Prime Healthcare Services v. United Nurses and Allied , 848 F.3d 41 ( 2017 )

United States Court of Appeals
For the First Circuit
No. 16-1161
PRIME HEALTHCARE SERVICES - LANDMARK LLC,
Plaintiff, Appellee,
v.
UNITED NURSES AND ALLIED PROFESSIONALS, LOCAL 5067,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald L. Lagueux, U.S. District Judge]
Before
Torruella, Lipez, and Barron,
Circuit Judges.
Christopher Callaci, for appellant.
David C. Casey, with whom Jillian S. Folger-Hartwell and
Littler Mendelson, P.C. were on brief, for appellee.
February 3, 2017
TORRUELLA, Circuit Judge. This appeal requires us to
decide whether a dispute between employees and their successor
employer should be resolved in arbitration or in the courts. The
parties agreed to arbitrate this dispute. The district court,
however, refused to compel arbitration; it found that ERISA
preempted arbitration of this dispute, and reasoned that this, in
turn, presented an issue of arbitrability properly decided by a
judge, not an arbitrator. Because we find that the issue of ERISA
preemption in this case is not an issue of arbitrability, but
rather one that is squarely for the arbitrator to decide, we
reverse.
I. Background
Plaintiff-Appellee Prime Healthcare Services ("Prime")
purchased Landmark Medical Center ("Landmark"), a financially-
troubled hospital in Woonsocket, Rhode Island, in December 2013.
Defendant-Appellant United Nurses and Allied Professionals, Local
5067 ("Union") is a union local which represented Landmark's
employees pursuant to a collective bargaining agreement.
In 2006, Landmark and the Union entered into a collective
bargaining agreement ("Landmark CBA"), in effect until 2009,
renewed automatically each year unless either party reopened.
This CBA contained a grievance and arbitration clause that provided
that any unresolved disputes "concerning the interpretation,
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application or meaning" of the CBA could be submitted to
arbitration with the American Arbitration Association. This CBA
also contained a pension provision, which stated, in relevant part:
The Employer [Landmark] and the Union agree that, if
during the term of this Agreement the Employer sells
more than fifty (50) percent of its assets, the
Employer may terminate the Landmark Medical Center
Retirement Plan for Union Employees in accordance with
the requirements of ERISA. The Union acknowledges
and agrees it is clearly and unmistakably waiving any
and all rights it has or may have to bargain with the
Employer over any aspect of the termination, provided
such termination shall not reduce benefits accrued by
any participant in the Landmark Medical Center
Retirement Plan for Union Employees as of the date of
termination.
In June 2008, Landmark was placed under the oversight of
a Temporary Special Master by the Providence Superior Court due to
its financial woes.
In 2012, Prime made an offer to take over Landmark.
Prime met with the Union and agreed that it would take over
Landmark's contract with its employees.
On October 10, 2012, Prime and the Union signed a cover
memorandum ("Cover Memorandum") and accompanying contract ("Prime
CBA"). The Cover Memorandum provided that "Prime shall recognize
and continue to process any and all grievances and/or labor
arbitrations pending at the time of the closing pursuant to the
CBAs referenced herein". The Cover Memorandum also stipulated
that in the event of inconsistencies between the Cover Memorandum
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and the Asset Purchase Agreement (that was yet to be concluded and
approved by the court), the Cover Memorandum would govern. The
Prime CBA contained the same grievance/arbitration clause as the
Landmark CBA.
On June 5, 2013, the Pension Benefit Guarantee
Corporation ("PBGC") announced its intention to involuntarily
terminate Landmark's defined benefit retirement plan because
Landmark had failed to maintain the minimum funding requirements.1
The termination was completed the following week.
On July 1, 2013, the Union filed a grievance against
Landmark alleging a violation of the pension provision of the
Landmark CBA. The grievance was denied, and the Union demanded
arbitration.
On July 8, 2013, the Providence Superior Court
authorized Landmark to execute the termination agreement. The
Court also ruled that "any and all rights and remedies of [the
Union] with respect to the employee retirement benefits are
reserved." The PBGC and the Special Master then entered into an
Agreement for Appointment of Trustee and Termination of Plan.
1 A detailed description of the PBGC and its functions has been
offered by the court below. See Prime Healthcare Servs., LLC --
Landmark v. United Nurses & Allied Prof'ls, Local 5067, 158
F. Supp. 3d 60, 62-97. See also United Steelworkers of America
v. United Eng'g, Inc., 52 F.3d 1386 (6th Cir. 1995).
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This Agreement conveyed all assets of the retirement plan to the
PBCG, and provided, inter alia, that any asset purchase agreement
that the Special Master entered into could not include assumption
of the retirement plan.
In October 2013, the Union amended its grievance against
Landmark to state: "The employer violated the governing Collective
[B]argaining Agreement . . . when it changed the terms of the
defined pension benefit provisions and ceased making contributions
to employees [sic] pensions". Landmark denied this amended
grievance, too, and the Union filed a request for arbitration on
November 8, 2013.
On November 26, 2013, Prime entered into the Asset
Purchase Agreement with the Special Master to purchase Landmark.
This court-approved Agreement stated that Prime would not assume
or be responsible for "any Liability under any Benefit Plan and
all administrative costs associated therewith."
On December 31, 2013, when the Asset Purchase Agreement
became effective, Landmark terminated all of its employees. On
January 1, 2014, some of these employees were hired back by Prime,
and the Prime CBA took effect.
On May 5, 2014, Prime filed a Petition for Declaratory
Judgment in the United States District Court for the District of
Rhode Island. Prime sought, inter alia, to stay arbitration.
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In June 2014, the Union filed another grievance against
Prime, stating that it violated the 2012 Cover Memorandum by
refusing to submit the Union's pending grievance to arbitration.
On January 21, 2016, the District Court for the District
of Rhode Island (Lagueux, J.) ruled, on summary judgment, for Prime
on the grounds that ERISA preempted the Union's claims (and any
matters relating to the Retirement Plan).
This appeal timely followed.
II. Standard of Review
"Summary judgment is appropriate when the record shows
that 'there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.'" Farmers Ins.
Exch. v. RNK, Inc., 632 F.3d 777, 782 (1st Cir. 2011) (quoting
Fed. R. Civ. P. 56(a)). "We review de novo the grant of a motion
for summary judgment." Id. at 782. "[W]e may affirm the entry
of summary judgment 'on any ground made manifest by the record,'
so long as the record 'reveals that there is no genuine issue as
to any material fact and that the moving party is entitled to
judgment as a matter of law.'" Batista v. Cooperativa de Vivienda
Jardines de San Ignacio, 776 F.3d 38, 42 (1st Cir. 2015) (citations
omitted).
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As neither party disputes any material facts, our review
focuses solely on whether the movant was entitled to judgment as
a matter of law.
III. Discussion
The issue before us is whether an arbitrator or a court
should resolve the present dispute. This issue raises two
questions, which we address in turn: first, whether the present
case raised a question of substantive arbitrability, and with it,
the presumption against arbitration; and, second, whether the
subject matter of the Union's claims is suitable for arbitration.
A. Arbitrability2
Because we already offered a detailed discussion of the
Supreme Court's precedents concerning arbitrability in Kristian v.
Comcast Corp., 446 F.3d 25, 37-41 (1st Cir. 2006), we here limit
our discussion to those aspects of arbitrability necessary to
resolve the present case.
"The 'question of arbitrability' is a term of art with
a narrow scope." Unite Here Local 217 v. Sage Hospitality
2 The term "arbitrability" has been used inconsistently, at times
encompassing all prerequisites to and conditions for arbitration.
George Bermann, The Gateway Problem in International Commercial
Arbitration, 37 Yale J. Int'l L. 1, 10 (2012). As we explain in
this section, we here use the term in the narrow sense in which
the Supreme Court used it in Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83-84 (2002).
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Resources, 642 F.3d 255, 261 (1st Cir. 2011). The Supreme Court
considers the phrase "question of arbitrability"
applicable in the kind of narrow circumstance where
contracting parties would likely have expected a court
to have decided the gateway matter, where they are
not likely to have thought that they had agreed that
an arbitrator would do so, and consequently, where
reference of the gateway dispute to the court avoids
the risk of forcing parties to arbitrate a matter that
they may well not have agreed to arbitrate.
Kristian, 446 F.3d at 38 (quoting Howsam, 537 U.S. at 83-84
(2002)).
As we went on to explain in Kristian, "[t]he cornerstone
here is an assumption about the intent of the contracting parties
to an arbitration agreement, in 'the kind of narrow circumstances
where contracting parties would likely have expected a court to
have decided the gateway matter.'" 446 F.3d at 38 (quoting Howsam,
537 U.S. at 83-84). And in these narrow circumstances, a
presumption applies that a court, rather than an arbitrator,
decides the gateway matter. Id. at 38-39. This presumption can
be defeated, however, by clear and unmistakable evidence that the
parties did mean to submit that matter to arbitration. Unite
Here, 642 F.3d at 262.
There are two categories of disputes where we apply the
presumption that courts, rather than arbitrators, resolve the
gateway matter: "(1) disputes 'about whether the parties are
bound by a given arbitration clause'; and (2) disagreements 'about
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whether an arbitration clause in a concededly binding contract
applies to a particular type of controversy.'" Id. at 39 (quoting
Howsam, 537 U.S. at 84) (clarifying that "[e]xamples of the former
include whether an arbitration contract binds parties that did not
sign the agreement; and whether an arbitration agreement survived
a corporate merger and bound the subsequent corporation. . . .
Examples of the latter include whether a labor-management layoff
controversy was covered by the arbitration clause of a collective-
bargaining agreement; and whether a clause providing for
arbitration of various grievances covers claims for damages for
breach of a no-strike agreement") (citations omitted).
The kind of arbitrability involved in these two
categories -- the kind of arbitrability where we presume that a
court decides the gateway matter -- can be referred to as
"substantive arbitrability." Howsam, 537 U.S. at 85. The Supreme
Court has also found that there is "procedural arbitrability,"
where the presumption is that an arbitrator -- not a court --
should decide the gateway matter, because that is what the parties
would likely have expected. Id. at 84. Examples of "procedural
arbitrability" include "procedural questions which grow out of the
dispute and bear on its final disposition," and "allegation[s] of
waiver, delay, or a like defense to arbitrability." Kristian, 446
F.3d at 39 (quoting Howsam, 537 U.S. at 84).
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The present dispute does not raise an issue of
substantive arbitrability. The Cover Memorandum entered into by
Prime and the Union stated that "Prime shall recognize and continue
to process any and all grievances and/or labor arbitrations pending
at the time of the closing [of the Asset Purchase Agreement]
pursuant to the CBAs referenced herein," and the parties agree
that the grievance at issue here was pending at the time of the
closing of the Asset Purchase Agreement. Both the Landmark CBA
and the Prime CBA contained arbitration clauses. The Providence
Superior Court, which authorized Landmark to execute the
termination agreement, ruled that "any and all rights and remedies
of [the Union] with respect to the employee retirement benefits
are reserved." The present dispute between the Union and Prime
is indeed about employee retirement benefits. Thus, both parties
are bound by the arbitration clause.
This binding arbitration clause also applies to the
dispute at issue. Not only is the Cover Memorandum directly
applicable to the dispute before us, but all the relevant documents
contain broad language. Thus, the Cover Memorandum is applicable
to "any and all grievances and/or labor arbitrations," and the
arbitration provisions of both the Landmark CBA and the Prime CBA
encompass "any dispute between the Hospital and the Union
concerning the interpretation, application or meaning of any of
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the express provisions of this Agreement." "The breadth of the
arbitration clause, which covers 'any disputes over [the]
interpretation or application' of the Agreement, presents an
insurmountable impediment to [Prime]'s position." Unite Here, 642
F.3d at 262.
Still, the district court concluded that the matter
before us presented an issue of arbitrability, and was therefore
for the court, not for an arbitrator, to decide. The district
court reached this conclusion by reasoning that the Union's claim
was one that, per ERISA, could only be brought by the PBGC, and
that ERISA's preemptive sweep therefore preempted or barred
arbitration. Prime now urges us to adopt this analysis. We
decline. As we demonstrate in the next section, a statutory bar
to or preemption of arbitration is not an issue of arbitrability
-- and ERISA does not bar or preempt the arbitration of this claim.
Consequently, this case should proceed to arbitration, and the
arbitrator shall decide, inter alia, whether ERISA bars or preempts
the Union's claims.
B. Suitability of the Subject Matter for Arbitration
"[T]he [Supreme] Court stated that once it was clear
that the 'parties' agreement to arbitrate reached the statutory
issues,' a court must then consider 'whether legal constraints
external to the parties' agreement foreclosed the arbitration of
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those claims.'" Bercovitch v. Baldwin School, Inc., 133 F.3d 141,
148-49 (1st Cir. 1998) (quoting Mitsubishi Motors Corp. v. Soler
Chrysler–Plymouth, Inc., 473 U.S. 614, 628 (1985)). The "liberal
policy favoring arbitration agreements" informs this inquiry. Id.
at 149 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20, 25 (1991)). Still,
there might be some cases in which the arbitral
setting is an inappropriate forum for the resolution
of statutory claims, but . . . the burden [is]
squarely on the plaintiff to prove that this is so.
. . . If Congress intended to preclude a waiver [of
a judicial forum], that intention would be
discoverable in the text or legislative history of
the statute, or in an 'inherent conflict' between
arbitration and the underlying goals of the statute.
Id. (quoting Gilmer, 500 U.S. at 26) (internal citations omitted).
The question we must resolve then, is whether the text
or the legislative history of ERISA shows Congressional intent to
preclude a waiver of judicial remedies, and whether an inherent
conflict exists between arbitration and the underlying goals of
ERISA. This is a different inquiry from the inquiry into
arbitrability -- the arbitrability inquiry focuses on the intent
of the parties, whereas we must now focus on the intent of
Congress.3
3 Although, confusingly, the term "arbitrability" has been used
to encompass the suitability of the subject matter for arbitration,
we here follow the Supreme Court in Howsam, and use the term of
art "arbitrability" in its narrow sense. See supra n.1.
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As a preliminary matter, we note that an argument that
ERISA in general shows Congressional intent to preclude
arbitration is highly implausible. See, e.g., Bird v. Shearson
Lehman/American Exp., Inc., 926 F.2d 116, 118-19 (2d Cir. 1991).
Because Prime does not advance such an argument, we need not decide
the issue here. We also note that the fact that the arbitration
agreement is contained in a collective bargaining agreement does
not make it any less enforceable. 14 Penn Plaza LLC v. Pyett, 556
U.S. 247, 251 (2009) (enforcing arbitration clause in collective
bargaining agreement).
Prime, however, argues that the subject matter of the
present case is not suitable for arbitration. Prime contends that
the Union's claim is preempted or barred by ERISA. Citing 29
U.S.C. §§ 1341(a)(1), 1362(b)-(c), Prime contends that Title IV of
ERISA provides the exclusive means by which defined benefit pension
plans may be terminated, and also specifies which entities can
pursue claims for unfunded liabilities. Citing 29 U.S.C.
§ 1342(d)(1)(B)(ii), Prime then argues that where, as here, the
PBGC initiated the termination, only the PBGC and the statutory
trustee of the plan (which Prime states is the PBGC in this case)
have the power to collect any amounts due under the plan. Prime
also cites 29 U.S.C. § 1367 for the proposition that ERISA provides
the mechanism by which the PBGC can enter into settlement
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agreements with plan sponsors to recoup any amounts due under the
plan. Prime then shifts its attention to 29 U.S.C. §§ 1322(c) and
1344. Prime believes that these sections would be superfluous if
the Union were to prevail on its claim, because these sections
provide that the PBGC must allocate to participants and
beneficiaries a portion of the unfunded benefit liabilities
recovered for the terminated plan, and set out a priority scheme
for doing so. Prime then argues that in order for the PBGC to
ensure that this priority scheme is followed, the PBGC alone must
control all assets that will be allocated to participants and
beneficiaries in question. Prime's concern is that if an
arbitrator were to rule in favor of the Union, the PBGC would then
be unable to fulfill the role ERISA prescribes for it. In this,
Prime sees an "inherent conflict" between the purposes of ERISA
and arbitration.
The fatal flaw in Prime's reasoning is that it fails to
draw a simple, but crucial distinction: the question before us
is not whether the Union can bring its claim, but who decides --
court or arbitrator -- whether the Union can bring its claim.
Even if we assume, for the sake of argument, that Prime's reading
of ERISA is correct, this does not mean that the subject matter of
the Union's claims is not suitable for arbitration.4 For if ERISA
4 To be clear, we by no means suggest that Prime's reading of
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indeed preempts or bars the Union's claim, an arbitrator can make
that determination. And if it is indeed key to the statutory
scheme of ERISA that all assets that will be allocated to
participants and beneficiaries of the plan be under the control of
the PBGC, then, once again, an arbitrator can make that
determination.
Prime, however, argues that an arbitrator may reach the
wrong conclusion, and thus the purposes of ERISA would not be
reached. This is exactly the kind of "outmoded" view of
arbitration that the Supreme Court has repeatedly rejected. See,
e.g., Rodríguez, 490 U.S. at 481. We are not to presume that an
arbitrator will make mistakes. In addition, the judicial review
of arbitral decisions, albeit limited, provides adequate
protection against errors that an arbitrator may commit.
Mitsubishi, 473 U.S. at 638 ("Having permitted the arbitration to
go forward, the national courts of the United States will have the
opportunity at the award-enforcement stage to ensure that the
legitimate interest in the enforcement of the antitrust laws has
been addressed."). Consequently, a subject matter cannot be
ERISA is, or is not, correct -- this matter will be for the
arbitrator to resolve in the first instance. Rather, we are merely
assuming for the sake of argument that Prime's reading of ERISA is
correct, only to show that even if it is correct, the Union's
claims must still be arbitrated.
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unsuitable for arbitration by virtue of a concern that the
arbitrator may err.5
It is telling that Prime is able to point to only one
case in which a court found an "inherent conflict" between
arbitration and the purposes of a statute: In re United States
Lines, Inc., 197 F.3d 631 (2d Cir. 1999). That case is readily
distinguishable from the present one. In United States Lines, the
court found that, under the right circumstances, core (but not
non-core) bankruptcy matters must be resolved in bankruptcy court,
rather than arbitration. Id. at 640. This is because one of the
policies that underlies the Bankruptcy Code is the need for a
single, centralized proceeding -- and the preferred forum for that
proceeding is bankruptcy court. Id. at 640-41. The court cited
5 Prime also argues that a claim may not be arbitrated at all if
the arbitral award would require a party to violate the law. In
a similar vein, Prime argues that arbitration would be futile if
it resulted in an award contrary to federal law, and that an
arbitrator cannot order something that is contrary to federal law.
Prime cites George Watts & Son, Inc. v. Tiffany & Co., 248 F.3d
577, 580-81 (7th Cir. 2001) in support of this proposition. These
arguments, too, are rooted in an outmoded view of arbitration as
an inadequate forum for the adjudication of federal claims -- but
we are not to presume that an arbitrator will make a wrong
determination of the federal claims, and if she does, we will be
able to review it. Prime has also failed to demonstrate that the
only award an arbitrator could render would be an award of pension
benefits (which, on Prime's reading of ERISA, would violate federal
law). In other words, we have no reason in the present case to
presume that an arbitrator will compel Prime to do anything that
is contrary to federal law.
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to, inter alia, the text and legislative history of the Bankruptcy
Code -- including direct references to arbitration -- for the
proposition that Congress intended to preclude parties from
arbitrating certain claims. Id. In the present case, by
contract, Prime has not pointed to anything in ERISA or its
legislative history that calls for a single, centralized
proceeding to decide the Union's claim; Prime has also not pointed
to anything in ERISA or its legislative history that would preclude
arbitration from being the proper forum for the resolution of that
claim.6
IV. Conclusion
Because the case before us belongs in arbitration, we
vacate the memorandum and order of the district court, and remand
with instructions to grant the Union's motion to compel
arbitration. We take care to note that we have resolved only one
narrow question: whether this dispute -- including the issue of
whether ERISA bars or preempts the Union's claims -- should be
resolved by an arbitrator or by a court. Nothing in our opinion
6 The Union also argues that the district court relied on mootness
to deny its demand for arbitration. While the Union is likely
correct that mootness would present an issue of "procedural
arbitrability", and thus presumptively be for the arbitrator to
decide, we do not read the district court as having relied on
mootness to reach its conclusion, for the district court noted
that its "ruling does not rest squarely on the doctrine of
mootness".
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is intended to intimate in any way how the arbitrator should
resolve the dispute -- that is, of course, for the arbitrator to
decide.
Vacated and Remanded. Costs are awarded to appellant.
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