Northern New England Telephone Operations LLC v. Local 2327, International Brotherhood of Electrical Workers ( 2013 )

United States Court of Appeals
For the First Circuit
Nos. 13-1167
13-1186
NORTHERN NEW ENGLAND TELEPHONE OPERATIONS LLC,
d/b/a FAIRPOINT COMMUNICATIONS,
Plaintiff-Appellant, Cross-Appellee,
v.
LOCAL 2327, INTERNATIONAL BROTHERHOOD OF
ELECTRICAL WORKERS, AFL-CIO,
Defendant-Appellee, Cross-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. George Z. Singal, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella, Circuit Judge,
and Stearns,* District Judge.
Arthur G. Telegen, with whom John E. Duke and Seyfarth Shaw
LLP, were on brief for appellant/cross-appellee.
Alfred Gordon O'Connell, with whom Pyle Rome Ehrenberg PC, was
on brief for appellee/cross-appellant.
November 12, 2013
*
Of the District of Massachusetts, sitting by designation.
TORRUELLA, Circuit Judge. This case asks us to review
the appropriateness of an arbitral award entered against FairPoint
Communications ("FairPoint") in favor of Local 2327, International
Brotherhood of Electrical Workers, AFL-CIO (the "Union").
Fairpoint asserts, as it did in the court below, that the arbitral
panel exceeded the scope of its authority in crafting the award,
disregarding the express terms of the parties' Collective
Bargaining Agreement ("CBA") and adopting a manifestly unreasonable
interpretation of this agreement's terms. The district court
disagreed, finding that the panel's interpretation fell within the
wide boundaries of discretion granted to arbitral decisions by our
courts and granting summary judgment in favor of the Union.
Although the district court affirmed the award, it denied the
Union's request for costs and fees. The parties now cross-appeal,
both seeking review of the aspects of this decision contrary to
their interests. Agreeing with the district court's determination
-- albeit on different grounds as to the non-imposition of costs
and fees -- we affirm.
I. Background
A. FairPoint's telecommunications operation
On April 1, 2008, FairPoint purchased Verizon New
England, Inc.'s ("Verizon") telecommunications operations in
Vermont, New Hampshire, and Maine. As a term of purchase,
FairPoint agreed to hire all former Verizon employees, represented
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by the Union, in those states. FairPoint and Verizon negotiated a
Transition Services Agreement under which Verizon's employees and
systems remained active through February 1, 2009 (the "cutover
date") so as to ensure continuity of service during the transfer of
operations and ownership to FairPoint.
This appeal concerns FairPoint's Wholesale Group, which
is responsible for facilitating the purchase of access to
FairPoint's operational infrastructure and services by smaller,
regional telecommunication operators. These purchase orders are
grouped into Access Service Requests ("ASRs"), which are complex
orders requiring personal service, and Local Service Requests
("LSRs"), which are simple orders generally completed by an
automated system, without human intervention.
At the time of FairPoint's purchase, 94% of Verizon's LSR
orders were fully automated; only the remaining 6% of more complex
LSR work was routed to employees. FairPoint intended to complete
a number of system upgrades prior to the cutover date, so as to
match this 94% percent "flowthrough" rate by the time it took over
Verizon's operations. Consequently, FairPoint expected that only
a small percentage of complex LSR work would be completed by Union
employees. Its original staffing plan included no reference to
subcontracting.
As the cutover date approached, however, FairPoint
realized that its flowthrough rate was significantly lower than
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expected, only around 60%. It also became clear that the
transition in ownership would require a ten-day "blackout period,"
during which all orders would be handwritten, resulting in a
significant backlog. These unexpected obstacles created additional
staffing needs not addressed by FairPoint's original staffing plan.
FairPoint approached the Union and explained that it would need to
hire a "bubble workforce" until the backlog created by the blackout
period had been resolved and the flowthrough rate neared 94%.
FairPoint estimated this would take between sixty days and six
months.
Subsequently, FairPoint hired TeleTech, a Canadian
company, to staff the bubble workforce. Beginning in February 2009,
TeleTech staff handled simple LSR work -- the work that would have
been otherwise fully automated -- while Union employees handled
more complex LSR work.1 Despite FairPoint's assurances that this
bubble workforce was temporary, the simple LSR work was never
allocated to Union employees. In September 2010, the work was
indefinitely transferred from Teletech to APAC, a subcontractor
located in Utica, New York.
1
TeleTech originally completed some ASR work as well, although
all of that work eventually returned to the Union and is not in
dispute here. Some simple LSR work was also completed by Union
employees based in Portland, Maine. This was usually as a result
of FairPoint's "Single Point of Contact" program, which allowed
clients to have all of their service needs, simple and complex,
handled by a single representative.
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B. The Fairpoint-Union CBA
When FairPoint purchased Verizon's telecommunication
systems, it also succeeded to Verizon's CBA with the Union,
originally signed in 2003. Under a provision titled "Limitations
on Transfer of Jobs," this 2003 agreement held that: "a Company may
not permanently transfer more than 0.7% of [Union] represented jobs
. . . to an area outside the New England States []." As
interpreted in a prior grievance arbitration -- filed by the Union
in an attempt to arrest Verizon's sale of the company to FairPoint
-- this restriction applied only to transfers "between Verizon
entities," not transfers to external companies. IBEW, System
Council T-6 and Verizon New England, Grievance #77-07 and 78-07 at
57-58.
Throughout February 2008, the Union negotiated with
FairPoint to amend and extend this 2003 agreement. In its final
version, the revised CBA deleted much of the language that had been
subject to the earlier arbitration, replacing it with new terms:
During each contract year of the parties'
current collective bargaining agreement[]
("CBA"), from August 3, 2008 to August 3,
2013, the Company may not permanently transfer
[Union] represented jobs to any entity which
is not a signatory to this agreement.
Also incorporated into the revised CBA, however, was an agreement
letter signed by Union and FairPoint representatives that
referenced certain pre-amendment elements of the Limitation on
Transfer of Jobs provision. In particular, this letter announced
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a method for calculating the 0.7% transfer cap, despite this cap's
deletion from the revised CBA.
At this same time, the parties negotiated amendments to
a Memorandum of Agreement specifically focused on the sub-
contracting of plant-technician jobs. This agreement, along with
another, unmodified provision -- detailing FairPoint's ability to
contract out certain other non-sales jobs -- appeared in a
different section of the CBA from the Limitation on Transfer of
Jobs provision.
C. The arbitration
In 2010, the Union filed a grievance based on the
allegedly wrongful transfer of LSR work. A panel of three
arbitrators took up this grievance on October 27 and November 17,
2010, with both parties stipulating to the question for
arbitration:
Did the Company violate [the Limitation on
Transfer of Jobs provision] of the April 1,
2008 collective bargaining agreement with
regard to wholesale work being performed by
employees of TeleTech or APAC? If so, what
shall be the remedy?
FairPoint argued that no violation had occurred, citing
the previous arbitration as evidence that the Limitation on
Transfer of Jobs provision applied only to transfers between
FairPoint owned-entities, making transfers to independent entities
like TeleTech and APAC acceptable. FairPoint also claimed that,
regardless of whether the panel interpreted "any entity . . . not
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signatory to this agreement" to include non-FairPoint owned
businesses, no transfer had ever occurred. Because Union employees
never possessed the jobs in question -- under Verizon's ownership
they were completed by an automated system -- FairPoint contended
they could not have been "transferred" away.
The panel disagreed. As to the restriction on transfers
to "any entity," it reasoned that "any" implied "the opposite of
limitation." As such, the plain meaning of this provision
restricted transfer to "any business, not just those affiliated
with FairPoint." Moreover, the panel identified no evidence that
the parties intended to retain the pre-amendment CBA's more limited
restrictions on job transfer. It refused to hold that the other
provisions of the CBA -- defining the scope of acceptable
subcontracting for certain non-sales jobs -- were necessarily
incongruous, expressing a belief that all three provisions could be
interpreted in a consistent manner. Although recognizing that the
agreement letter's reference to the since-deleted 0.7% transfer cap
was clearly contradictory, the panel reasoned that it could not
"disregard the plain language of the [Limitation on Transfer of
Jobs provision] because of [this] apparent inconsistency with
another provision."
Although the issue of whether jobs were indeed
"transferred" gave the panel more pause, ultimately it concluded
that the facts presented constituted just such a wrongful
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conveyance. First, the panel noted that FairPoint's staffing plan,
shared with the Union, envisioned that all necessary LSR work would
eventually be completed by Union employees. Second, the panel
determined that it was "not completely correct" to say that the
Union never did any LSR work; testimony established some small
amount of this work was completed by Union employees. On these
grounds, the panel found an "unmistakable mutual understanding and
expectation" that the jobs in question would be completed by Union
employees. The panel concluded that this concrete, shared
expectation was sufficient to make the allocation of this work to
TeleTech and APAC a wrongful transfer of jobs.
The panel entered an award in favor of the Union,
requiring FairPoint to return all LSR work and to rehire any Union
employees wrongfully laid off during the relevant time period.
D. The district court's opinion
FairPoint filed suit in district court under section 301
of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185,
arguing that the arbitral panel had exceeded its authority by
wrongfully adding and subtracting terms from the CBA. Specifically,
FairPoint asserted that the panel's interpretation of the
Limitation on Transfer of Jobs provision impermissibly stripped
FairPoint of management rights expressly afforded to it by the CBA
and could not be reconciled with the CBA's other subcontracting
provisions. It also restated the argument that no transfer had
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occurred, the jobs in question having never been possessed by Union
employees. The Union cross-filed, seeking an award of costs and
fees for what it asserted was spurious litigation.
The district court granted summary judgment in favor of
the Union, finding that FairPoint's arguments established only a
disagreement with the panel's interpretation of the CBA, not proof
that such an interpretation was in excess of the panel's authority.
Nonetheless, the district court denied costs and fees pursuant to
Federal Rule of Civil Procedure 11, reasoning that the Union had
failed to properly abide by the rule's provisions and that,
regardless, sanctions were inappropriate in this case. These
cross-appeals followed.
II. Discussion
A. FairPoint's request to vacate the award
Review of a district court's decision to grant summary
judgment affirming an arbitral award is plenary. Teamster Local
Union No. 42 v. Supervalu, Inc., 212 F.3d 59, 65 (1st Cir. 2000).
Yet, "[c]ourts [] do not sit to hear claims of factual or legal
error by an arbitrator as an appellate court does reviewing
decisions of lower courts." United Paperworkers Int'l Union, AFL-
CIO v. Misco, Inc., 484 U.S. 29, 38 (1987). Rather, judicial
review of arbitration awards is "among the narrowest known in law."
Me. Cent. R.R. Co. v. Bhd. of Maint. of Way Emps., 873 F.2d 425,
428 (1st Cir. 1989).
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Our review, therefore, adopts the same highly deferential
standard as did the court below. See Pérez-Acevedo v. Rivero-
Cubano, 520 F.3d 26, 29 (1st Cir. 2008). Moreover, "an
arbitrator's factual findings are not open to judicial challenge."
El Dorado Technical Servs., Inc. v. Unión Gen. de Trabajadores de
P.R., 961 F.2d 317, 320 (1st Cir. 1992). Instead, we accept the
arbitrator's factual conclusions, Bos. Med. Ctr. v. Serv. Emps.
Int'l Union, Local 285, 260 F.3d 16, 18 (1st Cir. 2001), and limit
our review to "determining if the arbitrator's interpretation of
the contract is in any way plausible," Labor Relations Div. of
Constr. Indus., Inc. v. Int'l Bhd. of Teamsters, Chauffeurs,
Warehousemen & Helpers, Local No. 379, 29 F.3d 742, 745 (1st Cir.
1994); see also Misco, 484 U.S. at 38 ("[A]s long as the arbitrator
is even arguably construing or applying the contract and acting
within the scope of his authority, that a court is convinced he
committed serious error does not suffice to overturn his
decision.").
It is through this exceedingly narrow lens that we assess
the appropriateness of the FairPoint-Union arbitral award.
1. Scope of the panel's authority
FairPoint first asserts that the panel acted in excess of
the authority granted to it by the CBA's arbitration clause. This
clause provides that an arbitrator "shall have no power to add to,
subtract from, modify or disregard any of the provisions of this
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agreement." FairPoint purports that this provision raises the
standard of our review, requiring us to reject even plausible
interpretations of the CBA that exceed this "express limitation[]"
on an arbitrator's authority.
This argument asks too much of the broadly worded
arbitration provision in question. In interpreting a provision of
similar generality,2 we have recognized that a "standard 'no
modification' clause incorporates general legal principles
concerning an arbitrator's authority, reinforcing the admonition
. . . that legitimate arbitral awards draw their essence from the
contract." Kraft Foods, Inc. v. Office & Prof'l Emps. Int'l Union,
AFL-CIO, CLC, Local 1295, 203 F.3d 98, 101 (1st Cir. 2000)
(internal alteration and quotation marks omitted) (quoting LaRocque
v. R.W.F., Inc., 8 F.3d 95, 97 (1st Cir. 1993)). That an award
"must draw its essence from the contract," Misco, 484 U.S. at 38,
is simply a reiteration of our requirement, described above, that
the interpretation be in some way "plausible." Labor Relations
Div. of Constr. Indus., 29 F.3d at 745 (citing Misco, 484 U.S. at
36-38). As such, without foreclosing the possibility that the text
of some arbitration clauses might "limit an arbitrator's power of
2
That clause stated: "'[t]he arbitrator shall have no authority
to amend, alter, or modify this Agreement or its terms and shall
limit the decision solely to the interpretation and application of
this Agreement.'" Kraft Foods, Inc. v. Office & Prof'l Emps. Int'l
Union, AFL-CIO, CLC, Local 1295, 203 F.3d 98, 101 (1st Cir. 2000).
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contract construction to a greater extent than the background law,"
Kraft Foods, Inc., 203 F.3d at 101 n.1, we find that the generic
no-modification provision in question evidences no intent to
circumscribe the arbitrator's authority beyond our accepted
standard.3
2. The ban on subcontracting to "any entity"
In any case, FairPoint struggles to identify precisely
how the panel's decision on subcontracting veered over the line
separating interpretation and modification. In sum, FairPoint
forwards two arguments in support of its claim. First, it notes
that the CBA grants it an express right to "manage its business
subject [only] to the limitations contained in [the CBA]." By
restricting subcontracting, FairPoint asserts that the arbitrator
wrongly "subtract[ed] from" this right by "add[ing]" additional
restrictions not clear on the CBA's face. Second, it argues that
the CBA's specific restrictions on subcontracting certain plant
jobs imply that the parties knew how to explicitly limit
subcontracting and would have done so for sales jobs if so desired.
Moreover, interpreting the Limitation on Transfer of Jobs provision
to create a blanket ban on subcontracting would render these
provisions superfluous, in violation of a basic rule of contract
3
We would be hard-pressed to identify an instance in which an
"interpretation" that in fact disregarded express contract terms,
or created additional terms from thin air, would be found
"plausible."
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interpretation. FairPoint contends, therefore, that the panel
clearly "disregard[ed]" these specific provisions and impermissibly
"add[ed]" an overly broad restriction to the CBA.
Certainly, the narrow nature of our review does not
amount to a blank check. United Steelworkers of Am. v. Enter.
Wheel & Car Corp., 363 U.S. 593, 597 (1960) ("[A]n arbitrator is
confined to interpretation and application of the collective
bargaining agreement; he does not sit to dispense his own brand of
industrial justice."). Yet, considering these arguments in turn,
we are unable to identify any instance in which the panel exceeded
the bounds of its interpretative powers.
As to the management rights provision, we see no
contradiction between its terms and the arbitrator's interpretation
of the Limitation on Transfer of Jobs provision. The former
provision grants FairPoint control over all management decisions,
save those limited by other provisions of the CBA. The panel
interpreted the latter provision, in a manner not expressly
foreclosed by anything in the CBA, as one such limitation. In
reaching this conclusion, the panel neither "disregarded [] the
lack of restrictions on FairPoint's ability to subcontract" nor
"added subcontracting restrictions." It simply read one provision
as creating an exception to another that, by its terms, allowed for
just such exceptions. This is not the stuff of which vacated
arbitral awards are made.
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On a review of the record, neither can we agree that the
arbitral panel manifestly disregarded the other CBA provisions
limiting subcontracting for particular plant jobs. The panel
explicitly stated that "it would be possible to interpret the []
two [specific restrictions] as exceptions to the broad jobs
prohibition of the [CBA]."4 It also directly considered the
inconsistency between the Limitation on Transfer of Jobs provision
and the agreement letter, but ultimately concluded that it could
not "disregard the plain language of the [CBA]." In reaching this
conclusion, the panel relied heavily on the parties' apparent
intent. It highlighted the parties' extended negotiations
regarding the Limitation on Transfer of Jobs provision, during
which they undisputedly deleted the 0.7% cap and removed other
language that had previously been interpreted as restricting only
transfers between Verizon-owned entities.
While finding it "hard to fathom" why this letter was
executed as written, the panel reasoned that the parties'
bargaining history made clear their intent to construct a more
4
The provisions in question are indeed worded so as to plausibly
create exceptions to an otherwise total ban. For instance, one
provision states that "under the following conditions work may be
contracted out," while the other states that "[t]he Company will
maintain its established policies as to assignment of work in
connection with the installation and maintenance of communications
facilities." Both, therefore, could be interpreted as granting a
greater power to subcontract in certain specific instances than was
permitted under the more general Limitation on Transfer of Jobs
provision. While perhaps this was not the best interpretation,
neither can we deem it a wholly implausible one.
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comprehensive ban on job transfers than that of the pre-amendment
CBA. In light of this mutual intent, the panel was unwilling to
allow a letter -- incorporated into the CBA but apparently based
erroneously on a since-amended version of its text5 -- to prevail
over the express terms of the current provision.
Ideally, the panel's discussion of these points would
have been more robust, and we are not untroubled by its contention
that a more thorough attempt to harmonize these provisions "would
be rash." Still, we are not tasked with reviewing the intricacies
of these provisions anew, but only with determining if the panel's
resolution supplants express contract terms with "[its] own brand
of industrial justice." Id. On the whole, the panel's decision
that these apparent inconsistencies could not overwrite the plain
meaning of the phrase "any entity" -- bolstered as it was by the
parties' bargaining history and apparent intent -- does not appear
wholly contrary to either basic reason or rules of contract
interpretation. See Smart v. Gillete Co. Long-Term Disability
Plan, 70 F.3d 173, 178 (1st Cir. 1995) (stating that contract
interpretation looks first to the text's plain meaning and, if
ambiguity exists, then to the parties' intent).
5
We express no conclusive opinion as to whether, in fact, the
parties simply erred by not updating this letter, but we note that
its text also includes reference to "the December 2000 bargaining
sessions." Because the Union and FairPoint's negotiations occurred
in 2008, this lends plausibility to the panel's suggestion that the
text mistakenly referenced the prior CBA.
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Ultimately, FairPoint's arguments in regard to
subcontracting express disagreement with the panel's interpretation
of the CBA, suggesting an alternative interpretation that it
believes is more appropriate. These arguments do not establish,
however, that the panel's interpretation was either implausible or
in excess of its authority.
3. The meaning of "transfer"
FairPoint next contests the panel's decision that jobs
once completed by a computer program were wrongfully "transferred"
away from Union employees. It asserts, as it did before the court
below, that the only plausible interpretation of "transfer"
requires an element of predicate possession that was absent in this
case. Therefore, FairPoint concludes, the panel's determination
that jobs were impermissibly transferred away from Union employees
"ignores the plain language" of the CBA in favor of an
impermissible construction that is clearly in excess of the panel's
interpretive authority.
We do not disagree that the term "transfer" connotes an
assignment from one entity to another. See Webster's Third New
International Dictionary 2426-27 (1971) (defining "transfer" as "to
carry or take from one person or place to another" or "the
conveyance . . . from one person to another" (emphasis added)).
Therefore, we must review the facts presented in this case to
determine whether, given this definition, the panel's finding that
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a transfer occurred was indeed plausible. We begin this review by
adopting the panel's factual findings in full, including the
determination that the Union had a concrete expectation, amounting
to a "legitimate claim," that its employees would perform these
jobs. El Dorado Technical Servs., Inc., 961 F.2d at 320 (holding
that courts, in considering arbitral awards, do not review findings
of fact). Our inquiry is thus limited to determining whether it is
conceivable that this "legitimate claim" vested in the Union a
degree of possession sufficient to make the subcontracting of these
jobs a form of transfer.
The panel's interpretation of "transfer" is indeed
expansive, and if we were initially tasked with construing the
meaning of this term, we might find FairPoint's argument more
convincing. We cannot say, however, that it is beyond any
plausible interpretation of the term as used in the CBA that
subcontracting jobs to which Union employees had a "legitimate
claim" -- undisputedly founded on a mutual understanding of the
parties -- constituted a "transfer." It is at least conceivable
that this well-defined expectation was a sufficient form of
predicate possession to mean that these jobs were indeed removed or
conveyed away from the Union. See Local 1445, United Food &
Commercial Workers Int'l Union, AFL-CIO v. Stop & Shop Co., Inc.,
776 F.2d 19, 21 (1st Cir. 1985) (finding that to warrant reversal,
awards must be premised on reasoning "so palpably faulty" that no
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judicial body "ever could conceivably have made such a ruling"
(citing Bettencourt v. Bos. Edison Co., 560 F.2d 1045, 1050 (1st
Cir. 1977))). The plausibility of this reading is further
bolstered by the panel's factual finding that some small portion of
LSR work was already completed by Union employees.
That FairPoint contracted to resolve disputes via
arbitration means they must now live by the bargain they struck.
Misco, 484 U.S. at 37-38 ("Because the parties have contracted to
have disputes settled by an arbitrator . . . it is the arbitrator's
view of the . . . meaning of the contract that they have agreed to
accept."). Finding no grounds on which to vacate the arbitral
award, we affirm the district court's grant of summary judgment for
the Union.
B. The Union's request for costs and fees
A district court's decision to grant or deny a request
for costs and fees is reviewed for a "manifest abuse of
discretion." Gay Officers Action League v. Puerto Rico, 247 F.3d
288, 292 (1st Cir. 2001). Here, the district court assessed the
Union's request under Federal Rule of Civil Procedure 11 ("Rule
11"), apparently not recognizing that an award of costs and fees is
available as a matter of federal common law for actions proceeding
under § 301 of the LMRA. See Local 2322, Int'l Bhd. of Elec.
Workers v. Verizon New England, Inc., 464 F.3d 93, 100 (1st Cir.
2006). It is well accepted that "a court's material error of law
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is invariably an abuse of its discretion." Negrón-Almeda v.
Santiago, 528 F.3d 15, 25 (1st. Cir. 2008). Therefore, the
district court's determination not to award costs and fees based on
the Union's failure to "cite Rule 11 or comply with its
requirements" was in error.
The district court went on, however, to hold that even
had the Union complied with the procedural requirements of Rule 11,
it would have, "in its discretion," denied the request "to award
fees and costs as a sanction on the record presented." Because the
standard for awarding costs and fees under Rule 11 is substantially
the same as that of section 301 actions, compare Fed. R. Civ. P. 11
(allowing courts to apply sanctions in the case of "frivolous"
arguments), with Local 2322, Int'l Bhd. of Elec. Workers, 464 F.3d
at 100 (allowing for an award of costs and fees where arguments are
"frivolous, unreasonable, or without foundation"), the district
court's error appears, for all practical purposes, devoid of
materiality. Consequently, we review the district court's latter
holding, denying an award of costs and fees based on its review of
the record, for an abuse of discretion.
The Union asserts that an award of costs and fees is
necessary to avoid the continued filing of frivolous litigation
seeking to overturn arbitral awards. It requests that this court
assign costs and fees as a means by which to deter potential
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litigants, lest we be continually inundated with what the Union
styles as wholly frivolous claims.
Undisputedly, this court has long lamented the
"exasperating frequency" with which arbitration awards are
appealed. See Posadas de P.R. Assocs., Inc. v. Asociación de
Empleados de Casino de P.R., 821 F.2d 60, 61 (1st Cir. 1987).
Here, however, FairPoint's claims do not appear wholly "frivolous,
unreasonable, or without foundation." Local 2322, Int'l Bhd. of
Elec. Workers, 464 F.3d at 100. The line between frivolous
arguments and merely unpersuasive ones is fine, and while FairPoint
was ultimately unsuccessful, its contention that the panel
impermissibly modified, rather than interpreted, the CBA was "at
least colorable." Id. On this basis, we will not usurp the
district court's discretion by awarding costs and fees it chose to
deny.
III. Conclusion
For the foregoing reasons we affirm.
Affirmed.
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