United Transp v. Suburban Tran , 51 F.3d 376 ( 1995 )

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
3-16-1995
United Transp v. Suburban Tran
Precedential or Non-Precedential:
Docket 94-5336
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 94-5336
___________
UNITED TRANSPORTATION UNION LOCAL 1589
vs.
SUBURBAN TRANSIT CORP.
SUBURBAN TRANSIT CORP., a corporation of the
State of New Jersey
vs.
UNITED TRANSPORTATION UNION LOCAL 1589,
AFL-CIO
United Transportation Union Local 1589,
Appellant.
___________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil Nos. 93-cv-05728 and 93-cv-05769)
___________
ARGUED DECEMBER 6, 1994
BEFORE: STAPLETON, ROTH and LEWIS, Circuit Judges.
(Filed March 16, 1995)
___________
Timothy R. Hott (ARGUED)
Hott & Margolis
591 Summit Avenue, Suite 300
Jersey City, NJ 07306
Attorney for Appellant
Francis A. Mastro (ARGUED)
Apruzzese, McDermott, Mastro & Murphy
25 Independence Boulevard
Post Office Box 112
Liberty Corner, NJ 07938
Attorney for Appellee
___________
OPINION OF THE COURT
___________
LEWIS, Circuit Judge.
United Transportation Union, Local 1589, AFL-CIO (the
"Union") appeals a district court order vacating an arbitration
award in favor of Joseph Nagy, a former employee of Suburban
Transit Corporation ("Suburban"). Because we agree with the
Union that the district court failed to accord the arbitration
award proper deference, we will reverse.
I.
A.
Suburban and the Union are parties to a collective
bargaining agreement ("CBA"). Under the CBA, Suburban is given
certain rights to discipline and discharge its employees, and the
Union is entitled to contest any disciplinary action of
management. The parties agreed in the CBA to submit to
arbitration any grievance that they cannot resolve.
More specifically, Article I, Section 5 of the CBA
states that "[t]he Union recognizes the right of the Company to
exercise all functions of management, including . . . the right
to hire, promote, demote, transfer, and discipline or discharge
for proper cause." CBA, art. I § 5. The same provision explains
that "[t]he Union shall retain the right to contest any action of
management in accordance with the appropriate provisions of this
contract." In Article IV, entitled "Discipline Procedure," the
CBA sets forth eleven sections describing a variety of
disciplinary procedures. For most alleged infractions, an
employee is entitled to a hearing before discipline is imposed.
However, in certain circumstances, Suburban has the right to
suspend the employee immediately and then promptly hold a
hearing. In virtually all circumstances, an employee may appeal
from his hearing to "the highest officer of Suburban" (CBA art.
IV, § 3), and if the parties cannot resolve their differences
even at this stage, "the dispute may be presented to an
arbitrator selected through the rules of the American Arbitration
Association or the N.J. State Board of Mediation . . . ." Id.
art. V, § 1(d). With respect to arbitration, the parties agree
that "[t]he determination of th[e] arbitrator shall be final and
binding on both parties" (id.), but the CBA also explains that
the arbitrator's authority is not plenary; rather,
[a]uthority of the arbitrator shall be
limited to the determination of the dispute
or grievance arising out of the
interpretation, application or operation of
the provisions of this agreement on
submission of the issues involved by the
parties to this agreement. He shall not have
any authority whatsoever to alter, amend or
modify any of the provisions of this
agreement.
Id. art. V, § 3.
B.
On December 15, 1992, Nagy was involved in a bus
accident on the New Jersey Turnpike: he rear-ended a tractor
trailer because he was tailgating. In his 12 years of
employment, he had been involved in 24 accidents, nine of which
were deemed preventable. This was his third preventable rear-end
collision.
Suburban fired Nagy, and the Union protested. When the
parties could not resolve their dispute, the matter was submitted
to arbitration on the following questions:
Was the discharge of Joseph Nagy for just cause?
If not, what shall be the remedy?
After a hearing, the arbitrator ruled that Nagy was
responsible for the accident, but that Suburban should not have
fired him. Instead, the arbitrator concluded, discharge was too
harsh a sanction for a long term employee where the employee had
been afforded no opportunity to improve his driving skills
through a retraining program.
Pursuant to 9 U.S.C. § 10(d), the Union and Suburban
moved in the district court to enforce and vacate, respectively,
the arbitrator's award. The district court, in a written
opinion, denied the Union's motion to enforce and granted
Suburban's motion to vacate the award, reasoning that the
arbitrator had read into the CBA terms that were not there. The
district court had jurisdiction under 29 U.S.C. § 185(a), and we
have jurisdiction under 28 U.S.C. § 1291.
II.
On appeal, the Union argues that because the
arbitrator's award was at least arguably based on a construction
of the CBA, the district court erred when it granted Suburban's
motion to vacate the award. We agree.
A.
District courts have very little authority to upset
arbitrators' awards. As we explained in News America
Publications, Inc. v. Newark Typographical Union, Local 103, 918
F.2d 21 (3d Cir. 1990), "courts play an extremely limited role in
resolving labor disputes." Id. at 24. "A court may not overrule
an arbitrator simply because it disagrees with the arbitrator's
construction of the contract . . . or because it believes its
interpretation of the contract is better than that of the
arbitrator." Id. (internal citation omitted). Rather, "[a]s
long as the arbitrator has arguably construed or applied the
contract, the award must be enforced, regardless of the fact that
a court is convinced that [the] arbitrator has committed a
serious error." Id. Thus, "there must be absolutely no support
at all in the record justifying the arbitrator's determinations
for a court to deny enforcement of an award." Id. "[O]nly where
there is a manifest disregard of the agreement, totally
unsupported by principles of contract construction and the law of
the shop, may a reviewing court disturb the award." Id.
(internal quotation omitted). Thus, as we wryly concluded, "[i]t
should be clear that the test used to probe the validity of a
labor arbitrator's decision is a singularly undemanding one."
Id.
Although News America is notable for the thoroughness
of its exposition, it is by no means the only source of our
longstanding disinclination to allow district courts to overturn
arbitration awards. To the contrary, our case law is uniform on
this point. E.g., Roberts & Schaefer Co. v. Local 1846, UMW, 812
F.2d 883, 885 (3d Cir. 1987) ("[e]ven when the award was dubious,
and the result one that we would not have reached had the matter
been submitted to the court originally, we have upheld the
arbitrator's decision"); United Indus. Workers v. Government of
the Virgin Islands, 987 F.2d 162, 170 (3d Cir. 1993) (scope of
review is "narrowly circumscribed"); Newark Morning Ledger Co. v.
Newark Typographical Union, 797 F.2d 162, 165 (3d Cir. 1986) (our
"strict standard means that a reviewing court will decline to
sustain an award `only in the rarest case'"). As long as an
arbitrator's decision arguably construes or "draws its essence"
from the CBA, a district court is not permitted to vacate the
award. "An arbitration award draws its essence from the
bargaining agreement if `the interpretation can in any rational
way be derived from the agreement, viewed in the light of its
language, its context, and any other indicia of the parties'
intention." Tanoma Min. Co., Inc. v. Local Union No. 1269, UMWA,
896 F.2d 745, 748 (3d Cir. 1990), quoting and adding emphasis to
Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1128 (3d Cir.
1969). Only when an arbitrator "acted in manifest disregard of
the law, or if the record before the arbitrator reveals no
support whatsoever for the arbitrator's determination," may a
district court invade the province of the arbitrator. United
Indus. Workers, 987 F.2d at 170.
The reason for such a lenient standard is not difficult
to discern. "[F]requent judicial disapproval of the awards of
labor arbitrators would tend to undermine a system of private
ordering that is of the highest importance to the well-being of
employer and worker alike." Newark Morning Ledger, 797 F.2d at
165.
B.
With these considerations in mind, we turn to the
district court's decision to vacate the arbitration award in this
case. Although the district court recognized that it had limited
authority to review in this case, the court nevertheless found
that the arbitrator's award did not draw its essence from the CBA
here because the arbitrator "read[] into" the CBA terms that were
not there -- specifically, provisions dealing with retraining,
progressive discipline, setting criteria for retraining, and
defining who is entitled to retraining. This conclusion,
however, was inaccurate.
Contrary to the district court's reasoning, the
arbitrator did not impermissibly "read into" the parties'
agreement terms that were not there. Rather, the arbitrator
simply interpreted the ambiguous term "proper cause" in a manner
unsatisfactory to management. The CBA allows Suburban to
discipline or discharge for "proper cause" (art I, § 5), but does
not define the phrase. When the grievance was submitted to
arbitration, the arbitrator was forced to decide what "proper
cause" meant (or "just cause" according to the language of the
questions submitted to arbitration, supra p. 4). We cannot say
that the arbitrator was engrafting provisions onto the CBA when
he evidently decided that he must decide whether it was fitting
(a synonym for "proper") and fair or equitable (two synonyms of
"just," the term used in the actual submission to the arbitrator)
for Suburban to have discharged a long-term employee for the
accident in question. In making this determination, the
arbitrator wrote that although it was clear that Nagy had been
negligent, what was not clear was the "validity of the
punishment" imposed by Suburban. He noted that although Nagy had
been involved in many accidents, some were minor and occurred
shortly after he was hired, and he had also received three annual
safety awards. The arbitrator also explained that Nagy had never
been offered any retraining despite Suburban's recent decision to
implement such a program. This surprised and concerned the
arbitrator because Nagy was a "veteran employee who has given
loyal service to his company for some twelve years." Taking all
of this into account, the arbitrator apparently determined that
Suburban had proper cause to punish Nagy in some manner, but not
to discharge him. Thus, the arbitrator concluded that Nagy was
properly punished through the suspension he had served, "it being
understood that [Nagy] shall cooperate with management in
undergoing a retraining program."
Suburban protests that this interpretation of the
phrase "proper cause" imposed upon the company a "progressive
discipline" system not bargained for by the parties. The
complete answer to this contention is that the parties bargained
for contractual ambiguity instead of defining "proper cause" in
the CBA. Having decided not to define the phrase, Suburban
cannot escape the results of that bargain simply because the
arbitrator has chosen to interpret that phrase differently than
Suburban may have wanted -- even if Suburban's interpretation of
the CBA is more reasonable than the result announced by the
arbitrator. News America, 918 F.2d at 24 ("[i]n reviewing an
arbitral award, courts must recognize that the parties bargained
for the arbitrator's construction of the agreement"); Roberts &
Schaefer Co. v. Local 1846, UMW, 812 F.2d 883, 885 (3d Cir. 1987)
("after bargaining for the decision of this arbitrator, the
Company cannot avoid his decision merely because the arbitrator
may have reached an incorrect result"). To the extent the
arbitrator's award was based upon a theory that the parties
intended "proper cause" to incorporate some form of progressive
discipline, that interpretation has some basis in the CBA.1 And
in any event, even if the arbitrator's interpretation of the
phrase "proper cause" did, in effect, impose a progressive
discipline system upon the parties, we have recognized that such
a result can be a justified interpretation of a "just cause"
provision. See Arco-Polymers, Inc. v. Local 8-74, 671 F.2d 752
(3d Cir. 1982) ("`[i]n a proper case an arbitrator . . . may
construe a "just cause" provision of a labor contract to include
a progressive discipline requirement and may determine that
certain conduct is "just cause" for discipline but not for
discharge'" (quoting Mistletoe Express Service v. Motor
Expressmen's Union, 566 F.2d 692, 695 (10th Cir. 1977))).
In sum, that the arbitrator's interpretation of "proper
cause" was a legitimate reading of that phrase compels the
conclusion that the arbitrator's award both construed and drew
1
. The CBA itself could be read to require differing gradations
of punishment based upon different degrees of culpability. The
CBA discusses "minor infractions," which have less formal
adjudicative procedures, and more serious infractions, including
rear-end collisions, which trigger Suburban's right to
immediately suspend the driver, but which also trigger a driver's
right to a hearing if suspension is imposed. See CBA art. IV,
§§ 5, 7, 8. The procedures for resolving these more serious
infractions do not state that a driver must be fired if he is
found responsible for wrongdoing; in fact, the phrasing clearly
contemplates that suspension is a punishment short of -- and only
potentially leading to -- discharge. See id. § 8. Thus, the CBA
contemplates that some actions that may be cause for suspension
will not be cause for discharge, and the arbitrator did not
manifestly disregard the CBA in taking into consideration the
context in which the dispute arose (Nagy's conduct, his tenure,
his overall driving record, and Suburban's recent adoption of a
driver retraining program) in deciding Nagy's culpability and the
propriety of firing him, as opposed to merely suspending him.
its essence from the CBA. That being the case, the district
court had no grounds to vacate the award.
C.
Suburban urges that if we find that the district court
erred in vacating the arbitration award, we should nevertheless
affirm the district court on the ground that the award violates
public policy. Essentially, Suburban argues that public policy
demands that common carriers provide safe carriage to their
passengers, and that the arbitration award undermines this
policy. However, we decline Suburban's invitation to invalidate
the award on public policy grounds.
Arbitration awards rendered pursuant to collective
bargaining agreements can be vacated when such awards violate
public policy. W.R. Grace & Co. v. Local Union 759, 461 U.S.
757, 766 (1983). However, the public policy "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.'" Id. at 766, quoting Muschany v.
United States, 324 U.S. 49, 66 (1945). Although we have rejected
the argument that an arbitration award may be set aside on public
policy grounds only when it "violates positive law," we have
stressed that a public policy must be "well defined and dominant"
before it may be used to upset an arbitrator's award. Exxon
Shipping Co. v. Exxon Seamen's Union, 11 F.3d 1189, 1192, 1194
(3d Cir. 1993) (arbitration award vacated as against public
policy when it required shipping company to reinstate able bodied
seaman on oil tanker after seaman was found to be highly
intoxicated while on duty); see also Exxon Shipping Co. v. Exxon
Seaman's Union, 993 F.2d 357 (3d Cir. 1993); Stroehmann Bakeries,
Inc. v. Local 776, Int'l Brotherhood of Teamsters, 969 F.2d 1436
(3d Cir. 1992). In determining whether a public policy exists,
federal courts must use common sense, keeping in mind that "a
formulation of public policy based only on `general
considerations of supposed public interests' is not the sort that
permits a court to set aside an arbitration award that was
entered in accordance with a valid collective bargaining
agreement." United Paperworkers Int'l Union, AFL-CIO v. Misco,
Inc., 484 U.S. 29, 44 (1987).
We have addressed the public policy exception to
enforcement of arbitration awards in light of W.R. Grace and
Misco in two recent decisions discussed by the parties here:
United States Postal Service v. National Assn of Letter Carriers,
839 F.2d 146 (3d Cir. 1988), and Service Employees Int'l Union
Local 36 v. City Cleaning Company, Inc., 982 F.2d 89 (3d Cir.
1992). In Service Employees, we explained that "[t]he public
policy exception" to the enforcement of arbitration awards "is
slim indeed." Service Employees, 982 F.2d at 92. The exception
is available only when "the arbitration decision and award create
an explicit conflict with an explicit public policy . . .." Id.
And in Letter Carriers, despite recognizing that customer and
co-worker safety may be valid public policy, we determined that
"a policy in favor of protecting co-workers and customers from
[an employee's] violent conduct (assuming, arguendo, that such a
policy is properly ascertained) does not require his discharge
for its fulfillment." Letter Carriers, 839 F.2d at 149-50.2
We acknowledge that public transportation safety is a
valid public concern, but Suburban has failed to demonstrate that
public policy requires vacation of the arbitrator's award here.
Suburban has not provided us with "laws and legal precedents"
which describe an "explicit" public policy; rather, what Suburban
has described as putative public policy is more akin to the
amorphous "public interests" that were deemed insufficient to
articulate public policy in W.R. Grace.3 Furthermore, even if we
2
. In three recent cases not discussed by the parties, we
found that arbitrators' awards should be vacated on public policy
grounds. See Exxon Shipping Co. v. Exxon Seamen's Union, 11 F.3d
1189 (3d Cir. 1993) (Exxon Shipping II); Exxon Shipping Co. v.
Exxon Seaman's Union, 993 F.2d 357 (3d Cir. 1993) (Exxon
Shipping I); Stroehmann Bakeries, Inc. v. Local 776, Int'l
Brotherhood of Teamsters, 969 F.2d 1436 (3d Cir. 1992). In each
of those cases, however, the public policy was much more explicit
and the conflict between it and the particular award much more
pronounced than is the case here.
3
. In an effort to demonstrate that the arbitrator's award
would conflict with explicit public policy, Suburban cites 49
C.F.R. § 391.25, a Department of Transportation regulation
requiring motor carriers to review annually their drivers'
records to ascertain whether any of their drivers are
disqualified to drive a motor vehicle under 49 C.F.R. § 391.15.
Suburban cannot contend that the arbitrator's award prevents the
company from making its annual review under § 391.25, however,
nor can it suggest that the award forces the company to keep Nagy
on the road in violation of § 391.15. Section 391.15
disqualifies a driver in only two circumstances: (1) if the
driver loses his or her driving privileges, as discussed in §
391.15(b); or (2) if the driver commits certain "criminal [or]
other offenses" as detailed in § 391.15(c). Furthermore,
citation to section 391.25 demonstrates that any "public policy"
in favor of driver safety is much more lenient than Suburban
would have it. Only in egregious cases do federal regulations
disqualify drivers. Neither condition appears to have been met
in Nagy's case.
found that Suburban had articulated a public policy which could,
in some cases, undermine an arbitration award, we still would not
vacate the award here. Suburban simply has not shown that the
arbitrator's award in this case would explicitly conflict with
the public policy championed by the company. Nagy has obviously
had many accidents, but he has also won a number of safety
awards. Additionally, the arbitrator's award seeks to encourage
driver retraining; thus, it seems that the arbitrator had an eye
toward public safety when he rendered his decision. Therefore,
Suburban's public policy argument fails to persuade us that the
arbitrator's award must be vacated.
III.
For the foregoing reasons, we will reverse and remand
with instructions to confirm the arbitration award.