Southwestern Electric Cooperative, Inc v. International Brotherhood of Electrical Workers
Filing
38
ORDER granting 17 MOTION for Sanctions Pursuant to Rule 11 filed by International Brotherhood of Electrical Workers, Local No. 702, granting 11 MOTION to Enforce Arbitration Award filed by International Brotherhood of Electrical Work ers, Local No. 702, and denying 4 MOTION to Vacate Arbitration Award filed by Southwestern Electric Cooperative, Inc. Sanctions briefs due by 9/28/2012 if not agreed upon by 9/12/2012. Signed by Chief Judge David R. Herndon on 8/26/2012. (msdi)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
SOUTHWESTERN ELECTRIC COOPERATIVE, INC.,
Plaintiff,
v.
INTERNATIONAL BROTHERHOOD OF ELECTRICAL
WORKERS, LOCAL NO. 702,
Defendant.
No. 11-cv-1047-DRH
ORDER
HERNDON, Chief Judge:
At issue here is whether plaintiff Southwestern Electric Cooperative Inc. (the
“plaintiff” or “employer”) and defendant International Brotherhood of Electrical
Workers, Local No. 702 (the “defendant” or “union”) have agreed to submit a
particular grievance to arbitration. For the reasons explained below, the Court finds
that the parties have agreed to submit the grievance at issue to arbitration.
Therefore, the Court denies plaintiff’s motion to vacate arbitration award (Doc. 4),
grants defendant’s motion to enforce arbitration award (Doc. 11), and grants
defendant’s motion for sanctions (Doc. 17).
I. Background
During the time period relevant to this case, the employer and union had
entered into an “articles of agreement” (the “agreement”) whereby the employer
agreed to provide each of its employees a certain number of sick days per year.
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The agreement provided that any unused sick days accumulated in the employee’s
personal sick bank, up to a maximum of seventy days. Days accrued beyond
seventy went to the Central Bank, whose purpose was “to provide extended sick
pay for employees who have exhausted their accumulated personal sick leave due
to serious illness or injury and are unable to return to work as verified by a
doctor’s statement.” (Doc. 5-2, p. 16).
Pursuant to the agreement, a four-person committee, consisting of two
union representatives and two management representatives, was to be established
to consider each request for payment. The agreement required a majority vote of
the committee to approve payment from the Central Bank. Despite this provision,
because the employer has three service areas, the parties agreed to establish a sixperson committee, consisting of three union representatives and three
management representatives (the “Central Bank committee”).
The agreement also set forth grievance and arbitration procedures.
Specifically, the agreement provided that “[a] complaint or grievance arising under
the terms and provisions of this [a]greement, or any difference between the parties
as to the interpretation and application of this [a]greement, shall be settled in
accordance with the following procedures,” which set forth the procedures for an
aggrieved employee to take to present a complaint or grievance. In essence, if a
complaint or grievance is not resolved internally between the employer and union,
then the agreement provides that the matter shall be submitted to arbitration.
Further, the agreement dictates that “[t]he [a]rbitrator shall have no authority to
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change, alter, add or delete from the contract. The [a]rbitrator’s decision within
the limits of his authority shall be final and binding upon the parties.”
On October 19, 2010, plaintiff’s employee, Joanne M. Branger, filed a
request for sick leave from the Central Bank with plaintiff. (Doc. 5-3). Branger
sought thirteen weeks or sixty-five days of sick leave bank days as a result of longterm disability. (Doc. 5-3). Branger’s request was sent to the Central Bank
committee and the three union representatives voted to her approve her request
while the three management representatives voted to deny it. Branger was notified
of this decision by letter on November 12, 2010. (Doc. 29-1). On November 23,
2011, the union filed a grievance alleging that the employer violated the agreement
by not paying Branger for her requested time from the Central Bank. Unable to
resolve the dispute internally, the grievance went to arbitration. The arbitration
was held on July 11, 2011, and on September 24, 2011, the arbitrator issued his
award (Doc. 5-6), determining that the employer violated the agreement by not
paying Ms. Branger for her requested Central Bank sick leave time and ordering
the employer to pay her thirteen weeks of sick leave from the Central Bank.
On November 28, 2011, plaintiff filed a complaint to vacate arbitration
award (Doc. 2), a motion to vacate the arbitration award (Doc. 4), and a
memorandum in support thereof (Doc. 5). In plaintiff’s complaint and motion to
vacate, plaintiff contends that 1) the arbitrator’s award does not draw its essence
from the collective bargaining agreement because a majority of the Central Bank
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committee did not vote in favor of approving the grievant’s request for Central
Bank time and 2) the arbitrator exceeded the scope of it authority and exhibited a
manifest disregard for the law because the Central Bank committee’s decision was
not subject to arbitration because the Central Bank committee was a party to
neither the collective bargaining agreement nor the arbitration.
On January 4, 2012, defendant filed its answer and a counterclaim to
enforce the arbitration award (Doc. 10), arguing that the employer’s refusal to
comply with the arbitrator’s award is without justification or excuse and is
vexatious and unreasonable. Accordingly, defendant requested an order enforcing
the award issued by the arbitrator, prejudgement interest, and an award to the
union of its attorney fees and costs. That same day, defendant filed its motion to
enforce arbitration award (Doc. 11) along with a memorandum in support thereof
(Doc. 12). On January 23, 2012, defendant filed a motion for sanctions pursuant
to Federal Rules of Civil Procedure 11 (Doc. 17) on the grounds that:
1.
This case was filed and is being presented for improper
purposes including the denial of paid sick leave on an arbitrary
and capricious basis, to cause unnecessary delay in complying
with the arbitration award issued by [the arbitrator] in favor of
[d]efendant and to needlessly increase the cost of litigation;
2.
The claims, defenses and other legal contentions are not
warranted by existing law or by a nonfrivolous argument for
extending, modifying or reversing existing law or for
establishing new law.
3.
The factual contentions have no evidentiary support.
As a result, defendant requests that the Court award defendant its reasonable
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attorney fees and costs. Plaintiff filed an opposition to defendant’s motion for Rule
11 sanctions (Doc. 21), contending that sanctions were inappropriate because this
is a case of first impression in which the only related case precedent supports
plaintiff’s position that the arbitration award should be vacated. The Court will
address the motion to vacate arbitration (Doc. 4) and motion to enforce arbitration
award (Doc. 11) together first, followed by defendant’s motion for sanctions (Doc.
17).
II. Analysis
A. Whether the Court Should Vacate or Enforce the Arbitration Award?
“Judicial review of arbitration awards under collective bargaining
agreements is extremely limited.” Dexter Axle Co. v. Int’l Assoc. of Machinists &
Aerospace Workers, Dist. 90, Lodge 1315, 418 F.3d 762, 765 (7th Cir. 2005).
The Federal Arbitration Act (the Act), 9 U.S.C. §§ 1-16, “reflects the fundamental
principal that arbitration is a matter of contract.” Rent-A-Ctr., W., Inc. v.
Jackson, 130 S. Ct. 2772, 2776 (2010). “Although it is often said that there is a
federal policy in favor of arbitration, federal law places arbitration clauses on
equal footing with other contracts, not above them.” Janiga v. Questar Capital
Corp., 615 F.3d 735, 740 (7th Cir. 2010).
“As with any contract, the touchstone for interpreting an arbitration clause
must be the intention of the parties.” Agco Corp. v. Anglin, 216 F.3d 589, 593
(7th Cir. 2000). “Whether an issue is subject to arbitration is a simple matter of
contract interpretation.” Welborn Clinic v. Medquist, Inc., 301 F.3d 634, 639 (7th
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Cir. 2002).“[I]n deciding whether the parties have agreed to submit a particular
grievance to arbitration, a court is not to rule on the potential merits of the
underlying claims.” AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S.
643, 649 (1986). That is for the arbitrator to decide. Id.
“[A] court may order arbitration of a particular dispute only where the court
is satisfied that the parties agreed to arbitrate that dispute.” Granite Rock Co. v.
Int’l Bhd. of Teamsters, 130 S. Ct. 2847, 2856 (2010) (emphasis in original). “To
satisfy itself that such agreement exists, the court must resolve any issue that calls
into question the formation or applicability of the specific arbitration clause that a
party seeks to have the court enforce.” Id.
“To determine whether a contract’s arbitration clause applies to a given
dispute, federal courts apply state-law principles of contract formation.” Gore v.
Alltel Commc’ns, LLC, 666 F.3d 1027, 1032 (7th Cir. 2012) (citing Rosenblum v.
Travelbyus.com Ltd., 299 F.3d 657, 662 (7th Cir. 2002)). “Once it is clear,
however, that the parties have a contract that provides for arbitration for some
issues between them, any doubt concerning the scope of the arbitration clause is
resolved in favor of arbitration as a matter of law.” Gore, 666 F.3d at 1032 (citing
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).
“‘To this end, a court may not deny a party’s request to arbitrate an issue “unless
it may be said with positive assurance that the arbitration clause is not susceptible
of an interpretation that covers the asserted dispute.”’” Gore, 666 F.3d at 1032
(quoting Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 909 (7th
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Cir. 1999)). “The presumption of arbitrability is particularly applicable where the
arbitration provision is broad.” Exelon Generation Co. v. Local 15, Int’l Bhd. of
Elec. Workers, AFL-CIO, 540 F.3d 640, 646 (7th Cir. 2008) (citing United
Steelworkers v. Cooper Tire & Rubber Co., 474 F.3d 271, 279 (6th Cir. 2007)).
“Where the arbitration provision is broad . . . only an ‘”express provision excluding
a particular grievance from arbitration . . . [or] the most forceful evidence of a
purpose to exclude the claim from arbitration”’ can keep the claim from
arbitration.” Exelon Generation Co., 540 F.3d at 646 (quoting AT&T Techs., Inc.,
475 U.S. at 650.
“‘As long as the arbitrator’s award “draws its essence from the collective
bargaining agreement,” and is not merely “his own brand of industrial justice,” the
award is legitimate.’” Clear Channel Outdoor, Inc. v. Int’l Unions of Painters &
Allied Trades, Local 770, 558 F.3d 670, 675 (7th Cir. 2009) (quoting United
Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 36-38 (1987)). “A decision
draws its essence from the collective bargaining agreement when it has a plausible
foundation in the terms of the agreement.” Clear Channel Outdoor, Inc., 558 F.3d
at 675. Doubts are resolved in favor of enforcing the award. Id. “‘It is only when
the arbitrator must have based his award on some body of thought, or feeling, or
policy, or law that is outside the contract . . . that the award can be said not to
“draw its essence from the collective bargaining agreement.”’” Clear Channel
Outdoor, Inc., 558 F.3d at 675 (Arch of Ill., Div. of Apogee Coal Corp. v. Dist. 12,
United Mine Workers of Am., 85 F.3d 1289, 1292 (7th Cir. 1996)). “It is
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abundantly clear that it is the arbitrator who is behind the driver’s wheel of
interpretation, not the court.” Dexter Axle Co., 418 F.3d at 768. “Great deference
is paid to an arbitrator’s construction and interpretation of an agreement.” Id. “It
is elementary that the ‘question of interpretation of the collective bargaining
agreement is a question for the arbitrator.’” Id. (quoting United Steel Workers of
Am. v. Enterprise Wheel & Car Corp., 363 U.S. 593, 599 (1960)). The Court’s job
in “reviewing a labor arbitrator’s award is to ensure that the arbitrator was
interpreting the collective bargaining agreement, not that he was doing so
correctly.” Clear Channel Outdoor, Inc., 558 F.3d at 677 (citing Major League
Baseball Players Ass’n v. Garvey, 532 U.S. 504, 509 (2001)). A district court’s
grant or denial of a motion to compel arbitration is reviewed de novo. Gore, 666
F.3d at 1033.
Here, the presumption of arbitrability applies. Indeed, the agreement is
quite broad, providing that “[a] complaint or grievance arising under the terms
and provisions of this [a]greement, or any difference between the parties as to the
interpretation and application of this [a]greement,” shall be governed by the
procedures set forth in the agreement, which ultimately leads to arbitration. See
Exelon Generation Co., 540 F.3d at 646 (applying the presumption of arbitrability
where the arbitration provision was quite broad and covered “‘any dispute . . . as
to the interpretation or application or any of the provisions of this Agreement’”).
Thus, with the presumption in place, plaintiff’s hurdle just became a little higher.
Even without this presumption, however, there is no question the arbitrator
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was interpreting the agreement when he rendered his decision. In his twentythree page decision, the arbitrator set forth all of the pertinent agreement
provisions and went through a thorough background of how the parties came to
reach the agreement, including noting that chief executive officer Kerry Sloan
testified that in a negotiation session in 2002, he told the union business
representative, Danny Miller, that the union could arbitrate a denial of a request to
use sick leave from the Central Bank if the employer was not acting fairly and
deadlocked on every request. On cross-examination, Sloan stated if the employer
was not acting fairly then the union could arbitrate. Moreover, the arbitrator
specifically considered the employer’s argument that there was nothing in the
contract that demonstrated that it was the intent of the parties to allow decisions
of the Central Bank committee to be subject to review through the grievance and
arbitration process. Indeed, the arbitrator found that the agreement’s language
that “any difference between the parties as to the interpretation and application of
this [a]greement” was very broad language for triggering the grievance procedure.
As such, he determined that there was clearly “a difference between the parties as
to the interpretation and application of this [a]greement” regarding how sick leave
from the Central Bank should be administered. Additionally, he found that the
history and language of the agreement supported a finding that the dispute is
arbitrable, noting that before 2002, decisions of the Central Bank committee were
specifically excluded from arbitration. That language was removed in 2002.
Thus, this Court finds it abundantly clear that the arbitrator was interpreting the
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agreement when he rendered his decision. See Clear Channel Outdoor, Inc., 558
F.3d at 676 (“The arbitrator’s decision thus drew its essence from the collective
bargaining agreement: It was tethered to the language of the agreement, it set forth
an arguable construction of the agreement, and it applied that interpretation to the
facts that the parties submitted.”). Even if the Court disagreed with the
arbitrator’s decision, which it does not, it would not be in a position to reinterpret
the agreement; that was the arbitrator’s job. See Clear Channel Outdoor, Inc.,
558 F.3d at 679 (“But it was not our construction of the contract for which the
parties bargained. They agreed to have an arbitrator interpret their agreement.
And because the arbitrator’s decision drew its essence from the agreement, we are
obliged to uphold the arbitrator’s award.”). Accordingly, the Court finds that
parties agreed to arbitrate the dispute at issue. The Court cannot say with positive
assurance that the arbitration clause is not susceptible to an interpretation that
covers the dispute. Gore, 666 F.3d at 1032. To the contrary, the agreement
clearly indicates that this was the type of dispute that was intended to be
arbitrated between the parties. Had plaintiff intended otherwise, it could have
contracted to have the agreement state that decisions of the Central Bank
committee are not subject to arbitration. See Dreis & Krump Mfg. Co. v. Int’l
Assoc. of Machinists & Aerospace Workers, Dist. No. 8, 802 F.2d 247, 255 (7th
Cir. 1986) (“If the company wanted an unlimited right of subcontracting it should
have written it into the management-rights clause or created an express exception
to the arbitration clause . . . .”). The agreement does not. Rather, it indicates that
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a complaint or grievance “arising under the terms and provisions of this
[a]greement, or any difference between the parties as to the interpretation of this
[a]greement, shall be settled in accordance” with the procedures set forth in the
agreement. See CUNA Mut. Ins. Soc’y, 443 F.3d at 563 (“Here, the provision only
defines the scope of the arbitrator’s inquiry; it does not impose a substantive limit
on what is to be arbitrated. This scope is open to interpretation by the arbitrator,
and as we have discussed above, [the arbitrator’s] interpretive route was
reasonable and easy to follow.”). The arbitrator’s decision had a plausible
foundation in the agreement. Plaintiff’s arguments to the contrary simply lack
merit and warrant no further discussion. As a result, plaintiff’s motion to vacate
arbitration award (Doc. 4) is denied and defendant’s motion to enforce arbitration
award (Doc. 11) is granted. The arbitrator’s award is upheld and plaintiff is
ordered to follow it.
B. Whether the Court Should Impose Sanctions?
Under the familiar “American Rule,” each party to a lawsuit ordinarily bears
its own attorney’s fees unless a statute, a contract, or decisional authority provides
otherwise. See Alyeska Pipeline & Serv. Co. v. Wilderness Soc’y, 421 U.S. 240,
247 (1975); Gaffney v. Riverboat Servs. of Ind., Inc., 451 F.3d 424, 466 (7th Cir.
2006); Osler Inst., Inc. v. Forde, 386 F.3d 816, 818 (7th Cir. 2004). Rule 11
provides one of those exceptions.
Rule 11 provides, in pertinent part, that “[b]y presenting to the court a
pleading, written motion, or other paper – whether by signing, filing, submitting,
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or later advocating it – an attorney or unrepresented party certifies that to the best
of the person’s knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances[,] . . . it is not being presented for any
improper purpose, such as to harass, cause unnecessary delay, or needlessly
increase the cost of litigation[.]” FED. R. CIV. P. 11(b)(1). The rule provides further
that “[i]f, after notice and a reasonable opportunity to respond, the court
determines that Rule 11(b) has been violated, the court may impose an
appropriate sanction on any attorney, law firm, or party that violated the rule or is
responsible for the violation.” FED. R. CIV. P. 11(c)(1). “On its own, the court may
order an attorney, law firm, or party to show cause why conduct specifically
described in the order has not violated Rule 11(b).” FED. R. CIV. P. 11(c)(3). “A
sanction imposed under this rule must be limited to what suffices to deter
repetition of the conduct or comparable conduct by others similarly situated” and
“[t]he sanction may include nonmonetary directives” or “an order to pay a penalty
into court[.]” FED. R. CIV. P. 11(c)(4). Finally, “[a]n order imposing a sanction
must describe the sanctioned conduct and explain the basis for the sanction.”
FED. R. CIV. P. 11(c)(6).
“Under Rule 11, the district court may impose sanctions if a lawsuit is ‘not
well grounded in fact and is not warranted by existing law or a good faith
argument for extension, modification, or reversal of existing law.’” CUNA Mut. Ins.
Soc’y v. Office & Prof’l Emps. Int’l Union, Local 39, 443 F.3d 556, 560 (7th Cir.
2006) (quoting Nat’l Wrecking Co. v. Int’l Bhd. of Teamsters, Local 731, 990 F.2d
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957, 963 (7th Cir. 1993)). “The court must ‘undertake an objective inquiry into
whether the party or his counsel should have known that his position is
groundless.’” Id. Rule 11 does not require bad faith on the part of a party or its
counsel; rather it is an objective test. Dreis & Krump Mfg. Co., 802 F.2d at 255.
A “long line of Seventh Circuit cases . . . have discouraged parties from challenging
arbitration awards and have upheld Rule 11 sanctions in cases where the
challenge to the award was substantially without merit.” CUNA Mut. Ins. Soc’y,
443 F.3d at 560 (collecting cases). The Seventh Circuit reviews a district court’s
decision to impose Rule sanctions using an abuse of discretion standard. CUNA
Mut. Ins. Soc’y, 443 F.3d at 560 (citing Cooter & Gell v. Hartmarx Corp., 496 U.S.
384, 405 (1990)).
Here, the Court finds that plaintiff’s challenge to the arbitration award is
substantially without merit and sanctions are therefore warranted. Looking
objectively at plaintiff’s challenge, as the Court must, it cannot discern how
plaintiff could logically believe that this dispute was not subject to arbitration. In
fact, as the arbitrator explained, the parties clearly contemplated arbitrating
disputes such as these. If plaintiff truly believed this case was not subject to
arbitration, it could have refused to arbitrate this case in the first place, which
would have likely resulted in defendant filing a motion to compel arbitration. At
that point, the Court would have decided whether the parties agreed to arbitrate
the dispute at issue, and if the Court found that they did not, no arbitration would
have taken place. That is not what happened here. Arbitration has already
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occurred, and the arbitrator’s award has been rendered. Unhappy with the
arbitrator’s decision, plaintiff attempts to frame its argument as a dispute as to
whether the parties ever agreed to arbitrate the grievance at issue, which the Court
finds obviously arises from the agreement between the parties and is therefore
subject to arbitration. See Dreis & Krump Mfg. Co., 802 F.2d at 255 (“A company
dissatisfied with the decisions of labor arbitrators need not include an arbitration
clause in its collective bargaining contracts, but having agreed to include such a
clause it will not be permitted to nullify the advantages to the union by spinning
out the arbitral process unconscionably through the filing of meritless suits and
appeals.”). This is exactly the type of situation that the Seventh Circuit has
warned attorneys from pursuing and this is an appropriate case for sanctions.
See CUNA Mut. Ins. Soc’y, 443 F.3d at 561 (“The precedent is clear and emphatic
and directs us to uphold sanctions in a broad spectrum of arbitration cases.”);
Dreis & Krump Mfg. Co., 802 F.2d at 256 (“Lawyers practicing in the Seventh
Circuit, take heed!”). Accordingly, the Court hereby grants defendant’s motion for
sanctions (Doc. 17) and imposes as sanctions the defendant’s reasonable costs
and attorney fees in defending this suit.
III. Conclusion
For the reasons stated above, the Court denies plaintiff’s motion to vacate
arbitration award (Doc. 4), grants defendant’s motion to enforce arbitration award
(Doc. 11), and grants defendant’s motion for sanctions (Doc. 17). Plaintiff is
ordered to comply with the arbitrator’s award, and pay pre-judgment interest and
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defendant’s reasonable attorney fees and costs. If the parties can resolve the rate
of pre-judgment interest, attorney fees, and costs, the Court would be much
obliged, and the parties can notify the Court of this within fourteen days of this
order. If this cannot be done, however, the parties are ordered to brief this issue
within thirty days of the date of this order.
IT IS SO ORDERED.
David R.
Herndon
2012.08.26
07:45:04 -05'00'
Signed this 26th day of August, 2012.
Chief Judge
United States District Court
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