National Ass. of Government Employees, Inc. v. National Emergency Medical Services Ass., et al
Filing
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Chief Judge Patti B. Saris: MEMORANDUM and ORDER entered. The plaintiff's motion to confirm the arbitration award 91 is ALLOWED. The defendant's motion to vacate 97 and the plaintiff's motion for attorneys' fees 100 are DENIED. (Geraldino-Karasek, Clarilde)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
NATIONAL ASSOCIATION OF
GOVERNMENT EMPLOYEES, INC.,
Plaintiff-Respondent,
v.
NATIONAL EMERGENCY MEDICAL
SERVICES ASSOCIATION, INC.,
and
TORREN K. COLCORD,
Defendants-Petitioners.
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) CIVIL NO. 13-10854-PBS
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MEMORANDUM AND ORDER
February 4, 2015
Saris, Chief Judge.
I. INTRODUCTION
The plaintiff, National Association of Government Employees
(NAGE), requests a judgment confirming an arbitration award
handed down on May 15, 2014, and requiring the defendants,
National Emergency Medical Services Association (NEMSA), to pay
NAGE $260,064. NEMSA, in its opposition, asks the Court to vacate
the arbitration award. After hearing, NAGE’s motion to confirm
(Docket No. 91) is ALLOWED. NEMSA’s motion to vacate (Docket No.
97) and NAGE’s motion for attorneys’ fees (Docket No. 100) are
DENIED.
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II. FACTUAL BACKGROUND
The plaintiff, NAGE, is a labor organization representing
federal, state, and municipal employees. This case involves the
International Association of EMTs and Paramedics (IAEP), a
subdivision of NAGE with approximately 10,000 members. The
defendant, NEMSA, is a smaller organization that represents
approximately 5,000 emergency medical services employees. Torren
Colcord, also a defendant, is NEMSA’s executive director.
In March, 2012, NAGE and NEMSA agreed to join forces, and
signed three contracts that eventually gave rise to the
arbitration at issue. The Affiliation Agreement required NEMSA
monthly to remit funds to NAGE, amounting to 10% of NEMSA’s dues
and fees from each bargaining unit, and required NAGE to protect
NEMSA’s bargaining relationships against challenges from other
unions (including NAGE). The Servicing Agreement required NEMSA
to pay a monthly fee amounting to 85% of the same dues and fees,
in return for which NAGE would provide staff and resources to
represent NEMSA’s unit members. The Employment Agreement, between
NAGE and Colcord only, made Colcord a NAGE employee for ten
years. The Affiliation and Servicing Agreements both provided
that arbitration or mediation were the “only means” of settling
disputes not resolved by good-faith discussion.1 The results of
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The Affiliation Agreement provides:
“The only means of settlement of disputes concerning the
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any such arbitration would be final and binding on the parties.
In the arbitrator’s words, “[d]isharmony between the two
unions ensued almost immediately after the ink dried on the three
contracts.” Docket No. 97-1, p. 5. Most relevantly, NEMSA
preserved a retainer agreement with Goyette & Associates
(Goyette), a California law firm, without NAGE’s knowledge. Until
early May, 2012, NEMSA paid $45,000 monthly to Goyette; at that
point, Colcord diverted those monthly fees to himself. Goyette
subsequently filed a lawsuit for over $825,000 in missing fees
and obtained a writ of attachment for $270,000. This attachment
prevented NEMSA from fulfilling its fee obligations to NAGE,
which was still unaware of the Goyette agreement or the
subsequent lawsuit. NEMSA made only partial payments in December,
2012, and January, 2013; it made no payments at all in February
and March 2013. Further controversy arose over the formula used
to calculate NEMSA’s payments to NAGE.
In late 2012, the President and Treasurer of NAGE spoke with
NEMSA personnel about NAGE’s concerns with NEMSA’s financial
condition. Both organizations discussed terminating Colcord and
interpretation, application, and enforcement of the terms of
this Agreement shall be . . . good faith discussions in
which each party shall attempt to share all information it
has concerning the issue . . . In the event that the dispute
is not settled by good-faith discussions, either party may
request mediation/arbitration.” Docket No. 97-2, p. 7.
The Servicing Agreement is to the same effect.
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instituting new leadership, but were advised by consulting
attorneys that such a course of action would violate the
Employment Agreement. NAGE informed NEMSA in February, 2013, that
it planned to issue a notice of default in light of NEMSA’s
delinquent payments. Further discussions occurred throughout the
next few months, but no resolution was reached. On April 5, 2013,
NAGE sent a letter terminating all three agreements with NEMSA.
NAGE subsequently began to raid NEMSA’s membership and challenge
NEMSA’s representation of several national bargaining units. In
April, 2013, NAGE filed suit against NEMSA and Colcord in this
Court to recover damages for the alleged contract breaches, over
NEMSA’s objection that the arbitration provisions in the
Agreements forbade such judicial action. At the Court’s
encouragement, the parties agreed to submit to arbitration
pursuant to Section 301 of the Labor Management Relations Act
(LMRA), 29 U.S.C. § 185(a) (Section 301), and the proceeding was
stayed pending the issuance of an award.
At arbitration, NEMSA raised a plethora of claims against
NAGE, only one of which the arbitrator, Robert M. Hirsch, found
meritorious.2 NAGE, as it now concedes, had declined to arbitrate
the underlying disputes and instead “ran to court” with its
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Specifically, NEMSA contested NAGE’s alleged refusal to
arbitrate, its failure to protect against raiding, disregard of
NEMSA’s autonomy, failure to engage in good faith discussions,
failure to give reasonable notice before termination, posttermination raiding, and breach of certain servicing agreement
obligations.
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breach of contract claim. Docket No. 97-1, p. 10. Although NAGE
argued that it merely sought interim judicial relief, the
arbitrator concluded that NAGE had breached the arbitration
provisions of the Agreements by virtue of its failure to
arbitrate, and that NEMSA was entitled to consequential damages
for its efforts to enforce those provisions.
In turn, NAGE sought a declaration that it was legally
justified in terminating its three contracts with NEMSA, as well
as damages against NEMSA and Colcord jointly and severally. The
arbitrator granted both requests. He first concluded that, while
the arbitration provisions in the Agreements served as a dispute
resolution mechanism, they did not “bar either party from
terminating the contracts where a material breach was committed
by the other side.” Docket No. 97-1, p. 14. NAGE was thus within
its rights to cease performance upon NEMSA’s failure to pay fees
it indisputably owed. The arbitrator further found that NAGE was
entitled to damages from NEMSA and Colcord in the amount of
$281,380 based on their respective breaches of the Servicing and
Affiliation Agreements. Colcord had breached by diverting funds
from Goyette to himself, the arbitrator wrote, while NEMSA erred
in subsequently defaulting on its payments to NAGE.
Since that point, neither NEMSA nor Colcord has made any of
the required payments. NAGE, accordingly, sought confirmation of
the arbitration award in this Court. NEMSA filed a motion to
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vacate.
III. DISCUSSION
A.
Timeliness of NEMSA’s Motion to Vacate
At the outset, NAGE urges the Court to dismiss NEMSA’s
motion to vacate the arbitration award on the ground that it was
not timely filed. Both parties agree that Massachusetts is the
forum state, but disagree on the appropriate state statute of
limitations. NAGE, on the one hand, urges the Court to apply the
thirty-day Massachusetts deadline governing motions to vacate
arbitration awards set forth in M.G.L. c. 251, § 123, and
contends that NEMSA’s request, filed outside of that time frame,
should fail on this basis alone. NEMSA looks instead to choiceof-law principles, which, it maintains, require the use of
California’s extended, 100-day deadline. Cal. Code Civ. Proc. §
1288.
The timeliness tussle is not surprising. “When Congress
fails to furnish an express statute of limitations in connection
with enforcement of a federal right, a court’s initial look must
be to state law to isolate the most closely analogous rule of
timeliness.” Posadas de Puerto Rico Assoc., Inc. v. Asociacion de
Empleados de Casino de Puerto Rico, 873 F.2d 479, 480 (1st Cir.
1989) (applying Puerto Rico’s thirty-day statute of limitations
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That provision states, in relevant part, that “[a]n application
[to vacate] shall be made within thirty days after delivery of a
copy of the award to the applicant.”
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for motions to vacate arbitration award in absence of deadline in
Section 301 of LMRA); DelCostello v. Int’l Bhd. Of Teamsters, 462
U.S. 151, 158 (1983). In this situation, federal courts will
apply the statute of limitations of the forum state’s most
analogous cause of action unless a federal limitations period
“provides a closer analogy” and the federal policies at stake
“render the federal rule more suitable.” Communications Workers
of America v. Western Electric Co., 860 F.2d 1137, 1139 (1st Cir.
1988) (quoting DelCostello, 462 U.S. at 172).
Once a court opts to borrow from state law, the selection of
a limitations period is complicated if multiple states are
connected to the dispute. The Supreme Court has expressly
reserved the question whether federal or state conflict of laws
principles should govern. UAW v. Hoosier Cardinal Corp., 383 U.S.
696, 705 n.8 (1966) (applying forum state deadline in Section 301
suit but noting that forum state was also state in which “all
operative events occurred”).
Most courts agree that, in selecting a choice of law rule to
govern the quest for the most appropriate state limitations
period for an underlying federal claim, the optimal approach is
to fashion a federal choice of law rule. See Berger v. AXA
Network LLC, 459 F.3d 804, 809-10 (7th Cir. 2006) (citing cases);
see also Wang Labs., Inc. v. Kagan, 990 F.2d 1126, 1128 (9th Cir.
1993) (deciding “as a matter of federal law which state statute
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of limitations is appropriate” for ERISA claim). Indeed, in the
labor context, courts have generally held that federal choice of
law principles should control, since “[t]he application of a
state borrowing statute in a Section 301 case will comport with
federal labor policy only coincidentally, if at all.” Champion
Int’l Corp. v. United Paperworkers Int’l Union, 779 F.2d 328, 333
(6th Cir. 1985).
Although the Supreme Court has not yet established a federal
common law choice of law rule, courts to address the question
have applied the forum state’s limitations period absent good
reason for departure. First, three circuit courts agree that the
forum state’s deadline should not control if it “would seriously
frustrate federal . . . policy.” Consol. Express, Inc. v. N.Y.
Shipping Assoc., Inc., 602 F.2d 494, 507-08 (3d Cir. 1979),
vacated on other grounds, Consol. Express, Inc. v. N.Y. Shipping
Assoc., Inc., 448 U.S. 902 (1980); Champion, 779 F.2d at 334;
Berger, 459 F.3d at 813. Furthermore, the Seventh Circuit has
concluded that the forum’s law should give way where “another
state has more significant contacts with the dispute.” Berger,
459 F.3d at 813; see also Restatement (Second) of Conflict of
Laws § 142 cmt. e (1971) (statute of limitations to be drawn from
state with “most significant relationship to the occurrence and
the parties”). Finally, the Third and Sixth Circuits have
rejected the forum state’s deadline where it “work[s] severe
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hardship to the litigants,” Consol. Express, 602 F.3d at 507-08,
or “create[s]. . . unfairness to the parties,” Champion, 779 F.2d
at 334.
To be sure, the First Circuit has ruled that the thirty-day
deadline under Massachusetts law is not “anathematic to the
federal [labor] policies at stake and the practicalities of
litigation.” Posadas, 873 F.2d at 486 (internal quotation
omitted). But Posadas did not address those situations in which
the forum state did not have the greatest connection to the
dispute or where the forum deadline was unjust to the parties.
Both of these concerns are present here, and together warrant use
of the California deadline.
As NEMSA points out, the American Arbitration Association
concluded that the proper location of the arbitration was
California, and the matter was ultimately arbitrated by a
California-based arbitrator. Moreover, at the time of the
arbitration, NEMSA had lost four bargaining units to NAGE, three
of which were located in California. The Affiliation and
Servicing Agreements refer to California, not Massachusetts, and
NEMSA is a California nonprofit labor organization.
Massachusetts’s primary link to the dispute is the fact that
NAGE is headquartered here. As the arbitrator ruled, though, NAGE
improperly began this litigation in Massachusetts rather than
following the arbitration provisions in the contract; NAGE now
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attempts to cranberry-pick the more favorable Massachusetts
limitations period primarily on this basis. To apply the thirtyday deadline would reward NAGE for its improper “gotcha!” conduct
of picking a forum with the most restrictive time limit, although
the state with the greater connection to the litigation is
California. Accordingly, in these circumstances, NEMSA has
presented compelling evidence that California has the closest
connection to the case, and that the forum state’s deadline would
be unfair to the parties. NEMSA’s motion to vacate the
arbitration award was thus timely filed under California’s 100day deadline.
B.
NAGE’s Motion to Confirm
NEMSA contends that the arbitrator strayed too far from the
language of the initial Agreements in crafting his award and that
the final award was out of step with federal labor policy.
The standard for judicial review of arbitration awards
pursuant to Section 301 of the LMRA is “one of the narrowest
standards of judicial review in all of American jurisprudence.”
UMass Mem’l Med. Ctr., Inc. v. United Food & Commercial Workers
Union, 527 F.3d 1, 4 (1st Cir. 2008) (quotation omitted). Even a
belief that an arbitrator is patently wrong cannot justify a
court’s substitution of its own judgment for that of the
arbitrator. See Cytyc Corp. v. DEKA Prods. Ltd. P’ship, 439 F.3d
27, 34 (1st Cir. 2006). Instead, “as long as an honest arbitrator
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is even arguably construing or applying the contract and acting
within the scope of his authority, the fact that a court is
convinced he committed serious error does not suffice to overturn
his decision.” E. Assoc. Coal Corp. v. United Mine Workers of
Am., Dist. 17, 531 U.S. 57, 62 (2000) (internal quotation
omitted). Arbitration awards are thus “nearly impervious to
judicial oversight.” Teamsters Local Union No. 42 v. Supervalu,
Inc., 212 F.3d 59, 61 (1st Cir. 2000).
As a result, the Court will only set aside an arbitration
award if it cannot discern, within the four corners of the
parties’ initial agreement, any plausible basis for the
arbitrator’s interpretation. Coastal Oil of New Eng., Inc. v.
Teamsters Local, 134 F.3d 466, 469 (1st Cir. 1998). Otherwise
framed, an award must “draw[] its essence from the collective
bargaining agreement” and not merely reflect the arbitrator’s
“own brand of industrial justice.” Steelworkers v. Enter. Wheel &
Car Corp., 363 U.S. 593, 596 (1960).
An arbitration award may also be vacated if it contravenes a
public policy that is “explicit,” “well defined,” and “dominant.”
W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 766 (1983).
However, the Court’s authority to vacate an award for this reason
is narrow. The Court will only overturn an arbitration award on
the basis of public policy after an “examination of whether the
award created any explicit conflict with other laws and legal
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precedents rather than an assessment of general considerations of
supposed public interests.” Prudential-Bache Sec., Inc. v.
Tanner, 72 F.3d 234, 241 (1st Cir. 1995) (internal quotations
omitted). Any violation of such a policy must then be “clearly
shown.” Misco, 484 U.S. at 43. Moreover, courts often reject such
challenges. See, e.g., id. At 30-31 (arbitration award
reinstating worker who had brought drugs onto employer property
did not violate public policy); W.R. Grace, 461 U.S. at 766-67
(arbitration award granting damages to claimant under collective
bargaining agreement, which conflicted with district court order,
did not violate public policy requiring obedience to court
order); Genzyme Corp. v. Fed. Ins. Co., 622 F.3d 63, 69-70 (1st
Cir. 2010) (no public policy preventing securities litigation
coverage in insurance policies where policy specifically
mentioned such litigation). The policy in question must be
“ascertained by reference to positive law and not from general
considerations of supposed public interests.” E. Assoc. Coal
Corp., 531 U.S. at 62-63. The First Circuit has declined to
vacate arbitration awards that “violate[] no specific provision
of any law or regulation.” Boston Med. Ctr. v. SEIU, Local 285,
260 F.3d 16, 25 (1st Cir. 2011).
The arbitrator agreed with NEMSA that “the arbitration
provisions in the agreements served as a dispute resolution
mechanism.” On this basis, the arbitrator concluded that NAGE
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breached the Agreements when it filed suit in federal court in
lieu of submitting the dispute to mediation.7 Docket No. 97-1, p.
14. However, the arbitrator further reasoned, the arbitration
provisions did not
bar either party from terminating the contracts where a
material breach was committed by the other side. It is black
letter law that a party is excused from its obligation to
perform under a contract where the counter-party has committed
a material breach of that contract.
Id.
NAGE maintains that the arbitration award “drew its essence”
from the Agreements and, accordingly, that the Court is not now
entitled to substitute its own judgment for that of the
arbitrator. NEMSA, in turn, complains that the arbitrator failed
even to interpret the Agreements in crafting his award, since his
reliance on black-letter contract law was in tension with the
arbitration provisions to which the parties had initially agreed.
In my view, the arbitrator’s reading of the Agreements was
not unreasonable. It cannot be said, as NEMSA would have it, that
the arbitrator did not undertake to interpret the Agreements in
good faith, or that he “ignored the plain language” of the
arbitration provisions in the Agreements. Misco, 484 U.S. at 38.
As the Supreme Court recently stated, arbitrators may consider
ordinary contract law when construing labor agreements. M&G
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Indeed, he awarded consequential damages to NEMSA on this
basis.
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Polymers USA, LLC v. Tackett, No. 13-1010, slip op. at 6 (Jan.
26, 2015) (“We interpret collective-bargaining agreements . . .
according to ordinary principles or contract law, at least when
those principles are not inconsistent with federal labor
policy.”); Providence Journal Co. v. Providence Newspaper Guild,
271 F.3d 16, 20-21 (1st Cir. 2001) (affirming arbitrator’s
interpretation of labor agreement based on principles of contract
law); N. Adams Reg. Hosp. v. Mass. Nurses Ass’n, 889 F. Supp.
507, 513-14 (D. Mass. 1995) (arbitrator “could properly resort to
traditional rules of contract construction to clarify . . .
ambiguity and determine the parties’ intent”); see generally
Elkouri & Elkouri, How Arbitration Works, Ch. 10.7 at 60-69 (7th
ed. 2012) (“[A]rbitrators are expected to recognize the
fundamental principles of contract law.”).
NEMSA insists that the arbitrator’s reliance on black-letter
contract law contravened federal labor policy favoring the
arbitration of labor disputes. The Agreements are governed by the
principles set forth in Section 301 of the LMRA, NEMSA points
out, which require the enforcement of arbitration provisions in
labor contracts. See, e.g., United Steelworkers of America v.
Warrior & Gulf Nav. Co., 363 U.S. 574, 577-78 (1960) (“[T]he
policy to be applied in enforcing . . . [labor] arbitration was
that reflected in our national labor law.”).
NEMSA has not clearly shown that the arbitrator’s award ran
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counter to the federal policy in favor of labor awards. Indeed,
the arbitrator expressly concluded that NAGE had breached the
Agreements by filing suit in federal court rather than submitting
to arbitration. “The claimant has established that NAGE breached
its duty under the arbitration provisions of the Affiliation and
Servicing Agreements,” he noted, “and is entitled to
consequential damages incurred by NEMSA to enforce those
provisions.” Docket No. 97-1, p. 11. Accordingly, the arbitrator
rejected NAGE’s position that it had no duty to arbitrate. Even
if the better approach would have been to conclude that NAGE was
required to arbitrate the question of material breach before it
ceased performance under the contract, the arbitrator’s decision
to import common-law principles of contract did not violate the
public policy in favor of arbitration.
C.
Attorneys’ Fees
NAGE also seeks the attorneys’ fees and costs incurred in
responding to NEMSA’s motion to vacate. Under federal common law,
such an award is warranted in a Section 301 action where the
losing party’s position was “frivolous, unreasonable, or without
foundation.” Local 2322, Int’l Bhd. Of Elec. Workers v. Verizon
New Eng., Inc., 464 F.3d 93, 100 (1st Cir. 2006) (quotation
omitted). This standard is not met here.
IV. ORDER
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The plaintiff’s motion to confirm the arbitration award
(Docket No. 91) is ALLOWED. The defendant’s motion to vacate
(Docket No. 97) and the plaintiff’s motion for attorneys’ fees
(Docket No. 100) are DENIED.
/s/ Patti B. Saris
Patti B. Saris
Chief United States District Judge
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