Terex Corporation v. Local Lodge No. 790

UNITED STATES COURT OF APPEALS
Filed 10/10/96
TENTH CIRCUIT

TEREX CORPORATION,

Plaintiff-Appellant,
v.
No. 95-5190
LOCAL LODGE 790 INTERNATIONAL (D.C. No. 95-C-412-BU)
ASSOCIATION OF MACHINISTS AND (Northern District of Oklahoma)
AEROSPACE WORKERS, AFL-CIO,

Defendant-Appellee.

ORDER AND JUDGMENT*

Before SEYMOUR, Chief Judge; and PORFILIO and EBEL, Circuit Judges.

Terex Corporation appeals from a final order and judgment issued by the United

States District Court for the Northern District of Oklahoma, granting Local Lodge 790's

Motion for Judgment on the Pleadings pursuant to Rule 12(c) of the Federal Rules of

Civil Procedure. The district court entered final judgment for Local Lodge 790 (the

*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
Union), rejecting Terex’s attempt to vacate an arbitration award rendered under the

parties’ Collective Bargaining Agreement (the Agreement). In partial reliance upon

“practices of the shop,” the district court found the arbitration award drew its essence

from the Agreement and the Union was entitled to its enforcement. Seeing no factual

predicate in the pleadings for the conclusion that the attendance policy was subject to

bargaining as part of the practices of the shop, we reverse.

Unit Rig, a division of Terex, manufactures large, off-highway mining vehicles in

its Tulsa, Oklahoma plant. Local Lodge 790 is a labor organization representing

approximately 190 of Terex’s employees. Terex and the Union entered into a Collective

Bargaining Agreement that was effective until April 30, 1996. The Agreement defined

grievance and arbitration procedures for the resolution of disputes and called for unsolved

grievances to be submitted to an arbitrator for resolution. The Agreement limited the

authority of the arbitrator to “the application and interpretation of the existing Agreement

or any supplements thereto or amendments thereof.”

On February 9, 1994, Terex implemented a revised “No Fault Attendance Policy”

in an effort to correct a perceived problem with employee attendance. On February 14,

1994, the Union filed a grievance with Unit Rig protesting Terex’s unilateral

implementation of the policy. Attempts to resolve the grievance failed, and the Union

invoked the arbitration procedure.

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 W. Edwin Youngblood, the arbitrator selected by the parties, conducted a hearing

and reviewed the evidence and briefs submitted by both sides. On February 8, 1995, Mr.

Youngblood found Terex had violated the Agreement with its unilateral change in the

attendance policy and called for Terex to reinstate the former attendance policy.

Terex brought the present action, under the Labor Management Relations Act and

the Federal Arbitration Act, seeking to set aside the arbitration award. The Union filed a

counterclaim, seeking enforcement of the award. After briefs were submitted, the Union

filed a motion for judgment on the pleadings in accordance with Fed. R. Civ. P. 12(c). In

granting the Union’s motion, the district court stated:

It appears that Terex simply seeks to have the Court re-litigate the
grievance, which it has no authority to do.

Having reviewed the arbitration award and the Agreement between
the parties, the Court finds that the arbitration award draws its essence from
the Agreement. It is clear from the arbitration award that the Arbitrator
explicitly referred to and relied upon the Agreement in reaching his
decision. Moreover, the Court rejects Terex’s argument that the arbitration
award did not draw its essence from the Agreement because it was
inconsistent with the Arbitrator’s own findings. Although the Arbitrator
recognized that Terex had a right under the management rights clause of the
Agreement to establish rules governing the workplace and that Terex had a
practice of doing so, including establishing an attendance policy, the
Arbitrator found that a major change in working conditions, such as
the new attendance policy required, was a bargainable subject and any
unilateral change of a bargainable subject violated the Agreement.

(emphasis added). Terex now solicits review of the district court order.

Terex argues the award does not draw its essence from the Agreement and must be

vacated because it is inconsistent with the arbitrator’s own findings. The company claims

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the arbitrator expressly found that the Management Rights clause of the Agreement

authorized Terex to implement work rules, and even used the company’s attendance

policy as an example of the kind of rules within its control. Specifically, the arbitrator

stated: “The Management Rights clause in the Collective Bargaining Agreement

provides the authority to make rules governing the workplace, and that has been the

practice. As an example, is its Attendance Policy.” Terex argues that despite this finding,

the arbitrator contradicted himself by concluding, “to change that policy during the term

of the Collective Bargaining Agreement without the Union’s agreement, or unilaterally, is

prohibited because it violates either the Collective Bargaining Agreement or practice.”

Terex maintains that once the arbitrator found the Management Rights clause of

the Agreement authorized Terex to implement an attendance policy, he was compelled to

render an award for the company. It argues the arbitrator ignored his own finding and

exceeded his authority by essentially rewriting the Agreement to conform with “his own

brand of industrial justice.” Terex urges the award does not draw its essence from the

Agreement because the arbitrator admitted the Agreement’s Management Rights clause

gives Terex the power to implement work rules pertaining to employee attendance.

Therefore, the award should be vacated.

In response, the Union argues the award is expressly based on the arbitrator’s

application of the plain language of the Agreement to Terex’s unilateral implementation

of a heavily altered attendance policy. Terex notes that throughout the opinion, the

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arbitrator refers to and relies upon the terms and provisions of the Agreement. The Union

argues the award clearly draws its essence from the Agreement and, therefore, should be

affirmed.

Additionally, the Union attacks Terex’s reliance on the arbitrator’s reference to the

Management Rights clause as being inconsistent with other language in the award. The

Union argues Terex hinges its entire case on two sentences taken out of context. When

viewed in relation to the entire opinion, the Union maintains the reference was simply one

step in the arbitrator’s chain of reasoning—a step that properly took into account industry

norms and the parties’ past practices. The reference does not contradict or obscure his

finding that a substantial unilateral change in the policy violates the Agreement.

Finally, the Union claims that even if the reference makes the award somewhat

ambiguous, the Supreme Court has ruled that ambiguity is no basis for vacating an

arbitration award. W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 764 (1983)

(stating an award must be upheld as long as it draws its essence from the collective

bargaining agreement, even when the basis for the arbitrator’s decision may be

ambiguous). The Union relies on the strong federal policy favoring the enforcement of

arbitration awards, and urges this court to affirm the district court’s decision because the

award clearly draws its essence from the Agreement.

Judgment granted on the pleadings under Rule 12(c) is subject to de novo review.

Estate of Washington v. United States Secretary of Health & Human Servs., 53 F.3d.

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1173, 1174 (10th Cir. 1995). In reviewing a judgment on the pleadings, we must view the

facts presented in the complaint as true and construe them in the light most favorable to

the non-moving party. Mock v. T.G.& Y. Stores Co., 971 F.2d 522, 529 (10th Cir. 1992).

It is well settled that “[j]udicial review of an arbitral award . . . ‘is among the

narrowest known to the law.’” Champion Boxed Beef Co. v. Local No.7, 24 F.3d 86, 87

(10th Cir. 1994) (quoting Litvak Packing Co. v. United Food & Commercial Workers,

Local Union No.7, 886 F.2d 275, 276 (10th Cir. 1989). In Champion Boxed Beef, we

stated:

The arbitrator’s factual findings are beyond review, and, so long as the
arbitrator does not ignore the plain language of the collective bargaining
agreement, so is his interpretation of the contract. As long as the
arbitrator’s award “draws its essence from the collective bargaining
agreement” it must be upheld.

Id. at 87. (citations omitted).

This court has stressed its limited power to review arbitration awards by stating:

We will not interfere with an arbitrator’s decision “unless it can be said
with positive assurance that the contract is not susceptible to the arbitrator’s
interpretation.” Sterling, Colo. Beef Co. v. United Food & Commercial
Workers Local Union No. 7, 767 F.2d 718, 720 (10th Cir. 1985). “[A]s
long as the arbitrator is 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.” United
Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 38 (1987).

United Food & Commercial Workers Local Union No. 7R v. Safeway Stores, Inc., 889

F.2d 940, 947 (10th Cir. 1989).

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 This Mount Everest of standards reflects the strong federal policy favoring

arbitration agreements. The concept that the award must “draw its essence from the

agreement” was established in United Steelworkers of America v. Enterprise Wheel &

Car Corp., 363 U.S. 593 (1960). In Enterprise Wheel, the Court also stated, “[a] mere

ambiguity in the opinion accompanying an award, which permits the inference that the

arbitrator may have exceeded his authority, is not a reason for refusing to enforce the

award.” Id. at 598.

Applying this narrow standard to the present case, we could conclude the district

court acted properly in finding the Union was entitled to judgment on the pleadings

against Terex, but for one problem. The pleadings filed in this action rely solely upon the

language of the contract. Other than those we have described, there are no facts alleged

relating to the past practices between the parties regarding the bargainability of major

changes in attendance policy, and nothing contained in the record provides that

information. Indeed, nowhere do we find the facts upon which the arbitrator relied to

reach his conclusion the change in attendance policy was bargainable because it

established practice between the parties. While such practices can surely be considered

in determining whether a matter arises out of the collective bargaining agreement, United

Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 581-82

(1960), “the labor arbitrator’s source of law is not confined to the express provisions of

the contract, as the industrial common law--the practices of the industry and the shop--is

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equally a part of the collective bargaining agreement although not expressed in it.” It is

also apparent the arbitrator in this case went beyond the language of the agreement itself

to support his conclusion. He stated:

I believe and find that a major change in working conditions, such as the
new policy requires, is a bargainable subject and to change the policy
unilaterally while the Collective Bargaining Agreement is in effect violates
the Collective Bargaining Agreement. Under some circumstances,
unilateral action may be permitted but the fact that either a Collective
Bargaining Agreement or a practice was in effect covering the subject
matter changes that. As Elkouri and Elkouri state in How Arbitration
Works, 4th Edition, page 475, “Where an arbitrator finds that
management is contractually bound as to a matter, either by the parties’
written Collective Bargaining Agreement, or by virtue of a binding past
practice as part of their “whole” agreement, management generally will
remain bound at least until the end of the term of the collective
agreement.” I find this to be the situation in this case. The Management
Rights clause in the collective Bargaining Agreement provides the
authority to make rules governing the work place, and that has been the
practice. As an example, is its Attendance Policy. But to change that
policy during the term of the Collective Bargaining Agreement without
the Union’s agreement, or unilaterally, is prohibited because it violates
either the Collective Bargaining Agreement or practice. Accordingly, I
find the Collective Bargaining Agreement has been violated thereby. The
grievance must, therefore, be sustained and the parties put back in the
situation existing prior to the unilateral change made by the Company in
1994.

(emphasis added).

In reaching his conclusion, the arbitrator found that Terex may have had the

authority to establish an attendance policy that would remain in effect throughout the

term of the Agreement, but because of past practices between the parties, that authority

could not be exercised unilaterally without violating the Agreement. The theory is sound,

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and it may be supported by facts, but none have been asserted in the pleadings upon

which the judgment was based. We must therefore conclude the judgment was premature

and REVERSE AND REMAND for further proceedings.

ENTERED FOR THE COURT

Judge John C. Porfilio
United States Circuit Judge

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