Court Opinion

ID: 4373729
Source: CourtListenerOpinion
Date Created: 2019-03-05 17:00:23.309978+00
Date Added: 2024-06-11T14:22:09.642112
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                               File Name: 19a0103n.06

                                       Nos. 18-1160/1161
                                                                                     FILED
                                                                                Mar 05, 2019
                                                                            DEBORAH S. HUNT, Clerk
                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

                       18-1160

 INTERNATIONAL          UNION, UNITED    )
 AUTOMOBILE,         AEROSPACE   AND     )
 AGRICULTURAL IMPLEMENT WORKERS OF       )
 AMERICA (UAW), et al.,                  )
                                         )
      Plaintiffs - Appellees,
                                         )
      v.                                 )
 TRW AUTOMOTIVE U.S. LLC,                )
                                         )
      Defendant - Appellant.             )
                     18-1161             )                      ON APPEAL FROM THE
                                         )                      UNITED STATES DISTRICT
 TRW AUTOMOTIVE U.S. LLC,                )                      COURT FOR THE EASTERN
                                         )                      DISTRICT OF MICHIGAN
      Plaintiff - Appellant,
                                         )
      v.                                 )
 INTERNATIONAL             UNION, UNITED )
 AUTOMOBILE,            AEROSPACE   AND )
 AGRICULTURAL IMPLEMENT WORKERS OF )
 AMERICA (UAW), et al.,                  )
                                         )
      Defendants - Appellees.            )

BEFORE:        SILER, MOORE, and ROGERS, Circuit Judges.

       ROGERS, Circuit Judge. This is a combined appeal brought by TRW challenging orders

in two separate cases regarding an arbitral decision against TRW and in favor of retired TRW

employees and their union. Among other things, the arbitral decision (1) arguably awarded health

benefits beyond the scope of the collective bargaining agreement’s arbitration clause, and (2) did

not award attorney’s fees. In the initial action, the defendant TRW successfully moved to compel
Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

arbitration, and the plaintiffs, who succeeded in the arbitration, later sought attorney’s fees. The

district court in that action entered an order denying TRW’s motion to rule that attorney’s fees

flatly could not be awarded. TRW appeals that order, but we lack appellate jurisdiction to review

such a nonfinal order at this time. In a separate action, TRW challenged an aspect of the remedy

awarded by the arbitrator that provided relief on the basis of an implicit agreement beyond the

scope of the collective bargaining agreement and its arbitration clause. Notwithstanding the

extraordinary deference accorded to arbitral decisions, it was error for the district court to enforce

that aspect of the arbitral award in this case.

                                                  I.

        TRW Automotive U.S. LLC is an employer engaged in commerce as defined under the

Labor Management Relations Act (“LMRA”), 29 U.S.C. §§ 142, 152, and 185. TRW operated an

automotive plant in Sterling Heights, Michigan, which closed in 2006. Before the plant closed,

TRW entered into a series of collective bargaining agreements with International Union, United

Automobile, Aerospace, and Agricultural Implement Workers of America (“the UAW”) and Local

247, the collective bargaining representatives of some of TRW’s Sterling Heights employees. The

last CBA was negotiated in 2002. After TRW announced its plans to close the Sterling Heights

plant on August 17, 2005, TRW and the UAW were not able to negotiate a closing agreement.

They instead agreed to extend the 2002 CBA, which remains in effect. The 2002 CBA provided

health insurance coverage for active and retired employees. Employees who retired before March

1, 1989 received coverage through a Blue Cross/Blue Shield plan. Employees who retired between

March 1, 1989 and January 1, 2003 were also covered under a Blue Cross/Blue Shield plan, with

a co-insurance arrangement of 85% company payment and 15% retiree payment. Individual

employees paid $100 annual deductibles, while employees and eligible dependents paid

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

$200 annual deductibles. Employees who retired after January 1, 2003 were covered under a

costlier Blue Cross/Blue Shield plan with a co-insurance arrangement of 80% company payment

and 20% employee payment.                Under that plan, individual employees paid a $200 annual

deductible, while employees with eligible dependents paid a $400 annual deductible.1

          Beginning in 2007, TRW changed the default health insurance carrier to Humana. It was

this change that was at the heart of the arbitral decision. Because Humana did not offer a plan that

perfectly corresponded to the 2002 CBA’s requirements, TRW voluntarily provided its employees

with coverage that exceeded the 2002 CBA’s requirements, with TRW noting that it was “aware

that it had no obligation to do so.” Part of that coverage included a Medicare Advantage plan for

Medicare-eligible retirees. In its letter announcing the change to Humana healthcare coverage,

TRW expressly “retain[ed] the right to amend or terminate these enhance[ed benefits] at any time.”

          Later, in 2011, TRW sent a letter to its former employees informing them that it “would

discontinue providing Medicare-eligible retirees and surviving spouses’ healthcare.” The letter

was presumably based on a provision in the CBA excluding “former employees or retired

employees . . . who are or may become eligible for hospital-medical expense benefits under

1
    The 2002 CBA provided:
          32.1.1 Coverage. The coverage set forth below shall be subject to a co-insurance arrangement of
          eighty-five percent (85%) Company payment and fifteen percent (15%) employee payment of all
          applicable hospital-surgical-medical expenses. A deductible amount of $100 per calendar year for
          employee only and $200 per calendar year for employee and eligible dependents shall be applied to
          all eligible expenses incurred. However, the maximum out of pocket expense of $500 per calendar
          year for employee only or $1,000 per calendar year for an employee and eligible dependent shall be
          applied excluding the deductible amounts indicated . . .
          This coverage remains in effect until December 31, 2002. Employees that retire January 1, 2003,
          will also be eligible for the 85/15 Blue Cross Blue Shield Plan.
          Effective January 1, 2003, the coverage set forth below shall be subject to a co-insurance
          arrangement of eighty percent (80%) Company payment and a twenty percent (20%) employee
          payment of all applicable hospital-surgical medical expenses. A deductible amount of $200 per
          calendar year for employee only and $400 per calendar year for employee and eligible dependents
          shall be applied to all eligible expenses incurred. However, the maximum out-of-pocket expense of
          $1000 per calendar year for employee only or $2,000 per calendar year for an employee and eligible
          dependents shall be applied excluding the deductible amounts indicated.

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

Federal law providing such benefits for the public at large” from the coverage provided in

Paragraph 32.1 of the CBA. TRW planned to replace the Humana healthcare coverage with Health

Reimbursement Accounts (“HRAs”) that would be funded at TRW’s discretion. The 2011 Letter

also stipulated that TRW retained the “right to amend or terminate the HRA.”

                                                 A.

       In response to the 2011 Letter, the UAW, along with multiple former employees from the

Sterling Heights plant (the former employees and the UAW will be collectively referred to as “the

plaintiff employees”), filed suit in the Eastern District of Michigan on October 21, 2011 in Case

No. 11-cv-14630. The plaintiff employees sought to bring a class action under FED. R. CIV. PROC.

23(a), (b)(1), and (b)(2), with the proposed class “consist[ing] of all persons who retired from

TRW at its Sterling Heights plant, including the retirees’ dependents and surviving spouses, who

are eligible to receive retirement healthcare under the CBAs, excluding any retirees, dependents,

and surviving spouses who have legally released their rights to such claims.” The complaint

asserted that the 2002 CBA obligated TRW “to provide the individual plaintiffs, their eligible

dependents and surviving spouses, and others similarly-situated, with lifetime retirement

healthcare fully-paid by the employer.” Because the transfer of the retirees’ healthcare to HRAs

in 2011 “material[ly] reduc[ed]” the healthcare benefits, the complaint alleged that it constituted a

breach of the 2002 CBA. The complaint also alleged that transferring the retirees to the HRAs

violated § 301 of the LMRA and the Employee Retirement Income Security Act (“ERISA”), 29

U.S.C. §§ 1132(a)(1)(B) and (a)(3). Among other types of requested relief, the plaintiff employees

sought damages for “any and all losses that [were] incurred as a result of TRW’s wrongful

conduct,” along with attorney’s fees.

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

       On January 25, 2012, TRW filed a motion to compel arbitration. In support of its motion,

TRW cited Section 4 of the 2002 CBA, arguing that the parties had committed to arbitrate “any

disagreement concerning the interpretation or determination of rights and obligations under the

CBAs:”

       4.1 Exclusive Remedy: The Union and the employees agree that the grievance
       and arbitration procedures provided herein are adequate to provide fair and final
       determination of all grievances which may arise out of the employment relationship
       during the term of this Agreement and that such procedures shall be the exclusive
       remedy for the enforcement by them of any claim against the Company.

The following section of the CBA defines “grievance”:

       4.1.1 Grievance Defined. A grievance is any complaint, dispute or controversy in
       which an employee or the Union claims that the Company has failed to carry out a
       provision of the Agreement and which involves a question concerning the
       interpretation or application of or compliance with this Agreement, including any
       question relating to the rates of pay, hours of work and other conditions of
       employment of any employee.

In the case of arbitration, Section 4.4 of the CBA provides additional relevant information about

the scope of the arbitrator’s authority, along with the availability of attorney’s fees:

       The impartial arbitrator shall not have authority to alter or modify this agreement.
       Each party shall bear the expense of his own representatives; and all other expenses
       of the arbitration, if any, shall be shared equally by the parties. The award of the
       impartial arbitrator shall be final and binding upon the parties and upon all
       employees and persons affected, all of whom agree to abide by his award. The
       expenses of the impartial arbitrator, if any, shall be shared and paid equally by the
       parties.

       The district court granted TRW’s motion to compel arbitration on September 30, 2012.

Although the plaintiff employees argued that they should be able to litigate their ERISA claims in

court, the district court rejected the argument. The court determined that the plaintiff employees

“[we]re essentially seeking rights that arise out of the CBA and not an independent ERISA plan”

and that the plaintiff employees were therefore required to arbitrate the ERISA claims along with

the others. In addition to granting TRW’s Motion to Compel Arbitration, the district court

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

dismissed the case without prejudice, stating that“[a]ny party may file a motion to reopen the case

after the arbitration has concluded.”

       The plaintiff employees appealed the order compelling arbitration on October 2, 2012.

However, the arbitrator ultimately ruled in the plaintiff employees’ favor on the question of

whether TRW breached its contractual duties under the CBA. On September 13, 2013, the plaintiff

employees moved to voluntarily dismiss their appeal of the district court’s order compelling

arbitration, and their motion was granted one week later.

                                                 B.

       The arbitrator described the issue before him as “whether the adoption of the HRA structure

as implemented by TRW constitutes a breach of contract.” Prior to the arbitration hearing, the

parties entered into a stipulation that “[t]he [arbitration] motions will be limited to the issues of

contract interpretation and breach.” However, the stipulation also stated that “[t]he parties each

reserve[d] the right to present further evidence to address issues unresolved by the Arbitrator’s

decision on the motions, including any factual disputes; ERISA issues; etc.” The arbitrator issued

his decision on May 15, 2013, determining that TRW breached the 2002 CBA when it transferred

the retirees from their Humana healthcare coverage to the HRAs. As a result, the arbitrator denied

TRW’s motion for summary judgment and granted the plaintiff employees’ motion for summary

judgment for the following reasons.

       First, the arbitrator determined that “Paragraphs 32.1.1 and 32.1.2 clearly and

unambiguously set forth the coverage that must be provided” by TRW. Section 32.1.3 of the CBA

identifies the two optional plans to which each employee may subscribe, and it provides that TRW

“will continue to make monthly contributions on behalf of [such] subscribing employees” if they

choose to do so. Section 32.1.3 also specifies that if either of the optional plans charges a premium

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

that “exceeds what is considered a reasonable premium charge for the level of service,” TRW

“reserves the right to substitute other optional medical plans that provide similar coverage.”

Because the “right to substitute” was included at the end of the section describing the optional

plans, the arbitrator determined that it was limited to that section. In other words, the CBA gave

TRW the right to substitute coverage for the optional plans, not for the coverage requirements laid

out in Section 32.1.1.

       Second, the arbitrator found that the CBA required TRW to “make suitable arrangements

for retirees and their eligible dependents to continue receiving such medical plan coverages they

had as active employees at the time of their retirement for their lifetimes.” The arbitrator based

this finding on Paragraph 32.1.4 of the 2002 CBA, which states:

       [The] Company will continue to make suitable arrangements for retired employees
       to continue such coverages as they had at the time of retirement, subject to the
       continued availability of such coverages by the carrier. The Company will continue
       to make monthly contributions on behalf of subscribing retired employees and their
       eligible dependents towards the cost of such coverage equal to the subscription rate
       or premium charge for all premiums, but for retired employees enrolled in the
       coverage described in 32.1.3, not in excess of the amount which the Company
       would contribute had the retired employees subscribed to the coverages provided
       in paragraph 32.1.1. The cost of such coverage in excess of the Company’s
       contributions will continue[ ] to be paid by the retired employee. In the event such
       additional contribution is required, suitable arrangements will be made for the
       deduction of such contributions of each retired employee who elects this coverage
       from the monthly retirement benefit payable to him under the Retirement Income
       Plan by the Trustee there under.

The arbitrator interpreted this section, in conjunction with the other sections of Paragraph 32, to

mean that TRW is required to provide the same level of coverage for retirees and their eligible

dependents as they received at the time of their retirement, provided that such coverage is still

available.   If the coverage were not available, then TRW would need to make “suitable

arrangements” to substitute a “similar program” for the formerly provided coverage. According

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

to the arbitrator, nothing in the record “indicate[d] that such coverages [we]re not available;

therefore, there [wa]s no necessity for suitable arrangements to be made [here].”

       Based on these sections, the arbitrator found that TRW’s transfer of the retirees’ healthcare

benefits to HRAs in 2011 constituted a breach of the CBA. The retirees “have a vested right to

lifetime hospital-medical-surgical insurance coverage by TRW,” and the CBA does not permit

TRW to terminate the coverage requirements laid out in Paragraphs 32.1.1 and 32.1.2. Even if

TRW was correct to argue that it “retained the right to make reasonable modifications to the retiree

medical plan while still making suitable arrangements to provide meaningful coverage,” the

arbitrator concluded that TRW’s substitution of the HRAs were too costly and “frustrating” for the

retirees to amount to such a “suitable arrangement.”

       The arbitrator examined a section of the CBA that arguably excluded Medicare-eligible

retirees from receiving coverage under Paragraph 32.1 of the CBA. The section, Paragraph

32.1.8.1, stated that “[t]he provisions of this Paragraph 32.1 shall not be applicable to former

employees or retired employees (and/or spouses) who are or may become eligible for hospital-

surgical-medical expense benefits under Federal law providing such benefits for the public at

large.” The arbitrator determined that the section was not referring to Medicare. Paragraph

32.1.8.1 refers to benefits provided under Federal law that are directed toward the “public at large,”

whereas Medicare is only available for a subset of the population. In addition, Paragraph 32.1.8.2

states that “if [the laws referenced in 32.1.8.1] permit,” the company may “substitute a plan of

benefits for the benefits provided by the laws referred to in paragraph 32.1.8.1 and modify the

applicable provisions to the extent and in the respects necessary to secure the approval of such

substitution from the appropriate governmental authority.” The arbitrator noted that it would not

be necessary for TRW to obtain any such approval from a governmental authority to offer a plan

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

other than Medicare to its employees, meaning that the “laws referenced in 32.1.8.1” could not

refer to Medicare. The arbitrator did not provide an alternative explanation of what Paragraphs

32.1.8.1 and 32.1.8.2 were referring to, although he speculated that the contract writers might have

been anticipating the development of a single-payer healthcare system. Regardless, he rejected an

interpretation of Paragraph 32.1.8.1 that would exclude Medicare-eligible retirees from the

coverage provided under Paragraph 32 of the CBA.

       To remedy TRW’s breach of the CBA, the arbitrator ordered TRW to revert the retirees’

healthcare coverage back to the Humana coverage that it initiated in 2007. In support of the

remedy, the arbitrator noted that “it is recognized that the hospital-medical-surgical plan existing

prior to January 1, 2012 was offered to the retirees and, as far as can be determined by the record,

accepted by the retirees.” The arbitrator therefore concluded that “it is that plan which must be

considered as agreed upon as the existing iteration of the coverage required pursuant to the retirees’

vested right under Paragraph 32.1 et seq.” However, the arbitrator did not grant attorney’s fees to

the plaintiff employees. The arbitrator instead determined that “each party shall bear the expense

of its own representatives,” in accordance with Paragraph 4.4 of the CBA.

                                                 C.

       We lack jurisdiction to review the order in the appeal of Case No. 2:11-cv-14630, because

the order appealed from is not final under 28 U.S.C. § 1291.

       In the same action in which the district court ordered arbitration, the plaintiff employees

responded to the issuance of the arbitral ruling by filing a motion for attorney’s fees and expenses

under ERISA, 29 U.S.C. § 1001 et seq, on October 4, 2013. The plaintiff employees also filed a

renewed motion for summary judgment on October 24, 2013, claiming that TRW’s breach of the

CBA also constituted a violation of ERISA. In response, TRW filed a motion to strike on

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

November 14, 2013, arguing in part that the district court lacked subject matter jurisdiction over

the Renewed Motion for Summary Judgment and that the Renewed Motion was untimely.

       The district court granted the plaintiff employees’ Renewed Motion for Summary

Judgment and denied TRW’s Motion to Strike. With respect to the Motion to Strike, the district

court determined that the plaintiff employees’ Renewed Motion for Summary Judgment was not

time-barred. TRW argued that the Sixth Circuit has stated that “challenges to an arbitration award

are subject to the three-month limitations period provided in the Federal Arbitration Act (9 U.S.C.

§ 12).” However, the district court concluded that the three-month limitations period was not an

issue, as the arbitration award had only addressed the plaintiff employees’ breach-of-contract

claim. The district court stated that the plaintiff employees’ Renewed Motion for Summary

Judgment did not amount to a challenge to the arbitration award that would have been subject to

the three-month limitations period, because the arbitrator had not decided whether there was an

ERISA violation.

       The district court then granted the plaintiff employees’ Renewed Motion for Summary

Judgment, ruling that the plaintiff employees could seek attorney’s fees notwithstanding the lack

of a specific ruling regarding ERISA in the arbitral award, and notwithstanding the lack of any fee

award in the arbitral award. The court held that the plaintiff employees showed that there was “an

absence of a genuine dispute of material fact[ ] that . . . TRW violated [the retirees’] rights under

ERISA.” The district court also dismissed the plaintiff employees’ Motion for Attorney Fees

without prejudice, stating that the motion was premature because it was filed before the plaintiff

employees’ ERISA claims were decided. While rejecting TRW’s arguments against attorney’s

fees, however, the district court did not award fees. The plaintiff employees then filed a second

motion for attorney’s fees, which is currently pending before the district court. TRW appeals the

                                                -10-
Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

district court’s grant of the plaintiff employees’ Renewed Motion for Summary Judgment, arguing

that the district court lacked the authority and subject-matter jurisdiction to decide the plaintiff

employees’ ERISA claims and that its Renewed Motion for Summary Judgment was untimely.

       We do not have appellate court jurisdiction over the district court’s order. Our jurisdiction

is limited to appeals of district court judgments that are “final.” 28 U.S.C. § 1291. A mere

determination of liability under ERISA, without any further decision about entitlement to relief,

does not constitute such a final judgment, nor does a dismissal of a motion for attorney’s fees

without prejudice. Morgan v. Union Metal Mfg., 757 F.2d 792, 795–96 (6th Cir. 1985); see also

Dixon v. Travelers Indem. Co., 630 F. App’x. 518, 520 (6th Cir. 2015). A decision regarding

attorney’s fees is only final when the district court has determined the amount to be awarded, rather

than when the court has determined whether there is liability for attorney’s fees or when the court

has refrained from deciding the issue entirely. See Morgan, 757 F.2d at 795–96. Because the

district court declined to decide whether TRW owes attorney’s fees for its violation of ERISA,

appellate review of the order would be premature.

       While there is a “uniform rule” that an unresolved issue of attorney’s fees does not defeat

the finality of a district court’s judgment, that rule justifies appellate review only when the

appellant challenges a separate final judgment. Tahfs v. Proctor, 316 F.3d 584, 590 (6th Cir. 2003)

(quoting Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202 (1988)). TRW does not identify,

much less challenge, any such final judgment supporting appellate court jurisdiction. On appeal,

the only part of the district court’s order that TRW addresses—apart from the attorney’s fee

question—is the district court’s determination that TRW’s breach of the CBA violated ERISA.

However, TRW does not contest that determination. TRW rather concedes that it violated ERISA,

and argues that the arbitrator had already concluded as much during the arbitration. For these

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

reasons, we do not have appellate court jurisdiction over the district court’s order in Case No. 2:11-

cv-14630.

                                                 D.

       We do have appellate jurisdiction over the district court’s order denying TRW’s motion to

partially vacate the arbitration award in Case No. 2:13-cv-12160. The district court’s dismissal of

TRW’s cause of action with prejudice and affirmation of the arbitral award amounted to a final,

appealable order under 28 U.S.C. § 1291. See Preferred Care of Delaware, Inc. v. Estate of

Hopkins by and through Hopkins, 845 F.3d 765, 768 (6th Cir. 2017). Furthermore, 9 U.S.C.

§ 16(a)(1)(D) provides that “[a]n appeal may be taken from” an order “confirming or denying

confirmation of an [arbitral] award or partial award.” In this case, the district court denied TRW’s

motion to partially vacate the arbitral award and affirmed the arbitral remedy, making the district

court’s order appealable under 9 U.S.C. § 16(a)(1)(D). See Dealer Comput. Servs., Inc. v. Dub

Herring Ford, 623 F.3d 348, 350–51 (6th Cir. 2010); Grain v. Trinity Health, Mercy Health Servs.,

Inc., 551 F.3d 374, 377 (6th Cir. 2008).

       On May 15, 2013, TRW filed a complaint in the Eastern District of Michigan, asking the

district court to partially vacate the arbitration award. In its subsequent motion for summary

judgment, TRW argued that the arbitrator did not arguably construe or apply the CBA when it

ordered TRW to reinstate healthcare coverage under Humana. TRW also argued that the arbitrator

exceeded his authority by issuing a remedy that was based on an agreement that allegedly

happened when TRW “made an ‘offer’ of enhanced insurance benefits in 2007, [which] the retirees

‘accepted’ . . . by signing up.” TRW claimed that the remedy was outside the scope of the

arbitrator’s authority, since the arbitration pertained only to issues arising out of the 2002 CBA.

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

       The district court denied TRW’s Motion for Summary Judgment on January 16, 2018. It

affirmed the arbitrator’s award, determining that the arbitrator’s remedy was appropriate because

it was reasonable to think that TRW and the plaintiff employees had “agreed to modify the [2002]

CBA” when “TRW proposed, and [the plaintiff employees] did not oppose, substituting the

Humana plan for the Blue Cross Blue Shield plan in 2007.” The district court therefore concluded

that the arbitrator did not exceed his authority in ordering TRW to restore the Humana healthcare

coverage, even though the benefits were more generous that the coverage requirements enumerated

in Paragraph 32 of the 2002 CBA. TRW filed this timely appeal on February 14, 2018.

                                                II.

       With respect to the arbitration award, the arbitrator did not arguably construe or apply the

2002 CBA when he ordered TRW to restore the enhanced healthcare benefits that it offered its

retirees from 2007 to 2012, and he exceeded his authority by interpreting the retirees’ acceptance

of TRW’s 2007 offer of enhanced coverage as a modification of their prior agreement. The district

court accordingly should have partially vacated the arbitral award.

       Although the standard for vacating an arbitration award is high, the arbitral remedy

ordering TRW to restore enhanced healthcare benefits to its retirees satisfies that standard. An

arbitration award is legitimate as long as it “‘draws its essence from the collective bargaining

agreement,’ and is not merely issuing ‘his own brand of industrial justice.’” United Paperworkers

Intern. Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 36 (1987) (quoting Steelworkers v. Enter.

Wheel & Car Corp., 363 U.S. 593, 597 (1960)). However, an arbitration award should be vacated

when a “procedural aberration” occurs during the arbitration process. Michigan Family Res., Inc.

v. Serv. Emp. Intern. Union Local 517M, 475 F.3d 746, 753 (6th Cir. 2007) (en banc). For the

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following reasons, the arbitrator’s remedy involved two procedural aberrations, rendering it

illegitimate.

        First, the arbitrator did not arguably construe or apply the language of the 2002 CBA, which

expressly describes the healthcare coverage requirements to which retirees and their dependents

are entitled. Paragraph 32.1.1 of the CBA provides the healthcare coverage requirements for

employees who retired before March 1, 1989, along with the healthcare coverage requirements for

the employees who retired between March 1, 1989 and January 1, 2003. For example, Paragraph

32.1.1 describes the co-insurance arrangements that TRW is required to enter with its retirees, and

it also specifies the deductible amounts owed by retirees with and without dependents. The

language is so clear that the arbitrator described Paragraphs 32.1 and 32.1.2 as “unambiguously

set[ting] forth the coverage that must be provided” by TRW. Yet, the arbitrator ordered TRW to

provide coverage that exceeded the requirements spelled out in the “unambiguous[ ] language” of

the CBA. The arbitrator did so based on his judgment that TRW “substituted a somewhat enhanced

hospital-medical-surgical plan administered by Humana” in 2007 for the one set forth in Paragraph

32.1.1 of the 2002 CBA, and as a result, “such policy became the accepted standard of performance

by both TRW and the beneficiaries.”

        By his own admission, the arbitrator’s reasoning therefore disregards the plain language of

the CBA, instead relying on TRW’s decision to enhance healthcare benefits in 2007 as a

justification for the remedy. We have recognized that arbitral decisions that are “untethered to”

the “terms of the agreement” at issue may constitute illegitimate procedural aberrations, if they

fail to “arguably constru[e] or apply[ ]” the agreement’s language and therefore “cast doubt on

whether the arbitrator indeed was engaged in interpretation.” Michigan Family Res., Inc., 475 F.3d

at 753. That is precisely what happened here. The arbitrator was charged with interpreting the

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2002 CBA and ordering a remedy on that basis. Nonetheless, the arbitrator determined that the

parties had entered a modification of the 2002 CBA in 2007 and therefore ordered a more generous

remedy than what would have been required under the clear terms of the CBA.

       The arbitrator’s reasoning is similar to the reasoning from other arbitration awards that

were vacated because the arbitrator did not arguably construe or apply the contract at issue. For

example, in Demotic Corp. v. Int’l Union, United Auto. Aerospace, & Agr. Implement Workers of

Am. (UAW), the Western District of Michigan vacated an arbitration decision that ordered an

employer to pay insurance benefits to employees for up to six months after their voluntary layoffs,

despite the parties’ agreement that the “clear terms of the CBA” only required three months of

coverage. 635 F. Supp. 2d 662, 667 (W.D. Mich. 2009). The arbitrator justified his decision in

virtually the same way as the arbitrator in this case: he determined that the employer’s past practice

of providing more generous insurance coverage than the CBA required set a precedent that

effectively overrode the terms of the CBA. Id. at 667–68. The district court vacated the arbitral

decision, in part because the arbitrator disregarded the clear language of the relevant CBA and

thereby “eschew[ed] genuine interpretation and instead order[ed] the outcome which he considered

more just.” Id at 679. Similarly, in Liberty Nursing Center of Willard, Inc. v. United Food &

Commercial Workers Union Local 911, the Northern District of Ohio vacated an arbitration award

that disregarded clear language in a CBA specifying how much an employer could charge for

dental and vision insurance. 525 F. Supp. 2d 933, 937–38 (N.D. Ohio 2007). The district court

did so because the “arbitrator [ ] was not even arguably construing the contract,” which was evident

from the arbitrator’s refusal to follow the clear “numerical language of the contract.” Id. at 937.

       Second, to the extent that the arbitrator attempted to justify his remedy by claiming that the

parties modified the terms of the 2002 CBA in 2007 when the retirees accepted TRW’s offer of

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enhanced healthcare benefits, the arbitrator exceeded the scope of his authority. When an arbitrator

“resolv[es] a dispute not committed to arbitration,” he “act[s] ‘outside his authority’” and commits

a procedural aberration. Michigan Family Res., Inc., 475 F.3d at 753. While the 2002 CBA

granted the arbitrator the authority to resolve “any complaint, dispute or controversy” arising from

a dispute about TRW’s “fail[ure] to carry out a provision of the [CBA],” it also expressly provided

that “[t]he impartial arbitrator shall not have authority to alter or modify this agreement.”

Furthermore, Paragraph 4.1.1 expressly restricts the arbitrator’s authority to resolving “question[s]

concerning the interpretation or application of or compliance with this Agreement.” In light of this

language, the arbitral decision should have been entirely based on the 2002 CBA, rather than on a

subsequent agreement between the parties.

       The arbitrator’s decision to base the remedy on the 2007 Humana plan that “was offered to

the retirees and . . . accepted by the retirees” therefore exceeds the scope of his authority. Dematic

Corp. involved a CBA with a similar limitation on the arbitrator’s ability to modify the contract,

and the district court concluded that the arbitrator “exceeded her authority” by effectively re-

writing the terms of the agreement. 635 F. Supp. 2d at 673. We similarly determined that an

arbitrator exceeded his authority because his award was based on a 2002 CBA, even though the

parties had submitted a grievance based on an earlier CBA. Totes Isotoner Corp. v. Int’l Chemical

Workers Union Council/UFCW Local 664C, 532 F.3d 405, 415–16 (6th Cir. 2008). The arbitrator

in this case formulated a remedy based on an agreement that the parties allegedly reached in 2007,

despite the fact that the 2002 CBA was the only agreement that the arbitrator had the authority to

interpret and apply. In so doing, the arbitrator overstepped the bounds of his authority.

       The arbitrator did not arguably construe or apply the 2002 CBA when he ordered TRW to

reinstate the enhanced healthcare coverage that it began providing in 2007, and he exceeded his

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

authority by determining that the parties modified the terms of the 2002 CBA. For these reasons,

the district court erred by affirming the arbitrator award, rather than vacating the remedy as an

illegitimate procedural aberration.

                                               III.

       The order of the district court affirming the arbitrator’s remedy is reversed and the case is

remanded to the district court for proceedings consistent with this opinion.

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Nos. 18-1160/1161, UAW Int’l v. TRW Auto. U.S., LLC

       KAREN NELSON MOORE, Circuit Judge, dissenting.                     This case illustrates the

difficulty of according appropriate deference to an arbitrator’s decision. It is easy enough to say

that we must affirm an arbitrator’s decision so long as it was not “so untethered from the agreement

that it casts doubt on whether he was engaged in interpretation.” Mich. Family Res., Inc. v. Serv.

Employees Int’l Union Local 517M, 475 F.3d 746, 754 (6th Cir. 2007) (en banc). Perhaps it is

sometimes less easy to apply this standard, but apply it we must. Unfortunately the majority did

not do so here. Rather, it substitutes its judgment where the arbitrator’s ought to remain.

Therefore, I must dissent.

       Of course, the majority does not say it ignores the standard of review. It begins Part II of

its opinion by emphasizing the deference we give to arbitrators and asserts that an arbitral award

is to be overturned only when a procedural aberration occurs. It then attributes to the arbitrator

procedural aberrations of two types: failure arguably to construe or apply the language of the

Collective Bargaining Agreement (“CBA”) and actions in excess of the arbitrator’s authority. The

problem is that the procedural aberrations identified by the majority are not as they are

characterized. What the majority claims are procedural flaws are, in fact, substantive criticisms of

the arbitrator’s contractual interpretation—precisely what we must respect, even when it is

“nothing more than error.” Mich. Family, 475 F.3d at 756.

       For example, turning first to the assertion that the arbitrator was not arguably construing

or applying the CBA, the majority says that the arbitrator’s order to provide the 2007 Humana plan

was “based on [the arbitrator’s] judgment” rather than the CBA itself. Maj. Op. at 14. The

majority seems to be saying the arbitrator was applying “his own brand of industrial justice” when

he ordered TRW to revert to the 2007 Humana policy. See United Steelworkers of Am. v. Enter.

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Wheel & Car Corp., 363 U.S. 593, 597 (1960). That is at best an uncharitable reading of the

arbitrator’s decision, however.

       The reasoning supplied by the arbitrator was, in fact, expressly grounded in the terms of

the CBA. The arbitral award first considers TRW’s obligations under the collective bargaining

agreement and determines that TRW must provide hospital-medical-surgical insurance to the

retirees. R. 1-4 (13-cv-12160) (Arb. Op. at 12–23) (Page ID #142–53). Next, it determines that

TRW, “acting pursuant to its obligations under the collective bargaining agreement,” substituted

the Humana plan for the original Blue Cross/Blue Shield plan and by doing so modified the terms

of the CBA. Id. at 23 (Page ID #153) (emphasis added) (“[T]he [2007 Humana plan] was offered

to the retirees and, as far as can be determined by the record, accepted by the retirees. Therefore,

it is that plan which must be considered as agreed upon as the existing iteration of the coverage

required pursuant to the retirees’ vested right under Paragraph 32.1 et seq.” (emphasis added)).

Plainly this analysis is grounded in and interpreting the CBA. Further, the arbitrator’s modification

theory distinguishes this case from those cited by the majority, such as Dematic Corp. v. UAW,

635 F. Supp. 2d 662 (W.D. Mich. 2009). Dematic reversed an arbitrator who considered the

parties’ prior course of dealing and alleged oral agreements to overrule the clear language of the

contract. Id. at 678. Here, though, the arbitrator’s theory was that the contract itself was modified

by the 2007 letter, and so consideration of the letter is interpretation of the contract.

       The majority’s conclusion that the arbitrator exceeded the scope of his powers is similarly

flawed. The CBA says that the arbitrator “shall not have authority to alter or modify” the CBA

and restricts the arbitrator’s authority to questions “concerning the interpretation or application of

or compliance with” the CBA. R. 8-2 (11-cv-14630) (CBA at 15, 19) (Page ID #71, 73). From

this the majority concludes that the arbitrator’s reference to the 2007 Humana plan exceeded his

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authority. The problem with the majority’s conclusion is that the arbitrator did not modify the

contract; rather, he concluded that the parties modified the contract. Similarly, the arbitrator did

not look outside the contract when he referred to the 2007 Humana plan; rather, he concluded that

the 2007 Humana plan became part of the contract via the parties’ modification. And again, this

feature of the arbitrator’s decision—that the parties modified the contract—distinguishes this case

from the cases cited by the majority.

       Clearly the arbitrator was engaging in contract interpretation, although perhaps not as the

majority would have. In the end, though, “the arbitrator’s remedy is related to his interpretation

of the CBA and necessarily flows from his finding” that the 2007 Humana letter was an accepted

offer to modify the CBA. See Equitable Res., Inc. v. United Steel Workers Int’l Union, 621 F.3d

538, 553 (6th Cir. 2010). Therefore the arbitrator’s decision must be upheld, and I must dissent.

       One point remains that is worth emphasis: this decision is of very limited effect. This

ruling does not affect the arbitrator’s holding that “retirees have a vested right to lifetime hospital-

medical-surgical insurance coverage by TRW. There is no language giving TRW the right to

terminate the coverages of Paragraph 32.1 et seq. for any retiree or surviving spouse or eligible

dependent.” R. 1-4 (13-cv-12160) (Arb. Op. at 22) (Page ID #152). The majority’s judgment

applies only to the arbitrator’s finding that the 2007 Humana plan “must be considered as agreed

upon as the existing iteration of the coverage required pursuant to the retirees’ vested right under

Paragraph 32.1 et seq.” Id. at 23 (Page ID #153). Any remedial action taken in light of the

majority’s opinion ought to bear this in mind.

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