ABM Indus. Groups, LLC v. Int'l Union of Operating Eng'rs

19-2755-cv
ABM Indus. Groups, LLC v. Int'l Union of Operating Eng'rs, et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2019
(Submitted: June 25, 2020 Decided: July 29, 2020)
Docket No. 19-2755-cv
ABM INDUSTRY GROUPS, LLC,
Petitioner-Appellant,
- against -
INTERNATIONAL UNION OF OPERATING ENGINEERS,
LOCAL 30, 30A, 30B, AFL-CIO,
Respondent-Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
Before:
WINTER, CALABRESI, and CHIN, Circuit Judges.
Appeal from a judgment of the United States District Court for the
Southern District of New York (Woods, J.) denying petitioner-appellant's motion
to confirm and granting in part respondent-appellee's motion to vacate an
arbitration award, pursuant to Section 301 of the Labor Management Relations
Act, 29 U.S.C. § 185. Petitioner-appellant contends that the district court erred in
denying its motion to confirm the arbitration award.
REVERSED AND REMANDED.
HARRY M. WEINBERG, Law Offices of Harry Weinberg,
Esq., and ROBERT S. SCHWARTZ, Law Office of
Robert S. Schwartz, PLLC, New York, New York,
for Petitioner-Appellant.
JAMES M. STEINBERG, Brady McGuire & Steinberg P.C.,
Tarrytown, New York, for Respondent-Appellees.
PER CURIAM:
Petitioner-appellant ABM Industry Groups, LLC ("ABM") appeals
the district court's judgment, entered August 5, 2019, denying its motion to
confirm an arbitration award and granting in part the motion of respondent-
appellee International Union of Operating Engineers, Local 30, 30A, 30B, AFL-
CIO ("Local 30" or the "Union") to vacate the award, pursuant to Section 301 of
the Labor Management Relations Act (the "LMRA"), 29 U.S.C. § 185. On appeal,
ABM principally argues that the district court erred in denying its motion to
confirm the arbitration award.
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ABM provided building maintenance and janitorial services to a
commercial office building in Tarrytown, New York (the "property"). ABM
employed engineers who worked at the property and were represented by Local
30. ABM and Local 30 were parties to a collective bargaining agreement (the
"CBA") that was in effect from January 1, 2015 through December 31, 2017, which
covered the terms and conditions of employment for the Local 30 employees
working at the property. On or about March 9, 2017, the property was sold, and
ABM was informed that the new owner would no longer employ the existing
employees, including John Phillip and Eugene Clerkin, who were members of
Local 30. On April 6, 2017, ABM paid Phillip and Clerkin termination pay and
accrued vacation and sick pay, pursuant to the CBA. Unbeknownst to ABM,
Phillip and Clerkin were rehired by the new owner of the property and
continued their same job duties.
On July 28, 2017, Local 30 filed a grievance against ABM under the
CBA on behalf of Phillip and Clerkin, alleging that the two employees were not
paid all accrued vacation credits. During this dispute, ABM learned that Phillip
and Clerkin remained employed at the property, and sent them a written
demand seeking the return of the termination and certain accrued vacation pay.
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Specifically, on August 22, 2017, ABM directly contacted Phillip and Clerkin to
advise them of the "inadvertent wage overpayment" and provided them "options
for repayment." See J. App'x at 200-01 (letter to Phillip); 197-98 (letter to Clerkin).
On August 29, 2017, on behalf of Phillip and Clerkin, Local 30 responded to ABM
to "disagree[] with ABM's characterization of the payments made to [Local 30]
members and dispute[] that any funds are owed to ABM." J. App'x at 199. Local
30 argued that the two employees were "actually owed funds under the terms of
the [CBA]." J. App'x at 199. Pursuant to the CBA's grievance procedure, Local 30
and ABM agreed to arbitrate Local 30's grievances regarding the two employees'
vacation credits and ABM's claim to claw back the termination pay.
The arbitration hearing was held on April 4, 2018, with
representatives for Local 30 and ABM present. Although Phillip and Clerkin
were not present, they were the designated "Grievants" and were represented by
Local 30's counsel at the arbitration. The parties submitted a number of issues to
the arbitrator, including the following: "Do the Grievants, Mr. Clerkin and Mr.
Phillip, owe ABM reimbursement for termination pay already paid to each of
them?" J. App'x at 32.
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After the arbitration, Local 30's counsel submitted a letter brief on
behalf of Phillip and Clerkin, advancing several arguments as to why the
employees were entitled to additional hours in accrued vacation, additional pay
under the CBA, and remittance of benefit contributions. Counsel also addressed
ABM's reimbursement claim on the merits, and did not argue that the arbitrator
lacked jurisdiction to decide the claim.
The arbitrator issued an opinion and award on October 12, 2018 (the
"Award"), concluding that Phillip and Clerkin were not entitled to termination
pay and directing them to repay certain amounts to ABM.
On November 18, 2018, ABM commenced the instant action by filing
a petition to confirm the Award. ABM moved for summary judgment
confirming the Award on January 16, 2019. Local 30 opposed the motion and
cross-moved for summary judgment to vacate the Award or, in the alternative, to
dismiss ABM's petition. The district court issued a memorandum opinion and
order on August 5, 2019, denying ABM's motion to confirm the Award and
vacating in part the Award, after concluding that the Award was "ultra vires and
unenforceable to the extent that it imposes obligations on non-parties [Phillip
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and Clerkin] to the [CBA]." J. App'x at 263. Judgment entered August 5, 2019.
This appeal followed.
DISCUSSION
"We review a district court's decision to confirm or vacate an
arbitration award de novo on questions of law and for clear error on findings of
fact." Nat'l Football League Mgmt. Council v. Nat'l Football League Players Ass'n, 820
F.3d 527, 536 (2d Cir. 2016). Our authority to review a labor arbitration award is
"narrowly circumscribed and highly deferential." Id. at 532. We may not "review
the arbitrator's decision on the merits," but "inquire only as to whether the
arbitrator acted within the scope of his authority as defined by the collective
bargaining agreement." Id. at 536. "We review a determination of an agency
relationship de novo." Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d
349, 353 (2d Cir. 1999).
I. Applicable Law
Arbitration is a "creature of contract," Starke v. SquareTrade, Inc., 913
F.3d 279, 288 (2d Cir. 2019); thus, "a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit," United Steelworkers
of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). Nonetheless, this
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Court has recognized five "limited theories" where non-signatories may be
bound by arbitration agreements entered into by others. Thomson-CSF, S.A. v.
Am. Arbitration Ass'n, 64 F.3d 773, 776, 780 (2d Cir. 1995) (enumerating five
circumstances binding non-signatories: "1) incorporation by reference; 2)
assumption; 3) agency; 4) veil-piercing/alter-ego; and 5) estoppel"). "Traditional
principles of agency law may bind a nonsignatory to an arbitration agreement."
Id. at 777. "Agency is the fiduciary relation which results from the manifestation
of consent by one person to another that the other shall act on his behalf and
subject to his control, and consent by the other so to act." Merill Lynch Inv.
Managers v. Optibase, Ltd., 337 F.3d 125, 130 (2d Cir. 2003) (quoting Restatement
(Second) of Agency § 1 (1958)).
In the labor law context, of course, a labor union is the exclusive
agent for its members. The National Labor Relations Act (the "NLRA") provides
that the labor union is the exclusive representative, or agent, of employees in
collective bargaining. See 29 U.S.C. § 159(a) ("Representatives designated or
selected for the purposes of collective bargaining by the majority of the
employees in a unit appropriate for such purposes, shall be the exclusive
representatives of all the employees in such unit for the purposes of collective
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bargaining in respect to rates of pay, wages, hours of employment, or other
conditions of employment."); see also 29 U.S.C. § 158(a)(5) ("It shall be an unfair
labor practice for an employer . . . to refuse to bargain collectively with the
representatives of his employees." (emphasis added)). Importantly, the resolution
of disputes that arise under a CBA through grievance procedures is an essential
part of collective bargaining. 29 U.S.C. § 158(d) ("[T]o bargain collectively is the
performance of the mutual obligation of the employer and the representative of
the employees to meet at reasonable times and confer in good faith with respect
to wages, hours, and other terms and conditions of employment, or the
negotiation of an agreement, or any question arising thereunder." (emphasis
added)).
II. Application
In denying ABM's petition to confirm the Award, the district court
reasoned that no precedent or authority supported the proposition "that a union
can bind its members to make payments ordered by an arbitrator under an
arbitration agreement to which they were not signatories, following a process in
which they did not participate." J. App'x at 261. The district court plainly erred,
for the record is clear that Phillip and Clerkin did participate in the arbitration
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proceeding -- they were the Grievants who initiated the proceeding -- and the
Union possessed both agency and statutory authority to appear in the arbitration
on their behalf. 1 We conclude that the arbitrator did not exceed her authority
because under both agency law principles and federal labor law, the Union
possessed the authority to bind Phillip and Clerkin to the Award.
A. Agency Law
As this Court has explained, "[a]ctual authority is created by direct
manifestations from the principal to the agent, and the extent of the agent's
actual authority is interpreted in the light of all circumstances attending those
manifestations, including the customs of business, the subject matter, any formal
agreement between the parties, and the facts of which both parties are aware."
Highland Capital Mgmt. LP v. Schneider, 607 F.3d 322, 327 (2d Cir. 2010) (quoting
Peltz v. SHB Commodities, Inc., 115 F.3d 1082, 1088 (2d Cir. 1997)). Here, Phillip
and Clerkin directly manifested their intent to be represented by Local 30 and to
be bound by the Award by authorizing the Union to submit their claims for
unpaid accrued vacation credits to arbitration. After ABM made its
1 "While the existence of an agency relationship often turns on questions of fact,
the issue is properly resolved as a matter of law where, as here, the relevant facts are
uncontroverted." Johnson v. Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir. 2013).
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overpayment claim, the parties stipulated to the submission of ABM's claim for
reimbursement from Phillip and Clerkin to the arbitrator. Counsel for Phillip
and Clerkin addressed the issue on the merits, urging the arbitrator to reject
ABM's claim for reimbursement on the grounds that the two employees were
entitled to termination pay under the CBA. The arbitrator resolved this
stipulated issue by concluding that termination pay was not owed to the two
employees, and directing them to pay ABM the amounts erroneously disbursed. 2
Accordingly, the district court erred in vacating the arbitration award in part and
concluding that the award was "ultra vires and unenforceable to the extent that it
imposes obligations on non-parties to the agreement." J. App'x at 263.
B. Federal Labor Law
As discussed above, federal labor law confirms that when a union
prosecutes employees' grievances against an employer, it represents those
employees and those employees are therefore bound by the arbitral award. See
29 U.S.C. § 158(d). This basic truth has long been reflected in precedent. See
Humphrey v. Moore, 375 U.S. 335, 342 (1964) ("the union [i]s [the] exclusive
2 Because we conclude that the record contains sufficient evidence to support an
agency relationship between Local 30 and the employees, we need not address the other
grounds for binding non-signatories to a contract signed by others. See Thomson-CSF,
S.A. v. Am. Arbitration Ass'n, 64 F.3d at 776.
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bargaining agent in the negotiation and administration of a collective bargaining
contract" (emphasis added)); United Steelworkers of Am. v. Warrior & Gulf Nav. Co.,
363 U.S. 574, 581 (1960) ("[T]he grievance machinery under a collective
bargaining agreement is at the very heart of the system of industrial self-
government . . . . The grievance procedure is, in other words, a part of the
continuous collective bargaining process.").
Precedent also makes clear that employees are bound by arbitration
decisions and settlements of grievances by union representatives. "[S]ettlement
of a grievance by the union and the employer is binding upon the individual
employee, absent evidence that the union has acted in bad faith in carrying
out its duty of full and fair representation." Suissa v. Am. Exp. Lines, Inc., 507 F.2d
1343, 1347 (2d Cir. 1974). Other courts have similarly concluded that "an
employee may not attack a final arbitration decision, . . . except on the grounds of
fraud, deceit or breach of the duty of fair representation unless the grievance was
a sham, substantially inadequate or substantially unavailable." Margetta v. Pam
Pam Corp., 501 F.2d 179, 180 (9th Cir. 1974) (internal quotation marks omitted).
The district court ignored that Local 30 pursued the employees'
grievance as their "exclusive representative," thus binding them to the outcome.
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The CBA expressly contemplates that Local 30 will prosecute employees'
interests as their representative against ABM. The preamble to the CBA makes
this explicit:
The parties hereto being desirous of reducing to writing
the Agreement arrived at as a result of collective
bargaining between them, the Union representing a
majority of employees as hereinafter described, and
further, the Union by reason thereof, being the exclusive
bargaining agent for such employees, do agree as and for
their Agreement as follows.
App'x at 14 (emphasis added). Article 11, which provides an arbitral grievance
procedure for all questions arising under the CBA, is no different, as it also calls
for Local 30 to arbitrate employees' grievances through arbitration.
The intent of the parties here was clearly for employees' grievances
to be submitted to arbitration and for employees to be bound by the arbitrator's
decision. An arbitrator's scope of authority "'generally depends on the intention
of the parties to an arbitration, and is determined by the agreement or
submission.'" Local Union No. 38 v. Hollywood Heating & Cooling, Inc., 88 F. Supp.
2d 246, 252 (S.D.N.Y. 2000) (quoting Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d
Cir. 1987)). Because the parties' intent as revealed throughout the CBA was for
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Local 30 to represent employees' interests, Local 30 cannot now claim that the
employees were not bound by the CBA or the arbitration.
To be sure, as described above, the record contains numerous
instances demonstrating the employees' intent to be bound by Local 30 in the
arbitration. For example, in a September 2018 letter to the arbitrator, union
counsel represented that "[o]ur office represents Grievants [Local 30] and Local 30
members John Philip and Eugene Clerkin in connection with the above- referenced
matter." App'x at 158 (emphasis added). In the same letter, counsel stated: "We
respectfully submit that the following amounts are owed by ABM to the Local 30
Trust Funds on behalf of the grievants." App'x at 162 (emphasis added).
Throughout the letter and the parties' Joint Statement of Stipulated Facts for
arbitration, counsel referred to the employees as "the grievants," undercutting
their argument on appeal -- and the district court's conclusion -- that only Local
30 was bound by the grievance procedure and a party to the arbitration. See, e.g.,
App'x at 163, 174. And finally, union counsel even sent a letter cautioning ABM
from contacting the employees directly because their interests were being
prosecuted by Local 30. Based on this extensive record evidence, Local 30 cannot
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now move to vacate the Award on the ground that the employees were not party
to the CBA and to the arbitration.
It is, of course, true that Phillip and Clerkin were not signatories to
the CBA and the agreement to arbitrate. But it is the nature of labor agreements
and labor arbitrations that the unions are the exclusive bargaining agents for and
the agents of the union members. See generally Abdullayeva v. Attending Homecare
Servs. LLC, 928 F.3d 218, 223 (2d Cir. 2019) (a "Union [is] legally authorized to
negotiate collective bargaining agreements on [an employee's] behalf" (citing 29
U.S.C. § 159(a))). Under the CBA, Local 30 was the "sole collective bargaining
agency" for the covered employees, J. App'x at 14, and the CBA provided for
vacation, holiday, sick, and termination pay, J. App'x at 18-21. Disputes in
connection with the interpretation and application of these provisions were to be
resolved through a grievance procedure, including arbitration, with the Union
representing the employees. That was precisely the procedure that was followed
here when Phillip and Clerkin initiated -- and participated in -- the grievance
process. For these reasons, under both agency and statutory law principles, we
have little trouble concluding that Local 30 possessed the requisite authority to
bind the employees to the Award.
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CONCLUSION
For the reasons set forth above, the district court's judgment is
REVERSED and the case is REMANDED with instructions to the district court
to grant ABM's petition to confirm the Award, to deny Local 30's cross-motion to
vacate the Award, and to enter an amended judgment accordingly.
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