8th Cir. Rejects Firm's Bid to Undo Labor Contract Mistake

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By Lawrence E. Dubé

April 15 — A metal can manufacturer was not entitled to rescission of a union contract provision the company signed by mistake, the U.S. Court of Appeals for the Eighth Circuit ruled, reversing a lower court order in the company's favor on that issue.

Silgan Containers Corp. convinced a district court that Missouri law supported its right to rescind an agreement on pension contributions for employees represented by a Sheet Metal Workers local, but the Eighth Circuit disagreed April 15.

The decision showed the court's reluctance to allow judicial intervention in contract negotiations between a labor union and a sophisticated employer.

Writing for the appeals court, Judge Duane Benton said union negotiators may have kept silent about the company's error, but the company was responsible for its own failure to notice that the pension provision lacked a cap on employer contributions that was included in the prior collective bargaining agreement.

Dispute Over Pension Contributions Cap

According to the decision and court records, Silgan and Sheet Metal Workers Local 2 had a long history of collective bargaining at the company's St. Joseph, Mo., plant.

A 2008-2012 collective bargaining agreement required the employer to make pension contributions of $1.98 per hour for each hour worked by a bargaining unit employee “up to a maximum of 2000 hours per year.”

In 2012, during negotiations for a new contract, the parties discussed the union's proposal for significant revisions in the pension provision, including an increase of the employer's contribution from $1.98 to $2 per hour. The union proposal did not include the 2,000-hour cap, and the court said Silgan made no mention of the subject.

As negotiations continued, a Silgan representative commented the proposed contract language would “work like it had always worked in the past.” The union's representatives decided not to mention the removal of the 2,000-hour cap, and when Silgan eventually produced its final contract offer, the cap was still missing.

Local 2 submitted the proposal to its membership, which ratified the new contract. Company and union representatives proofread the agreement; Silgan requested several edits but made no mention of a cap on pension contributions.

Company Claimed Mistake, Sought Court Relief

Silgan later argued it did not agree to make contributions for more than 2,000 hours worked by an employee in a year, and the union pursued a grievance to arbitration to enforce the agreement as written, without a cap.

An arbitrator sustained the grievance, but the U.S. District Court for the Western District of Missouri vacated the award, and the union appealed.

The Eighth Circuit held the federal district court, rather than the arbitrator, had the authority to decide Silgan's challenge to the collective bargaining provision, because it was a dispute about the formation of a contract rather than the interpretation of the agreement.

However, the appeals court said it was error for the lower court to rescind the disputed article on pension contributions.

Appeals Court Reverses Rescission Order

Benton said federal law applies to actions concerning union contracts that are brought under the Labor-Management Relations Act.

Federal courts can look to state law if it is compatible with the purposes of the LMRA, but the Eighth Circuit said the lower court misapplied Missouri law.

Missouri courts allow rescission in the case of a unilateral mistake only if it would be unconscionable to grant enforcement and the party opposing rescission had reason to know of the mistake.

The appeals court said that “at worst, the Union remained silent about the 2000-hour cap,” while Silgan was a “sophisticated party” and passed up numerous opportunities to complain about omitting the cap from the new collective bargaining agreement.

Stating the employer was not entitled to judicial relief from a mistake of its own making, the Eighth Circuit reversed the judgment rescinding the pension article and remanded the case to the lower court for further proceedings consistent with the appellate court's opinion.

Judges Diana E. Murphy and Lavenski R. Smith joined in the opinion.

Donald Aubry of Steve A.J. Bukaty Chartered in Kansas City, Mo., argued the appeal for Sheet Metal Workers Local 2. Raymond M. Deeny of Sherman & Howard in Colorado Springs, Colo., argued for Silgan Containers Corp.

To contact the reporter on this story: Lawrence E. Dubé in Washington at ldube@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com