Opinion
NO. 3-02-CV-2582-L
May 19, 2003
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
This action to vacate an arbitration award is before the court on cross-motions for summary judgment. For the reasons stated herein, defendants' motion should be granted and plaintiff's motion should be denied.
I.
Plaintiff Rock-Tenn Company ("RTC") is a paper manufacturing company that operates a mill in Dallas, Texas. (Plf. Orig. Compl. at 1, ¶ 3). As part of its business operations, RTC uses truck drivers to deliver paper products to distribution centers and customers at various locations throughout the United States. (Plf. MSJ App., Exh. E at 106). RTC classifies these trucking operations as either "short-haul" or "long-haul" routes. ( Id.). A "short-haul" route involves driving to destinations of less than 100 miles. ( Id.). Destinations of 100 miles or more are designated as "long-haul" routes. ( Id.). Historically, RTC has used both subcontractors and company employees to meet its trucking needs. ( Id., Exh. D at 43-44, 56, 66-69). Over the years, the percentage of loads carried by subcontractors has ranged from 66%, when RTC employed six or seven truck drivers, to 90%, when the company employed only one or two drivers. ( Id., Exh. D at 66-66B). The truck drivers employed by RTC are members of a labor union, Defendant Paper, Allied-Industrial Chemical and Energy Workers International Union, AFL-CIO, CLC, Local 4-0895 ("Union"), and are covered by a Collective Bargaining Agreement ("CBA"). ( Id., Exh. C at 10-33).
The CBA covers "production, maintenance, shipping, and warehouse employees of Rock-Tenn Company, Mill Division, Dallas, Texas . . ." (Plf. MSJ App., Exh. C at 13). Although truck drivers are not listed as covered employees in the Union recognition clause, they are included in the Wage Schedule attached to the CBA. ( See id., Exh. C at 32-33). This led the arbitrator to conclude that truck drivers were covered by the CBA, since "common sense would indicate that Truck Drivers and Shipping are intended to be together." ( Id., Exh. E at 113). Plaintiff does not challenge this finding.
During labor negotiations, RTC made a proposal to drop all in-house trucking operations. ( Id., Exh. D at 45, 70). The Union rejected this proposal and it was withdrawn from consideration. ( Id., Exh. D at 45, 50, 71). Notwithstanding this concession, Article III of the CBA entered into by the parties provides, in pertinent part:
Nothing in this Agreement shall limit in anyway [sic] the Company's subcontracting work or shall require the Company to perform any particular work in this plant rather than elsewhere.
( Id., Exh. C at 13). In late 2001, RTC decided to subcontract all of its long-haul deliveries in an effort to save money. ( Id., Exh. D at 74-75). Because drivers earn extra compensation for long-haul routes, this decision resulted in a significant reduction in the take-home pay of truck drivers employed by the company. ( Id.). All six of those drivers filed grievances against RTC and the case proceeded to arbitration pursuant to the terms of the CBA. On November 13, 2002, the arbitrator ruled in favor the Union drivers, finding that:
An identical subcontracting clause has been present in the parties' collective bargaining agreements since 1980. ( Id., Exh. D at 59-62, 73).
The Company's right to subcontract under Article III, Management Rights is not unfettered. If interpreted literally, the provision would produce results contrary to the purpose of the Agreement and specifically would be contrary to Article I, Union Recognition, and Article XXVII, Wages of the Agreement.
( Id., Exh. E at 119). While refusing to excise the subcontracting clause from the agreement, the arbitrator interpreted Article III in a way that obligated RTC to assign long-haul trips to subcontractors and Union drivers "at the same level as before they were discontinued." ( Id., Exh. E at 119-20). One reason offered to support this decision was that:
During the last contract negotiations, the Company presented a proposal to "Get out of the Trucking business." [Record citation omitted]. Failing to receive a favorable Union response, the Company withdrew the demand from the bargaining table. However, a short time later, the Company removed the Truck Drivers from "long haul" routes and transferred the work to subcontractors, thereby effectively achieving their demand which had been withdrawn in the most recent contract negotiations. The Company did not act in good faith and evaded the spirit of [the] Agreement by these actions.
( Id., Exh E at 119) (emphasis added).
Dissatisfied with the result, RTC filed suit in federal district court to vacate the arbitration award. The Union has counterclaimed to enforce the decision. Both sides now move for summary judgment. The motions have been fully briefed by the parties and are ripe for determination.
II.
Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matter of Gleasman, 933 F.2d 1277, 1281 (5th Cir. 1991). Cases involving the review of arbitration awards are particularly well-suited for summary disposition because the material facts are rarely disputed. See Dalfort Aerospace, Inc. v. Airline Division of the International Brotherhood of Teamsters, 2001 WL 640790 at *2 (N.D. Tex. Jun. 7, 2001); United States Postal Service v. National Association of Letter Carriers, AFL-CIO, 1999 WL 33504467 at *5 (S.D. Tex. Jul. 15, 1999).
When a case is presented to the court by way of cross-motions for summary judgment, each party has the burden of producing evidence to support its motion. Ghoman v. New Hampshire Insurance Co., 159 F. Supp.2d 928, 931 (N.D. Tex. 2001). The movant has the initial burden of showing the absence of a genuine fact issue. Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 312 (5th Cir. 1995); Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). The burden then shifts to the nonmovant to show that summary judgment is not proper. Duckett v. City of Cedar Park, 950 F.2d 272, 276 (5th Cir. 1992). The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 113 S.Ct. 82 (1992). All the evidence must be viewed in the light most favorable to the party opposing the motion. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir. 1993). However, conclusory statements, hearsay, and testimony based merely on conjecture or subjective belief are not competent summary judgment evidence. Topalian, 954 F.2d at 1131.
III.
The sole issue raised by the Union truck drivers in their grievances, as stated by the arbitrator, was whether RTC violated the CBA by subcontracting all of its long-haul trucking operations. ( See Plf. App., Exh. E at 106). The arbitrator found that it did because:
When the Company proposed in the last contract negotiation to "get out of the trucking business" and the proposal was rejected by the Union, the Company withdrew the proposal and following negotiations, the Company arbitrarily withheld "long haul" work from Grievants and thereby achieved their negotiation goal [so they thought]. The Company did not act in good faith in performing the Agreement which cannot be condoned or allowed.
( Id., Exh. E at 120). In reaching this decision, the arbitrator recognized that the CBA protected RTC's right to subcontract its work, but reasoned that:
The Company's right to subcontract under Article III, Management Rights is not unfettered. If interpreted literally, the provision would produce results contrary to the purpose of the Agreement and specifically would be contrary to Article I, Union Recognition, and Article XXVII, Wages of the Agreement.
( Id., Exh. E at 119). RTC now challenges the arbitration award on the grounds that: (1) the decision is in clear conflict with the CBA provision allowing the company to subcontract its work; and (2) the arbitrator exceeded his jurisdiction and authority as defined by the CBA.
A.
The statutory basis for vacating an arbitration award is found in 9 U.S.C. § 10. See Prestige Ford v. Ford Dealer Computer Services, Inc., 324 F.3d 391, 394 (5th Cir. 2003). Under this statute, a federal district court may vacate an award upon the application of any party to the arbitration:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.9 U.S.C. § 10(a). Only the fourth element of the statute is at issue in this proceeding.
When an arbitrator exceeds his authority, the resulting decision must be vacated. Bruce Hardwood Floors v. UBC, Southern Council of Industrial Workers, Local Union No. 2713, 103 F.3d 449, 452 (5th Cir.), cert. denied, 118 S.Ct. 329 (1997); Houston Lighting Power Co. v. International Brotherhood of Electrical Workers, Local Union No. 66, 71 F.3d 179, 182 (5th Cir. 1995), cert. denied, 117 S.Ct. 52 (1996). "[T]he rule in this circuit, and the emerging trend among other courts of appeals, is that arbitral action contrary to express contractual provisions will not be respected." Delta Queen Steamboat Co. v. District 2 Marine Engineers Beneficial Ass'n, 889 F.2d 599, 604 (5th Cir. 1989), cert. denied, 111 S.Ct. 148 (1990). An arbitrator has no license to "dispense his own brand of industrial justice[,]" and when his words "manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award." United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960).
An arbitration decision must also "draw its essence from the collective bargaining agreement[.]" United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 36, 108 S.Ct. 364, 370, 98 L.Ed.2d 286 (1987), quoting Enterprise Wheel, 80 S.Ct. at 1361; Williams v. Cigna Financial Advisors, Inc., 197 F.3d 752, 757-58 (5th Cir. 1999), cert. denied, 120 S.Ct. 1833 (2000). Under the "essence" test, the critical inquiry is whether the arbitrator's award "was so unfounded in reason and fact, so unconnected with the wording and purpose of the collective bargaining agreement as to `manifest an infidelity to the obligation of an arbitrator.'" Executone Information Systems, Inc. v. Davis, 26 F.3d 1314, 1325 (5th Cir. 1994), quoting Brotherhood of R.R. Trainmen v. Central of Georgia Railway, 415 F.2d 403, 412 (5th Cir. 1969), cert. denied, 90 S.Ct. 564 (1970). Stated differently, an arbitration award draws its essence from the collective bargaining agreement if it "is rationally inferable from the contract." Id. (citation omitted).
However, a court may not vacate an arbitration award simply because its interpretation of the collective bargaining agreement differs from the arbitrator's construction of the agreement. Enterprise Wheel, 80 S.Ct. at 1362. "A mere ambiguity in the opinion accompanying an award, which permits the inference that the arbitrator may have exceeded his authority, is not a reason for refusing to enforce the award." Id. at 1361. In determining whether an arbitrator exceeded his powers, the court must resolve all doubts in favor of the arbitrator's decision. Valentine Sugars, Inc. v. Donau Corp., 981 F.2d 210, 213 (5th Cir.), cert. denied, 113 S.Ct. 3039 (1993), citing Moses H. Cone Memorial Hospital v. Mercury Construction, 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983).
B.
RTC first contends that the arbitration award does not draw its essence from the CBA because "it directly conflicts with the express terms of the Contract's subcontracting provision." (Plf. MSJ Br. at 4). Article III of the CBA provides, in pertinent part:
Nothing in this Agreement shall limit in anyway [sic] the Company's subcontracting work or shall require the Company to perform any particular work in this plant rather than elsewhere.
(Plf. MSJ App., Exh. C at 13). According to RTC, the plain meaning of this unambiguous provision allows the company to subcontract all of its long-haul trucking operations to an outside contractor and the arbitrator was not at liberty to disregard this language or re-write the agreement.
The interpretation of a collective bargaining agreement is a "question for the arbitrator." Enterprise Wheel, 80 S.Ct. at 1362. Although an arbitrator may not ignore the plain language of the agreement, he is not required to construe that language in a vacuum or interpret it in a way that leads to absurd consequences. Here, the arbitrator found it necessary to construe Article III of the CBA in the context of the agreement as a whole. He concluded that:
The Company's right to subcontract under Article III, Management Rights is not unfettered. If interpreted literally, the provision would produce results contrary to the purpose of the Agreement and specifically would be contrary to Article I, Union Recognition, and Article XXVII, Wages of the Agreement.
(Plf. MSJ, Exh. E at 119). Article I, Union Recognition, provides:
The Company recognizes the Union as the exclusive representative for the purpose of collective bargaining with respect to rates of pay, wages, hours of employment, and other conditions of employment for all production, maintenance, shipping, and warehouse employees of the Rock-Tenn Company, Mill Division, Dallas, Texas . . ., but excluding administrative, executive, office clerical, professional employees, guards, and supervisors as defined in the Labor-Management Relations Act of 1947, as amended.
( Id., Exh. C at 13). Article XXVII establishes a hourly wage schedule for company employees, including truck drivers, with additional compensation for long-haul routes based on mileage. ( Id., Exh. C at 28, 33). The arbitrator found that the strict reading of Article III advocated by RTC, allowing the company to subcontract all of its long-haul routes, would be contrary to these other contract provisions:
Taking the Company interpretation to its eventual conclusion, subcontractors could be employed to perform [replace] unit work available through attrition, since by doing so, no one is displaced. Eventually, when the last unit member left [for whatever reason] there would be no unit workforce — only subcontractors. Certainly, by no stretch of the imagination, in this Arbitrator's opinion, was that the intent agreed to by the Union in the language of the Agreement.
( Id., Exh. E at 115). The arbitrator also cited past practices, dating back to at least 1984, whereby company drivers and subcontractors shared long-haul routes. ( Id., Exh. E at 117). Based on his interpretation of the agreement as a whole and the past practices of the parties, the arbitrator found that long-haul trips should be shared by subcontractors and Union drivers "at the same level as before they were discontinued." ( Id., Exh. E at 120).
The approach taken by the arbitrator in this case is similar to that approved by the Fifth Circuit in Folger Coffee Co. v. International Union, United Automobile, Aerospace Agricultural Implement Workers of America-UAW, Local Union No. 1805, 905 F.2d 108 (5th Cir. 1990). In Folger, the Union filed a grievance alleging that the company had violated a collective bargaining agreement by subcontracting yard work to a professional landscaping company. The CBA contained a subcontracting clause which provided that:
The Company shall continue to have all the rights which it had prior to the employees' selection of the Union as the collective bargaining agent, except those that are specifically given up or modified by the express written terms of the Agreement. Included in the rights reserved to the Company except where they are given up or modified by any of the express written provisions of this Agreement are . . . the determination of the nature and extent of work, if any, to be contracted or transferred out and the persons, means and methods to be so utilized.Id. at 109 n. 3 (original emphasis omitted). The arbitration panel sustained the Union's grievance and ordered the company to return yard maintenance work to the bargaining unit employees. The panel reasoned that despite language in the CBA which granted the company the power to subcontract its work, Union members traditionally performed the yard work and had the necessary skills and tools for the job. The arbitrators therefore concluded that the company's actions were contrary to other provisions of the CBA dealing with Union recognition and employee seniority rights. In affirming this decision, the Fifth Circuit noted:
The collective bargaining agreement . . . is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen cannot wholly anticipate. . . . It calls into being a new common law — the common law of a particular industry or of a particular plant. . . . Gaps may be left to be filled in by reference to the practices of the particular industry and of the various shops covered by the agreement. . . . 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.Id. at 110-11, quoting United Steelworkers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574, 578-82, 80 S.Ct. 1347, 1351-52, 4 L.Ed.2d 1409 (1960). The court went on to hold that the panel's interpretation of the subcontracting clause was not only proper under these well-settled rules of construction, but was also supported by the stated purpose of the CBA as set forth in Article I — "to promote, improve, and strengthen the relationship and good will between the Company, the employees, and the Union." Id. at 111. According to the court:
A corollary to Article I is that subcontracting cannot be used to undermine the Union where the bargaining relationship is already established. Article I therefore constitutes a limitation upon the Company's right to contract out. 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.Id. (emphasis added).
The stated purpose of the CBA between RTC and the Union, like the agreement in Folger, is "to cooperate fully to the end that harmonious relations may be maintained at all times [. . .]" (Plf. MSJ App., Exh. C at 12). Although the subcontracting clause in this case is broader than the clause in Folger, it does not contain a specific provision which "completely and explicitly" entitles the company to contract all of its long-haul trucking routes regardless of the effect on Union drivers. Absent such a provision, the arbitrator properly relied on other provisions of the CBA and past practices in interpreting the true meaning of Article III. His resulting decision is "rationally inferable from the contract" and should not be disturbed on judicial review. Executone, 26 F.3d at 1325. See also Misco, 108 S.Ct. at 371 (court should not vacate arbitration award on ground that the arbitrator misread the contract).
RTC suggests that the arbitrator was precluded from relying on other contract provisions and parole evidence because he never found that the language of Article III was ambiguous. Such is not the case. As the Fifth Circuit stated in Folger:
[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.
C.
In a related argument, RTC contends that the arbitrator exceeded his limited authority "by rewriting the Contract, basing the award on his own notions of fairness, and failing to consider the only issue that was actually submitted to him." (Plf. MSJ Br. at 6). The scope of the arbitrator's authority and jurisdiction is clearly delineated in the CBA. Article XV of the agreement provides, in pertinent part:
The jurisdiction and authority of the impartial arbiter and his opinion and award, shall be confined to the interpretation of the provision or provisions of this agreement at issue between the Company and the Union.
The impartial arbiter shall have no authority to add to, detract from, alter, amend, or modify any provision of this Agreement or impose on any party hereto a limitation or obligation not explicitly provided for in this Agreement.
(Plf. MSJ App., Exh. C at 26). RTC maintains that the arbitrator exceeded his authority by basing his decision on the company's lack of good faith during the collective bargaining process rather than the terms of the agreement itself.
At the arbitration hearing, the Union elicited evidence that RTC had made a proposal during labor negotiations to get out of the trucking business entirely. A Union representative testified that this led him to believe that the company was intent on getting rid of its truck drivers at some point in the future. ( Id., Exh. D at 50-51). RTC objected to this evidence as being outside the scope of the grievance. ( Id., Exh. D at 51-52). The Union responded that the grievance also included attempts by RTC to circumvent the labor contract and bad faith bargaining tactics. ( Id., Exh. D at 52). In his final decision, the arbitrator found that:
When the Company proposed in the last contract negotiation to "get out of the trucking business" and the proposal was rejected by the Union, the Company withdrew the proposal and following negotiations, the Company arbitrarily withheld "long haul" work from Grievants and thereby achieved their negotiation goal [so they thought]. The Company did not act in good faith in performing the Agreement which cannot be condoned or allowed.
( Id., Exh. E at 120) (emphasis added). However, as previously discussed, the arbitrator also found that RTC's right to subcontract all of its long-haul trucking operations was not unfettered in light of other provisions of the CBA. ( Id., Exh. E at 119).
Thus, it is unclear to what extent the arbitrator based his decision on RTC's lack of good faith during labor negotiations, which arguably exceeded the scope of his authority, as opposed to his interpretation of the agreement as a whole. Such an ambiguity is not grounds for vacating an arbitration award. See Enterprise Wheel, 80 S.Ct. at 1361 ("A mere ambiguity in the opinion accompanying an award, which permits the inference that the arbitrator may have exceeded his authority, is not a reason for refusing to enforce the award.").
RECOMMENDATION
The arbitration decision in this case neither conflicts with the terms of the CBA nor exceeds the jurisdiction and authority of the arbitrator. Accordingly, defendants' motion for summary judgment should be granted and plaintiff's motion should be denied. The award should be affirmed in all respects.