United States Court of Appeals For the First Circuit
No. 95-1471
SERVICE EMPLOYEES INTERNATIONAL UNION, AFL-CIO, CLC,
Plaintiff, Appellee,
v.
LOCAL 1199 N.E., SEIU, AFL-CIO, CLC,
Defendant, Appellant,
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Stahl, Circuit Judge,
Campbell, Senior Circuit Judge,
and Lynch, Circuit Judge.
Larry Engelstein with whom Jonathan P. Hiatt, Warren H. Pyle, and
Angoff, Goldman, Manning, Pyle, Wanger & Hiatt, were on briefs for
appellee. Robert M. Gault with whom Richard Mirabito, Susan M. Basham, John
M. Creane, Michael E. Passero, Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., and Law Firm of John M. Creane, were on briefs for
appellant.
November 21, 1995
LYNCH, Circuit Judge. The attempted dissolution of LYNCH, Circuit Judge.
timeless vows of fidelity between two labor organizations
gave rise to this litigation. An extremely unhappy
relationship between a local union and its International led
the Local to stop paying its monthly per capita taxes to the
International. That in turn led the International to sue the
Local in federal court in Massachusetts to collect those
taxes. When the Local replied that it had no obligation to
pay the taxes, the International claimed arbitration. The
court ordered arbitration; the arbitrator ordered the payment
of the taxes and late fees. The Local appeals from the
district court's decision confirming the arbitrator's award.
We affirm in part and vacate and remand in part.
The plaintiff International is the Service
Employees International Union, AFL-CIO, CLC ("SEIU"), a one
million member organization. The Local is District 1199, an
18,000 member union of health care employees. The Local
asserts that following a New York Times article in the Spring
of 1991 questioning the propriety of the financial dealings
of certain International officials, it led a movement to
promote reform within the International. These efforts, it
says, were met with retribution from the International,
which, in turn, caused the Local to withhold taxes. The
International denies any wrongdoing or retribution and
attributes more common, self-interested motives to the Local.
History
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The International sued the Local in federal court
in Massachusetts on September 17, 1993, seeking a preliminary
injunction requiring the Local to pay per capita taxes which
it had withheld since October 1992. Six days later, in
federal court in Connecticut, certain individual members of
the Local sued both the Local itself and the International
for rescission of the contract between the two on the
grounds that the contract was entered into without fully
informing the members or receiving their authorization.
This, the Connecticut suit claimed, contravened the bylaws
and constitution governing the Local as well as the Labor-
Management Reporting and Disclosure Act ("LMRDA"), 29 U.S.C.
401, et seq.1
The Massachusetts court denied the Local's motion
to transfer the action to Connecticut. It also denied the
International's motion for a preliminary injunction, but
granted the International's motion to compel arbitration.
The district court denied both the Local's motions to stay
proceedings and to dismiss and the International's motions to
enjoin the Local from proceeding with its cross-claim in
Connecticut and for entry of default. The district court
later denied the Local's motion to reconsider, vacate and
1. Motions in the Connecticut case, O'Neil et al. v.
New England Health Care Employees Union, District 1199, and
SEIU, No. 3:93CV1918(JAC) (D. Conn.), were under advisement
at the time of oral argument in this case.
-4- 4
reassign for reargument the motion to compel arbitration.
The Local, however, went to arbitration voluntarily. The
parties agreed upon the six questions to be put to the
arbitrator.2
Before arbitration commenced, on January 19, 1994,
the Executive Board of the Local unanimously voted to
terminate its contract with the International.
2. The Local and the International stipulated that the six questions to be addressed by the arbitrator were:
1. Does the failure of District 1199 NE to remit to the SEIU the monthly per capita tax, as set forth in Article 10 of the Affiliation Agreement, constitute a violation of the Affiliation Agreement, and if so, what shall be the remedy?
2. Does the failure of District 1199 NE to pay to the SEIU the late penalty fee as required under Art II, Sec. 3 of the SEIU constitution and bylaws constitute a violation of the Affiliation Agreement, and if so, what shall be the remedy?
3. Does the failure of District 1199 NE to pay its full per capita tax obligations to the SEIU before paying any other bills, as required under Art XII, Sec. 4 of the SEIU constitution and bylaws, constitute a violation of the Affiliation Agreement, and if so, what shall be the remedy?
4. Does the failure of District 1199 NE to furnish to an auditor designated by the International President to examine its books and record all of its books, records, accounts, receipts, vouchers, and financial data as requested, as required under Art XII, Sec. 6(a) of the SEIU constitution and bylaws, constitute a violation of the Affiliation Agreement, and if so, what shall be the remedy?
5. Does the District have the right to terminate the 1992 Affiliation Agreement, and if so, under what circumstances?
6. Does the District's purported termination on or about January 19, 1994, violate the 1992 Affiliation Agreement, and if so, what shall be the remedy?
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After seven days of hearings, the arbitrator issued
an initial decision that: (i) the Local was liable to the
International for per capita taxes; (ii) the Local did not
have the right to terminate its contract (the "Affiliation
Agreement") with the International, except through the
procedure set forth within the International's Constitution
and Bylaws, and (iii) the Local's purported disaffiliation
vote of January 19, 1994 violated the Affiliation Agreement
and was rescinded. The Arbitrator reserved decision on
various remedial issues, including payment schedule, late
fees, auditor's access to data, and priority of paying per
capita obligations, in order to give the parties a chance to
reach a negotiated resolution.
Negotiations on remedial matters failed, according
to the Local, because the International preconditioned any
compromise on the Local securing the withdrawal of the
Connecticut lawsuit. The Local argued to the arbitrator that
such preconditioning was an unlawful burden on the "right to
sue" guaranteed to union members by the LMRDA. The
arbitrator, however, refused to consider the issue, since it
related to a separate lawsuit that was not before him. On
November 9, 1994 the arbitrator awarded the International
unpaid taxes, late fees, and all other ancillary relief.3
3. The total amount of unpaid dues and late fees (calculated at the rate of 2% per month, compounded), was approximately $2,000,000 ($1,500,000 in unpaid dues and
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Post-arbitration, the International moved to confirm the
arbitrator's award, and the Local moved to vacate it. The
district court granted the International's motion to confirm.
The Local has appealed, making three arguments.
The Local argues that the arbitrator exceeded his authority
by rescinding the vote of the Local's Executive Board and
ordering payment of the outstanding per capita taxes, saying
these remedies were not authorized by the Affiliation
Agreement. The Local also urges that confirmation of the
arbitrator's award violated public policy in that the award
undermined both the free speech rights of union members to be
critical of the International and to institute legal
proceedings against it. The Local finally argues that the
district court erred in granting the International's motion
to compel arbitration and in denying both the Local's motion
to stay proceedings and its motion to transfer the case to
Connecticut.
Confirmation of the Arbitrator's Award
This Court reviews the district court's
confirmation of the arbitrator's award de novo as to
questions of law and mixed questions of law and fact, and for
clear error as to questions of fact. See First Options of
Chicago, Inc. v. Kaplan, 115 S. Ct. 1920, 1926 (1995).
Federal court review of arbitral decisions on matters of
$500,000 in late fees).
-7- 7
contract interpretation is extremely narrow and
extraordinarily deferential. See Dorado Beach Hotel Corp. v.
Union de Trabajadores de la Industria Gastronomica Local 610,
959 F.2d 2, 3-4 (1st Cir. 1992); El Dorado Technical Servs.,
Inc. v. Union General de Trabajadores, 961 F.2d 317, 319 (1st
Cir. 1992) ("[A] court should uphold an award that depends on
an arbitrator's interpretation of a collective bargaining
agreement if it can find, within the four corners of the
agreement, any plausible basis for that interpretation.").
The Local argues that this case should be treated
as a commercial contract dispute between two entities and not
as a labor dispute under 301 of the Labor Management
Relations Act, 29 U.S.C. 185. This, the Local posits,
would permit less deference to the arbitrator. Indeed, it
appears it would not. This Court in Advest, Inc. v.
McCarthy, 914 F.2d 6 (1st Cir. 1990) explained, after
reviewing different articulations of the standard of review
of an arbitrator's award in both labor and commercial cases,
that the different formulations were in essence "identical."
See id. at 8-9; see also Hill v. Norfolk W. Ry. Co., 814 F.2d
1192, 1195 (7th Cir. 1987). Without deciding the larger
question, we decline in this dispute between two unions to
vary from the deferential treatment of arbitration awards
established by the Supreme Court in labor disputes under the
United Steelworkers trilogy of cases. See United
-8- 8
Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593,
596-97 (1960); United Steelworkers v. American Mfg. Co., 363
U.S. 564, 568 (1960); United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 582 (1960).
The Local argues that the arbitrator exceeded his
authority by imposing remedies he was not authorized to
impose. It concentrates its force on the arbitrator's ruling
that the disaffiliation vote was contrary to the Affiliation
Agreement and his award rescinding the vote. It also attacks
the order that it pay the due per capita taxes and late fees
that had accrued.
The arbitrator interpreted the Affiliation
Agreement to disallow disaffiliation except by the methods
set forth in the International's Constitution and Bylaws.4
Those methods do not include disaffiliation by a vote of a
local union's executive board. The only method of
disaffiliation allowed by the International's Constitution
and Bylaws imposes onerous requirements. The article
entitled "Dissolution" states that no local union "can
dissolve, secede or disaffiliate while there are seven (7)
dissenting members . . . ." Further, the Affiliation
Agreement is of indefinite duration.
4. In the Affiliation Agreement the International explicitly waived, for the Local, a number of the requirements of its Constitution and Bylaws, but did not waive the requirements of Article XXIV, the dissolution provision.
-9- 9
The Local argues that the arbitrator's award
contradicts the autonomy it had explicitly negotiated for in
the Affiliation Agreement. Whether or not we might have read
the contract differently, or have sympathy for the plight of
the Local that now finds itself unable to disaffiliate from
the International with whom it has, at best, a badly
strained relationship, the arbitrator's reading of the
Affiliation Agreement is plausible and we cannot disturb it.
In the face of evidence that affiliation negotiations had
been lengthy, with the Local negotiating a number of specific
protective provisions in the Affiliation Agreement (such as
bars on the power of the International to impose a
trusteeship, a merger, or a forfeiture of assets in the event
of a dissolution), it was plausible to conclude, as the
arbitrator did, that the Local bound itself to a contract of
unlimited duration that allowed only a tiny escape hatch.5
The Local also erroneously argues that because this
case involves a contract dispute, the arbitrator was only
authorized to award damages and nothing else for breach of
contract. Specific performance is a recognized remedy for a
5. The Local also points to cases mentioning "autonomy" as a factor in determining a local union's right to terminate its affiliation agreement. Those cases, however, turn, as does this one, on the terms of the local union's agreement with the international. See, e.g., Local
No. 1, Amalgamated Lithographers v. Brown, 270 N.Y.S.2d 891,
896 (N.Y. App. Div. 1966), aff'd, 286 N.Y.S.2d 853 (N.Y.
1967); Sanders v. De Lucia, 266 F. Supp. 852, 856 (S.D.N.Y.
1967), aff'd, 379 F.2d 550 (2d Cir. 1967).
-10- 10
breach of contract, and because that remedy was not expressly
precluded by the Affiliation Agreement, it was plausible for
the arbitrator to award it. "[S]ubject to the terms of the
empowering clause, arbitrators possess latitude in crafting
remedies as wide as that which they possess in deciding
cases." Advest, 914 F.2d at 10-11.
exceeded his authority in that requiring a payment of the per
capita taxes plus a penalty was not among the specific
remedies listed in the International's Constitution and
Bylaws for non-payment of dues. The remedies explicitly
listed are suspension of the local union, revocation of the
local union's charter, and appointment of a trustee. The
arbitrator, however, plausibly rejected an interpretation
that these were exclusive remedies. The relevant section of
the International's Constitution and Bylaws does not limit
the International's remedies to the three enumerated.
Rather, the relevant clause refers the matter of non-payment
of dues to the International President for such action as he
shall deem appropriate, "including without limitation" the
three actions specifically listed (emphasis added).
Alleged Violations of Public Policy
The Local argues that the arbitrator's award must
be set aside in any event because it is contrary to public
policy that is explicit, well-defined and dominant. See,
-11- 11
e.g., W.R. Grace & Co. v. Local Union 759, Int'l Union of the
United Rubber, Cork, Linoleum & Plastic Workers of Am., 461
U.S. 757, 766 (1983). That policy, it says, is contained in
the LMRDA, 101(a)(2),(4), and the protections it
guarantees to union members to be able to express freely
their views and opinions, and to institute proceedings in
court or in front of an administrative agency. W h e n a
violation of well-defined and dominant public policy is
asserted, the question is ultimately one for resolution by
the courts, and a court is required to make its own
independent evaluation. See id.
The Local makes two very precise arguments.6
First, it says, the award condones violation of free speech
rights in ignoring that the International "repeatedly and
systematically retaliated against the District for engaging
in union democracy activities." As an example, the Local
points to the fact that the International President, John
Sweeney, did not include the Local's representative on his
slate of candidates for election to the executive board of
the International (which would, according to the Local, have
6. For the first time on appeal, the Local also argues that the arbitrator's reading of the Affiliation Agreement's preconditions to disaffiliation violates public policy. It is settled that "absent the most extraordinary circumstances, legal theories not raised squarely in the lower court cannot be broached for the first time on appeal." Teamsters,
Chauffeurs, Warehousemen and Helpers Union, Local No. 59 v.
Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992).
-12- 12
guaranteed the election of its candidate). The Local cites
in support of its argument cases involving situations in
which the union officials whose rights under the LMRDA were
endangered had won elections and were being removed or
suspended during their terms. See Maceira v. Pagan, 649 F.2d
8, 10-11 (1st Cir. 1981); Bradford v. Textile Workers, 563
F.2d 1138, 1139-40 (4th Cir. 1977). Although a plausible
argument might be made for extending those cases beyond their
facts, the arbitrator found as a matter of fact that no
promise to slate the Local's candidate for the
International's board elections had been made as a part of
the Affiliation Agreement, and that refusal to do so was not
in retaliation for the Local's "union democracy" activities.
We may not second guess the factual findings of the
arbitrator. See Paperworkers Int'l Union v. Misco, Inc., 484
U.S. 29 (1987). In Misco, the Supreme Court counselled that
it is "the arbitrator's view of the facts . . . that [the
parties have] agreed to accept" and that "[c]ourts thus do
not sit to hear claims of factual . . . error by an
arbitrator as an appellate court does in reviewing decisions
of lower courts." Id. at 37-38. The factual predicate for
the Local's argument was explicitly found wanting by the
arbitrator. Absent such a factual predicate, we may not
reach the legal claims.
-13- 13
The Local next argues that the arbitrator's award
violates LMRDA 101(a)(4), which provides as follows:
Protection of right to sue.--No labor organization shall limit the right of any member thereof to institute an action in any court, or in a proceeding before any administrative agency, irrespective of whether or not the labor organization or its officers are named as defendants or respondents in such action or proceeding . . .
29 U.S.C. 411(a)(4).
During the negotiations mandated by the arbitrator,
the International, according to the Local, refused to
negotiate over a reduction in or a reasonable repayment
schedule for the per capita taxes or a waiver of the late
fees, unless the Local arranged for the withdrawal of the
O'Neil lawsuit that its members had brought in Connecticut.
The Local argues that the International, by conditioning
negotiations on the Local securing the withdrawal of its
members' lawsuit, violated the "right to sue" guaranteed to
union members by LMRDA 101(a)(4).
The arbitrator refused to consider the issue of
whether the International had violated the "right to sue" of
the Local's members. He said that the O'Neil lawsuit was not
before him. The legal question, however, has nothing to do
with the O'Neil litigation itself. Instead, the issue is
whether the International, in refusing to do other than
extract its maximum recovery unless the Local secured the
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withdrawal of its members' lawsuit, violated the members'
"right to sue."7 Two distinct issues are presented:
payment of the per capita taxes and payment of the late fee.
The per capita taxes paid by the local unions are
the means by which the International funds its existence.
The Local makes no claim that the per capita taxes are
usually waived, reduced, or rescheduled. Since the per
capita taxes are payments that the International expects to
collect in full as a matter of course, the failure to
7. There is clear evidence in the form of correspondence between the International and the Local showing the International's unwillingness to waive or reduce the payments owed, unless the O'Neil lawsuit was withdrawn.
The arbitrator, however, made no findings on whether this was so and on the issue of whether conditioning negotiations on the Local securing withdrawal of a member's lawsuit constitutedan interference with a member's "right to sue." In addition, an issue mentioned in passing, but not squarely argued by the International, is whether this Court may consider the evidence of the International's conduct during settlement negotiations. But issues not squarely raised by the parties are waived. See Grella v. Salem Five
Cent Savings Bank, 42 F.3d 26, 36 (1st Cir. 1994) (argument
raised by way of "cursory footnote" deemed waived). There is much law, in any event, to support admissibility. See NLRB
v. Gotham Indus., Inc., 406 F.2d 1306, 1313 (1st Cir. 1969)
(statements made during the course of a labor negotiation that are the basis for a charge of unfair labor practices are admissible on the trial of that issue); see also Urico v.
Parnell Oil Co., 708 F.2d 852, 854 (1st Cir. 1983) (evidence
of settlement negotiations is admissible to show that a wrongful refusal to make a reasonable settlement offer prevented the plaintiffs from being able to mitigate damages); Overseas Motors, Inc. v. Import Motors Ltd., 375
F.Supp. 499, 537 (E.D. Mich. 1974)("[I]t would also seem reasonable to admit such evidence where the settlement negotiations are themselves subjects of the lawsuit--i.e., operative facts"), aff'd, 519 F.2d 119 (6th Cir.), cert.
denied, 423 U.S. 987 (1975).
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negotiate over reducing or rescheduling them cannot on these
facts be said to be a "penalty" on the "right to sue."
The late fee is a different matter. The 2% a month
late fee is at a rate many states consider usurious8. When
compounded monthly, the annual rate works out to 26.82% a
year and adds up here to $500,000 -- approximately a third of
the actual principal payment. Further, the evidence is that
late fees are routinely waived by the International, and even
when assessed, the fees are typically small.9 In the
context of the high rate charged and the routine waiver of
late fees in other cases, conditioning a waiver on the Local
securing withdrawal of its members' lawsuit may be a
deterrent to members suing. "If a union member's right to
sue is to have any meaning, courts must be ever vigilant in
protecting that right against indirect and subtle devices as
well as against direct and obvious limitations." Phillips v.
International Ass'n of Bridge Workers, Local 118, 556 F.2d
939, 942 (9th Cir. 1977); see also Moore v. Local 569 of
8. For example, the rate above which interest charges constitute usury in Massachusetts is 20%. See Mass. Gen. L.
ch. 271, 49; Begelfer v. Najarian, 381 Mass. 177, 182
(1980); see also Eric A. Posner, Contract Law in the Welfare
State: A Defense of the Unconscionability Doctrine, Usury
Laws, and Related Limitations on the Freedom To Contract, 24
J. Legal Stud. 283, 313 (1995) (presenting a short history of the development of usury laws).
9. Evidence pointed to by the International itself, to show how it regularly assesses and collects late fees, shows that other than in this case, all the late fees it has assessed have been for amounts lower than $1,000.
-16- 16
Int'l. Bhd. of Elec. Workers, 53 F.3d 1054, 1056 (9th Cir.
1995) ("The employee bill of rights protection is worded in
the most inclusive terms, which are clearly intended to
preclude restraints upon members' rights to seek relief from
courts and agencies."), petition for cert. filed, 64 U.S.L.W.
3271 (Sep. 20, 1995). If enforcement of the late fee portion
of the arbitrator's award was in retaliation for the filing
of the O'Neil lawsuit, that would arguably violate
101(a)(4)'s prohibition against a union obstructing the right
of its members to sue. The arbitrator failed to conduct any
factfinding on this issue. Hence we vacate the award of late
fees and remand this issue to the district court to send back
to the arbitrator for factfinding and decision. See Labor
Relations Div. of Constr. Industries v. International Bhd of
Teamsters, Local No. 379, 29 F.3d 742, 749 (1st Cir. 1994)
(case involving fact-intensive factor balancing remanded to
district court with instructions that it be remanded to the
arbitrator for initial determination).
The International argues that there was no penalty
on the members' right to sue because in this case, the late
fees were imposed before the O'Neil suit was brought. The
International's distinction, however, is evanescent. It is
not the imposition of the late fees that is at issue, but the
subsequent refusal to grant a waiver of those late fees as
-17- 17
the International usually has done, unless the suit was
withdrawn.10 Rulings on Motions
The Local argues that the district court erred in
granting the International's motion to compel arbitration and
in not granting both the Local's motion to have the case
transferred to Connecticut for consolidation with the O'Neil
case and its motion to stay the Massachusetts action.
There was no error in compelling the Local to
arbitration. To the extent that the Local is arguing that
there was no need to order it to arbitration as it would go
voluntarily, the district court could reasonably think an
order necessary in light of the motion to enjoin arbitration
filed by the Local in the Connecticut action.
The district court's rulings on the motions to
transfer and stay are reviewed for an abuse of discretion.
See Cianbro Corp. v. Curran-Lavoie, Inc., 814 F.2d 7, 11 (1st
10. The International also argues that 101(a)(4) protects the rights of "members" to sue, and that that right does not extend to the Local as an organization. The Local, however, is not asserting its own right to sue, but that of its members. The Local appears to meet the three-pronged test for associational standing set out in Hunt v. Washington
State Apple Advertising Comm'n, 432 U.S. 333, 343 (1977). See
International Union, United Automobile, Aerospace &
Agricultural Implement Workers v. Brock, 477 U.S. 274, 282
(1986) (holding that union has standing to assert rights of members where Hunt test is satisfied); United States v. Local
560 (I.B.T.), 974 F.2d 315, 339-42 (3d Cir. 1992)(applying
the test of organizational standing to sue to the case of a Local asserting the rights of its members under the LMRDA); see also American Postal Workers Union v. M. Frank, 968 F.2d
1373, 1375 (1st Cir. 1992);
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Cir. 1987); Chrysler Credit Corp. v. Marino, 63 F.3d 574, 578
(7th Cir. 1995). The district court did not abuse its
discretion in denying the Local's motions to transfer the
action or to stay it. The Massachusetts suit dealt with the
distinct issue of the parties' conduct under the Affiliation
Agreement. The Connecticut action dealt with the separate
issue of whether the Local's members needed to have ratified
the Affiliation Agreement. In the interests of dealing with
matters before it in a timely manner, the district court
denied the stay, and was well within its bounds in doing so.
Accordingly, the late fee portion of the award is
vacated and remanded to the district court to be remanded to
the arbitrator. The district court's judgment is affirmed in
all other respects. The International's motion for sanctions
against the Local, for filing a frivolous appeal, is denied.
No costs are awarded.
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