13

‐ 2579

‐ cv

Am. Postal Workers Union, AFL

‐ CIO v. U.S. Postal Serv.,



## In the



# United States Court of Appeals

**For the Second Circuit**

________

A UGUST T ERM 2013

No. 13

‐ 2579

‐ cv

A MERICAN P OSTAL W ORKERS U NION

, AFL

‐ CIO,

Plaintiff

‐ Appellee,

v.

U NITED S TATES P OSTAL S ERVICE

, Defendant

‐ Appellant.

________

Appeal from the United States District Court

for the Southern District of New York.

No. 12 Civ. 7896 (KBF)

― Katherine B. Forrest, Judge

.

________

A RGUED : M AY 19, 2014

D ECIDED : J UNE 6, 2014

________2 No. 13

‐ 2579

‐ cv

Before: W INTER

, W ALKER and C ABRANES

, Circuit Judges

.

________

Defendant United States Postal Service appeals from the May

16, 2013 judgment of the United States District Court for the

Southern District of New York (Katherine B. Forrest, Judge ) granting

the motion of plaintiff American Postal Workers Union (“APWU”)

to vacate an arbitral award on the basis that the arbitrator exceeded

his powers under the relevant agreement by applying the doctrine of

collateral estoppel against APWU.

We hold that the arbitrator’s decision to apply collateral

estoppel

― which was based on his interpretation of particular

provisions of the arbitration agreement, and is within an arbitrator’s

authority to decide under a broad arbitration agreement

― did not

exceed his powers under the arbitration agreement as would be

required to justify vacating the award.

Accordingly, we REVERSE the May 16, 2013 judgment of the

District Court and REMAND with instructions to confirm the

arbitral award.

________

S ARAH T. K ANTER (Darryl J. Anderson, on the

brief ), O’Donnell, Schwartz & Anderson, P.C.,

Washington, DC, for Plaintiff

‐ Appellee American

Postal Workers Union, AFL

‐ CIO

,3 No. 13

‐ 2579

‐ cv

M ICHAEL J. B YARS (Emily E. Daughtry, on the

brief ), Assistant United States Attorneys, for Preet

Bharara, United States Attorney for the Southern

District of New York, New York, NY, for

Defendant

‐ Appellant United States Postal Service

.

________

J OSÉ A. C ABRANES

, Circuit Judge :

Defendant United States Postal Service (“USPS”) appeals from

the May 16, 2013 judgment of the United States District Court for the

Southern District of New York (Katherine B. Forrest, Judge ) granting

the motion of plaintiff American Postal Workers Union (“APWU”)

to vacate an arbitral award on the basis that the arbitrator had

exceeded his powers under the relevant agreement by applying the

doctrine of collateral estoppel against APWU. 1

We hold that the arbitrator’s decision to apply collateral

estoppel

― which was based on his interpretation of particular

provisions of the arbitration agreement, and is within an arbitrator’s

authority to decide under a broad arbitration agreement

― did not

exceed his powers under the arbitration agreement as would be

required to justify vacating the award.

1 The doctrine of collateral estoppel, also known as issue preclusion, provides

that a judgment in a prior action may preclude relitigation of issues in a second action, if

those issues were actually litigated and necessary to the outcome of the first action.

Parklane Hosiery Co. v. Shore

, 439 U.S. 322, 326 n.5 (1979).4 No. 13

‐ 2579

‐ cv

Accordingly, we reverse the May 16, 2013 judgment of the

District Court and remand with instructions to confirm the arbitral

award.

BACKGROUND

Carla LaGreca, a former USPS employee, was initially

employed as a Mail Processing Clerk. Around 1986, she applied for

workers’ compensation benefits for carpal tunnel syndrome

developed in connection with her job. In 2007, the USPS reassigned

LaGreca to a limited

‐ duty position consistent with her work

restrictions. In September 2008 the USPS concluded that it no longer

had work available consistent with LaGreca’s condition and placed

her on leave

‐ without

‐ pay/injured

‐ on

‐ duty status. LaGreca then

initiated the grievance and arbitration proceedings giving rise to this

case.

A. The Grievance and Arbitration Procedures

The APWU and the USPS are parties to a Collective

Bargaining Agreement (“CBA”) pursuant to which LaGreca may

challenge USPS employment decisions that allegedly violate the

CBA. The CBA provides for a four

‐ step grievance process

culminating in arbitration.5 No. 13

‐ 2579

‐ cv

As set forth in the Postal Reorganization Act, 39 U.S.C.

§ 1005(c), 2 postal employees like LaGreca also receive workers’

compensation protection under the Federal Employees’

Compensation Act, 5 U.S.C. §§ 8101 et. seq. Under this Act, USPS

employees with job

‐ related disabilities may seek relief for alleged

violations of their rights by appealing to the Merit Systems

Protection Board (“MSPB”) for a determination of whether the USPS

acted “arbitrarily [or] capriciously” in making its employment

decisions (an “MSPB appeal”). 5 C.F.R. § 353.304. 3 The MSPB has

held that USPS employees “have the right to file both a grievance

[under the CBA] and [an MSPB] appeal concerning the same agency

action.” Latham v. U.S. Postal Serv., 117 M.S.P.R. 400, ¶ 29 (2012).

On September 16, 2008, LaGreca initiated a grievance

pursuant to the CBA, which culminated in arbitration. The APWU

argued, on LaGreca’s behalf, that the elimination of her position

violated the CBA, and was based on retaliatory and discriminatory

motives.

2 39 U.S.C. § 1005(c) provides: “Officers and employees of the Postal Service shall

be covered by subchapter I of chapter 81 of title 5, relating to compensation for work

injuries.”

3 5 C.F.R. § 353.304(c) provides: “An individual who is partially recovered from a

compensable injury may appeal to MSPB for a determination of whether the agency is

acting arbitrarily and capriciously in denying restoration.” Restoration rights under the

Federal Employees’ Compensation Act include the creation of limited duty assignments

for employees with temporary or permanent compensable injuries. 5 U.S.C. § 8151(b); 5

C.F.R. § 353.301(d).6 No. 13

‐ 2579

‐ cv

On December 29, 2008, while the grievance process was

ongoing, LaGreca filed an MSPB appeal, claiming that the USPS

acted arbitrarily and capriciously in eliminating her position. On

August 14, 2009, her MSPB appeal was denied based on the

conclusion of an Administrative Law Judge (“ALJ”) that the USPS

had properly eliminated LaGreca’s position because LaGreca’s

doctor had declared her totally disabled as of September 2, 2008.

LaGreca’s appeal from that decision was dismissed as untimely.

On March 23, 2012, LaGreca’s CBA grievance was submitted

to Arbitrator Randall Kelly. The USPS argued that the matter was

not arbitrable because the ALJ had already resolved the issue by

concluding during the MSPB appeal that LaGreca was totally

disabled. Over the objection of the APWU, Arbitrator Kelly agreed

to bifurcate the proceeding and first address the question of whether

collateral estoppel was applicable in the circumstances presented

here.

On this subject, Arbitrator Kelly noted that “[t]he [CBA]

specifically recognizes the concept of res judicata when a matter is

simultaneously before the MSPB and arbitration; albeit for veterans .”

Joint App’x 26 (emphasis supplied). Specifically, Article 16.9

provides that an “employee appeal[ing] under the Veterans’

Preference Act” waives his right to invoke the CBA arbitration

process if: (1) “an MSPB settlement agreement is reached”; (2) “a

hearing on the merits before the MSPB has begun”; or (3) “the MSPB

issues a decision on the merits of the appeal.” Id. at 101. Arbitrator

Kelly then recognized that Article 16.9 does not apply to LaGreca,7 No. 13

‐ 2579

‐ cv

but concluded that this provision, as well as other awards where the

doctrine of collateral estoppel was applied, supported the

conclusion that the CBA embraces the application of preclusion

principles. Id. at 26.

In applying collateral estoppel to LeGreca’s claim, Arbitrator

Kelly first determined that the ALJ’s decision denying her appeal

was the final decision of the MPSB, a matter not disputed on appeal.

He then stated that the “undeniable conclusion to be derived from

the MSPB decision” was that “[LaGreca] [wa]s totally disabled as of

September 2, 2008.” Id. at 27. Accordingly, “[USPS] could not have

been arbitrary and capricious when it terminated her Modified Duty

Assignment” and “the matter is

. . . therefore not arbitrable based on

the doctrine of collateral estoppel.” Id.

The APWU sought vacatur of this decision in the District

Court on the basis that Arbitrator Kelly’s decision to apply collateral

estoppel was in excess of his powers under the CBA.

B. The District Court’s Decision

In addressing cross

‐ motions for summary judgment, the

District Court stated: “Arbitrator Kelly found no explicit support in

the [CBA] for applying collateral estoppel to LaGreca’s case. Instead,

he purported to find implicit support in the Section 16.9 of the

Agreement [addressing claimants pursuant to the Veterans’

Preference Act].” Am. Postal Workers Union, AFL

‐ CIO v. U.S. Postal

Serv.

, No. 12

‐ cv

‐ 7896 (KBF), 2013 WL 1890264, at *3 (S.D.N.Y. May 2,

2013). The District Court asserted that “[t]he [CBA] does not make8 No. 13

‐ 2579

‐ cv

any provision for the application of collateral estoppel in general,”

and the only provision that addresses preclusion does not apply to

LaGreca. Id. at *4. The District Court stated further that, if any

inference could be drawn from Section 16.9, it was that preclusion

principles do not apply in other circumstances. Id.

The District Court concluded that Arbitrator Kelly improperly

“relied on the free

‐ floating principle of collateral estoppel to use the

MSPB decision to preclude LaGreca from recovering in her

grievance under the [CBA]

. . . without any contractual basis.” Id.

Accordingly, the District Court vacated Arbitrator Kelly’s award

and remanded the case for arbitration. This appeal followed.

DISCUSSION

The question here—whether Arbitrator Kelly had authority,

pursuant to the CBA, to apply collateral estoppel to LaGreca’s

claim—is a legal one, reviewed de novo on appeal. See Scandinavian

Reinsurance Co. v. St. Paul Fire & Marine Ins. Co.

, 668 F.3d 60, 71 (2d

Cir. 2012).

Vacatur is appropriate when an arbitrator’s decision

“exceeded [his] powers” under the relevant contract. 9 U.S.C.

§ 10(a)(4). 4 The crux of the excess

‐ of

‐ powers standard is “whether

4 The Federal Arbitration Act (“FAA”) provides that a district court “may make

an order vacating the [arbitral] award upon the application of any party to the arbitration

. . . 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.” 9

U.S.C. § 10(a)(4).9 No. 13

‐ 2579

‐ cv

the arbitrator’s award draws its essence from the collective

bargaining agreement.” St. Mary Home, Inc. v. Serv. Emps. Int’l Union,

Dist. 1199, 116 F.3d 41, 44 (2d Cir. 1997) (internal quotation marks

and citations omitted). Particularly where, as here, the challenge is

to “an award deciding a question which all concede to have been

properly submitted [to the arbitrator] in the first instance,” 5 vacatur

under the excess

‐ of

‐ powers standard is appropriate only in the

“narrowest” of circumstances. Jock v. Sterling Jewelers Inc.

, 646 F.3d

113, 122 (2d Cir. 2011) (internal quotation marks omitted).

The Supreme Court recently reaffirmed that

[i]t is not enough to show that the arbitrator committed

an error—or even a serious error. Because the parties

bargained for the arbitrator’s construction of their

agreement, an arbitral decision even arguably

construing or applying the contract must stand,

regardless of a court’s view of its (de)merits.

The arbitration here was pursuant to the Postal Service Reorganization Act

(“PRA”), not the FAA. Courts, however, have recognized that the stringent standard for

vacating an arbitration award is materially the same under the FAA, Labor Management

Relations Act (“LMRA”), and the PRA. See Oxford Health Plans LLC v. Sutter

, 133 S. Ct.

2064, 2068 (2013) (relying on LMRA case law when discussing deference to FAA awards);

USPS v. APWU

, 553 F.3d 686, 688

‐ 89 (D.C. Cir. 2009) (applying LMRA standards to cases

under the PRA).

5 Although the APWU objected to bifurcation of the proceedings, there is no

indication in the record that it disputed that the applicability of collateral estoppel was an

arbitrable issue. Moreover, doing so would have been futile in light of our holding in U.S.

Fire Insurance Co. v. National Gypsum Co.

, that the decision whether to apply collateral

estoppel based on a prior judicial decision is within the arbitrator’s authority under a

broad arbitration agreement. 101 F.3d 813, 817 (2d Cir. 1996).10 No. 13

‐ 2579

‐ cv

Oxford Health Plans LLC v. Sutter

, 133 S. Ct. 2064, 2068 (2013)

(alterations, citations, and internal quotation marks omitted). 6 In

order to vacate, a court must find that “the arbitrator act[ed] outside

the scope of his contractually delegated authority.” Id. (internal

quotation marks omitted).

In Oxford Health Plans

, the issue was whether the arbitrator

exceeded his authority by permitting class

‐ wide arbitration. Id. In

holding vacatur inappropriate the Supreme Court noted that the

arbitrator “focused on the arbitration clause’s text, analyzing

(whether correctly or not makes no difference)

. . . what it sent to

arbitration.” Id. at 2069. The Court distinguished its decision in

Stolt–Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662

(2010), which “overturned the arbitral decision [to permit class

arbitration] because it lacked any contractual basis for ordering class

procedures, not because it lacked

. . . a ‘sufficient’ one.” Oxford

Health Plans

, 133 S. Ct. at 2069. In Stolt–Nielsen

, the parties had

expressly stipulated that they had never reached an agreement

regarding class arbitration. Id. Accordingly, the arbitral decision

“was not—indeed, could not have been—based on a determination

regarding the parties’ intent.” Id. (internal quotation marks omitted).

Similarly, in Harry Hoffman Printing, Inc. v. Graphic Communications

International Union, Local 261 —the case relied upon by the District

Court—we vacated an arbitral decision imposing additional due

process requirements because the arbitration panel “creat[ed]

6 The District Court did not have the guidance of Oxford Health Plans when

deciding whether to vacate the arbitral award in this case.11 No. 13

‐ 2579

‐ cv

entirely new terms” in the CBA, notwithstanding a so

‐ called “no

modification” clause. 950 F.2d 95, 100 (2d Cir. 1991). Simply put, as

in Stolt

‐ Nielsen

, the arbitral panel’s decision in Harry Hoffman lacked

any contractual basis and, indeed, was expressly prohibited by the

CBA. See id

. at 99

‐ 100.

The situation here is analogous to Oxford Health Plans :

Arbitrator Kelly looked at the terms of the CBA and concluded that,

in the circumstances presented, they supported application of

collateral estoppel. Nothing in the CBA expressly forecloses use of

preclusion principles with respect to MSPB appeals or other

grievance proceedings. Moreover, we have held that under a broad

arbitration agreement such as the one at issue in this case, arbitrators

possess authority to apply collateral estoppel based on prior judicial

or administrative decisions. See, e.g.

, U.S. Fire Ins. Co. v. Nat’l Gypsum

Co.

, 101 F.3d 813, 817 (2d Cir. 1996) (“[A]mbiguity as to whether an

issue [of collateral estoppel] is within the scope of an arbitration

agreement is resolved in favor of arbitrability.”); Nat’l Union Fire Ins.

Co. v. Belco Petroleum Corp.

, 88 F.3d 129, 135 (2d Cir. 1996) (“Nothing

in the arbitration clause gives any indication that anyone other than

the arbitrator should decide the preclusive effect of a prior

arbitration.”).

In sum, Arbitrator Kelly concluded that Section 16.9

demonstrated the shared intent of the parties to the CBA to permit

decisions of the MSPB to inform, and in some cases, preclude

decisions in a subsequent arbitration. Nothing in the CBA expressly

foreclosed this conclusion. The District Court concluded that, “[i]f12 No. 13

‐ 2579

‐ cv

one were to draw any inference from [Section 16.9], it would be the

converse inference that, because the [CBA] explains where principles

of preclusion do apply, those principles do not apply elsewhere.”

Am. Postal Workers Union

, 2013 WL 1890264, at *4. That is simply a

different interpretation of the contract, and while arguably a better

interpretation of the CBA, it is simply not a basis for vacatur.

Because Kelly was “arguably construing or applying the contract,”

his decisions “must stand, regardless of a [district] court’s view of its

(de)merits.” Oxford Health Plans

, 133 S. Ct. at 2068 (internal quotation

marks omitted).

CONCLUSION

To summarize, we hold that:

(1) Under the broad arbitration agreement in the CBA,

the preclusive effect of a prior judicial or

administrative decision is a matter to be decided by

the arbitrator.

(2) Nothing in the CBA foreclosed application of

preclusion principles by the arbitrator.

(3) The arbitrator did not exceed his authority by

interpreting the terms of the contract, whether

correctly or not, to permit use of collateral estoppel

based on a prior administrative decision.

Accordingly, we REVERSE the May 16, 2013 judgment of the

District Court and REMAND with instructions to confirm the

arbitral award.