed to the requested return-to-work agreement. On July 9, the employer filed a lawsuit in federal court under § 301 of the LMRA to enjoin the strike (as a violation of the parties' CBA) and for strike-related damages. In its defense, the union contended that the CBA had never been ratified (and, thus, could not be breached) and the trial court refused to enjoin the strike. Subsequently, 12 union members testified to the July 2 ratification vote and the employer moved for a new trial. The union then held another ratification vote on August 22 (when the members again voted to approve the new CBA) and announced the vote and the cessation of the strike on September 12 in order to render the employer's motion moot as the trial court was preparing to hear it. Although the employer's request for the injunction was now moot, the court agreed to hold a new trial on the employer's motion for strike damages. The unions then demanded arbitration of the dispute and moved the court for an order compelling arbitration. The employer then amended its complaint to add a claim against the international union for tortiously interfering with its contract by convincing the local union to breach the new CBA by extending the strike beyond July 5.

The trial court refused to recognize a new federal claim under § 301 for tortious interference and dismissed that claim. It also refused the unions' request to refer the question about when the CBA was ratified to the arbitrator. Instead, a jury concluded that the CBA was ratified on July 2 (instead of August 22) and the breach of contract claim was sent to the arbitrator to determine damages. On appeal, the Ninth Circuit affirmed dismissal of the tortious interference claim, but held that the ratification dispute should have been resolved in arbitration because any ambiguity in the scope of the arbitration clause was to be resolved in favor of arbitration and because the employer conceded the applicability of the arbitration clause by filing suit for breach of the arbitration clause in the parties' contract. The Supreme Court reversed.

The primary dispute in this case centered on whether the arbitrator or the trial court should have determined the date when the CBA was ultimately ratified: Was it July 2 or August 22? The Court held that the trial court was correct to determine the date when the CBA was ratified instead of permitting an arbitrator to do so. "[W]here, as here, the date on which an agreement was ratified determines the date the agreement was formed, and thus determines whether the agreement's provisions were enforceable during the period relevant to the parties' dispute."

The Court made little attempt to harmonize its primary analysis with the Prima Paint line of cases (as typified by last week's Rent-a-Center decision). As a general rule, the trial court determines the arbitrability of a dispute, not the arbitrator (unless, of course, the parties' clearly and unmistakably delegate the decision to the arbitrator). Once a dispute is found to be within the scope of an arbitration clause by a court, then it is referred to arbitration. To succeed in avoiding arbitration, the opposing party must challenge the validity and/or scope of the arbitration clause itself. Just last week, the Court reaffirmed that when a party raises a defense that goes to the validity of the contract as a whole, but not to the validity of only the arbitration clause, then the arbitrator decides the dispute instead of the court. That being said, the Court still rejected the Ninth Circuit's application of these rules in this case:

The second principle the Court of Appeals invoked is that this presumption of arbitrability applies even to disputes about the enforceability of the entire contract containing the arbitration clause, because at least in cases governed by the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq.,
courts must treat the arbitration clause as severable from the contract in which it appears, and thus apply the clause to all disputes within its scope "'[u]nless the [validity] challenge is to the arbitration clause itself'" or the party "disputes the formation of [the] contract." (emphasis added).

According to the Court: "These principles would neatly dispose of this case if the formation dispute here were typical. But it is not." This was supposedly because the plaintiff both conceded the formation and validity of the arbitration clause. Moreover, the Court concluded that the unions,

like the Court of Appeals, over-reads our precedents. The language and holdings on which Local and the Court of Appeals rely cannot be divorced from the first principle that underscores all of our arbitration decisions: Arbitration is strictly "a matter of consent . . . ., our precedents hold that courts should order arbitration of a dispute only where the court is satisfied that neither the formation of the parties' arbitration agreement nor (absent a valid provision specifically committing such disputes to an arbitrator) its enforceability or applicability to the dispute is in issue. Ibid. Where a party contests either or both matters, "the court" must resolve the disagreement.

To start, the Court said it was the trial court's duty to determine whether the particular dispute at issue was subject to the parties' arbitration clause. Interestingly, it states that "[t]o satisfy itself that such agreement exists, the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce . . . . these issues typically concern the scope of the arbitration clause and its enforceability. In addition, these issues always include whether the clause was agreed to, and may include when that agreement was formed." (emphasis added).

The Court rejected any argument that the LMRA's rules concerning the arbitration of labor disputes differs materially from the FAA's rules concerning arbitration of commercial and other disputes. "We, like the Court of Appeals, discuss precedents applying the FAA because they employ the same rules of arbitrability that govern labor cases. "[E]ven in LMRA cases, "courts" must construe arbitration clauses because "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit."

Our cases invoking the federal "policy favoring arbitration" of commercial and labor disputes apply the same framework. They recognize that, except where "the parties clearly and unmistakably provide otherwise," . . . , it is "the court's duty to interpret the agreement and to determine whether the parties intended to arbitrate grievances concerning" a particular matter, id., at 651. They then discharge this duty by: (1) applying the presumption of arbitrability only where a validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand; and (2) adhering to the presumption and ordering arbitration only where the presumption is not rebutted.

Interestingly, this case is not materially different from any other case where one party disputes that a contract was ever formed – and by extension – an arbitration clause. One could argue that this decision will apply with equal force to future disputes under the FAA. Nonetheless, the Court concedes that not every case will require the same conclusion:

In reaching this conclusion [about the arbitrability of the formation date dispute] we need not, and do not, decide whether every dispute over a CBA's ratification date would require judicial resolution. We recognize that ratification disputes in labor cases may often qualify as "formation disputes" for contract law purposes because contract law defines formation as acceptance of an offer on specified terms, and in many labor cases ratification of a CBA is necessary to satisfy this formation requirement. See App. 349−351. But it is not the mere labeling of a dispute for contract law purposes that determines whether an issue is arbitrable. The test for arbitrability remains whether the parties consented to arbitrate the dispute in question.

In its essence, the Court refused to let the unions speak out of both sides of their mouth and be too cute by half: The unions were contending that they could not be liable for breach of the no-strike clause because the CBA was not ratified until August 22, but the unions were still seeking to compel the dispute to arbitration even though the arbitration clause likewise would not have been ratified (or enforceable) until August 22. On the other hand, if the CBA were ratified on July 2, then the unions breached the no-strike clause and the dispute would be subject to arbitration. It was this central question-- that there was no valid arbitration clause unless the CBA were ratified on July 2 -- that prompted the Court to rule in favor of the trial court's jurisdiction. When the unions attempted to fix their "cute" argument by pointing out that the CBA became effective on May 1 after it was ratified (regardless of the date), the majority rejected the argument on the grounds that it had not been raised below or to contest certiorari.

The Court's secondary analysis makes more sense: a dispute about the ratification dates did not "arise under" the CBA or fit neatly within the CBA's arbitration clause. "Section 20 of the CBA provides in relevant part that '[a]ll disputes arising under this agreement shall be resolved in accordance with the [Grievance] procedure,' which includes arbitration."

First, we do not think the question whether the CBA was validly ratified on July 2, 2004—a question that concerns the CBA's very existence—can fairly be said to "arise under" the CBA. Second, even if the "arising under" language could in isolation be construed to cover this dispute, Section 20's remaining provisions all but foreclose such a reading by describing that section's arbitration requirement as applicable to labor disagreements that are addressed in the CBA and are subject to its requirement of mandatory mediation.

The Court of Appeals erred in examining only whether the parties' dispute about the no-strike clause arose under the CBA instead of examining whether the ratification date dispute "arose under" the CBA:

The issue is whether the formation-date defense that Local raised in response to [the employer]'s no-strike suit can be characterized as "arising under" the CBA. It cannot for the reasons we have explained, namely, the CBA provision requiring arbitration of disputes "arising under" the CBA is not fairly read to include a dispute about when the CBA came into existence.

Finally, the unions argued that the employer waived its objection to arbitration when it filed suit seeking to enforce the CBA which requires the dispute to be compelled to arbitration. Although I generally do not like it when parties get too cute, this argument is at least appealing on its face. However, the Court still neatly disposed of it because it hadn't forgotten that the unions were being "too cute:"

We do not agree that by seeking an injunction against the strike so the parties could arbitrate the labor grievance that gave rise to it, [the employer] also consented to arbitrate the ratification (formation) date dispute we address above. . . . [The employer's] decision to sue for compliance with the CBA's grievance procedures on strike-related matters does not establish an agreement, "implicit" or otherwise, to arbitrate an issue (the CBA's formation date) that [the employer] did not raise, and that [the employer] has always (and rightly, . . . ) characterized as beyond the scope of the CBA's arbitration clause. The mere fact that Local raised the formation date dispute as a defense to [the employer's] suit does not make that dispute attributable to [the employer] in the waiver or estoppel sense the Court of Appeals suggested, see 546 F. 3d, at 1178, much less establish that [the employer] agreed to arbitrate it by suing to enforce the CBA as to other matters.

Justices Sotomayor and Stevens dissented from the arbitrability discussion on the grounds that when the CBA was finally executed in December, it was explicitly retroactive to May 1. (This argument had been rejected by the majority on the grounds it had not been raised before the Ninth Circuit or when challenging certiorari). It also seems a little weird to me that it would matter since the same language would typically have been present in the CBA when it was ratified – either in July or August. Any "constructive" effective date would not seem to cover the unions' defense to the breach of contract claim being asserted by the employer when that defense concerned the actual effective dates based on the actual ratification date.

The secondary holding of the Court was to reject the employer's attempt to bring a tortious interference claim under § 301. This argument was unanimously rejected by the Court. Section 301 grants the federal courts jurisdiction over difficult-to-prove breach of contract claims between employers and unions and pre-empts many (even most) state law claims. The employer sought to expand federal jurisdiction so that it could reach the international union's immoral conduct in inducing the local union to breach the CBA when it could not sue the international union for full relief under § 301 because it was not a party to the CBA. However, all of the courts of appeals have refused to expand § 301 to encompass federal tort rights. The Court was also unconvinced that alternative remedies were unavailable.

In reaching this conclusion, we emphasize that the question before us is a narrow one. It is not whether the conduct [the employer] challenges is remediable, but whether we should augment the claims already available to [The employer] by creating a new federal common-law cause of action under §301(a). That we decline to do so does not mean that we approve of IBT's alleged actions. [The employer] describes a course of conduct that does indeed seem to strike at the heart of the collective bargaining process federal labor laws were designed to protect. As the record in this case demonstrates, however, a new federal tort claim is not the only possible remedy for this conduct. [The employer]'s allegations have prompted favorable judgments not only from a federal jury, but also from the NLRB. In proceedings that predated those in which the District Court entered judgment for [the employer] on the CBA's formation date,¹⁷ the NLRB concluded that a "complete agreement" was reached on July 2, and that Local and the [ international union] violated federal labor laws by attempting to delay the CBA's ratification pending execution of a separate agreement favorable to [the international union].

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.