State Court Petition to Vacate Arbitration Award Does Not Toll DFR Claim: Second Circuit | Practical Law

State Court Petition to Vacate Arbitration Award Does Not Toll DFR Claim: Second Circuit | Practical Law

In Kalyanaram v. American Association of University Professors at the New York Institute of Technology, Inc., the US Court of Appeals for the Second Circuit held that an employee's breach of duty of fair representation (DFR) claim accrued when the arbitrator issued the "final award," which remained final despite the issuance of subseqent supplemental awards. The court also held, as a matter of first impression, that a state court action to vacate an arbitration award did not toll the statute of limitations period on a DFR claim.

State Court Petition to Vacate Arbitration Award Does Not Toll DFR Claim: Second Circuit

by Practical Law Labor & Employment
Published on 11 Feb 2014 • USA (National/Federal)
In Kalyanaram v. American Association of University Professors at the New York Institute of Technology, Inc., the US Court of Appeals for the Second Circuit held that an employee's breach of duty of fair representation (DFR) claim accrued when the arbitrator issued the "final award," which remained final despite the issuance of subseqent supplemental awards. The court also held, as a matter of first impression, that a state court action to vacate an arbitration award did not toll the statute of limitations period on a DFR claim.
On February 3, 2014, in Kalyanaram v. American Association of University Professors at the New York Institute of Technology, Inc., the US Court of Appeals for the Second Circuit affirmed the district court's dismissal of the plaintiff's claim against his union for breach of its duty of fair representation (DFR). The Second Circuit held that the plaintiff's claim was time-barred because he filed it eleven months after his claim accrued, which was when the arbitrator issued the "final award," and the plaintiff's state court action to confirm or deny the award did not toll the claim's six month statute of limitations period. (No. 12-3630-cv, (2d Cir. Feb. 3, 2014).)

Background

The plaintiff, a former professor at the New York Institute of Technology, was terminated by the school based on various allegations. The plaintiff challenged his termination through arbitration pursuant to the union's collective bargaining agreement (CBA).
The arbitrator issued an interim decision:
  • Finding there was just cause to terminate the plaintiff under the CBA.
  • Ordering the school to:
    • assign plaintiff to research leave for one year with full pay;
    • provide plaintiff a neutral reference; and
    • not disparage him to potential employers.
The arbitrator denied plaintiff's motion to reconsider the decision, adopted the interim decision as the "final award" on October 19, 2009 and retained jurisdiction over the matter to implement the final award. After the "final award," the arbitrator issued supplemental awards throughout 2010 and 2011 requiring the school to provide reference letters and an extension of salary.
Concurrently, the plaintiff filed a petition to vacate the award in New York state court. The state court denied his petition and granted the school's cross-motion to confirm the award. The plaintiff appealed, and the appellate court affirmed the trial court's decision.
On September 7, 2010, the plaintiff filed a DFR claim alleging in part that the union failed to provide him with adequate representation in challenging the employer's purported breach of the CBA and preventing his personal counsel from fully participating in the hearings. For more information about DFR claims, see Practice Note, Labor Law: Beyond the NLRA and RLA: Section 301.
The district court granted the union's motion for partial judgment on the pleadings dismissing the plaintiff's DFR claim as time-barred because:
  • A DFR claim has a six month statute of limitations triggered by an event from which an employee knows or reasonably should have known that a breach of the DFR occurred (DelCostello v. Int'l Bhd. of Teamsters, 462 U.S. 151 (1983)).
  • Since the union purported to fulfill its duty to fairly represent the plaintiff during the arbitration process, and the plaintiff alleges that the union inadequately represented him in the arbitration, the plaintiff's claim accrued when the arbitrator issued the final award.
  • The plaintiff filed his claim eleven months after the arbitrator issued the "final award."
The plaintiff appealed the district court's dismissal of his DFR claim to the Second Circuit alleging that:
  • His claim was timely because:
    • the DFR claim did not accrue until the final award was confirmed in state court, which occurred within the six month limitations period; or
    • the state court proceedings tolled the limitations period of the DFR claim.
  • The "final award" was not final because the arbitrator awarded subsequent supplemental awards.

Outcome

The Second Circuit affirmed that the plaintiff's DFR claim was time-barred. It found that the plaintiff's claim accrued when the arbitrator issued the "final award" because:
  • In the Second Circuit, a cause of action accrues when a plaintiff knows or reasonably should have known that the breach occurred.
  • The plaintiff gained the requisite knowledge of the breach when the arbitrator issued the "final award."
  • The arbitrator's award was made final and binding when it was named the "final award."
  • Language in the CBA stating that the arbitrator's final decision is "subject to appeal" only recognizes that the award may be confirmed or vacated by a court after it is issued and does not change the accrual date for a DFR claim.
As a matter of first impression, the court held that the plaintiff's state court action to set aside the arbitration award did not toll the limitations period of the DFR claim, because:
  • Tolling does not apply where the plaintiff chooses to pursue an optional parallel avenue of relief. Tolling would apply where a plaintiff must pursue a separate administrative remedy as a precondition to filing a suit.
  • The plaintiff's state claim to set aside the final award was a parallel avenue of relief to his DFR claim. The plaintiff was not required to file it before filing the DFR claim.
  • The plaintiff's state claim was not part of the same statutory scheme as the underlying arbitration and it concerned different questions of law.
The court also held that arbitrator's subsequent awards did not negate the finality of the "final award" because:

Practical Implications

DFR claims are hybrids of two related claims:
  • A claim against the employer for breaching a CBA.
  • A claim against the union for breaching its duty of fair representation toward the employee by failing to adequately address the employer's breach.
If an employee proves both that the employer breached the CBA and the union breached its duty of fair representation:
  • The employer is generally liable for back pay caused by the breach, if the union had not breached its duty of fair representation.
  • The union is liable for the increase in back pay due to its breach.
In light of this decision, unions and employers in the Second Circuit have greater certainty about when their potential liability under DFR claims accrue and expire.