In re the Matter of the Grievance Arbitration between AFSCME, Council 96 and Independent School District No. 704, Proctor Public Schools.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-125

In re the Matter of the

Grievance Arbitration between

AFSCME, Council 96

and

Independent School District No. 704,

Proctor Public Schools.

Filed August 17, 2004

Affirmed

Lansing, Judge

St. Louis County District Court

File No. C7-03-602616

Sarah Lewerenz, 211 West Second Street, #205, Duluth, MN 55802(for appellant AFSCME)

Diane B. Bratvold, Maggie R. Wallner, John C. Hauge, Rider Bennett, LLP, Suite 2000, 333 South Seventh Street, Minneapolis, MN 55402(for respondent school district)

            Considered and decided by Hudson, Presiding Judge; Lansing, Judge; and Willis, Judge.

U N P U B L I S H E D   O P I N I O N

LANSING, Judge

            AFSCME appeals the district court's denial of its motion to compel arbitration with Independent School District No. 704.  AFSCME argues that questions of arbitrability based on the procedural requirements of the parties' collective-bargaining agreement should be resolved by an arbitrator, not the courts.  District No. 704 contends that arbitration rights for this particular grievance were relinquished by a previous settlement agreement between the parties and, also, that this matter should be reviewed under the Federal Arbitration Act rather than the Minnesota Uniform Arbitration Act.  Because the district court properly resolved a strictly procedural issue that required no resolution of a factual dispute, we affirm.

F A C T S

            AFSCME, Council 96 is a union representing public employees in northeastern Minnesota.  Jodi Smolnikar-Joki is an employee of Independent School District No. 704 in Proctor and a member of AFSCME, Council 96.  In 2001 she attempted to bid (fill an open union job) for the position of guidance secretary for the Proctor schools.  District 704 rejected her bid, stating that she was not qualified for the job, and Smolnikar-Joki filed a grievance under AFSCME's collective-bargaining agreement with the school district. 

In January 2002 the parties entered into a settlement agreement based on their stated preference that the matter "be resolved by settlement, rather than by arbitration."  The settlement agreement provided that it "would result in the dismissal of the grievance at the time the [a]greement was executed and the dropping of any future claims to the guidance secretary position."  The agreement also stated that the settlement did  "not set precedent and may not be used in any other grievance situation."

The following June, facing a seasonal layoff, Smolnikar-Joki attempted to bump (attain an occupied position because of seniority) into the guidance-secretary position.  District 704 refused the request, asserting that Smolnikar-Joki was unqualified for the position and that the issue "had previously been addressed through a grievance resolution."  Smolnikar-Joki then filed another grievance, which District 704 again denied, based on the settlement agreement in which Smolnikar-Joki disclaimed any right to bid or bump into the position. 

In July 2002 AFSCME notified District 704 of its intent to proceed with arbitration, and the district protested that the grievance was resolved by the January 2002 settlement agreement.  In September 2002 AFSCME requested that District 704 either resolve the grievance or "process it to the next step."  One year later, AFSCME finally filed an application to compel arbitration in the district court.

Following a hearing, the district court denied AFSCME's petition for an order to compel arbitration.  The court reviewed both the settlement agreement and the collective-bargaining agreement and found that the second grievance "could have been submitted to arbitration," but denied the petition based on AFSCME's failure to follow the timelines provided by article 23 of the collective-bargaining agreement.  AFSCME appeals from this decision. 

D E C I S I O N

            We review de novo an appeal of a decision that a dispute is not subject to arbitration.  Indep. Sch. Dist. No. 88 v. Sch. Serv. Employees Union Local 284, 503 N.W.2d 104, 106 (Minn. 1993).  Any doubt on the scope of arbitrable issues will be resolved in favor of arbitration.  Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790, 795 (Minn. 1995).  In general, procedural questions stemming from the dispute that affect the final decision in an arbitration are presumptively for an arbitrator and not for a judge to decide.  John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557, 84 S. Ct. 909, 918 (1964) (holding that arbitrator should decide whether prerequisite steps to arbitration have been completed).  It is similarly presumed that an arbitrator should decide allegations of waiver, laches, or a like defense to arbitrability.  Brothers Jurewicz, Inc. v. Atari, Inc., 296 N.W.2d 422, 426-27 (Minn. 1980).

            As a preliminary matter, we address District 704's claim that the district court mistakenly applied Minn. Stat. § 572.09 (2002) (the Minnesota Uniform Arbitration Act (MUAA)) rather than 9 U.S.C. §§ 1-16 (2001) (the Federal Arbitration Act (FAA)).  District 704 argues that the Minnesota Supreme Court's recent decision in Onvoy, Inc. v. SHAL, LLC, 669 N.W.2d 344 (Minn. 2003), requires that federal arbitration law supplant state arbitration law in all "transactions that affect interstate commerce."  Id. at 351.

            Both state and federal law applications require a two-step analysis to determine whether the parties agreed to submit Smolnikar-Joki's grievance to arbitration: first, whether a valid arbitration agreement exists; and second, whether this dispute is governed by that agreement.  Compare Churchill Envtl. Indus. & Equity Partners, LP v. Ernst & Young, LLP, 643 N.W.2d 333, 336 (Minn. App. 2002) (applying FAA), with Minn. Teamsters Pub. & Law Enforcement Employees' Union, Local 320 v. County of St. Louis, 611 N.W.2d 355, 358 (Minn. App. 2000) (applying MUAA).  The Onvoy court, applying the FAA, held that any doubt on the intent of the parties to arbitrate should be resolved in favor of arbitration.  669 N.W.2d at 351.  Under the MUAA, the standard for reviewing a motion to compel arbitration is "whether the scope of the arbitration agreement is reasonably debatable."  Minn. Teamsters, 611 N.W.2d at 359.

Although District 704 advances the application of federal arbitration law, it acknowledges in its brief that "the same result obtains whether this dispute is considered under the FAA or under the MUAA."  Because deciding whether the state statute governing arbitration is preempted is not necessary to resolve the issue in this appeal, we need not determine whether Onvoy applies to disputes between a union and a public employer.  See Martin ex rel. Hoff v. City of Rochester, 642 N.W.2d 1, 10-11 (Minn. 2002) (listing circumstances, including the conflict of state and federal law, that trigger preemption and stating that "[p]reemption of state laws is generally disfavored"), cert. denied sub. nom. Minnesota v. Martin, 123 S. Ct. 2668 (2003). 

            We now turn to the central issue raised in this appeal:  whether the viability of the right to arbitration should have been resolved by the district court or the arbitrator.  In denying AFSCME's motion to compel arbitration, the district court determined that AFSCME failed to adhere to the timing requirements of the collective-bargaining agreement and thus was not entitled to arbitration of Smolnikar-Joki's grievance.  The district court rested its determination on the "inexplicable failure on the part of the plaintiff to abide by the timelines" of the collective-bargaining agreement. 

At the motion hearing, AFSCME did not dispute its lack of timeliness; rather, it relied entirely on the legal argument that procedural issues are the province of the arbitrator and not the courts.  In its appellate brief, AFSCME advances a factual claim for the viability of its untimely request to comply arbitration:  that it was the practice of the parties to depart from the procedural formalities of the collective-bargaining agreement.  But AFSCME did not present this defense or assert any evidence of past practices in the motion hearing.  It appears that AFSCME first raised the past-practices argument in a January 20, 2004, letter to the district court when it unsuccessfully requested permission to make a motion to reconsider the denial of the motion to compel arbitration.

            AFSCME contends that it could not present this fact at the motion hearing because the district court is not allowed to make findings on disputed facts underlying motions to compel arbitration.  Local 1119, AFSCME v. Mesabi Reg'l Med. Ctr., 463 N.W.2d 290, 296 (Minn. App. 1990).  We agree that a hearing on a motion to compel arbitration is not a forum that requires development of a factual record, but a petitioner must, at the very least, assert the existence of disputed facts that would support a right to arbitrate.  See Millwrights Local 548, United Bhd. of Carpenters v. Robert J. Pugleasa Co., 419 N.W.2d 105, 108 (Minn. App. 1988) (acknowledging "support for the proposition that a court may consider a strictly procedural question as to the timeliness of a demand for arbitration in those rare instances where no factual dispute exists and resolution of the issue would preclude all need for arbitration" and quoting Retail Delivery Drivers Local 588 v. Servomation Corp., 717 F.2d 475, 478 (9th Cir. 1983) (citing Wiley, 376 U.S. at 557-58, 84 S. Ct. at 918-19)); see also200 Levee Drive Assocs. v. Bor-Son Bldg. Corp., 441 N.W.2d 560, 563-64 (Minn. App. 1989) (stating that judgment on a statute-of-limitations defense during action to stay arbitration was proper when issue could be "effortlessly decided by the trial court").

AFSCME did not inform the district court that prior practices by the parties ignored procedural formalities, and we cannot impute error to a district court decision that did not contemplate these unasserted facts.  Absent any notion of those practices, the court could only conclude that under the terms of the agreement the right to arbitrate was no longer viable.

            We recognize that the law favors deference to the arbitration process when the courts are faced with procedural issues under an arbitration agreement.  In Pugleasa, the union waited eight months to compel arbitration, despite a provision in the arbitration agreement that grievances were waived unless submitted within ten days.  419 N.W.2d at 106-07.  We held that this interval did not defeat an employee's right to have his dispute submitted to arbitration.  Id. at 109.  But Pugleasa does not indicate that the union failed to assert a disputed issue that would support the right to arbitrate.  Pugleasa concluded that an arbitrator would have the power to take testimony and resolve the effect of past practices on timeliness issues.  Id.; see also Minn. Teamsters,611 N.W.2d at 358 (emphasizing that Minnesota law favors arbitration of disputes but recognizing that district court may decide arbitrability of preliminary question).  The circumstances in this case are distinct from those that underlay our prior holdings on this issue: we find no indication in the record that AFSCME asserted a factual dispute or claimed that past practices would support the right to arbitrate.

Despite the strong preference in Minnesota law that both procedural and substantive issues arising out of arbitration agreements be resolved by arbitrators, we are persuaded that the district court properly decided that AFSCME's failure to follow the timing guidelines of the collective-bargaining agreement extinguished Smolnikar-Joki's right to have her grievance heard in arbitration.

            Affirmed.