Opinion ID: 771712
Heading Depth: 3
Heading Rank: 1

Heading: Arbitrary Conduct

Text: 23 As noted, in determining whether a union's conduct was so far outside a wide range of reasonableness as to be irrational, O'Neil, 499 U.S. at 67 (internal citation and quotation marks omitted), we evaluat[e] the rationality of a union's decision in light of both the facts and the legal climate that confronted the negotiators at the time the decision was made, id. at 78. Plaintiffs thus had the burden at trial of establishing that the leadership's decision to negotiate and execute the Amendment, under the factual and legal circumstances existing at that time, was irrational. Their attempt to satisfy this burden was limited to the contention that the Agreement unambiguously provided that the Settlement fund was net of payroll taxes. Because - as explained in the preceding section - this contention is erroneous, it follows that plaintiffs failed to present any evidence from which a reasonable trier of fact could conclude that the leadership's decision to negotiate and execute the Amendment was arbitrary. 24 Indeed, the evidence presented at trial that was relevant to the issue of the rationality of the leadership's decision supports the opposite conclusion - that the leadership's decision to negotiate and execute the Amendment was rational. White Rose's lead negotiator testified at trial that a Joint Counsel 16 official told him that Joint Counsel 16 withdrew as escrow agent because it did not want to undertake the administrative burden required by the escrow agent. 8 As this statement suggests, administration of the Settlement Fund was not a cost-free enterprise. Hence, assuming that the union leadership had been able to secure a replacement escrow agent, the cost of the administration of the escrow account would have to have been borne in some manner, either by the union or from the escrow account. Plaintiffs, however, presented no evidence that showed that such costs would have been significantly less than the $193,000 in payroll taxes that was deducted from the Settlement Fund as a result of the Amendment, such that the leadership's decision to enter into the Amendment rather than secure a replacement escrow agent was irrational. 25 Furthermore, citing relevant case law, White Rose has argued that, under the Agreement, the escrow agent - as opposed to White Rose - was responsible for payroll taxes on the Settlement Fund. See STA of Baltimore-ILA Container Royalty Fund. v. United States, 621 F. Supp. 1567, 1575 (D. Md. 1985), aff'd, 804 F.2d 296 (4th Cir. 1986) (holding that the escrow agent of a settlement fund may be considered the employer for tax purposes). Although plaintiffs dispute this position - just as they dispute White Rose's position on the issue whether the Settlement Fund was net or inclusive of payroll taxes - plaintiffs failed to present evidence that showed that the leadership acted irrationally in entering into the Amendment with White Rose instead of pursuing arbitration 9 or litigation on these issues. Plaintiffs presented no evidence at trial that tended to show that the leadership believed or should have believed that an arbitrator would unquestionably find that the Settlement Fund was net of payroll taxes, nor, assuming that the arbitrator determined that the Settlement Fund was net of payroll taxes, that he or she would go on to find that White Rose - as opposed to the escrow agent - was responsible for the payroll taxes. If the arbitrator would have found that the Settlement Fund was inclusive of payroll taxes, the members would have received the same amount of money that they received pursuant to the Amendment. And even if the arbitrator would have found that the Settlement Fund was net of payroll taxes, if the arbitrator had then found that the escrow agent - as opposed to White Rose - was responsible for the payroll taxes, the leadership likely would have been able to secure a replacement escrow agent only by agreeing to the very sort of amendment they in fact negotiated and executed with White Rose. In view of these significant risks, it was not unreasonable for the leadership to choose the safer course of entering directly into the Amendment with White Rose. 26 Moreover, even assuming arguendo that it was more likely than not that an arbitrator would find in the union's favor on the net vs. inclusive issue and on the issue of whether the escrow agent or White Rose was to be responsible for payment of the payroll taxes, the leadership could have reasonably determined that immediate distribution of a somewhat reduced fund was to be preferred to distribution of the entire $1.5 million after months or even years of costly arbitration or litigation. In other words, on this record, no reasonable trier of fact could conclude that the leadership acted irrationally by negotiating an amendment that produced certain and prompt access to a share of the [Settlement Fund] and avoided the costs and risks associated with major [arbitration and/or] litigation. . . . In labor disputes, as in other kinds of litigation, even a bad settlement may be more advantageous in the long run than a good lawsuit. O'Neill, 499 U.S. at 81. 27 In sum, there is no question that, under the factual and legal circumstances existing at the time, the leadership's decision to negotiate and execute the Amendment fell well within the wide range of reasonableness afforded unions by O'Neill. Hence, in concluding that the leadership's negotiation and execution of the Amendment was arbitrary, the district court clearly erred.