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            Title Luden's, Inc. v. Local Union No. 6

 

            Date 1994

            By

            Subject Other\Dissenting

                

 Contents

 

 

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42 of 64 DOCUMENTS

LUDEN'S INC., Appellee v. LOCAL UNION NO. 6 OF THE BAKERY, CONFECTIONERY AND TOBACCO WORKERS INTERNATIONAL UNION OF AMERICA; AMERICAN ARBITRATION ASSOCIATION, Bakery, Confectionery and Tobacco Worker's International Local Union 6, Appellant

No. 92-1982

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

28 F.3d 347; 1994 U.S. App. LEXIS 14936; 146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

June 24, 1993, Argued

June 17, 1994, Filed

SUBSEQUENT HISTORY:   **1

As Corrected June 24, 1994.

Panel Rehearing with Suggestion In Banc Denied July 20,

1994, Reported at: 1994 U.S. App. LEXIS 18702. PRIOR HISTORY: On Appeal From the United States District Court For the Eastern District of Pennsylvania.

(D.C. Civ. No. 92-01545).

CASE SUMMARY:

PROCEDURAL  POSTURE:  Appellant  union  chal- lenged the decision from the United States District Court for the Eastern District of Pennsylvania,  which granted summary  judgment  to  appellee  employer  that  enjoined arbitration in appellee's action for a declaratory judgment to prevent arbitration of the retroactivity of wages under a lapsed collective bargaining agreement.

OVERVIEW:  Appellee  employer  allowed  a  collective bargaining  agreement  to  terminate  of  its  own  terms. Appellant union noticed a grievance relating to retroac- tivity of wages under the former agreement. Appellee was granted summary judgment from the district court on a claim for a declaratory judgement that enjoined an arbitra- tion of the retroactivity of wages under the lapsed agree- ment.  The  court  vacated  the  injunction  and  remanded the  case  with  instructions  that  the  parties  arbitrate  the grievance. The court determined that the parties' duty to arbitrate survived the contract termination through an im- plied-in--fact contract. The court held that in a continuing employment  relationship  an  arbitration  clause  survived the expiration or termination of a collective bargaining agreement intact as a term of a new, implied-in--fact col- lective bargaining agreement unless (i) both parties in fact

intended the term not to survive, or (ii) under the totality of  the  circumstances  either  party  to  the  lapsed  collec- tive bargaining agreement objectively manifested to the other a particularized intent, expressed verbally or non- verbally, to disavow or repudiate that term.

OUTCOME: The court vacated the injunction in favor of appellee employer that enjoined arbitration in appellee's action for a declaratory judgment on the retroactivity of wages  under  a  lapsed  collective  bargaining  agreement with appellant union, and remanded with instructions that the parties arbitrate the grievance because the court de- termined  that  the  parties'  duty  to  arbitrate  survived  the contract termination through an implied-in--fact contract.

LexisNexis(R) Headnotes

Labor & Employment Law > Collective Bargaining & Labor Relations > Arbitration > Arbitrator's Authority

HN1  Unless the parties clearly and unmistakably pro- vide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator. Labor & Employment Law > Collective Bargaining & Labor Relations > Judicial Review

Civil  Procedure  >  Appeals  >  Appellate  Jurisdiction  > Final Judgment Rule

HN2  The appellate court has jurisdiction over an appeal from a final judgment of a United States district court.  28

U.S.C.S. § 1291.

Labor & Employment Law > Collective Bargaining & Labor Relations > Judicial Review

Civil  Procedure  >  Appeals  >  Standards  of  Review  > Standards Generally

Civil  Procedure  >  Summary  Judgment  >  Summary

Judgment Standard

HN3  The appellate court exercises plenary review over

28 F.3d 347, *; 1994 U.S. App. LEXIS 14936, **1;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

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a district court's grant of summary judgment. In doing so, the court employs the same test the district court initially should have employed. When the parties stipulate to all material facts, the court need not concern itself with con- flicting affidavits; nonetheless, where it must draw infer- ences from the stipulated facts, it still must resolve them against the moving party and in favor of the nonmoving party.

Labor & Employment Law > Collective Bargaining & Labor Relations > Arbitration > Arbitrator's Authority

HN4  Courts are not to reach the merits of the dispute, but instead are to order arbitration if the lapsed collec- tive bargaining agreement arguably creates the obligation at the center of the grievance. The need to construe the lapsed agreement to determine if the grievance has merit, even  if  the  necessary  interpretation  involves  answering the query whether the asserted right vested under the col- lective bargaining agreement or survived its termination, is enough to require arbitration.

Labor & Employment Law > Collective Bargaining & Labor Relations > Arbitration > Arbitrator's Authority

HN5   A  court  has  the  duty  to  reach  the  merits  of  the claim, and can order arbitration only if it concludes that the lapsed collective bargaining agreement in fact creates the right or obligation at issue.

Labor & Employment Law > Collective Bargaining & Labor Relations > Enforcement

HN6  Section 301 of the Labor Management Relations Act authorizes federal courts to fashion a body of federal law for the enforcement of collective bargaining agree- ments.

Contracts Law > Types of Contracts > Implied-in--Fact

Contracts

HN7  Thus general principles of contract law teach that when a contract lapses but the parties to the contract con- tinue to act as if they are performing under a contract, the material terms of the prior contract will survive in- tact unless either one of the parties clearly and manifestly indicates,  through words or through conduct,  that it no longer wishes to continue to be bound thereby,  or both parties  mutually  intend  that  the  terms  not  survive.  The rationale  for  this  rule  is  straightforward:   when  parties to an ongoing, voluntary, contractual relationship, espe- cially a relationship which by its nature generally implies that some mutually agreed upon rules govern its config- uration, continue to behave as before upon the lapse of the contract, barring contrary indications, each party may generally reasonably expect that the lapsed agreement's terms remain the ones by which the other party will abide. Contracts Law > Types of Contracts > Implied-in--Fact Contracts

HN8  Since the peaceful continuation of the contractual relationship is the linchpin of the decision, resort to ul- timate economic weapons, either a lock-out or a strike, would usually manifest an intent to repudiate the arbitra- tion provision of the implied-in--fact collective bargaining agreement.

Contracts Law > Types of Contracts > Implied-in--Fact

Contracts

HN9  As a general matter, implied-in--fact collective bar- gaining agreements are compatible with federal labor law and advance the goals of federal labor policy. The court has intimated that an employer and a union may adopt an enforceable labor contract without reducing the agree- ment to writing, and that what really is crucial is "conduct manifesting an intent to be bound by agreed-upon terms." A union may impliedly accept a "unilateral offer" made when an employer implements its final offer after reach- ing a bargaining impasse by the ordinary act of entering the employer's open doors Similarly, the employer may make an implied offer simply by leaving the shop doors open for its unionized employees, especially when there has  been  sixty  days  notice  of  intent  to  terminate  prior to the termination of the collective bargaining agreement and the employer is at liberty to keep its doors shut.  29

U.S.C.S. § 158(d)(4).

Labor & Employment Law > Collective Bargaining & Labor Relations > Enforcement

Contracts              Law         >              Contract                Interpretation       > Interpretation Generally

HN10  The court will generally apply contract law lib- erally in order to recognize a collective bargaining agree- ment which lessens strife and fosters congenial relations between employees and management.

Contracts Law > Types of Contracts > Implied-in--Fact

Contracts

HN11   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. Labor & Employment Law > Collective Bargaining & Labor Relations > Arbitration > Arbitrator's Authority

HN12  To effectuate the federal labor policy favoring the resolution  of  employee grievances  by  a  method  agreed upon  by  the  parties,  29  U.S.C.S.  §  173(d),  there  is  a strong presumption favoring arbitrability of disputes be- tween parties who include arbitration provisions in their collective bargaining agreements.

Labor & Employment Law > Collective Bargaining & Labor Relations > Arbitration > Arbitrator's Authority

HN13  An order to arbitrate a particular grievance should not be denied unless it may be said with positive assurance

28 F.3d 347, *; 1994 U.S. App. LEXIS 14936, **1;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

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that the arbitration clause is not susceptible of an inter- pretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.

Labor & Employment Law > Collective Bargaining & Labor Relations > Arbitration > Arbitrator's Authority

HN14  A post-expiration grievance can be said to arise under  the  contract  only  (1)  where  it  involves  facts  and occurrences that arose before expiration, (2) where an ac- tion taken after expiration infringes a right that accrued or vested under the agreement, or (3) where, under normal principles  of  contract  interpretation,  the  disputed  con- tractual right survives expiration of the remainder of the agreement.

Labor & Employment Law > Collective Bargaining & Labor Relations > Duty to Bargain

HN15  Section 8(a)(5) of the National Labor Relations Act,  specifically  29  U.S.C.S.  §  158(a)(5),  imposes  the statutory  duty  to  continue  operating  according  to  cer- tain existing terms and conditions of employment until the parties reach a good faith bargaining impasse, even where the parties are negotiating a new agreement after the termination of the previous one.

Labor & Employment Law > Collective Bargaining & Labor Relations > Unfair Labor Practices

HN16  The board's primary jurisdiction over unfair la- bor practices also counsels against the inclusion in an im- plied-in--fact collective bargaining agreement of a term or condition which is a member of the group of items sub- ject to mandatory bargaining but not subject to a party's unilateral modification.  29 U.S.C.S. § 160(a).

Labor & Employment Law > Collective Bargaining & Labor Relations > Arbitration > Arbitrator's Authority

HN17  The court holds that in a continuing employment relationship an arbitration clause may survive the expira- tion or termination of a collective bargaining agreement intact as a term of a new, implied-in--fact collective bar- gaining agreement unless (i) both parties in fact intend the term not to survive, or (ii) under the totality of the cir- cumstances either party to the lapsed collective bargaining agreement objectively manifests to the other a particular- ized intent, be it expressed verbally or non-verbally, to disavow or repudiate that term.

COUNSEL: BERNARD N. KATZ, Esquire (ARGUED), LYNNE P. FOX, Esquire, Meranze and Katz, 12th Floor, Lewis Tower Bldg. Philadelphia, PA 19102, Attorneys for Appellant.

DANA  S.  SCADUTO,  Esquire  (ARGUED),  McNees, Wallace  &  Nurick,  100  Pine  Street,  P.O.  Box  1166, Harrisburg, PA 17108-1166, Attorney for Appellee.

JUDGES:   Before:               BECKER,   ALITO,   and   ROTH, Circuit Judges..

OPINIONBY: BECKER

OPINION:   *349   OPINION OF THE COURT

BECKER, Circuit Judge.

Luden's Inc. ("Luden's"), the manufacturer of a well- known brand of cough drops, among other products, com- menced  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 pre- vent 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 collec- tive bargaining agreement ("CBA"). n1 The parties pre- sented the district **2    court with stipulated facts and documents,  and then by agreement filed cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. The district court granted Luden's motion and denied the Union's,  thereupon permanently enjoin- ing the scheduled arbitration proceedings. See Luden's, Inc.  v.  Local  Union  No.  6  of  Bakery,  Confectionery  & Tobacco Workers Int'l Union, 805 F. Supp. 313, 327 (E.D. Pa. 1992).

n1  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 PP 32-33 & Exh. J.

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.   **3

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 re- solve disputes arising out of the administration of CBAs.

28 F.3d 347, *349; 1994 U.S. App. LEXIS 14936, **3;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

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On May 1, 1988, Luden's and the Union jointly exe- cuted 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 P 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 there- after, until a new agreement, the wage clause of which shall be retroactive to

28 F.3d 347, *350; 1994 U.S. App. LEXIS 14936, **3;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

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*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 **4   and Tobacco Workers' International Union of America or has been terminated by the Company.

Stip. of Facts, Exh. A. As will become apparent, the unart- ful 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 am- icable resolution of grievances arising between employ- ees and management in the course of their intimate em- ployment relationship. n2 The fifth and final step of that procedure  permitted  either  party  to  submit  unresolved grievances  to  final  and  binding  arbitration;  the  parties were to select the arbitrator cooperatively from a short list provided by AAA. Stip. of Facts, Exh. A.

n2   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  satisfac- tory  resolution  of  the  grievance  at Step IV, either party may request the American  Arbitration  Association  to submit a list of arbitrators for the con- sideration  of  the  parties.  Thereafter, the matter, unless settled, shall be pro- cessed through  arbitration in accor- dance 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 autho- rized to resolve whether by the terms of the Agreement or by mutual request of the parties.

Stip. of Facts, Exh. A.

**5

The 1988 CBA by its terms was scheduled to expire on  or  after  April  29,  1991,  the  exact  date  being  trig- gered  by  either  sixty  days  notice  of  either  party  or  the parties' joint execution of a replacement CBA. In a let- ter 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 P

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 nego- tiations  on  a  new  CBA.  Of  the  fifteen  separate  negoti- ating  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 P 3. At the last of the pre-April 29 meetings, Luden's extended three sep- arate 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 **6   of the retroactive application of the new wage clause according to the terms of Article XXIX. Stip. of Facts P 4 & Exhs. C-E.

By memorandum dated April 29, 1991, Luden's Plant Manager Donald B. Watson advised Union employees of the  general  status  of  contract  negotiations,  and  specifi- cally reported that Luden's and the Union had "agreed to disregard the deadline of April 29  and to  continue op- erating under the terms of the current contracts." Stip. of Facts P 5 & Exh. F. A few days later, however, in a letter dated May 3, 1991, Luden's disclosed a changed strategy. On that occasion,  Watson notified the Union's business representative Francis Ryan that Luden's wished to termi- nate 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 en- closed proposal. Stip. of Facts P 6 & Exh. G. The Union's negotiating committee

28 F.3d 347, *351; 1994 U.S. App. LEXIS 14936, **6;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 6

*351   promptly rejected Watson's offer. Stip. of Facts P

7.

Representative (May 3, 1991)).

Over the course of the next few months, the parties

**7   continued their negotiations, each submitting vari- ous offers or counteroffers. Stip. of Facts PP 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. n3 Stip. of Facts P 11 & Exh. O. Each of these letters reported that Luden's would pay retroactive wages to April 29, 1991 if the Union and its membership accepted Luden's offer in  its  entirety.  n4  Despite  Luden's  efforts,  though,  the membership rejected each of the Luden's offers which the Union submitted to it for approval (specifically, the offers of May 16 and June 20, 1991). Stip. of Facts PP 9, 12.

n3   The   Union,   distressed   over   the   letters Luden'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  P  13,  14.  The  amended charge accused Luden's both of "violating its obli- gation to bargain in good faith by both threatening improper actions and by undermining and bypass- ing the bargaining representatives of the employ- ees"  and  also  of  engaging in  "surface bargaining behavior  by  having  preconceived  inflexible  posi- tions," 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  de- clined to issue a complaint. Stip. of Facts P 15 & Exh. M. On October 18, 1991 the NLRB's General Counsel  denied  the  Union's  appeal  from  that  de- cision.  Stip.  of  Facts  PP  16,  17  &  Exh.  P.  For  a more thorough discussion of these collateral pro- ceedings, see 805 F. Supp. at 317-18.

**8

n4  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, Luden's Plant Manager, to Ryan, Union's Business

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, Luden's

Plant  Manager,  to  Luden's  Employees  (July  15,

1991)).

On November 1, 1991, during a negotiation session, Luden's proposed what was,  from the Union's perspec- tive, a superior agreement, but one which was silent with respect to the retroactivity **9   of wages. Stip. of Facts P 18 & Exh. Q. The following day the Union submitted certain terms and conditions of that proposal to its mem- bership, tallying a vote in favor of approval. Stip. of Facts P 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  memo- rialize the agreement by drafting a document reflecting its understanding of the terms of the membership's vote. Stip. of Facts P 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 retroactivity provision of the old Article XXIX mandated retroactive application of the new pay scale to May 1,  1991. Stip. of  Facts  P  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 n.2) and requested AAA to pro- vide a list of arbitrators to resolve the conflict over the retroactivity provision of Article XXIX. Stip. of Facts P

24. AAA reserved September 15 and 16, 1992 **10   for the arbitration of the dispute. Stip. of Facts P 25.

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146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

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On March 6, 1992, Luden's initiated the instant action against the Union and AAA, seeking a declaratory judg- ment that the dispute between the parties regarding the

retroactivity of wages under the "lapsed" 1988 CBA was not arbitrable. n5 Moreover, Luden's

28 F.3d 347, *352; 1994 U.S. App. LEXIS 14936, **10;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 8

*352    prayed for an injunction against the arbitration proceeding which the Union had scheduled with AAA. Stip. of Facts PP 24-25. The parties submitted stipulated facts and documents to the district court and agreed to submit the issues for resolution upon cross-motions for summary judgment based solely and exclusively thereon. Stip.  of  Facts  PP  29-31.  After  ordering  the  parties  to supply supplemental motions addressing the intervening decision in Litton Financial Printing Division v. NLRB,

501 U.S. 190, 111 S. Ct. 2215, 115 L. Ed. 2d 177 (1991), the district court granted Luden's motion and denied the Union's. See 805 F. Supp. at 315 n.1, 327. In granting the relief requested by Luden's, the district court permanently enjoined the arbitration slated for mid September. As of the date of oral **11   argument before this Court, their minds had not yet met, and the plant operated without a signed CBA. Stip. of Facts P 23.

n5 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 confu- sion on this issue, we will utilize "lapsed" herein to denote either an expired or a terminated CBA.

II. THE DISTRICT COURT'S DECISION AND THE ISSUES ON APPEAL

In resolving the summary judgment motions, the dis- trict 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 ad- dressing the arbitrability of the post-termination dispute. In the first section of its opinion, the district court con- cluded that it, not an arbitrator, was to decide the issue of  the  arbitrability  of  the  dispute;  n6  that  either  party could unilaterally terminate the 1988 CBA according to Article XXIX thereof on or after   **12   April 29, 1991 with sixty days notice; that, because of the parties' subse- quent arrangement to continue honoring the 1988 CBA,

the Union's letter of February 14, 1991 did not actually terminate the Agreement; that Luden's May 3, 1991 letter

(which specified May 13, 1991 as Luden's intended ter- mination date) operated to terminate the Agreement, but not until sixty days after its receipt (on July 2, 1991); and that the Agreement's arbitration clause (Article XVI) was inclusive enough to encompass grievances over the appli- cation of the retroactivity provision of Article XXIX. See

805 F. Supp. at 320-25.

n6   See   A   T   &   T   Technologies,    Inc.   v. Communications Workers, 475 U.S. 643, 649, 106

S. Ct. 1415, 1418, 89 L. Ed. 2d 648 (1986) (holding that " HN1  unless the parties clearly and unmis- takably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator").

We  do  not  pass  judgment   **13    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 chal- lenges 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 pro- vision  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. **14   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. n7

28 F.3d 347, *353; 1994 U.S. App. LEXIS 14936, **14;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 9

*353    See infra at n.24. Conscious of the fact that in the process of applying the Litton test it had construed the provisions of the 1988 CBA, the court justified its ap- proach by reference to Litton, which had instructed courts to determine "whether the parties intended to arbitrate the dispute, even if it requires the court to interpret a provision of the expired agreement." Id. at 327 (citing Litton, 111

S. Ct. at 2227). The court, at bottom, held that Luden's did not have to arbitrate the dispute.

n7  The  district  court  apparently  did  not  con- sider why Luden's was not obliged to arbitrate the retroactivity question at least with respect to wages earned  before  July  2,  1991,  the  effective  termi- nation  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 retroactiv- ity clause was never activated (a conclusion upon which we decline to pass judgment), the court per- haps 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 contruction 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.

**15

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.  de- nied,  489  U.S.  1054,  109  S.  Ct.  1316,  103  L.  Ed.  2d

585  (1989);  Huettig  &  Schromm,   Inc.  v.  Landscape

Contractors Council, 790 F.2d 1421, 1425-26 (9th Cir.

1986). HN2  We have jurisdiction over an appeal from a final judgment of a United States district court. See 28

U.S.C.A. § 1291 (1993).

HN3   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 **16   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; nonethe- less, 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 **17    breed uncer- tainty in the sphere of labor law. In Nolde the Supreme Court held that HN4  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. n8 In particular, the Court held that the need to construe the lapsed agreement to determine if the grievance has merit --  even if the necessary interpreta- tion involves answering the query whether the asserted right vested under the CBA or survived its termination -- is enough to require arbitration. See Nolde, 430 U.S. at

249-52, 97 S. Ct. at 1071-72.

n8  See  Nolde,  430  U.S.  at  249,  97  S.  Ct.  at

1071  ("Of  course,  in  determining  the  arbitrabil- ity  of  the  dispute,  the  merits  of  the  underlying claim for severance pay are not before us." (em- phasis  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 arbitra- tion, 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 24; 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 ar- bitration 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

28 F.3d 347, *353; 1994 U.S. App. LEXIS 14936, **17;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 10

instrument which will support the claim." (footnote omitted)).

**18

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's disavowal that it was overruling Nolde on the other hand. See Litton, 501 U.S. at 193-95, 205-07,

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Page 11

*354     111  S.  Ct.  at  2219,   2225;  id.  at  2228-29

(Marshall,  J.,  dissenting);  id.  at  2232  (Stevens,  J.,  dis- senting);  John  F.  Corcoran,  Note,  The  Arbitrability  of Labor Grievances that Arise After the Expiration of the Collective Bargaining Agreement, 43 SYRACUSE L. REV.

1073,  1085  &  n.87  (1992)   hereinafter  Arbitrability  of Labor Grievances . In contradistinction to Nolde, Litton held that HN5  a court has the duty to reach the merits of the claim, and can order arbitration only if it concludes that the lapsed CBA in fact creates the right or obligation at issue. See Litton, 111 S. Ct. at 2227. n9

n9 The Court, moreover, took this prescription quite seriously, for, as Justice Marshall pointed out in his dissent,  it was debatable whether the obli- gation  at  issue  in  Litton  arose  under  the  expired CBA or not.   Compare Litton, 111 S. Ct. at 2227

(construing the qualified seniority provision as not having vested) with id. 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 dis- sent). Cf.   Litton, 111 S. Ct. at 2232 (Stevens, J., dissenting) (declining to address the merits of the dispute).

**19

As  far  as  we  can  tell,  other  courts  have  uniformly resolved  this  tension  by  reading  Litton  as  having  im- pliedly  overruled  the  portion  of  Nolde  holding  that  a court answering the arbitrability question is not to look to the merits of the underlying claim. n10 Being reluc- tant  to  follow  their  course,  and  having  conscientiously reviewed this case after oral argument, we requested the parties to file supplemental memoranda setting forth their views as to whether,  under the federal common law of CBAs,  this  Court  should  recognize  an  implied-in--fact CBA which arose by virtue of the parties' conduct after the lapse of the 1988 CBA. n11 If we were to do so, we would not need to confront the tension between Nolde and Litton, since the duty to arbitrate would stem from the implied-in--fact CBA (albeit derived in part from the lapsed CBA) rather than directly from the lapsed contract, and the question whether the right at issue accrued, if at all, under the lapsed contract or during the interim period before Luden's implementation of the November 4, 1991 near "agreement" would be mooted. Because we conclude that Luden's contractual duty to arbitrate grievances never lapsed completely,   **20   this avenue provides the route whereby we may avoid addressing the uncertain interplay between Nolde and Litton, though we express hope that

the Supreme Court will take on that challenge itself.

n10 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").

**21

n11 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.

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 con- sult the federal common law of CBAs. HN6  Section 301 of the LMRA, as Litton stated, "authorizes federal courts to fashion a body of federal law for the enforcement of

CBAs ."  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 **22    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

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Page 12

*355    Wiley & Sons, Inc. v. Livingston, 376 U.S. 543,

548, 84 S. Ct. 909, 914, 11 L. Ed. 2d 898 (1964) ("State law may be utilized so far as it is of aid in the development of correct principles or their application in a particular case, but the law which ultimately results is federal." (citation omitted)); Mack Trucks, 856 F.2d at 591-92 (holding that we look to "federal labor relations law, not state contract law," to ascertain if a contract has formed, as "in the field of labor relations, the technical rules of contract law do not determine the existence of an agreement"). Implied- in-fact CBAs encompassing arbitration clauses, then, will have their surest footing if both "ordinary" contract law and federal labor policy sanction them. n12

n12  Of  course,  an  implied-in--fact  CBA  suf- fices 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 re- quire an actual written CBA because the Supreme Court has broadly interpreted "'contract' to include any  'agreement  between  employers and  labor  or- ganizations 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 encom- pass 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).

**23

General  contract  law  recognizes  and  enforces  "im- plied-in--fact"  contracts.  Section  4  of  the  Restatement

(Second) of Contracts, which employs the rubric "inferred from fact" to 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 manifesta- tion 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 in- tention to make a promise may be manifested in language or by implication from other cir- cumstances,  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 with- out a new express **24   agreement, it will be inferred that the service and the compensation are the same as be- fore." 2 CORBIN ON CONTRACTS § 504, at 717 (1963). Other treatises issue comparable pronouncements. n13

n13 See 2 WILLISTON ON CONTRACTS §

6.42, at 452 (4th ed. Lord ed. 1990) ("When a con- tract 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 par- ties have assented to another contract for a term of the same length with the same salary and condi- tions 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 im- plied offer may arise when an employer has previ- ously retained an employee. The employer may ask the former employee to perform a new job without mentioning that the employee will receive compen- sation for it. . . . If a reasonable person would have inferred  from  the  employer's  request  that  he  in- tended 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.

**25   HN7

Thus general principles of contract law teach us that when a contract lapses but the parties to the contract con-

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Page 13

tinue to act as if they are performing under a contract, the material terms of the prior contract will survive in- tact unless either one of the parties clearly and manifestly

indicates,  through words or through conduct,  that it no longer

28 F.3d 347, *356; 1994 U.S. App. LEXIS 14936, **25;

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Page 14

*356   wishes to continue to be bound thereby, or both parties  mutually  intend  that  the  terms  not  survive.  The rationale  for  this  rule  is  straightforward:   when  parties to an ongoing, voluntary, contractual relationship, espe- cially a relationship which by its nature generally implies that some mutually agreed upon rules govern its config- uration, continue to behave as before upon the lapse of the contract, barring contrary indications, each party may generally reasonably expect that the lapsed agreement's terms remain the ones by which the other party will abide. While this rationale loses some of its cogency in situ- ations where the contract lapses because one party termi- nates 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 con- tinuing **26   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' "inter- est 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. n14 Indeed, although we have not been made privy either to the Union's or to Luden's motives in moving to terminate the 1988 CBA, neither evidence nor reason suggests that discontent with the arbitration procedure was a contributing factor.

n14 We say "generally" because the events lead- ing  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  otherwise  clearly  transmit  an  intent  to  be  rid of the arbitration provision. In context of this opin- ion, clear cases of implicit repudiation normally fall within the domain of what we denote as disavowals or repudiations.

**27

Consistent with that observation is the fact that nei- ther party clearly notified the other -- whether by an ex- press n15 or clearly implicit disavowal, see supra at n., or by clearly incompatible conduct, see infra at n. -- that it  was  unilaterally  revoking  or  repudiating  the  arbitra- tion  provision  so  well  established  between  the  parties. Cf.  International Bhd. of Boilermakers -- Local 1603 v. Transue & Williams Corp.,  879 F.2d 1388,  1390,  1393

(6th Cir. 1989) (emphasizing that the employer did not explicitly inform the union it wished "to revoke the par- ties' agreement as to the grievance procedures" and that there was "no evidence to indicate a dispute over the terms of the grievance and arbitration provisions" before find- ing an implied-in--fact contract arose after expiration of the parties' CBA); United Paperworkers Int'l Union Local No. 200 v. Wells Badger Indus., Inc., 835 F.2d 701, 702-

04  (7th  Cir.  1987)  (same).  In  fact,  Luden's  November

7, 1992 memorialization of the parties' near "agreement" contains a grievance and arbitration procedure virtually identical to the one the 1988 CBA contained. In short, the record **28   does not reveal that the parties disagreed about the continuation of the arbitration procedure dur- ing the interim bargaining period in any meaningful way or that both parties actually intended for the arbitration clause not to endure,  the occurrence of either of which would have excluded that term from the implied-in--fact CBA,  but  instead  indicates  that  Luden's  kept  the  doors to its business open, invited its employees to enter, and conducted business as usual.

n15 On this basis it is apparent that, even if the retroactive wage provision were subject to inclu- sion  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  compre- hensive offer (which the Union proceeded to do), Luden's  would  make  "no  retroactive  payments." Letter  from  Donald  P.  Watson,  Plant  Manger,  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 of- fer, "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.

**29

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Page 15

*357   In context of these facts, we think that the Union's membership was working under the reasonable presump- tion  that  it  was  entitled  to  arbitrate  grievances  rather than be forced to turn to the less efficient and more ex- pensive  mechanism  of  litigating  them.  The  employer's uninterrupted  fidelity  to  the  arbitration  provision  stood as the implied consideration for the employees' contin- ued diligent and loyal service. Even had Luden's enter- tained a subjective desire to end its obligation to arbitrate grievances, since the record does not show the Union to have  shared  that  desire,  the  objective  terms  of  the  im- plied-in--fact  CBA  controlling  the  parties'  relationship would not have changed. See Mack Trucks, 856 F.2d at

592  ("The  parties'  objective  intent  to  create  a  contract is relevant -- not their subjective beliefs."). Had Luden's demonstrably  disavowed  that  provision,  the  union  em- ployees could have consciously chosen whether or not to continue working diligently for their employer (that is, they could have elected, based on their employer's deci- sion to refuse arbitration, whether to quit, strike, engage in a boycott, work slow-down, or work stoppage, or to continue **30  to execute their job responsibilities faith- fully). n16 But Luden's did not do so, and its employees were thus deprived of the potential to make an informed choice. Throughout the relevant period,  Luden's reaped benefits from its union employees' loyal service, and now it must accept the consequences. n17

n16  We  cannot  provide  a  recipe  for  conduct which suffices to preclude the formation or annul the existence of an implied-in--fact arbitration pro- vision,  and  leave  that  question  for  later  develop- ment. We can provide some guidance now, though.

HN8  Since the peaceful continuation of the con- tractual relationship is the linchpin of our decision, we note that resort to ultimate economic weapons

(either a lock-out or a strike) would usually mani- fest 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 ar- bitrate 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

"the  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 incorporat- ing all the undisputed terms of the old CBA  ex- isted"); 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  im- plicit "rejection of the employer's offer"), cert. de- nied, 117 L. Ed. 2d 417, 112 S. Ct. 1172 (1992); Transue & Williams Corp., 879 F.2d at 1394 (high- lighting  the  fact  that  "at  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 con- tract"). Accordingly, such conduct would probably send a clear message that the acting party no longer wishes to be bound by an implied-in--fact arbitra- tion provision. Cf. Carpenters S. Cal. Admin. Corp. v. J.L.M. Constr. Co., 809 F.2d 594, 598 (9th Cir.

1987) ("An 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).

**31

n17 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 relation- ship continued, but because we do not believe that Luden's genuinely wished to abrogate,  for exam- ple, its employee's obligations to clean and main- tain their uniforms, to work specified shifts, or to notify  security  of  tardinesses  or  absences,  or  the Union's obligation to submit copies of notices to it for inspection before posting them on the com- pany bulletin board, all of which were part of the

1988 CBA. Indeed, for all we can tell, Luden's ex- pected  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

28 F.3d 347, *357; 1994 U.S. App. LEXIS 14936, **31;

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Page 16

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  criti- cal dissimilarity between arbitration provisions and many other terms of agreement between parties to a CBA. For many terms and conditions of employ- ment,  it  is  patently  obvious  if  either  party  elects to reject it. For example, had the employees been dissatisfied with their obligation to wear uniforms, they  would  have  shown  up  for  work  in  regular

street clothes, and Luden's would immediately have known of its employees' intent not to abide by that expired condition of employment. Not so with an arbitration  provision,  whose  subjective  unilateral rejection will not be apparent until a dispute erupts unless either party clearly and objectively expresses or indicates its views on the matter.

**32

28 F.3d 347, *358; 1994 U.S. App. LEXIS 14936, **32;

146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 17

*358   Having looked only to ordinary principles of con- tract  interpretation,  we  are  inclined  at  this  juncture  to recognize an implied-in--fact CBA incorporating the ar- bitration provision from a lapsed CBA. We cannot do so, however,  unless  an  implied-in--fact  CBA  incorporating a duty to arbitrate is also compatible with federal labor policy. We think that it is.

HN9  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  em- ployer and a union may adopt an enforceable labor con- tract 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 reach- ing a bargaining impasse by the ordinary act of entering the employer's open doors, a view with **33   which we now concur. n18 Similarly,  the employer may make an

(implied) offer simply by leaving the shop doors open for its unionized employees, n19 especially when there has been sixty days notice

28 F.3d 347, *359; 1994 U.S. App. LEXIS 14936, **33;

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Page 18

*359  of intent to terminate prior to the termination of the CBA and the employer is at liberty to keep its doors shut, see 29 U.S.C.A. § 158(d)(4) (1973) (prohibiting lock-outs unless 60 days notice of termination was provided and the CBA has expired).

n18 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,

117  L.  Ed.  2d  417,   112  S.  Ct.  1172  (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. 1984); 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 em- ployer 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 con- duct  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 lim- ited 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) ("An uninter- rupted and accepted custom established during the life-span of an expired CBA  may become an im- plied term and condition of employment by mutual consent of the parties. Once an implied term is es-

tablished, 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 vol- untary submission to an arbitrator for the arbitrator to decide the arbitrability of a dispute that "consent to arbitrate may be implied from the parties' con- duct");  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).

**34

n19 See NLRB v. Haberman Constr. Co., 641

F.2d 351, 355-57 (5th Cir. 1981) (en banc) (affirm- ing  the  Board's  finding  that  "the  Company  man- ifested  an  intent  to  abide  by  the   national   con- tract,"  although  it  was  not  a  signatory  thereto,

"by  enjoying  its  benefits  and  abiding  by  its  pro- visions," and thereupon concluding that the com- pany was bound by the terms of the national con- tract)  ("It  is  well  settled  that  a  union  and  em- ployer's adoption of a labor contract is not depen- dent 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  omitted)); BAKALY & GROSSMAN, MODERN LAW OF CONTRACTS, § 3.1.1 at 22 ("In the employment context,  an implied offer may arise when an em- ployer  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 re- quest that he intended to pay for the services, then the employer's request will be deemed an offer.");

1  HOWARD  A.  SPECTER  &  MATTHEW  W. FINKIN,  INDIVIDUAL  EMPLOYMENT  LAW AND  LITIGATION  §§  1.01,  1.02  (1989)  (" An employment contract  may be expressed in words or  arise  by  implication  from  the  conduct  of  the parties.") ("An offer may be implied from the em- ployer's actions or practices.") ("Acceptance of an employment contract  may be made orally, in writ- ing,  or  by  commencement  or  continuing  perfor- mance."); I FARNSWORTH ON CONTRACTS §

3.15a,  at 242 (1990) ("occasionally both the em-

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146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 19

ployer's  offer  and  the  employee's  acceptance  are implied-in--fact from  their conduct"  (citing,  inter alia, Novosel v. Nationwide Ins. Co., 721 F.2d 894,

902-03 (predicting Pennsylvania law regarding the creation of an implied contractual "just cause" pro- vision), reh'g denied, 721 F.2d 903 (3d Cir. 1983))).

**35

Turning  now  specifically  to  arbitration  clauses,  we think that federal labor policy condones their incorpora- tion into an implied-in--fact CBA. n20 First, federal labor policy,  insofar as it is solicitous of peaceful labor rela- tions, favors the existence of CBAs, and HN10  we will generally apply contract law liberally in order to recog- nize  a  CBA  which  lessens  strife  and  fosters  congenial relations between employees and management. See John Wiley & Sons, Inc. v. Livingston, 376 U.S. at 550, 84 S. Ct. at 914-15 ("Although the duty to arbitrate . . . must be founded on a contract, the impressive policy considera- tions favoring arbitration are not wholly overborne by the fact that the employer  did not sign the contract being construed.");  Eastern  Air  Lines,  Inc.  v.  Air  Line  Pilots Ass'n,  Int'l,  861  F.2d  1546,  1550  (11th  Cir.  1988);  see also 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.").

n20   HN11   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 for- mation  of  an  implied-in--fact  CBA  terminable  at will by either party. Incorporating the duration pro- vision of the lapsed CBA would in most if not all instances substantially interfere with collective bar-

gaining because, depending on what other terms are incorporated into the implied-in--fact CBA, it might leave nothing to bargain over. Perhaps more prob- lematically, when an arbitration clause in particu- lar 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 im- pliedly found such a result contrary to federal la- bor 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 n..

**36

Second,   HN12  to effectuate the federal labor pol- icy 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 pre- sumption favoring arbitrability of disputes between par- ties  who  include  arbitration  provisions  in  their  CBAs. The Supreme Court explained the basis for this policy in Nolde:

The  labor  arbitrator  is  usually  chosen  be- cause of the parties' confidence in his knowl- edge 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

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146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 20

*360     upon   the   determination   of   a grievance, because he cannot be similarly in- formed.

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)).

**37   n21

n21 See A T & T Technologies, 475 U.S. at 650,

106 S. Ct. at 1419 (observing that "th e  presump- tion  of  arbitrability  for  labor  disputes  recognizes the greater institutional competence of arbitrators in interpreting collective-bargaining agreements, 'fur- thers the national labor policy of peaceful resolu- tion of labor disputes and thus best accords with the  parties'  presumed  objectives  in  pursuing  col- lective 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)  (enu- merating  the  advantages  of  arbitration  over  liti- gation);   FRANK  EKLOURI  &  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 partic- ular 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) ju- risdiction 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 submer- sion in the "common law of the shop" --  to locate and discern meaning and intent where judges can unearth only ambiguity and doubt that renders arbi- tration such a popular dispute resolution technique in CBAs.

**38

Applying that policy, the Supreme Court in Nolde held that " HN13  'an 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 arbitra- bility 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, 111 S. Ct. at 2226.

**39   n22

n22  The  salience  of  an  arbitration  provision to  both  parties  as  well  as  its  weighty  stature  un- der federal labor law is further demonstrated by its membership in the set of mandatory subjects of col- lective bargaining. See, e.g., United Elec. Workers v. NLRB, 133 U.S. App. D.C. 115,  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).

**40

Luden's  objects,  however,  that  our  recognition  that an implied-in--fact CBA arises despite an employer's an- nouncement of its intent to terminate a CBA would ren- der  the  announcement  nugatory  and  "would  altogether eliminate the significance of contract expiration or termi- nation."  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 supra at n.. We only hold that the termination of a CBA, standing alone, does not objectively manifest the clear, particularized intent to dis- avow  its  terms  needed  to  prevent  certain  of  the  lapsed

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Page 21

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 arbitration

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146 L.R.R.M. 2586; 128 Lab. Cas. (CCH) P11,137

Page 22

*361    provision  of  the  implied-in--fact  CBA.  n23  Of course, repudiation would affect only future disputes aris- ing after such notice, whenever **41   it may come, and such a termination could certainly not affect disputes in- volving pre-expiration facts, accrued rights, or persisting rights (as measured with respect to the lapsed or the im- plied-in--fact CBA). n24 That is to say, an implied-in--fact arbitration provision is in its legal effect indistinguishable from that of the standard written and undersigned one.

n23 Obviously either party may prevent the im- plied-in--fact terms from arising altogether by re- pudiating them concurrently with,  or in some in- stances before, see supra at 16 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 par- ties consciously intend for that term not to survive the lapse of the CBA.

n24 In Litton the Supreme Court enumerated three types of disputes which, albeit flaring up post- expiration,  could  "arise  under  the   lapsed   con- tract:"

HN14

A postexpiration grievance can be said to arise under the contract only (1)  where  it  involves  facts  and  occur- rences  that  arose  before  expiration,

(2)   where  an  action  taken after  ex- piration infringes a right that accrued or vested under the agreement, or (3)  where, under normal principles of con- tract interpretation, the disputed con- tractual right survives expiration of the remainder of the agreement.

111 S. Ct. at 2225 (the "pre-expiration facts," "ac- crued  rights,"  and  "persisting  rights"  prongs,  re- spectively).

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 arbi- trate never came to rest clearly compels the result that  the  dispute  must  proceed  to  arbitration.  The parties' duty to arbitrate was never discharged be- cause 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 "agree- ment." 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  pre- sumption favoring arbitration governs. See Nolde,

430 U.S. at 255, 97 S. Ct. at 1074, quoted supra at .

**42

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 uni- lateral 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). n25 Finally, the term of the implied-in-- fact CBA we recognize here is restricted to an arbitration provision;  it may well be that the implied-in--fact CBA does not incorporate all, or any other, of the terms of the lapsed CBA.  Cf.  General Warehousemen & Employees Union Local No. 636 v. J.C. Penney Co., 484 F. Supp. 130,

134 (W.D. Pa. 1980) ("Even though employees continue to work under the compensation arrangements of an old contract, the court cannot imply that the entire contract was extended." (emphasis supplied)). We cannot foretell what other, if any, terms of the lapsed agreement would similarly generally survive. But see supra at n.. But since it is the case that the implied-in--fact **43    CBA will incorporate at most those terms of the lapsed CBA which have not clearly been disavowed in some way and whose inclusion is compatible with federal labor policy, we can mention some potential considerations.

n25   HN15   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 par- ties 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, 111 S. Ct. at 2221.

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   **44   CBA means that the other party has consented to the continuation of the provision. Although arbitration is a subject of mandatory bargain- ing, 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, 111 S. Ct. at

2221-22; cf.   Indiana & Mich. Elec. Co., 284 N.L.R.B.

53, 58 (1987). We have said above with respect to arbi- tration provisions that, as both parties are free to modify the arbitration clause unilaterally after the lapse of the

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*362   CBA, the absence of contrary indications gener- ally gives rise to a reasonable presumption that the silent party has agreed to continue in effect the arbitration pro- vision of the lapsed CBA. See supra at .

On this basis, arbitration differs markedly from most other mandatory topics of collective bargaining, the uni- lateral  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 **45   to its statutory duty prevent- ing 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. n26

n26  Thus  although  we  acknowledge  and  ap- preciate the dissent's concern that in some circum- stances "the employer's post-termination conduct may  have  been  based  on  its  understanding  of  its statutory obligations under the NLRA ," infra at X  (dissenting  opinion  at  2),  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 in- corporated into the implied-in--fact CBA is an ar- bitration clause.

HN16  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 memberof the   **46   group of items subject to manda- tory bargaining but not subject to a party's unilateral mod- ification. 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 un- fair 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 ar- bitration provision does not undermine the NLRB's pri- mary 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,  n27  our  recognition

**47    of  an  implied-in--fact  arbitration  provision  re- spects  the  Board's  turf,  because  it  implicates  primarily the  interpretation  and  application  of  the  1988  and  the implied-in--fact CBAs, over which § 301 grants federal courts jurisdiction, not the interpretation and application of  the  NLRA,  over  which  the  Board  maintains  special expertise.  See,  e.g.,  Smith  v.  Evening  News  Ass'n,  371

U.S. 195, 197-98, 83 S. Ct. 267, 268-69, 9 L. Ed. 2d 246

(1962) (holding courts and the Board exercise concurrent jurisdiction over breaches of CBAs that amount to an un- fair labor practice). In appreciation of this distinction, the Board itself has adopted a system of prearbital deferral

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*363   which exalts the parties' agreed-upon method to resolve a dispute above Board proceedings. See Collyer Insulated Wire, 192 N.L.R.B. 837 (1971). See generally II CHARLES J. MORRIS, THE DEVELOPING LABOR LAW 1016-49 (3d ed. Patrick Hardin ed. 1992). We high- light these observations because the same might not be true for subjects of mandatory bargaining whose unilat- eral modification does constitute an unfair labor practice. n28   **48

n27 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  "the  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);  cf.   Local  Union  No.  47, Int'l Bhd. of Elec. Workers v. NLRB, 288 U.S. App. D.C. 363, 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 im- passe (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 unsuccess- fully bring an unfair labor practices charge against Luden's on other counts, see supra at n.3). See, e.g., Derrico v. Sheehan Emergency Hosp., 844 F.2d 22,

26 (2d Cir. 1988) ("The terms of an expired agree- ment . . . retain legal significance because they de- fine the status quo" from which neither party may depart before bargaining to impasse.).

**49

n28 We deem it notable also that our decision will not threaten to inundate the federal courts with

§ 301 suits which should by statutory design pro- ceed  as  unfair  labor  practice  charges  before  the Board.

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." 111 S. Ct. at 2222. Our analysis complies with that principle, contrary to Luden's supposition, for we recognize that it generally is the par- ties' actual (albeit implied-in--fact) agreement to continue in effect the arbitration term of the lapsed CBA absent contrary indications. n29 Because the duty to arbitrate

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Page 25

*364  we recognize is rooted in an implied-in--fact CBA, a contractual agreement which like any other is predicated on the parties' manifest intent and not on any statutory

**50   or legal duty, cf.  Indiana & Mich. Elec. Co., 284

N.L.R.B. at 57, our decision does not run afoul of Litton's teachings that a court must decide whether an issue is ar- bitrable, and that it must do so on the basis of the parties' contractual consent thereto, see Litton, 111 S. Ct. at 2222,

2226, 2227.

n29 The dissent suggests that we may be em- ploying a quasi-contract rather than an implied-in-- fact contract approach. See infra at X (dissenting opinion at 3-4). As the preceding discussion should make clear, such is not the case. Our approach only recognizes that the parties, by not clearly disavow- ing 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 22 n.20, 25.

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 (defin- ing a quasi-contract as "an obligation that is cre- ated  by  the  law  without  regard  to  expression  of assent  by  either  words  or  acts");  1  WILLISTON 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 par- ties."). While the boundary line between contract and quasi contract may be "wavering and blurred,"

1 CORBIN ON CONTRACTS § 19, at 44, the dif- ference is real.

Instead, our conclusion is based on the "objec- tive" 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 "the parties' objective intent to create a contract is relevant --  not their subjec- tive 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 mani- fest assent even though he does not in fact assent. In  such  cases  a  resulting  contract  may  be  void- able  because  fraud,  duress,  mistake,  or  other  in-

validating  cause.");  id.  §  2  cmt.  b  ("The  phrase

'manifestation of intent' adopts an external or ob- jective 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, noth- ing to do with the personal, or individ- ual,  intent  of  the  parties.  A  contract is an obligation attached by the mere force of law to certain acts of the par- ties,  usually  words,  which  ordinarily accompany and represent a known in- tent.  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 understand- ing  of  the  implied-in--fact  CBA.  See  infra  at  X

(dissenting opinion at 2). 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 ef- fect to the parties' objective manifestations of in- tent.  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  the lapsed CBA continued in effect; parties often have doubts about the precise contours of their rights and obligations, even under well-drafted written agree- ments, and such uncertainty does not negative the right. Assuming an objective manifestation of in- tent by both parties necessary for the formation of

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Page 26

an implied-in--fact CBA, a term may be included as a part of the CBA unless both parties subjectively intended that it not be.

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 par- ticular term which the implied-in--fact CBA would otherwise incorporate.

**51

IV. CONCLUSION

For the foregoing reasons, HN17  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 in- tent, 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 **52  according to the terms of their 1988 CBA was never totally discharged. In other words, Luden's general, undifferen- tiated 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  in- structions to direct the parties to proceed to arbitrate the retroactive wage grievance. The parties shall bear their own costs.

DISSENTBY: ALITO

DISSENT: ALITO, Circuit Judge, dissenting.

I would affirm the decision of the district court. For es- sentially 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 con- cerning the retroactivity of the proposed wage increase was not subject to the arbitration provision of the termi- nated 1988 collective bargaining agreement.

I would not reach the theory on which the court's de- cision is based, i.e., that the parties, upon the termination of the 1988 agreement,  entered into an implied-in--fact agreement containing an arbitration **53   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 circum- stances, I do not think that it is necessary or appropriate to reach this theory, which may have considerable prece- dential 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 reser- vations 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

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Page 27

*365   sure that the conduct of Luden's in this case man- ifested such assent. After all, Luden's took pains to ter- minate the 1988 collective bargaining agreement. While it appears to be true that "Luden's kept the doors to its business **54   open, invited its employees to enter, and conducted business as usual" (Maj. typescript 19), I am not sure that this conduct should be interpreted as a man- ifestation of assent to a new,  tacit contract,  particularly since federal labor law placed limitations on Luden's abil- ity to engage in a different course of conduct. See Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 198-99, 115

L.  Ed.  2d  177,  111  S.  Ct.  2215  (1991)  (concerning  an employer's unilateral changes in terms and conditions of employment); Stokely-Van Camp, Inc., 186 N.L.R.B. 440

(1970) (concerning pre-impasse lock-outs).

Even assuming for the sake of argument that the par- ties entered into some type of implied agreement, I am not  certain  that  this  agreement  also  contained  an  arbi- tration 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 **55   to a promise or agreement or a term thereof, it is interpreted in accor- dance with the meaning attached by one of them if at the time the agreement was made

(a) that party did not know of any differ- ent 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 the 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 indi- cating 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

**56    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 pu- tative 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 understand- ing." Baltimore & Ohio R.R. v. United States, 261 U.S.

592,  597,  67 L. Ed. 816,  43 S. Ct. 425 (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:

We  hold  that  in   **57    a  continuing  em- ployment  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 either or both parties in fact intend the term not to survive, or 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 repu- diate that term.

Maj. typescript at 34. This flat rule is suggestive of an obli- gation that arises by operation of law, not one based on an actual, albeit tacit, agreement between two particular parties.

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Page 28

*366    If  this  interpretation  of  the  court's  decision  is correct, I have serious reservations whether that decision is consistent with the Supreme Court's refusal in Litton,

501 U.S. at 200-01, to recognize a legal duty to arbitrate disputes arising after a collective bargaining agreement expires. In Litton, the Court "reaffirmed . . . that under the

NLRA arbitration is a matter of consent, and that it will not be imposed upon parties beyond the scope of their agreement." Id. at 201. **58

For  these  reasons,  I  am  not  willing  at  this  point  to endorse the court's analysis, and I therefore respectfully dissent.

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