Opinion
Civil Action No. 98-4994(JBS).
November 10, 1999
Howard S. Simonoff, Esquire, Beth Lincow Cole, Esquire, Tomar, Simonoff, Adourian, O'Brien, Kaplan, Jacoby Graziano, Cherry Hill, New Jersey, Attorneys for Plaintiff.
Kenneth N. Rubin, Esquire, Cherry Hill, New Jersey, Attorney for Defendant.
OPINION
This is an action to enforce an arbitration award entered in favor of plaintiff in the amount of $229,237.41 pursuant to a collective bargaining agreement between these parties. Defendant contends it was not subject to the arbitrator's jurisdiction and that the arbitrator denied defendant a full and fair opportunity to present its side of the case before entering an award. Presently before the court is plaintiff's motion for summary judgment.
Plaintiff asserts that this court has subject matter jurisdiction to enforce the collective bargaining agreement under 29 U.S.C. § 185 and 28 U.S.C. § 1331 1337. This court finds, instead, that its subject matter jurisdiction to enforce the arbitrator's award is derived from the Federal Arbitration Act, 9 U.S.C. § 1, et seq., and 28 U.S.C. § 1331 1337. As discussed herein, the Federal Arbitration Act confers a very narrow jurisdiction upon this federal court to review and enforce an arbitrator's award if duly entered under the grievance and arbitration process of a collective bargaining agreement. For this and other reasons discussed below, the court will enter summary judgment for the plaintiff and enforce the arbitrator's award.
I. FACTUAL SUMMARY
Plaintiff, South Jersey Regional Counsel of Carpenters, Locals 393 and 623, affiliated with the United Brotherhood of Carpenters and Joiners of America, AFL-CIO (hereafter collectively called the "Union") is a labor organization which entered into a collective bargaining agreement with the defendant, PN Drywall, and its owner, Joseph Nunes, on November 28, 1995. (Short Form Agreement, J.A. Ex. C.) Under this agreement, the Union and PN Drywall agreed "to be bound by every current collective bargaining agreement between Local Unions or District Councils and Building Contractors Association of New Jersey, governing wages, working conditions, and payments of fringe benefit funds which agreement is incorporated by reference." (Id.) This agreement is effective and is deemed renewed throughout the term of the above master agreement and any renewals thereof, "unless at least 90 days before termination of the then current collective bargaining agreement, either side notifies the other in writing of cancellation of this Agreement." (Id.)
The short form agreement between the Union and PN Drywall was never terminated, so the applicable Collective Bargaining Agreement binding these parties during the time relevant hereto was the master Collective Bargaining Agreement between the New Jersey State Council of Carpenters and the Building Contractors Association of New Jersey, effective May 1, 1997 to April 30, 2000. (J.A. Ex. B, hereafter "Collective Bargaining Agreement").
In September, 1997, the Union developed information which led it to believe that PN Drywall was using non-union employees at a job site at the Absecon Manor Nursing and Rehabilitation Project in Absecon, New Jersey, where PN Drywall was the drywall and framing subcontractor. Also, the Union allegedly learned that PN Drywall, operating under the name Pat's Drywall, was the subcontractor on an Eckerd Drug Store Project in Cherry Hill, New Jersey, and that it failed to use Union employees.
The Union initiated grievances addressing both situations (J.A. Ex. D F), and PN Drywall failed to respond to the Unions' requests to meet with Mr. Nunes or his representative. (Id.) The grievance procedures did not achieve resolution, so the Union invoked the arbitration provision of the Collective Bargaining Agreement, Art. XVII, Step. IV, et seq., which states as follows:
If the parties are unable to affect an amicable settlement or adjustment of any grievance or controversy, such grievance or controversy shall be submitted to binding arbitration under the rules of the American Arbitration Association at the request of either party provided notice in writing of the intent to do so is given through the other party and the American Arbitration Association within thirty-five (35) working days after Step III has been completed. An arbitrator shall be selected pursuant to the rules of the American Arbitration Association who shall hear the matter and his decision will be final and binding on the contract to the Union and all Employers.
2. The Arbitrator shall render his decision in writing on the grievance and solely on the meaning and interpretation of the particular provision of the contract which gave rise to the dispute.
3. The Arbitrator shall have no power to add to, subtract from, or modify this agreement.
4. The parties affected shall be afforded a full opportunity to present any evidence, written or oral, which may be pertinent to the matter in dispute.
5. Except by mutual agreement, all timeliness provisions must be complied with and failure to comply by either party will result in default by that party of its position.
6. The Arbitrator shall render a decision in writing within ten (10) days after the close of an arbitration proceeding.
7. No employee, except to the extent that the law permits, shall be allowed to compel the Union to proceed to arbitration in any matter which the Union does not consider justified.
8. Each party shall share equally the expense of the arbitrator.
The Union invoked the American Arbitration Association process, and the Absecon Manor and Eckerd Drug site grievances were consolidated for hearing on July 12, 1998. Nunes declined to participate at any stage of the process. He did not respond to AAA's letters and did not make any effort to oppose consolidation or to select an arbitrator of his liking (J.A. Exs. H, I, J K). The arbitration was scheduled and AAA sent notice to Nunes, who still did not acknowledge the process.
On the day of the arbitration hearing, July 21, 1998, Nunes did not appear, nor did he send a representative, and the arbitrator, Steven Wolf, called Nunes's home and left a message asking where he was. Wolf received a return call from Nunes's wife, who informed Wolf that he was at Wills Eye Hospital and would be unable to attend the hearing. Having received no prior notice that the defendant's representatives would not appear, and having received no request for adjournment or any other indication of Nunes's interest in being heard, see J.A. Ex. K, Wolf decided to proceed with the hearing ex parte, received testimony of three witnesses, and awarded damages to the Union totaling almost $230,000, for reasons stated in his Opinion and Award entered September 3, 1998. (J.A. Ex. A.) The arbitrator's award ordered defendant PN Drywall to pay the Union a total of $190,496.13 for damages concerning the Absecon Manor site, and $38,741.28 for damages concerning the Eckerd Drug Store site. (Id.)
II. SUMMARY OF ISSUES
Plaintiff filed the Complaint in this case on November 4, 1998, seeking to enforce AAA's award. Presently before this court is the plaintiff's motion for summary judgment pursuant to Rule 56, Fed.R.Civ.P., to enforce the award. From the record before it, the court must decide whether the arbitrator properly exercised substantive and procedural jurisdiction over the dispute. Specifically, the Court must first decide whether defendant was bound by the Collective Bargaining Agreement's arbitration clause. Next, if defendant was bound, then the Court must decide whether arbitrator Wolf was entitled to proceed ex parte. For reasons discussed below, both jurisdictional questions are resolved in favor of the plaintiff. Therefore, summary judgment will be entered against the defendant, and the arbitration award shall be affirmed.
Finally, the Court must decide whether the plaintiff is entitled to its request for prejudgment interest, as well as costs and attorney's fees. For reasons explained below, balance of equities here militate against awarding prejudgment interest, but the plaintiff is entitled to reasonable attorney's fees.
III. DISCUSSION
A. Arbitrator Wolf's Opinion and Award
Arbitrator Wolf first found that both parties had been duly notified on April 3, 1998 that the hearing was to take place on Tuesday, July 21, 1998 at 10:00 A.M. in AAA's Philadelphia offices, and that plaintiff had appeared but defendant had not. Initially, Wolf noted that at the beginning of the hearing, he called PN Drywall to ascertain if the Company would appear, and, after leaving a message, received a phone call from Nunes's wife that he was in the hospital and could not attend. As discussed above, Wolf then elected to proceed with the arbitration hearing ex parte because Nunes had failed to appear at the hearing without advance notice, and without or to seek postponement of the hearing. (Opinion and Award of Arbitrator at 1-2, J.A. Ex. A.)
Turning to the merits of the dispute, Wolf resolved all issues in favor of plaintiff. He found (1) the company had used non-union employees at both the Absecon Manor and Eckerd sites; (2) that the union had tried within the guidelines of the Collective Bargaining Agreement to resolve the Absecon and Eckerd disputes through discussion and grievance proceedings; (3) the company had engaged in an attempt to circumvent its responsibilities to use union labor; (4) despite having been given timely notice of the arbitration hearing, the Company did not participate in the proceeding, nor did it otherwise attempt to refute the Union's allegations, and; (5) there is evidence to support a further finding that PN Drywall created a "new or double-breasted corporation" for the purposes of avoiding the terms of the Collective Bargaining agreement. Having so found, Wolf awarded plaintiff $190,496.13 for damages connected to the Absecon Manor site, and $38,741.28 for damages connected to the Eckerd site.
P N Drywall refused to comply with the arbitrator's award, and plaintiff has brought suit seeking to compel defendant's compliance. The parties agree on the operative facts, and it is uncontroverted that the decision of an arbitrator should not be disturbed except under exceptional circumstances. United Paperworkers Int'l Union v. Misco, 484 U.S. 29, 38 (1987). Nevertheless, defendant claims that the arbitration award is unenforceable for two reasons.
First, plaintiff claims that the award is unenforceable for the reason that the dispute was not substantively arbitrable because Nunes was not covered by the Collective Bargaining Agreement's arbitration clause. This is so, argues plaintiff, because Nunes's "contact with plaintiff only ran for a period of one year and was not in force at the time of the work performed." (Def.'s Br. in Opp'n at 3.) Second, defendant argues that the arbitration award is unenforceable for the reason that Wolf should not have proceeded without defendant having had the opportunity to be heard. The essence of this argument is that, because Nunes was not present due to an outpatient visit to Wills Eye Hospital, the arbitrator had no power to make a decision which affected him. Thus, the defendant's second argument is one of procedural jurisdiction, i.e., that the arbitrator was divested of jurisdiction when Nunes failed to appear for the hearing.
As this matter is before the Court on a motion for summary judgment, the Court may grant plaintiff's motion only if the materials of record "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). Thus plaintiff should prevail only if there are no genuine issues as to whether the arbitrator had jurisdiction to decide the issues before him.
B. Substantive Arbitrability
Defendant first argues that this dispute was improperly submitted to arbitration because he was not covered by the Collective Bargaining Agreement, which explicitly provides for arbitration in the event that the parties are unable to bring about an amicable settlement of any grievance or controversy. (Collective Bargaining Agreement, Art. XVII ¶ 1, Step IV, J.A. Ex. B.) In its opposition, defendant claims that PN Drywall is not bound by the bargaining clause because its arrangement with the Union was only to last one year. (Pl.'s Br. in Opp'n at 6.) The threshold issue before the Court, then, is whether or not the parties to this dispute were subject to the terms of the Collective Bargaining Agreement.
When presented with issues concerning the scope of a Collective Bargaining Agreement's arbitration clause, courts themselves must determine whether the parties expressed an intent to have certain disputes submitted to arbitration. John Wiley Sons, Inc. v. Livingston, 376 U.S. 543, 547 (1964). Therefore, the court must satisfy itself that it was the parties' intent to submit disputes to arbitration. Bell Atlantic-Pennsylvania, Inc. v. Communications Workers of America, 164 F.3d 197, 201 (3d Cir. 1999).
After reviewing the record in this case, the Court finds no merit in defendant's argument that he did not intend to be subject to arbitration. The contract between the Union and PN Drywall, (Ex. C,supra), was signed by Nunes on November 28, 1995, and plainly shows that Nunes and PN Drywall agreed to be bound by the Collective Bargaining Agreement:
"the undersigned agree to be bound by every current collective bargaining agreement between the Local Unions or District Councils and Building Contractors Association of New Jersey governing wages, working conditions and payments to fringe benefit finds which agreement is incorporated by reference."
The Collective Bargaining Agreement also clearly sets forth the duration of the agreement, providing:
"This Agreement shall continue in effect for the duration of the [Collective Bargaining Agreement] and shall be deemed renewed on the same basis as the [Collective Bargaining Agreement] is renewed . . . unless at least 90 days before termination of the then current collective bargaining agreement, either party notifies the other in writing of cancellation of this Agreement."
Thus, as of October 1997, the time of the incidents underlying this dispute, the Agreement between plaintiff and defendant bound Nunes and PN Drywall to the then-effective Collective Bargaining Agreement which, as explained above, provides for arbitration of all labor disputes. Defendant has provided no evidence that Nunes or PN Drywall submitted written notice of cancellation of this Agreement. Thus, there remain no issues of fact concerning whether PN Drywall and its owner Joseph Nunes were bound by the Collective Bargaining Agreement.
Plainly, the Union, PN Drywall, and Joseph Nunes all were parties to the applicable Collective Bargaining Agreement, and their dispute whether the company had breached its duties under the agreement, by hiring non-union carpenters as employees at the Absecon and Cherry Hill job sites, in violation of Art. I (the "recognition clause") and Art. XVIII, Section 3 (the "subcontractor clause" banning PN Drywall and Nunes from the "creation of or operation of new or double-breasted corporations for the purposes of avoiding the obligations of this Agreement") was squarely within the sphere of matters governed by the agreement and by its arbitration clause. In order to overcome the presumption of arbitrability of these matters, the employer must show that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.United Steel Workers v. Lukens Steel Co., 969 F.2d 1468 (3d Cir. 1992). No such evidence has been proffered by defendant in opposition to this motion, and the court finds plaintiff has demonstrated the substantive arbitrability of this dispute.
C. Procedural Arbitrability
The Court next will consider defendant's argument that it was improper for arbitrator Wolf to proceed ex parte. As explained above, defendant is essentially arguing that Wolf was divested of jurisdiction over PN Drywall once it became apparent that Nunes would not appear. This argument is also unavailing.
Once the threshold issue of substantive arbitrability has been resolved, and the court determines that the parties have contracted to arbitrate their disputes, any further matters surrounding the dispute are to be submitted to the arbitration procedure. Bell Atlantic-Pennsylvania, 164 F.3d at 201. Once the determination has been made that the dispute was arbitrable, the entire dispute must be resolved by the arbitrator. Id. Thus, procedural issues, such as whether to proceed ex parte, or whether a party has waived his or her appearance, are procedural matters reserved for the arbitrator's decision.
In this case, the matter was properly before the arbitrator, and the question of whether to proceed without Nunes was a procedural matter left to the arbitrator's discretion. Under the rule of procedural arbitrability, the procedural questions growing out of the dispute and bearing on its final disposition are to be left to the arbitrator. John Wiley Sons, Inc. v. Livingston, 376 U.S. 543, 557-558 (1964); Ass'n of Flight Attendants v. USAir, Inc., 960 F.2d 345, 349 (3d Cir. 1992).
Even if one assumes that Nunes actually was unable to come to the hearing, there is absolutely no indication in the record that he had any intention of doing so, and the record is strongly to the contrary due to his many months of willful non-participation in the grievance procedures, the selection of the arbitrator, and the consolidation of the matters. Irrespective of Nunes's intent, this Court may not second-guess the arbitrator's decision to proceed ex parte. So long as the arbitrator is even arguably applying the contract and acting within the scope of his authority, even serious error would be insufficient to overturn the arbitrator's decision. United Paperworkers, 484 U.S. at 38 (emphasis supplied).
This court declines defendant's invitation to hear testimony upon matters that defendant failed to present to the arbitrator regarding his indisposition on the hearing date, including proposed testimony of his wife and doctors. First, even at this late date, defendant has offered no affidavits or other evidence of his medical situation, nor does his attorney even attempt to explain how some eye problem prevented Nunes from seeking a postponement of the hearing so he could attend. Second, nowhere does defendant allege that he intended to participate but for his medical excuse. Third, and most important, the rule of procedural arbitrability precludes such a federal court usurpation of the arbitrator's procedural functions under the circumstances of this case.
Moreover, the employer is entitled to no greater procedural right than the arbitration clause and incorporated rules grant to it. In the present case, the arbitrator was called upon to interpret the meaning of the procedural fairness aspect of the arbitration clause in Art. XVII, Step IV, Subpar. 4, supra, which provides: "The parties affected shall be afforded a full opportunity to present any evidence, written or oral, which may be pertinent to the matter in dispute." Mr. Nunes, having received full notice of th hearing's time, place, date, and subject matter, took no steps to prepare or attend. Additionally, the arbitration process is conducted "under the rules of the American Arbitration Association," according to Art. XVII, Step IV, supra. Rule 27 of the AAA Labor Arbitration Rules explicitly provides in relevant part that "the arbitration may proceed in the absence of any party or representative who, after due notice, fails to be present or fails to obtain a postponement. An award shall not be made solely on the default of a party. . ." Consistent with Rule 27, the arbitrator heard testimony from three witnesses, viewed videotapes and other evidence, and rendered a thoughtful award upon the merits. The rules thus anticipate precisely the type of evidentiary proceeding that the arbitrator convened. It bears further noting that the arbitrator's exercise of discretion to proceed without Nunes was further consistent with Nunes's failure to contact the AAA or the arbitrator to offer evidence, or otherwise object to the proceeding at any time in the six weeks from the hearing on July 21, 1998 to the entry of the award on September 3, 1998.
As defendant has failed to adduce any evidence raising a genuine issue as to whether PN Drywall and Nunes were bound to arbitrate this dispute with the Union, and has failed to show that Arbitrator Wolf was not entitled to proceed ex parte, the Court will enter summary judgment for the plaintiff. Judgment will be entered for plaintiff and against PN Drywall in the amount of $190,496.13 with respect to the Absecon Manor job, and $38,741.28 with respect to the Eckerd Drug job.
D. Fees and Interest
Having resolved all issues in favor of the plaintiff, the Court next considers plaintiff's request for prejudgment interest, as well as costs and attorney's fees. Plaintiff's position is that defendant has no rational basis for refusing to arbitrate, and no basis for refusing to honor the arbitration award. Thus, plaintiff argues, defendant's arguments for vacating the award are made in bad faith. As this Court should discourage bad faith arguments, plaintiff asserts, attorney's fees are warranted.
Awards of prejudgment interest and attorney's fees are purely discretionary. In this case, the defendant apparently was without counsel until this lawsuit was filed. Plaintiff has presented no evidence that defendant has a pattern or practice of violating Collective Bargaining Agreements, nor has defendant engaged in conduct in this litigation that can be characterized as willful, bad-faith interference with the court's orderly processes; thus, the sanction of prejudgment interest and attorney's fees is unavailable under the inherent power of the court under Chambers v. Nasco, Inc., 501 U.S. 32 (1991). Instead, it seems plausible that Nunes did not thoroughly understand the consequences of ignoring the grievance and arbitration procedures, and simply hoped the controversy would go away.
On the other hand, however, an award of attorney's fees may be awarded, even absent willful, bad faith, if the challenger fails to abide by a labor arbitrator's decision without justification. Teamsters Local Union No. 764 v. J.H. Merritt Co., 770 F.2d 40, 43 n. 2 (3d Cir. 1985); Chauffeurs Teamsters and Helpers v. Stroehmann Bros., 625 F.2d 1092, 1094 (3d Cir. 1980). In suits of this type, the presumption is that attorney's fees "are generally awarded if the defaulting party acted without justification. . .or if the party resisting arbitration did not have a `reasonable chance to prevail. . . .'" Stroehmann Bros., 625 F.2d at 1094 (citations omitted).
In the present case, defendant came forward with no plausible basis of prevailing upon either the substantive or procedural arbitrability issues. Substantive arbitrability was clear beyond dispute from simply reading the Short Form Agreement and the Collective Bargaining Agreement provisions quoted above. Procedural arbitrability is normally beyond the realm of issues to be considered by a federal court because the well-established law supports the arbitrator's exercise of discretion upon procedural matters such as whether to convene the hearing in a party's absence. Even if the law were unclear, which it is not, then the circumstances of this case, including the wording of the relevant provision of Rule 27 of the AAA Rules cited above, gave the arbitrator the explicit authority to proceed just as he did. Finally, there is not even a suggestion in this entire record that the defendant did not in fact violate Art. I and Art. XVIII — the "recognition" and "subcontractor" clauses — by using non-union laborers to perform work covered by the Collective Bargaining Agreement.
For these reasons, I cannot find that the defendant presented any substantial basis for non-enforcement of the arbitrator's award. It is appropriate to recognize in this case that plaintiff has been put through undue expense in retaining counsel and pursuing this case to enforce arbitration rights which were not even marginally debatable, all due to defendant's unreasonable refusal to abide by the arbitrator's award. Reasonable attorney's fees and costs will be awarded to plaintiff for all legal services related to the filing and prosecution of this lawsuit.
III. CONCLUSION
For the reasons discussed above, the plaintiff's motion for summary judgment will be granted and the arbitration award will be upheld, and reasonable counsel fees will be awarded to plaintiff. The corresponding Order is entered for judgment in favor of plaintiff and against defendant in the amount of $229,237.41 plus reasonable counsel fees and costs in an amount to be determined pursuant to Local Civil Rule 54.1. Plaintiff's counsel shall submit the Affidavit of Counsel Fees and Costs in the form required by Local Civil Rule 54.1 within Fourteen (14) days hereof. Any objection to the amount claimed shall be filed by defendant within Seven (7) days of filing of plaintiff's Rule 54.1 submission. The court will proceed to rule upon the amount of such fees and costs upon the papers submitted without further hearing.
ORDER FOR JUDGMENT
This case came before the Court upon motion of plaintiffs for summary judgment against defendant enforcing the arbitration award of the American Arbitration Association, Case No. 14-300-2069-97A, dated September 3, 1998, in the amount of $229,237.41, together with attorneys' fees and prejudgment interest in connection with this suit; and
The Court having considered all submissions of the parties in support and opposition, and having heard the arguments of counsel on October 28, 1999; and
Finding, for reasons stated in the Opinion of today's date that plaintiff's motion should be granted and judgment entered accordingly, together with an award of reasonable attorneys' fees and costs of this litigation but without prejudgment interest;
IT IS this day of November 1999 hereby
ORDERED that plaintiffs' motion for summary judgment be, and it hereby is, GRANTED; and
IT IS FURTHER ORDERED that JUDGMENT be entered in favor of plaintiffs South Jersey Regional Council of Carpenters, and its Locals 393 and 623 Affiliated with the United Brotherhood of Carpenters and Joiners of America, AFL-CIO and against defendant PN Drywall enforcing the arbitration award in the amount of Two Hundred Twenty-Nine Thousand Two Hundred Thirty-Seven Dollars and Forty-One Cents ($229,237.41), together with reasonable attorneys' fees and costs of suit in an amount to be determined pursuant to Local Civil Rule 54.1; and
IT IS FURTHER ORDERED that plaintiffs' counsel shall submit their Affidavit of Counsel Fees and Costs in the form required by Local Civil Rule 54.1 within fourteen (14) days hereof; that any objection to the amounts claimed shall be filed by defendant within seven (7) days thereafter; and that the Court will determine the amount of such fees and costs upon the papers submitted without further hearing.