Opinion
99 Civ. 9828 (JSM)
September 20, 2000
For Petitioner: Rory J. McEvoy, Littler Mendelson, P.C., New York, New York.
For Respondent: William K. Wolf, Abigail R. Levy, Friedman Levine, New York, New York.
MEMORANDUM OPINION AND ORDER
Petitioner Beth Israel Medical Center ("Beth Israel") brings this petition seeking to vacate an arbitration award. Respondent Local 814, International Brotherhood of Teamsters (the "Union") opposes the petition and moves for confirmation and enforcement of the award. For the reasons set forth below, Beth Israel's petition to vacate is denied, and the Union's motion for confirmation and enforcement is granted.
FACTS
The Union represents, for collective bargaining purposes, the security officers employed by Beth Israel within New York City. In connection with this representation, the Union has been a party to collective bargaining agreements with Beth Israel. The most recent collective bargaining agreement (the "CBA") covers the period from March 15, 1997 to March 14, 2000. See Declaration of William K. Wolf in Support of Defendant/Respondent's Motion to Confirm and Enforce the Arbitration Award ("Wolf Decl.") Ex. C at 1, 30. Article II(D) of the CBA states: "Employees working during a shift which begins before 6:00 AM or ends after 7:00 PM shall receive a pay differential of 10 percent (10%) of their base pay." Id. at 5. The CBA also provides for the arbitration of grievances. See id. at 18-20.
Under the prior collective bargaining agreements, the Union had not represented the security officers employed at Beth Israel's Kings Highway, Phillips Ambulatory Care Center ("PACC"), and Beth Israel North ("BI North") divisions because these divisions had previously been staffed by outside security firms before they were acquired by Beth Israel. During the negotiations of the CBA, the parties agreed to include in the Union's bargaining unit the security officers employed at the Kings Highway, PACC, and BI North divisions. This agreement was embodied in the Memorandum of Agreement (the "MOA"), see Wolf Decl. Ex. D, and subsequently incorporated into the CBA under Article XXXII, see Wolf Decl. Ex. C.
Pursuant to the MOA, the parties created a new security officer title for officers hired after March 15, 1997 at the Kings Highway, PACC, and BI North divisions. See Wolf Decl. Ex. D. The parties have since referred to the officers hired under this title as "Tier II" officers, while the incumbent security officers at these divisions are referred to as "Tier I" officers. The MOA sets forth terms and conditions of the Tier II officers' employment, but it does not mention the night shift differential. At its conclusion, the MOA provides that its section on the new security officer title "covers the wages and benefits that apply to this title at the BI North, [PACC], and the Kings Highway Division sites" and that "[a]ll other management and union proposals, if any, are withdrawn upon execution of this agreement." Id. at 3.
After the CBA became effective, a dispute arose between the parties as to whether the night shift differential, as set forth in Article II(D) of the CBA, should apply to Tier II officers. In early 1998, the Union filed a grievance demanding night shift differential pay for Tier II employees who worked shifts implicating the night shift differential provision. In June 1998, after Beth Israel denied the grievance, the Union filed a demand for arbitration. The parties jointly selected an arbitrator to decide the breadth of the night shift differential clause and stipulated that the issue to be determined was: "Has [Beth Israel] violated the collective bargaining agreement by not paying a night shift differential to Second Tier officers? If so, what shall be the remedy?"
It is undisputed that Tier I officers are entitled to receive the night shift differential.
Before the arbitration occurred, in September 1998 a Union representative notified Marisa Ognibene ("Ognibene"), the labor relations manager for the Kings Highway division, that neither Tier I nor Tier II security officers at Kings Highway were receiving night shift differential. The Union representative asked Ognibene (1) to pay all security officers (including Tier II officers) at Kings Highway night shift differential prospectively and (2) to pay the differential retroactively to all officers for the twenty-month period beginning in March 1997 through September 1998. According to Beth Israel, at this time, Ognibene was unaware of the Union's grievance and pending demand for arbitration.
Beth Israel asserts that after Ognibene verified that Tier I officers were not receiving night shift differential at the Kings Highway division, she instructed the payroll department to begin paying the differential to Tier I officers. Beth Israel also asserts that to confirm these instructions, on October 5, 1998, Ognibene sent her supervisor an email seeking guidance and approval to begin paying night shift differential to Tier I officers. According to the hospital, Ognibene's supervisor responded later that day that Ognibene should pay the differential, as it was in the contract.
Beth Israel asserts that despite Ognibene's instructions, the payroll department at Kings Highway began to pay night shift differential to both Tier I and Tier II officers prospectively and paid the differential to both Tier I and Tier II officers retroactively. Allegedly, neither Ognibene nor Beth Israel discovered this error until January 27, 1999, at the first arbitration hearing.
The arbitration hearings were held on January 27 and March 4, 1999. On May 29, the arbitrator ruled that Beth Israel had violated the CBA by not paying a night shift differential to Tier II officers and that Article II of the CBA was applicable to Tier II officers retroactive to February 4, 1999. In response to this arbitral decision, Beth Israel commenced an action in state court against the Union by filing a petition to vacate the award. The Union removed the action to this court and then filed an answer and counterclaim seeking confirmation and enforcement of the award.
DISCUSSION
I. Judicial Review of an Arbitration Award
An arbitrator's award is entitled to great deference by a reviewing court. See Hill v. Staten Island Zoological Soc'y, Inc., 147 F.3d 209, 212 (2d Cir. 1998) (collecting cases). "Arbitration awards are subject to very limited review in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation." Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993). Therefore, the standard for avoiding summary confirmation of an arbitration award is high, and the burden of proof is on the party moving to vacate the award. See Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997).
A federal court may set aside an arbitral decision only in very unusual circumstances. See Bendel Feed Flour Mill, Ltd. v. Seaboard Corp., No. 99 Civ. 4054, 2000 WL 1051870, at *2 (S.D.N.Y. July 28, 2000). A district court may vacate an arbitral decision upon the statutory grounds specified in 9 U.S.C. § 10 of the Federal Arbitration Act (the "FAA"). See Acciardo v. Millennium Secs. Corp., 83 F. Supp.2d 413, 417 (S.D.N.Y. 2000). Under 9 U.S.C. § 10(a)(4), an award may be vacated "[w]here the arbitrators exceeded their powers." In addition to the statutory grounds for vacatur, a court may vacate an arbitral award where the arbitrator acts in manifest disregard of the law or the evidence, see Halligan v. Piper Jaffray, Inc., 148 F.3d 197, 202, 204 (2d Cir. 1998), or where an award under a collective bargaining agreement is contrary to public policy, see Newsday, Inc. v. Long Island Typographical Union, No. 915, 915 F.2d 840, 844 (2d Cir. 1990); see also Brookdale Hosp. Med. Ctr. v. Local 1199, Nat'l Health Human Serv. Employees Union, 107 F. Supp.2d 283, 289 (S.D.N.Y. 2000).
II. The Arbitrator Did Not Exceed His Power
In determining whether an arbitrator has exceeded his power under Section 10(a)(4), the reviewing court must determine first whether the arbitrator acted within the scope of his authority, and second whether the award draws its essence from the agreement or is merely an example of the arbitrator's own brand of justice. See Local 1199, Drug, Hosp. Health Care Employees Union v. Brooks Drug Co., 956 F.2d 22, 25 (2d Cir. 1992). Under this standard, "an arbitration award must be upheld when the arbitrator `offer[s] even a barely colorable justification for the outcome reached.'" Wackenhut Corp. v. Amalgamated Local 515, 126 F.3d 29, 31 (2d Cir. 1997) (quoting Andros Compania Maritima, S.A. v. Marc Rich Co., 579 F.2d 691, 704 (2d Cir. 1978)).
A. The Arbitrator Acted Within the Scope of His Authority
The "scope of authority of arbitrators generally depends on the intention of the parties to an arbitration, and is determined by the agreement or submission." Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987) (quoting 6 C.J.S. Arbitration § 69, at 280-81 (1975)); see Hill, 147 F.3d at 214. In this case, the parties stipulated that the issue to be determined by the arbitrator was: "Has the Employer violated the collective bargaining agreement by not paying a night shift differential to Second Tier officers? If so, what shall be the remedy?" Wolf Decl. Ex. A at 1. This submission reflects the parties' unambiguous intent to submit to, and be bound by, the arbitrator's decision regarding whether Beth Israel violated the CBA by not paying the differential. See Local Union No. 38, Sheet Metal Workers' Int'l Ass'n v. Hollywood Heating Cooling, Inc., 88 F. Supp.2d 246, 252 (S.D.N.Y. 2000). Clearly, then, the arbitrator was acting within the scope of the authority conferred upon him by the parties' submission in determining that Beth Israel violated the CBA. See id.
Beth Israel argues that the arbitrator exceeded his authority by finding that an extra-contractual agreement required Beth Israel to pay night shift differential to all Tier II officers. Beth Israel contends that the arbitrator resolved the submitted question in its favor by ruling that Beth Israel had no obligation to pay the differential to Tier II officers under the CBA, but then he imposed a new term upon the parties to which they had never agreed. However, the arbitrator did not rule that Beth Israel had no such obligations under the CBA. Instead, he concluded that the parties had reached an agreement in connection with settlement of the dispute at Kings Highway, which modified the CBA, and that this modified agreement required Beth Israel to pay night shift differential to certain Tier II officers. See Wolf Decl. Ex. A at 6. Thus, the arbitrator acted within the scope of his authority by interpreting the CBA, as modified by the parties.
Beth Israel cites Leed Architectural Products, Inc. v. United Steelworkers of America, Local 6674 in support of its argument that the award should be vacated because the arbitrator altered the agreement between the parties. See 916 F.2d 63 (2d Cir. 1990). However, Leed is distinguishable because in Leed the arbitrator altered the contract, while here the arbitrator found that the parties themselves modified the agreement.
B. The Arbitrator's Award Draws Its Essence from the Agreement
An arbitral decision should not be vacated where it draws its essence from the agreement, even if it contains factual errors or erroneous interpretations of contract provisions. See First Nat'l Supermarkets, Inc. v. Retail, Wholesale Chain Store Food Employees Union Local 338, 118 F.3d 892, 896 (2d Cir. 1997). In order to satisfy the requirement that the award "draws its essence" from the agreement, the arbitrator must only explain his reasoning under the contract in terms that offer even a barely colorable justification of the outcome reached. See Hollywood Heating, 88 F. Supp. 2d at 252.
While "an arbitrator is confined to interpretation and application of the collective bargaining agreement [,] . . . [h]e may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement." United Steelworkers of America v. Enterprise Wheel Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361 (1960); see Local 1199, 956 F.2d at 25. In making such a determination, the arbitrator may consider the intent of the parties as revealed through their conduct, bargaining history, past practices, rights established under earlier agreements, and other rudimentary sources of contract construction. See Radio Television Broadcast Eng'rs Union, Local 1212 v. WPIX, Inc., 716 F. Supp. 777, 781-82 (S.D.N.Y.), aff'd, 895 F.3d 1411 (2d Cir. 1989) (citing Western Elec. Co. v. Communications Workers of America, 450 F. Supp. 876, 882 (E.D.N.Y.), aff'd, 591 F.2d 1333 (2d Cir. 1978)). More specifically, the arbitrator may discern whether the "[p]arties [have] modif[ied] their contractual obligations by an agreement reasonably to be understood from their conduct." Id. at 782 (quoting Fox v. Merrill Lynch Co., 453 F. Supp. 561, 564 (S.D.N.Y. 1978)).
In the present case, the arbitrator accorded great weight to the fact that Tier II officers at Kings Highway had been paid the night shift differential since February 1999. While Beth Israel claimed that it was the result of a payroll error, the arbitrator was not persuaded by this argument. Instead, he concluded that the payment of the night shift differential to certain Tier II officers was part of a grievance settlement negotiated in February 1999 between the Union's representative and Ognibene. The conduct of the Union's representative and Ognibene indicates that the parties had mutually modified the CBA when negotiating the settlement of the earlier grievance. See id. at 781-82. This conduct, properly considered by the arbitrator, reveals Beth Israel's intent to pay the night shift differential to certain Tier II officers. Then, guided by the well-settled arbitral rule that employees similarly situated are to be treated similarly absent some express contractual or otherwise binding agreement enunciating the difference in employment status, the arbitrator determined that all of the Tier II officers are entitled to the night shift differential retroactive to February 4, 1999. Thus, regardless of any factual errors or erroneous interpretations of the contractual provisions, the arbitrator's award was drawn from the essence of the CBA, as modified by the parties.
Citing cases in which courts have vacated an arbitrator's award because the award modified or changed the parties' agreement, Beth Israel argues that the arbitrator "based his award on some body of thought, or feeling, or policy, or law that is outside the contract." Pl.'s Mem. Supp. Pet. to Vacate at 15 (quoting In re Marine Pollution Serv., Inc., 857 F.2d 91, 94 (2d Cir. 1988)). However, while an arbitrator's award may be vacated if it modifies the agreement, it is also possible that the award highlights a change in the agreement that has been negotiated by the parties. See WPIX, 716 F. Supp. at 782. Here, according to the arbitrator, certain Tier II officers began to receive the night shift differential in February 1999 as part of a settlement reached by Beth Israel and the Union concerning an earlier grievance. The arbitrator determined that this settlement altered the terms of the CBA. In the arbitrator's view, the conduct of the parties in reaching the settlement modified the CBA so as to provide certain Tier II officers with the night shift differential. Thus, the arbitrator's award is not based on a body of thought, feeling, policy or law outside the agreement, but it is based on the conduct of the parties. See id.
The decisions that Beth Israel cites on this issue are inapposite because in this case the arbitrator did not unilaterally modify the CBA, while in those cases the arbitrator unilaterally modified the agreements. Here, the arbitral award is based upon a modification of the CBA as evidenced by the parties' conduct. The award is not founded upon the arbitrator's personal views or values — he neither imposed his own notions of equity, see In re Marine Pollution Serv., Inc., 857 at 95, nor made an irrational inference or assumption, see Harry Hoffman Printing, Inc. v. Graphic Communications, Int'l Union, Local 261, No. Civ.-88-1165E, 1991 WL 46487, at *3 (W.D.N.Y. Mar. 25, 1991), aff'd, 950 F.2d 95 (2d Cir. 1991); City of New York v. Davis, 536 N.Y.S.2d 757, 759 (App.Div. 1989).
Because the arbitrator acted within the scope of his authority and his award drew from the essence of the agreement, he did not exceed his powers under 9 U.S.C. § 10(a)(4).
III. The Arbitrator Did Not Manifestly Disregard the Facts
Review of an arbitration award on the basis of manifest disregard of the facts is "severely limited." Halligan, 148 F.3d at 202; see Greenberg v. Bear Stearns Co., No. 99 Civ. 358, 1999 WL 642859, at *1 (S.D.N.Y. Aug. 23, 1999), aff'd, 220 F.3d 22 (2d Cir. 2000). While judicial review of an arbitrator's factual determinations is quite limited, a court may modify or vacate an arbitrator's award for manifest disregard of the law or the evidence if there is "strong evidence" contrary to the findings of the arbitrator and the arbitrator has not provided an explanation of his decision. See Halligan, 148 F.3d at 204; see also Daily News, L.P. v. Newspaper Mail Deliverers' Union of New York and Vicinity, No. 99 Civ. 5165, 1999 WL 1095613, at *7 (S.D.N.Y. Dec. 2, 1999); Greenberg, 1999 WL 642859, at *1. However, the court may not re-weigh the evidence or question the credibility findings of the arbitrator. See Campbell v. Cantor Fitzgerald Co., 21 F. Supp.2d 341, 349 (S.D.N.Y. 1998), aff'd, 205 F.3d 1321 (2d Cir. 1999).
Beth Israel contends that various factual errors made by the arbitrator constituted a manifest disregard of the evidence. While the arbitrator did make factual errors, as the Union admits, he correctly found that Beth Israel had paid the night shift differential to certain Tier II officers since February 1999. From this finding, the arbitrator inferred that the payment of these Tier II officers was not a mistake. Because this inference is reasonable and the finding upon which it is based is undisputed, the arbitrator presents a "colorable justification for the outcome reached." Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir. 1997). Thus, the arbitrator did not act in manifest disregard of the evidence.
For example, the arbitrator stated that there were eight Tier II security officers at Kings Highway, while there were only seven. In addition, he mistakenly found that the Tier II security officers at Kings Highway only received the differential prospectively, although they also received it retroactively.
In its attempt to satisfy its burden of proving the arbitrator's manifest disregard of the facts, Beth Israel relies upon Halligan v. Piper Jaffray, Inc., 148 F.3d 197 (2d Cir. 1998). Such reliance is misplaced. In Halligan, the Second Circuit vacated the arbitrator's award because the award did not contain any explanation or rationale for the result and there was "strong evidence" that contravened the arbitrator's position. See id. at 204. In the present case, the arbitrator, after considering all of the evidence put before him, provided sufficient explanations for his factual determinations and made a reasonable inference based upon an undisputed finding. As the arbitrator presented more than a "barely colorable justification for the outcome reached," Beth Israel's argument on this issue fails.
IV. The CBA Is Not Contrary to Public Policy
Although a court may refuse to enforce an arbitrator's award under a collective bargaining agreement if the award is contrary to public policy, see Newsday, Inc. v. Long Island Typographical Union, No. 915, 915 F.2d 840, 844 (2d Cir. 1990); see also Brookdale Hosp. Med. Ctr. v. Local 1199, Nat'l Health Human Serv. Employees Union, 107 F. Supp.2d 283, 289 (S.D.N.Y. 2000), the Statute of Frauds is not applicable to collective bargaining agreements, see American Fed'n of Television Radio Artists v. Inner City Broad. Corp., 748 F.2d 884, 887 (2d Cir. 1984); see also Mack Trucks, Inc. v. International Union, United Auto., Aerospace Agric. Implement Workers of America, 856 F.2d 579, 592 (3d Cir. 1988). Thus, the parties' modification of the CBA is not contrary to public policy and is not grounds for vacatur of the award.
CONCLUSION
For the foregoing reasons, the petition to vacate the arbitration award is denied, and the Union's motion for confirmation and enforcement is granted.
SO ORDERED.