W.S.B. & Associates, Inc. v. Service Employees International Union, Local 1877

Filing 40

ORDER by Magistrate Judge Wayne D. Brazil denying 29 Motion for Summary Judgment; granting 30 Motion to Confirm Arbitration Award (hlk, COURT STAFF) (Filed on 9/14/2009)

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

W.S.B. & ASSOCIATES, Petitioner, v. SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 1877, Respondent. /

No. C 08-05266 WDB ORDER ON MOTIONS

Petitioner W.S.B. & Associates, Inc. ("WSB") has filed a motion for summary judgment on its petition to vacate an arbitration award, and motion to dismiss the cross-petition for confirmation of the arbitration award, filed by Respondent Service Employees International Union, Local 1877 (the "Union"). The Union has moved to confirm the arbitration award and seeks an award of attorneys' fees. On September 11, 2009, the Court held a hearing on the motions at which the parties were represented by counsel. For the reasons set forth below, the Court DENIES WSB's motions, GRANTS the Union's motion to confirm the arbitration award, and DENIES the Union's request for attorneys' fees.

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FACTUAL AND PROCEDURAL BACKGROUND The essential factual allegations are undisputed. On or about June 5, 2001, WSB and the Union entered into a written collective bargaining agreement with a stated term from June 1, 2000, to May 31, 2005. Pet., Ex. A. Section 17 of the CBA provides for grievance procedures for disputes arising out of the CBA, subject to certain stated limitations. Specifically, Section 17.3 of the CBA states as follows: A grievance need not be considered unless the aggrieved party serves upon the other parties a written statement setting forth the facts constituting the alleged grievance. For a disciplinary case grievance, such notice must be served within ten (10) days from the date of discharge. Such written statement concerning any other type of grievance must be served within fifteen (15) days of its occurrence or the discovery thereof by the aggrieved party. Pet., Ex. A at 13. The CBA called for a wage increase for all employees to become effective in June 2004, as reflected in Appendix A. See Pet., Ex. A § 8.1 ("The wage rates for PG&E security officers shall be as listed in Appendix A.") WSB represents, and the Union does not dispute, that on June 3, 2004, the president of WSB, Bobby Sisk, met with the Union president, Mark Sherwood, and two shop stewards for the job site at PG&E. In its arbitration brief, WSB stated that the purpose of the June 3 meeting was to inform the union that PG&E would not give WSB an hourly rate increase for WSB employees assigned there. Pet., Ex. C (Sisk Post-Hearing Arbitration brief). In a letter to the Union dated June 23, 2004, however, Mr. Sisk indicated that at the June 3 meeting, "my customer was working on trying to get us a 1.5% increase, and that I would match their increase by 1.5% for a total increase of 3%." Supplemental Declaration of Daniel Boone in Opposition to Pet's Motion ("Suppl. Boone Decl.), Ex. B (Arbitration Exhibits) at ER 16. Mr. Sisk further stated in the June 23 letter that on June 21, 2004, PG&E informed him that "as a result of their budgetary restrictions," PG&E would not approve an increase for WSB employees. Suppl. Boone Decl., Ex. B at ER 16. Mr. Sisk's June 23 letter indicated that WSB would
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"continue to look at ways, if any on how we may be able to increase the hourly rates." Id. Allegedly because of the unanticipated shortfall in funding under its contract with Pacific Gas & Electric, however, WSB did not implement the 2004 wage increase until a year after it was initially due, in June 2005. On November 26, 2006, the Union filed a grievance, alleging that the employees covered by the CBA were being paid incorrect wages "due to a lack of wage increases in June of 2004, as was allowed for in the contract." Pet., Ex. B. During a hearing on July 9, 2007, on consolidated grievances, the parties agreed that Arbitrator Thomas Angelo serve as the mutually agreed upon arbitrator to hear the Union's grievance concerning the 2004 wage increase dispute. Suppl. Boone Decl., Ex. B. at JT 8 (July 16, 2007, Decision and Award). An arbitration hearing on the 2004 wage dispute was held on August 31, 2007. WSB was not represented by counsel, but Mr. Sisk, as WSB's president, appeared at and participated fully in the arbitration hearing. Arbitrator Angelo conducted the hearing, at which witnesses were called and evidence was presented, and accepted post-hearing briefs from both parties. In his opening statement at the arbitration hearing on behalf of WSB, Mr. Sisk stated as follows: Notwithstanding the fact that both Mr. Tanner and Mr. Sterling met twice with Mr. Sherwood in my office in the month of June 2004, my June 23rd, 2004, letter is a follow-up to that meeting addressed to Mr. Mark Sherwood letting him know that at that time we were having problems trying to get an increase from Pacific Gas and Electric. . . . [T]he purpose of the other documents are [sic] to demonstrate that for nearly 18 months there was no real discussion on the 2004 raises to the extent where any formal demand was made until the October 24th, 2006, letter from Mr. O'Leary. The purpose of supplying all of the documents with respect to negotiations will demonstrate that everybody sort of went along with this whole notion until they got mad when the Collective Bargaining Agreement was not accepted by the bargaining

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members. It was only at that time that they assert via this November 24th, 2006, letter a demand for 2004 wages. Suppl. Boone Decl., Ex. A (8/31/07 Hrg. Trans.) at 12-14. The parties agreed during the arbitration hearing to submit written closing arguments. 8/31/07 Hrg. Trans. at 44. Mr. Sisk submitted an arbitration brief, dated September 10, 2007, on behalf of WSB. Because the parties have raised an issue about the text and context of WSB's post-hearing brief, the relevant portions are reproduced here:

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Pet., Ex. C. On October 5, 2007, Arbitrator Angelo issued a Decision and Award, sustaining the Union's grievance in its entirety and ordering WSB to pay the unpaid wage
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increase for the period from June 2004 to June 2005, plus a payment of wages for each Union member at the corrected rate for the remedial period. Pet. Ex. D. In determining this remedy, the Arbitrator cited Section 8.7 of the CBA, which provides as follows: In the event the Employer intentionally violates this Agreement by failing to pay the proper wage rate to an employee (except in cases of recognized clerical error), said Employer shall pay the employee an amount equal to double the proper wage rate for the period of violation. Pet., Ex. A § 8.7. On November 20, 2008, WSB filed a Petition to Vacate Arbitration Award. On December 9, 2008, the Union filed a Cross-Petition to Confirm the Arbitration Award. During case management proceedings with the Court, the parties agreed to submit the matter on cross-motions for summary judgment concerning the cross-petitions for vacatur and confirmation of the arbitration award. DISCUSSION I. Jurisdiction This Court has jurisdiction to vacate or enforce compliance with an arbitration award under Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185. Petitioner alleges, erroneously, that the Federal Arbitration Act, 9 U.S.C. § 10, and the California Arbitration Act, Code of Civil Procedure § 1286.2, provide additional bases for jurisdiction. Neither the Federal Arbitration Act, nor state law, governs judicial review of arbitration awards involving collective bargaining agreements. See Kemner v. District Council of Painting and Allied Trades No. 36, 768 F.2d 1115, 1118 n.1 (9th Cir. 1985); Fristoe v. Reynolds Metals Co., 615 F.2d 1209, 1212 (9th Cir. 1980) ("When principles of federal labor law are involved, they supersede state contract law or other state law theories."). The Court therefore proceeds under Section 301 of the LMRA.

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II.

Applicable Standard A. Motion for Summary Judgment To succeed on a motion for summary judgment, the moving party must

establish that, under facts that are not subject to genuine dispute, that party is entitled to judgment as a matter of law. Federal Rule of Civil Procedure 56(c). In reviewing a motion for summary judgment, the Court considers the evidence in the light most favorable to the party against whom the judgment is sought. B. Judicial Review of Arbitration Award

Judicial scrutiny of an arbitrator's decision in a labor dispute is extremely limited. Sprewell v. Golden State Warriors, 266 F.3d 979, 986 (9th Cir.), as amended, 275 F.3d 1187 (9th Cir. 2001). The arbitrator, as the party chosen by the parties to resolve grievances under their CBA, is entitled to considerable deference, and his decision may be vacated only if it failed to derive its essence from the CBA itself; exceeded the scope of the issues submitted; violated an "explicit, well defined, and dominant" public policy; or was procured by fraud. Id.; Virginia Mason Hosp. v. Washington State Nurses Ass'n., 511 F.3d 908, 913-14 (9th Cir. 2007) (citing E. Associated Coal Corp. v. United Mine Workers of Am., 531 U.S. 57, 62 (2000); United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960)). The Court may vacate the arbitrator's award if he ignored the plain language of the CBA, or the arbitrator's interpretation of any of the relevant CBA provisions was not, on its face, a plausible interpretation of the contract. Virginia Mason Hosp. v. Washington State Nurses Ass'n., 511 F.3d 908, 913 -914 (9th Cir. 2007) (quoting Phoenix Newspapers, Inc. v. Phoenix Mailers Union Local 752, 989 F.2d 1077, 1080 (9th Cir.1993)). "Even if we were convinced that the arbitrator misread the contract or erred in interpreting it, such a conviction would not be a permissible ground for vacating the award." Id. (citing United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 37-38 (1987) (footnote omitted).
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Procedural questions growing out of a dispute properly submitted to arbitration are for the arbitrator to decide. United Steelworkers of America, AFL-CIO-CLC v. Smoke-Craft, Inc., 652 F.2d 1356, 1360 (9th Cir. 1981). Under the LMRA, the arbitrator's view of the scope of his or her powers and issues submitted for arbitration receives the same judicial deference as the arbitrator's decision on the merits. New United Motor Mfg., Inc. v. United Auto Workers Local 2244, 617 F.Supp.2d 948, 960 (N.D.Cal. 2008) (citing Sheet Metal Workers' Int'l Ass'n Local Union No. 359 v. Madison Indus., 84 F.3d 1186, 1190 (9th Cir.1996)). III. WSB's Motion for Summary Judgment Petitioner's motion for summary judgment advances several grounds for vacating the arbitration award: (1) the grievance was not filed in a timely manner; (2) the CBA had expired by the time that the Union filed the November 26, 2006, grievance; and (3) Section 8.7 of the CBA is unenforceable and void as a penalty clause. A. Untimeliness of Union Grievance

WSB contends that the Arbitrator exceeded his authority by arbitrating a grievance that was served well beyond the 15-day limit provided in the CBA. The Union contends that WSB waived the untimeliness objection by agreeing to appear before the Arbitrator on the 2004 wage increase dispute. As noted above, the pertinent language in the CBA is: "A grievance need not be considered unless the aggrieved party serves upon the other parties a written statement . . . . Such written statement . . . must be served within fifteen (15) days of its occurrence or the discovery thereof by the aggrieved party." An arbitrator could rationally interpret this language as having the following effect: it requires grievance proceedings to go forward if the grievant complies with the deadline but it permits the parties to the contract to go forward with the grievance
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procedure even if the grievant does not comply with the deadline. This provision does not purport to declare that arbitration-jurisdiction over a grievance evaporates, regardless of the parties' wishes or conduct, if the grievance is not timely filed. In this important sense, this provision is not jurisdictional. It permits parties to elect to waive an objection to timeliness. WSB alleges that it was engaged in negotiations or discussions with the Union about the missed pay raise for months after the 15-day deadline passed. Yet WSB never suggested to the Union that it had no standing to pursue this matter because the 15-day deadline had passed. Instead, when the obviously very tardy grievance finally was formally presented, WSB, through its president, worked with the Union to select an arbitrator, agreed to a hearing date, showed up at the hearing and participated fully -- after hearing the arbitrator announce at the beginning of the proceedings and on the record that the parties had stipulated that the matter was properly submitted to him for determination. During the hearing, WSB made arguments and presented evidence about how the CBA should be interpreted and applied. WSB never stated that it believed that the arbitrator did not have authority to rule on the submitted matter. In post-hearing arbitration briefs, WSB pressed the point about the long delay between the breach and the filing of the grievance -- but the arbitrator reasonably could have understood, and apparently did understand, that when WSB was pressing this point it was for the purpose of trying to persuade the arbitrator about how to interpret and apply (in the specific circumstances the parties had encountered) the terms of the contract -- not for the purpose of contending that the arbitrator had no authority to hear and determine the matter because the grievance had not been filed within 15 days of the breach. WSB seemed to press the points about the passage of time, and about the intervening discussions with the Union, to support a contention that its violation of the contract was not "intentional" (as the parties intended that phrase in the CBA to be interpreted), willful, or informed by bad faith. In sum, it was
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perfectly rational for the Arbitrator to conclude that WSB's arguments about delay in filing the grievance were intended to support WSB's views about which remedies the CBA left available -- and about the play in making that determination the Arbitrator should give to equitable considerations. In this Circuit, a party that participates voluntarily in an arbitration under a CBA waives its right to challenge the jurisdiction of the arbitrator, or the arbitrator's rulings about the scope of his jurisdiction, unless that party unequivocally (expressly, clearly) objects to the arbitrator's jurisdiction and preserves its right to challenge that jurisdiction in court. Van Waters & Rogers Inc. v. International Broth. of Teamsters, Chauffeurs, Warehousemen & Helpers of America, Local Union 70, 913 F.2d 736, 740 (9th Cir.1990) (citing George Day Construction Co. v. Carpenters Local 354, 722 F.2d 1471, 1475 (9th Cir.1984)). We find that WSB waived its right to press this challenge to the Arbitrator's jurisdiction by failing to clearly register or preserve an objection to the Arbitrator's authority to hear this dispute. It follows that we must DENY WSB's motion for summary judgment on the ground that the Union's grievance was untimely. B. Expiration of CBA

WSB also seems to contend the Arbitrator exceeded his authority on the ground that the CBA had expired in June 2005. This argument was never presented to the arbitrator -- and therefore was waived. If WSB had preserved it, the argument would be unavailing on the merits -- because the issue presented to the arbitrator was what remedy, if any, should be awarded to the Union for an alleged breach that occurred while the CBA indisputably was in effect (between June 1, 2004, and May 31, 2005). It was legally irrelevant whether a CBA was in effect at the time the arbitration hearing occurred. WSB's motion for summary judgment on this ground also is DENIED.

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C.

Unenforceability

WSB contends in its moving papers that the arbitrator violated established public policy against unenforceable liquidated damages provisions by awarding not only the 4% wage increase, but an additional payment of the total amount of wages for the period of violation. WSB did not present this unenforceability argument to the arbitrator and did not raise it in its Petition in these court proceedings. By depriving the arbitrator of an opportunity to consider this issue -- and the parties of an opportunity to develop the kind of evidentiary record that would be necessary to rule fairly on it -- WSB also has waived this ground for objecting to the arbitrator's decision. IV. Union's Motion for Confirmation of Arbitration Award A. GRANTED. B. Request for Attorneys' Fees Arbitration Award For the reasons discussed above, the Union's motion to confirm the Award is

The Union seeks an award of attorneys' fees. The court may assess attorneys' fees "when the losing party has `acted in bad faith, vexatiously, wantonly, or for oppressive reasons.'" International Union of Petroleum and Indus. Workers v. Western Indus. Maintenance, Inc., 707 F.2d 425, 428 (9th Cir.1983) (citation omitted). Given the substantial delay in the filing of this grievance, WSB's proffered justifications for its failure to timely implement the 4% increase in pay, the on-going discussions during 2004 and 2005 between WSB and the Union about this matter and the medical benefits situation (and the inferences that WSB might reasonably have drawn therefrom about the status of this dispute), and the arguably counter-intuitive character of the sanction imposed in the arbitration award (disproportionate to the
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harm caused by the breach), we are not prepared to find that WSB's resistance to paying the Arbitrator's award was wholly without arguable justification or inspired by bad faith. On this record, we DENY the Union's motion for an award of attorneys' fees. See New United Motor Mfg., Inc. v. United Auto Workers Local 2244, 2008 WL 5068523 (N.D.Cal., Nov 25, 2008) (denying award of attorneys' fees after denial of petition to vacate arbitration awards). CONCLUSION For the foregoing reasons, the Court rules as follows: (1) WSB's Motion for Summary Judgment and Motion to Dismiss Counter-Claim are DENIED, and the Petition to Vacate the Arbitration Award is DENIED; (2) (3) (4) (5) The Union's Motion for Confirmation of Arbitration Award is GRANTED; The Union's request for fees is DENIED. The matter is REMANDED to Arbitrator Angelo to calculate the amount of damages due and owing under the Award. Judgment will be entered in favor of the Union and against WSB.

IT IS SO ORDERED.

Dated: September 14, 2009

WAYNE D. BRAZIL United States Magistrate Judge

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