Advantage Veterans Services of Walterboro LLC v. United Steel Paper and Forestry Rubber

• Court: Court of Appeals for the Fourth Circuit
• Decided: June 15, 2023
• Docket: 22-1268
• Status: Published

Opinion

USCA4 Appeal: 22-1268 Doc: 34 Filed: 06/15/2023 Pg: 1 of 12

PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 22-1268

ADVANTAGE VETERANS SERVICES OF WALTERBORO, LLC,

Plaintiff - Appellant,

v.

UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL, Local 7898,

Defendant - Appellee.

Appeal from the United States District Court for the District of South Carolina, at Charleston. Margaret B. Seymour, Senior District Judge. (2:20–cv–02214–MBS)

Argued: March 9, 2023 Decided: June 15, 2023

Before NIEMEYER, QUATTLEBAUM and RUSHING, Circuit Judges.

Reversed by published opinion. Judge Quattlebaum wrote the opinion, in which Judge Niemeyer and Judge Rushing joined.

ARGUED: Lewis Traywick Duffie, LITTLER MENDELSON, P.C., Atlanta, Georgia, for Appellant. Keren Wheeler, UNITED STEELWORKERS, Pittsburgh, Pennsylvania, for Appellees. ON BRIEF: Aaron I. Saltzman, Atlanta, Georgia, William H. Foster, LITTLER MENDELSON, P.C., for Appellant. USCA4 Appeal: 22-1268 Doc: 34 Filed: 06/15/2023 Pg: 2 of 12

QUATTLEBAUM, Circuit Judge:

The standard of review for arbitration awards is exceedingly narrow, with courts

generally deferring to an arbitrator’s findings and reasoning. But even under this limited

scope of review, an arbitration award must be vacated if it does not draw its essence from

the parties’ arbitration agreement. This appeal requires us to determine whether an

arbitration award failed to draw its essence from the agreement when an arbitrator ignored

the parties’ agreed upon procedural rules for conducting the arbitration. Under the language

of the agreement here, the answer is yes. So, we reverse the district court’s order affirming

the arbitration award and vacate the underlying award.

I.

In this appeal, Advantage Veterans Services of Walterboro, LLC (“AVSW”) and

United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and

Service Workers International, Local 7898 (the “Union”) dispute the legitimacy of an

arbitration award, which stemmed from the discharge of a union-represented employee.

The appeal centers on the provisions of the parties’ collective bargaining agreement (the

“CBA”). The CBA contains a number of provisions that govern the relationship between

AVSW, the Union and the Union’s members who work at AVSW. But for our purposes,

two articles are most important.

First, Article 14 gives AVSW the right to discipline and fire an employee. Section

2 of Article 14 provides: “AVSW reserves the right to discipline (including disciplinary

suspensions), discharge, dismiss or demote an employee for just cause. AVSW will notify

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a Union Steward prior to suspending or discharging an employee, except in cases requiring

the immediate removal of an employee.” J.A. 37.

Second, Article 13 establishes a grievance procedure and arbitration requirement.

Under that provision, either AVSW or the Union may submit a grievance to arbitration if

the grievance is not satisfactorily resolved through the informal grievance procedure. But,

in doing so, Article 13 limits the arbitrator’s authority in conducting the arbitration. Section

4(e) demands that, in “all discipline cases, the arbitrator shall determine whether AVSW

had a reasonable basis for concluding that the employee engaged in the conduct for which

he/she is being disciplined.” J.A. 36. For simplicity, we refer to this provision as the

“reasonable basis determination.”

Under the CBA, that reasonable basis determination must be made by the arbitrator

for an award to be legitimate. Section 4(d) states that “[t]he decision of the arbitrator shall

be final and binding on the Union and AVSW so long as it is in accord with [Article 13 §

4(e)].” J.A. 35. And § 4(e) states that “[i]f the Arbitrator’s Award complies with and is not

contrary to this Agreement and the limitations imposed by [Article 13 § 4], the Award shall

be final and binding on the parties.” J.A. 36. Finally, § 4(e) states that “[i]f a court of

competent jurisdiction finds that the Arbitrator abused his or her discretion in any way or

if the Award is contrary to this Agreement in any way, the Award shall be deemed not to

draw its essence from the Agreement and shall be vacated.” J.A. 36.

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II.

Turning now to the procedural history of this case, AVSW challenges an arbitration

award in favor of the Union and Sarah Black, a Union-represented employee who worked

at a nursing care facility for military veterans operated by AVSW. We need not revisit in

detail the circumstances underlying Black’s termination, so we describe instead only the

relevant procedural history. 1

AVSW discharged Black after it concluded she violated two policies: one

prohibiting “discrimination or harassment or bullying, including inappropriate comments

regarding an employee’s race, sex, religion, national origin or other protected category,”

and another prohibiting “[f]alsifying records, including time records, expense claims,

patient medical records or engaging in other acts of dishonesty.” J.A. 50.

Following Black’s termination, the Union filed two grievances complaining that

AVSW terminated Black without just cause and without first notifying the Union. After

the parties unsuccessfully participated in the CBA’s grievance procedure, the grievances

were submitted to arbitration.

The arbitrator determined that to resolve the dispute, she needed to decide (1)

“[w]hether [Black] was terminated pursuant to the just cause provision of the parties’

[CBA] and, if not, what shall be the remedy,” and (2) whether there was “a breach of any

1 The factual background underlying Black’s termination is laid out in more detail in Advantage Veterans Servs. of Walterboro, LLC v. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l, Loc. 7898, No. 2:20-CV-2214- MBS, 2022 WL 427363 (D.S.C. Feb. 11, 2022).

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provision of the [CBA] related to the advance notice requirements of Article 14[.]” J.A.

91. Then, after considering evidence compiled during a one-day hearing, the arbitrator

issued an award. Following her understanding of the way other arbitrators had addressed

similar disciplinary charges, the arbitrator interpreted the “just cause” standard of Article

14 to require “strong, convincing evidence” of the alleged violation. J.A. 114. 2 She

determined that AVSW failed to provide the required strong, convincing evidence that

Black violated the policies for which she was dismissed. As such, the arbitrator held that

Black was not terminated for just cause and ordered AVSW to reinstate her and issue

backpay. She also determined that AVSW violated the provision in Article 14 of the CBA

that required AVSW to notify the Union prior to suspending or discharging an employee.

AVSW sued the Union in district court pursuant to § 301 of the Labor Management

Relations Act, seeking to vacate the award. Both AVSW and the Union eventually moved

for summary judgment. The Union contended that the award was entitled to deference and

must be upheld. AVSW argued that the arbitrator did not make the reasonable basis

determination required by Article 13 and, as such, the award did not draw its essence from

the CBA and must be vacated. The district court disagreed with AVSW and found that the

arbitrator applied both a just cause analysis and the required reasonable basis

2 Specifically, the award stated: “Arbitrators often apply a strict standard of proof to evidence of charges where the consequences of finding a violation will most likely result in termination without progressive discipline. This is particularly true in regard to charges involving dishonesty, because sustaining a discharge based upon dishonesty may affect an employee’s future career. Therefore, there must be strong, convincing evidence to terminate an employee’s job for these charges, especially when the employee has significant job tenure and a clean disciplinary record.” J.A. 114.

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determination. And alternatively, it found that even if the arbitrator failed to apply the

reasonable basis determination, doing so would not compel an opposite result. So,

according to the district court, it was required to affirm the award. The district court

explained that “it is not for the court to find that [the arbitrator’s] analysis constitutes the

best or most accurate reading of the CBA; it is enough for purposes of this action to find

that her analysis reflects a plausible reading of the CBA.” J.A. 1175. Based on this

reasoning, the district court granted the Union’s cross-motion for summary judgment

seeking to confirm the arbitration award and denied AVSW’s.

AVSW timely appealed. 3

III.

A court’s review of a labor-arbitration pursuant to a collective bargaining agreement

is very limited. Brown & Pipkins, LLC v. Serv. Emps. Int’l Union, 846 F.3d 716, 723 (4th

Cir. 2017). In fact, the scope of judicial review of arbitration awards in general “is among

the narrowest known at law.” MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849,

857 (4th Cir. 2010). In the labor context, courts’ deferential standard of review stems from

two principles. First is the “decided preference for private settlement of labor disputes

without the intervention of government” reflected in federal labor-management relations

statutes. United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 37–38

(1987) (citing Labor Management Relations (Taft-Hartley) Act § 203(d), 29 U.S.C.

3 We have jurisdiction under 28 U.S.C. § 1291.

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§ 173(d)). Second is that, by entering into a collective bargaining agreement, parties have

contracted for the arbitrator to act as a factfinder and interpret the meaning of the contract,

rather than a judge. Id. at 37–38.

For these reasons, courts “do not sit to hear claims of factual or legal error by an

arbitrator as an appellate court does in reviewing decisions of lower courts.” Id. at 38.

Instead, courts generally defer to an arbitrator’s findings and reasoning. Mountaineer Gas

Co. v. Oil, Chem. & Atomic Workers Int’l Union, 76 F.3d 606, 608 (4th Cir. 1996). A court

must affirm the award so long as the arbitrator “is even arguably construing or applying

the contract and acting within the scope of [her] authority . . . [even if the] court is

convinced [she] committed serious error.” Major League Baseball Players Ass’n v.

Garvey, 532 U.S. 504, 509 (2001) (internal quotation marks omitted).

Our standard of review nonetheless requires us to ensure that an arbitrator acted

consistent with the agreement’s contractually defined scope of authority. An award is

illegitimate if it “fails to draw its essence” from the agreement. Champion Int’l Corp. v.

United Paperworks Int’l Union, AFL-CIO, 168 F.3d 725, 729 (4th Cir. 1999). An

arbitration award fails to draw its essence from an arbitration agreement when the award

“reflects merely the arbitrator’s personal notions of right and wrong,” id., or “the

arbitrator’s words manifest an infidelity” to the agreement. Clinchfield Coal Co. v. Dist.

28, United Mine Workers of Am. & Loc. Union No. 1452, 720 F.2d 1365, 1368 (4th Cir.

1983).

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IV.

With that standard of review in mind, we turn to the issues presented by AVSW’s

appeal. To determine whether the arbitrator’s award drew its essence from the CBA, we

face two questions. First, did the arbitrator make the required reasonable basis

determination? Second, if not, does our standard of review require us to vacate the award?

A.

Beginning with our first question, the arbitrator never explicitly made the required

reasonable basis determination. The award’s only references to the reasonable basis

determination requirement are in listing relevant contractual provisions and summarizing

AVSW’s position. Besides that, the only other hint that the arbitrator might have actually

considered the requirement is the award’s description of information that AVSW had when

it terminated Black’s employment. For example, the award states that, prior to terminating

Black’s employment, AVSW’s administrator was briefed, reviewed all witness statements

regarding the event leading to Black’s termination and interviewed the two parties directly

involved in that incident. Similarly, the award recognizes AVSW’s argument that the

misconduct was “attested to by numerous other employees.” J.A. 111.

To the Union, this is enough. It insists that, by citing the pertinent language in the

CBA and describing some of the evidence AVSW had at the time it terminated Black, we

should presume that the arbitrator did, in fact, make the required determination. In

advancing that argument, the Union points out that arbitrators are generally not required to

provide reasoning for their decisions. Champion Int’l Corp., 168 F.3d at 729.

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The Union is correct that arbitrators are generally not required to provide their

substantive reasoning. Nonetheless, “a court reviewing an arbitration award must satisfy

itself that the award is grounded in the [CBA].” Id. And the question here is whether the

arbitrator made the determination explicitly required by the CBA. Cf. Cannelton Indus.,

Inc. v. Dist. 17, United Mine Workers of Am., 951 F.2d 591, 594 (4th Cir. 1991) (“[I]n

some cases reviewing courts must rely on the arbitrator’s reasoning to determine whether

he was applying contractual terms or ‘his own brand of industrial justice’ to resolve

disputes.”).

Nothing in the award indicates the arbitrator made that determination. As explained

above, Article 13 § 4(e) required the arbitrator to determine whether AVSW had a

reasonable basis for concluding that Black committed the conduct that led to her discharge.

The word “had” in the CBA’s description of the required reasonable basis determination is

important. It signals a backwards-looking analysis. It required the arbitrator to determine

whether AVSW had a reasonable basis for its decision at the time it discharged Black. And

the arbitrator never did this.

In fact, rather than looking backward to the information AVSW had at the time of

its discharge decision, the arbitrator considered the evidence presented at the time of the

hearing. The award explains that “[t]his is a case that must be decided upon the credibility

of the only two witnesses to the critical events leading to [Black’s] termination who

appeared at arbitration.” J.A. 120 (emphasis added). Further, the analysis section of the

award concludes that, at the arbitration, AVSW did not present strong, convincing evidence

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that Black committed the misconduct for which she was discharged. Thus, the arbitrator

failed to make the required reasonable basis determination.

B.

Having concluded that the arbitrator did not make the required reasonable basis

determination, we must next decide if that failure, under our standard of review, warrants

vacating the award.

The Union says it does not. It contends that we may only vacate the arbitration award

(1) if it blatantly ignores the unambiguous language of the CBA and (2) if that

unambiguous language were applied, it would compel a result opposite from that reached

by the arbitrator. Resp. Br. 16 (citing Mountaineer Gas Co., 76 F.3d at 608; MCI

Constructors, LLC, 610 F.3d at 861). The Union insists the CBA only requires that the

reasonable basis determination be made. According to the Union, an arbitrator that makes

the reasonable basis determination in AVSW’s favor may still find that AVSW loses. The

arbitrator could have, the Union continues, found that AVSW had a reasonable basis for

concluding that Black engaged in the conduct for which she was disciplined but still found

that AVSW did not present sufficient evidence of misconduct to satisfy the just-cause

standard at the arbitration hearing. 4 As a result, the Union contends that the arbitrator could

4 One might argue that the reasonable basis determination also has a substantive component, such that if AVSW had a reasonable basis for discharging Black at the time of the disciplinary action, it wins. While that might seem logical, as already noted, we generally defer to arbitrators’ substantive findings and reasoning. For that reason, had the arbitrator made the determination and still found that AVSW failed to present sufficient evidence of misconduct at the hearing, we might be required to defer to such a substantive interpretation. See Mountaineer Gas Co., 76 F.3d at 608 (“[A] reviewing court generally

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have reached the same conclusion even if she had made the reasonable basis determination.

In other words, the Union argues that even if the arbitrator ignored the directive of Article

13 § 4(e), MCI Constructors requires us to affirm the district court because applying that

directive would not compel an opposite result.

We disagree. MCI Constructors addressed substantive standards, not procedural

requirements. The contractual language at issue there, which the arbitrator ignored,

involved the substantive issues underlying the dispute. It did not provide the procedural

rules the parties agreed had to be followed in the arbitration. MCI Constructors, 610 F.3d

at 859–62. In fact, neither party has pointed us to a previous case in our circuit in which an

arbitrator ran afoul of a clear procedural requirement laid out in the parties’ arbitration

agreement.

But the Ninth Circuit addressed that type of provision in Western Employers

Insurance Co. v. Jeffries & Co., Inc., 958 F.2d 258 (9th Cir. 1992). There, the parties’

arbitration agreement required arbitrators to include a statement of findings of fact and

conclusions of law with any arbitration award, and the award failed to include such a

statement. In vacating the arbitration award, the court held that because arbitration is a

creature of contract, parties have “a right to arbitration according to the terms for which it

contracted.” Id. at 261.

defers to the arbitrator’s reasoning.”). But we need not decide if the Union is right because, as described above, the CBA required the arbitrator to make the reasonable basis determination.

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That makes sense. Our deferential standard for determining whether an arbitrator

erred substantively is rooted in the contractual nature of arbitration. If the parties agree to

resolve disputes by arbitration, we defer to the determinations made in the process the

parties agreed to. Here, however, the CBA limits the arbitrator’s power. It requires that the

arbitrator make the reasonable basis determination. And it premises the legitimacy of any

arbitration award on the arbitrator’s complying with that directive. It even provides that

any award that is contrary to the CBA in any way—which includes that directive—“shall

be deemed not to draw its essence from the [CBA] and shall be vacated.” J.A. 36. Given

this language, it would be paradoxical to use our highly deferential standard of review,

which once again, is rooted in principles of contract, to look past the arbitrator’s failure to

follow contractually agreed-upon procedural rules for the arbitration.

We cannot ignore such clear and unambiguous procedural requirements. Because

the arbitration award failed to make the required reasonable basis determination, it does

not “draw its essence” from the CBA. And we must vacate any arbitration award that fails

to draw its essence from the parties’ arbitration agreement. Champion Int’l Corp., 168 F.3d

at 729.

For the foregoing reasons, we reverse the district court’s order granting summary

judgment to the Union and denying summary judgment to AVSW. As a result, we vacate

the underlying arbitration award.

REVERSED