Court Opinion

ID: 9402795
Source: CourtListenerOpinion
Date Created: 2023-06-16 21:00:41.806263+00
Date Added: 2024-06-11T17:20:02.557252
License: Public Domain

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                                             PUBLISHED

                             UNITED STATES COURT OF APPEALS
                                 FOR THE FOURTH CIRCUIT

                                             No. 22-1268

        ADVANTAGE VETERANS SERVICES OF WALTERBORO, LLC,

                           Plaintiff - Appellant,

                    v.

        UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING,
        ENERGY,   ALLIED     INDUSTRIAL AND   SERVICE   WORKERS
        INTERNATIONAL, Local 7898,

                           Defendant - Appellee.

        Appeal from the United States District Court for the District of South Carolina, at
        Charleston. Margaret B. Seymour, Senior District Judge. (2:20–cv–02214–MBS)

        Argued: March 9, 2023                                         Decided: June 15, 2023

        Before NIEMEYER, QUATTLEBAUM and RUSHING, Circuit Judges.

        Reversed by published opinion. Judge Quattlebaum wrote the opinion, in which Judge
        Niemeyer and Judge Rushing joined.

        ARGUED: Lewis Traywick Duffie, LITTLER MENDELSON, P.C., Atlanta, Georgia, for
        Appellant. Keren Wheeler, UNITED STEELWORKERS, Pittsburgh, Pennsylvania, for
        Appellees. ON BRIEF: Aaron I. Saltzman, Atlanta, Georgia, William H. Foster, LITTLER
        MENDELSON, P.C., for Appellant.
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        QUATTLEBAUM, Circuit Judge:

               The standard of review for arbitration awards is exceedingly narrow, with courts

        generally deferring to an arbitrator’s findings and reasoning. But even under this limited

        scope of review, an arbitration award must be vacated if it does not draw its essence from

        the parties’ arbitration agreement. This appeal requires us to determine whether an

        arbitration award failed to draw its essence from the agreement when an arbitrator ignored

        the parties’ agreed upon procedural rules for conducting the arbitration. Under the language

        of the agreement here, the answer is yes. So, we reverse the district court’s order affirming

        the arbitration award and vacate the underlying award.

                                                     I.

               In this appeal, Advantage Veterans Services of Walterboro, LLC (“AVSW”) and

        United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and

        Service Workers International, Local 7898 (the “Union”) dispute the legitimacy of an

        arbitration award, which stemmed from the discharge of a union-represented employee.

        The appeal centers on the provisions of the parties’ collective bargaining agreement (the

        “CBA”). The CBA contains a number of provisions that govern the relationship between

        AVSW, the Union and the Union’s members who work at AVSW. But for our purposes,

        two articles are most important.

               First, Article 14 gives AVSW the right to discipline and fire an employee. Section

        2 of Article 14 provides: “AVSW reserves the right to discipline (including disciplinary

        suspensions), discharge, dismiss or demote an employee for just cause. AVSW will notify

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        a Union Steward prior to suspending or discharging an employee, except in cases requiring

        the immediate removal of an employee.” J.A. 37.

               Second, Article 13 establishes a grievance procedure and arbitration requirement.

        Under that provision, either AVSW or the Union may submit a grievance to arbitration if

        the grievance is not satisfactorily resolved through the informal grievance procedure. But,

        in doing so, Article 13 limits the arbitrator’s authority in conducting the arbitration. Section

        4(e) demands that, in “all discipline cases, the arbitrator shall determine whether AVSW

        had a reasonable basis for concluding that the employee engaged in the conduct for which

        he/she is being disciplined.” J.A. 36. For simplicity, we refer to this provision as the

        “reasonable basis determination.”

               Under the CBA, that reasonable basis determination must be made by the arbitrator

        for an award to be legitimate. Section 4(d) states that “[t]he decision of the arbitrator shall

        be final and binding on the Union and AVSW so long as it is in accord with [Article 13 §

        4(e)].” J.A. 35. And § 4(e) states that “[i]f the Arbitrator’s Award complies with and is not

        contrary to this Agreement and the limitations imposed by [Article 13 § 4], the Award shall

        be final and binding on the parties.” J.A. 36. Finally, § 4(e) states that “[i]f a court of

        competent jurisdiction finds that the Arbitrator abused his or her discretion in any way or

        if the Award is contrary to this Agreement in any way, the Award shall be deemed not to

        draw its essence from the Agreement and shall be vacated.” J.A. 36.

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                                                    II.

               Turning now to the procedural history of this case, AVSW challenges an arbitration

        award in favor of the Union and Sarah Black, a Union-represented employee who worked

        at a nursing care facility for military veterans operated by AVSW. We need not revisit in

        detail the circumstances underlying Black’s termination, so we describe instead only the

        relevant procedural history. 1

               AVSW discharged Black after it concluded she violated two policies: one

        prohibiting “discrimination or harassment or bullying, including inappropriate comments

        regarding an employee’s race, sex, religion, national origin or other protected category,”

        and another prohibiting “[f]alsifying records, including time records, expense claims,

        patient medical records or engaging in other acts of dishonesty.” J.A. 50.

               Following Black’s termination, the Union filed two grievances complaining that

        AVSW terminated Black without just cause and without first notifying the Union. After

        the parties unsuccessfully participated in the CBA’s grievance procedure, the grievances

        were submitted to arbitration.

               The arbitrator determined that to resolve the dispute, she needed to decide (1)

        “[w]hether [Black] was terminated pursuant to the just cause provision of the parties’

        [CBA] and, if not, what shall be the remedy,” and (2) whether there was “a breach of any

               1
                The factual background underlying Black’s termination is laid out in more detail
        in Advantage Veterans Servs. of Walterboro, LLC v. United Steel, Paper & Forestry,
        Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l, Loc. 7898, No. 2:20-CV-2214-
        MBS, 2022 WL 427363 (D.S.C. Feb. 11, 2022).

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        provision of the [CBA] related to the advance notice requirements of Article 14[.]” J.A.

        91. Then, after considering evidence compiled during a one-day hearing, the arbitrator

        issued an award. Following her understanding of the way other arbitrators had addressed

        similar disciplinary charges, the arbitrator interpreted the “just cause” standard of Article

        14 to require “strong, convincing evidence” of the alleged violation. J.A. 114. 2 She

        determined that AVSW failed to provide the required strong, convincing evidence that

        Black violated the policies for which she was dismissed. As such, the arbitrator held that

        Black was not terminated for just cause and ordered AVSW to reinstate her and issue

        backpay. She also determined that AVSW violated the provision in Article 14 of the CBA

        that required AVSW to notify the Union prior to suspending or discharging an employee.

               AVSW sued the Union in district court pursuant to § 301 of the Labor Management

        Relations Act, seeking to vacate the award. Both AVSW and the Union eventually moved

        for summary judgment. The Union contended that the award was entitled to deference and

        must be upheld. AVSW argued that the arbitrator did not make the reasonable basis

        determination required by Article 13 and, as such, the award did not draw its essence from

        the CBA and must be vacated. The district court disagreed with AVSW and found that the

        arbitrator applied both a just cause analysis and the required reasonable basis

               2
                 Specifically, the award stated: “Arbitrators often apply a strict standard of proof
        to evidence of charges where the consequences of finding a violation will most likely result
        in termination without progressive discipline. This is particularly true in regard to charges
        involving dishonesty, because sustaining a discharge based upon dishonesty may affect an
        employee’s future career. Therefore, there must be strong, convincing evidence to
        terminate an employee’s job for these charges, especially when the employee has
        significant job tenure and a clean disciplinary record.” J.A. 114.

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        determination. And alternatively, it found that even if the arbitrator failed to apply the

        reasonable basis determination, doing so would not compel an opposite result. So,

        according to the district court, it was required to affirm the award. The district court

        explained that “it is not for the court to find that [the arbitrator’s] analysis constitutes the

        best or most accurate reading of the CBA; it is enough for purposes of this action to find

        that her analysis reflects a plausible reading of the CBA.” J.A. 1175. Based on this

        reasoning, the district court granted the Union’s cross-motion for summary judgment

        seeking to confirm the arbitration award and denied AVSW’s.

               AVSW timely appealed. 3

                                                      III.

               A court’s review of a labor-arbitration pursuant to a collective bargaining agreement

        is very limited. Brown & Pipkins, LLC v. Serv. Emps. Int’l Union, 846 F.3d 716, 723 (4th

        Cir. 2017). In fact, the scope of judicial review of arbitration awards in general “is among

        the narrowest known at law.” MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849,

        857 (4th Cir. 2010). In the labor context, courts’ deferential standard of review stems from

        two principles. First is the “decided preference for private settlement of labor disputes

        without the intervention of government” reflected in federal labor-management relations

        statutes. United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 37–38

        (1987) (citing Labor Management Relations (Taft-Hartley) Act § 203(d), 29 U.S.C.

               3
                   We have jurisdiction under 28 U.S.C. § 1291.

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        § 173(d)). Second is that, by entering into a collective bargaining agreement, parties have

        contracted for the arbitrator to act as a factfinder and interpret the meaning of the contract,

        rather than a judge. Id. at 37–38.

                 For these reasons, courts “do not sit to hear claims of factual or legal error by an

        arbitrator as an appellate court does in reviewing decisions of lower courts.” Id. at 38.

        Instead, courts generally defer to an arbitrator’s findings and reasoning. Mountaineer Gas

        Co. v. Oil, Chem. & Atomic Workers Int’l Union, 76 F.3d 606, 608 (4th Cir. 1996). A court

        must affirm the award so long as the arbitrator “is even arguably construing or applying

        the contract and acting within the scope of [her] authority . . . [even if the] court is

        convinced [she] committed serious error.” Major League Baseball Players Ass’n v.

        Garvey, 532 U.S. 504, 509 (2001) (internal quotation marks omitted).

                 Our standard of review nonetheless requires us to ensure that an arbitrator acted

        consistent with the agreement’s contractually defined scope of authority. An award is

        illegitimate if it “fails to draw its essence” from the agreement. Champion Int’l Corp. v.

        United Paperworks Int’l Union, AFL-CIO, 168 F.3d 725, 729 (4th Cir. 1999). An

        arbitration award fails to draw its essence from an arbitration agreement when the award

        “reflects merely the arbitrator’s personal notions of right and wrong,” id., or “the

        arbitrator’s words manifest an infidelity” to the agreement. Clinchfield Coal Co. v. Dist.

        28, United Mine Workers of Am. & Loc. Union No. 1452, 720 F.2d 1365, 1368 (4th Cir.

        1983).

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                                                    IV.

               With that standard of review in mind, we turn to the issues presented by AVSW’s

        appeal. To determine whether the arbitrator’s award drew its essence from the CBA, we

        face two questions. First, did the arbitrator make the required reasonable basis

        determination? Second, if not, does our standard of review require us to vacate the award?

                                                     A.

               Beginning with our first question, the arbitrator never explicitly made the required

        reasonable basis determination. The award’s only references to the reasonable basis

        determination requirement are in listing relevant contractual provisions and summarizing

        AVSW’s position. Besides that, the only other hint that the arbitrator might have actually

        considered the requirement is the award’s description of information that AVSW had when

        it terminated Black’s employment. For example, the award states that, prior to terminating

        Black’s employment, AVSW’s administrator was briefed, reviewed all witness statements

        regarding the event leading to Black’s termination and interviewed the two parties directly

        involved in that incident. Similarly, the award recognizes AVSW’s argument that the

        misconduct was “attested to by numerous other employees.” J.A. 111.

               To the Union, this is enough. It insists that, by citing the pertinent language in the

        CBA and describing some of the evidence AVSW had at the time it terminated Black, we

        should presume that the arbitrator did, in fact, make the required determination. In

        advancing that argument, the Union points out that arbitrators are generally not required to

        provide reasoning for their decisions. Champion Int’l Corp., 168 F.3d at 729.

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               The Union is correct that arbitrators are generally not required to provide their

        substantive reasoning. Nonetheless, “a court reviewing an arbitration award must satisfy

        itself that the award is grounded in the [CBA].” Id. And the question here is whether the

        arbitrator made the determination explicitly required by the CBA. Cf. Cannelton Indus.,

        Inc. v. Dist. 17, United Mine Workers of Am., 951 F.2d 591, 594 (4th Cir. 1991) (“[I]n

        some cases reviewing courts must rely on the arbitrator’s reasoning to determine whether

        he was applying contractual terms or ‘his own brand of industrial justice’ to resolve

        disputes.”).

               Nothing in the award indicates the arbitrator made that determination. As explained

        above, Article 13 § 4(e) required the arbitrator to determine whether AVSW had a

        reasonable basis for concluding that Black committed the conduct that led to her discharge.

        The word “had” in the CBA’s description of the required reasonable basis determination is

        important. It signals a backwards-looking analysis. It required the arbitrator to determine

        whether AVSW had a reasonable basis for its decision at the time it discharged Black. And

        the arbitrator never did this.

               In fact, rather than looking backward to the information AVSW had at the time of

        its discharge decision, the arbitrator considered the evidence presented at the time of the

        hearing. The award explains that “[t]his is a case that must be decided upon the credibility

        of the only two witnesses to the critical events leading to [Black’s] termination who

        appeared at arbitration.” J.A. 120 (emphasis added). Further, the analysis section of the

        award concludes that, at the arbitration, AVSW did not present strong, convincing evidence

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        that Black committed the misconduct for which she was discharged. Thus, the arbitrator

        failed to make the required reasonable basis determination.

                                                      B.

               Having concluded that the arbitrator did not make the required reasonable basis

        determination, we must next decide if that failure, under our standard of review, warrants

        vacating the award.

               The Union says it does not. It contends that we may only vacate the arbitration award

        (1) if it blatantly ignores the unambiguous language of the CBA and (2) if that

        unambiguous language were applied, it would compel a result opposite from that reached

        by the arbitrator. Resp. Br. 16 (citing Mountaineer Gas Co., 76 F.3d at 608; MCI

        Constructors, LLC, 610 F.3d at 861). The Union insists the CBA only requires that the

        reasonable basis determination be made. According to the Union, an arbitrator that makes

        the reasonable basis determination in AVSW’s favor may still find that AVSW loses. The

        arbitrator could have, the Union continues, found that AVSW had a reasonable basis for

        concluding that Black engaged in the conduct for which she was disciplined but still found

        that AVSW did not present sufficient evidence of misconduct to satisfy the just-cause

        standard at the arbitration hearing. 4 As a result, the Union contends that the arbitrator could

               4
                 One might argue that the reasonable basis determination also has a substantive
        component, such that if AVSW had a reasonable basis for discharging Black at the time of
        the disciplinary action, it wins. While that might seem logical, as already noted, we
        generally defer to arbitrators’ substantive findings and reasoning. For that reason, had the
        arbitrator made the determination and still found that AVSW failed to present sufficient
        evidence of misconduct at the hearing, we might be required to defer to such a substantive
        interpretation. See Mountaineer Gas Co., 76 F.3d at 608 (“[A] reviewing court generally

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        have reached the same conclusion even if she had made the reasonable basis determination.

        In other words, the Union argues that even if the arbitrator ignored the directive of Article

        13 § 4(e), MCI Constructors requires us to affirm the district court because applying that

        directive would not compel an opposite result.

               We disagree. MCI Constructors addressed substantive standards, not procedural

        requirements. The contractual language at issue there, which the arbitrator ignored,

        involved the substantive issues underlying the dispute. It did not provide the procedural

        rules the parties agreed had to be followed in the arbitration. MCI Constructors, 610 F.3d

        at 859–62. In fact, neither party has pointed us to a previous case in our circuit in which an

        arbitrator ran afoul of a clear procedural requirement laid out in the parties’ arbitration

        agreement.

               But the Ninth Circuit addressed that type of provision in Western Employers

        Insurance Co. v. Jeffries & Co., Inc., 958 F.2d 258 (9th Cir. 1992). There, the parties’

        arbitration agreement required arbitrators to include a statement of findings of fact and

        conclusions of law with any arbitration award, and the award failed to include such a

        statement. In vacating the arbitration award, the court held that because arbitration is a

        creature of contract, parties have “a right to arbitration according to the terms for which it

        contracted.” Id. at 261.

        defers to the arbitrator’s reasoning.”). But we need not decide if the Union is right because,
        as described above, the CBA required the arbitrator to make the reasonable basis
        determination.

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                  That makes sense. Our deferential standard for determining whether an arbitrator

        erred substantively is rooted in the contractual nature of arbitration. If the parties agree to

        resolve disputes by arbitration, we defer to the determinations made in the process the

        parties agreed to. Here, however, the CBA limits the arbitrator’s power. It requires that the

        arbitrator make the reasonable basis determination. And it premises the legitimacy of any

        arbitration award on the arbitrator’s complying with that directive. It even provides that

        any award that is contrary to the CBA in any way—which includes that directive—“shall

        be deemed not to draw its essence from the [CBA] and shall be vacated.” J.A. 36. Given

        this language, it would be paradoxical to use our highly deferential standard of review,

        which once again, is rooted in principles of contract, to look past the arbitrator’s failure to

        follow contractually agreed-upon procedural rules for the arbitration.

                  We cannot ignore such clear and unambiguous procedural requirements. Because

        the arbitration award failed to make the required reasonable basis determination, it does

        not “draw its essence” from the CBA. And we must vacate any arbitration award that fails

        to draw its essence from the parties’ arbitration agreement. Champion Int’l Corp., 168 F.3d

        at 729.

                                                      V.

                  For the foregoing reasons, we reverse the district court’s order granting summary

        judgment to the Union and denying summary judgment to AVSW. As a result, we vacate

        the underlying arbitration award.

                                                                                          REVERSED

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