Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-01953/USCOURTS-casd-3_18-cv-01953-0/pdf.json

Nature of Suit Code: 720
Nature of Suit: Labor Management Relations Act
Cause of Action: 09:0010 Petition to Vacate Arbitration Award

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

COSTCO WHOLESALE 

CORPORATION, 

Petitioner,

v.

INTERNATIONAL BROTHERHOOD 

OF TEAMSTERS, LOCAL NO. 542,

Respondent.

Case No.: 18-CV-01953-AJB-BLM

ORDER:

(1) DENYING COSTCO 

WHOLESALE CORPORATION’S 

MOTION TO VACATE 

ARBITRATION AWARD; AND

(2) GRANTING MOTION TO 

ENFORCE ARBITRATION AWARD 

BY INTERNATIONAL 

BROTHERHOOD OF TEAMSTERS, 

LOCAL NO. 542

(Doc. Nos. 2, 14, 17)

Presently before the Court are Petitioner Costco Wholesale Corporation’s motion 

to vacate arbitration award, (Doc. No. 2), and Respondent International Brotherhood of 

Teamsters, Local No. 542’s motion to enforce arbitration award, (Doc. Nos. 14, 17).

Pursuant to Civil Local Rule 7.1.d.1, the Court finds the matter suitable for decision on the 

papers and without oral argument. For the reasons explained more fully below, the Court

DENIES Petitioner’s motion to vacate arbitration award and GRANTS Respondent’s 

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motion to enforce arbitration award. 

BACKGROUND

The present action revolves around the termination of James Diaz, a forklift driver 

for Costco at the Carlsbad warehouse. (Doc. No. 2-1 at 7.) On November 5, 2017, Charles 

Harris, an employee at the Carlsbad warehouse, informed Keith Paget, a manager, that 

Harris had observed several employees conducting suspicious activities that appeared to 

be drug related. (Id.) Paget then informed Jesse Sanchez, another manager. (Id.) Paget and 

Sanchez reviewed the tapes from November 3 and 4, 2017. (Id. at 7–8.) On November 3, 

2017, the tape revealed Diaz throwing another employee a small clear plastic bag 

containing a white substance. (Id. at 8.) On November 10, 2017, Paget and Sanchez 

interviewed two employees who admitted to doing cocaine on the job and buying cocaine 

from Diaz four to five times. (Id.) On the same day, Diaz was interviewed and denied all 

allegations of drug dealing and agreed to provide a written statement to that effect. (Id.) 

Paget then informed Diaz that the Carlsbad police were on their way to assist the 

investigation. (Id.) Diaz then proceeded to leave the premises. (Id.) Later, the police 

informed Paget that the white substance was in fact cocaine. (Id.) 

On November 12, 2017, Diaz was placed on “a 3 day unpaid disciplinary 

suspension.” (Doc. No. 2-1 at 9.) The Corrective Consultation stated: “James [Diaz] needs 

to understand the seriousness of this matter and the impact it has on the company. James is 

being placed on a 3 day unpaid disciplinary suspension. James will report to the Warehouse 

Manager on Thursday, 11/16/17 at 2:45 p.m. to discuss his future at Costco Wholesale.” 

(Id.) The Corrective Consultation cited two violations of Collective Bargaining Agreement 

(“CBA”): Major Offense #9 “bringing liquor, narcotics, or dangerous drugs into the 

company premises or consuming liquor or dangerous drugs on company premises or 

reporting for duty under the influence of liquor, narcotics, or dangerous drug” and #24 

“failure to fully cooperate in a company investigation.” (Id.)

On November 16, 2017, Diaz was terminated by Costco for violation of Major 

Offenses #9 and #24. (Id.) On the same day, the Union filed a Grievance Report on behalf 

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of Diaz claiming unjust termination. (Id. at 10.) Arbitration was conducted on May 2, 2018 

before the “Board of Adjustment” – two Union and two Costco representatives, plus panel 

arbitrator Dave Hart. (Id.) The Union argued that Diaz’s termination was “double 

jeopardy” based on the language in Diaz’s suspension notice. (Id.) Costco argued that the 

extremely serious nature of the underlying offenses, Diaz could not have had any 

expectation that a three-day suspension was the only discipline he would receive. (Id.) 

The respective Costco and Union representatives on the Board of Adjustment split 

equally on the grievance so Arbitrator Hart was to make the decision. (Id. at 11.) On May 

21, 2018, Hart sent an email that stated: “The above named grievant prevails in his 

grievance. The Union’s arguments as to double jeopardy were correct. Union remedy is 

adopted. So that I can look at myself in the mirror, my resignation is effective today.” (Id.

at 5.) Costco requested that Arbitrator Hart email a copy of the completed Board of 

Adjustment Decision form. (Id.) Costco never received a copy. (Id.) The Board of 

Adjustment Decision states: “The panel has deadlocked, and has passed the determing [sic] 

vote to the Arbitrator for resolution.” (Doc. No. 23 at 12.) Arbitrator Hart wrote on the 

form: “Double Jeopardy was proved by preponderance of evidence presented. Employee 

to be made whole.” (Id.) 

On August 22, 2018, Costco filed a petition to vacate the arbitration award. (Doc. 

No. 1.) On the same day, Costco filed the instant motion to vacate the arbitration award. 

(Doc. No. 2.) On September 14, 2018, Respondent filed the instant motion to enforce the 

arbitration award. (Doc. Nos. 14, 17.)

LEGAL STANDARD

A district court’s role in reviewing an arbitral award is limited. See United 

Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564, 567–68 (1960). Indeed, “[t]he federal 

policy of settling labor disputes by arbitration would be undermined if courts had the final 

say on the merits of the awards.” Local Joint Exec. Bd. of Las Vegas v. Riverboat Casino, 

Inc., 817 F.2d 524, 526 (9th Cir. 1987) (citation omitted). An award will be upheld 

provided it “draws its essence from the collective bargaining agreement” and does not 

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“manifest an infidelity” to the agreement. United Steelworkers of Am., 363 U.S. at 597.

“[I]f, on its face, the award represents a plausible interpretation of the contract in the 

context of the parties’ conduct, judicial inquiry ceases and the award must be affirmed.” 

Holly Sugar Corp. v. Distillery Union, 412 F.2d 899, 903 (9th Cir. 1969).

There are several grounds for vacatur under both the LMRA and the Federal 

Arbitration Act (“FAA”). The grounds for vacatur under the LMRA are:

(1)The arbitrator’s award does not “draw its essence” from the CBA;

(2)The arbitrator exceeds the boundaries of the issues submitted to him or her;

(3)The award is contrary to public policy.

Int’l Union of Painters & Allied Trades, Drywall Tapers, Finishers & Allied Worksers, 

Local Union 1944 v. TNT Plastering & Stucco, LLP (2012-024), No. 13-00238, 2013 WL 

6210636, at *3 (D. Haw. Nov. 27, 2013) (citing United Food & Commercial Workers Int’l 

Union, Local 588 v. Foster Poultry Farms, 74 F.3d 169, 173 (9th Cir. 1995); McCabe 

Hamilton & Renny Co., Ltd. v. Int’l Longshore & Warehouse Union, Local 142, AFL-CIO, 

624 F. Supp. 2d 1236, 1234–44 (D. Haw. 2008)). The grounds for vacatur under the FAA 

are:

(1)The award was procured by corruption, fraud, or undue means;

(2)There was evident partiality or corruption in the arbitrators, or either of them;

(3)The arbitrators are guilty of misconduct by refusing to postpone the hearing, upon 

sufficient cause shown, or in refusing to hear evidence pertinent and material to the 

controversy; or of any other misbehavior by which the rights of any party have been 

prejudiced; or 

(4)Where the arbitrators exceeded their powers, or so imperfectly executed them that a 

mutual, final, and definite award upon the subject matter submitted was not made.

Id. (citing 9 U.S.C. § 10(a)).

/ / /

/ / /

/ / /

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Specifically, Section 9 of the FAA states:

If the parties in their agreement have agreed that a judgment of 

the court shall be entered upon the award made pursuant to the 

arbitration, and shall specify the court, then at any time within 

one year after the award is made any party to the arbitration may 

apply to the court so specified for an order confirming the award, 

and thereupon the court must grant such an order unless the 

award is vacated, modified, or corrected as prescribed in section 

10 and 11 of this title. If no court is specified in the agreement of 

the parties, then such application may be made to the United 

States court in and for the district within which such award was 

made. 

9 U.S.C. § 9. 

DISCUSSION

Petitioner request that the Court vacate the arbitration award arguing that (1) that the 

award does not draw its essence from the CBA and the arbitrator exceed his authority by 

imposing the concept of “double jeopardy” as against the plain language of the CBA; (2) 

the arbitrator exceeded his authority by refusing to consider evidence at the hearing, issuing 

an “email award” instead of following the CBA’s required procedure and by acting as a 

mediator and engaging in ex parte communications with the Union; (3) the award runs 

counter to public policy against drug dealing to employees in safety-sensitive positions; 

and (4) the award is fatally indefinite because the awarded remedy is unknown. (Doc. No. 

2-1 at 11–15.) In opposition, Respondent opposes each of these points and asserts that the 

arbitration award should be enforced. (Doc. Nos. 23, 14, 17.) 

After a careful review of the applicable law, the arguments proffered by both parties, 

and the exhibits, the Court agrees with Respondent that the award should be enforced.

A. The Arbitrator’s Award Draws its Essence from the CBA

Petitioner argues that the arbitrator’s decision does not draw its essence from the 

CBA because double jeopardy is not mentioned in the CBA, but rather an “imported 

concept.” (Doc. No. 2-1 at 16.) However, Petitioner relies upon a First Circuit case where 

the court was reviewing a district court’s entry of summary judgment regarding an 

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arbitration award utilizing a different standard than the Ninth Circuit’s standard. See Zayas 

v. Bacardi Corp., 524 F.3d 65, 68 (1st Cir. 2008). Further, the court held that double 

jeopardy would not apply in an investigatory suspension. Id. at 69. Respondent does not 

disagree that double jeopardy would not attach to an investigatory suspension. (Doc. No. 

17 at14.) Here, it is clear from the CBA that there is a difference between investigatory 

suspensions and disciplinary suspensions. (See generally Doc. No. 16-7.) Costco labeled 

Diaz’s suspension as a disciplinary suspension. Therefore, it is likely that Arbitrator Hart 

found that this is a disciplinary suspension rather than an investigatory suspension. 

Thus, it appears that Petitioner is requesting the Court to reach a different conclusion 

from Arbitrator Hart that the suspension was investigatory. However, Arbitrator Hart’s 

decision that the suspension was disciplinary rather than investigatory represents a 

plausible interpretation and the Court is not entitled to reweigh the merits of the grievance. 

See Holly Sugar Corp., 412 F.2d at 903; ASARCO LLC v. United Steel, Paper and Forestry, 

Rubber, Mfg., Energy, Allied Indus. and Serv. Workers Int’l Union, AFL-CIO, CLC, 910 

F.3d 485, 491–93 (9th Cir. 2018). Arbitrator Hart was permitted “to rely on a number of 

resources, including ‘statutes, case decisions, principles of contract law, practices, 

assumptions, understandings, [and] the common law of the shop’ in his effort to give 

meaning to the” CBA. ASARCO LLC, 910 F.3d at 492 (citations omitted). Accordingly, 

Arbitrator Hart was permitted to rely upon the concept of double jeopardy. Further, even 

if the Court could conceivably reach a different result, Arbitrator Hart’s decision and award 

are given great deference. See id. Accordingly, the Court finds that Arbitrator Hart’s 

application of double jeopardy does draw from the essence of the CBA and he did not 

exceed his authority in applying the concept of double jeopardy. 

B. The Arbitrator did not Exceed his Authority

Petitioner contends that the Arbitrator exceeded his authority “in three additional 

contexts (1) his improper limitations on argument and evidence at the hearing, (2) engaging 

in post-hearing ex parte communications with Diaz and the Union and thereby tainting his 

independence, and (3) by failing to issue an award as required by the CBA.” (Doc. No. 2-

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1 at 17.) 

Under 9 U.S.C. § 10(a)(3), a district court may vacate an arbitration award where an 

arbitrator refused “to hear evidence pertinent and material to the controversy.” Under 

California Code of Civil Procedure section 1286.2(a)(5), Petitioner must show “substantial 

prejudice ... by refusal of the arbitrato[r] to hear evidence material to the controversy.” 

See, e.g., Burlage v. Sup. Ct., 178 Cal. App. 4th 524 (Cal. Ct. App. 2009). Petitioner claims 

that Arbitrator Hart was improper in limiting evidence at the hearing to only evidence that 

related to double jeopardy. (Doc. No. 2-1 at 17.) Petitioner attempted to present evidence 

regarding the underlying offense, however, Arbitrator Hart refused to hear it. (Id.) The 

issue submitted to Arbitrator Hart was whether double jeopardy applied to this suspension 

and termination. It is unclear how evidence of Diaz’s underlying offenses would be 

material to a procedural question. Further, Petitioner contends that it was prejudiced 

because Arbitrator Hart would not know what sections of the CBA would apply, however,

it appears that Arbitrator Hart was aware that this was a disciplinary suspension. The Court 

does not find that Petitioner was prejudiced by the fact that Arbitrator Hart did not allow 

evidence at the hearing regarding the reason for Diaz’s disciplinary suspension. 

Petitioner asserts that “[e]x parte evidence to an arbitration panel that disadvantages 

any of the parties in their rights to submit and rebut evidence violates the parties’ rights 

and is grounds for vacation of an arbitration award.” Pac. Reins. Mgmt. Corp. v. Ohio 

Reins. Corp., 935 F.2d 1019, 1025 (9th Cir. 1991). However, Arbitrator Hart was not 

presented with ex parte evidence. It is undisputed that Arbitrator Hart engaged in ex parte 

communications with Respondent, but no new evidence was presented in those 

communications. Further, Petitioner has failed to allege how this communication regarding 

an unauthorized settlement offer to Diaz caused it any disadvantage. See Am. Tel. & Tel. 

Co. v. United Computer Sys., Inc., 7 Fed. Appx. 784, 788 (9th Cir. 2001). The Court agrees 

with the parties that this behavior is peculiar, however, it likely did not disadvantage 

Petitioner.

Next, Petitioner argues that Arbitrator Hart exceeded his authority by failing to issue 

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a written award. (Doc. No. 2-1 at 18.) However, Arbitrator Hart did issue a written award. 

First, Arbitrator Hart issued his award in his email and also completed the Board of 

Adjustment Decision. Accordingly, he did follow the procedure in the CBA. Even if 

Petitioner received the Board of Adjustment Decision late, it is unclear to the Court how 

this prejudiced Petitioner. Petitioner was aware of Arbitrator Hart’s decision by the email. 

Since Petitioner was not prejudiced by the delay of the receival of the Board of Adjustment 

Decision and Arbitrator Hart did in fact follow the procedure, the Court does not believe 

this is grounds for vacating the arbitrator award.

C. The Award does not run Counter to Public Policy

Petitioner contends that the Arbitrator’s award runs counter to public policy because 

reinstating Diaz for criminal conduct of possessing cocaine is a violation of the strong 

public policy of safe operation of heavy equipment. (Doc. No. 2-1 at 18–19.) The Supreme 

Court has made it clear “that any such public policy must be ‘explicit,’ ‘well defined,’ and 

‘dominant.’ It must be ‘ascertained ‘by reference to the laws and legal precedents and not 

from general considerations of supposed public interests.’” Eastern Associated Coal Corp. 

v. United Mine Workers of Am., Dist. 17, 531 U.S. 57, 62 (2000) (citations omitted). “The 

party seeking to vacate the arbitration award bears the burden of showing that the award 

violates public policy.” Southern Cal. Gas Co. v. Utility Workers Union of America, Local 

132, AFL-CIO, 265 F.3d 787, 796 (9th Cir. 2001). Petitioner has failed to provide an 

“explicit,” “well defined,” and “dominant” public policy that the arbitrator has violated. 

Further, in Eastern Associated Coal Corp., the Supreme Court held that reinstating an 

employee who had failed two drug tests was not against public policy. Id. at 468–69. 

Accordingly, the Court does not find that reinstating Diaz as an employee is against an 

“explicit,” “well defined,” and “dominant” public policy.

D. The Award Remedy is Known

Lastly, Petitioner argues that the arbitrator’s award should be vacated because the 

remedy is unknown. (Doc. No. 2-1 at 19.) However, Arbitrator Hart stated in his email, 

“Union remedy is adopted.” (Doc. No. 23-15 at 3.) Further, the Board of Adjustment 

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Decision states, “relief being sought: returned to work and be made whole in every aspect.” 

(Doc. No. 23-16 at 2.) The CBA also provides that “[t]he Arbitrator shall have the authority 

to order or deny reinstatement of an employee with or without back pay in whole or in 

part.” (Doc. No. 23-7 at 13.) Since Petitioner now has the Board of Adjustment Decision 

as well as the email, the Court believes the remedy is known to Petitioner.

CONCLUSION

Based on the foregoing, the Court DENIES Petitioner’s motion to vacate and 

accordingly, GRANTS Respondent’s motion to enforce the arbitration award. 

IT IS SO ORDERED.

Dated: March 28, 2019

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