Local 863 International Brotherhood of Teamsters v. Jersey Coast Egg Producers, Inc.

773 F.2d 530

• Court: Court of Appeals for the Third Circuit
• Decided: September 25, 1985
• Docket: No. 84-5869
• Status: Published

Opinions

OPINION OF THE COURT

MANSMANN, Circuit Judge.

This appeal requires the court to decide whether an order of the district court vacating an arbitration award is error. We find that, given the limited scope of review over arbitration decisions afforded the courts, the district court erred in vacating the award. We reverse the district court and reinstate the arbitration award.

I.

On February 27, 1984, a customer reported observing appellee’s delivery truck driver, Douglas Samuels, make an unauthorized sale of one case of eggs to an unidentified person. Approximately one week later, although its records did not evidence a loss of eggs, the appellee discharged Mr. Samuels for theft. The appellee stated in its “Employee Warning Report” notifying Mr. Samuels of his immediate termination: “We have been advised that on 2/27/84 you were seen selling eggs off your delivery truck to an unauthorized individual. This is against company policy.” Appendix, at la. The appellee had implemented a set of written rules and operating procedures for drivers in August of 1981. One of these rules, rule 13, provides in part: “The driver will be terminated immediately if the following events occur. 1. Stealing from the company or its customers.” Id. at 227a. The appellant union filed a grievance pursuant to the parties’ collective bargaining agreement protesting Mr. Samuels’ discharge.

In addition to discharging Mr. Samuels, the appellee pursued a criminal complaint in the Municipal Court of Voorhees Township, alleging theft of the eggs which were valued at $35.00. Following a nonjury trial on April 9, 1984, Mr. Samuels was found guilty of the misdemeanor and was ordered to pay a $50.00 fine, $25.00 in costs, and $25.00 to the Violent Crime Compensation Board. No appeal from the criminal conviction was taken.

The grievance filed by the appellant union proceeded through the various stages of review and was scheduled for arbitration on July 26, 1984. On July 12, 1984, the appellee filed a complaint in the Superior Court of New Jersey, Chancery Division, seeking a temporary restraining order on the arbitration and a declaratory judgment providing that no arbitrable issue exists as to the validity of the discharge. On July 24, 1984, the Superior Court refused to restrain the arbitration.¹

An arbitration hearing was conducted as scheduled on July 26. In an Opinion and Award issued September 11, 1984, the arbitrator set aside the discharge, holding “that the Grievant did not violate the Company rule in paragraph 13 and that there was no just or sufficient cause for the discharge of the Grievant.” Id. at 173a (emphasis in original).

On September 17, 1984, the appellant union filed a petition to confirm the arbitration award in the United States District Court. On the following day, the appellee filed a motion to vacate the award in the Superior Court of New Jersey, Chancery Division. This action was removed by appellants to the district court pursuant to 28 U.S.C. § 1441. The appellants alleged that the action involved section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185, and sections 9 and 10 of the United States Arbitration Act, 9 U.S.C. §§ 9 & 10. The petition to confirm and the motion to vacate the arbitration award were consolidated in the district court.

The appellee subsequently moved to remand the motion to state court, and the appellants moved to amend their petition to confirm so as to invoke section 301 of the LMRA. The appellants’ motion to amend was granted on November 29, 1984. On December 3, 1984, the district court heard oral argument on the appellee’s motion to remand and on the cross-motions to confirm and to vacate the arbitration award. In an opinion issued from the bench, the district court denied appellee’s motion to remand. The court granted appellee’s motion to vacate and denied appellant union’s petition to confirm. The court reasoned that the arbitrator’s decision exhibited manifest disregard for the law by ignoring the collateral estoppel effect of the misdemeanor conviction. The Court issued the appropriate order on December 5, 1984. Before this court is an appeal of that order.

II.

This court must decide whether the district court exceeded the permissible bounds of its scope of review in setting aside the arbitration award. In essence, we must review the district court’s conclusion that the arbitrator exhibited manifest disregard for the law by refusing to accord disposi-tive preclusive effect to Mr. Samuels’ misdemeanor conviction for theft. Because this issue involves the interpretation and application of legal precepts, our review is plenary. Universal Minerals Inc. v. C.A. Hughes & Co., 669 F.2d 98, 101-02 (3d Cir.1981).

At the outset we note that the district court’s scope of review over the arbitration award is narrowly circumscribed. Parties who include an arbitration clause in their collective bargaining agreement “choose to have disputes concerning constructions of the contract resolved by an arbitrator.” W.R. Grace & Co. v. Local Union 759, International Union of the United Rubber, Cork, Linoleum & Plastic Workers of America, 461 U.S. 757, 764, 103 S.Ct. 2177, 2182, 76 L.Ed.2d 298 (1983). A court must defer to an arbitrator’s decision “so long as it draws its essence from the collective bargaining agreement.” United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960) (“Enterprise Wheel”). “[A] federal court may not overrule an arbitrator’s decision simply because the court believes its own interpretation of the contract would be the better one.” W.R. Grace & Co., 461 U.S. at 764, 103 S.Ct. at 2182 (quoting Enterprise Wheel, 363 U.S. at 596, 80 S.Ct. at 1360). Nor may a court disturb an arbitrator’s award because it finds an error of law. Wilko v. Swan, 346 U.S. 427, 436-37, 74 S.Ct. 182, 187-88, 98 L.Ed. 168 (1953). The Supreme Court of the United States has noted:

As their award may be made without explanation of their reasons and without a complete record of their proceedings, the arbitrators’ conception of the legal meaning of such statutory requirements as “burden of proof,” “reasonable care” or “material fact,” ... cannot be examined.

Id. at 436, 74 S.Ct. at 187. An award may be set aside only in limited circumstances, for example, where the arbitrator’s decision evidences manifest disregard for the law rather than an erroneous interpretation of the law. Id.

The collective bargaining agreement between the appellant union and the appellee sets forth a procedure for the filing of grievances and for submission of disputes to arbitration at the request of either party. See Appendix, at 221a-222a. The issue submitted to the arbitrator in the instant action is set forth in the Opinion and Award:

Was the discharge of Douglas Samuels, the Grievant, for just and sufficient cause pursuant to the terms of the Collective Bargaining Agreement? If not, what shall be the remedy?

Id. at 169a. Presumably, resolution of that issue involved the arbitrator’s interpretation and application of Paragraph 21 of the Collective Bargaining Agreement entitled “Discharge of Employees.” Id. at 222a. Paragraph 21 provides:

No employee shall be discharged by the Employer except for just and sufficient cause. When an Employee is discharged the Employer shall notify the Union by Registered Mail within five (5) days after the discharge and state the reasons for the discharge. If the Union, in any case, contends that an employee was discharged without just and sufficient cause, then and in that event the validity of said discharge shall be submitted to Arbitration in the manner provided for in Paragraph “18”. In the event the Board of Mediation determines that an Employee was discharged without just and sufficient cause, said Employee shall be reinstated with full pay for all time lost by him from work as a result of said discharge.

Id. The arbitrator “reviewed and weighed carefully all of the testimony and evidence offered at the hearing, including the post hearing transcript” and concluded that “[t]he discharge of Douglas Samuels, the Grievant, was not for just and sufficient cause pursuant to the terms of the Collective Bargaining Agreement.” Id. at 174a (Arbitrator’s Opinion and Award).

In light of the agreement between the parties, the issue submitted to the arbitrator, and the arbitrator’s conclusion, this court finds that the district court impermissibly set aside the arbitrator’s award. As this court noted in a similar context, “once it is conceded that the arbitrator had the power to make a just cause determination, the district court is not free to review the merits of that determination.” Super Tire Engineering Co. v. Teamsters Local Union No. 676, 721 F.2d 121, 125 (3d Cir.1983), cert. denied, — U.S. -, 105 S.Ct. 83, 83 L.Ed.2d 31 (1984). The Supreme Court has warned the federal courts not to review the reasoning of the arbitrator.

Arbitrators have no obligation to the court to give their reasons for an award. To require opinions free of ambiguity may lead arbitrators to play it safe by writing no supporting opinions. This would be undesirable for a well-reasoned opinion tends to engender confidence in the integrity of the process and aids in clarifying the underlying agreement.

Enterprise Wheel, 363 U.S. at 598, 80 S.Ct. at 1361. So long as it draws its essence from the collective bargaining agreement, an arbitrator’s award must be enforced absent a showing of “[fjraud, partiality, misconduct, violation of a specific command of law, or vagueness rendering enforcement impractical,” Super Tire Engineering Co., 721 F.2d at 124 n. 5 (citing Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1128 n. 27 (3d Cir.1969)), or a showing that enforcement would be contrary to public policy. W.R. Grace & Co., 461 U.S. at 766, 103 S.Ct. at 2183.

The district court, recognizing that in this case only a “manifest disregard” of the law would warrant the setting aside of the arbitrator’s award, held that “the arbitrator’s refusal to accept the valid, unap-pealed judgment of a court of this state [the misdemeanor conviction], rendered after a full and fair hearing, and disposing of the precise issue being arbitrated, constituted manifest disregard for the law.” Appendix, at 211a-212a. The district court, however, erred in applying the principle of collateral estoppel so as to void the arbitra-bility of the issue submitted to the arbitrator.

We need not reach the issue of whether an arbitrator was bound by the doctrine of collateral estoppel in the circumstances of this case or in any such case at this time.² Assuming, arguendo, that this doctrine of collateral estoppel precludes relitigation of the factual issue of theft, it remains within the arbitrator’s purview to interpret the impact of such a finding in the context of the particular collective bargaining relationship in question. The court may not reevaluate supposed inconsistencies in the arbitrator’s logic or review the merits of the arbitrator’s decision.³ See Super Tire Engineering Co., 721 F.2d at 125. It remains the decision of the arbitrator, and the arbitrator alone, whether the misdemeanor conviction constitutes just cause for the dismissal under the terms of the collective bargaining agreement.

The district court impermissibly imposed its own interpretation of the collective bargaining agreement by essentially holding that the misdemeanor conviction for theft was per se support for the discharge. Such a decision ignores the possibility that an arbitrator may interpret the contract in a different manner and find a lack of “just and sufficient cause” for a discharge for theft despite the misdemean- or conviction. This is especially true where, as here, the discharge occurred one month prior to the conviction. It cannot be said that Mr. Samuels’ discharge was an issue that was “strictly a function of management” or an issue removed from the scope of arbitration. United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 584, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960). The collective bargaining agreement clearly calls for arbitration of any disputed discharge. The work rule warning that theft from the employer or from a customer will result in a discharge does not supercede the agreement to arbitrate.

In Super Tire Engineering, this court addressed a factual context similar to that at bar. In that case, the collective bargaining agreement provided for immediate dismissal of employees found drinking alcoholic beverages during work hours. Super Tire Engineering, 721 F.2d at 122. Nonetheless, an arbitrator reinstated an employee discharged for violation of the drinking rule. Id. at 123. The arbitrator found that the “just cause” clause of the collective bargaining agreement applied to the “immediate dismissal” for drinking provision and held that the discharge of the grievant lacked just cause because the employees, and the discharged employee in particular, had not received sufficient warning of the automatic sanction of discharge. Id. This court refused to permit the setting aside of that award, reasoning that “[i]n the absence of an unambiguous provision in the agreement mandating dismissal or removing an arbitrator’s review function, we will not set aside an arbitrator’s decision to review a dismissal in light of the mix of factors that make up just cause.” Id. at 125.

Similarly, in Arco-Polymers, Inc. v. Local 8-74, this court held that a district court erred in vacating an arbitration award where the arbitrator had reinstated an employee absent for more than four days without “good and sufficient cause” despite a provision of the collective bargaining agreement stating that such persons “shall be subject to discharge.” 671 F.2d 752, 753-54 (3d Cir.1982). This court found that an opinion and award which “might be viewed as confusing and subject to various interpretations” should not be set aside so long as one of those interpretations would support a finding that the award draws its essence from the contract. Id. at 756-57. The interpretation accepted by the Arco-Polymers court was that “[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.” Id. at 756 (quoting Mistletoe Express Service v. Motor Expressmen’s Union, 566 F.2d 692, 695 (10th Cir.1977)). This court concluded that “it would not necessarily have been inconsistent for the arbitrator to have found that [the discharged employee] had no ‘good and sufficient cause’ for his absences but that the Company had no ‘just cause’ to discharge him.” Arco-Polymers, Inc., 671 F.2d at 756.

In the instant litigation, the arbitrator interpreted the employer’s burden of proof, stating:

That discharge [of Mr. Samuels], however, whether prohibited by an established work rule or by generally accepted contractual notions, must be judged by the standards attached to the effective collective bargaining agreement. That standard herein, and as stated above, is by clear and convincing evidence supporting the allegations and a factual finding thereof. Such a factual determination has not been reached by the Arbitrator in the instant matter.

Appendix, at 173a. As the Supreme Court of the United States noted in Wilko v. Swan, the arbitrator’s conception of matters such as the burden of proof may not be reexamined by the courts. 346 U.S. at 436, 74 S.Ct. at 187. The instant arbitrator found that the employer had not met its burden of proof because it failed to establish proof of loss and failed to accord the process due a twenty-five year employee. Appendix, at 173a. It is a permissible interpretation of the award to say that the arbitrator decided that, by the terms of the agreement and under the facts of the case, a misdemeanor conviction was not just cause for dismissal. Such an interpretation suggests that the award draws its essence from the parties’ agreement and may not be set aside. See Sun Petroleum Products Co. v. Oil, Chemical and Atomic Workers International Union, Local 8-901, 681 F.2d 924, 928 (3d Cir.1982) (“when an arbitrator’s opinion is subject to varying interpretations, a court may not deny enforcement of the arbitrator’s award as long as one interpretation of the opinion suggests the award does draw its essence from the parties’ agreement”) (citations omitted).

“The short answer to [the employer’s] contentions is that [it] agreed to leave to an arbitrator the resolution of disputes whether [just] cause existed for the discharge of any employee represented by [the union]. The arbitrator has ruled, and [the employer] is bound by that award.” Mobil Oil Corp. v. Independent Oil Workers Union, 679 F.2d 299, 304 (3d Cir.1982). Neither this court nor the district court may substitute its interpretation of the collective bargaining agreement and the collateral estop-pel effect of the misdemeanor conviction for the decision of the arbitrator on the issue submitted to arbitration pursuant to the parties’ agreement. It is for the arbitrator and not for the court to decide whether a misdemeanor conviction supports a discharge under the terms of the collective bargaining agreement. Cf. W.R. Grace & Co., 461 U.S. at 765-66 n. 8, 103 S.Ct. at 2183-84 n. 8 (court not permitted to interpret clause specifying that state and federal laws supercede the collective bargaining agreement).

III.

We find that the district court erred in holding that the arbitrator’s award evidenced a manifest disregard for the law. Consequently, we will reverse the district court and will reinstate the award of the arbitrator.

1 . Subsequent to the issuance of the arbitrator’s award on September 11, 1984, the Superior Court of New Jersey dismissed the appellee’s action seeking declaratory judgment.

2 . The case law is far from clear on this issue. While the district court held that the law requires application of the doctrine of collateral estoppel in arbitrations, we question that proposition in light of recent comments contained in decisions of the Supreme Court of the United States. See Dean Witter Reynolds Inc. v. Byrd, — U.S.-,-& n. 9, 105 S.Ct. 1238, 1243 & n. 9, 84 L.Ed.2d 158 (1985); McDonald v. City of West Branch, 466 U.S. 284,-, 104 S.Ct. 1799, 1802, 80 L.Ed.2d 302 (1984); Kremer v. Chemical Construction Corp., 456 U.S. 461, 477-78, 102 S.Ct. 1883, 1895-96, 72 L.Ed.2d 262 (1982).

3 . The district court ignores this principle when it holds that given the arbitrator’s finding "that the company rule allowing discharge for theft was proper under the collective bargaining agreement,” appendix, at 205a, the misdemean- or conviction requires approval of the discharge.