Opinion ID: 3190776
Heading Depth: 2
Heading Rank: 1

Heading: Multi-year award

Text: Hamilton Park’s main contention is that there is no authority in the CBA for Scheinman to issue an award that goes through June 2016. This is true but ultimately not dispositive. That is because parties are permitted to “agree to allow an arbitrator to go beyond the express terms of the collective bargaining agreement.” High Concrete Structures, Inc. of N.J. v. United Elec. Radio & Mach. Workers of Am., Local 166, 879 F.2d 1215, 1218 (3d Cir. 1989). Here, Scheinman found that the parties made such an agreement. Specifically, his award states that “[b]oth sides agreed” to a “multi-year Award, at my discretion.” 8 Meanwhile, Hamilton Park has presented no evidence sufficient to demonstrate that the agreement did not exist. The only evidence it produced shows that neither it nor other members of the bargaining group authorized Tuchman or Scheinman to issue a multi-year award. But there is no competent evidence that Tuchman did not agree to the longer award on behalf of the bargaining group. That evidence might have come in the form of a signed declaration from Tuchman. But, as discussed, Tuchman declined to sign it. We do not assume that Tuchman’s refusal to sign the declaration is necessarily the same as a repudiation of its contents. Indeed, we note that counsel for Hamilton Park represented to the District Court that Tuchman, though he refused to sign the document, “did not deny that he did not authorize Arbitrator Scheinman to issue an award beyond one year.” On appeal, Hamilton Park vigorously challenges the arbitration award but fails to mention—even once—that Tuchman refused to sign a declaration that counsel had submitted to the District Court. The Magistrate Judge found the circumstances surrounding the declaration to be “troubling[].” No doubt. And even more troubling is Hamilton Park’s failure to acknowledge the incident in its briefing. Hamilton Park places great emphasis on the lack of any writing memorializing the agreement to authorize a multi-year award. It argues that an oral agreement would violate the CBA, which requires any changes to be in writing and signed by authorized representatives. But we have held that, once parties are in front of an arbitrator, their decision to submit additional subjects to arbitration—even those beyond the scope of the CBA—need not be “express” and instead “may be based on other relevant . . . actions.” High Concrete Structures, 879 F.2d at 1219. Indeed, an agreement to allow an arbitrator to address particular issues “may be implied 9 from the conduct of the parties.” Teamsters Local Union No. 764 v. J.H. Merritt & Co., 770 F.2d 40, 42 (3d Cir. 1985). In our case, the parties’ relevant conduct was to authorize Scheinman to enter a multi-year award. And the evidence of this is Scheinman’s acknowledgement of the agreement in his award. The CBA’s writing requirement thus does not get Hamilton Park relief from its agreement. For instance, in High Concrete Structures the employer argued that the arbitration award, which went beyond the terms of the CBA, violated both the clause declaring the agreement to be complete and final (i.e., an integration clause) and the provision preventing the arbitrator from changing the agreement’s terms. We disagreed, observing that nothing in the CBA expressly “prohibit[ed] the parties from agreeing to a submission which is broader.” 879 F.2d at 1219 (“[I]n determining the arbitrator’s authority, the court must look not only at the text of the collective bargaining agreement but also at the agreed submission.”). Similarly, nothing in the CBA prohibited Hamilton Park and the union from agreeing to arbitrate additional issues. There are important policy considerations behind the rule from J.H. Merritt and High Concrete Structures. Specifically, there is a “strong federal policy favoring the speedy resolution of labor disputes through arbitration.” J.H. Merritt, 770 F.2d at 43. If a party, through its actions, were able to induce an arbitrator to issue an award outside the CBA and then challenge that award if it is unhappy with it, this policy would be frustrated. Id. Hamilton Park, having agreed to go beyond the CBA, is bound by that determination. As a result, we cannot say that Scheinman “exceeded [his] powers” within the meaning of the FAA. See 9 U.S.C. § 10(a)(4). Nor does the award fail to “draw its essence from 10 the terms of the collective bargaining agreement,” Jersey Nurses, 868 F.2d at 88, because that requirement poses no obstacle where the parties agree to go beyond the scope of the CBA, High Concrete Structures, 879 F.2d at 1219. Meanwhile, there is no tension with a “well-defined and dominant public policy,” Exxon Shipping, 993 F.2d at 360 (internal quotation marks omitted), as holding parties to their representations to an arbitrator by no means contravenes public policy. Finally, there are no concerns about an arbitrator meting out his “own brand of industrial justice,” Citgo Asphalt, 385 F.3d at 816 (internal quotation marks omitted), or giving an award based on “a matter not submitted” for arbitration, 9 U.S.C. § 11(b), because here the evidence demonstrates that Scheinman had the parties’ authorization. In one respect, however, the District Court erred in its analysis. Specifically, it determined that “the Court cannot challenge Arbitrator Scheinman’s finding that the parties consented to expanding his jurisdiction.” For this, the Court relied on the proposition that, as a general matter, we will not “reconsider the merits of an [arbitration] award even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract.” United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 36 (1987). However, this analysis overlooks two considerations. The first is that courts are authorized to review challenges that go “to the making of the agreement to arbitrate.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006) (internal quotation marks omitted). The second is that we can inquire into whether an award is obtained “through the arbitrator’s dishonesty.” Misco, 484 U.S. at 38. All of this goes to say that our deferential review of arbitration awards does not deprive Hamilton Park of the ability to establish that, contrary to Scheinman’s representations, it did not agree to a multi-year 11 award. The fatal flaw for Hamilton Park, however, is that it has not done so. B. Second generation interest arbitration provision The next issue is Scheinman’s inclusion of a second generation interest arbitration provision, which allows the union to force arbitration on any disputes that arise during negotiations over the award’s last year (June 30, 2015–June 30, 2016). This is not a question of Scheinman’s authority to issue an award covering the year ending June 30, 2016. Rather, it is purely a question of the remedy that he imposed.3 And unlike with the extension of jurisdiction to encompass a multi-year award, Scheinman did not find that the parties agreed to a new arbitration provision. Because Hamilton Park did not consent to the provision, its inclusion is contrary to both the FAA and the NLRA. Although this is a matter of first impression for us, we join the company of several of our sister courts that have found second generation interest arbitration provisions to be impermissible without mutual consent. As a starting point, under the FAA arbitration “is strictly a matter of contract.” Bel-Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435, 444 (3d Cir. 1999). As a result, a basic premise is that we “initially must find that there is a valid agreement to arbitrate.” Century Indem. Co. v. Certain Underwriters at Lloyd’s, London, 584 F.3d 513, 523 (3d Cir. 2009). And “[i]f a party has not agreed to arbitrate, the courts have no authority to mandate that [it] do so.” Bel-Ray, 181 3 The parties gave Scheinman the authority to impose all “appropriate remedies.” The key word, of course, is “appropriate.” We must therefore determine whether the arbitration provision is permissible. 12 F.3d at 444. Where a party has not executed an express agreement to arbitrate, we must therefore discern whether any “traditional principles of contract and agency law” can make it nonetheless bound by an arbitration provision. E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 194 (3d Cir. 2001) (internal quotation marks omitted). Here, the initial contract was the CBA. The parties subsequently enlarged Scheinman’s authority under the oral agreement to permit a multi-year award. However, neither the CBA nor the oral agreement contemplated the arbitration of disputes for the year starting June 30, 2015. Nor did Hamilton Park, through its conduct, imply that it agreed to such a provision. It certainly was permitted—similar to what it did when it consented to the longer award—to agree to a new arbitration provision. But there is no evidence that it did. To the extent Scheinman attempted to infer Hamilton Park’s consent by reference to the arbitration provision in the 2008–2013 agreement, that inference was flawed. Under this reasoning, Hamilton Park’s agreement to arbitrate disputes for that contract’s last year (February 28, 2012–February 28, 2013) means that it would consent to having the same arrangement in place for the new award’s last year (June 30, 2015–June 30, 2016). But neither Scheinman in his award nor the union on appeal has identified any principle of contract or agency law that would require a party to arbitrate in the future merely because it has agreed to do so in the past. The District Court notes that Hamilton Park, in agreeing to a multi-year award, never expressly “defin[ed] the boundaries” of Scheinman’s discretion and never objected during the arbitration process to the inclusion of the second generation interest arbitration provision. But this gets things backwards. Our starting principle is not that parties can be 13 forced to arbitrate unless they agree otherwise, but rather that “[i]f a party has not agreed to arbitrate, the courts have no authority to mandate that [it] do so.” Bel-Ray, 181 F.3d at 444. And even assuming there might be circumstances where a lack of objection can signal consent, this is not one of them. There is no evidence that Hamilton Park had any reason to suspect prior to the issuance of the award that it would contain a second generation interest arbitration provision. A party cannot object to what it cannot reasonably foresee. Apart from being untethered from the principles embodied in the FAA, the second generation interest arbitration provision also conflicts with the NLRA’s public policy considerations. Under the NLRA, employers and unions are required to bargain over “wages, hours, and other terms and conditions of employment.” Brockway Motor Trucks, Div. of Mack Trucks, Inc. v. NLRB, 582 F.2d 720, 725 (3d Cir. 1978) (internal quotation marks omitted). On these subjects, the parties have an obligation to negotiate in good faith. NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 349 (1958). By limiting mandatory bargaining to these topics, the NLRA embodies the public policy that, for all other subjects, parties are “free to bargain or not to bargain, and to agree or not to agree.” Id. The question of whether to require arbitration does not relate to any of the mandatory bargaining subjects. As a result, the NLRA allows parties to accept or reject an arbitration provision as they see fit. However, if arbitrators were free to do as Scheinman did here, parties would have no control over the continued inclusion of an arbitration provision. This would allow for an end-run around the NLRA’s public policy considerations. To see how this problem plays out in practice, we start with the undisputed premise that, because an arbitration 14 provision is not a mandatory subject of bargaining, Hamilton Park was under no obligation to agree to arbitration in the 2008–2013 CBA. It is only because Hamilton Park reached a limited agreement—the inclusion of an arbitration provision in a single CBA—that Scheinman was involved in the case in the first instance. He then used this agreement to expand Hamilton Park’s arbitration requirements. If an arbitrator, once empowered to decide a particular dispute, could then require all future disputes to be arbitrated, a party that has once agreed to a limited arbitration provision could forever be held hostage to it. As the Fifth Circuit explained, a party . . . may find itself locked into that procedure for as long as the bargaining relationship endures. Exertion of economic force to rid oneself of the clause is foreclosed, for the continued inclusion of the term is for resolution by [the arbitrator, who is] an outsider. Parties may justly fear that the tendency of arbitrators would be to continue including the clause, for that is exactly what happened in this case. NLRB v. Columbus Printing Pressmen & Assistants’ Union No. 252, 543 F.2d 1161, 1169 (5th Cir. 1976). Because second generation interest arbitration provisions imposed without consent violate the contract law principles of the FAA and the public policy goals of the NLRA, we hold that they are unenforceable. As discussed, there is no evidence that Hamilton Park agreed to have such a provision. Hence it must be removed from Scheinman’s award. Our holding tracks the overwhelming consensus of federal courts. See, e.g., Local Union No. 666, Int’l Bhd. of 15 Elec. Workers, AFL-CIO v. Stokes Elec. Serv., Inc., 225 F.3d 415, 425 (4th Cir. 2000); Local 58, Int’l Bhd. of Elec. Workers, AFL-CIO v. Se. Mich. Chapter, Nat’l Elec. Contractors Ass’n, Inc., 43 F.3d 1026, 1032 (6th Cir. 1995); Am. Metal Products, Inc. v. Sheet Metal Workers Int’l Ass’n Local Union No. 104, 794 F.2d 1452, 1456–57 (9th Cir. 1986); Sheet Metal Workers’ Int’l Ass’n, Local 14 v. Aldrich Air Conditioning, Inc., 717 F.2d 456, 459 (8th Cir. 1983); Columbus Printing, 543 F.2d at 1169–7. See also Globe Newspaper, 648 F. Supp. 2d at 198 (“It appears that every court to have considered this question has concluded that this type of second generation interest arbitration provision is unenforceable . . . .”).4