Alcan Packaging Co. v. Graphic Communication Conference , 729 F.3d 839 ( 2013 )

United States Court of Appeals
For the Eighth Circuit
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No. 12-3272
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Alcan Packaging Co.,
lllllllllllllllllllllPetitioner - Appellee,
v.
Graphic Communication Conference, International Brotherhood of Teamsters &
Local Union No. 77-P; Graphic Communications Conference, International
Brotherhood of Teamsters & Local Union No. 727-S,
lllllllllllllllllllllRespondents - Appellants.
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Appeal from United States District Court
for the Southern District of Iowa - Des Moines
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Submitted: June 10, 2013
Filed: September 5, 2013
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Before COLLOTON, GRUENDER, and BENTON, Circuit Judges.
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COLLOTON, Circuit Judge.
Teamsters Local Unions 727-S and 77-P (“the Unions”) appeal from the district
court’s order vacating an arbitrator’s award of severance pay. Because the arbitrator
was at least arguably construing or applying the collective bargaining agreement, a
federal court must defer to the arbitrator’s interpretation, and we therefore reverse.
I.
In 2009, Rio Tinto PLC agreed to sell to Bemis Company, Inc., three packaging
plants operated by Rio Tinto’s subsidiary, Alcan Packaging Company. The sale
closed on March 1, 2010. The Unions represent the workers at the plants and were
parties to a collective bargaining agreement with Alcan. After the sale was
announced, Bemis informed the Unions that it would not adopt the terms of the
agreement. Bemis and the Unions entered into negotiations. Bemis eventually hired
all of the Alcan workers who applied to work for Bemis, though under less favorable
terms of employment than the workers had enjoyed under their agreement with Alcan.
After the sale closed, the Unions filed a grievance against Alcan, claiming that
Alcan violated the agreement. As relevant to this appeal, the Unions claimed that
eligible workers at the three plants were entitled to severance pay. Alcan denied the
grievance, and the agreement required the parties to submit the dispute to an
arbitrator.
The relevant portion of the agreement, Appendix D, provides: “If the Company
shall close a plant completely and permanently, employees whose employment shall
be terminated as a result thereof and [who are eligible] shall be entitled to a Severance
. . . .” Because the Unions and Bemis successfully completed their negotiations
before the sale closed, there was a seamless transition on the day that Bemis took
over, and operations at the plants never ceased. Alcan argued to the arbitrator,
therefore, that it never closed the plants, so severance pay was not due under
Appendix D. The Unions maintained that Alcan completely and permanently closed
the plants—as far as the company was concerned—by selling them to Bemis, even
though business at the plants continued uninterrupted following the sale.
The arbitrator ruled for the Unions. Alcan then filed this action in the district
court, seeking to vacate the arbitrator’s award of severance pay. The district court
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granted Alcan’s motion, concluding that the arbitrator’s award of severance pay could
not be reconciled with the plain meaning of Appendix D. The Unions appeal, and we
review the district court’s decision to vacate the arbitrator’s award de novo. Ace Elec.
Contractors, Inc. v. Int’l Bhd. of Elec. Workers, Local Union No. 292, 414 F.3d 896,
899 (8th Cir. 2005).
II.
Alcan’s action to vacate the arbitrator’s award arises under Section 301 of the
Labor Management Relations Act, 29 U.S.C. § 185. Section 301 confers jurisdiction
on federal courts over cases involving a breach of a collective bargaining agreement,
id., and it authorizes federal courts to fashion the substantive law that governs such
labor disputes. Textile Workers Union of Am. v. Lincoln Mills of Ala., 353 U.S. 448,
456-57 (1957). Except in limited circumstances, that body of law requires a court to
defer to the arbitrator’s interpretation. See United Paperworkers Int’l Union v.
Misco, Inc., 484 U.S. 29, 38 (1987).
When Alcan and the Unions contracted to resolve their disputes via arbitration,
they agreed to be bound by the arbitrator’s interpretation of the agreement. We may
not vacate an award merely because our construction of the agreement differs from
the arbitrator’s. United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S.
593, 599 (1960). If the arbitrator was “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.” Misco, 484 U.S.
at 38 (emphasis added). Only when an arbitrator issues an award that does not “draw
its essence from the contract,” because it reflects instead the arbitrator’s “own notions
of industrial justice,” may a court vacate an arbitrator’s decision. Id.Alcan suggests that the Federal Arbitration Act, 9 U.S.C. § 10(a)(4), may
provide for more vigorous judicial review than does § 301. If the Act applies, then
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§ 10(a)(4) does not prescribe a different standard of review. The Supreme Court’s
most recent case applying § 10(a)(4) recited the § 301 standard and cited authorities
arising under the latter statute. See Oxford Health Plans LLC v. Sutter, 133 S. Ct.
2064, 2068 (2013) (citing E. Associated Coal Corp. v. United Mine Workers of Am.,
531 U.S. 57, 62 (2000), Misco, 484 U.S. at 38, and Enter. Wheel & Car Corp., 363
U.S. at 599). If there were a conflict between the statutes, moreover, we would apply
§ 301, because it is a specific directive to create the substantive law that governs
collective bargaining agreements, and the specific governs over the general. Int’l
Bhd. of Elec. Workers, Local Union No. 545 v. Hope Elec. Corp., 380 F.3d 1084,
1097-98 (8th Cir. 2004); Smart v. Int’l Bhd. of Elec. Workers, Local 702, 315 F.3d
721, 724 (7th Cir. 2002).
So we evaluate the arbitrator’s decision under the deferential standard that long
has governed § 301 cases. The arbitrator here began his analysis by quoting
Appendix D and focusing on the issues as the parties had framed them. He
recognized that Alcan was liable for severance pay only if two conditions were
satisfied: Alcan must have closed the plants completely and permanently, and
eligible employees must have been terminated as a result of the closures. The main
question facing the arbitrator was whether the seamless transition meant that Alcan
had not closed the plants.
After consulting the text of Appendix D and arbitral decisions interpreting
similar agreements, the arbitrator concluded that Alcan completely and permanently
closed the plants by selling them. Then, after analyzing the text and analogous
arbitral precedents, the arbitrator concluded that the employees had been terminated
as a result of the closures. In sum, the arbitrator’s award has the hallmarks of an
honest judgment that drew its essence from the agreement: he analyzed the text of
the contract, consulted decisions interpreting similar contracts, and squarely
addressed the parties’ arguments.
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Alcan contends that the district court properly vacated the award because the
arbitrator’s interpretation of the agreement conflicts with the ordinary meaning of the
contract. The sale of the plants was not a closure, the company says, because Alcan
did nothing to stop work or other operations at the plants, and the facilities continued
to operate without interruption on the day of the sale. Without a closure, Alcan
reasons, severance pay was not due under Appendix D, so the arbitrator exceeded his
authority by effectively amending the agreement and dispensing his own brand of
industrial justice.
This challenge to the award is insufficient to justify vacatur. For one thing, it
is not so clear that the arbitrator’s decision is contrary to the plain language of the
contract. Alcan concedes that because the contract refers to whether “the Company”
has closed the plant completely and permanently, the prospect of closure must be
viewed from Alcan’s point of view. If another company reopens the plant after Alcan
closes it, even if the closure is for only a day or even an hour, then the reopening by
another party does not vitiate a complete and permanent closure by Alcan. So the
company is reduced to arguing that while a brief pause between Alcan’s closure and
Bemis’s reopening would result in a complete and permanent closure by Alcan, there
was no closure here because the transition was seamless. The arbitrator thought there
was no meaningful distinction between the two scenarios under the contract. In his
view, that a purchaser might reopen a plant, or even seamlessly continue operations,
does not mean that the seller did not close it.
Even if the arbitrator was incorrect about that point, such a mistake is not
sufficient reason to set aside the award. “[T]he parties having authorized the
arbitrator to give meaning to the language of the agreement, a court should not reject
an award on the ground that the arbitrator misread the contract.” Misco, 484 U.S. at
38. This is not a situation in which the arbitrator ignored the plain language of the
contract, such as by applying the wrong agreement, see Coca-Cola Bottling Co. of St.
Louis v. Teamsters Local Union No. 688, 959 F.2d 1438, 1440-41 (8th Cir. 1992), or
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by relying heavily on parole evidence of the parties’ bargaining history rather than
the unambiguous terms of the agreement itself. See Excel Corp. v. United Food &
Commercial Workers Int’l Union, Local 431, 102 F.3d 1464, 1468 (8th Cir. 1996).
Nor is this appeal comparable to Inter-City Gas Corp. v. Boise Cascade Corp., 845
F.2d 184 (8th Cir. 1988), where there was no indication that the arbitrator arguably
construed or applied the contract when he “disregarded” and “ignored” its plain
language. Id. at 188, 189; see Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d
1175, 1181 (D.C. Cir. 1991) (eschewing a “broad” reading of Inter-City Gas); Dist.
No. 72 & Local Lodge 1127 v. Teter Tool & Die, 630 F. Supp. 732, 736 (N.D. Ind.
1986) (cited in Inter-City Gas, 845 F.2d at 187-88) (vacating arbitrator’s award where
arbitrator “disregarded” contract language and based decision “solely upon testimony
pertaining to the parties’ intent at the time of the contracting,” such that the award
drew its essence “not from the agreement, but rather from the negotiations”).
This is a case, rather, in which the arbitrator at least arguably construed the
relevant provision of the contract, but the company contends that he misread the
agreement and committed serious error in his interpretation. In that situation, the
arbitrator’s decision must stand. Misco, 484 U.S. at 38. Erroneous textual analysis,
like “improvident, even silly, factfinding,” id. at 39, does not justify disregarding the
decision of the arbitrator agreed upon by the parties to resolve their dispute over
severance pay. “It is the arbitrator’s construction which was bargained for; and so far
as the arbitrator’s decision concerns construction of the contract, the courts have no
business overruling him because their interpretation of the contract is different from
his.” Enter. Wheel & Car Corp., 363 U.S. at 599.
Alcan seeks support in Smullin v. Mity Enterprises, Inc., 420 F.3d 836 (8th Cir.
2005), which applied the definition of “plant closing” in the Worker Adjustment and
Retraining Notification Act (“WARN Act”), 29 U.S.C. § 2101 et seq. Under the
statute, “plant closing” meant “the permanent or temporary shutdown of a single site
of employment,” id. § 2101(a)(2), which the regulations defined as “the effective
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cessation of production or the work performed” by the facility. 20 C.F.R. § 639.3(b).
Not surprisingly, this court determined that this definition was “facility-specific, not
employer-specific,” and that there was no “plant closing” when the plant in question
did not miss even a day of operation. 420 F.3d at 838.
This case, of course, is not governed by the WARN Act, but by a contract
under which the triggering event occurs “[i]f the Company shall close a plant
completely and permanently.” Even Alcan does not contend that this definition is
facility-specific: the Company closes a plant “completely and permanently” even if
a different company reopens the facility at a later time—otherwise, how would the
parties ever know that a closure was “permanent”? If the arbitrator had decided this
dispute based on the definition of “plant closing” in the WARN Act rather than by
reference to the contract between the parties, then he truly would have dispensed his
own brand of industrial justice.
* * *
For the foregoing reasons, we reverse the judgment of the district court and
remand the case with directions to confirm the arbitration award. We deny the
request of the Unions for an award of attorneys’ fees. Alcan acted promptly to seek
an order vacating the arbitration award, and the company did not act dishonestly or
in bad faith.
GRUENDER, Circuit Judge, dissenting.
I agree with the district court that this is the rare case in which we should
vacate an arbitrator’s award. The arbitrator here ignored the plain language of the
collective bargaining agreement. When three plants are sold to another party and
continue operating seamlessly with the same employees during and after that sale, the
plants cannot have closed completely and permanently such that the seller must then
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pay severance benefits. Yet the arbitrator here awarded severance benefits. The
district court’s judgment vacating this award should be affirmed.
Courts must give considerable deference to arbitration awards. On this point,
the court and I agree. In a labor dispute such as this, the parties have “agreed to
submit all questions of contract interpretation to the arbitrator.” Misco, 484 U.S. at
36-37 (quoting United Steelworkers of America v. American Mfg. Co., 363 U.S. 564,
567-68 (1960)). “[I]t is the arbitrator’s view of the facts and of the meaning of the
contract that [the parties] have agreed to accept.” Id. at 37-38. As a result, “[a]
reviewing court cannot overturn an arbitrator’s award even if the court is convinced
the arbitrator committed serious error so long as the arbitrator was arguably
construing or applying the contract.” Excel Corp., 102 F.3d at 1467. But an
arbitrator’s authority to issue an award is not unlimited. As the court recognizes,
ante at 3, if an arbitration award does not “draw[ ] its essence from the collective
bargaining agreement” because it reflects the arbitrator’s “own brand of industrial
justice,” then the court should vacate that award. Enter. Wheel, 363 U.S. at 597. That
is to say, “[t]he arbitrator may not ignore the plain language of the contract,” Misco,
484 U.S. at 38, or “interpret[ ] unambiguous language in any way different from its
plain meaning.” Inter-City, 845 F.2d at 187 (quoting Teter Tool & Die, 630 F. Supp.
at 736). In so doing, the arbitrator “amends or alters the agreement and acts without
authority.” Id. Thus, where the arbitrator departs from the unambiguous language
of the contract in granting an award, the court should vacate that award.
Here, the severance provision of the collective bargaining agreement is
unambiguous. It states:
If the Company shall close a plant completely and permanently,
employees whose employment shall be terminated as a result thereof and
who at the time shall have a length of continuous service with the
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Company of five (5) years or more, shall be entitled to a Severance
allowance as follows . . . .
By operation of this provision, qualifying employees are entitled to severance benefits
only if (1) “the Company shall close a plant completely and permanently” and (2) that
closure results in the termination of their employment. Although the collective
bargaining agreement does not itself define the term “close,” the term is commonly
understood, and is defined, as meaning “[t]o conclude; to bring to an end.” Black’s
Law Dictionary 271 (8th ed. 2004). As the district court correctly reasoned: “The
word ‘closed’ is meant to distinguish it from ‘open.’ The word ‘completely’ is meant
to distinguish it from ‘partially.’ The reference to ‘permanently’ is meant to
distinguish it from ‘temporarily.’” This unambiguous language should have made
this an easy case. Cf. Smullin, 420 F.3d at 838 (concluding, in the context of the
WARN Act, that“[i]t is obvious” that a plant does not close when employees at the
plant “did not miss even a day of operation” (emphasis added)). Under questioning
at the arbitration hearing, Mark Cooper, a witness for the Unions, conceded:
Q: [D]o you have any information that would indicate that the [three
plants] were ever closed even for a minute? I’m not asking about
ownership, I’m just saying did they shut the places down?
A: No.
Furthermore, as the court notes, ante at 2, Bemis hired all of the Alcan workers who
applied to work for Bemis. Accordingly, since the plants at issue did not
“close”—much less “close . . . completely and permanently”—and since the
employees were not terminated as a result thereof, the severance provision was not
triggered.
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The arbitrator attempts to sidestep this self-evident conclusion by asserting that
“when a company goes out of a line of business by selling a plant it has, as far as its
employees in that plant are concerned, completely and permanently closed.” The
court asserts that this interpretive effort by the arbitrator, with its “hallmarks of an
honest judgment,” disposes of this case. Ante at 4-6. According to the court, if the
arbitrator makes any attempt at interpretation, as the arbitrator did here, the
arbitrator’s decision must stand. Not so. We have explained that “if the arbitrator
‘interprets unambiguous language in any way different from its plain meaning, [the
arbitrator] amends or alters the agreement and acts without authority.’” Inter-City,
845 F.2d at 187 (quoting Teter Tool & Die, 630 F. Supp. at 736) (alteration in
original). In other words, “the arbitrator may not disregard or modify unambiguous
contract provisions.” Id. (emphasis added). Accordingly, an interpretive effort by the
arbitrator does not mean that the arbitrator’s decision must stand, if in so doing the
arbitrator modifies unambiguous language.
The arbitrator’s attempt to introduce ambiguity into the severance provision
falls flat.1 According to the arbitrator, plant closure is employer-specific as opposed
to facility-specific. That is to say, when Alcan sold its plants to Bemis, the plants
were permanently and completely closed as between Alcan and its employees. That
closure is unambiguously facility-specific becomes obvious when the severance
provision is viewed in the larger context of the collective bargaining agreement, as
1
The court perceives ambiguity in the severance provision by imagining a
scenario of a “brief pause” between the seller’s closure of a plant and the buyer’s
reopening of it. The court then asserts that Alcan is reduced to arguing that there is
a meaningful distinction between (1) a seamless transition from buyer to seller and
(2) the court’s imagined “brief pause” scenario. Ante at 5. Since both parties agree
that there was a seamless transition from Alcan to Bemis, the question of whether the
court’s “brief pause” scenario amounts to a complete and permanent closure under the
severance provision is not before the court. Thus, we need not decide this question.
Even so, the court’s ability to imagine a hard case does not make the severance
provision ambiguous in this easy case.
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applied by the arbitrator. Specifically, the successors and assigns clause of the
collective bargaining agreement states: “[N]o merger, purchase, sale, transfer,
assignment or consolidation, shall terminate or suspend this contract or relieve an
employer . . . a transferee, purchaser, successor, or assignee, from the obligation to
comply with the terms and conditions of this contract.” Since Bemis contracted
around this provision, the arbitrator applied this provision against Alcan.2 Thus, even
though Alcan may no longer be the employer, the Bemis employees, by operation of
this clause, are still entitled to the benefits of the collective bargaining agreement.
As counsel for the Unions conceded at oral argument, Alcan is therefore required to
“make up the differences” between the Alcan and the Bemis contracts. This is
significant because, as the court notes, ante at 2, Bemis hired Alcan’s employees
under less favorable terms than the workers had under their collective bargaining
agreement with Alcan. With this established, the incongruity of the arbitrator’s award
comes into full view. The arbitrator required that (1) Alcan honor the collective
bargaining agreement as if the Bemis employees were still working for Alcan and that
(2) Alcan pay severance benefits due to a complete and permanent closure of the
plants. Both cannot be true. Either the plants closed, leaving Alcan on the hook for
severance benefits, or the plants did not close, leaving Alcan on the hook for full pay
and benefits as provided in the Alcan collective bargaining agreement. The arbitrator,
however, ignored this “either-or” by awarding a double recovery, a windfall surely
not contemplated by the collective bargaining agreement. In so doing, the arbitrator
“dispense[d] his own brand of industrial justice.” Enter. Wheel, 363 U.S. at 597.
The arbitrator here ignored the unambiguous language of the severance
provision. In awarding severance benefits, the arbitrator was “not construing an
ambiguous contract term, but rather was imposing a new obligation.” Keebler Co.
v. Milk Drivers & Dairy Employees, Local No. 471, 80 F.3d 284, 288 (8th Cir. 1996).
I therefore respectfully dissent.
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2
The district court affirmed this finding, and Alcan did not appeal this ruling.
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