Opinion
Case No. 3:01-CV-006-X
June 7, 2001
MEMORANDUM OPINION ORDER
Before the Court are: Plaintiff's Motion to Vacate Arbitration Award and supporting materials, filed January 2, 2001; Defendant's Motion to Enforce the Arbitration Award, filed April 11, 2001; and Plaintiff's Reply, filed May 11, 2001. This case involves cross motions to enforce and vacate an arbitrator's award under the Railway Labor Act, 45 U.S.C. § 159 (the RLA). The Court evaluates the motions as cross motions for Summary Judgment. For the reasons stated below, the Court GRANTS Defendant's Motion to Enforce the Award (read as a Motion for Summary Judgment), and DENIES Plaintiff's Motion to Vacate the Award (read as a Motion for Summary Judgment).
I. Background
The case arises out of a so-called "minor," dispute under the RLA between DalFort Aerospace, an aircraft repair company, and the union that represents many of its employees. The union complained that DalFort improperly contracts out repair work of the sort performed by union employees, in violation of the parties' 1997 Collective Bargaining Agreement (CBA). DalFort maintains that the CBA does not prohibit it from using the number of contract labor employees currently working for DalFort. Contract laborers are not currently displacing union employees, but they are paid a significantly higher hourly wage than union employees. This, of course, raises the interesting question of why DalFort employees are not fleeing union life for the greener pastures of contract work. Apparently, some are. See Award at 13, in Def.'s Mot., Exh. A. Presumably other union workers find that DalFort's benefits make it worth their while to stay. Contract workers currently make up about 45% of DalFort's repair work force.
The parties opted to submit the grievance over contract labor to arbitration, rather than proceed through the System Adjustment Board, which either party would have had an absolute right to insist upon. The parties voluntarily agreed to a single neutral arbitrator, Diane Dunham Massey. See Pl.'s Br. at 17. The question presented to the arbitrator was: "Did the Company violate the Collective Bargaining Agreement, Joint Exhibit #1, when it contracted out work which is of the same type performed by members of the Bargaining Unit? If so, what is the appropriate remedy?" Id. The CBA currently governing the parties' relationship contains a provision addressing the use of contract labor. It provides:
The parties agree that the Company may contract out work when:
1. the Company facilities and/or equipment are inadequate; and/or
2. the personnel are not sufficient and/or qualified to perform work; and/or
3. other justifiable reasons presented to the Union prior to the work being contracted out.
NOTE: It is further understood that work performed at a customer's request by an outside source shall not be considered as work contracted out. In addition all work which was being contracted out as of January 1, 1994 may continue to be contracted out.See CBA, Art. 2, Sec. B, in Pl.'s App. at 197.
Massey sustained the union's grievance, finding that DalFort violated the CBA by contracting out 45% of its repair work. The award orders DalFort to pay the Union the equivalent of dues on 80% of the straight labor hours performed by contract workers until the other conditions of the award are met. See Award at 17-18, in Def.'s Mot., Exh. A. It further orders that over the period of a year, DalFort reduce its contract labor workforce to no more than 25% of the total workforce. Id. If DalFort fails to meet the prescribed workforce targets, then it will have to pay the Union $4.00 for every hour worked by the percentage of contract workers in excess of the targets.
The arbitrator's award will certainly have a favorable impact on the union's ability to negotiate a more lucrative CBA for the union employees. Both parties acknowledged during the arbitration the potential wage implications of the arbitrator's award. Each side claims that the other has attempted to use the contracting provision to its unfair advantage in wage negotiations: the union contends that DalFort has read the provision in an overly expansive way, so that it can eviscerate the strength of the bargaining unit, and hire more contract workers without ever having to raise core employee wages. DalFort contends that the union poorly negotiated the 1997 CBA, and now wants to cap contract labor unfairly so that DalFort has to pay all core employees more to attract enough core employees. Although the arbitrator's award is likely to affect wage negotiations, this case is an interpretive, or "minor," dispute, properly before the arbitrator under the terms of the parties' submission to her. II. Bases for Review
A. Summary Judgment
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). "Summary judgment is appropriate when there is no genuine issue of material fact and only a question of law is presented." McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 301 (5th Cir. 1993). The parties have not identified any disputed facts. The questions presented are questions of law.
B. Review of RLA Arbitration Award
The parties agree that 45 U.S.C. § 159(3) governs this Court's review of the arbitrator's award. See Pl.'s Br. at 24-25; Def.'s Mot. at 2-3. Review of arbitration awards is one of the narrowest known to the law. See Atchison, Topeka and Santa Fe Ry. Co. v. United Transp. Union, 175 F.3d 355, 357 (5th Cir. 1999). The grounds for review under the RLA are especially narrow. See Union Pacific R.R. v. Sheehan, 439 U.S. 89, 94 (1978). Section 159(3) provides that an RLA arbitration award may be impeached and set aside only if (a) the award does not conform to the requirements established by statute or the proceedings themselves were improper; (b) the award exceeds the scope of the stipulation to arbitrate; or (c) the award was tainted by fraud or corruption. The Fifth Circuit has also held that an award may be set aside if it does not comport with due process. See Atchison, Topeka and Santa Fe, 175 F.3d at 358.
C. Subject Matter Jurisdiction
Before knowing what the result would be, both parties agreed to arbitrate in a manner not prescribed by the RLA, and voluntarily submitted their dispute to a single neutral arbitrator in lieu of proceeding before a system adjustment board. The Court has subject matter jurisdiction to enforce such an award. See Order of Ry. Conductors and Brakemen and Bhd. of R.R. Trainmen v. Clinchfield R.R. Co., 407 F.2d 985, 988-89 (6th Cir. 1969), cert. denied, 395 U.S. 841 (1969); Krieter v. Lufthansa German Airlines, Inc., 558 F.2d 966 (9th Cir. 1977).
III. Analysis
A. Award Draws its Essence from the CBA
First, Plaintiff argues that Arbitrator Massey's award does not "draw its essence" from the CBA. The Court disagrees. The Fifth Circuit's holding in a factually similar non-RLA arbitration case largely dictates this Court's conclusion that Massey's interpretation of the contract is tenable. See Folger Coffee Co. v. Int. 7 Union, United Automobile, Aerospace Agricultural Implement Workers of America-UAW, Local Union No. 1805, 905 F.2d 108 (5th Cir. 1990).
In Folger, Folger Coffee Company had a CBA with a union representing landscapers and yard workers at its New Orleans facility. Id. at 109. The union filed a grievance when Folger subcontracted yard work to a landscaping company outside the union. Id. The parties submitted the grievance to binding arbitration in accordance with the CBA, requesting a ruling on whether Folger violated the CBA by contracting out labor previously performed by the union employees. Id. The arbitration panel found for the union, and ordered Folger to stop using the outside landscaping company. Id. The panel found that while Folger did have some right to subcontract under the terms of the CBA, the right to do so was not absolute. Id. The arbitrators interpreted the subcontracting provision, which by its own terms did not place express limitations on Folger's subcontracting right, as being subject to a good faith requirement; Folger could not contract out the landscaping work when the union workers had the ability to do it. Id. at 111. The Fifth Circuit added that this good faith requirement could be derived not only from general principles of interpretation, but also from the language in Article I of the CBA, which stated that the purpose of the CBA was "to promote, improve, and strengthen the relationship and good will between the Company, the employees, and the Union." Id.
The distinctions Plaintiff makes between the present case and Folger are valiant attempts to get around that compelling authority which, mystifyingly, Defendant does not discuss. As in Folger, the right to contract out work under the present CBA is not absolute. If Dalfort had an unrestricted right to contract out work, the "Note" contained in Section B of the CBA, which states types of work not to be considered as work contracted out, would be unnecessary. Instead, the arbitrator found that the right to contract out labor should be read in light of the CBA's preliminary general statement of purpose. See CBA, Art. 1. In both cases the arbitrators found that decisions should be made in good faith, and should further the goals of the CBA. In the present case, Arbitrator Massey determined that obligations in the CBA are subject to good faith and reasonableness requirements, see Award at 11, and the CBA is to be interpreted to further the goals listed in Article 1 of the agreement. See CBA, Art. 1. In Folger, the arbitrators found that subcontracting decisions should be made in good faith, "represent a reasonable business decision, and not result in a subversion of the collective bargaining agreement or a serious weakening of the bargaining unit." See Folger; 905 F.2d at 111. The conclusion the Fifth Circuit reached in Folger is directly on point:
Defendant has sufficiently addressed each of Plaintiff's bases for vacating the award to avoid being deemed to have "ceded" them.
Absent a specific provision which completely and explicitly entitles the Company to contract out regardless of its effect on the bargaining unit, a reasonable interpretation of the contract is that subcontracting must be balanced against the rights of the employees, the Company, and the Union. . . . [A]rbitrators need not explicitly state that they find a clause ambiguous; nor would they lack the power, as courts frequently do, to construe and apply perfectly unambiguous terms of a contract. Arbitrators must only show that the award is "rationally inferable" in "some logical way" from the agreement.Folger, 905 F.2d at 111. In the present case, the arbitrator likewise found that the contracting provision in Article 2 of the CBA is subject to a balancing of the goals stated in Article 1.
Arbitrator Massey found that although use of contract labor is not resulting in layoffs of core workers, the rising percentage of contract workers disrupts the balance of the relationship between the company and the union employees. As contract employees work alongside union employees, they will have an increasing ability to control working conditions, thereby undermining the right of the union to exclusively negotiate on behalf of the employees. Arbitrator Massey states, "[a] bargaining unit of permanent employees simply loses its effect in an environment of where there is, essentially, an equal number of contract workers. It would be next to impossible to enforce contract terms relative to such things as discipline in such an environment." See Award at 12.
Based on her review of all the facts and circumstances behind the present grievance, the arbitrator decided that it is not reasonable for more than 25% of DalFort's workforce to be contract workers. This decision is the type of gap filling that both the Supreme Court, and the Fifth Circuit as discussed in Folger, have held to be proper. See United Steelworkers v. Warrior Gulf Navigation Co., 363 U.S. 574, 578-83 (1960); Folger, 905 F.2d at 110-11; Delta Queen Steamboat Co. v. District 2 Marine Eng'rs Beneficial Ass'n, 889 F.2d 599, 602 (5th Cir. 1989) (arbitrator may look beyond the CBA when it is silent upon a precise question). The number Massey settled on reflects her judgment of the proper balance under the CBA:
The labor arbitrator's source of law is not confined to the express provisions of the contract, as the industrial common law — the practices of the industry and the shop — is equally a part of the collective bargaining agreement although not expressed in it. . . . The parties expect that [the arbitrator's] judgment of a particular grievance will reflect not only what the contract says but, insofar as the collective bargaining agreement permits, such factors as the effect upon productivity of a particular result, its consequence to the morale of the shop, [her] judgment whether tensions will be heightened or diminished.See United Steelworkers, 363 U.S. at 582. Nothing in Massey's award expressly contradicts language in the CBA, and it was for her, not this Court, to draw conclusions from the differences between former and present versions of the CBA. The Court need not and does not necessarily endorse the arbitrator's award as the best reading of the contract. It is enough that her decision was "rationally inferable" in light of the broad discretion afforded arbitrators, and in light of Folger's holding that arbitrators may look to a variety of sources including the CBA's general statement of purpose to interpret non-specific CBA provisions. The parties voluntarily chose Massey to arbitrate this dispute, presumably because they trusted her judgment. Now they must, under the facts and law of this case, live with that judgment.
B. Arbitrator's Jurisdiction
District courts have authority to review whether an RLA arbitration entity exceeded its jurisdiction in resolving a submitted grievance. See Bruce Hardwood Floors, Div. of Triangle Pac. Corp. v. UBC, Southern Council of Indus. Workers, Local Union No. 2713, 103 F.3d 449, 452 (5th Cir. 1997) (citing Delta Queen Steamboat Co., 889 F.2d at 602). In the present case, Arbitrator Massey did not effectively decide a dispute of the sort excluded from arbitration or adjustment by Article 22, Section D of the CBA, nor did she impose a remedy that it was outside her jurisdiction to impose. The parties asked the arbitrator to decide whether contracting out certain types of work violated the CBA and, if so, the appropriate remedy. Massey concluded that DalFort did violate the CBA when it contracted out the "same type" of work performed by union employees, because of the unreasonable volume of work it was contracting out. She determined that DalFort could not reasonably and in good faith, consistent with the purposes stated in Article 1 of the CBA, read Article 2, Section B to allow such a result. Accordingly, she ordered a reduction in the percentage of contract workers.
Consistent with the Folger court's analysis, the issue presented to Massey involved an interpretation of the existing CBA contracting provisions, and thus falls within the scope of disputes properly submitted as arising "under the agreement." See CBA, Art. 22, Sec. A; see Consolidated Rail Corp. v. Ry. Labor Executives' Ass'n, 491 U.S. 299 (1989) (a dispute is "minor" if arguably capable of resolution by the terms of the CBA). As Massey explained, resolving the limits of DalFort's ability to contract out work under Article 2, Section B is important to the Union's ability to exist as a viable bargaining unit, a right the arbitrator found to be implicit in Article 2, Section A, and Article 1. The fact that the union also wants leverage in wage negotiations does not render the Union's attempt to enforce existing rights under Articles 1 and 2 of the CBA "frivolous." See Con. Rail, 491 U.S. at 306-07. Massey did not ignore express provisions of the agreement she was hired to interpret. See Bruce Hardwood Floors, 103 F.3d at 452. This case is not like the Tenth Circuit case Plaintiff cites in which a contract worker dispute was properly classifiable as "major," and thus outside system board jurisdiction, because the CBA in that case contained no provision governing contracting. See St. Louis Southwestern Ry. Co. v. Bhd. of R.R. Signalmen, 665 F.2d 987, 992-93, 998 (10th Cir. 1981). In that case, the dispute over contract labor simply could not have been resolved by reference to the CBA. Id.
It may very well be that Massey's award will have the effect of forcing Dalfort to raise wages for its core union employees in order to shift the proportion of contract workers to permanent employees. Arbitrator Massey straightforwardly acknowledged the parties' economic incentives and the likely impact of her award. The arbitrator's jurisdiction under the CBA, however, depends on whether the dispute itself "relates to" a general change in rate of pay. See CBA, Art. 22, Sec. D. Under DalFort's characterization, it is difficult to fathom what disputes arising "under the terms of the agreement would not run afoul of Section D's jurisdictional line. An interpretation of almost any phrase or provision of the CBA would necessarily affect "hours of work, rates of pay, rules and working conditions." See id. Massey was careful to avoid dictating to Dalfort how it should go about complying with the CBA. She decided only the interpretive dispute question before her, jointly submitted by Dalfort and the Union, and within the scope of Article 22, Section A. Any ultimate change in rate of pay will undoubtedly be the product of intense negotiation between the parties. The arbitrator did not exceed her jurisdiction.
C. Punitive Award
The contingent payments outlined in the award are not punitive. The arbitrator's comment that she does not generally impose punitive damages appears to refer to her decision not to award back pay. See Award at 18. She labels the prospective contingent damages as "compensation" and "restitution." Id. In light of her conclusion that Dalfort is currently in violation of the CBA, it was reasonable for Massey to structure the award so that Dalfort can comply with it, potentially without ever having to pay the prospective damages outlined in paragraph two of the "Conclusions" section. See Award at 18-19. The monetary award to the Union is designed to encourage compliance and is based on projected, though difficult to measure, damages in the event of noncompliance. The award is within the range of remedial orders available to the arbitrator. See Local 369, Bakery Confectionary Workers Int. 7 Union of America, AFL-CIO v. Cotton Baking Co., Inc., 514 F.2d 1235, 1237-38 (5th Cir. 1975); Kraft Foods, Inc. v. Office and Professional Employees Int'I Union, AFL-CIO, CLC, Local 1295, 203 F.3d 98, 102 (1st Cir. 2000) ("Where . . . the agreement neither requires nor bars particular remedies, the arbitrator's discretion is at its zenith.'") (citations omitted).
IV. Conclusion
For the reasons stated above, the Court GRANTS Defendant's Motion for Summary Judgment (to Enforce the Award), and DENIES Plaintiff's Motion for Summary Judgment (to Vacate the Award).