Wheelabrator v. Massachusetts ( 1996 )


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  • USCA1 Opinion











    United States Court of Appeals
    For the First Circuit
    ____________________


    No. 95-2142

    WHEELABRATOR ENVIROTECH OPERATING SERVICES INCORPORATED,

    Plaintiff, Appellee,

    v.

    MASSACHUSETTS LABORERS DISTRICT COUNCIL LOCAL 1144
    AND LABORERS INTERNATIONAL UNION OF NORTH AMERICA,

    Defendants, Appellants.

    ____________________

    APPEAL FROM THE UNITED STATES DISTRICT COURT

    FOR THE DISTRICT OF MASSACHUSETTS

    [Hon. Douglas P. Woodlock, U.S. District Judge] ___________________

    ____________________

    Before

    Stahl, Circuit Judge, _____________
    Aldrich, Senior Circuit Judge, ____________________
    and Lynch, Circuit Judge. _____________

    ____________________

    Ira Sills with whom Segal, Roitman & Coleman was on brief for _________ _________________________
    appellant.
    Benjamin B. Culp, Jr., with whom Steven M. Bernstein, Fisher & ______________________ ____________________ ________
    Phillips, Bradford J. Smith and Goodwin, Procter & Hoar, were on brief ________ _________________ _______________________
    for appellee.
    ___________________

    July 10, 1996
    ____________________
    1 STAHL, Circuit Judge. This appeal involves a STAHL, Circuit Judge. ______________

    2 challenge to a district court's grant of summary judgment
















    1 vacating an arbitration award. Massachusetts Laborers

    2 District Council, Local 1144, ("the Union") seeks

    3 reinstatement of an arbitrator's ruling that Wheelabrator

    4 Envirotech Operating Services, Inc., breached its collective

    5 bargaining agreement with the Union by failing to compel its

    6 successor to assume the agreement. Because we hold that the

    7 arbitrator plausibly construed the collective bargaining

    8 agreement, we vacate the district court's ruling and direct

    9 the district court to enter judgment confirming the

    10 arbitration award.

    11 I. I. __

    12 Background Background __________

    13 A. Relevant Facts __________________

    14 On October 16, 1980, Envirotech Operating Services,

    15 Inc., ("EOS") entered into a contract with the City of

    16 Taunton, Massachusetts, ("the City") to take over the

    17 operation of the City's waste water treatment plant ("the

    18 plant").1 The parties amended this contract in 1982,

    19 renegotiated it in 1985, and amended it again in 1989. The

    20 City ultimately allowed this operational contract with the

    21 EOS to expire on June 30, 1992. As a condition of its


    ____________________

    22 1. Baker International owned EOS in 1980 when it initially
    23 contracted with the City to operate the plant. Baker
    24 International subsequently sold EOS to Waste Management
    25 International. Ultimately, Wheelabrator acquired EOS several
    26 years later and formed the appellee, Wheelabrator Envirotech
    27 Operating Systems, Inc.

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    1 initial agreement with the City, EOS hired a significant

    2 number of the City's employees who were then working at the

    3 plant. EOS also agreed to recognize the Union as the

    4 exclusive bargaining representative for its employees at the

    5 plant and to assume the City's collective bargaining

    6 agreement with the Union.

    7 Following the expiration in 1982 of this initial

    8 bargaining agreement (which EOS had assumed), EOS and the

    9 Union agreed to the first in a series of collective

    10 bargaining agreements, each lasting three years in duration.

    11 The parties negotiated the collective bargaining agreement

    12 that is the subject of this appeal (the "CBA") in 1989 and it

    13 expired on May 31, 1993, eleven months after the expiration

    14 of EOS's operational contract with the City. Each of the

    15 three-year agreements contained an identical "successor

    16 clause" that provided:

    17 In the event the operation of the plant,
    18 in whole or in part, is assumed by any
    19 other entity, public or private, the
    20 successor organization . . . shall agree
    21 to all terms and conditions of this
    22 Agreement unless that assumption in whole
    23 or in part would be in violation of legal
    24 rights and obligations of the affected
    25 employees of the successor organization.

    26 In March 1992 -- prior to the expiration of EOS's

    27 contract with the City -- the City solicited proposals to

    28 operate the plant. EOS and three other companies submitted

    29 bids. The City did not require the bidders to agree to



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    1 assume the EOS-Union CBA. On June 23, 1992, the City

    2 announced that Operations Management International ("OMI")

    3 had submitted the winning bid and would assume the operation

    4 of the plant effective July 1, 1992. Subsequently, OMI hired

    5 a substantial number of employees who had worked for EOS and

    6 recognized the Union as the bargaining representative of its

    7 employees. OMI, however, refused to assume the EOS-Union

    8 CBA.

    9 At a city council meeting on June 30, 1992, EOS

    10 implored the City to reconsider its decision to award the

    11 contract to OMI. The City declined. During the meeting, OMI

    12 confirmed that it did not intend to assume the EOS-Union CBA.

    13 B. The Arbitrator's Award __________________________

    14 On June 30, 1992, the Union filed a grievance

    15 against EOS under the procedure outlined in the CBA, alleging

    16 that EOS had breached the CBA by failing to secure OMI's

    17 assumption of the CBA. EOS responded that it had no such

    18 obligation because, inter alia, the successor clause did not _____ ____

    19 apply to a situation in which, as here, no privity existed

    20 between EOS and the entity assuming the operation of the

    21 plant. On February 24, 1993, an arbitration hearing was

    22 convened to resolve the dispute.

    23 Following the hearing, the arbitrator concluded (1)

    24 that the language of the successor clause was ambiguous; (2)

    25 that the parties intended the clause to require EOS to



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    1 obligate all successors, even those with which it had no

    2 privity, to assume the terms and conditions of the CBA; and

    3 (3) that EOS had failed to make any effort to fulfill that

    4 obligation with respect to OMI. As a remedy, the arbitrator

    5 ordered EOS to make whole its former employees who began

    6 working for OMI in July 1992 for all losses in wages, fringe

    7 benefits, and other conditions incurred as a result of OMI's

    8 failure to assume the CBA. The arbitrator further ordered

    9 the parties to offset against the award the value of any

    10 relevant benefits agreed to by OMI in its negotiations with

    11 the Union or any payments resulting from the settlement of

    12 the Union's related grievance against the City.

    13 The Union's grievance against the City focused on

    14 the City's failure to obligate OMI to assume the CBA. The

    15 City settled the grievance and agreed to pay all former EOS

    16 employees the difference between what OMI pays the employees

    17 and the amount the employees would have received under the

    18 EOS-Union CBA. The City, however, did not agree to

    19 compensate the employees for the loss of vacation time and

    20 other fringe benefits.

    21 C. The District Court's Order ______________________________

    22 Following arbitration, EOS brought this action in

    23 federal district court seeking to vacate the arbitrator's

    24 award. EOS moved for summary judgment arguing, inter alia, _____ ____

    25 that the arbitrator had not plausibly construed the CBA. The



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    1 Union also moved for summary judgment to confirm the award.

    2 In ruling on the cross-motions, the district court upheld the

    3 arbitrator's interpretation of the successor clause.

    4 Although the court admitted that, as a matter of first

    5 impression, it likely would have interpreted the successor

    6 clause as applying only to subsequent employers with which

    7 EOS had privity, it nonetheless found the arbitrator's

    8 interpretation of the clause plausibly based on the language

    9 of the CBA. In so holding, the court noted that the

    10 arbitrator's interpretation found some support in the Supreme

    11 Court's opinion in NLRB v. Burns Int'l Sec. Servs., Inc., 406 ____ _____________________________

    12 U.S. 272 (1972). In Burns, the Court implicitly held that a _____

    13 prevailing competitive bidder that hired a substantial

    14 complement of the prior employer's workers could be

    15 considered a "successor employer" for certain purposes. Id. ___

    16 at 277-81.

    17 The court nonetheless vacated the award, ruling

    18 that the arbitrator failed to consider whether EOS could

    19 possibly perform its obligations under the successor clause.

    20 The court reasoned that the clause was unenforceable because,

    21 due to the lack of privity, EOS had no ability to compel OMI

    22 to assume the CBA. In short, the district court held that,

    23 in failing to consider EOS's inability to perform, the

    24 arbitrator manifestly ignored the law of contracts and,

    25 instead, pursued an outcome that reflected the arbitrator's



    -7- 7













    1 own "personal notions of industrial justice." The Union now

    2 appeals.

















































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    1 II. II. ___

    2 Standard of Review Standard of Review __________________

    3 We review de novo a district court's decision to __ ____

    4 grant summary judgment vacating an arbitrator's decision.

    5 See Labor Relations Div. of Const. Indus. of Mass., Inc. v. ___ ______________________________________________________

    6 International Bhd. of Teamsters, Local No. 379, 29 F.3d 742, ______________________________________________

    7 745 (1st Cir. 1994). In so doing, we are not bound by the

    8 district court's rationale but may affirm the ruling on any

    9 independently sufficient ground. Carreiro v. Rhodes Gill & ________ _____________

    10 Co., 68 F.3d 1443, 1446 (1st Cir. 1995). ___

    11 Review of arbitral decisions, however, is extremely

    12 narrow and exceedingly deferential. Service Employees Int'l _______________________

    13 Union v. Local 1199 N.E., SEIU, 70 F.3d 647, 651 (1st Cir. _____ _____________________

    14 1995) (citing Dorado Beach Hotel Corp. v. Union de ____________________________ _________

    15 Trabajadores de la Industria Gastronomica, Local 610, 959 ________________________________________________________

    16 F.2d 2, 3-4 (1st Cir. 1992)); Maine Cent. R.R. Co. v. ______________________

    17 Brotherhood of Maintenance of Way Employees, 873 F.2d 425, _____________________________________________

    18 428 (1st Cir. 1989) ("Judicial review of an arbitration award

    19 is among the narrowest known in the law."). In general, a

    20 court reviewing an arbitral decision does "not sit to hear

    21 claims of factual or legal error as an appellate court does

    22 in reviewing decisions of lower courts." United Paperworkers ___________________

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

    24 Essentially, a reviewing court should refrain from

    25 intervening in all but the most limited circumstances, those



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    1 in which the challenger can establish that the arbitrator's

    2 award is "(1) unfounded in reason and fact; (2) based on

    3 reasoning so palpably faulty that no judge, or group of

    4 judges, ever could conceivably have made such a ruling; or

    5 (3) mistakenly based on a crucial assumption that is

    6 concededly a non-fact." Advest, Inc. v. McCarthy, 914 F.2d ____________ ________

    7 6, 8-9 (1st Cir. 1990) (citations omitted); see also ___ ____

    8 Bettencourt v. Boston Edison Co., 560 F.2d 1045, 1050 (1st ___________ __________________

    9 Cir. 1977).

    10 Specifically, as in this case, when the arbitration

    11 concerns the interpretation of a collective bargaining

    12 agreement, a court should uphold the view of the arbitrator

    13 so long as "it can find, within the four corners of the

    14 agreement, any plausible basis for that interpretation." El __

    15 Dorado Technical Servs. v. Union Gen. de Trabajadores de ________________________ _______________________________

    16 Puerto Rico, 961 F.2d 317, 319 (1st Cir. 1992). In other ___________

    17 words, an arbitrator may not ignore the plain language of the

    18 agreement, but a court need only be convinced that the

    19 arbitrator's reading "'draws its essence from the collective

    20 bargaining agreement'" and does not merely rely on the

    21 arbitrator's own notions of "``industrial justice.'" Misco, _____

    22 484 U.S. at 36 (quoting United Steelworkers of Am. v. _____________________________

    23 Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960)). In ____________________________

    24 fine, we should refuse to set aside an arbitrator's decision

    25 "unless it can be shown that the arbitrator acted in a way



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    1 for which neither party could [possibly] have bargained."

    2 Local 1145, United Food & Commercial Workers Int'l Union v. __________________________________________________________

    3 Stop & Shop Cos., 776 F.2d 19, 21 (1st Cir. 1985) (citing _________________

    4 Enterprise Wheel, 363 U.S. at 599). ________________

    5 III. III. ____

    6 Analysis Analysis ________

    7 We divide our analysis into two parts. First, we

    8 consider whether the district court erroneously vacated the

    9 arbitration award on the basis that the arbitrator improperly

    10 failed to consider EOS's inability to compel OMI to assume

    11 the CBA. Finding the Union's argument persuasive on that

    12 point, we then independently review whether the arbitrator

    13 plausibly interpreted the phrase "successor organization" as

    14 properly applying to OMI, an entity with which EOS does not

    15 have privity.

    16 A. Impossibility of Performance ________________________________

    17 The Union challenges the district court's

    18 conclusion that the arbitrator "manifestly disregarded the

    19 law of contracts" by failing to excuse EOS's performance

    20 under the doctrine of impossibility.2 The Union argues

    21 that, given the court's finding that the arbitrator plausibly

    ____________________

    22 2. In Advest, 914 F.2d at 9, we recognized the "manifest ______
    23 disregard" standard as an alternate, though equally
    24 deferential, mode of review applicable to arbitral decisions.
    25 We explained that, under this formulation, review "embraces
    26 instances where it is clear from the record that the
    27 arbitrator recognized the applicable law--and then ignored
    28 it." Id. ___

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    1 interpreted the successor clause as obligating EOS to assure

    2 that OMI would assume the CBA, the impossibility doctrine

    3 does not apply to this case. We agree.

    4 Essentially, the district court held (and EOS

    5 contends) that the arbitrator fundamentally erred in failing

    6 to recognize that, because EOS exercised no control over OMI

    7 or the City, performance of its obligations under the

    8 successor clause was impossible. While it may be true that

    9 EOS could not possibly have compelled OMI to assume the CBA,

    10 that fact, however, is not determinative as to whether the

    11 arbitrator should have excused EOS's nonperformance. Excuse

    12 under the contract doctrine of impossibility depends not

    13 simply on whether performance has become substantially

    14 impossible, but also on whether or not the parties reasonably

    15 foresaw and allocated the risk that the event or

    16 circumstances making performance impossible might occur.

    17 See, e.g., Chase Precast Corp. v. John J. Panessa Co., 566 ___ ____ ___________________ ____________________

    18 N.E.2d 603, 606 (Mass. 1991) ("The principal question . . .

    19 remains whether an unanticipated circumstance, the risk of

    20 which should not fairly be thrown on the promisor, has made

    21 performance vitally different from what was reasonably to be

    22 expected."); see also E. Allan Farnsworth, Contracts 9.6, ___ ____ _________

    23 at 715 (2d ed. 1990) ("If a party expressly undertakes to

    24 perform, even though performance becomes impracticable [or

    25 impossible], impracticability [or impossibility] will not



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    1 excuse performance, and the party will be liable for damages

    2 for nonperformance."). Parties can plausibly assume the

    3 risks of events occurring where they know they will not be

    4 able to complete specific performance, but will be able to

    5 pay damages. The rationale justifying excuse arises only

    6 when an unexpected or non-bargained-for event makes

    7 performance so vitally different from that which the parties

    8 originally contemplated, that the change in performance can

    9 be said effectively to have vitiated the consent of the

    10 parties.

    11 In this case, once it is assumed that the parties

    12 intended the successor clause to apply whether or not privity

    13 existed between EOS and its successor, any impossibility

    14 argument must fail. If, as the arbitrator found, EOS and the

    15 Union intended and contemplated that the successor clause

    16 would obligate EOS to assure that any successor would assume

    17 the CBA, EOS cannot now complain that performance of that

    18 obligation is impossible. In other words, by agreeing to

    19 include the successor clause, EOS accepted and bargained for

    20 the risk that, if it lost the contract, it would effectively

    21 guarantee that its "successor" would assume the terms and

    22 conditions of the CBA. As long as EOS clearly foresaw and

    23 bargained with the knowledge that it could lose the contract

    24 -- something we must assume if the arbitrator plausibly

    25 interpreted the successor clause -- the fact that performance



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    1 might be impossible if EOS indeed lost the contract is of no

    2 moment.

    3 In the alternative, EOS argues that the district

    4 court correctly vacated the arbitration award because EOS's

    5 failure to perform under the successor clause did not cause

    6 the Union's injuries. EOS reasons that the arbitrator held

    7 that EOS had breached the successor clause, not because it

    8 had failed to compel OMI to assume the CBA, but, instead,

    9 because EOS did not even try. Thus, EOS concludes, the

    10 arbitrator interpreted the successor clause as imposing on

    11 EOS only the duty to make a good faith effort to compel OMI

    12 to assume the CBA. EOS then reasons that, because it had no

    13 power or leverage to bind OMI (or the City), any attempt to

    14 do so would have been futile. In other words, because EOS

    15 did not have control over OMI, it could not have persuaded or

    16 compelled OMI to assume the CBA and, thus, the Union would

    17 have suffered injury whether or not EOS had "performed" under

    18 the successor clause (i.e., tried to compel OMI to assume the ____

    19 CBA). Therefore, EOS contends, its breach of the successor

    20 clause did not cause any damage to the Union.

    21 Though this reasoning has some force, EOS

    22 constructs it (as did the district court) on a false premise.

    23 Specifically, EOS reads the arbitrator's interpretation of

    24 the duties imposed by the successor clause too narrowly.

    25 That the arbitrator recounted EOS's failure even to try to



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    1 obligate OMI as evidence that EOS breached the successor

    2 clause does not necessarily mean that, had EOS attempted but

    3 failed to obligate OMI, the arbitrator would have found that

    4 EOS had satisfactorily performed. To the contrary, the

    5 arbitrator expressly stated in the arbitration award "that

    6 the intent of the successor clause was an obligation on the

    7 predecessor to obligate the successor to assume all terms and ________

    8 conditions of the [CBA]." (Emphasis added.) This

    9 unequivocal statement calls for more from EOS than simply a

    10 good faith, but unsuccessful, attempt to obligate OMI.

    11 Indeed, the fact that the arbitrator awarded damages confirms

    12 that the arbitrator read the successor clause as imposing a

    13 duty on EOS to succeed in obligating its successor, not

    14 simply a duty to try. If not, one would have to conclude

    15 that the arbitrator irrationally awarded damages for injuries

    16 to the Union that were not causally linked to EOS's failure

    17 to perform, and we have found no compelling reason to reach

    18 such a conclusion. At bottom, we view the arbitrator's

    19 reference to EOS's failure even to try to persuade OMI as, at

    20 most, a rhetorical flourish, simply emphasizing the extent of

    21 EOS's breach (i.e., not only did EOS fail to compel OMI to ____

    22 assume the CBA, it did not even try).

    23 In sum, the district court erroneously vacated the

    24 arbitration award on the grounds that EOS could not possibly

    25 perform its obligations under the successor clause.



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    1 B. Successor Clause ____________________

    2 As noted, much of our analysis so far relies on the

    3 assumption that the arbitrator permissibly interpreted the

    4 successor clause as requiring EOS to assure that OMI would

    5 assume the CBA. While we acknowledge that the district court

    6 ruled favorably to the Union on this point, we are not bound

    7 by its holding and may independently review the arbitrator's

    8 decision on this issue. See Carreiro, 68 F.3d at 1446. ___ ________

    9 Because the issue strikes us as quite close, we now turn to

    10 consider it, using de novo review. See Labor Relations, 29 __ ____ ___ ________________

    11 F.3d at 745. In so doing, we consider first whether the

    12 arbitrator's interpretation is consistent with the plain

    13 language of the CBA, and, second whether, on the facts of

    14 this case, the arbitrator's interpretation is one for which

    15 the parties could possibly have bargained. As we have

    16 stated, our ultimate task is limited to determining only

    17 whether the arbitrator's interpretation of the successor

    18 clause "draws its essence from the collective bargaining

    19 agreement" and does not merely reflect the arbitrator's own

    20 notions of "industrial justice." Misco, 484 U.S. at 36 _____

    21 (internal quotations omitted). 1. The Plain Language of the ______________________________

    22 CBA ___

    23 We begin with the text. In relevant part, the

    24 successor clause provides:

    25 In the event the operation of the plant,
    26 in whole or in part, is assumed by any


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    1 other entity, public or private, the
    2 successor organization . . . shall agree
    3 to all terms and conditions of this
    4 Agreement. .

    5 We agree with the district court that the

    6 arbitrator's interpretation is not inconsistent with the

    7 plain language of the successor clause. First, following its

    8 successful bid, OMI clearly became an "entity" that had

    9 "assumed" the operation of the plant. Next, while one could

    10 arguably read the phrase "successor organization" as

    11 importing a further restriction on the type of entities

    12 covered by the clause (e.g., only those entities in privity ____

    13 with the predecessor), we do not think the text compels that

    14 interpretation. To the contrary, we think one could

    15 permissibly read the text "any other entity" that has

    16 "assumed" "the operation of the plant" as defining the scope

    17 of the phrase "successor organization." Thus, because OMI is

    18 an "entity" that has "assumed" the operation of the plant,

    19 the arbitrator's conclusion that OMI is a "successor" is

    20 consistent with the language of the clause. Cf. Howard ___ ______

    21 Johnson Co. v. Detroit Local Joint Executive Bd., Hotel & ___________ _____________________________________________

    22 Restaurant Employees Int'l Union, 417 U.S. 249, 262 n.9 __________________________________

    23 (1974) ("There is, and can be, no single definition of

    24 'successor' which is applicable in every legal context.").

    25 Furthermore, as the district court noted, this

    26 reading gathers at least some support from the Supreme

    27 Court's decision in Burns. In Burns, the Court effectively _____ _____


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    1 held that an entity like OMI -- a prevailing competitive

    2 bidder that had hired a substantial complement of its

    3 predecessor's employees -- was a "successor employer," see ___

    4 Burns, 406 U.S. at 296 (Rehnquist, Burger, Brennan, Powell, _____

    5 JJ., dissenting, describing majority opinion as implicitly

    6 premised on the successorship doctrine), and required it to

    7 recognize and bargain collectively with the union

    8 representing those employees, id. at 277-81. Thus, the ___

    9 application of the term "successor" to an entity that has no

    10 direct connection or link to the original employer, i.e., no ____

    11 privity, has some precedent in labor case law. See also NLRB ___ ____ ____

    12 v. Houston Bldg. Serv., Inc., 936 F.2d 178, 180-81 (5th Cir. _________________________

    13 1991) (subsequent employer who successfully bids for a

    14 contract is a "successor employer" with a duty to bargain

    15 with union), cert. denied, 502 U.S. 1090 (1992); Systems _____ ______ _______

    16 Mgmt. v. NLRB, 901 F.2d 297, 301-05 (3d Cir. 1990) (similar); _____ ____

    17 cf. Howard Johnson, 417 U.S. at 262 n.9 ("A new employer ___ ______________

    18 . . . may be a successor for some purposes and not for

    19 others.").

    20 Notably in Burns, however, the Court did not _____

    21 require the "successor employer" in that case to assume the

    22 obligations of the collective bargaining agreement between

    23 its predecessor and the union. 406 U.S. at 286. Indeed, the

    24 Court declined to do so principally because a complete lack

    25 of privity existed between the successor employer and its



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    1 predecessor. Id. Arguably, such reasoning supports EOS's ___

    2 position that the successor clause in this case should be

    3 read narrowly as obligating EOS to require only those

    4 "successors" with which it has privity to assume the CBA.

    5 Nevertheless, we do not think the reasoning compels such a

    6 reading. In Burns, the Court analyzed only the obligations _____

    7 of a successor employer arising generally from the National

    8 Labor Relations Act. The Court did not, however, focus on

    9 the issue addressed here: whether the parties to a

    10 collective bargaining agreement could agree to bind a

    11 predecessor employer to obligate even a successor with which

    12 it lacks privity to assume the terms and conditions of the

    13 agreement.

    14 In sum, we agree that the arbitrator's conclusion

    15 that OMI is a successor employer is not inconsistent with the

    16 plain language of the CBA.

    17 2. The Arbitrator's Own Notions of Industrial ___________________________________________________

    18 Justice _______

    19 Notwithstanding our conclusion that the

    20 arbitrator's interpretation fits within the text of the

    21 successor clause, we decline to end our analysis at this

    22 juncture. Instead, we proceed to consider whether, in the

    23 context of this case, the arbitrator's interpretation does

    24 not merely reflect the arbitrator's own notions of industrial

    25 justice. In other words, we consider whether, on the facts



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    1 presented here, the parties could possibly have agreed that

    2 the successor clause obligated EOS to assure that even

    3 "privity-less" successors, like OMI, would assume the CBA.

    4 See Stop & Shop, 776 F.2d at 21 (a court should uphold the ___ ____________

    5 arbitrator's interpretation "unless it can be shown that the

    6 arbitrator acted in a way for which neither party could

    7 [possibly] have bargained").

    8 In so doing, we agree that it is arguably doubtful __

    9 that EOS and the Union could possibly have intended the

    10 successor clause to apply in this case, if to have done so

    11 necessarily required the parties to read the clause as

    12 imposing an obligation on EOS that would both (1) be

    13 impossible to perform and (2) expose EOS to a risk of

    14 substantial loss for nonperformance. Therefore, we will now

    15 consider whether acceptance of the arbitrator's

    16 interpretation necessarily requires us to conclude, as EOS

    17 contends we must conclude, that the parties read the clause

    18 as imposing an impossible obligation on EOS that exposed it

    19 to a risk of substantial loss.

    20 a. Perception that performance is impossible _____________________________________________

    21 If we accept the arbitrator's interpretation, EOS

    22 contends that the parties would have understood the successor

    23 clause as burdening EOS with an impossible obligation because

    24 they would have recognized that EOS lacked the ability to

    25 gain leverage over the City or any successor with which it



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    1 was not in privity. Thus, EOS would not be able to compel

    2 such a successor (or compel the City to require such a

    3 successor) to assume the CBA. While the Union concedes this

    4 is true with respect to a successor like OMI, it argues that,

    5 with respect to the City, the facts before the arbitrator

    6 belie the assertion. First, the Union notes that, as part of

    7 the City's initial contract with EOS, the City required EOS

    8 to assume its collective bargaining agreement with the Union.

    9 This suggests, the Union contends, that the City (or at least

    10 EOS might have perceived that the City) would have viewed

    11 sympathetically a request to impose a similar condition on

    12 any future successors. The Union further points out that,

    13 when EOS amended and renegotiated its contract with the City,

    14 it could have bargained with the City to include in future

    15 bid solicitations a requirement that all bidders agree to

    16 assume any then existing bargaining agreement between EOS and

    17 the Union. The Union also argues that the fact the City has

    18 agreed to pay Union members their lost wages following OMI's

    19 failure to assume the CBA further suggests that the City

    20 would have recognized that it had some obligation to consider

    21 the welfare of its former employees.

    22 Though not overly persuasive, these arguments do

    23 indeed tend to support the Union's position. EOS responds by

    24 pointing out that, in fact, it was unable to persuade the

    25 City to require OMI to assume the CBA. However, nothing in



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    1 the record suggests that EOS ever attempted to persuade the

    2 City to impose such a condition before the June 30, 1992,

    3 council meeting, which occurred after the City had awarded

    4 the contract to OMI. EOS's inability to persuade the City to

    5 impose the condition on OMI in 1992 does not foreclose the

    6 inference that EOS may have believed that it could convince

    7 the City to impose the condition when EOS originally agreed

    8 with the Union to include the successor clause. Moreover,

    9 even if EOS perceived that it might not be able to perusade

    10 the City to obligate its successor to assume the CBA, EOS

    11 could well have assumed the risk of having to pay damages in

    12 that situation.

    13 In sum, we do not think that, in accepting the

    14 arbitrator's interpretation, we must conclude that the

    15 parties necessarily intended to impose an impossible

    16 condition on EOS. b. Perception of risk of substantial ____________________________________

    17 loss ____

    18 Nor do we believe that the parties necessarily

    19 perceived the clause as exposing EOS to a risk of substantial

    20 loss. While the arbitrator's interpretation of the clause

    21 does effectively make EOS the guarantor of its employees'

    22 salaries and fringe benefits in the event it loses its

    23 contract with the City, we do not agree that EOS must have

    24 viewed the risk associated with that guarantee as so

    25 substantial that it never would have agreed to bear it.



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    1 First, the risk was temporally limited. EOS knew that the

    2 clause posed a significant risk only for the period of time

    3 that the CBA survived EOS's contract with the City, i.e., ____

    4 eleven months. Second, EOS also knew that, under Burns, any _____

    5 successor employer that assumed the operation of the plant

    6 and hired a "substantial complement" of EOS's employees would

    7 likely be required to recognize the Union and engage in

    8 collective bargaining. Hence, if that occurred, EOS's

    9 potential liability was limited to the extent that any future

    10 agreement between the Union and EOS's successor would be less

    11 favorable to the Union than the current CBA. Arguably, if

    12 EOS believed it had achieved the best deal possible under the

    13 current CBA, it would not have believed that a successor,

    14 required to bargain with the Union, would be able to reach a

    15 significantly better deal. Finally, EOS would have perceived

    16 the risk as substantial only to the extent that it believed

    17 that the City would not require a successor employer to

    18 assume the CBA or that an arbitrator would enforce the

    19 obligation against it.

    20 In sum, as with the argument that the parties must

    21 have perceived the successor clause as imposing an impossible

    22 obligation, we do not think that, in accepting the

    23 arbitrator's interpretation, we must conclude that the

    24 parties perceived the clause as exposing EOS to a significant

    25 risk of substantial loss. Though as a matter of first



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    1 impression we might well have decided this case otherwise,

    2 given our standard of deference and the ambiguity of

    3 contractual language, we cannot say the arbitrator's reading

    4 of the successor clause merely reflects the arbitrator's own

    5 notions of industrial justice. It is neither inconsistent

    6 with the text, nor so improbable that we are convinced that

    7 "the arbitrator acted in a way for which neither party could

    8 [possibly] have bargained." Stop & Shop, 776 F.2d at 21.3 ___________

    9 IV. IV. ___

    10 Conclusion Conclusion __________

    11 For the foregoing reasons, we vacate the district

    12 court's grant of summary judgment, and order the court to

    13 enter judgment in favor of the Union, confirming the

    14 arbitration award.








    ____________________

    15 3. We also note that the arbitrator found, as a matter of
    16 fact, that, in adopting the successor clause, EOS and the
    17 Union shared the understanding that the clause bound EOS to
    18 compel all successors, even those with which it did not have
    19 privity, to assume the CBA. In making this finding, the
    20 arbitrator specifically credited and relied on testimony to
    21 that effect given by a Union representative who had
    22 participated in the negotiations of the initial collective
    23 bargaining agreement between the Union and EOS. See Misco, ___ _____
    24 484 U.S. at 37-38 ("Courts do not sit to hear claims of
    25 factual and legal error" because it is "the arbitrator's view
    26 of the facts and meaning of the contract that [the parties
    27 have] agreed to accept."); Service Employees Int'l, 70 F.3d ________________________
    28 at 653.

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