Opinion ID: 855223
Heading Depth: 2
Heading Rank: 3

Heading: claim for relief

Text: As a preliminary matter, we address and dispose of the Railway’s waiver argument. Citing a Seventh Circuit case, Pokuta v. Trans World Airlines, Inc., 191 F.3d 834, 840 (7th Cir. 1999), the Railway urges that we apply the general principle that failure to raise an allegation of bias by an arbitrator until after entry of the final award constitutes waiver of the claim to § 153(q) of the Railway Labor Act. Applying this rule, the Railway argues that the Union failed to raise its objection regarding corruption either to the NMB or Peterson. Specifically, the Railway contends that, while Schollmeyer did write to the NMB objecting to the reassignment, he did so on the basis that the NMB might not fund the second Board. Therefore, the Railway argues, because the Union failed to raise an objection regarding corruption, it has waived the claim. This case does not require us to decide whether to import the waiver-of-arbitration-bias rule into the Act. Rather, we agree with the district court that, at the motion to dismiss stage, the Union properly alleged that it raised the corruption objection to Peterson. United Transp. Union v. BNSF Ry. Co., No. 10-CV-05808, 2011 WL 3055226, at  (W.D. Wash. July 25, 2011) (“For the purposes of this Motion, the Court UNITED TRANSP . UNION V . BNSF RAILWAY CO . 29 must assume UTU made the corruption argument to Peterson and that Peterson ignored it.”) Although the Railway is correct that Schollmeyer’s objection to the NMB was not based on any allegation of corruption, it ignores his declaration, where he stated the following: I did sign the award which came out of PLB 7254, but my reasons for doing so are not accurately portrayed at the brief of the BNSF at Page 11, lines 4–5. My signature does not equate with a concurrence in the result. It is meant only to signify that I was present and participated in the hearing and the discussion. I oppose the result. I told Boldra and Peterson specifically about Mr. Boldra’s threat to Zimmerman in February of 2009, at executive session, about the recusal and the dismissal, and how I thought it was improper. Obviously, those arguments weren’t successful with the majority of PLB 7254. Boldra contests this assertion in his declaration, but at the motion to dismiss stage, we accept the facts as they are alleged by the plaintiff. Therefore, even under the Railway’s preferred rule (which we neither adopt nor reject), we find that the Union did not waive its corruption claim.
When deciding whether a pleading states a plausible claim for relief, we are required by Rule 12(b)(6) to consider a complaint’s factual allegations “together with all reasonable inferences” from those allegations. Cafasso, U.S. ex. re. v. General Dynamics C4 Systems, Inc., 637 F 3d 1047, 1054 30 UNITED TRANSP . UNION V . BNSF RAILWAY CO . (9th Cir. 2011). Applying that standard, we conclude that the Union properly stated a claim upon which relief may be granted under § 153(q) First of the Act. It is important, as a preliminary matter, to distinguish between the Zimmerman Order and the Peterson Award, both of which can, if the Union can prove its allegations, be set aside as the product of corruption, but for different (although related) reasons. With regard to the Zimmerman Order, the district court did not address whether the Union properly alleged corruption because it had already granted dismissal under 12(b)(1). Nevertheless, the Union’s allegations present a plausible claim for setting aside the Zimmerman Order. If Boldra, as a high-ranking Railway official and as the Railway’s representative on the Board, made such a statement and intended it as an economic threat against Zimmerman if she did not change the outcome of the Zimmerman Order, then Boldra committed an act of attempted extortion and impaired the integrity of the arbitral process itself. Because such conduct by any member of a Board would justify setting aside the Order, we conclude that the Union properly stated a plausible claim for which relief could be granted with regard to both the Zimmerman Order and the Board’s failure to decide the dispute. If the Union’s allegations are true, the Peterson Award can also be set aside as the product of corruption. The Union alleges that Peterson was made aware that the Railway had threatened the prior neutral arbitrator with economic ruin when she circulated her tentative ruling against the Railway. It is therefore plausible, under the Union’s allegations, that Peterson’s decision reflected precisely the same fear regarding the Railway’s threat as did Zimmerman’s when she decided to dismiss the proceeding after being told that she would be unable to work for a Class One railroad again if she UNITED TRANSP . UNION V . BNSF RAILWAY CO . 31 issued decisions like the one in this case. Accordingly, we conclude that the Union has properly stated a claim upon which relief can be granted with regard to the Peterson Award.
In order to assess the Union’s claim, we must first define “corruption” under the RLA.14 The legislative history behind the 1966 amendments is explicit that Congress intended that review for corruption under the RLA would mirror review for corruption in arbitral decisions generally. H. Rep. 89-1114, at 3, 16. Because the Federal Arbitration Act (FAA), initially enacted in 1925, allows vacatur “where the award was procured by corruption, fraud, or undue means,” 9 U.S.C. § 10(a)(1), one might expect to find reasonably developed federal doctrine on what constitutes “corruption” in cases under the FAA. In fact, while many FAA cases discuss “fraud” or “undue means,” no case by the Supreme Court or a court of appeals discusses the “corruption” prong of arbitral decisions. 14 Because we analyze the Union’s claim as one of corruption, we do not respond in detail to the district court’s discussion applying the fraud test, as set forth in Pacific & Arctic Railway, 952 F.2d 1144 (9th Cir. 1991). Because the Railway’s brief on appeal mirrored the district court’s reliance on fraud, we also do not respond to its contentions. This should not, however, be read as an endorsement of the district court’s reasoning in applying the fraud doctrine. Indeed, the district court’s suggestion that Peterson could not have committed fraud because he mentioned the Union’s arguments before dismissing them is plainly incorrect. Mentioning a party’s arguments (and then ruling against the party) does not show a lack of fraud or corruption. 32 UNITED TRANSP . UNION V . BNSF RAILWAY CO . Despite the absence of FAA doctrine specifically defining what constitutes corruption, we are not left without guidance. As explained in Section I.A, Congress created the NRAB scheme to ensure an expeditious resolution to minor disputes in the railroad industry. Accordingly, it intended that NRAB decisions be accorded a degree of finality and thus limited judicial review to the narrow grounds set forth in 45 U.S.C. 153(q) First. Being mindful of Congress’s interest in the finality in the NRAB scheme, we must ensure that the definition of corruption under the RLA encompasses only serious misconduct—i.e., conduct of the sort that would justify vacatur of an NRAB decision. See Pacific & Arctic Railway, 952 F.2d 1144, 1148 (9th Cir. 1991) (adopting a more rigorous test for “fraud” under the RLA than the test for “fraud” under common law because of the “strong federal policy favoring finality”); Dogherra v. Safeway Stores, Inc., 679 F.2d 1293, 1297 (9th Cir. 1982) (“[I]n order to protect the finality of arbitration decisions, courts must be slow to vacate an arbitral award . . . .”); see also Toyota of Berkeley v. Auto. Salesman’s Union, Local 1095, United Food & Commercial Workers Union, 834 F.2d 751, 755 (9th Cir. 1987) (stating that the “appearance of impropriety, standing alone, is insufficient to” vacate an arbitral proceeding), amended, 856 F.2d 1572 (9th Cir. 1988).15 We therefore hold that corruption under the RLA encompasses three categories of conduct. First, corruption 15 Courts have also recognized that arbitration omits many of the niceties of federal courts, and “whatever indignation a reviewing court may experience in examining the record, it must resist the temptation to condemn imperfect proceedings without a sound statutory basis for doing so.” Forsythe In’l, S.A. v. Gibbs Oil Co. of Texas, 915 F.2d 1017, 1022 (5th Cir. 1990). UNITED TRANSP . UNION V . BNSF RAILWAY CO . 33 includes acts that threaten the integrity of arbitral proceedings that are either quasi-criminal or criminal in nature, including, but not limited to, acts of violence or threats thereof. Second, corruption encompasses acts of bribery and extortion16 that threaten the integrity of arbitral proceedings, the latter of which includes, but is not limited to, threats of economic injury.17 Third, corruption extends to similarly egregious abuses of office that threaten the integrity of arbitral proceedings. Additionally, as with fraud under the RLA, corruption must be proven by clear and convincing evidence. Dogherra v. Safeway Stores, Inc., 679 F.2d 1293, 1297 (9th Cir. 1982). By limiting corruption to the categories set forth above and by adopting a heightened evidentiary standard, we ensure that NRAB determinations maintain the presumption of finality that Congress intended. We turn now to the facts of the case. If the Union’s allegations are taken in the light most favorable to it as the non-moving party, we conclude that Boldra’s statement to the neutral member, upon reviewing her proposed decision, that “[i]f you are going to issue these kinds of opinions, you will never work for a Class One railroad again,” can, if proven in subsequent proceedings, plausibly bear the Union’s interpretation as a threat of economic retaliation that threatens the integrity of arbitral proceedings. We explained supra that 16 W e also agree with the argument that “extortion” is a species of “bribery.” Cf. Wilkie v. Robbins, 551 U.S. 537, 564 n.12 (2007) (“[T]he Hobbs Act expanded the scope of common law extortion to include private perpetrators while retaining the core idea of extortion as a species of corruption, akin to bribery.”). 17 An act of attempted bribery or extortion, so long as it threatens the integrity of arbitral proceedings, would also constitute corruption under the RLA. 34 UNITED TRANSP . UNION V . BNSF RAILWAY CO . a threat of economic injury that threatens the integrity of arbitral proceedings is a form of extortion, which is a category of corruption under the RLA. Thus, if we take the Union’s allegations as true and accept the meaning of Boldra’s statement that the Union imputes to it, as we must at this stage of the proceedings, Boldra committed an act of attempted extortion, and his conduct would therefore constitute corruption under the RLA. The Union’s understanding of Boldra’s statement is not, of course, the only possible interpretation. Under other interpretations, the statement might not support a finding of corruption, and we do not, by this opinion, prejudge whether Boldra’s conduct actually constituted corruption under the RLA. The Railway, for example suggests a very different interpretation of Boldra’s alleged statement. It claims that, at the executive session, Zimmerman said that her notes reflected that Boldra had previously agreed that reinstating employee Kite would be an acceptable result. Boldra swore by declaration that he told Zimmerman that her notes were incorrect and that he had never so agreed. He further claims that he made the alleged statement in order to remind Zimmerman of the importance of the case to Railway because it involved what the Railway understood to be an employee’s second-time alcohol violation. Under the Railway’s interpretation, Boldra likely meant to convey his belief that Zimmerman’s draft award was so erroneous, or apparently biased, that it would destroy Zimmerman’s credibility in the labor arbitration industry. Such a prediction, though potentially inappropriate in a professional setting, may not be tantamount to extortion. As with the Union’s interpretation, this is a possible construction of Boldra’s statement, but a fact-finder would UNITED TRANSP . UNION V . BNSF RAILWAY CO . 35 have to determine whether, in the context of the particular case before it, the statement warranted a finding of extortion. This is true with respect to the Union’s interpretation, the Railway’s, and other possible interpretations as well. The question of the meaning of Boldra’s statement cannot be resolved at the stage of a motion to dismiss, and we leave to the fact-finder the ultimate determination of what Boldra actually said and whether any statement he may have made constituted corruption.
As explained supra, the Union alleges that it communicated Boldra’s misconduct in the first arbitration to Peterson. We can therefore infer that Peterson was fully aware that, when a neutral arbitrator had proposed ruling against the Railway, the Railway’s representative had threatened the arbitrator with never working again for a Class One Railroad. It is therefore plausible, as the Union alleges, that Peterson himself wanted to work for a Class One Railroad again, and might have been concerned that he, like Zimmerman, would be threatened if he chose to rule against the Railway. Based on these allegations, Peterson’s issuance of the Award in favor of the Railway could conceivably be the result of corrupt action, for reasons similar to those related to the Zimmerman Order. Of course, the Union would have to substantiate its allegations by clear and convincing evidence at the summary judgment phase, or perhaps at a trial. Because we deal only with this case at the motion to dismiss stage, we need conclude only that the Union’s allegations state a plausible claim upon which relief can be granted. They do so here. 36 UNITED TRANSP . UNION V . BNSF RAILWAY CO . Even if the Union were unable to prove that Peterson acted under an implicit threat in issuing an award in favor of the Railway, § 153(q) First nevertheless allows for the setting aside of the Peterson Award as the tainted product of Boldra’s alleged corruption, if such corruption (as defined herein) is proved by the Union by clear and convincing evidence. Section 153(q) First states that the district court may “set aside” an order “for fraud or corruption by a member of the division making the order.” Under the plain terms of the statute, the Peterson Award can be set aside because Boldra was a member of the Peterson Board and, under the Union’s allegations, he acted corruptly. Moreover, under those allegations, the Peterson Board would not have existed but for corruption by Boldra. That is, had Boldra not threatened Zimmerman, who then recused herself, there would have been no Peterson proceedings and hence no Peterson Award. Furthermore, the Union’s allegations state that Boldra’s corruption had a direct causal relationship to the Peterson Award. The Union contends that the Railway’s intended purpose in leveling the economic threat against Zimmerman was, inter alia, to re-list the case and acquire a new hearing in which it might (and did) prevail. Indeed, because the Railway’s deficiency in the Zimmerman proceedings was apparently a failure to include evidence of the discharged employee’s prior violation, a second hearing offered Boldra an opportunity to enhance his arguments before a new neutral arbitrator. Thus, under the allegations set forth in the Union’s Petition for Review, the Peterson Award was both the intended and actual product of Boldra’s alleged corruption. Accordingly, under § 153(q) First, the Peterson Award can be “set aside . . . for corruption” by Boldra, the Railway’s representative in the proceeding and a necessary voting UNITED TRANSP . UNION V . BNSF RAILWAY CO . 37 member in order to achieve a majority award in favor of the Railway.18 The Railway asserts that the Peterson Award should instead be viewed as curing the alleged corruption that occurred during the Zimmerman proceedings. It contends that, because no threat was made during the Peterson proceedings, Peterson’s decision to issue the award in the Railway’s favor was based on his independent, neutral judgment. The Peterson Award, it argues, is therefore the outcome that the Railway would have acquired had it been given a new hearing without a corrupt arbitrator. The Railway contends that the Union may not be happy with the Peterson Award, but the harm from the alleged corruption has been cured by the issuance of that Award. This argument fails on several accounts. First, as a preliminary matter, the Union’s allegations contradict the premise that, because no explicit threat was made during the Peterson hearing, no threat could have affected the outcome of those proceedings. The Union alleges that, because Peterson was fully aware of the threat made during the Zimmerman proceedings, the threat actually carried over into the Peterson proceedings. Thus, at the motion to dismiss 18 The district court believed that the Peterson Award could not be set aside because the alleged corruption had not been used “to obtain the award.” Pacific & Arctic Railway, 952 F.2d 1144, 1151 (9th Cir. 1991). In fact, as explained supra in text, under the allegations of the complaint, that is exactly what the Railway was seeking to accomplish with its economic threat to Zimmerman: acquire a new hearing in which it could prevail. It is true that the Railway could not guarantee itself an award in its favor. However, there is no guarantee requirement in Pacific & Arctic Railway. If the Railway used corruption “to obtain the [Peterson A]ward,” it can be set aside. 38 UNITED TRANSP . UNION V . BNSF RAILWAY CO . stage, drawing all inferences in favor of the non-moving party, we cannot accept the Railway’s argument. Second, and more fundamental, the Railway’s argument is properly one of remedy: that the remedy for the alleged corruption at the Zimmerman proceedings would have been to remand for a new hearing before a different neutral arbitrator and that such a hearing effectively occurred here in the form of the Peterson proceedings. As we discuss further infra, we cannot determine the appropriate remedy at this stage of the proceedings, and thus the Railway’s argument is premature. Third, even if an untainted hearing were the appropriate remedy, the Peterson proceedings fail to meet this description because Boldra, the Railway representative who allegedly made the threat of economic retribution, was a member of the Board that issued the Peterson Award and a necessary signatory to it. Even if the Peterson Award were free of Zimmerman’s alleged taint, it is not free of Boldra’s. Thus, as alleged, the Peterson Board and the Peterson Award were tainted. These and other factual matters may be litigated at the summary judgment or trial stage. We cannot conduct a factual inquiry here. At this stage, however, on the basis of the Union’s allegations, we reject the Railway’s curing argument and hold that, in asking the district court to set aside the Peterson Award, the Union stated a claim upon which relief can be granted.
Because we hold that the district court erred in dismissing the Petition for Review on 12(b)(1) and 12(b)(6) grounds, we remand the case to that court to allow the Union to attempt to prove its allegations of corruption by clear and convincing evidence. If the Union prevails on the merits and the district court sets aside the Zimmerman Order and/or the Peterson UNITED TRANSP . UNION V . BNSF RAILWAY CO . 39 Award due to corruption, it would then have to consider what remedy might be appropriate. The RLA broadly empowers the district court to provide a remedy that it deems appropriate. 45 U.S.C. § 153(q) First (allowing the district court “to affirm the order of the division, or to set it aside, in whole or in part, or it may remand the proceedings to the division for such further action as it may direct” (emphasis added)). Under this broad power, the district court has a number of alternatives. It may remand the case back to the Board for a new untainted hearing; it may remand for a new hearing subject to various procedural or substantive limitations; it may remand allowing the Board to make its own determination as to how to proceed (including what evidence may be introduced or shall be excluded at any further hearing); or it may direct such further action by the Board as the court deems appropriate. In its Petition for Review, the Union asked for reinstatement of the Zimmerman Draft Award. Although the district court is empowered to provide for such a remedy or to allow the Board to decide whether to do so, we cannot determine at this stage of the proceedings that this would be an appropriate remedy in this case. Nor is it our function to make such a determination now. Any such decision must be based on the facts, as established at summary judgment or proven at trial.