Nolde Bros., Inc. v. Bakery Workers, 430 U.S. 243 (1977)

Nolde Brothers, Inc. v. Local No. 358,

Bakery & Confectionary Workers Union, AFL-CIO
No. 75-1198

Argued November 9, 1976
Decided March 7, 1977
430 U.S. 243

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Syllabus

Petitioner corporation entered into a collective bargaining agreement with respondent Union which contained a provision for severance pay on termination of the employment of certain employees. The agreement, which specified that any grievance arising between the parties was subject to binding arbitration, was to remain in effect until its expiration date and thereafter until execution of a new agreement or the existing agreement was terminated by either party upon seven days’ written notice. While contract changes were being negotiated after the contract’s expiration date, respondent, on August 20, 1973, gave notice of cancellation, and the contract terminated August 27. Negotiations nevertheless continued, but ended on August 31, when petitioner, threatened with a strike, informed respondent that it was closing its plant effective that day. Plant operations ceased shortly thereafter. Petitioner paid accrued wages, but rejected respondent’s demand for severance pay under the collective bargaining agreement and declined to arbitrate the claim therefor on the ground that its obligation to do so terminated with the collective bargaining agreement. Respondent then brought this action in District Court to compel petitioner, inter alia, to arbitrate the severance pay issue. The District Court granted petitioner’s motion for summary judgment, holding that the employees’ right to severance pay expired with respondent’s voluntary termination of the agreement; that consequently there was no longer a severance pay issue to arbitrate; and that, in any event, the duty to arbitrate ended with the contract. The Court of Appeals reversed, concluding that the parties’ arbitration duties under the contract survived its termination with respect to claims arising by reason of the agreement.

Held: Respondent’s claim for severance pay under the expired contract is subject to resolution under the contract’s arbitration terms. Pp. 248-255.

(a) The obligations of parties under the arbitration clause of a collective bargaining agreement may survive contract termination when the dispute is over an obligation arguably created by the expired agreement. John Wiley & Sons v. Livingston, 376 U.S. 543. Pp. 250-252.

(b) The parties agreed to resolve all disputes by resort to the mandatory grievance arbitration machinery established by the agreement. There is nothing in the arbitration clause that expressly excluded from its operation a dispute arising under the contract but based on events occurring after its termination. Absent some contrary indication, there are strong reasons to conclude that the parties did not intend their arbitration obligations to end automatically with the contract. Pp. 252-253.

(c) The parties clearly expressed their preference for an arbitral, rather than a judicial, interpretation of their obligations, and drafted their broad arbitration clause against a backdrop of a well established federal labor policy favoring arbitration as a means of resolving disputes. There is a strong presumption favoring arbitrability. Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582-583. Pp. 253-255.

(d) Where the dispute is over a provision of the expired collective bargaining agreement, the presumptions favoring arbitrability must be negated expressly or by clear implication. P. 255.

530 F.2d 548, affirmed

BURGER, C.J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined. STEWART, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 255.