Luden's Inc. v. Local Union No. 6 of the Bakery, Confectionery & Tobacco Workers' International Union
Luden's Inc. v. Local Union No. 6 of the Bakery, Confectionery & Tobacco Workers' International Union
Opinion of the Court
OPINION OF THE COURT
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”).
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 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*350 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’etre for this -litigation.
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.
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 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, Lu-den’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, Lu-den’s disclosed a changed strategy. On that occasion, Watson notified the Union’s business representative Francis Ryan that Lu-den’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 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
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.
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 retroactivity 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 membership’s vote. Stip. of Facts ¶ 21.
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 retroac-tivity 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 350 n. 2) 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 ret-roactivity of wages under the “lapsed” 1988 CBA was not arbitrable.
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;
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, 51 L.Ed.2d 300 (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.
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, 103 L.Ed.2d 585 (1989); Huettig & Schromnn, 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, 112 L.Ed.2d 1100 (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, 50 L.Ed.2d 748 (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.
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’& disavowal that it was overruling Nolde on the other hand. See Litton, 501 U.S. at 193-95, 205-
As far as we can tell, other courts have uniformly resolved this tension by reading Litton as having impliedly overruled the portion of Nolde holding that a court answering the arbitrability question is not to look to the merits of the underlying claim.
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].” 501 U.S. at 202, 111 S.Ct. at 2223 (quoting Textile Workers Union v. Lincoln Mills of Ala., 353 U.S. 448, 451, 77 S.Ct. 912, 915, 1 L.Ed.2d 972 (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, 7 L.Ed.2d 593 (1962); John
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” tó 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, 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.
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
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 termination 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.
Consistent with that observation is the fact that neither party clearly notified the other—whether by an express
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 “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.
Turning now specifically to arbitration clauses, we think that federal labor policy condones their incorporation into an implied-in-fact CBA.
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*360 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, 4 L.Ed.2d 1409 (1960)).
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, 4 L.Ed.2d 1409 (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, 501 U.S. at 207-08, 111 S.Ct. at 2226.
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 swpra at 359 n. 20. 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
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, 8 L.Ed.2d 230 (1962).
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, 501 U.S. at 197-201, 111 S.Ct. at 2221-22; supra at 359 n. 20; 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
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 unilateral changes.
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 member of 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, 70 L.Ed.2d 833 (1982) (“The Board is vested with primary jurisdiction to determine what is or is not an unfair labor practice. As a general rule, 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,
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.” 501 U.S. at 201, 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 indications.
IV. Conclusion
For the foregoing reasons, we 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 (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.
. 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.
. 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 grievance 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 parly may request the American Arbitration 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.
. The Union, distressed over the letters Laden'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 "violatpng] its obligation to bargain in good faith by both threatening 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.
. 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.
Stip. of Facts, Exh. G (Letter from Watson, Lu-den'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, Lu-den's Plant Manager, to Luden's Employees (July 15, 1991)).
.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”
. See AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986) (holding that ”[u]n-less 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”).
. 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 judgment), 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 construction of the relevant provision. Of course, since we will vacate the court's judgment, collateral estoppel will not bar the arbitrator from reconsidering afresh the district court's ruling.
. 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, 89 L.Ed.2d 648 (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, 4 L.Ed.2d 1409 (1960), quoted infra at 360; United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 596, 80 S.Ct. 1358, 1360, 4 L.Ed.2d 1424 (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, 4 L.Ed.2d 1403 (1960) ("The courts ... have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim.” (footnote omitted)).
. The Court, moreover, took this prescription quite seriously, for, as Justice Marshall pointed out in his dissent, it was debatable whether the obligation at issue in Litton arose under the expired CBA or not. Compare Litton, 501 U.S. at 209-10, 111 S.Ct. at 2227 (construing the qualified seniority provision as not having vested) with id. at 215-18, 111 S.Ct. 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, 501 U.S. at 218-20, 111 S.Ct. at 2232 (Stevens, J., dissenting) (declining to address the merits of the dispute).
. 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”).
. Both parties fully briefed the question of law presented, and neither party requested a remand to supplement the stipulated facts for purposes of their cross-motions for summary judgment.
. 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 maintenance 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, 7 L.Ed.2d 503 (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. Smith v. Evening News Ass'n, 371 U.S. 195, 199, 83 S.Ct. 267, 270, 9 L.Ed.2d 246 (1962) ("[Section] 301 is not to be given a narrow reading.”); Garrett R.R. Car & Equip., Inc. v. NLRB, 683 F.2d 731, 737 (3d Cir. 1982).
. 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.”) ("[Acceptance 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.
. 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 may otherwise clearly transmit an intent to be rid of the arbitration provision. In context of this opinion, clear cases of implicit repudiation normally fall within the domain of what we denote as disavowals or repudiations.
. 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 make "no retroactive payments.” Letter from Donald P. Watson, Plant Manager, 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.
. 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 development. We can provide some guidance now, though. Since the peaceful continuation of the contractual relationship is the linchpin 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 Steelworkers v. American Mfg. Co., 363 U.S. 564, 567, 80 S.Ct. 1343, 1346, 4 L.Ed.2d 1403 (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, - U.S. -, 112 S.Ct. 1172, 117 L.Ed.2d 417 (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 provision. 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).
. 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 tardiness-es 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
. 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, - U.S. -, 112 S.Ct. 1172, 117 L.Ed.2d 417 (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. 1987); 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, Teamsters & 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, 93 L.Ed.2d 702 (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 [established during the lifespan 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. 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).
. 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 contract is not dependent on the reduction to writing of their intention to be bound. Instead, what is required is conduct manifesting an intention to abide by the terms of an agreement.” (footnote and citations omit
. 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 357 n. 16.
. 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 arbitrators 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, 80 L.Ed.2d 366 (1984))); Clarence M. Updegraff, Arbitration and Labor Relations 21-22 (1978) (enumerating the advantages of arbitration over litigation); Frank Elkouri & 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 reflected in particular agreements.” United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 596, 80 S.Ct. 1358, 1360, 4 L.Ed.2d 1424 (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.
. 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, 11 L.Ed.2d 472 (1964).
. 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 356 n. 14, 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 intend for that term not to survive the lapse of the CBA.
. 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 occurrences 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 contractual right survives expiration of the remainder of the agreement.
501 U.S. at 205, 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 360.
.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 where, as here, the parties were negotiating a new agreement after the termination of the previous one, see Litton, 501 U.S. at 197-99, 111 S.Ct. at 2221.
. Thus although we acknowledge and appreciate the dissent's concern that in some circumstances "federal labor law placets] limitations on [the employer's] ability to engage in a different course of conduct," infra at 365, because arbitration clauses have definitively been excluded from the ban against unilateral modification of mandatory subjects of bargaining, we do not agree that this potential ambiguity is realized when the term incorporated into the implied-in-fact CBA is an arbitration clause.
. 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 WL 5476 (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 effective) 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 351 n. 3). 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.).
. We deem it notable also that our decision will not threaten to inundate the federal courts with § 301 suits which should by statutory design proceed as unfair labor practice charges before the Board.
. The dissent suggests that we may be employing a quasi-contract rather than an implied-in-fact contract approach. See infra at 365-66. 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 359 n. 20.
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 Willi-ston 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 contract 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 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, 58 L.Ed. 115 and 231 U.S. 60, 34 S.Ct. 22, 58 L.Ed. 121 (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 365. 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 manifestations 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 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 negate the right. Assuming an objective manifesta
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.
Dissenting Opinion
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 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
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 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 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 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, 43 S.Ct. 425, 426-27, 67 L.Ed. 816 (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 (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.
Maj. op. at 364. 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.
For these reasons, I am not willing at this point to endorse the court’s analysis, and I therefore respectfully dissent.
070rehearing
SUR PETITION FOR PANEL REHEARING WITH SUGGESTION FOR REHEARING IN BANC
July 20, 1994.
The petition for rehearing filed by Appel-lee having been submitted to the judges who participated in the decision of this Court and to all the other available circuit judges in active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is DENIED.
Reference
- Full Case Name
- LUDEN'S INC. v. LOCAL UNION NO. 6 OF the BAKERY, CONFECTIONERY AND TOBACCO WORKERS' INTERNATIONAL UNION OF AMERICA American Arbitration Association, Bakery, Confectionery and Tobacco Workers' International Local Union 6
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