MidAmerican Energy v. IBEW Local 499 ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 02-3826/3919
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MidAmerican Energy Company, *
*
Plaintiff - Appellant/ *
Cross Appellee, *
* Appeals from the United States
v. * District Court for the
* Southern District of Iowa.
International Brotherhood of *
Electrical Workers Local 499, *
*
Defendant - Appellee/ *
Cross Appellant. *
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Submitted: June 12, 2003
Filed: September 26, 2003
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Before BOWMAN, MURPHY, and BYE, Circuit Judges.
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BOWMAN, Circuit Judge.
In this labor case, MidAmerican Energy Company challenges the District
Court's decision not to set aside an arbitrator's award that required it to reinstate
Ronald Turner, a fired employee. The International Brotherhood of Electrical
Workers Local 499 (Union) seeks to enforce the award insofar as it requires Turner's
reinstatement, but seeks to overturn the District Court's decision not to award Turner
back pay. We affirm in part and reverse in part.
I.
MidAmerican operates a liquid natural gas storage facility in Waterloo, Iowa,
that is capable of holding some ten million gallons of gas and that, at the time of the
incident, held several million gallons of gas. On the night of June 1, 2001, Turner
was the only employee at the facility and was responsible for the security of the
facility and for monitoring the stability of the liquid natural gas on hand. Because he
was the only employee on duty and because liquid natural gas is a volatile substance,
he was not permitted to leave without being relieved. Shortly after midnight, Turner
decided to leave work. He thereupon disabled nearly forty monitoring and safety
devices (including fire warning and perimeter security systems) and left the premises
in a company vehicle (he left his own car in its parking spot so that his absence would
not be discovered). Turner does not dispute the fact that he disabled the safety and
security systems and that he took the company vehicle in order to conceal his
absence. Approximately a half-hour after Turner left, the plant manager received an
anonymous telephone call about a company van being driven about town. The plant
manager was unable to contact Turner at work and subsequently discovered Turner's
absence when he went to the plant to investigate. Turner eventually returned to work
at about three-thirty in the morning and was suspended on the spot and later fired.
The parties agree that Turner's actions violated company rules and state and federal
regulations and that, as a result of Turner's actions, MidAmerican was obliged to self-
report the incident and was exposed to potential fines. Aside from the major
dereliction of duty we have just described, Turner's work record was excellent.
After Turner was fired, he invoked the grievance procedures provided for in
the collective bargaining agreement that governed his employment, and the Union
represented him in the ensuing discussions and arbitration. MidAmerican refused to
reinstate Turner because it maintained his termination was "for just cause," as
provided for in the collective bargaining agreement. At the time his actions were
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discovered, during the company's investigation, and at the arbitration hearing, Turner
insisted that he left his post because he received a call from his wife, who informed
him that his son was missing and had possibly been injured in gang activity. He
insisted that he was very worried and left work to search for his son. His wife
corroborated this claim at the arbitration hearing. Although the arbitrator did state
that Turner's explanation was less than convincing, the arbitrator also stated that:
I note that at no time has [Turner] not taken full responsibility for his
actions. As the Local points out, he cooperated at all times with
Management during the course of their investigation, and has
consistently owned up to what he did, indicating that he knew it to be
wrong.
Arbitrator's Award at 12 (Dec. 26, 2001). With that in mind, the arbitrator issued the
following award:
[w]hile [Turner's] actions constitute just cause for discipline, his lengthy
and otherwise unblemished service with the Utility warrants a reduction
in the most severe of workplace penalties (termination). Accordingly,
Mr. Turner's discharge shall forthwith be reduced to a suspension
without any back pay. Further, should Management determine that he
can no longer occupy a position of trust such as he held on June 22nd of
this year, they may disqualify him from that job and transfer him to
another position in the bargaining unit where more direct supervision is
available. Hopefully, [Turner] will have learned from this experience
the importance of trust, and the need for adhering to the requirements of
his job assignment—whatever they may be. Should that again prove not
to be the case, however, then a more severe penalty may well be
justified.
Id. at 13.
After the arbitrator issued his award, MidAmerican was notified by an
anonymous caller that Turner might have lied about his reasons for leaving work on
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the night in question. The caller also suggested that MidAmerican contact Carol
Carey, whom the caller suggested might have information relating to Turner's
whereabouts on the night in question. MidAmerican did contact Carey, who later
testified in her deposition that she had been having an extramarital affair with Turner
and that he was with her on the night of June 1.
Thereafter, MidAmerican filed the present suit to vacate the arbitrator's award.
Both MidAmerican and the Union moved for summary judgment. MidAmerican
urged that the award should be set aside under one of two narrow exceptions that
permit a reviewing court to set aside arbitration rulings: public policy or fraud. For
its part, the Union sought to have the award enforced and also sought back pay for the
time between the issuance of the award and Turner's eventual reinstatement. The
District Court entered summary judgment denying MidAmerican's motion to set aside
the award, denying the Union's motion for back pay, and granting the Union's motion
to enforce the decision. MidAmerican appeals this adverse ruling and seeks to vacate
the award. The Union cross-appealed seeking back pay for Turner.
II.
We apply "ordinary, not special, standards when reviewing district court
decisions upholding arbitration awards." First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 948 (1995). Thus, we review a district court's findings of fact for clear
error and conclusions of law de novo. Id. at 947–48. Our review of the District
Court's decision to grant summary judgment is de novo. Gen. Trading Int'l, Inc. v.
Wal-Mart Stores, Inc., 320 F.3d 831, 835 (8th Cir. 2003). We review the grant of
summary judgment de novo even though the enforcement of an arbitration award is
involved. Teamsters Local Union No. 42 v. Supervalu, Inc., 212 F.3d 59, 65 (1st Cir.
2000).
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Judicial review of arbitration rulings is limited. See United Paperworkers Int'l
Union v. Misco, Inc., 484 U.S. 29, 37–38 (1987). Indeed, we have observed that "the
decision of an arbitrator who has not exceeded his contractual authority is almost
always upheld." Iowa Elec. Light & Power Co. v. Local Union 204 of the Int'l Bhd.
of Elec. Workers, 834 F.2d 1424, 1427 (8th Cir. 1987). In this case, MidAmerican
argues that two possible grounds exist on which to vacate the arbitrator's award.
First, MidAmerican argues that the public policy exception repeatedly recognized by
the Supreme Court is applicable to this case. See E. Associated Coal Corp. v. United
Mine Workers, 531 U.S. 57, 62–63 (2000). Second, MidAmerican contends that the
rule permitting a reviewing court to decline to enforce an arbitration award procured
by fraud should apply here. See 9 U.S.C. § 10(a)(1) (2000); Goff v. Dakota, Minn.
& E. R.R. Corp., 276 F.3d 992, 996 (8th Cir. 2002). We consider these arguments in
turn.
MidAmerican first argues that the public policy exception is applicable here
and that our decision in Iowa Electric Light & Power requires us to vacate the
arbitration award. The Supreme Court has repeatedly reaffirmed the existence of a
public policy exception and has explained that an arbitration award is unenforceable
if it contravenes an "explicit public policy." W.R. Grace & Co. v. Local Union 759,
Int'l Union of the United Rubber Workers, 461 U.S. 757, 766 (1983). The public
policy in question "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. (quoting Muschany v. United States, 324 U.S. 49, 66
(1945)). Our inquiry is further focused by the Supreme Court's decision in Eastern
Associated Coal Corporation, where the Court explicitly stated that the question in
these labor cases is not whether the employee's behavior violated some explicit public
policy, but whether his reinstatement violates public policy. E. Associated Coal
Corp., 531 U.S. at 62–63. Thus, it is not for us to determine whether Turner's
behavior violated public policy; rather, the question is whether the arbitrator's award,
with its requirement that Turner be reinstated into his previous position or
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"transfer[ed] . . . to another position in the bargaining unit where more direct
supervision is available," Arbitration Award at 13, violates "an explicit, well-defined,
and dominant public policy, as ascertained by reference to positive law and not from
general considerations of supposed public interests." E. Associated Coal Corp., 531
U.S. at 62–63. Applying the foregoing standard, we agree with the District Court that
the arbitrator's award does not violate public policy for two related reasons. First, we
are unable to discern the type of explicit safety concerns within the statutes and
regulations that govern the liquid natural gas industry that have led this and other
courts to decline to enforce arbitrator's awards that require an employee's outright
reinstatement. Second, the arbitrator's decision in this case is fundamentally different
from those awards that have been struck down for it does not require that Turner be
reinstated into his sensitive position. We consider these factors in turn.
First, MidAmerican is unable to identify any statutory or regulatory provisions
that evidence an explicit public policy that would be violated if the arbitrator's award
was enforced, a fact that distinguishes this case from Iowa Electric Light & Power.
In that case, an employee at a nuclear power plant disabled a federally-required safety
mechanism (a set of sealed, interlocking doors that provide secondary containment
in the event of an accident); an arbitrator eventually ordered that the employee should
be reinstated. Iowa Elec. Light & Power, 834 F.2d at 1426. We had little trouble
discerning an explicit and well-defined public policy in the voluminous statutory and
regulatory framework governing the nuclear-power industry. The framework within
which that industry functions is a result of the unique dangers and attendant safety
requirements of generating electric power by way of atomic fission. Id. at 1428.
Accordingly, we concluded that the statutory and regulatory framework that was put
in place to protect the public from the hazards of harnessing nuclear energy was a
dominant, explicit, and well-defined public policy. Thus, the arbitrator's award that
required the outright reinstatement of the employee violated this dominant, explicit,
and well-established public policy because the employee's knowing violation—which
occurred after his participation in several classes discussing this very feature and
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which occurred notwithstanding the extensive screening of employees in nuclear
power plants—indicated that he could not be trusted to work in the dangerous
environment to which the arbitrator ordered him returned. Our decision in that case
was driven in part by the fact that the Nuclear Regulatory Commission—the official
arbiter of this nation's nuclear policy—had already approved the employee's
discharge. Id. at 1428. The present case is demonstrably different.
Although liquid natural gas is a hazardous substance and its storage in bulk
quantities raises significant safety and security concerns, it is not regulated to the
degree that the nuclear power industry is. Although the liquid natural gas industry
is subject to safety regulations, MidAmerican is unable to identify statutory and
regulatory provisions that demonstrate that liquid natural gas is so dangerous that a
single violation of safety protocols is sufficient cause to deprive the employee of the
opportunity to work for that company in any capacity, which is all the arbitrator's
award provides for in this case. Rather, the regulatory framework on the federal level
is more general and does not contain the specific and exacting requirements found in
the regulations governing atomic energy. Compare, e.g., 15 U.S.C. §§ 717a–z (2000)
(natural gas), with 42 U.S.C. §§ 2011–2297h-13 (2000) (atomic energy); and 49
C.F.R. §§ 193.2001–193.2917 (2002) (liquid natural gas), with 10 C.F.R. §§ 1–199
(2003) (atomic energy). On the state level, the regulations are mostly procedural.
One chapter deals with the procedural requirements for obtaining a "permit to
construct, maintain, and operate an intrastate gas pipeline and for the underground
storage of gas." Iowa Admin. Code § 199-10.1(2)(479) (2003). A second chapter
concerns the procedure for establishing "standards for a petition for a permit to
construct, maintain, and operate a hazardous liquid pipeline and for the underground
storage of hazardous liquids." Id. § 199-13.1(2). Yet a third chapter deals with the
procedural aspects relating to the "standards regarding the transportation of natural
gas to protect landowners and tenants from environmental or economic damages
resulting from the construction, operation, or maintenance of pipelines." Id. § 199-
12.1(2). Therefore, we are unable to discern the type of explicit safety concerns that
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has led this and other courts to decline to enforce arbitrator's awards that require an
employee's outright reinstatement. See, e.g., Delta Air Lines, Inc. v. Air Line Pilots
Ass'n, Int'l, 861 F.2d 665, 674 (11th Cir. 1988) (vacating on public policy grounds
an arbitration award requiring the outright reinstatement of pilot who was discharged
for flying a commercial jet while intoxicated), cert. denied, 493 U.S. 871 (1989).
Second, the arbitrator's award in this case is qualitatively different than the one
in Iowa Electric Light & Power, where the arbitrator ordered that the employee be
reinstated into his original position in the nuclear power plant. In contrast to that
case, the very real safety concerns that are evident in the liquid natural gas regulatory
framework will not be violated by the arbitrator's award, for it merely requires that
MidAmerican re-employ Turner in some position and not that it reinstate him to any
position where he is without direct supervision and where the security and safety of
the plant are in his hands. Here, we find an award that is explicitly conscious of the
safety concerns Turner's actions engendered and does not require that Turner be re-
employed in his sensitive position. Arbitration awards that are cognizant of safety
concerns are regularly upheld by courts even where the employees in question work
in safety-sensitive industries. For example, in International Brotherhood of Electrical
Workers, Local 97 v. Niagara Mohawk Power Corporation, 143 F.2d 704 (2d Cir.
1998), the Second Circuit sustained an arbitration award that ordered an employee
who tested positive for cocaine to be reinstated into his position at a nuclear power
plant. However, the award in that case only reinstated the employee under certain
conditions that the Second Circuit concluded would not violate the public policy
evident in the regulations governing the nuclear power industry. Id. at 727–28.
Specifically, the award conditioned his reinstatement on the employee's production
of a negative drug sample, the employee's successful completion of any requirements
imposed by the company's employee assistance program, and provided that the
company could require that the employee be tested at random (and under observation)
for up to eighteen months following his reinstatement. Id. at 713; compare Delta Air
Lines, 861 F.2d at 674, with Northwest Airlines, Inc. v. Air Line Pilots Ass'n, Intern.,
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808 F.2d 76, 83–84 (D.C. Cir. 1987) (upholding award that ordered a pilot, who had
flown commercial jet while intoxicated, to be reinstated only after he was certified
by the Federal Air Surgeon as having sustained total abstinence from alcohol for not
less than two years), cert. denied, 486 U.S. 1014 (1988). Because the arbitrator's
award does not require that Turner be returned to his sensitive position, the District
Court properly concluded that enforcing the arbitrator's award would not violate
public policy.
We next turn to MidAmerican's claim that the arbitration award was procured
by fraud. Section 10(a)(1) of the Federal Arbitration Act provides that a court can
vacate an arbitration award "[w]here the award was procured by corruption, fraud, or
undue means." Although the Federal Arbitration Act does not govern labor cases, it
does inform our search for the federal common law that governs judicial review of
arbitration awards in labor cases. See Misco, 484 U.S. at 40 n.9. Section 10(a)(1)'s
fraud provision serves as grounds for vacating an arbitration award if the offended
party proves the fraud by clear and convincing evidence, shows the fraud was not
discoverable by due diligence before or during the proceeding, and shows that the
fraud was materially related to an arbitration issue. Goff, 276 F.3d at 996 (applying
§ 10(a)(1) to Railway Labor Act case); see also Bonar v. Dean Witter Reynolds, Inc.,
835 F.2d 1378, 1383 (11th Cir. 1988). In this case, the parties agree that the potential
fraud was not discoverable before or during the arbitration proceedings, but they
disagree as to whether fraud has been proved by clear and convincing evidence and
whether the potential fraud was materially related to the arbitration.
As to the materiality element, we reject the Union's claim that Turner's
deception, even if true, would not have affected the arbitration award. In fact,
nothing could be further from the truth. If Turner's prevarications and dissemblings
were established, it would not be possible to conclude that the award had not been
procured by fraud. It is true that the arbitrator's award is explicitly premised on his
conclusion that "[Turner's] lengthy and otherwise unblemished service with the
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Utility warrants a reduction in the most severe of workplace penalties (termination)."
Arbitration Award at 13. Still, it was not of little import to the arbitrator's conclusion
that "at no time has [Turner] not taken full responsibility for his actions" and that
Turner "cooperated at all times with Management during the course of their
investigation, and has consistently owned up to what he did, indicating that he knew
it to be wrong." Id. at 12. Further, the award specifically states that "[h]opefully,
[Turner] will have learned from this experience the importance of trust, and the need
for adhering to the requirements of his job assignment—whatever they may be.
Should that again prove not to be the case, however, then a more severe penalty may
well be justified." Id. at 13. Given these statements regarding how crucial the
arbitrator felt that honesty and truthfulness were and given the fact that, if fraud is
proven, the entirety of Turner's involvement in the arbitration process would be
shown to be a sham, we conclude that the alleged fraud is material to the case at hand.
As far as the requisite clear and convincing proof of fraud, the Union correctly
notes that to date the evidence merely shows that there is an inconsistency between
the statements of Turner and his wife and Ms. Carey. Given this inconsistency and
given the fact that the question of whether Turner and his wife lied is material, we
hold that a material issue of fact remains to be determined, and therefore the District
Court erred when it granted summary judgment on this issue. See Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986); Fed. R. Civ. P. 56(c).
Finally, we consider the Union's cross-appeal which seeks to overturn the
District Court's decision not to award Turner back pay from the date he would have
been reinstated if MidAmerican never sought to vacate the award. If the award was
ambiguous, we would have to remand the case to the arbitrator for clarification in the
event that the award was eventually upheld. See Glass Workers Int'l Union v.
Excelsior Foundry Co., 56 F.3d 844, 849 (7th Cir. 1995). However, this award is not
ambiguous, it is merely silent on this question and we will not treat this silence as
ambiguity. See Int'l Union of Operating Eng'rs, Local No. 841 v. Murphy Co., 82
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F.3d 185, 189 (7th Cir. 1996). Arbitrators undoubtedly know that their awards are
subject to challenge in the district courts. Here, the arbitrator was faced with Turner's
egregious conduct and MidAmerican's strong desire not to reemploy him, two facts
which increased the likelihood of a court challenge to the arbitrator's award. Yet, the
award that the arbitrator issued merely required that MidAmerican reemploy Turner
in some capacity, denied back pay, and said nothing about awarding back pay during
any legal challenge to the award that MidAmerican might bring. We see no
ambiguity in the award and the District Court's decision not to award Turner back pay
is affirmed.
III.
Accordingly, the judgment of the District Court denying Turner back pay is
affirmed and the judgment of the District Court with respect to MidAmerican's
motion to vacate the arbitration award on grounds of fraud is reversed. The case is
remanded for further proceedings consistent with this opinion on MidAmerican's
claim that the arbitration award was procured by fraud.
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