Wheelabrator Envirotech Operating Services Inc. v. Massachusetts Laborers District Council Local 1144 , 88 F.3d 40 ( 1996 )

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.
-3-
3
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
-4-
4
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
-5-
5
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
-6-
6
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.
-8-
8
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
-9-
9
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
-10-
10
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.
-11-
11
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
-12-
12
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
-13-
13
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
-14-
14
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.
-15-
15
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
-16-
16
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
-17-
17
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
-18-
18
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
-19-
19
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
-20-
20
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
-21-
21
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.
-22-
22
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
-23-
23
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.
-24-
24