1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-16-1995

United Transp v. Suburban Tran

Precedential or Non-Precedential:

Docket 94-5336

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Recommended Citation

"United Transp v. Suburban Tran" (1995). 1995 Decisions. Paper 77.

http://digitalcommons.law.villanova.edu/thirdcircuit_1995/77
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 No. 94-5336 

 ___________ 

 UNITED TRANSPORTATION UNION LOCAL 1589 

 vs. 

 SUBURBAN TRANSIT CORP. 

 SUBURBAN TRANSIT CORP., a corporation of the 

State of New Jersey 

 vs. 

 UNITED TRANSPORTATION UNION LOCAL 1589, 

AFL-CIO 

 United Transportation Union Local 1589, 

 Appellant. 

 ___________ 

 APPEAL FROM THE UNITED STATES DISTRICT COURT 

 FOR THE DISTRICT OF NEW JERSEY 

 (D.C. Civil Nos. 93-cv-05728 and 93-cv-05769) 

 ___________ 

 ARGUED DECEMBER 6, 1994 

 BEFORE: STAPLETON, ROTH and LEWIS, Circuit Judges. 

 (Filed March 16, 1995) 

 ___________ 

Timothy R. Hott (ARGUED) 

Hott & Margolis 

591 Summit Avenue, Suite 300 

Jersey City, NJ 07306 

 Attorney for Appellant

Francis A. Mastro (ARGUED) 

Apruzzese, McDermott, Mastro & Murphy 

25 Independence Boulevard 

Post Office Box 112 

Liberty Corner, NJ 07938 

 Attorney for Appellee

 ___________ 

 OPINION OF THE COURT 

 ___________ 

LEWIS, Circuit Judge. 

 United Transportation Union, Local 1589, AFL-CIO (the 

"Union") appeals a district court order vacating an arbitration 

award in favor of Joseph Nagy, a former employee of Suburban 

Transit Corporation ("Suburban"). Because we agree with the 

Union that the district court failed to accord the arbitration 

award proper deference, we will reverse. 
I. 

A. 

 Suburban and the Union are parties to a collective 

bargaining agreement ("CBA"). Under the CBA, Suburban is given 

certain rights to discipline and discharge its employees, and the 

Union is entitled to contest any disciplinary action of 

management. The parties agreed in the CBA to submit to 

arbitration any grievance that they cannot resolve. 

 More specifically, Article I, Section 5 of the CBA 

states that "[t]he Union recognizes the right of the Company to 

exercise all functions of management, including . . . the right 

to hire, promote, demote, transfer, and discipline or discharge 

for proper cause." CBA, art. I § 5. The same provision explains 

that "[t]he Union shall retain the right to contest any action of 

management in accordance with the appropriate provisions of this 

contract." In Article IV, entitled "Discipline Procedure," the 

CBA sets forth eleven sections describing a variety of 

disciplinary procedures. For most alleged infractions, an 

employee is entitled to a hearing before discipline is imposed. 

However, in certain circumstances, Suburban has the right to 

suspend the employee immediately and then promptly hold a 

hearing. In virtually all circumstances, an employee may appeal 

from his hearing to "the highest officer of Suburban" (CBA art. 

IV, § 3), and if the parties cannot resolve their differences 

even at this stage, "the dispute may be presented to an 

arbitrator selected through the rules of the American Arbitration 

Association or the N.J. State Board of Mediation . . . ." Id. 
art. V, § 1(d). With respect to arbitration, the parties agree 

that "[t]he determination of th[e] arbitrator shall be final and 

binding on both parties" (id.), but the CBA also explains that 

the arbitrator's authority is not plenary; rather, 

 [a]uthority of the arbitrator shall be 

limited to the determination of the dispute 

or grievance arising out of the 

interpretation, application or operation of 

the provisions of this agreement on 

submission of the issues involved by the 

parties to this agreement. He shall not have 

any authority whatsoever to alter, amend or 

modify any of the provisions of this 

agreement. 

Id. art. V, § 3. 

B. 

 On December 15, 1992, Nagy was involved in a bus 

accident on the New Jersey Turnpike: he rear-ended a tractor 

trailer because he was tailgating. In his 12 years of 

employment, he had been involved in 24 accidents, nine of which 

were deemed preventable. This was his third preventable rear-end 

collision. 

 Suburban fired Nagy, and the Union protested. When the 

parties could not resolve their dispute, the matter was submitted 

to arbitration on the following questions: 

 Was the discharge of Joseph Nagy for just cause? 

 If not, what shall be the remedy? 

 After a hearing, the arbitrator ruled that Nagy was 

responsible for the accident, but that Suburban should not have 

fired him. Instead, the arbitrator concluded, discharge was too 

harsh a sanction for a long term employee where the employee had 
been afforded no opportunity to improve his driving skills 

through a retraining program. 

 Pursuant to 9 U.S.C. § 10(d), the Union and Suburban 

moved in the district court to enforce and vacate, respectively, 

the arbitrator's award. The district court, in a written 

opinion, denied the Union's motion to enforce and granted 

Suburban's motion to vacate the award, reasoning that the 

arbitrator had read into the CBA terms that were not there. The 

district court had jurisdiction under 29 U.S.C. § 185(a), and we 

have jurisdiction under 28 U.S.C. § 1291. 

II. 

 On appeal, the Union argues that because the 

arbitrator's award was at least arguably based on a construction 

of the CBA, the district court erred when it granted Suburban's 

motion to vacate the award. We agree. 

A. 

 District courts have very little authority to upset 

arbitrators' awards. As we explained in News America 

Publications, Inc. v. Newark Typographical Union, Local 103, 918 

F.2d 21 (3d Cir. 1990), "courts play an extremely limited role in 

resolving labor disputes." Id. at 24. "A court may not overrule 

an arbitrator simply because it disagrees with the arbitrator's 

construction of the contract . . . or because it believes its 

interpretation of the contract is better than that of the 

arbitrator." Id. (internal citation omitted). Rather, "[a]s 

long as the arbitrator has arguably construed or applied the 

contract, the award must be enforced, regardless of the fact that 
a court is convinced that [the] arbitrator has committed a 

serious error." Id. Thus, "there must be absolutely no support 

at all in the record justifying the arbitrator's determinations 

for a court to deny enforcement of an award." Id. "[O]nly where 

there is a manifest disregard of the agreement, totally 

unsupported by principles of contract construction and the law of 

the shop, may a reviewing court disturb the award." Id. 

(internal quotation omitted). Thus, as we wryly concluded, "[i]t 

should be clear that the test used to probe the validity of a 

labor arbitrator's decision is a singularly undemanding one." 

Id. 

 Although News America is notable for the thoroughness 

of its exposition, it is by no means the only source of our 

longstanding disinclination to allow district courts to overturn 

arbitration awards. To the contrary, our case law is uniform on 

this point. E.g., Roberts & Schaefer Co. v. Local 1846, UMW, 812 

F.2d 883, 885 (3d Cir. 1987) ("[e]ven when the award was dubious, 

and the result one that we would not have reached had the matter 

been submitted to the court originally, we have upheld the 

arbitrator's decision"); United Indus. Workers v. Government of 

the Virgin Islands, 987 F.2d 162, 170 (3d Cir. 1993) (scope of 

review is "narrowly circumscribed"); Newark Morning Ledger Co. v. 

Newark Typographical Union, 797 F.2d 162, 165 (3d Cir. 1986) (our 

"strict standard means that a reviewing court will decline to 

sustain an award `only in the rarest case'"). As long as an 

arbitrator's decision arguably construes or "draws its essence" 

from the CBA, a district court is not permitted to vacate the 
award. "An arbitration award draws its essence from the 

bargaining agreement if `the interpretation can in any rational

way be derived from the agreement, viewed in the light of its 

language, its context, and any other indicia of the parties' 

intention." Tanoma Min. Co., Inc. v. Local Union No. 1269, UMWA, 

896 F.2d 745, 748 (3d Cir. 1990), quoting and adding emphasis to 

Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1128 (3d Cir. 

1969). Only when an arbitrator "acted in manifest disregard of 

the law, or if the record before the arbitrator reveals no 

support whatsoever for the arbitrator's determination," may a 

district court invade the province of the arbitrator. United 

Indus. Workers, 987 F.2d at 170. 

 The reason for such a lenient standard is not difficult 

to discern. "[F]requent judicial disapproval of the awards of 

labor arbitrators would tend to undermine a system of private 

ordering that is of the highest importance to the well-being of 

employer and worker alike." Newark Morning Ledger, 797 F.2d at 

165. 

B. 

 With these considerations in mind, we turn to the 

district court's decision to vacate the arbitration award in this 

case. Although the district court recognized that it had limited 

authority to review in this case, the court nevertheless found 

that the arbitrator's award did not draw its essence from the CBA 

here because the arbitrator "read[] into" the CBA terms that were 

not there -- specifically, provisions dealing with retraining, 

progressive discipline, setting criteria for retraining, and 
defining who is entitled to retraining. This conclusion, 

however, was inaccurate. 

 Contrary to the district court's reasoning, the 

arbitrator did not impermissibly "read into" the parties' 

agreement terms that were not there. Rather, the arbitrator 

simply interpreted the ambiguous term "proper cause" in a manner 

unsatisfactory to management. The CBA allows Suburban to 

discipline or discharge for "proper cause" (art I, § 5), but does 

not define the phrase. When the grievance was submitted to 

arbitration, the arbitrator was forced to decide what "proper 

cause" meant (or "just cause" according to the language of the 

questions submitted to arbitration, supra p. 4). We cannot say 

that the arbitrator was engrafting provisions onto the CBA when 

he evidently decided that he must decide whether it was fitting

(a synonym for "proper") and fair or equitable (two synonyms of 

"just," the term used in the actual submission to the arbitrator) 

for Suburban to have discharged a long-term employee for the 

accident in question. In making this determination, the 

arbitrator wrote that although it was clear that Nagy had been 

negligent, what was not clear was the "validity of the 

punishment" imposed by Suburban. He noted that although Nagy had 

been involved in many accidents, some were minor and occurred 

shortly after he was hired, and he had also received three annual 

safety awards. The arbitrator also explained that Nagy had never 

been offered any retraining despite Suburban's recent decision to 

implement such a program. This surprised and concerned the 

arbitrator because Nagy was a "veteran employee who has given 
loyal service to his company for some twelve years." Taking all 

of this into account, the arbitrator apparently determined that 

Suburban had proper cause to punish Nagy in some manner, but not 

to discharge him. Thus, the arbitrator concluded that Nagy was 

properly punished through the suspension he had served, "it being 

understood that [Nagy] shall cooperate with management in 

undergoing a retraining program." 

 Suburban protests that this interpretation of the 

phrase "proper cause" imposed upon the company a "progressive 

discipline" system not bargained for by the parties. The 

complete answer to this contention is that the parties bargained 

for contractual ambiguity instead of defining "proper cause" in 

the CBA. Having decided not to define the phrase, Suburban 

cannot escape the results of that bargain simply because the 

arbitrator has chosen to interpret that phrase differently than 

Suburban may have wanted -- even if Suburban's interpretation of 

the CBA is more reasonable than the result announced by the 

arbitrator. News America, 918 F.2d at 24 ("[i]n reviewing an 

arbitral award, courts must recognize that the parties bargained 

for the arbitrator's construction of the agreement"); Roberts & 

Schaefer Co. v. Local 1846, UMW, 812 F.2d 883, 885 (3d Cir. 1987) 

("after bargaining for the decision of this arbitrator, the 

Company cannot avoid his decision merely because the arbitrator 

may have reached an incorrect result"). To the extent the 

arbitrator's award was based upon a theory that the parties 

intended "proper cause" to incorporate some form of progressive 
discipline, that interpretation has some basis in the CBA.1 And 

in any event, even if the arbitrator's interpretation of the 

phrase "proper cause" did, in effect, impose a progressive 

discipline system upon the parties, we have recognized that such 

a result can be a justified interpretation of a "just cause" 

provision. See Arco-Polymers, Inc. v. Local 8-74, 671 F.2d 752 

(3d Cir. 1982) ("`[i]n a proper case an arbitrator . . . may 

construe a "just cause" provision of a labor contract to include 

a progressive discipline requirement and may determine that 

certain conduct is "just cause" for discipline but not for 

discharge'" (quoting Mistletoe Express Service v. Motor 

Expressmen's Union, 566 F.2d 692, 695 (10th Cir. 1977))). 

 In sum, that the arbitrator's interpretation of "proper 

cause" was a legitimate reading of that phrase compels the 

conclusion that the arbitrator's award both construed and drew 

 

1. The CBA itself could be read to require differing gradations 

of punishment based upon different degrees of culpability. The 

CBA discusses "minor infractions," which have less formal 

adjudicative procedures, and more serious infractions, including 

rear-end collisions, which trigger Suburban's right to 

immediately suspend the driver, but which also trigger a driver's 

right to a hearing if suspension is imposed. See CBA art. IV, 

§§ 5, 7, 8. The procedures for resolving these more serious 

infractions do not state that a driver must be fired if he is 

found responsible for wrongdoing; in fact, the phrasing clearly 

contemplates that suspension is a punishment short of -- and only 

potentially leading to -- discharge. See id. § 8. Thus, the CBA 

contemplates that some actions that may be cause for suspension 

will not be cause for discharge, and the arbitrator did not 

manifestly disregard the CBA in taking into consideration the 

context in which the dispute arose (Nagy's conduct, his tenure, 

his overall driving record, and Suburban's recent adoption of a 

driver retraining program) in deciding Nagy's culpability and the 

propriety of firing him, as opposed to merely suspending him. 
its essence from the CBA. That being the case, the district 

court had no grounds to vacate the award. 

C. 

 Suburban urges that if we find that the district court 

erred in vacating the arbitration award, we should nevertheless 

affirm the district court on the ground that the award violates 

public policy. Essentially, Suburban argues that public policy 

demands that common carriers provide safe carriage to their 

passengers, and that the arbitration award undermines this 

policy. However, we decline Suburban's invitation to invalidate 

the award on public policy grounds. 

 Arbitration awards rendered pursuant to collective 

bargaining agreements can be vacated when such awards violate 

public policy. W.R. Grace & Co. v. Local Union 759, 461 U.S. 

757, 766 (1983). However, the public policy "must be well 

defined and dominant, and is to be ascertained `by reference to 

the laws and legal precedents and not from general considerations 

of supposed public interests.'" Id. at 766, quoting Muschany v. 

United States, 324 U.S. 49, 66 (1945). Although we have rejected 

the argument that an arbitration award may be set aside on public 

policy grounds only when it "violates positive law," we have 

stressed that a public policy must be "well defined and dominant" 

before it may be used to upset an arbitrator's award. Exxon 

Shipping Co. v. Exxon Seamen's Union, 11 F.3d 1189, 1192, 1194 

(3d Cir. 1993) (arbitration award vacated as against public 

policy when it required shipping company to reinstate able bodied 

seaman on oil tanker after seaman was found to be highly 
intoxicated while on duty); see also Exxon Shipping Co. v. Exxon 

Seaman's Union, 993 F.2d 357 (3d Cir. 1993); Stroehmann Bakeries, 

Inc. v. Local 776, Int'l Brotherhood of Teamsters, 969 F.2d 1436 

(3d Cir. 1992). In determining whether a public policy exists, 

federal courts must use common sense, keeping in mind that "a 

formulation of public policy based only on `general 

considerations of supposed public interests' is not the sort that 

permits a court to set aside an arbitration award that was 

entered in accordance with a valid collective bargaining 

agreement." United Paperworkers Int'l Union, AFL-CIO v. Misco, 

Inc., 484 U.S. 29, 44 (1987). 

 We have addressed the public policy exception to 

enforcement of arbitration awards in light of W.R. Grace and 

Misco in two recent decisions discussed by the parties here: 

United States Postal Service v. National Assn of Letter Carriers, 

839 F.2d 146 (3d Cir. 1988), and Service Employees Int'l Union 

Local 36 v. City Cleaning Company, Inc., 982 F.2d 89 (3d Cir. 

1992). In Service Employees, we explained that "[t]he public 

policy exception" to the enforcement of arbitration awards "is 

slim indeed." Service Employees, 982 F.2d at 92. The exception 

is available only when "the arbitration decision and award create 

an explicit conflict with an explicit public policy . . .." Id. 

And in Letter Carriers, despite recognizing that customer and 

co-worker safety may be valid public policy, we determined that 

"a policy in favor of protecting co-workers and customers from 

[an employee's] violent conduct (assuming, arguendo, that such a 
policy is properly ascertained) does not require his discharge 

for its fulfillment." Letter Carriers, 839 F.2d at 149-50.2

 We acknowledge that public transportation safety is a 

valid public concern, but Suburban has failed to demonstrate that 

public policy requires vacation of the arbitrator's award here. 

Suburban has not provided us with "laws and legal precedents" 

which describe an "explicit" public policy; rather, what Suburban 

has described as putative public policy is more akin to the 

amorphous "public interests" that were deemed insufficient to 

articulate public policy in W.R. Grace.

3 Furthermore, even if we 

 

2. In three recent cases not discussed by the parties, we 

found that arbitrators' awards should be vacated on public policy 

grounds. See Exxon Shipping Co. v. Exxon Seamen's Union, 11 F.3d 

1189 (3d Cir. 1993) (Exxon Shipping II); Exxon Shipping Co. v. 

Exxon Seaman's Union, 993 F.2d 357 (3d Cir. 1993) (Exxon 

Shipping I); Stroehmann Bakeries, Inc. v. Local 776, Int'l 

Brotherhood of Teamsters, 969 F.2d 1436 (3d Cir. 1992). In each 

of those cases, however, the public policy was much more explicit 

and the conflict between it and the particular award much more 

pronounced than is the case here. 

3. In an effort to demonstrate that the arbitrator's award 

would conflict with explicit public policy, Suburban cites 49 

C.F.R. § 391.25, a Department of Transportation regulation 

requiring motor carriers to review annually their drivers' 

records to ascertain whether any of their drivers are 

disqualified to drive a motor vehicle under 49 C.F.R. § 391.15. 

Suburban cannot contend that the arbitrator's award prevents the 

company from making its annual review under § 391.25, however, 

nor can it suggest that the award forces the company to keep Nagy 

on the road in violation of § 391.15. Section 391.15 

disqualifies a driver in only two circumstances: (1) if the 

driver loses his or her driving privileges, as discussed in § 

391.15(b); or (2) if the driver commits certain "criminal [or] 

other offenses" as detailed in § 391.15(c). Furthermore, 

citation to section 391.25 demonstrates that any "public policy" 

in favor of driver safety is much more lenient than Suburban 

would have it. Only in egregious cases do federal regulations 

disqualify drivers. Neither condition appears to have been met 

in Nagy's case. 
found that Suburban had articulated a public policy which could, 

in some cases, undermine an arbitration award, we still would not 

vacate the award here. Suburban simply has not shown that the 

arbitrator's award in this case would explicitly conflict with 

the public policy championed by the company. Nagy has obviously 

had many accidents, but he has also won a number of safety 

awards. Additionally, the arbitrator's award seeks to encourage 

driver retraining; thus, it seems that the arbitrator had an eye 

toward public safety when he rendered his decision. Therefore, 

Suburban's public policy argument fails to persuade us that the 

arbitrator's award must be vacated. 

III. 

 For the foregoing reasons, we will reverse and remand 

with instructions to confirm the arbitration award.