Arbitrator Did Not Exceed Authority by Holding Agency Decision Precluded Arbitrating Union Grievance: Second Circuit | Practical Law

Arbitrator Did Not Exceed Authority by Holding Agency Decision Precluded Arbitrating Union Grievance: Second Circuit | Practical Law

In American Postal Workers Union v. U.S. Postal Service, the US Court of Appeals for the Second Circuit reversed a district court judgment vacating an arbitral award because an arbitrator exceeded his authority under the collective bargaining agreement (CBA). The Second Circuit held that the arbitrator had authority to interpret the CBA, including to apply the doctrine of collateral estoppel to preclude arbitration on grievance claims under the CBA allegedly litigated by the grievant in prior federal agency proceedings. Nothing in the CBA specifically foreclosed the arbitrator from reaching that conclusion and the district court should not have vacated the decision simply because it disagreed with the arbitrator's CBA interpretation.

Arbitrator Did Not Exceed Authority by Holding Agency Decision Precluded Arbitrating Union Grievance: Second Circuit

by Practical Law Labor & Employment
Published on 10 Jun 2014 • USA (National/Federal)
In American Postal Workers Union v. U.S. Postal Service, the US Court of Appeals for the Second Circuit reversed a district court judgment vacating an arbitral award because an arbitrator exceeded his authority under the collective bargaining agreement (CBA). The Second Circuit held that the arbitrator had authority to interpret the CBA, including to apply the doctrine of collateral estoppel to preclude arbitration on grievance claims under the CBA allegedly litigated by the grievant in prior federal agency proceedings. Nothing in the CBA specifically foreclosed the arbitrator from reaching that conclusion and the district court should not have vacated the decision simply because it disagreed with the arbitrator's CBA interpretation.
On June 6, 2014, in American Postal Workers Union v. U.S. Postal Service, the US Court of Appeals for the Second Circuit reversed a district court judgment vacating an arbitral award, finding that the arbitrator did not exceed his authority under the collective bargaining agreement (CBA). The Second Circuit held that the arbitrator had authority to interpret the CBA, including to apply the doctrine of collateral estoppel to preclude arbitration on grievance claims under the CBA allegedly litigated by the grievant in prior federal agency proceedings. The Second Circuit found that nothing in the CBA specifically foreclosed the arbitrator from reaching that conclusion and the district court should not have vacated the decision simply because it disagreed with the arbitrator's CBA interpretation. (13-2579-CV, (2d Cir. June 6, 2014).)

Background

Carla LaGreca was employed by the U.S. Postal Service (USPS) as a mail processing clerk. The following events occurred:
  • In 1986, LaGreca applied for workers' compensation benefits for carpal tunnel syndrome which she developed in the course of her work.
  • In 2007, the USPS assigned LaGreca to limited-duty consistent with her work restrictions.
  • In 2008, the USPS, concluding that it no longer had work available for LaGreca given her work restrictions, put her on leave-without-pay/injured-on-duty status.
  • LaGreca started the grievance and arbitration proceedings which led to this case.
The union's CBA with the USPS provides a four-step grievance process concluding with arbitration. Separate from contractual rights to pursue grievances under the governing CBA, postal employees with job-related disabilities may also appeal to the Merit Systems Protection Board (MSPB) to determine whether the USPS acted arbitrarily or capriciously in its employment decisions.
In September 2008, LaGreca filed a grievance under the CBA culminating in arbitration. The union argued (on LaGreca's behalf) that the elimination of her position:
  • Violated the CBA.
  • Was based on retaliatory and discriminatory motives.
In December 2008, LaGreca concurrently filed an MSPB appeal. In August 2009, an MSPB administrative law judge (ALJ) denied her appeal, holding that the USPS properly eliminated LaGreca's position because LaGreca's doctor had declared her totally disabled. LaGreca appealed the ALJ's decision, but her appeal was dismissed as untimely.
In March 2012, LaGreca's grievance under the CBA was submitted to an arbitrator. The USPS argued that the grievance was not arbitrable because the ALJ had already resolved the issue by denying the MSPB appeal. The union objected. Despite the union's objection, the arbitrator agreed to:
  • Bifurcate the proceeding to evaluate the USPS's collateral estoppel defense separately from the merits of the grievance.
  • Address whether collateral estoppel was applicable under these circumstances and the merits of the grievance afterwards only as necessary.
The arbitrator noted that:
  • Under Article 16.9, veterans appealing under the Veterans Preference Act waive their right to invoke the CBA arbitration process if:
    • An MSPB settlement agreement is reached.
    • A hearing on the merits before the MSPB has begun.
    • The MSPB issues a decision on the merits of the appeal.
  • Although Article 16.9 does not apply to LaGreca, it does, along with other arbitration awards under the CBA applying collateral estoppel, support the conclusion that the CBA permits MSPB decisions to preclude arbitration of CBA claims.
The arbitrator applied the collateral estoppel doctrine to LaGreca's claim and determined that:
  • The ALJ's decision denying LaGreca's appeal was the MSPB's final decision and was not appealed.
  • The conclusion in the MSPB's decision that LaGreca was totally disabled as of September 2, 2008 resolved the central issues in the grieved matter.
  • The USPS could not have been arbitrary and capricious when it terminated LaGreca's modified duty assignment.
  • The matter is not arbitrable based on the doctrine of collateral estoppel.
The union sought to have this decision vacated in a district court on the basis that the arbitrator's decision to apply collateral estoppel was outside the power given to him by the CBA.
The district court addressed cross-motions for summary judgment, holding that:
  • The arbitrator found no explicit support in the CBA for applying collateral estoppel to LaGreca's case. Instead, he purported to find implicit support in Article 16.9 of the Agreement.
  • The CBA does not provide for the application of collateral estoppel in general.
  • The only provision that addresses preclusion does not apply to LaGreca.
  • The only inference that could be drawn from Section 16.9 was that preclusion principles do not apply in other circumstances.
  • The arbitrator improperly relied on collateral estoppel to use the MSPB decision to preclude LaGreca from recovering her grievance under the CBA, without any basis in contract.
(Am. Postal Workers Union v. U.S. Postal Serv., 12 CIV. 7896, (S.D.N.Y. May 2, 2013).)
Therefore, the district court:
  • Vacated the arbitrator's award.
  • Remanded the case for arbitration.
The USPS appealed.

Outcome

The Second Circuit held:
  • Under the CBA's broad arbitration provision, the arbitrator should decide the preclusive effect of a prior judicial or administrative decision.
  • Nothing in the CBA foreclosed the arbitrator from applying preclusion principles.
  • The arbitrator did not exceed his authority under the CBA by interpreting the CBA's terms to permit use of collateral estoppel based on a prior agency decision.
Therefore, the Second Circuit:
  • Reversed the district court's judgment.
  • Remanded the case to the district court with instructions to confirm the arbitral award.
The Second Circuit noted:
The Second Circuit concluded that:
  • When (as in this case) the challenge is to an award deciding a question that the parties agree was properly submitted to the arbitrator initially, vacating the award under the excess-of-powers standard is appropriate only under the narrowest of circumstances (Jock v. Sterling Jewelers Inc., 646 F.3d 113, 122 (2d Cir. 2011)).
  • The situation here is similar to Oxford Health Plans because:
    • the arbitrator concluded from the terms of the CBA that, under the circumstances, they supported application of collateral estoppel;
    • nothing in the CBA expressly forecloses use of preclusion principles with respect to MSPB appeals or other grievance proceedings; and
    • under a broad arbitration agreement, arbitrators are authorized to apply collateral estoppel based on prior judicial or administrative decisions.
  • The CBA did not expressly foreclose the arbitrator from concluding that Article 16.9 showed the parties intended to in some cases allow decisions of the MSPB to preclude decisions in later arbitrations.
  • The district court's conclusion that the arbitrator should have inferred from the CBA's express statements about preclusion found in Article 16.9 that this provision set out the only circumstances where MSBP proceedings could preclude arbitration:
    • is simply a different interpretation of the CBA; and
    • while arguably a better interpretation of the CBA, cannot be a basis for vacating the arbitrator's decision.
  • Because the arbitrator was arguably construing or applying the contract, his decisions must stand, regardless of a district court's view of its demerits (Oxford Health Plans).

Practical Implications

This decision highlights the broad discretion federal courts will grant arbitrators selected by parties to decide disputes about interpretations of agreements.
If parties wish to limit the circumstances where an arbitrator can apply decisions in collateral matters to preclude arbitration on the issues before them, they should consider including express language in their arbitration clauses or agreements either:
  • Denying the arbitrator authority to apply collateral estoppel or other preclusion doctrines entirely.
  • Stating that the arbitrator only may apply collateral estoppel or other preclusion doctrines:
    • in specified circumstances; and
    • using specified types of collateral matters.
The decision happens to concern the interpretation of an arbitration provision in a CBA, but the Second Circuit does not limit its holding to labor arbitration and the potential preclusive effect of agency decisions concerning employment.