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Side agreement not arbitrable
July 11, 2005 by Ross Runkel at LawMemo

The union and the employer had two agreements: (1) a collective bargaining agreement which had an arbitration clause, and (2) a side agreement which was silent as to arbitration. The union claimed breach of the side agreement and sued to compel the employer to arbitrate.

Should the court compel arbitration? Arbitration is a matter of agreement, or consent, or intent. So It all boils down to figuring out what the parties intended. Intent in this context does not mean that we ask the negotiators what was going on in their minds. It means that a court looks at the situation from an "objective" viewpoint.

It's clear that the parties agreed to arbitrate something. The question is, what is the scope of that agreement to arbitrate?

If you're in the 9th Circuit, the court does it this way: "Disputes arising under a side agreement must be arbitrated if the dispute relates to a subject that is within the scope of the CBA's arbitration clause. . . . [and] [t]he clause contains no exclusion for disputes arising under side agreements." Inlandboatmens Union of the Pacific v. Dutra Group, 279 F.3d 1075 (9th Cir 2002).

If you're in the 2nd or 8th Circuit, you get a two-step analysis:

• Decide whether the arbitration clause is narrow or broad.
• If narrow, then decide "whether the dispute involves an agreement collateral to the agreement containing the arbitration clause."
• If broad, then decide "whether the dispute relates to the subject matter of the agreement."

In this case the arbitration clause was narrow. It defined a "grievance" as being an alleged violation of the CBA itself. (A broad clause might say something like "any dispute arising out of or relating to this agreement.")

The next question is whether the dispute is "collateral" to the CBA rather than "part and parcel of" the CBA.

In this case the side agreement dealt with retiree insurance, a topic that was not mentioned at all in the CBA. And nothing in the side agreement or the CBA indicated an intent to incorporate the side agreement into the CBA or to incorporate the arbitration clause into the side agreement.

Result: The clause is narrow, the dispute is collateral, and arbitration is not compelled. United Steelworkers v. Duluth Clinic (8th Cir 07/07/2005).

My view: Whichever circuit one is in, the message is clear. Think about arbitration when you're drafting a side agreement. If you want disputes arbitrated, then say so. If not, say not. If you say nothing, then may get to spend lots of time in court.

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