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On July 28, 1970, the Bakery Workers and Nolde Brothers entered into a collective bargaining agreement covering employees at the company's Norfolk, Virginia bakery. The agreement was to remain in effect until July 21, 1973 and thereafter until a new agreement was reached or until either party gave seven days' notice of termination. It included a broad arbitration clause, a no-strike clause, and a provision for severance pay, upon the permanent closing of the bakery, for each employee who had worked full-time for at least three years immediately prior to his layoff due to the closing.' After several months of negotiations, the union on August 21, 1973 gave notice of its intent to terminate the agreement. On August 31, 1973, the union threatened to strike, whereupon the company immediately shut down the bakery. After the company refused to give severance pay or to arbitrate whether it had a duty to do so, the union sued in federal district court under section 301 (a) of the Labor Management Relations Act. The district court held that the union had no contractual entitlement to severance pay because it had voluntarily terminated the agreement prior to the bakery closing. The court further stated that the company had no duty to arbitrate the dispute, since it had arisen after expiration of the agreement.
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