Friendly and Smith, Circuit Judges, and Blumenfeld District Judge.*fn*
In a decision reported in 230 F. Supp. 923 (1964), Judge Bonsal, in the District Court for the Southern District of New York, dismissed the first, third and fourth causes of action in a complaint by Genesco, Inc. against a union representing some of its employees and two union officers. Later, in order to arrive at a final judgment appealable under 28 U.S.C. § 1291, Genesco filed an amended complaint without the second cause of action, and this was dismissed in toto. Since Genesco does not appeal from the dismissal of the third and fourth causes of action, we shall state the case as if only the first had been pleaded.
Basing federal jurisdiction both on diverse citizenship and on § 301(a) of the Taft-Hartley Act, 29 U.S.C. § 185(a), Genesco sought damages for a strike in breach of a no-strike clause in an alleged collective bargaining contract dated as of October 31, 1962. The union moved to dismiss on the ground that by the alleged contract "the parties agreed that any issue or dispute arising out of an alleged breach thereof shall be settled by arbitration"; the motion stated that "the defendants specifically reserve the right, at a future time and in the appropriate forum to assert the defense that no collective bargaining agreement was in fact entered into by the defendants covering the period in question."
After hearing the motion, the judge entered an order reciting that "the existence of the collective bargaining agreements presents a threshold issue which must be determined before defendants' motion * * * can be decided" and directed a hearing before him "for the sole purpose of taking testimony with respect to the existence of collective bargaining agreements" during the period of the strike. We do not understand why this was thought necessary. The court's jurisdiction was not in issue; even if the first cause of action were viewed alone, and apart from the allegation of diversity, the claim of a contract between an employer and a labor organization gave jurisdiction under § 301(a) of the Taft-Hartley Act, although the plaintiff must prove the existence of a contract to obtain relief. Since the contract pleaded by the employer had an arbitration clause, the union was entitled to raise the question whether an action was not barred by its very terms, while reserving the right to deny the existence of the contract if the court decided adversely, F.R. Civ. P. 8(e).
What seems to have happened is that the judge, perhaps recognizing that the existence of an arbitration clause would normally not warrant dismissal as contrasted with a stay, see American Sugar Ref. Co. v. Anaconda, 138 F.2d 765, 767 (5 Cir. 1943), aff'd, without discussion of this point, 322 U.S. 42, 322 U.S. 42, 64 S. Ct. 863, 88 L. Ed. 1117 (1944); Swartz & Funston, Inc. v. Bricklayers Union, 319 F.2d 116 (3 Cir. 1963); Gilmour v. Wood Lathers Union, 223 F. Supp. 236, 244 (N.D. Ill. 1963); but see Bonnot v. Congress of Independent Unions, 331 F.2d 355, 359 (8 Cir. 1964), treated the case in effect as if he had denied the motion and the union had proffered the alternative defense that no contract existed, which it had reserved. We should have difficulty in approving this course if it had impaired any substantial rights. Not only is it better to let a party do its own pleading, but the collapsing process may have obscured the right to a trial by jury. Whatever the right to jury trial may be when the existence of a contract giving rise to substantive rights is undenied and the dispute, arising on a request for arbitration or for a stay, is solely over the existence of an agreement to arbitrate,*fn1 it can scarcely be doubted that Genesco was entitled to a jury trial on the existence of the contract on which all of its rights to damages hung. However, no one made any objection to the procedure the judge propounded, and a full evidentiary hearing was had; indeed, although Genesco objects in this court to the procedure that was followed, it still has not complained of deprivation of jury trial. We therefore treat the case as if the union had denied the existence of a collective bargaining agreement and, in the absence of a jury demand, the court had found in its favor.
Genesco was a member of the Shoe Manufacturers Board of Trade of New York, Inc., an association of employers, which for many years had acted for its members in bargaining with the union through a negotiating committee on which each member was represented. On August 29, 1962, the union addressed identical letters to the members of the Board of Trade, giving notice of the termination of the current contract on October 31 and offering to meet the members at the office of the Board to negotiate a new one. At the same time it sent a copy of the notice to Benjamin Seligman, attorney for the Board of Trade, and recited its understanding that the members "will be represented by your organization in the coming negotiations for a collective bargaining contract."
In addition to the issues common to all the members, Genesco had a particular problem with the union, namely, whether manufacture of a shoe called "Act II," by its I. Miller & Sons Co. division, should continue at its plant on 11th St. in Long Island City or be transferred to its plant on 23rd St. - an issue which concerned the union because of a radical decrease of production at the 23rd St. plant where there were many senior employees. Two union officials testified that after several unsuccessful efforts to discuss this question with Genesco's local plant manager, they had met at his suggestion with Seligman, who assured them that if agreement could be reached on other matters, Genesco would not stand a strike on the place of manufacture of Act II; Seligman denied this, and the judge did not resolve the conflict. Upon the expiration of the contracts on October 31, the union struck all members of the Board of Trade.
A day or so later the union informed Seligman of a settlement with another group of shoe manufacturers. On November 5, the Board of Trade sent the union a telegram saying that this settlement was acceptable and "we will meet with you to work out contract language"; the union was asked to have the employees back at work on November 6.
Later on November 5 officers of the union appeared at Seligman's law office with a number of unsigned contracts. The form, providing for a two-year extension of the basic agreement with various modifications, was entitled "Memorandum of Understanding * * * ..... between - on behalf of its members and Joint Council No. 13, USWA, AFL-CIO," and concluded with a blank subscribed "Firm" and a line for an officer's signature, and "Joint Council 13, United Shoe Workers of America, AFL-CIO, By ......" Whatever ambiguity may have existed in the form, the practice was to have contracts executed individually by each member firm. Seligman read the form and pronounced it acceptable to the Board of Trade. As the union officers began to sign the contracts, they informed him that none would be entered into with the two I. Miller factories unless the Act II issue was settled as they desired. Seligman insisted that the union was already committed to Genesco; at the same time, however, he arranged for a vice-president to come from its Nashville headquarters for a conference in New York the following morning. The union officers left the signed contracts with Seligman. They testified he promised these would not be presented to Genesco for signature; he denied this. Although the judge made no specific finding as to such a promise, we gather from his decision that he found the union had made quite clear its unwillingness to contract unless the Act II question was settled. The conference on November 6 proved fruitless. On that day the employees of the other Board of Trade members returned to work, but I. Miller's did not. On November 6 also I. Miller sent a long telegram to the union, taking the position that a contract had been made and that the continued strike was in breach of its no-strike clause. The next day the Board of Trade dispatched a telegram along the same lines, and Seligman transmitted to the union the contracts signed by the employers, including the two with I. Miller. The union promptly returned the latter.
On November 15 Genesco notified the union that it considered the contracts terminated by the union's material breach and that it had been compelled by the union's action to withdraw from the Board of Trade. Later it filed a charge with the National Labor Relations Board, whose Regional Director, on Feb. 28, 1963, issued a complaint alleging, inter alia, that the union had refused to sign a collective bargaining contract with Genesco to which it had agreed and by this and other acts had violated §§ 8(b)(1)(A), 8(b)(1)(B), and 8(b)(3) of the National Labor Relations Act. In April, the Regional Director approved a settlement, consented to by the union and the employer, wherein the union, disclaiming any admission it had violated the Act, agreed that it would not refuse to bargain with the Board of Trade by striking to compel I. Miller "to modify any collective bargaining agreements, during the effective term thereof, by requiring the transfer" of the place of manufacture of the Act II shoes, that it would not strike, without compliance with § 8(d) of the National Labor Relations Act, "to compel I. Miller to modify any collective bargaining agreements, during the effective term thereof" by requiring such transfer, and that it would not insist on a release from liability as a condition to entering into a collective bargaining agreement with I. Miller.
If the issue is to be determined by applying ordinary principles of contract law, we would conclude that no agreement between the union and Genesco was reached. Certainly none was made by the despatch of the Board of Trade's telegram on November 5, which indicated agreement in principle but proposed a meeting to work out contract language. See Lees v. Akshun Mfg. Co., 205 F.2d 577, 578 (7 Cir. 1953); Ryan v. Schott, 109 Ohio App. 317, 159 N.E.2d 907, 11 Ohio Op. 2d 90 (1953).A closer question would be whether contracts were made when Seligman pronounced the language satisfactory, just before the union officers reiterated their demand as to Act II, since the member firms had already approved the substance and Seligman had authority to approve the form. Cf. NLRB v. Winchester Electronics, Inc., 295 F.2d 288, 290-91 (2 Cir. 1961). That the parties plan later to sign an agreement does not preclude prior formation of the contract by signifying assent to an unsigned paper; the issue is one of intention, Mississippi & Dominion S. S. Co. v. Swift, 86 Me. 248, 29 A. 1063 (1894); Restatement (Second), Contracts § 26 (Tent. Draft No. 1, 1964), 1 Corbin, Contracts § 30 (1963); Llewellyn, On Our Case-Law of Contract: Offer and Acceptance, I, 48 Yale L.J. 1, 14 (1938). Considering the importance attached to signed contracts in the field of collective bargaining, H.J. Heinz Co. v. NLRB, 311 U.S. 514, 523-26, 85 L. Ed. 309, 61 S. Ct. 320 (1941), and § 8(d) of the Act, 29 U.S.C. § 158(d), the long-standing practice here of having contracts signed by the individual employers, the fact that the instant contracts were to be an extension and modification of contracts so signed, and the doubtful enforceability of a two-year oral contract,*fn2 we think no one really believed that the parties would be bound until the contracts were fully executed and delivered. This is so even though the employers asked that the men return to work before these steps were completed. Once this is decided, it is clear that delivery to Seligman of the forms signed by the union officers on condition that the contracts with Genesco should not be consummated until resolutions of the Act II issue, did not permit formation of a contract unless the condition was met. See Dickey v. Hurd, 33 F.2d 415, 419 (1 Cir.), cert. denied, 280 U.S. 601, 74 L. Ed. 646, 50 S. Ct. 82 (1929); Detroit Football Co. v. Robinson, 186 F. Supp. 933 (E.D. La.), aff'd on other grounds, 283 F.2d 657 (5 Cir. 1960); 1 Williston, Contracts § 77 (3d ed. Jaeger 1957); 3A Corbin, Contracts § 629A (1964 Supp.).
Genesco advances the interesting contention that ordinary contract principles are not the proper criterion in the light of Mr. Justice Douglas' statement in Textile Workers' Union v. Lincoln Mills, 353 U.S. 448, 456-57, 1 L. Ed. 2d 972, 77 S. Ct. 912 (1957), "that the substantive law to apply in suits under Section 301(a) is federal law which the courts must fashion from the policy of our national labor laws." It argues that when a union's refusal to sign a contract would constitute an unfair labor practice, compare Chicago Stevedoring Co., 125 N.L.R.B. 61 (1959), modified sub nom. NLRB v. Local 19, Int'l Bhd. of Longshoremen, 286 F.2d 661, cert. denied, 368 U.S. 820, 82 S. Ct. 36, 7 L. Ed. 2d 25 (1961), courts should hold that a contract exists, no matter how clearly a party has indicated it does not intend to be bound until a formal contract is signed. A court applying federal labor contract law would thus regard as done what it thinks the Labor Board would think ought to be done or, at least, what it thinks the Labor Board would order to be done. The justification for this, in addition to the authority of the Supreme Court's statement, would lie in reinforcing the principles of bargaining developed by the Board and in avoiding duplicitous judicial and administrative proceedings - the latter of which the aggrieved party could never compel and which might be impossible in some instances due to self-imposed limitations on the Board's jurisdiction, § 14(c)(1).
The argument ought not be rejected merely on a mechanical view that federal power attaches only when a contract has been made, so that the "federal law" doctrine expounded in Lincoln Mills and enforced in Local 174, Teamsters, Chauffeurs, Warehouse Men & Helpers of America v. Lucas Flour Co., 369 U.S. 95, 7 L. Ed. 2d 593, 82 S. Ct. 571 (1962), can apply only to interpretation of collective bargaining contracts as contrasted with their formation. Yet the distinction has force as a point of substance, although it has none as one of federal power. Where the parties have reached an agreement embodied in a signed contract, one of the prime aims of national labor policy, it is altogether reasonable that courts or arbitrators should hold them to it even though they may have to pass on the same conduct as the NLRB might have to consider in the trial of an unfair labor practice complaint; the doctrine of San Diego Building Trades Council v. Garmon, 359 U.S. 236, 3 L. Ed. 2d 775, 79 S. Ct. 773 (1959), has been shunted aside to that extent. See Smith v. Evening News Ass'n, 371 U.S. 195, 196-98, 9 L. Ed. 2d 246, 83 S. Ct. 267 (1962); Carey v. General Elec. Co., 315 F.2d 499, 508-11 (2 Cir. 1963), cert. denied, 377 U.S. 908, 12 L. Ed. 2d 179, 84 S. Ct. 1162 (1964). Utilizing national labor policy as a new source of law to govern the formation of labor contracts raises more serious problems. The Third Circuit, sitting in banc, divided evenly on the issue whether national labor policy should be deemed to nullify the doctrine of Pym v. Campbell, El. & Bl. 370, 374, 119 Eng. Rep. 903, 905 (1856), that "evidence to show that there is not an agreement at all is admissible" despite the parol evidence rule. Lewis v. Mears, 297 F.2d 101 (3 Cir.), cert. denied, 369 U.S. 873, 8 L. Ed. 2d 276, 82 S. Ct. 1142 (1962). See also Chief Judge Sobeloff's dissent in Lewis v. Lowry, 295 F.2d 197, 201-02 (4 Cir. 1961), cert. denied, 368 U.S. 977, 7 L. Ed. 2d 438, 82 S. Ct. 478 (1962). But an affirmative holding on that issue would have a much readier application, and would entail far less danger of judicial and administrative conflict, than a general principle that a court would consider a contract to have been made whenever it believes that failure to execute the contract is an unfair labor practice. Such a principle would place the courts - state as well as federal - in the center of the very area, the definition of unfair labor practices, which Congress staked out for the Labor Board; moreover it ...