Opinion
01 civ 7014 (HB)
October 30, 2001
OPINION ORDER
Michael Fishman, as President of Local 32B-32J, Service Employees International Union, AFL-CIO (the "Union"), petitioned the Court to confirm an arbitration award that required Fairfield Towers, do Presidential Management ("Fairfield"), to restore a handyperson position and to make back payments. Fairfield opposed the petition and argued that the award should be vacated or, in the alternative, the dispute should be remanded to the arbitrator because the award improperly extended relief beyond the effective date of the governing collective bargaining agreement ("CBA").
BACKGROUND
A dispute arose between Fairfield, a residential complex comprised of 11 high-rise and 8 town house buildings, and the Union concerning whether Fairfield had eliminated three handyperson positions and one superintendent position in violation of the 1997 collective bargaining agreement (the "1997 CBA"). Pursuant to the 1997 CBA, the parties commenced arbitration and participated in seven hearings before arbitrator Robert Herzog (the "arbitrator") between January 12, 1998 and May 21, 2001. On June 27, 2001, the arbitrator rendered an award in favor of Fairfield with respect to three of the four positions and for the Union on one of handyperson positions. Specifically, the arbitrator determined that Fairfield's failure to replace Shelton Durham ("Durham"), a handyperson who died in June 1997, constituted a violation of the 1997 CBA and ordered Fairfield to restore the handyperson position and to pay back wages from July 1, 1997 (the first full month after Durham's death) until Fairfield fills the vacancy left by Mr. Durham.
The seven hearings took place on: (1) January 12, 1998; (2) July 13, 1998; (3) September 11, 1998; (4) November 16, 1998; (5) January 18, 1999; (6) February 8, 1999; and (7) May 21, 2001.
The arbitrator ordered that the damage award "be divided equally among the Handypersons on payroll during the entire period from July 1, 1997" until Fairfield restored the position. Opinion and Award, Affirm. of Aaron Schlesinger, Exh. B, at 8.
Unbeknownst to the arbitrator, after the commencement of the arbitration in January 1998 but before the award was rendered on June 27, 2001, the 1997 CBA was cancelled. Apparently, at no point during the 3.5 years that the arbitration hearings dragged on did either party notify the arbitrator that the 1997 CBA, pursuant to which he had been appointed and upon which his authority was bottomed, was approaching its expiration date of April 20, 2000 or, later, that it was no longer in full force and effect. Admittedly, six of the seven arbitration hearings occurred on or before February 8, 1999, but between that date and the final arbitration hearing on May 21, 2001 there occurred a variety of events of self-evident importance to the arbitration and presumably to the arbitrator. By its terms, the 1997 CBA expired on April 20, 2000. Pursuant to Article XVIII of the 1997 CBA, after expiration the agreement continued "in full force and effect" until one of the parties "cancelled" the agreement upon 10 days written notice or the parties enter into a successor agreement. Here, the parties reached an impasse in their negotiations and on February 27, 2001 Fairfield provided the Union with notice of cancellation. Remarkably, none of the foregoing was put before the arbitrator, either at the May 21, 2001 hearing or in the June 2001 post-hearing briefs, and I'm told that he rendered his award in ignorance of the cancellation. And yet, the only issue before me is the legal effect of that cancellation, a fact one can only presume the parties deemed irrelevant to the arbitration.
The Union, while acknowledging the cancellation, seems to believe that the 1997 CBA continues in full force and effect. I disagree. Article XVIII of the 1997 CBA clearly provides that the agreement continues only until cancellation.
Since no one has said otherwise, I assume that the Union received the letter, apparently sent "Via Facsimile," on February 27, 2001.
The Union filed a petition to confirm the arbitration award on July 30, 2001 and to remand the extent/amount of damages to the arbitrator. The only portion of the award that is before me is the arbitrator's decision as to Durham's handyperson position. The other three positions raised in the arbitration are not in dispute.
I've recently been informed that the arbitrator has scheduled another hearing with respect to damages.
DISCUSSION
Fairfield opposed the petition on the ground that the enforcement of the award would violate public policy. In support of the arbitration award, the Union argued that (1) the award was consistent with public policy and (2) that Fairfield is barred from raising any defense or new issues now because it failed to do so before the arbitrator.
It is the rare case where a federal court will vacate an arbitration award, and "the scope of a district court's review of an arbitration award in a labor dispute is extremely limited." See 470 Stratford Holding Co. v. Local 32B-32J, Service Employees, 805 F. Supp. 118 (E.D.N.Y. 1992); Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997) ("arbitration awards are subject to very limited review in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation") (internal quotes omitted). The few statutory. 9 U.S.C. § 10 (the "Arbitration Act"), and judicially created exceptions to the general rule of confirmation are strictly construed, and the burden of proof falls squarely on the party seeking to vacate the award. See Transit Casualty Co. v. Trenwick Reinsurance Co., 659 F. Supp. 1346 (S.D.N.Y. 1987). As long as the award "draws its essence from the collective bargaining agreement," it generally should be confirmed regardless of any faulty factual or legal conclusions contained therein. See International Org. of Masters. Mates Pilots v. Trinidad Corp., 803 F.2d 69, 72 (2d Cir. 1986).
A. Public Policy
Fairfield's principal argument is that confirmation of the award in this case would prevent Fairfield from exercising its "right" under the National Labor Relations Act, 29 U.S.C.S. § 151 et seq., (the "NLRA"), to unilaterally reduce its workforce.
Pursuant to the NLRA, an employer may not alter the existing terms and conditions of employment set forth in a collective bargaining agreement without first bargaining to impasse. See 29 U.S.C. § 158(a)(5) (the NLRA obliges the parties "to bargain collectively," which is defined as the duty to "meet . . . and confer in good faith with respect to wages, hours, and other terms and conditions of employment"). However, when after negotiating in good faith the employer and the union reach an "impasse" — the meaning of which has been much litigated — the employer may discontinue bargaining and implement unilateral changes in working conditions so long as the changes are reasonably comprehended by the pre-impasse proposals to the union. See NLRB v. Katz, 369 U.S. 736 (1962). Fairfield argues that the parties reached an impasse, if not before then when the Union called for a strike on February 21, 2001, and that the NLRA conferred on Fairfield the right to implement unilaterally its last counter-proposal which included a "Management Right Clause" providing Fairfield with the authority to make reductions in force. Thus, Fairfield believes that to enforce the arbitration award and to require that Durham's position be restored would defeat what it characterizes as its "statutory" right to reduce force.
A court may refuse to confirm an arbitration award that contravenes a well-defined and dominant federal policy under the NLRA, see International Organization of Masters, etc. v. Trinidad Corp., 803 F.2d 69 (2d Cir. 1986); however, before a court may refuse to enforce an arbitration award on this ground the public policy allegedly violated "must be well defined and dominant, and is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed `public interests.'" W.R. Grace Co. v. Local 759, Rubber Workers, 461 U.S. 757, 766 (1983); accord Corporate Printing Co., Inc. v. New York Typograhpical Union No. 6, 86 civ. 1762, 1990 U.S. Dist. LEXIS 8591 (S.D.N.Y. 1990).
Here, there is no such "well defined" and "dominant" public policy. Fairfield argues that its "statutory" right to implement proposals made prior to impasse constitutes such a policy, but that argument overstates the importance of this "statutory right." Notably, the NLRA does not confer on employers the right to make reductions in force upon an impasse. Nor, indeed, does the NLRA create any "rights" with respect to post-impasse conduct at all. Instead, the NLRA imposes the obligation to "to bargain collectively," which bars employers from implementing unilateral changes before reaching an impasse. The NLRA itself does not speak to post-impasse conduct, but courts have construed the NLRA to prevent employers from implementing any changes that were not proposed or negotiated prior to impasse. In short, there is no support for Fairfield's claim that this Court's confirmation of the arbitrator's award would violate a public policy.
Fairfield cites to no authority, nor am I aware of any, which characterizes the ability of an employer to implement changes previously negotiated with the union as a "statutory right" or the kind of conduct protected by public policy.
The only relevant authority that Fairfield cited in support of its public policy argument, Stratford Holding Co. v. Local 32B-32J, 805 F. Supp. 118 (E.D N.Y. 1992), concerns the right to hire replacement workers, not at issue here, and held only that "the arbitrator's decision to award reinstatement to the two striking employees is unsupported by the terms of the collective bargaining agreement." Id. at 126. No subsequent court has cited to Stratford for the legal proposition asserted by Fairfield.
Moreover, for Fairfield's argument to prevail, all arbitration awards which impair an employer's ability after the expiration of an agreement (either by impasse or for some other reason) to change working conditions (including reductions in force) would necessarily violate public policy absent a clear waiver of by the employer of its "statutory rights." This is clearly not so. For example, in United Steelworkers of America v. Enterprise Wheel Car Corp., 363 U.S. 593, 599 (1960), the Supreme Court ordered the reinstatement of workers after the expiration of a collective bargaining agreement. See also Van Waters Rogers. Inc. v. Int'l Brotherhood of Teamsters, 56 F.3d 1132, 1137 (9th Cir. 1995). Also, it is clear that a court must confirm an arbitration award that extends relief beyond the effective date of the agreement, if the agreement provides the authority to do so and the dispute arose during the life of the agreement. See Enterprise Wheel. 363 U.S. 593. Here, Fairfield has not argued that the 1997 CBA omits such authority, but instead mistakenly relies on the broad brush of public policy. For all of the reasons discussed above Fairfield's argument fails.
B. Scope of Authority / Waiver
Nor, do I find that Fairfield can avoid the Union's waiver argument. An arbitration award may be vacated on the ground that "the arbitrators exceeded their powers." 9 U.S.C. § 10(a)(4). "The scope of authority of arbitrators generally depends on the intention of the parties to an arbitration, and is determined by the agreement or submission." Synergy Gas Co. v. Sasso, 853 F.2d 59, 63-64 (2d Cir. 1988) (quotations omitted). Fairfield had an opportunity to argue to the arbitrator that under its terms the 1997 CBA had no force and effect after cancellation, and that to restore the position and award back pay for time subsequent to the cancellation date would exceed the arbitrator's authority. Both issues require an interpretation of the 1997 CBA, and thus fall comfortably within the province of the arbitrator. See Enterprise Wheel, 363 U.S. at 599 ("the question of interpretation of the collective bargaining agreement is a question for the arbitrator . . . [and] the courts have no business overruling him because their interpretation of the contract is different from his"). The arbitration provision in the 1997 CBA is a broad one, and confers upon the arbitrator the authority to decide all differences "as to interpretation, application or performance of any part of this agreement," 1997 CBA. Art. VI(1), including, presumably, differences as to whether the agreement would continue in full force and effect after expiration pursuant to Article XVIII.
Had Fairfield raised the defense before the arbitrator, it is by no means clear that Fairfield would have prevailed, if the arbitrator had construed the 1997 CBA to apply to disputes that arose prior to the cancellation of the agreement, the Court would have had limited power to disturb his conclusions. I am persuaded by Enterprise Wheel., 363 U.S. 593 and other like authority that this Court must confirm an arbitration award so long as it is possible that the arbitrator's decision was based upon his construction of the 1997 CBA and that construction derived from some plausible theory of the general framework or "essence" of the agreement. See id. at 597 (award "is legitimate only so long as it draws its essence from the collective bargaining agreement"); Marval, 645 F. Supp. 1174; Van Waters Rogers v. Int'l Brotherhood of Teamsters, 56 F.3d 1132 (9th Cir. 1995); compare Polk Bros., Inc. v. Chicago Truck Drivers Union, 973 F.2d 593 (7th Cir. 1992) (arbitrator exceeded his authority and directly contradicted the terms of the agreement); General Warehousemen Helpers. Local 767 v. Standard Brands, Inc., 579 F.2d 1282 (5th Cir. 1978) (same).
Fairfield might have made these arguments — known as an "impasse and posting" defense — at either the May 21, 2001 arbitration hearing or in the June 2001 post-hearing briefs, but apparently did not do so. For that reason, to the extent that it is trying to do so here, Fairfield is barred from interposing such a defense. See American Nursing Home v. Local 44 Hotel, 89 civ. 1704, 1992 U.S. Dist. Lexis 2399, 12-13 (S.D.N.Y. 1992) ("[t]he Employers are precluded from asserting their impasse and posting defense before this Court because without excuse or justification, they failed to present such a defense to the Arbitrator. Failure to raise an issue in an arbitration proceeding waives the issue in a confirmation or enforcement proceeding"); United Food Comm. Workers. Local 400 v. Marval Poultry Co., 645 F. Supp. 1174 (W.D. Va. 1986); Carpenter Local No. 1027 v. Lee Lumber Bld. Material Corp., 2 F.3d 796 (7th Cir. 1993). To conclude otherwise would allow parties to an arbitration to sit back in hopes of a favorable decision from the arbitrator, and then attack the decision collaterally in federal court if it turned out not to be to their liking, thereby thwarting the national labor policy of encouraging the expeditious resolution through arbitration of labor disputes.
Notably, though it may have done so indirectly, Fairfield has not explicitly argued that the award should be vacated because the arbitrator exceeded his authority; rather, it submits that the failure to raise the issue before the arbitrator did not effect a waiver since the questions of whether the 1997 CBA remained in force and whether the award violated public policy were beyond the arbitrator's authority and are reserved to the Court. Fairfield is incorrect on at least 2 counts. First, determining whether a collective bargaining agreement has expired under the terms of the agreement is an appropriate issue for the arbitrator to decide. Second, as stated earlier, whether or not the 1997 CBA has expired does not necessarily preclude the arbitrator from ordering that a position be restored subsequent to the 1997 CBA's expiration. See Nolde Bros. v. Local 358, Bakery and Confectionary Workers Union, 430 U.S. 243, 252 (1976) ("We thus determined that the parties' obligations under their arbitration clause survived contract termination when the dispute was over an obligation arguably created by the expired agreement.").
It is no excuse that the attorneys representing Fairfield in connection with the motion before me were not the attorneys who represented Fairfield at the arbitration.
Because I find that the award was not contrary to public policy, and since Fairfield waived the only potentially cognizable challenge to the arbitrator's decision, I confirm the arbitration award of June 27, 2001.
CONCLUSION
For the foregoing reasons, the award is confirmed and the issue of damages is remanded to the arbitrator for consideration at the next scheduled hearing. The Clerk of the Court is directed to remove this case from my docket.