Court Opinion

ID: 4123401
Source: CourtListenerOpinion
Date Created: 2017-02-03 22:00:26.616339+00
Date Added: 2024-06-11T14:22:56.570000
License: Public Domain

United States Court of Appeals
                       For the First Circuit

No. 16-1161

              PRIME HEALTHCARE SERVICES - LANDMARK LLC,

                        Plaintiff, Appellee,

                                 v.

       UNITED NURSES AND ALLIED PROFESSIONALS, LOCAL 5067,

                        Defendant, Appellant.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF RHODE ISLAND

          [Hon. Ronald L. Lagueux, U.S. District Judge]

                               Before

                    Torruella, Lipez, and Barron,
                           Circuit Judges.

     Christopher Callaci, for appellant.
     David C. Casey, with whom Jillian S. Folger-Hartwell and
Littler Mendelson, P.C. were on brief, for appellee.

                          February 3, 2017
             TORRUELLA, Circuit Judge.          This appeal requires us to

decide whether a dispute between employees and their successor

employer should be resolved in arbitration or in the courts.                  The

parties agreed to arbitrate this dispute.                  The district court,

however,     refused   to   compel   arbitration;      it    found   that    ERISA

preempted arbitration of this dispute, and reasoned that this, in

turn, presented an issue of arbitrability properly decided by a

judge, not an arbitrator.       Because we find that the issue of ERISA

preemption in this case is not an issue of arbitrability, but

rather one that is squarely for the arbitrator to decide, we

reverse.

                               I.    Background

             Plaintiff-Appellee Prime Healthcare Services ("Prime")

purchased Landmark Medical Center ("Landmark"), a financially-

troubled hospital in Woonsocket, Rhode Island, in December 2013.

Defendant-Appellant United Nurses and Allied Professionals, Local

5067 ("Union") is a union local which represented Landmark's

employees pursuant to a collective bargaining agreement.

             In 2006, Landmark and the Union entered into a collective

bargaining    agreement     ("Landmark       CBA"),   in   effect    until   2009,

renewed automatically each year unless either party reopened.

This CBA contained a grievance and arbitration clause that provided

that   any   unresolved     disputes    "concerning        the   interpretation,

                                       -2-
application   or   meaning"   of   the   CBA   could   be   submitted   to

arbitration with the American Arbitration Association.          This CBA

also contained a pension provision, which stated, in relevant part:

         The Employer [Landmark] and the Union agree that, if
         during the term of this Agreement the Employer sells
         more than fifty (50) percent of its assets, the
         Employer may terminate the Landmark Medical Center
         Retirement Plan for Union Employees in accordance with
         the requirements of ERISA.     The Union acknowledges
         and agrees it is clearly and unmistakably waiving any
         and all rights it has or may have to bargain with the
         Employer over any aspect of the termination, provided
         such termination shall not reduce benefits accrued by
         any participant in the Landmark Medical Center
         Retirement Plan for Union Employees as of the date of
         termination.

           In June 2008, Landmark was placed under the oversight of

a Temporary Special Master by the Providence Superior Court due to

its financial woes.

           In 2012, Prime made an offer to take over Landmark.

Prime met with the Union and agreed that it would take over

Landmark's contract with its employees.

           On October 10, 2012, Prime and the Union signed a cover

memorandum ("Cover Memorandum") and accompanying contract ("Prime

CBA").   The Cover Memorandum provided that "Prime shall recognize

and continue to process any and all grievances and/or labor

arbitrations pending at the time of the closing pursuant to the

CBAs referenced herein".      The Cover Memorandum also stipulated

that in the event of inconsistencies between the Cover Memorandum

                                   -3-
and the Asset Purchase Agreement (that was yet to be concluded and

approved by the court), the Cover Memorandum would govern.                     The

Prime CBA contained the same grievance/arbitration clause as the

Landmark CBA.

             On     June     5,     2013,    the   Pension   Benefit   Guarantee

Corporation ("PBGC") announced its intention to involuntarily

terminate    Landmark's           defined   benefit    retirement   plan   because

Landmark had failed to maintain the minimum funding requirements.1

The termination was completed the following week.

             On July 1, 2013, the Union filed a grievance against

Landmark alleging a violation of the pension provision of the

Landmark CBA.        The grievance was denied, and the Union demanded

arbitration.

             On     July     8,     2013,    the   Providence   Superior     Court

authorized Landmark to execute the termination agreement.                      The

Court also ruled that "any and all rights and remedies of [the

Union]   with      respect    to     the    employee   retirement   benefits   are

reserved."        The PBGC and the Special Master then entered into an

Agreement for Appointment of Trustee and Termination of Plan.

1  A detailed description of the PBGC and its functions has been
offered by the court below. See Prime Healthcare Servs., LLC --
Landmark v. United Nurses & Allied Prof'ls, Local 5067, 158
F. Supp. 3d 60, 62-97. See also United Steelworkers of America
v. United Eng'g, Inc., 52 F.3d 1386 (6th Cir. 1995).

                                            -4-
This Agreement conveyed all assets of the retirement plan to the

PBCG, and provided, inter alia, that any asset purchase agreement

that the Special Master entered into could not include assumption

of the retirement plan.

           In October 2013, the Union amended its grievance against

Landmark to state: "The employer violated the governing Collective

[B]argaining Agreement . . . when it changed the terms of the

defined pension benefit provisions and ceased making contributions

to   employees   [sic]   pensions".     Landmark   denied   this   amended

grievance, too, and the Union filed a request for arbitration on

November 8, 2013.

           On November 26, 2013, Prime entered into the Asset

Purchase Agreement with the Special Master to purchase Landmark.

This court-approved Agreement stated that Prime would not assume

or be responsible for "any Liability under any Benefit Plan and

all administrative costs associated therewith."

           On December 31, 2013, when the Asset Purchase Agreement

became effective, Landmark terminated all of its employees.             On

January 1, 2014, some of these employees were hired back by Prime,

and the Prime CBA took effect.

           On May 5, 2014, Prime filed a Petition for Declaratory

Judgment in the United States District Court for the District of

Rhode Island.    Prime sought, inter alia, to stay arbitration.

                                  -5-
            In June 2014, the Union filed another grievance against

Prime, stating that it violated the 2012 Cover Memorandum by

refusing to submit the Union's pending grievance to arbitration.

            On January 21, 2016, the District Court for the District

of Rhode Island (Lagueux, J.) ruled, on summary judgment, for Prime

on the grounds that ERISA preempted the Union's claims (and any

matters relating to the Retirement Plan).

            This appeal timely followed.

                       II.    Standard of Review

            "Summary judgment is appropriate when the record shows

that 'there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.'"     Farmers Ins.

Exch. v. RNK, Inc., 632 F.3d 777, 782 (1st Cir. 2011) (quoting

Fed. R. Civ. P. 56(a)).      "We review de novo the grant of a motion

for summary judgment."       Id. at 782.   "[W]e may affirm the entry

of summary judgment 'on any ground made manifest by the record,'

so long as the record 'reveals that there is no genuine issue as

to any material fact and that the moving party is entitled to

judgment as a matter of law.'"     Batista v. Cooperativa de Vivienda

Jardines de San Ignacio, 776 F.3d 38, 42 (1st Cir. 2015) (citations

omitted).

                                   -6-
              As neither party disputes any material facts, our review

focuses solely on whether the movant was entitled to judgment as

a matter of law.

                             III.    Discussion

              The issue before us is whether an arbitrator or a court

should    resolve   the   present   dispute.       This      issue   raises   two

questions, which we address in turn:             first, whether the present

case raised a question of substantive arbitrability, and with it,

the presumption against arbitration; and, second, whether the

subject matter of the Union's claims is suitable for arbitration.

A.    Arbitrability2

              Because we already offered a detailed discussion of the

Supreme Court's precedents concerning arbitrability in Kristian v.

Comcast Corp., 446 F.3d 25, 37-41 (1st Cir. 2006), we here limit

our discussion to those aspects of arbitrability necessary to

resolve the present case.

              "The 'question of arbitrability' is a term of art with

a    narrow   scope."     Unite   Here   Local    217   v.   Sage    Hospitality

2  The term "arbitrability" has been used inconsistently, at times
encompassing all prerequisites to and conditions for arbitration.
George Bermann, The Gateway Problem in International Commercial
Arbitration, 37 Yale J. Int'l L. 1, 10 (2012). As we explain in
this section, we here use the term in the narrow sense in which
the Supreme Court used it in Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83-84 (2002).

                                     -7-
Resources, 642 F.3d 255, 261 (1st Cir. 2011).           The Supreme Court

considers the phrase "question of arbitrability"

        applicable in the kind of narrow circumstance where
        contracting parties would likely have expected a court
        to have decided the gateway matter, where they are
        not likely to have thought that they had agreed that
        an arbitrator would do so, and consequently, where
        reference of the gateway dispute to the court avoids
        the risk of forcing parties to arbitrate a matter that
        they may well not have agreed to arbitrate.

Kristian, 446 F.3d at 38 (quoting Howsam, 537 U.S. at 83-84

(2002)).

             As we went on to explain in Kristian, "[t]he cornerstone

here is an assumption about the intent of the contracting parties

to an arbitration agreement, in 'the kind of narrow circumstances

where contracting parties would likely have expected a court to

have decided the gateway matter.'" 446 F.3d at 38 (quoting Howsam,
537 U.S.   at   83-84).   And   in   these   narrow   circumstances,   a

presumption applies that a court, rather than an arbitrator,

decides the gateway matter.       Id. at 38-39.    This presumption can

be defeated, however, by clear and unmistakable evidence that the

parties did mean to submit that matter to arbitration.              Unite

Here, 642 F.3d at 262.

             There are two categories of disputes where we apply the

presumption that courts, rather than arbitrators, resolve the

gateway matter:      "(1) disputes 'about whether the parties are

bound by a given arbitration clause'; and (2) disagreements 'about

                                   -8-
whether an arbitration clause in a concededly binding contract

applies to a particular type of controversy.'"                Id. at 39 (quoting

Howsam, 537 U.S. at 84) (clarifying that "[e]xamples of the former

include whether an arbitration contract binds parties that did not

sign the agreement; and whether an arbitration agreement survived

a corporate merger and bound the subsequent corporation. . . .

Examples of the latter include whether a labor-management layoff

controversy was covered by the arbitration clause of a collective-

bargaining   agreement;       and   whether        a    clause     providing      for

arbitration of various grievances covers claims for damages for

breach of a no-strike agreement") (citations omitted).

           The    kind   of   arbitrability            involved    in   these     two

categories -- the kind of arbitrability where we presume that a

court   decides   the    gateway    matter    --       can   be   referred   to    as

"substantive arbitrability."        Howsam, 537 U.S. at 85.             The Supreme

Court has also found that there is "procedural arbitrability,"

where the presumption is that an arbitrator -- not a court --

should decide the gateway matter, because that is what the parties

would likely have expected.         Id. at 84.          Examples of "procedural

arbitrability" include "procedural questions which grow out of the

dispute and bear on its final disposition," and "allegation[s] of

waiver, delay, or a like defense to arbitrability."                 Kristian, 446
F.3d at 39 (quoting Howsam, 537 U.S. at 84).

                                     -9-
            The    present     dispute    does     not    raise    an   issue    of

substantive arbitrability.         The Cover Memorandum entered into by

Prime and the Union stated that "Prime shall recognize and continue

to process any and all grievances and/or labor arbitrations pending

at the time of the closing [of the Asset Purchase Agreement]

pursuant to the CBAs referenced herein," and the parties agree

that the grievance at issue here was pending at the time of the

closing of the Asset Purchase Agreement.                 Both the Landmark CBA

and the Prime CBA contained arbitration clauses.                   The Providence

Superior    Court,    which     authorized        Landmark    to    execute     the

termination agreement, ruled that "any and all rights and remedies

of [the Union] with respect to the employee retirement benefits

are reserved."       The present dispute between the Union and Prime

is indeed about employee retirement benefits.                Thus, both parties

are bound by the arbitration clause.

            This binding arbitration clause also applies to the

dispute at issue.        Not only is the Cover Memorandum directly

applicable to the dispute before us, but all the relevant documents

contain broad language.        Thus, the Cover Memorandum is applicable

to "any and all grievances and/or labor arbitrations," and the

arbitration provisions of both the Landmark CBA and the Prime CBA

encompass   "any     dispute    between     the    Hospital       and   the   Union

concerning the interpretation, application or meaning of any of

                                     -10-
the express provisions of this Agreement."             "The breadth of the

arbitration       clause,   which   covers   'any     disputes    over   [the]

interpretation      or   application'   of   the    Agreement,    presents   an

insurmountable impediment to [Prime]'s position."           Unite Here, 642
F.3d at 262.

             Still, the district court concluded that the matter

before us presented an issue of arbitrability, and was therefore

for the court, not for an arbitrator, to decide.                 The district

court reached this conclusion by reasoning that the Union's claim

was one that, per ERISA, could only be brought by the PBGC, and

that    ERISA's    preemptive   sweep   therefore     preempted    or    barred

arbitration.       Prime now urges us to adopt this analysis.                We

decline.     As we demonstrate in the next section, a statutory bar

to or preemption of arbitration is not an issue of arbitrability

-- and ERISA does not bar or preempt the arbitration of this claim.

Consequently, this case should proceed to arbitration, and the

arbitrator shall decide, inter alia, whether ERISA bars or preempts

the Union's claims.

B.     Suitability of the Subject Matter for Arbitration

             "[T]he [Supreme] Court stated that once it was clear

that the 'parties' agreement to arbitrate reached the statutory

issues,' a court must then consider 'whether legal constraints

external to the parties' agreement foreclosed the arbitration of

                                     -11-
those claims.'"    Bercovitch v. Baldwin School, Inc., 133 F.3d 141,

148-49 (1st Cir. 1998) (quoting Mitsubishi Motors Corp. v. Soler

Chrysler–Plymouth, Inc., 473 U.S. 614, 628 (1985)).           The "liberal

policy favoring arbitration agreements" informs this inquiry.           Id.

at 149 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20, 25 (1991)).    Still,

         there might be some cases in which the arbitral
         setting is an inappropriate forum for the resolution
         of statutory claims, but . . . the burden [is]
         squarely on the plaintiff to prove that this is so.
         . . . If Congress intended to preclude a waiver [of
         a   judicial   forum],  that   intention   would   be
         discoverable in the text or legislative history of
         the statute, or in an 'inherent conflict' between
         arbitration and the underlying goals of the statute.

Id. (quoting Gilmer, 500 U.S. at 26) (internal citations omitted).

             The question we must resolve then, is whether the text

or the legislative history of ERISA shows Congressional intent to

preclude a waiver of judicial remedies, and whether an inherent

conflict exists between arbitration and the underlying goals of

ERISA.     This   is   a   different   inquiry   from   the   inquiry   into

arbitrability -- the arbitrability inquiry focuses on the intent

of the parties, whereas we must now focus on the intent of

Congress.3

3  Although, confusingly, the term "arbitrability" has been used
to encompass the suitability of the subject matter for arbitration,
we here follow the Supreme Court in Howsam, and use the term of
art "arbitrability" in its narrow sense. See supra n.1.

                                   -12-
              As a preliminary matter, we note that an argument that

ERISA    in    general    shows     Congressional       intent    to        preclude

arbitration is highly implausible.               See, e.g., Bird v. Shearson

Lehman/American Exp., Inc., 926 F.2d 116, 118-19 (2d Cir. 1991).

Because Prime does not advance such an argument, we need not decide

the issue here.      We also note that the fact that the arbitration

agreement is contained in a collective bargaining agreement does

not make it any less enforceable.              14 Penn Plaza LLC v. Pyett, 556
U.S. 247, 251 (2009) (enforcing arbitration clause in collective

bargaining agreement).

              Prime, however, argues that the subject matter of the

present case is not suitable for arbitration.              Prime contends that

the Union's claim is preempted or barred by ERISA.                     Citing 29

U.S.C. §§ 1341(a)(1), 1362(b)-(c), Prime contends that Title IV of

ERISA provides the exclusive means by which defined benefit pension

plans may be terminated, and also specifies which entities can

pursue   claims    for    unfunded      liabilities.       Citing      29    U.S.C.

§ 1342(d)(1)(B)(ii), Prime then argues that where, as here, the

PBGC initiated the termination, only the PBGC and the statutory

trustee of the plan (which Prime states is the PBGC in this case)

have the power to collect any amounts due under the plan.                     Prime

also cites 29 U.S.C. § 1367 for the proposition that ERISA provides

the   mechanism    by    which    the   PBGC     can   enter   into    settlement

                                        -13-
agreements with plan sponsors to recoup any amounts due under the

plan.   Prime then shifts its attention to 29 U.S.C. §§ 1322(c) and

1344.   Prime believes that these sections would be superfluous if

the Union were to prevail on its claim, because these sections

provide   that   the     PBGC   must    allocate       to   participants      and

beneficiaries    a    portion   of   the    unfunded    benefit   liabilities

recovered for the terminated plan, and set out a priority scheme

for doing so.        Prime then argues that in order for the PBGC to

ensure that this priority scheme is followed, the PBGC alone must

control all assets that will be allocated to participants and

beneficiaries    in    question.       Prime's   concern     is   that   if    an

arbitrator were to rule in favor of the Union, the PBGC would then

be unable to fulfill the role ERISA prescribes for it.               In this,

Prime sees an "inherent conflict" between the purposes of ERISA

and arbitration.

           The fatal flaw in Prime's reasoning is that it fails to

draw a simple, but crucial distinction:            the question before us

is not whether the Union can bring its claim, but who decides --

court or arbitrator -- whether the Union can bring its claim.

Even if we assume, for the sake of argument, that Prime's reading

of ERISA is correct, this does not mean that the subject matter of

the Union's claims is not suitable for arbitration.4              For if ERISA

4   To be clear, we by no means suggest that Prime's reading of

                                     -14-
indeed preempts or bars the Union's claim, an arbitrator can make

that determination.          And if it is indeed key to the statutory

scheme   of    ERISA    that     all    assets       that    will   be   allocated    to

participants and beneficiaries of the plan be under the control of

the   PBGC,     then,     once    again,        an    arbitrator     can     make   that

determination.

              Prime, however, argues that an arbitrator may reach the

wrong conclusion, and thus the purposes of ERISA would not be

reached.       This     is   exactly     the     kind       of   "outmoded"    view   of

arbitration that the Supreme Court has repeatedly rejected.                         See,

e.g., Rodríguez, 490 U.S. at 481.                We are not to presume that an

arbitrator will make mistakes.              In addition, the judicial review

of    arbitral    decisions,           albeit        limited,     provides     adequate

protection      against      errors      that        an   arbitrator     may    commit.

Mitsubishi, 473 U.S. at 638 ("Having permitted the arbitration to

go forward, the national courts of the United States will have the

opportunity at the award-enforcement stage to ensure that the

legitimate interest in the enforcement of the antitrust laws has

been addressed.").           Consequently, a subject matter cannot be

ERISA is, or is not, correct -- this matter will be for the
arbitrator to resolve in the first instance. Rather, we are merely
assuming for the sake of argument that Prime's reading of ERISA is
correct, only to show that even if it is correct, the Union's
claims must still be arbitrated.

                                          -15-
unsuitable    for   arbitration    by   virtue   of   a   concern     that   the

arbitrator may err.5

            It is telling that Prime is able to point to only one

case   in   which   a   court   found   an   "inherent    conflict"    between

arbitration and the purposes of a statute:               In re United States

Lines, Inc., 197 F.3d 631 (2d Cir. 1999).             That case is readily

distinguishable from the present one.          In United States Lines, the

court found that, under the right circumstances, core (but not

non-core) bankruptcy matters must be resolved in bankruptcy court,

rather than arbitration.        Id. at 640.    This is because one of the

policies that underlies the Bankruptcy Code is the need for a

single, centralized proceeding -- and the preferred forum for that

proceeding is bankruptcy court.         Id. at 640-41.       The court cited

5  Prime also argues that a claim may not be arbitrated at all if
the arbitral award would require a party to violate the law. In
a similar vein, Prime argues that arbitration would be futile if
it resulted in an award contrary to federal law, and that an
arbitrator cannot order something that is contrary to federal law.
Prime cites George Watts & Son, Inc. v. Tiffany & Co., 248 F.3d
577, 580-81 (7th Cir. 2001) in support of this proposition. These
arguments, too, are rooted in an outmoded view of arbitration as
an inadequate forum for the adjudication of federal claims -- but
we are not to presume that an arbitrator will make a wrong
determination of the federal claims, and if she does, we will be
able to review it. Prime has also failed to demonstrate that the
only award an arbitrator could render would be an award of pension
benefits (which, on Prime's reading of ERISA, would violate federal
law). In other words, we have no reason in the present case to
presume that an arbitrator will compel Prime to do anything that
is contrary to federal law.

                                    -16-
to, inter alia, the text and legislative history of the Bankruptcy

Code -- including direct references to arbitration -- for the

proposition    that   Congress        intended    to   preclude        parties   from

arbitrating    certain    claims.         Id.     In       the   present    case,   by

contract, Prime has not pointed to anything in ERISA or its

legislative    history        that    calls     for    a     single,      centralized

proceeding to decide the Union's claim; Prime has also not pointed

to anything in ERISA or its legislative history that would preclude

arbitration from being the proper forum for the resolution of that

claim.6

                                IV.     Conclusion

          Because the case before us belongs in arbitration, we

vacate the memorandum and order of the district court, and remand

with   instructions      to     grant    the     Union's         motion    to   compel

arbitration.    We take care to note that we have resolved only one

narrow question:      whether this dispute -- including the issue of

whether ERISA bars or preempts the Union's claims -- should be

resolved by an arbitrator or by a court.                   Nothing in our opinion

6  The Union also argues that the district court relied on mootness
to deny its demand for arbitration.     While the Union is likely
correct that mootness would present an issue of "procedural
arbitrability", and thus presumptively be for the arbitrator to
decide, we do not read the district court as having relied on
mootness to reach its conclusion, for the district court noted
that its "ruling does not rest squarely on the doctrine of
mootness".

                                        -17-
is intended to intimate in any way how the arbitrator should

resolve the dispute -- that is, of course, for the arbitrator to

decide.

          Vacated and Remanded.   Costs are awarded to appellant.

                              -18-