Court Opinion

ID: 2967263
Source: CourtListenerOpinion
Date Created: 2015-09-22 02:13:25.585347+00
Date Added: 2024-06-11T15:27:57.496832
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

YUASA, INCORPORATED,
Plaintiff-Appellee,

v.

INTERNATIONAL UNION OF ELECTRONIC,
                                                                  No. 00-1019
ELECTRICAL, SALARIED, MACHINE AND
FURNITURE WORKERS, AFL-CIO,
LOCAL 175,
Defendant-Appellant.

Appeal from the United States District Court
for the District of South Carolina, at Florence.
Cameron McGowan Currie, District Judge.
(CA-99-2003-4-22)

Argued: June 9, 2000

Decided: August 21, 2000

Before WIDENER and NIEMEYER, Circuit Judges, and
Irene M. KEELEY, United States District Judge for the
Northern District of West Virginia, sitting by designation.

_________________________________________________________________

Vacated and remanded by published opinion. Judge Niemeyer wrote
the opinion, in which Judge Widener and Judge Keeley joined.

_________________________________________________________________

COUNSEL

ARGUED: Stephen Marc Koslow, Washington, D.C., for Appellant.
Stephen Floyd Fisher, JACKSON, LEWIS, SCHNITZLER & KRUP-
MAN, Greenville, South Carolina, for Appellee. ON BRIEF: Paul H.
Derrick, JACKSON, LEWIS, SCHNITZLER & KRUPMAN, Green-
ville, South Carolina, for Appellee.

_________________________________________________________________

OPINION

NIEMEYER, Circuit Judge:

The question presented in this case is whether an arbitrator
exceeded the scope of his authority -- defined both by a collective
bargaining agreement and by the grievance presented to him -- when
he entered an award in favor of employees at the lead-battery manu-
facturing plant of Yuasa, Inc., in Sumter, South Carolina. The arbitra-
tor interpreted an incentive plan in the collective bargaining
agreement through which the parties intended to reward production
quality. Yuasa brought this action to set aside the arbitrator's award,
contending that the arbitrator illegitimately went beyond the scope of
the grievance and ignored the plain language of the applicable agree-
ment.

The district court vacated a portion of the award, finding that the
arbitrator had exceeded his authority in rendering the award. Because
we conclude that the arbitrator acted within the scope of the grievance
presented to him and arguably construed or applied the collective bar-
gaining agreement, we vacate that part of the district court's ruling
setting aside the arbitrator's award and remand for further proceed-
ings.

I

In April 1998, Yuasa, Inc., and the International Union of Elec-
tronic, Electrical, Salaried, Machine and Furniture Workers, AFL-
CIO ("the Union"), which was the exclusive collective bargaining
representative for approximately 400 production and maintenance
employees at Yuasa's Sumter plant, entered into a collective bargain-
ing agreement, which included the substitution of a"Gainsharing
Plan" for the then-existing incentive plan. Under the Gainsharing
Plan, the Union agreed to accept a reduction in base pay in exchange

                    2
for "the opportunity to earn more money than the incentive plan"
through bonuses based on four performance criteria: quality, on-time
delivery, health, and productivity. The stated objective of the Gain-
sharing Plan was "to improve long term job security and customer sat-
isfaction by providing the employees with the opportunity to earn
additional monies for achieving specified levels of performance, par-
ticularly verifiable improvements."

Under the Plan, quality of performance was to be measured by a
"First Pass Yield" (sometimes "FPY") determined pursuant to a for-
mula for each of eight production departments in the Sumter plant.
When the plant-wide First Pass Yield -- the production yield of
"good product" -- equaled or exceeded 85%, each employee would
receive a bonus.1

While the method for computing the First Pass Yield in each of the
eight departments is expressly set forth in the collective bargaining
agreement, the agreement does not specify how the FPY percentages
from the eight departments are to be aggregated to produce a plant-
wide FPY percentage. The Union believed that the yields from the
eight departments were to be averaged, and the company believed that
the yields from the departments were to be multiplied.

The collective bargaining agreement establishes a grievance proce-
dure for resolving disputes under the agreement. An employee or
union steward who fails to resolve a grievance with a supervisor must
reduce the dispute to writing. The agreement provides: "In order to
avoid misunderstandings, the written grievance must cite the specific
clause of the Agreement which is claimed to be violated and the rem-
edy which is being sought." Once a grievance is submitted to a human
resources manager, "[v]iolations of other contract provisions cannot
be alleged" in that grievance. If the parties are unable to resolve the
_________________________________________________________________
1 The bonuses agreed to were:

         $100 per month if plant-wide FPY was 85%-87.9%;

         $150 per month if plant-wide FPY was 88%-89.9%;

         $200 per month if plant-wide FPY was 90%-91.9%; and

         $250 per month if plant-wide FPY was 92% or higher.

                   3
dispute on their own, either party may refer the dispute for "final and
binding" arbitration. "The arbitrator may only interpret the contract
and apply it to the particular case presented, as specified in the written
grievance," and he has "no authority to add to or subtract from or
modify any of the terms of Agreement."

Shortly after the Gainsharing Plan went into effect, a dispute arose
between the Union and Yuasa concerning the calculation of bonus
pay. The Union filed a grievance on June 22, 1998, charging Yuasa
with violating Article XXIV, Section 1, of the collective bargaining
agreement2 and describing its grievance as Yuasa's "[v]iolation of the
intent of language to determine the percentages for`First pass
Yield.'" The Union requested as relief that the First Pass Yield be
determined by "using average of each Department added and divided
by the number of Departments." Yuasa had been calculating plant-
wide FPY by multiplying together the FPY value for each depart-
ment.

Unable to resolve the dispute through negotiation, the Union pur-
sued its grievance to arbitration, and the arbitrator issued a written
opinion sustaining the Union's grievance. While the arbitrator
rejected the Union's claim that the departmental rates should be aver-
aged as opposed to being multiplied, he found that Yuasa had violated
Article XXIV, Section 1, of the collective bargaining agreement by
calculating the FPY in the gridcasting department-- one of the
plant's eight departments -- in a manner that frustrated the ability of
Union members to earn bonus pay.

Yuasa's Sumter plant manufactures lead-core batteries, and the
first step in the manufacturing process is gridcasting, during which
lead is melted down and cast into lead grids or lattices, which form
part of the core of a battery. After the lead is melted down in a ladle-
shaped pot, which is part of the gridcasting machine, the machine
_________________________________________________________________
2 Article XXIV, Section 1, provides in relevant part:

          The Company shall discontinue the current incentive plan and
          implement a Gainsharing Plan [which was attached to the collec-
          tive bargaining agreement as Attachment C] which will provide
          the opportunity to earn more money than the incentive plan.

                     4
pours the lead into molds to form grids. At the same time, a counter
on the machine counts each pour. If a grid contains a defect at this
early stage in the process, the employees simply throw the defective
grid back into the lead pot to be melted down and poured again. After
the grid production process is complete, the employees place the fin-
ished grids on a pallet where quality-assurance workers later examine
the grids for defects.

The collective bargaining agreement sets forth a formula for calcu-
lating the gridcasting department's First Pass Yield and defines the
components of that formula as follows:

          FPY = (Good Product - External Scrap) / Counter number

          Numerator: The Good Product comes from product that is
          counted by the operator and entered on the production
          report. External Scrap is product identified on M90 reports
          by operators in subsequent processes.

          Denominator: The Counter is attached to the grid casting
          machine and counts each ladle pour as it is made.

          The units of measure are grids.

The arbitrator determined that Yuasa was calculating the gridcast-
ing department's FPY in a manner inconsistent with the intent of the
parties as expressed in the collective bargaining agreement. Instead of
measuring the quality of product effected by the performance of
employees, Yuasa was also counting defective pours that resulted
from machine malfunctions not attributable to the quality of employee
work, which, the arbitrator found, represented between 20% and 40%
of the pours coming out of the machine. The arbitrator concluded that
the FPY formula could not be interpreted to include pours resulting
from a malfunctioning machine.

In short, the arbitrator sustained the Union's grievance but denied
the Union's requested relief, finding that multiplying together the
FPY percentages of the eight departments was most consistent with
the previous practice of the company and the nature of the productiv-

                    5
ity incentives under the Gainsharing Plan. The arbitrator instead
found that Yuasa was miscalculating the FPY for the gridcasting
department and accordingly ordered Yuasa to pay backpay to Union
members as "determined either by agreement of the parties or by this
arbitrator who maintains jurisdiction of this dispute."

Yuasa filed this action under § 301 of the Labor Management Rela-
tions Act, 1947, 29 U.S.C. § 185, seeking to vacate that portion of the
arbitration award which determined that Yuasa had improperly calcu-
lated the FPY for the gridcasting department, and the Union filed a
counterclaim, seeking to enforce the entire arbitration award. The dis-
trict court entered an order affirming the award"only insofar as it
[found] that plant-wide FPY should be calculated by multiplication of
individual FPYs," and vacating all other portions of the award. The
court concluded that the arbitrator had exceeded the contractually
drawn bounds of his authority, first, by addressing an issue -- the cal-
culation of the gridcasting department's FPY -- that was not raised
in the written grievance, and second, by failing to draw the essence
of his award from the collective bargaining agreement, specifically its
formula for the calculation of the gridcasting department's FPY.

The Union filed this appeal, challenging only that portion of the
district court's order which set aside a portion of the arbitration
award.

II

The parties to this case quickly found themselves in disagreement
over how to apply a quality-performance measurement, to which they
had agreed only shortly before. The chosen method for resolution of
this dispute was arbitration, and the arbitrator provided the parties
with that resolution -- one with which Yuasa disagrees. Our function
in this type of case is not to review the substance of the arbitration
award or even the rationality of the arbitrator's approach but to deter-
mine whether the arbitrator arguably functioned within the scope of
the powers given him by the arbitration agreement. Allowing final
adjustment of disputes to be achieved through the arbitration process
is a policy adopted both by the Labor Management Relations Act, see
29 U.S.C. § 173(d) ("Final adjustment by a method agreed upon by
the parties is declared to be the desirable method for settlement of

                     6
grievance disputes arising over the application or interpretation of an
existing collective-bargaining agreement"), and by the cases interpret-
ing it, see, e.g., United Steelworkers v. American Mfg. Co., 363 U.S.
564, 566 (1960). This is because "arbitration of labor disputes under
collective bargaining agreements is part and parcel of the collective
bargaining process itself." United Steelworkers v. Warrior & Gulf
Navigation Co., 363 U.S. 574, 578 (1960).

For these reasons, particularly in the labor context, we defer to an
arbitrator "as long as the arbitrator is even arguably construing or
applying the contract." United Paperworkers Int'l Union v. Misco,
Inc., 484 U.S. 29, 38 (1987); see also Champion Int'l Corp. v. United
Paperworkers Int'l Union, 168 F.3d 725, 728 (4th Cir. 1999). Our
province is not to decide the merits of the dispute between Yuasa and
the Union, but rather to "determine only whether the arbitrator did his
job -- not whether he did it well, correctly, or reasonably, but simply
whether he did it." Mountaineer Gas Co. v. Oil, Chem. & Atomic
Workers Int'l Union, 76 F.3d 606, 608 (4th Cir. 1996). Accordingly,
we may vacate an arbitrator's award only if it "violates clearly estab-
lished public policy, fails to draw its essence from the collective bar-
gaining agreement, or reflects merely the arbitrator's personal notions
of right and wrong." Champion Int'l, 168 F.3d at 729. One way we
determine whether an arbitrator's award fails to draw its essence from
the collective bargaining agreement is to ask "whether the award
ignored the plain language of the [agreement]." Mountaineer Gas, 76
F.3d at 608; see also Champion Int'l, 168 F.3d at 729. Summarized
succinctly,

          [T]he arbitrator's award settling a dispute with respect to the
          interpretation or application of a labor agreement must draw
          its essence from the contract and cannot simply reflect the
          arbitrator's own notions of industrial justice. But as long as
          the arbitrator is even arguably construing or applying the
          contract and acting within the scope of his authority, that a
          court is convinced he committed serious error does not suf-
          fice to overturn his decision.

Misco, 484 U.S. at 38.

With these principles in hand, we must decide in this case: (1)
whether the arbitrator went beyond the scope of the grievance in

                    7
deciding the correct application of the gridcasting department's FPY
formula, and (2) whether the arbitrator's interpretation of that formula
drew its essence from the language of the collective bargaining agree-
ment.

III

The Union contends first that the district court erred in concluding
that the arbitrator went beyond the scope of the grievance when he
decided the proper application of the FPY formula for the gridcasting
department. It argues that the language of its grievance addressing
plant-wide FPY encompasses also the FPY of the plant's individual
departments. Yuasa, on the other hand, contends that the district court
was correct because the Union's grievance only implicated the proper
method of calculating plant-wide FPY under the agreement.

The Union's grievance reads as follows:

          NATURE OF GRIEVANCE: Violations of the intent of lan-
          guage to determine the percentages for "First pass Yield."

The grievance refers to Article XXIV, Section 1, of the collective bar-
gaining agreement, by which the parties agreed to"implement a Gain-
sharing Plan which will provide the opportunity to earn more money
than the incentive plan."

This complaint is broad and would appear to encompass almost any
dispute involving the Gainsharing Plan. We have long recognized that
it is the grievance that serves as "both the source and limit of the arbi-
trator's authority and power." Textile Workers Union v. American
Thread Co., 291 F.2d 894, 898 (4th Cir. 1961). And in the absence
of any express limitation or reservation included in the grievance, we
presume that the parties, who agreed to arbitration, agree that the
authority to address everything necessary to resolve the particular
grievance is conferred upon the arbitrator. See Ormsbee Dev. Co. v.
Grace, 668 F.2d 1140, 1146 (10th Cir. 1982); see also O'Neil v. Hil-
ton Head Hosp., 115 F.3d 272, 273-74 (4th Cir. 1997) (noting that
"any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration" (quoting Moses H. Cone Mem'l

                     8
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983))). While
Yuasa points to the relief requested in the grievance -- which was
directed at the proper computation of plant-wide First Pass Yield --
as limiting the grievance, any relief requested, by its very nature, is
included to redress the grievance, not to limit its scope.

Consistent with Yuasa's argument, the district court in this case
characterized the issue before the arbitrator as"the singular question
of plant-wide FPY calculation." Even if that accurately stated the
scope of the issue, we would still conclude that the arbitrator was
empowered to determine, as components of that plant wide FPY, the
individual department's FPY values. This is because the plant-wide
calculation necessarily implicates the calculations of the individual
departments. Indeed, it is the company's manner of calculating plant-
wide FPY that puts such a great emphasis on the individual depart-
ments' FPY values. If the company's method of calculating the plant-
wide FPY is accepted, then any single departmental value below the
85% threshold would defeat a Gainsharing Plan bonus based on
"quality." Thus, when the arbitrator addressed the proper method of
arriving at the FPY percentage for the gridcasting department, he
acted within the scope of the authority given to him to determine the
proper plant-wide FPY.

IV

The Union contends also that the district court erred in finding that
the arbitrator's award did not draw its essence from the collective bar-
gaining agreement. The Union argues that the arbitrator, faced with
a conflict between the stated objective of the Gainsharing Plan and
the literal reading of the gridcasting department's FPY formula, was
properly authorized to interpret the formula in a manner that avoided
the conflict but yet was faithful to the bargain struck by the parties.
Yuasa asserts, on the other hand, that the arbitrator ignored the plain
language of the gridcasting department's FPY formula and substituted
for the agreed-upon formula his "own notions of industrial justice."
Misco, 484 U.S. at 38; see also United Steelworkers v. Enterprise
Wheel & Car Corp., 363 U.S. 593, 597 (1960).

The collective bargaining agreement provides that the First Pass
Yield is measured for the gridcasting department by deriving a per-

                     9
centage from the ratio of "Good Product" (lead grids entered on the
department's production report) minus "External Scrap" (defective
grids identified on M90 reports in subsequent processes) divided by
the "Counter number" (the reading of the counter that is attached to
the gridcasting machine and mechanically counts each ladle pour).

Yuasa argues that this formula and the definitions of its compo-
nents leave no room for interpretation by an arbitrator. It asserts that
the components of the applicable ratio are determined mechanically,
through reference to certain forms and to the gridcasting machine's
counter. To interpret the formula in a manner requiring the company
to disregard defective pours by the gridcasting machine, Yuasa con-
tends, does violence to the plain language of the formula and effec-
tively rewrites the agreement's terms, altering the bargain struck by
the parties.

The Union argues that Yuasa's mechanical interpretation cannot be
so absolute because it would defeat the essence of the parties' agree-
ment. Thus, it maintains that when the gridcasting machine malfunc-
tions and for that reason produces defective pours unrelated to
employees' performance, the defective pours should not be counted
against the employees. Yuasa responds that even though such defec-
tive pours could defeat any Gainsharing Plan bonuses, they are not
excluded by the terms of the agreement. Counsel for Yuasa conceded
at oral argument, however, that if the counter itself were broken and
improperly recorded pours, the improperly counted pours could not,
consistent with the parties' collective bargaining agreement, be used
in computing the FPY. This necessary acknowledgment by counsel --
a reading from a counter that does not function cannot be a reading
at all -- is consistent with the arbitrator's conclusion that defective
pours resulting from an otherwise malfunctioning machine were not
intended by the parties to be included in the First Pass Yield calcula-
tion. The broken-machine scenario was not addressed by the collec-
tive bargaining agreement and therefore had to be addressed through
interpretation.

The arbitrator in this case examined the collective bargaining
agreement's formula for calculating the gridcasting department's FPY
in light of circumstances that the agreement did not expressly address
-- the production of a high percentage of defective grids caused by

                     10
malfunctioning gridcasting machines. He determined that, in these
circumstances, the parties intended the formula to reflect the produc-
tivity of the workers in the department, not the failure of the machine.
Informed by the stated objective of the Gainsharing Plan to "provide
the employees with the opportunity to earn additional monies for
achieving specified levels of performance," the arbitrator found that
the parties' choice of the term "Excess Scrap," defined as "product
identified on M90 reports by operators in subsequent processes"
(emphasis added), conveyed an intent not to include those grids
thrown back into the lead melting pot during the gridcasting process
because the machine was defective. Likewise, he determined that the
parties intended the term "Counter number," defined with reference
to the machine counter, to reflect machine-defect-free pours, a num-
ber that would be recorded by the machine's counter if the machine
were not malfunctioning. Thus, the arbitrator did not ignore the plain
language of the collective bargaining agreement. Rather, he construed
it to apply to unaddressed circumstances in a manner that was consis-
tent with the parties' intent as manifested in the agreement itself. See
Restatement (Second) of Contracts § 202(1) (1981) ("Words . . . are
interpreted in the light of all the circumstances, and if the principal
purpose of the parties is ascertainable it is given great weight"); see
also id. § 202(5) ("Wherever reasonable, the manifestations of inten-
tion of the parties to a promise or agreement are interpreted as consis-
tent with each other and with any relevant course of performance,
course of dealing, or usage of trade").

While the proper resolution of this scope-of-arbitration issue is not
entirely free from doubt, we must resolve such doubt in favor of arbi-
tration. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24-25 (1983). When we do so, we conclude that the arbi-
trator was authorized to construe the FPY formula for circumstances
not addressed in the agreement and that his interpretation of the for-
mula drew its essence from the agreement. See Misco, 484 U.S. at 38.
Thus, whether or not we agree with the arbitrator's decision on the
merits, we believe that the arbitrator was authorized to construe the
formula to measure employee production quality by machine-defect-
free ladle pours rather than by a number mechanically rendered by a
defective machine.

Because we have determined that the arbitrator's award was within
the scope of the grievance presented by the parties for his resolution

                    11
and that the award drew its essence from the parties' collective bar-
gaining agreement, the portion of the district court's order vacating
the arbitrator's award is vacated and the case is remanded to the dis-
trict court for further proceedings consistent with this opinion.

IT IS SO ORDERED.

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