Court Opinion

ID: 616135
Source: CourtListenerOpinion
Date Created: 2011-10-26 19:44:48+00
Date Added: 2024-06-11T17:50:36.060301
License: Public Domain

NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                              ________________

                                      No. 10-3558
                                   ________________

                            RITE AID NEW JERSEY, INC.,
                                            Appellant
                                       v.

         UNITED FOOD COMMERCIAL WORKERS UNION, LOCAL 1360
                         ________________

                   On Appeal from the United States District Court
                              for the District of New Jersey
                             (D.C. Civil No. 1-10-cv-00510)
                  District Judge: The Honorable Joseph H. Rodriguez
                                    _______________

                      Submitted Under Third Circuit LAR 34.1(a)
                                   May 27, 2011

           BEFORE: FUENTES, FISHER, and NYGAARD, Circuit Judges.

                           (Opinion Filed: October 26, 2011)
                                  _______________

                              OPINION OF THE COURT
                                  _______________

NYGAARD, Circuit Judge.

      Rite Aid appeals the District Court‘s decision to deny its petition to vacate the

arbitration award entered against it and in favor of the United Food Commercial Workers

Union, Local 1360. We will affirm.

                                            I.
       Because we write solely for the benefit of the parties, we will only briefly recite

the essential facts. As they do in other states, Rite Aid operates a chain of drug stores in

New Jersey. See, e.g., Rite Aid of Pennsylvania, Inc. v. United Food and Commercial

Workers Union, Local 1776, 595 F.3d 128, 130 (3d Cir. 2010). The Union represents

nonmanagerial employees in Rite Aid‘s stores. In June of 2007, Rite Aid acquired the

Brooks Eckerd chain of drug stores and re-branded them as Rite Aid stores. As a result

of this acquisition, some Rite Aid stores that were in close proximity to Eckerd stores

were closed. Likewise, some Eckerd stores were closed in favor of existing Rite Aid

locations. Neither party disputes that Rite Aid utilized sound business practices and

legitimate reasons in determining which stores would close. Relevant to this appeal are

six instances where re-branded Eckerd stores remained open, retaining their full

complement of employees. The six Rite Aid locations that were closed were staffed by

Union employees. The former Eckerd employees were not members of the Union.

       A dispute quickly arose as to whether these Eckerd stores were ―replacement

stores‖ within the meaning of the parties‘ collective bargaining agreement and whether

the Union was entitled to have the CBA apply to the acquired Eckerd stores. 1 The

1
  The Collective Bargaining Agreement provides: ―1.1 The Employer recognizes the
Union as the exclusive representative of all associates except only store managers,
assistance managers, loss prevention agents, pharmacists, and pharmacy interns in its
drugstores currently covered under the agreement between UFCW Local 1360 and Rite
Aid of New Jersey, Inc., . . . or any replacement stores, and to include all stores added to
the Union via NLRB elections or other demonstration of the Union status acceptable to
the Employer under the jurisdiction of the United Food & Commercial Workers, Local
1360, now or hereafter owned and/or operated by the Employer .‖

                                              2
parties followed the grievance process outlined in their CBA, which culminated in three

days of arbitration hearings. The jointly selected arbitrator issued an opinion and award

in which he found that the Eckerd stores were ―replacement stores‖ under the CBA and

that Rite Aid violated the agreement in failing to recognize these newly-acquired Eckerd

stores as such. The arbitrator further determined that ―[t]he Rite Aid employees at the

closed Rite Aid stores had the right to follow their work to the former Eckerd stores that

replaced the closed Rite Aid stores.‖

       Rite Aid filed a petition in the District Court seeking to vacate the arbitrator‘s

award, arguing that the arbitrator‘s decision manifestly disregarded the applicable law by

imposing an award on the parties that required Rite Aid to apply the CBA to the former

Eckerd stores, absent a showing of interest in or majority support for the Union. Rite Aid

also claimed that the arbitrator‘s decision and award required it to discriminate against

nonunion employees. After briefing and a hearing, the District Court confirmed the

arbitrator‘s decision and award, finding that it ―draws its essence from the CBA and is

not reflective of the arbitrator‘s ‗own brand of justice.‘‖ Rite Aid timely appealed.

                                             II.

       The Federal Arbitration Act provides only four grounds upon which arbitral

awards may be vacated, 9 U.S.C. § 10(a) (2006), and those grounds are to be exclusive.

Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2008).2 Rite Aid does not challenge

2
  9 U.S.C. § 10(a) reads in full:
(a) In any of the following cases the United States court in and for the district wherein the
award was made may make an order vacating the award upon the application of any party
to the arbitration:
                                              3
the arbitrator‘s decision on any of these grounds, relying instead upon additional grounds

that permit vacatur in exceptional cases—public policy violations and manifest disregard

of the law. See Dluhos v. Strasberg, 321 F.3d 365, 369 (3d Cir. 2003) (―the judicially

created ‗manifest disregard of the law‘ standard allows a district court to vacate an

arbitration award‖); Local 863 Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen &

Helpers of Am. v. Jersey Coast Egg Producers, Inc., 773 F.2d 530, 533 (3d Cir. 1985)

(―An award may be set aside only in limited circumstances, for example, where the

arbitrator‘s decision evidences manifest disregard for the law rather than an erroneous

interpretation of the law.‖ (citing Wilko v. Swan, 346 U.S. 427, 436 (1953)).

       Reviewing the Arbitrator‘s decision, the District Court concluded that, in light of

the extremely deferential standard of review:

              the Court finds sound the arbitrator‘s decision that the re-
              branded Eckerd stores constituted ―replacement stores‖ under
              the terms of the Collective Bargaining Agreement. The
              arbitrator considered the NLRB decisions Rock Bottom
              Stores, Inc., 312 NLRB 400 (1993) and Harte & Company,
              Inc., 278 NLRB 947 (1986) but found them inapplicable to
              the instant case, which is governed by the CBA. Looking to

              (1) where the award was procured by corruption, fraud, or
              undue means;
              (2) where there was evident partiality or corruption in the
              arbitrators, or either of them;
              (3) where the arbitrators were guilty of misconduct in
              refusing to postpone the hearing, upon sufficient cause
              shown, or in refusing to hear evidence pertinent and material
              to the controversy; or of any other misbehavior by which the
              rights of any party have been prejudiced; or
              (4) where the arbitrators exceeded their powers, or so
              imperfectly executed them that a mutual, final, and definite
              award upon the subject matter submitted was not made.

                                             4
              the language of the CBA itself, in conjunction with the
              testimony presented, the arbitrator found that the Agreement
              between the parties was ‗violated when [Rite Aid] failed to
              recognize the above-referenced former Eckerd stores as
              ‗replacement stores‘ under the terms of the CBA. That
              decision draws its essence from the CBA, and is not reflective
              of the arbitrator‘s ‗own brand of industrial justice.‖ CITGO,
              385 F.3d 809, 816 (3d Cir. 2004) (quoting Misco, 484 U.S. at
              36).

We agree with the District Court. Here, the arbitrator was asked to decide a discrete

issue: whether the Eckerd-turned-Rite Aid stores were ―replacement stores‖ within the

meaning of the CBA. The arbitrator heard testimony over three days and considered

numerous exhibits, testimony and briefs filed by the parties. Then, the arbitrator issued a

thirty-three page opinion which related in detail his findings as to the evidence and his

resolution of the arguments raised by Rite Aid and the Union. The arbitrator found that

the Rite Aid stores under review were ―replacement stores‖ as that term was defined

under the CBA. Put another way, the arbitrator answered ―yes‖ to the question before

him and specifically acknowledged the limited nature of his ruling: ―[a]ccordingly, this

Opinion and Award is limited to a finding that the agreement was violated when the

Employer failed to recognize the above-referenced former Eckerd stores as ―replacement

stores‖ under the terms of the agreement.‖

                                             III.

       Rite Aid appeals the District Court‘s confirmation of the arbitrator‘s decision

arguing that the arbitrator‘s decision violates public policy because it grants recognition

to a minority union. Rite Aid‘s argument is meritless.

                                              5
       Assuming, post- Hall Street, that an ―[a]rbitration award . . . can be vacated when

such awards violate public policy,‖ or exhibit ―manifest disregard for the law,‖ there was

no such violation here. See, e.g., United Transp. Union Local 1589 v. Suburban Transit

Corp., 51 F.3d 376, 381 (3d Cir. 1995).3 Rite Aid argues that vacatur is appropriate

because the Arbitrator‘s decision ran afoul of public interests, namely provisions of the

National Labor Relations Act that prohibit the imposition of a minority union on an

unwilling workforce and prohibit the coercion of employees to engage in collective

bargaining. The problem, however, is that the Arbitration award does no such thing.

Rite Aid‘s argument is premature speculation.

       When the Arbitrator decided the discrete issue before him, he indicated that the

question of a proper remedy would not be decided until a later date:

              The question of remedy is now before the bar. When this
              Arbitrator was notified of his selection to serve as impartial
              arbitrator the selection letter specified that the subject matter
              was Violation of Recognition Clause Replacement Stores &
              Eckerd Stores, Case Number: 081127-00781-1. This
              Arbitrator was further advised that the selection involved a
              hearing and decision in both cases. The selection letter
              further stated, ―[w]hile the issues are somewhat related, the
              parties have elected to bifurcate the two matters and have
              them heard separately, albeit by one arbitrator. Accordingly,
              there is another hearing scheduled in this ―matter‖ for March
              25, 2010.

3
 We have not addressed the question of whether manifest disregard of the law remains a
valid ground for vacating an arbitration award under the FAA, in light of the Supreme
Court‘s decision in Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). Rite
Aid‘s argument does not rest on a manifest disregard for the law as much as it does a
violation of public policy.
                                              6
       Rite Aid has no disagreement with the arbitrator‘s determination that the stores at

issue here were ―replacement stores‖ within the meaning of the CBA. It challenges only

the results of that determination – results which may, or may not, flow from the

arbitrator‘s decision and may, or may not, be the subject of further arbitration, as the

arbitrator anticipated. The arbitrator‘s award is clear: the stores in question were

replacement stores, and the displaced employees should have been given the opportunity

to follow their work to those replacement stores as provided for by the CBA.

       It is, of course, dictum in that last portion of the award that Rite Aid focuses on –

the arbitrator‘s comment that the former union employees at the Eckerd Stores had a right

to follow their work to the replacement stores. Rite Aid maintains that this comment

requires recognition of the Union as the bargaining representative for the former Eckerd

employees. It does not. The arbitrator merely answered the question presented, finding

the stores in question to be replacement stores under the CBA. Rite Aid implies that the

arbitrator went further to rule on the consequences of his award, but he did not.

Concluding that these stores were replacement stores, the arbitrator found the CBA to

apply and did not address the consequences of that decision. The arbitration award was

within the terms of the submission and drew its essence from the terms of the CBA. See

United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38 (1987)

                                             IV.

       The parties to this case agreed to settle their disputes through arbitration. The

arbitration award is based on the arbitrator's interpretation of the CBA and factual record,

and Rite Aid has not shown that the arbitrator‘s award violates public policy or was a

                                              7
manifest disregard for the law. Accordingly, we will affirm the District Court's decision

to deny Rite Aid‘s petition to vacate the arbitration award.

                                             8