Resolution Performance Products, LLC v. Paper Allied Industrial Chemical & Energy Workers International Union, Local 4-1201 ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT March 6, 2007
Charles R. Fulbruge III
Clerk
No. 05-30813
RESOLUTION PERFORMANCE PRODUCTS, LLC,
Plaintiff-Appellee,
versus
PAPER ALLIED INDUSTRIAL CHEMICAL AND ENERGY WORKERS INTERNATIONAL
UNION, PACE LOCAL 4-1201 F/K/A NORCO CHEMICAL WORKERS UNION,
Defendants-Appellants.
______________________
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:04-CV-2324
______________________
Before HIGGINBOTHAM, DENNIS, and CLEMENT, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
As part of RPP’s purchase of a subsidiary of Shell Oil
Company, RPP signed a collective bargaining agreement with the
Union, which had had a longstanding relationship with Shell. After
the purchase, RPP used only subcontractors, not Union members, for
maintenance work, contrary to Shell’s past practice. The Union
complained that RPP should hire Union members for maintenance work,
as Shell had in the past. The arbitrator agreed. The federal
district court vacated the award. We reverse and remand.
I
From at least 1950 to 2000, Shell Oil Company owned a
subsidiary named Shell Epoxy Resins. During that time, Shell and
the Norco Chemical Workers Union, later the Paper Allied Industrial
Chemical and Energy Workers International Union,1 had a collective
bargaining agreement covering both production workers and
maintenance workers. Over that fifty-year span, the understanding
captured in the CBA was enriched by bargaining and several
arbitrations.
In 2000, Shell sold the resin subsidiary to Resolution
Performance Products, now Hexion Chemical Company. In the sale
agreements, RPP agreed to recognize the Union and adopt the CBA
with all past letters of agreement. RPP did so, adopting a CBA
identical in all relevant respects to the Shell-Union CBA. The CBA
stated, in pertinent part and italicized for importance:
Preamble
. . . . The Company hereby recognizes the Union as the
exclusive bargaining representative of the following
collective bargaining unit...[including both production
and maintenance workers.]
This Agreement constitutes the entire agreement between
the parties, and it is agreed that no prior understanding
or agreement shall hereafter be operative unless it was
reduced to writing and is not in conflict or inconsistent
with the terms hereof.
Article III — Classification of Employees
1. Craftsmen [maintenance workers]
. . .
(D) Nothing herein shall require the Company to adjust or
1
PACE subsumed NCWU in 2001, succeeding it in all respects.
2
maintain any given number of craftsmen in any craft.2
Article XIV — Contractors Rates of Pay
Section 1 - Contractor Performing Work within the Plant
Whenever a contractor or subcontractor performs work
within the Plant which could be performed by employees
covered by this Agreement, the Company will include a
provision in the applicable contract requiring the
contractor and subcontractor to pay not less than the
rates of pay provided in this Agreement for the same
character of work; provided, however, that the foregoing
shall not apply if there is an agreement as to rates
between the contractor or subcontractor and his employees
reached through collective bargaining . . . . 3
Section 2 - Demotions or Layoffs
RPP’s obligations under Section 1 will apply only for the
period of time when,
(A) an employee is demoted or displaced from any
department or craft listed in Exhibit “A” of the
Agreement through no fault of his/her own, whereupon
Section 1 will apply on a one-for-one basis to any
contractor performing work at the Norco Plant, or
(b) an employee is laid off due to a reduction in force.
However, RPP’s obligations under Section 1 will continue
to apply to any contracted work normally performed by
Operators.
After the sale, some production workers transferred to RPP,
but no maintenance workers transferred.4 During the first year of
2
There is no comparable provision under the section governing production
workers.
3
Neither party discusses whether RPP is paying the subcontractors
according to these compensation guidelines. See infra note 4 and accompanying
text (discussing how RPP now uses only subcontractors for maintenance).
4
According to RPP, Shell and RPP had agreed as part of the deal that Shell
would identify before the sale any openings for maintenance workers in the new
resin company (how Shell would know this is unclear) or maintenance workers
eligible to transfer, but it identified no such openings or workers through its
“posting” system. The record on appeal lacks this agreement, although the
arbitrator found that, “[a]pparently, Shell wished to retain all of its
[maintenance workers]” and “the [maintenance workers] wished to continue to be
employed [by Shell].” RPP also alleges that Shell and the Union refused to
release maintenance workers for whom RPP had offered jobs; although it cites only
briefs, not record evidence, for this allegation, it is consistent with the
arbitrator’s findings.
3
RPP’s control of the business, all maintenance workers were
subcontractors, either employees of various firms, including KBR,
or Shell employees subcontracted to RPP under the Interim Labor
Services Agreement.5 At the end of that year, RPP stopped using
Shell’s workers, who were parties to a Shell-Union CBA; and instead
of hiring Union workers, it used as maintenance workers, as it
still does, only subcontractors from firms other than Shell,
primarily KBR.
The Union asserted in a grievance in 2001 that RPP improperly
used subcontractors instead of union workers for maintenance. RPP
responded that it would not recognize the grievance because, among
other things, it was not timely, the CBA did not require it to
employ any maintenance workers, RPP had never employed any
maintenance workers and thus could not have subcontracted out the
work to the Union’s detriment, and Shell maintenance employees had
rejected employment with RPP, forcing the company to subcontract
out the work. Arbitration followed, and in July 2004 the
arbitrator concluded that the grievance was timely and that RPP
violated the CBA by subcontracting out all the maintenance work.
The arbitrator began by acknowledging the unique
circumstances: while RPP had never employed any Union workers for
maintenance, Shell had for fifty years. She then concluded that
5
Shell was a subcontractor because, under the interim services agreement,
it retained the right to control its employees, including the right to control
hours of work and delegation of assignments.
4
RPP, by assuming the obligations of the CBA and all past letters of
agreement, “logically...accepted” the “rich bargaining history” and
“past arbitral interpretations of its obligations under the CBA.”
Hence, she concluded, “the issue should be resolved in the same
manner as any other contracting out grievance” — analyzing the text
of the CBA and prior arbitral interpretations of that text.
First, she noted that the CBA addressed subcontracting only in
Article XIV, which prescribed subcontractor pay. She then stated,
“It is generally accepted that a CBA...which is silent about
subcontracting...does not give Management the unfettered right to
subcontract.” She did not mention the applicability of Article
III, which grants RPP the right to determine the number of
maintenance workers, or discuss the “recognition clause” in the
preamble, which the Union argues on appeal is a limitation on the
right to subcontract, stating only that the CBA is silent as to
RPP’s right to subcontract.
Turning then to past arbitral interpretations to inform that
silence, the arbitrator analyzed four prior matters, quoting
passages showing a desire to protect the integrity of the
bargaining unit:
[Even when subcontracting,] the Company is still
obligated to act reasonably and in good faith in such
matters, so as not to subvert the labor agreement or to
seriously damage the bargaining unit....
...
Arbitrators are hesitant to permit wholesale
subcontracting even where the labor contract is silent
5
regarding such restrictions, if the subcontracting act
would significantly undermine the integrity of the
bargaining unit or its members rights.
...
[T]he fact that the grievance may create a scheduling
difficulty or cost a bit more, does not change the fact
that this is bargaining unit work and, as such, cannot be
assigned to [ ] contract workers.
...
[Where Shell filled one position with an outside
subcontractor,] Shell’s decision . . . had absolutely no
impact on the scope or integrity of the bargaining unit.
The arbitrator distinguished the instant case from the fourth
arbitration, which arose when the last Union member serving as an
insulator retired and Shell hired for the waning position one
subcontractor, instead of a Union member. She noted that the
current case is about the entire maintenance unit, not just one
position, and that there is plenty of maintenance work for the unit
here, unlike the prior arbitration where there was not even one
daily full-time job for an insulator. She observed that the
arbitrator in the prior arbitration sensibly read the CBA not to
force Shell to maintain obsolete positions.
The arbitrator here found the lesson from past arbitrations
clear: though the company has some latitude to subcontract, it
cannot do so if subcontracting would significantly undermine the
integrity of the bargaining unit. Because RPP did not employ any
bargaining unit maintenance employees but instead subcontracted out
all the maintenance work, the arbitrator concluded that RPP had
6
undermined the integrity of the bargaining unit.
Finally, as the remedy, the arbitrator ordered that
the Company shall employ maintenance craft employees in
numbers comparable to that of the Epoxy Resins Department
when it was owned by Shell. Bargaining unit maintenance
employees shall be responsible for routine maintenance of
the plant. The Company may allocate work in the manner
comparable to Shell’s practices relating to employment
and contracting out, before the sale.
RPP filed suit in federal district court, seeking vacatur of
the award, and both parties moved for summary judgment. The
district court granted RPP’s motion. Although the court deferred
to the arbitrator’s conclusion that the grievance was timely, it
concluded that the arbitrator erred by considering past practice
where the CBA stated it was the entire agreement between the
parties and erred under Beaird Industries, Inc. v. Local Union 2297
International Union,6 which directs vacatur where the arbitrator
acts contrary to an express provision of the CBA, because Article
III of the CBA unambiguously did not require RPP to maintain a
fixed number of maintenance workers. The Union appealed.
II
We review the district court’s grant of summary judgment de
novo.7 Judicial review of arbitration decisions arising from the
terms of a CBA is “narrowly limited,” and courts should afford
6
404 F.3d 942, 944 (5th Cir. 2005).
7
Hunt v. Rapides Healthcare Sys., LLC, 277 F.3d 757, 762 (5th Cir. 2001).
7
“great deference” to arbitration awards.8 “As long as the
arbitrator’s decision ‘draws its essence from the collective
bargaining agreement’ and the arbitrator is not fashioning ‘his own
brand of industrial justice,’ the award cannot be set aside.”9
Additionally, “a court must affirm an arbitral award ‘as long as
the arbitrator is even arguably construing or applying the contract
and acting within the scope of his authority.’”10 Even where a
court would have interpreted the contract differently, a court must
still affirm the award.11 However, under Beaird, an arbitrator
lacks authority to render a decision contrary to an unambiguous
provision of the CBA.12
III
The Union argues that the award drew its essence from the CBA
because the CBA does not unambiguously permit RPP to subcontract,
especially in the face of the preamble’s “recognition clause,”
which recognizes the Union as the exclusive bargaining agent for
8
Beaird, 404 F.3d at 944.
9
Weber Aircraft Inc. v. Gen. Warehousemen & Helpers Union Local 767, 253
F.3d 821, 824 (quoting United Paperworkers Int'l Union v. Misco, Inc., 484 U.S.
29, 38 (1987)).
10
Beaird, 404 F.3d at 944 (quoting Misco, 484 U.S. at 38).
11
Id.
12
Id. at 946–47. See also Houston Lighting & Power Co. v. Int’l Bhd. of
Elec. Workers, Local Union No. 66, 71 F.3d 179, 182 (5th Cir. 1995) (“The ‘rule
in this circuit, and the emerging trend among other courts of appeals, is that
arbitral action contrary to express contractual provisions will not be
respected.’”) (quoting Delta Queen Steamboat Co. v. Dist. 2 Marine Eng’rs
Beneficial Ass’n, 889 F.2d 599, 604 (5th Cir. 1989)).
8
the class of maintenance workers. For this proposition it cites
three cases, which it also contends are more relevant than Beaird.
In Folger Coffee Co. v. Int’l Union,13 the arbitrator sustained
the union’s challenge to the company’s use of subcontractors,
concluding that, despite language in the CBA permitting the company
to subcontract, the right to subcontract was not absolute. In so
concluding, the arbitrator relied in part on the past practice of
union members performing the work of subcontractors and in part on
a CBA provision stating that the CBA’s purpose was to strengthen
the parties’ relationship. This court affirmed, concluding that
reliance on past practice was permissible where the agreement was
silent or insufficient to enable the arbitrator to render a
decision and that the arbitrator’s interpretation of the “purpose”
clause as a limitation on the right to subcontract was reasonable
because, unless the agreement contained an explicit clause
entitling the company to subcontract regardless of the effect on
the bargaining unit, subcontracting should be balanced against the
rights of the union.
In National Gypsum Co. v. Oil, Chemical, and Atomic Workers
International Union,14 the arbitrator concluded that, although the
CBA included a management rights clause permitting the company to
“schedule and reschedule employees as required by the business
13
905 F.2d 108 (5th Cir. 1990).
14
147 F.3d 399 (5th Cir. 1998).
9
needs” of the company, the company had to bargain before reducing
the work week from seven to six days. The arbitrator reasoned in
part that the recognition clause recognized the Union as the
exclusive bargaining agent. In so concluding, the arbitrator
relied in part on past practice, even though the agreement
explicitly stated that it constituted the “full scope” of the
agreement between the parties. This court affirmed, concluding
that the arbitrator, whose province it was to resolve conflict
between CBA provisions, had made a reasonable interpretation; it
evinced concern about the use of past practice given the “full
scope” clause, but because the decision was otherwise grounded in
the CBA, the inquiry into past practice was not “fatal.”
In NCR Corp. v. International Association of Machinists and
Aerospace Workers,15 the arbitrator interpreted the recognition
clause as a limitation on the management’s right-to-subcontract
clause in sustaining the union’s challenge to the company’s use of
subcontractors. In so concluding, the arbitrator also looked to
past practice. The Tenth Circuit reversed the district court’s
vacatur, emphasizing the deferential standard of review and
affirming the use of past practice.
In Beaird, the arbitrator sustained the union’s grievance
challenging company subcontracting. The district court vacated the
award. This court affirmed, determining that the CBA provision
15
906 F.2d 1499 (10th Cir. 1990).
10
defining the company’s right to subcontract was unambiguous:
“‘[T]he Company has and retains and the Union recognizes the sole
and exclusive right of the Company to exercise all the rights or
functions of management . . . [including] the decision to
subcontract out work . . . . ’” We concluded that, because no
other provision of the CBA limited this right, the arbitrator
failed to draw his conclusion from the essence of the agreement by
acting contrary to an express CBA provision.16 We distinguished
Folger on the ground that the CBA in Beaird was explicit in
permitting subcontracting and contained no limitation on
subcontracting; we also called Folger’s holding the “outer limits”
of deference to arbitral awards.
The Union claims that Beaird is not on point because the
Union’s CBA does not contain an unambiguous “management rights”
clause reserving to RPP the right to subcontract, and because its
CBA contains a recognition clause recognizing the Union as the
exclusive bargaining agent for the maintenance workers.
RPP counters that Article III unambiguously allows it not to
maintain maintenance workers, conflicting head-on with the
arbitrator’s award that RPP “shall employ maintenance [workers] in
numbers comparable to that of the [] Department when it was owned
by Shell....” It also contends that the arbitrator pointed to no
CBA provision which RPP violated.
16
404 F.3d at 944-47.
11
We conclude that the arbitrator’s award “drew its essence”
from the CBA. First, we put aside one area of contention. There
is a powerful argument that RPP, by explicitly assuming the Shell-
Union CBA and all prior letters of agreement, assumed the prior
arbitral interpretations of the CBA. The argument is that those
interpretations did more than fill interstices and provide needed
gloss to unclear provisions, the results of which must be
controlling now; they also framed the background against which the
parties understood the terms of negotiation. RPP contends that the
arbitral history is irrelevant.
The arbitrator here did consider past interpretations, but
only after concluding that the CBA was ambiguous as to
subcontracting. If the CBA did not unambiguously confer a right to
subcontract, then the arbitrator’s task was to construe an
ambiguous CBA, and mere disagreement with the performance of that
task is not alone a basis for vacating the award.17 Relatedly, the
role the past arbitral decisions played is not wholly clear. At
one point, after finding the CBA ambiguous, the arbitrator appeared
to construe the CBA de novo, without reference to any prior
arbitration: “It is generally accepted that a CBA...which is silent
about subcontracting...does not give Management the unfettered
right to subcontract.” That is, she seemingly decided how to
17
Beaird, 404 F.3d at 944 (quoting Misco, 484 U.S. at 38).
12
construe this CBA as a matter of first impression.18 Regardless,
the question for us is whether the CBA unambiguously gave RPP the
right to subcontract. We conclude that it did not.
That the CBA did not unambiguously give RPP the right to
subcontract is apparent. At the very least, that conclusion is
defensible and, therefore, we must defer to it. Most importantly,
the CBA is silent as to RPP’s right to subcontract,19 and the CBA
recognizes the Union as the representative of maintenance workers,
suggesting that RPP cannot subcontract all maintenance work.20
There was no recognition clause in Beaird, and the CBA there
included a “management rights” clause expressly reserving to
management the right to subcontract, absent here. Our result
accords with Folger Coffee Co. v. International Union, where the
18
Her use of the term “generally accepted” suggests reliance on prior
legal interpretations of similar contracts, but that is different from reliance
on precedential interpretations of the CBA at issue. After all, all judges when
interpreting contracts, even in the first instance, use rules and maxims derived
from other cases.
19
Subcontracting is mentioned once, but only in the section requiring any
subcontractors to be paid at certain rates.
20
In NCR Corp., 906 F.2d at 1505-06, the Tenth Circuit construed a
recognition clause as a limitation on an express right-to-subcontract clause.
This goes even further than we do since the CBA here contains no express right-
to-subcontract clause.
At oral argument, RPP contended that we cannot rely on the recognition
clause because the arbitrator did not rely on it in her analysis. This mistakes
the nature of our review of arbitral awards, which we review in toto only to
determine whether they draw their “essence” from the CBA. After all, arbitrators
need not, and sometimes do not, attach any reasoning to their awards, and we do
not by virtue of that fact vacate such awards. See Sarofim v. Trust Company of
the West, 440 F.3d 213, 218 (5th Cir. 2006). Moreover, we can affirm a federal
district court’s judgment on grounds presented by the parties but not relied on
by the court, see Brown v. Nationsbank Corp., 188 F.3d 579, 586 (5th Cir. 1999);
certainly our review of arbitral awards is no less deferential. In short, we can
and should uphold an award on any reasonable ground. See Brabham v. A.G. Edwards
& Sons, Inc., 376 F.3d 377, 385 (5th Cir. 2004).
13
CBA explicitly gave management the right to subcontract, absent
here, but that clause was contradicted by others.21 In sum, the CBA
here did not speak in unambiguous terms about subcontracting.
Because the CBA was ambiguous about RPP’s right to subcontract, we
must defer to the arbitrator’s interpretation, which draws its
essence from the CBA, that the CBA does not permit wholesale
subcontracting.22
RPP’s best argument, that advanced by the district court, is
that Article III unambiguously gives RPP a right to subcontract by
stating that RPP has no obligation to maintain any specific number
of maintenance workers. Article III, of course, makes no mention
of subcontracting. Rather, both RPP and the district court focus
on the wording in the arbitrator’s award that “the Company shall
employ maintenance...employees in numbers comparable to that of the
Epoxy Resins Department when it was owned by Shell.” Just one or
two pages before that statement, however, the arbitrator stated
that “the CBA cannot mandate that a job classification remain
filled if there is inadequate work” due to modernization, a
changing market, or similar business reasons. That is, she
21
905 F.2d at 109. Beaird distinguished Folger precisely because the CBA
in Beaird had the explicit management rights clause and no contradictory clauses,
again highlighting the lack of such an explicit clause here. 404 F.3d at 945-46.
22
Contrary to RPP’s assertion, the arbitrator need not have pointed to a
specific, explicit CBA provision that RPP violated. The CBA was ambiguous about
subcontracting; the arbitrator reasonably interpreted that ambiguity to preclude
wholesale subcontracting, thus RPP violated the CBA. Our holdings in Folger and
Beaird, and traditional principles of contract interpretation, do not require
violation of a specific, explicit provision.
14
acknowledged that the CBA does not mandate that RPP maintain
positions it wants to eliminate, as the Union conceded at oral
argument.23 Reading the “award” as not just the final section
entitled “award” but rather the entire document,24 we see ambiguity
in the award stemming from these two statements. Put another way,
with this dispute, drawn as it is over the right of RPP to
subcontract, we do not read the arbitrator’s remedy as
unambiguously imposing the obligation to engage unneeded workers.
That reading is defied by the circumstance that the issue in
dispute is subcontracting or not, as the arbitrator herself made
clear in dispensing with the idea that RPP would have to employ a
certain number of workers. The critical element in the remedy is
the obligation to “employ,” that is “not subcontract,” not the
phrase “in numbers comparable.” In context, it is not unreasonable
to read the award as ordering that to the extent that RPP chooses
to use routine maintenance workers, it must meet that need as its
predecessor did by employing Union workers, not by wholesale
23
Again, we need not decide the appropriate precedential effect of prior
arbitral decisions. In addressing the prior arbitrations, the arbitrator
confirmed her own view that the company cannot be made to retain a certain number
of positions in the face of certain circumstances: “As Arbitrator Fox correctly
observed, the CBA cannot mandate....” The relevant point is that the conflict
arises from her own statements, the precedential force of prior arbitrations
aside.
24
See, e.g., Cannelton Indus., Inc. v. Dist. 17, United Mine Workers of
Am., 951 F.2d 591, 594 (4th Cir. 1991) (explaining that courts sometimes look to
an arbitrator’s reasoning in determining whether the award draws its essence from
the CBA).
15
subcontracting.25
In sum, the CBA did not clearly allow RPP to subcontract out
the maintenance work. The arbitrator resolved the dispute over
this uncertainty by precluding subcontracting, a resolution we
cannot fault, footed as it is in the terms of the contract.
IV
RPP presses an alternative ground for affirmance,26 that the
arbitrator, whose action on this point was affirmed by the district
court, improperly found the grievance arbitrable. Namely, RPP
contends that the arbitrator ignored the plain language of the CBA
requiring the party requesting arbitration, the Union, to apply for
a panel of arbitrators within thirty days of requesting
arbitration.27
Although the Union waited more than thirty days to apply for
a panel of arbitrators, the district court explained that
[t]he arbitrator found the matter arbitrable after
reviewing correspondence between the parties’ counsel
regarding the original grievances and the Union’s desire
to proceed to arbitration....The Arbitrator...concluded
25
RPP suggested at oral argument that maintenance workers might become
obsolete. About that we say only that RPP is not obligated to use any workers
to do maintenance.
26
The Union incorrectly argues that RPP has forfeited this issue by
failing to cross-appeal it. We may affirm a lower court’s grant of summary
judgment on a ground not relied upon (or rejected) by that court as long as the
movant below asserted the ground, see Black v. North Panola School District, 461
F.3d 584, 593 (5th Cir. 2006); hence before us now is the propriety of the entire
order of summary judgment.
27
RPP also argued in front of the arbitrator and the district court that
the underlying grievances were not timely filed, but it abandons this argument
on appeal.
16
the delay in proceeding to arbitration was a result of
RPP counsel’s failure to correspond with the Union in a
timely fashion.28
On appeal, RPP argues that the arbitrator’s focus on the
correspondence improperly contradicts the plain meaning of the CBA.
In other words, RPP contends that the Union should have requested
a panel within thirty days, regardless of any dilatory tactics or
obstruction, intentional or not, on RPP’s part.
We are unwilling to say that the arbitrator’s conclusion did
not “draw[] its essence from the collective bargaining agreement”
and that the arbitrator was not “even arguably construing or
applying the contract and acting within the scope of h[er]
authority.”29 The CBA’s prescribed arbitration procedures are
necessarily somewhat flexible, and the CBA sustains the
interpretation that a party cannot obstruct the procedures and then
benefit from that obstruction. And we do not second-guess the
arbitrator’s factual finding that RPP’s counsel’s correspondence
led to the delay.
We REVERSE the district court’s judgment and REMAND for
proceedings consistent with this opinion.
28
The arbitrator also concluded that the CBA, by stating that the party
seeking arbitration “may” apply for a panel of arbitrators within thirty days,
did not require the Union to act within thirty days. We do not address this
issue.
29
Misco, 484 U.S. at 38.
17