Southern Ohio Trenching and Excavating, Inc. v. International Union of Operating Engineers,

Filing 28

MEMORANDUM OPINION & ORDER, Defendant's 19 MOTION for Summary Judgment against Southern Ohio Trenching and Excavating be SUSTAINED. Signed by Judge Henry R. Wilhoit, Jr on 1/12/17.(SMT)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
ASHLAND
Civil Action 15-27-HRW
SOUTHERN OHIO TRENCHING &
EXCAVATING, INC.,

v.

PLAINTIFF,

MEMORANDUM OPINION AND ORDER

INTERNATIONAL UNION OF
OPERATING ENGINEERS, LOCAL 181,

DEFENDANT.

This matter is before the Comt upon the parties' cross motions for summary judgment
[Docket Nos. 19 and 20). The motions have been fully briefed by the parties [Docket Nos. 19-1,
20-1, 23, 24, 25 and 26]. For the reasons set forth herein the Court finds that Defendant
International Union of Operating Engineers, Local 181 is entitled to judgment as a matter of law.
I.

This is an action pursuant to Section 301 of the Labor Management Relations Act of
1947, as amended, 29 U.S.C. § 185 ("LMRA") and the Federal Arbitration Act, 9 U.S.C. § lO(a),
to vacate Arbitrator John Remington's arbitration award dated March 16, 2015 issued in favor of
Defendant, International Union of Operating Engineers, Local 181 and against Southern Ohio
Trenching & Excavation, Inc. ("Southern Ohio") in a labor dispute between the parties.
Plaintiff Southern Ohio operates a contracting business in fronton, Ohio and performs
excavation and installation work on municipal utilities projects in southern Ohio and
nottheastern Kentucky. Mark Barner is the president of Southern Ohio and was the only
employee of Southern Ohio who was a member of Defendant Local 181. Southern Ohio's

remaining employees were either members of other unions or not members of any labor union.
Since approximately 2003, Southern Ohio and Local 181 maintained what Plaintiff
describes as a" non-exclusive referral relationship for labor." To-wit, Local 181 made referrals
of members to work on Southern Ohio's projects, but Southern Ohio was not obligated to use
Local 181 members; nor was Local 181 obligated to provide labor for Southern Ohio's projects.
Notably, Local 181 did not bargain for or on behalf of the interests of Southern Ohio's
employees.
Mark Barner, signed numerous "Acceptance[s] of Agreement" beginning in 2003 and
renewed them, most recently in 2012. Section 3 of these Agreements, "Disputes", specifically
refer to arbitration [Docket No. 1-2]. These Agreements bound Southern Ohio to what is referred
to as the "Highway Contractor's Agreement", which is an agreement between Local 181 and
Highway Contractor's, an organization of Kentucky contractors, and includes a specific
Grievance Procedure (referred to as "Article 8"), including arbitration [Docket No. 1-1]. Further,
the Highway Conh·actor's Agreement requires Southern Ohio to hire only Local 18l's on its
Kentucky-based projects.
In 2014, Southern Ohio was awarded a contract for installation of a sanitmy sewer system
for the City of South Shore, Kentucky (the "South Shore project").

Southern Ohio used its own

employees, including its own operating engineers, on the South Shore project and, also,
subcontracted a portion of the project to CJ. Hughes Constrnction, a Huntington, West Virginia
contractor whose employees are not Local 181 's but members of another union.
In March 2014, Local 181 filed a formal grievance against Southern Ohio, alleging that

Southern Ohio had violated the Agreement by not using members of Local 181 on the South

2

Shore project [Docket No. 1-3]. The matter proceeded to arbitration. However, Southern Ohio
objected to the arbitrability of the dispute and the arbitrator's jurisdiction of the matter on 3
grounds. First, it contended that there was no agreement to arbitrate. Second, it argued that
even if there was an agreement, it had been repudiated by Southern Ohio. Finally, Southern
Ohio maintained the dispute involves an interpretation of statutory law, and is thus, not subject to
arbitration [Docket No. 1-5]. Southern Ohio communicated its objections to the Arbitrator, John
Remington, who notified Southern Ohio that he would proceed with the arbitration unilaterally if
Southern Ohio did not appear.

The arbitration was conducted in Ashland, Kentucky on December 2, 2014. Southern
Ohio participated in the arbitration and reiterated its objections during the proceeding.

Arbitrator Remington concluded that Southern Ohio violated the Agreement by not
employing members of Local 181 on the South Shore project and awarded damages and directed
Southern Ohio pay Local 181 the wages it payed to the non-Union members on the South Shore
Project and make appropriate contributions to the pension fund [Docket No. 1-11].

This lawsuit followed, wherein Southern Ohio seeks a judgment to vacate and set aside
the Arbitrator's award and dismisses the grievance of Local 181.

II.
The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, expresses the federal policy
favoring enforcement of arbitration awards. See generally Volt Info. Scis., Inc. v. Bd. ofTrs. of

Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). To
3

encourage parties to agree to arbitration, the FAA ensures that "arbitration awards are both fair
and final." Solvay Phann., Inc. v. Duramed Phann., Inc., 442 F.3d 471, 475 (6th Cir.2006). The
Act promotes finality "by substantially limiting the occasions for judicial review," id., and
expressing a "presumption that arbitration awards will be confirmed." Andersons, Inc. v. Horton

Farms, Inc., 166 F.3d 308, 328 (6th Cir.1998). Under the FAA, comis may vacate an arbitration
award under the four express statutmy grounds in§ IO(a)(l)-(4). And, though accompanied by
some uncertainty, see Hall St. Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170
L.Ed.2d 254 (2008), the Sixth Circuit also recognizes that judicial intervention may be
appropriate where arbitrators act with "manifest disregard for the law," see, e.g., Grain v. Trinity

Health, 551 F.3d 374, 380 (6th Cir.2008), cert. denied, 558 U.S. 820, 130 S.Ct. 96, 175 L.Ed.2d
30 (2009); Coffee Beane1y, Ltd. WW, L.L.C., 300 Fed.Appx. 415 (6th Cir.2008), cert. denied,
558 U.S. 819, 130 S.Ct. 81, 175 L.Ed.2d 28 (2009).

In light of these policies, a party seeking vacatur of an arbitration award "must clear a high

hurdle." Stolt-Nielsen S.A. v. AnimalFeeds lnt'l Corp., 559 U.S. 662, 130 S.Ct. 1758, 1767, 176
L.Ed.2d 605 (2010). "When courts are called on to review an arbitrator's decision, the review is
very natrnw; [it is] one of the narrowest standards of judicial review in all of American
jurispmdence Uhl v. Komatsu Forklift Co., 512 F.3d 294, 305 (6th Cir.2008) (emphasis added)

(quoting Nationwide Mut. Ins. Co. v. Home Ins. Co., 429 F.3d 640, 643 (6th Cir.2005)); see also
NCR C01p. v. Sac-Co., Inc., 43 F.3d 1076, 1079 (6th Cir.1995) (noting that a comi's review of
an arbitration award "is generally extremely narrow"). Thus, as the U.S. Supreme Court has long
held, "the comis play only a limited role when asked to review the decision of an arbitrator," and

4

are not authorized to reconsider the merits of an award. United Paperworkers Int'! Union,

AFL-CIO v. Misco, Inc., 484 U.S. 29, 36, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987). Even "the
arbitrator's 'improvident, even silly, fact-finding does not provide a basis for a reviewing cou1i to
refuse to enforce an award." Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509,
121 S.Ct. 1724, 149 L.Ed.2d 740 (2001) (quoting Misco, 484 U.S. at 39, 108 S.Ct. 364).
Accordingly, as the Sixth Circuit has succinctly advised, "[C]omis must refrain from reversing
an arbitrator simply because the court disagrees with the result or believes the arbitrator made a
serious legal or factual error." Solvay, 442 F.3d at 476 . "If a court can find any line of argument
that is legally plausible and supports the award then it must be confirmed." Id. (quoting Merrill

Lynch, Pierce, Fenner & Smith v. Jaros, 70 F.3d 418, 421 (6th Cir.1995)).

III.

A.

The grievance was properly subject to arbitration.

Before examining the arbitrator's award, the undersigned must resolve the threshold issue
of whether arbitration was appropriate. Stated another away, was there a valid, enforceable
agreement to arbitrate between the pa1iies?

Given the deferential standard ofreview, Southern Ohio endeavors mightily to dispute the
existence of a valid agreement to arbitrate. It contends that no such agreement existed as the
arbitration was bourne of A1iicle 8 of the Highway Contractor's Agreement, which was not
signed by Southern Ohio.

It maintains that without a signature, there was no "meeting of the

minds" with regard to arbitration.

5

Defendant cries foul and points out that Southern Ohio, Mark Barner, specifically, signed
numerous Agreements, over the course of several years, which specifically bound Southern Ohio
to the Highway Contractors Agreement and both agreements contain clear language requiring
arbitration. Defendant suggests, and this Court is inclined to agree, that Plaintiffs argument in
this regard is merely a smoke screen for its refusal to abide by the Agreements that Barner
signed. Nor is there anything in the record to suggest that Barner was tricked, defrauded or
otherwise coerced into signing the agreements. To the contrary, during the Arbitration Hearing,
Barner testified that he signed it but did not read it. He "just wanted to move on and to
business." [Docket No. 19-9 and 10, pp. 71-73]. That Barner was not involved in the
negotiations of the Highway Contractors Agreement, he did negotiate the participation
Agreements, which, by their plain te1ms, bound him to the former, an a11'angement which
Southern Ohio followed and benefitted from, for eight years. Therefore, Southern Ohio's
attempt to avoid arbitration by argument the absence of an agreement to arbitrate is in vain.

In what can only be described as a Hail Maiy pass, Plaintiff next argues that the
Agreements signed by Barner as well as the Highway Contractor Agreement are "pre-hire"
agreements, which can be cancelled, and, in some case, unilaterally repudiated, at the end of their
terms. Plaintiff maintains that The Highway Contractors Agreement was a Section 8(f) pre-hire
agreement.

It argues that the Agreement was a master agreement between the Union and an

association of contractors of which Southern Ohio was not a member. According to Plaintiff,
the Agreement purported to cover current employees as well as employees that Southern Ohio
had not yet hired. There was no election to certify Local 181 as the exclusive bargaining agent of

6

Southern Ohio's employees. It points out that only one Southern Ohio employee was a member
ofLocal 181. Therefore, Southern Ohio was a single employee bargaining unit to a pre-hire
agreement and, as such, it had the right to unilaterally repudiate the Agreement, which it did.
Once the parties' relationship ended, Southern Ohio had no further obligations to Local 181, and
there was no valid collective bargaining agreement or arbitration provision.

In making its argument, Plaintiff relies exclusively upon the 6'h Circuit's opinion in Baker

Concrete Construction v. Reinforced Contractors Ass'n, 2016 WL 1594591(April16, 2016).
Baker Concrete was an Ohio constrnction firm that occasionally subcontracted work to smaller
firms. Baker Concrete became a signat01y to a master multi-employer collective bargaining
agreement between a union and a contractors association of which Baker Concrete was not a
member. In 2013, Baker Concrete notified the union that it was repudiating the master
agreement. The union filed a grievance alleging that Baker Concrete had violated the master
agreement. Baker Concrete objected to arbitration, arguing that it had repudiated the agreement.
Baker Concrete appeared at arbitration to preserve its objections to the arbitration. The arbitrator
found that Baker Concrete was in violation of the master collective bargaining agreement. Baker
Concrete filed an action in the Southern District of Ohio seeking to vacate the arbitration award.
The district court sustained Baker Concrete's motion for summaty judgment. On appeal, the
Sixth Circuit determined that the agreement was a Section 8(f) pre-hire agreement because the
union had not been selected by a majority of Baker Concrete employees to represent it. The court
noted that only one of Baker Concrete's employees was a member of the union and that the
language of the master collective bargaining agreement showed that is was intended to cover

7

current employees as well as employees that Baker Concrete had not yet hired. Nevertheless, the
comt held that, as a Section S(f) pre-hire agreement, the agreement could be cancelled by Baker
Concrete at any time. When Baker Concrete repudiated the pre-hire agreement, its relationship
with the union ended, and there was no agreement to enforce. Therefor, the arbitrator did not
have the authority to decide whether the dispute was governed by the agreement, did not have
authority to determine that Baker Concrete had violated the agreement, and affitmed summaty
judgment vacating the arbitrator's decision.

At first blush, Baker appears to be strikingly similar to the instant case. However, in

Baker, Judge Batchelder found that it was nndisputed that Baker had never hired any employees
under the Contract for several years prior to the repudiation of the Collectively Bargained
Agreement. Further Baker sent specific letters to the Union stating that it was no longer under
any contractual obligation. By contrast, in this case, Southern Ohio had hired Local !Si's in the
past, had sought and retained referrals from the Union, had signed agreements and received
fringe benefits from the Health and Welfare Fund and Pension Fund under the contract for over
eight years.

As for notice, in this case, unlike Baker, there were no letters, or any other form of
communication, purporting to repudiate or cancel the agreement. Moreover, Baker involved a
one-man bargaining unit, which is a required factual precedent for unilateral repudiation.
Othetwise, pre-hire agreements are are enforceable and binding and cannot be revoked until the
end of the agreement. As such, Baker is distinguishable, and thus, irrelevant.

8

Plaintiff also points out that the Arbitration clause of the Highway Contractor's
Agreement, a.k.a. Article 8, excludes disputes involving the interpretation of a statute from its
grievance procedure. Plaintiff seizes upon this exception. It points out Local 181 's grievance
charged it with violating the sub-contractors provision in Article A-5 of the Highway Contractors
Agreement. That provision states in pertinent part:

When the Employer signato1y to this Agreement subcontracts any
of his work covered by this Agreement that the Employer n01mally,
customarily, and traditionally performs, it shall be subcontracted subject to all terms and
conditions of this Agreement, and the Employees of such subcontractor or subcontractors shall
be required to become members of the Union as a condition of employment, as provided under
Article 7 of the Agreement, except by mutual agreement of the parties.

Southern Ohio asserts that the provision violates Section 8(e) of the National Labor
Relations Act as a prohibited secondary activity clause, since the clause is not designed to
preserve or protect traditional work performed by Local 181, but rather to increase Local 181 's
membership by requiring employees of third pmiies to join Local 181. Since the purpose of the
clause was to increase union membership, and not to protect Local 181 's work, the clause was
unenforceable under Section 8(e) of the Act, 29 U.S.C. § 185. Plaintiff concludes, as the clause
violates a federal statute, a dispute based upon the clause necessarily involves the inte1pretation
of the federal statute and, as such, is not with the purview of Grievance Procedure set fotih in the
Agreement. Therefore, according to Plaintiff, the arbitrator exceeded his authority by
adjudicating the claim and awarding damages.

Plaintiff cites a single 6 1h Circuit case in this regard: Becker Electric v. International

9

Brotherhood ofElectrical Workers, 927 F.2d 985 (6'h Cir. 1991), aper curiam opinion wherein
Becker Electric brought an action against a union, alleging that strike was unlawful because
purpose was to force employer and related entities to agree to a "work preservation" clause which
violated the NLRA's prohibition on secondaiy activities. The United States District Court for the
Southern District of Ohio, Judge Weber granted summary judgment for union, and Becker
appealed. The Court of Appeals held that "work preservation" clause in collective bargaining
agreement which made te1ms of agreement applicable to other entities controlled by employer
did not violate prohibition on agreements or activities with secondary effects on neutral
employers, where union's purpose was not to coerce neutral employers or suppliers to withhold
business relations with employer, but to prevent primary employer from avoiding collective
bargaining agreement by performing union jobs through other entities it controlled.
Yet Plaintiff fails to explain how Becker changes the landscape in this case. Nor does
this Court see its relevance. As Defendant states, the NLRA 's prohibition against secondary
boycotts is not implicated in this case and the issue is the enforcement of the subcontracting
clause to which Plaintiff agreed.
The arbitration clauses within both agreements are enforceable and, as such, the arbitrator
had proper jurisdiction of Local 18l's grievance.

B.

The arbitrator's award is valid and enforceable.

As explained supra, this Comt's review of the arbitrator's award is extremely limited.
Indeed, the cases are few are far between in which a court has called into question the decision of
an arbitrator who properly presided over a grievance. The Sixth Circuit has held that arbitration

10

awards can be vacated in only four scenarios:
(1) when the award conflicts with the express terms of the collective bargaining
agreement;
(2) when the award imposes additional requirements that are not expressly provided in
the agreement;
(3) when the award is without rational support or cannot be rationally derived from the
terms of the agreement; or
(4) when the award is based on general considerations of fairness and equity instead of
the precise terms of the agreement.

Appalachian Regional Healthcare, Inc. v. United Steelworkers ofAmerica, 245 F. 3d 601, 603
(6th Cir. 2001):

The Highway Contractors Agreement provides:
[T]he employer agrees to notify the Union, when new, additional or replacement
employees are needed .... The decision with regard to the hire and tenure of all
employees shall be made by the Employer. The Contractor shall be the sole judge
as to the qualifications of any applicant for employment. ...The Employer agrees
to give preference of employment to equally qualified applicants residing within the above mentioned 1
applied to employment and reduction of force. The contractor will assist Local No. 181 in its
efforts to get outside contractors to use local people on their projects. The Union and Employer
both agree to recognize, cooperate with and actively participate in training programs.

Plaintiff argues that the Arbitrator "re-wrote" the Agreement. Specifically, by concluding
that Southern Ohio violated the Agreement by using its own employees on the project, the
arbitrator rewrote the Agreement to provide that Southern Ohio was required to use only Local
181 members and that it was required to hire every member referred by Local 181, even to the
exclusion of its own employees. Plaintiff asse1is that the Arbitrator imposed additional
obligations on Southern Ohio that were not in the Agreement and also took away the
management rights given to Southern Ohio regarding its right to make its own hiring decisions.

11

Defendant argues that no new obligations were imposed and that the arbitrator was
faithful to the essence of the contract. The Comt agrees. Past practice demonstrates that
Southern Ohio understood the agreement and benefitted from it. Southern Ohio breached the
Agreement when it did not hire member of the Union. The arbitrator's award makes the Union
whole again and there no legal basis to vacate the Award.

IV.
The parties agreed to the arbitration and are bound by the arbitrator's award due.
Accordingly,

IT IS HEREBY ORDERED that Defendant's Motion for Summaty Judgment Against
Southern Ohio Trenching and Excavating, Inc. be SUSTAINED.
This ___/J_'!!?ay of J anua1y, 2017.

Signed By:

tl1u.ir.v R. Wllholt, Jr.
United Statell District Judge

12