United States Court of Appeals
For the First Circuit
Nos. 06-1169, 06-1170
LOCAL 2322, INTERNATIONAL BROTHERHOOD
OF ELECTRICAL WORKERS,
Plaintiff, Appellant/Cross-Appellee,
v.
VERIZON NEW ENGLAND, INC.,
Defendant, Appellee/Cross-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Boudin, Chief Judge,
Lynch, Circuit Judge,
and Schwarzer,* Senior District Judge.
Alfred Gordon with whom Harold L. Lichten and Pyle, Rome,
Lichten, Ehrenberg & Liss-Riordan, P.C. were on brief for
plaintiff, appellant/cross-appellee.
James W. Bucking with whom Alicia Alonso Matos and Foley Hoag
LLP were on brief for defendant, appellee/cross-appellant.
September 28, 2006
*
Of the Northern District of California, sitting by
designation.
BOUDIN, Chief Judge. Thomas Ouellette, a Verizon
employee, took the day off on December 2, 2002, to attend the
funeral of his wife's grandfather and was disciplined. This in
turn led to arbitration and to the present appeal, which presents
a procedural issue of some importance. The events following
Ouellette's December 2 day away from work can be briefly
summarized.
Because Verizon considered the absence to be
unauthorized, it suspended Ouellette for three days. Pursuant to
the collective bargaining agreement between Verizon and Local 2322
of the International Brotherhood of Electrical Workers ("the
union"), the union filed a grievance. Verizon reduced the
discipline to a one-day suspension, designating December 3 as an
unpaid day of suspension. Still unsatisfied, the union demanded
arbitration.
The parties submitted to the arbitrator the question,
"Was the one-day suspension given to Thomas Ouellette for just
cause? If not, what shall be the remedy?" On June 4, 2004, the
arbitrator issued a decision ("the June award") which attributed
some blame both to Ouellette and his supervisor and concluded:
The one day suspension given to Thomas
Ouellette was not for just cause. The day
shall be converted to leave without pay and
the discipline removed from his file.
Verizon then altered its records for December 3, 2002, from
"suspension" to "unpaid absence" and deleted any reference to
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discipline. Verizon left unchanged the "unauthorized absence"
marked on Ouellette's attendance record for December 2.
The union interpreted the June award as ordering Verizon
both to pay Ouellette for December 3 and to strike the
"unauthorized" reference from Ouellette's attendance record for
December 2 (although the union did not claim that he should be paid
for December 2). When Verizon disagreed, the union on June 24,
2004, wrote to the arbitrator with a copy to Verizon's counsel,
seeking clarification of the award. Its letter said:
It seems absolutely clear that the "day" which
you hold should be "converted to leave without
pay" is the day that Mr. Ouellette attended
the funeral. The second additional day for
which he was suspended and not paid, is
obviously covered by that part of your award
that says "the one day suspension . . . was
not for just cause." As such, Mr. Ouellette
is clearly entitled to pay for that day.
Verizon responded by saying that the award was not
ambiguous; that "[t]he day" that the arbitrator had directed in the
second sentence of the award be converted to "leave without pay"
was self-evidently the same day ("the one day suspension") referred
to in the first sentence; and that the arbitrator had no power to
alter his earlier award. In a conference call with the parties on
August 10, 2004, the arbitrator said that he had intended to award
Ouellette back pay for December 3.
On August 16, 2004, the arbitrator issued a letter
purporting to clarify his award ("the August letter"):
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The one day suspension give[n] to Thomas
Ouellette was not for just cause. He shall
be made whole for all lost wages and benefits
arising from this suspension and the
discipline shall be removed from his file.
The day of the funeral shall be treated as
[a] day of leave without pay.
Verizon neither complied with this "make whole" directive
nor did it seek review in court. In November 2004, the union sued
Verizon in federal district court under section 301 of the Labor
Management Relations Act, 29 U.S.C. § 185 (2000). That statute
provides federal courts with authority to enforce collective
bargaining agreements and, as construed by the Supreme Court in
Textile Workers v. Lincoln Mills, 353 U.S. 448, 451 (1957), invokes
federal substantive law to govern those agreements.
In its motion for summary judgment, the union argued for
enforcement of the back pay directive. In its cross motion Verizon
answered that the August letter was not a proper award but an
illegitimate alteration of the original June award. The union
replied that Verizon forfeited its "alteration" defense because it
had not brought suit to set aside either the June award or the
August letter.
The district court granted summary judgment in favor of
the union, requiring that back pay be awarded to Ouellette for
December 3, 2002. It did not concern itself with the union's
forfeiture argument, because it found that in any event the August
letter was merely a permissible clarification of the original
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award. However, the court refused the union's request for
attorneys' fees, saying that Verizon's position was not frivolous
but merely unpersuasive.
Both sides have appealed. Verizon claims that the August
letter was an alteration of the award and beyond the arbitrator's
authority. The union says that Verizon forfeited this defense and
that in any case the August letter is a clarification that the
arbitrator could permissibly make. Given the forfeiture, the union
says that Verizon should pay the union's attorneys' fees for the
district-court enforcement proceeding.
We begin with the forfeiture issue. This is not an
objection, like Article III or subject matter jurisdiction, that
has to be addressed at the threshold; the district court was free
to bypass the issue and decide the case on the merits. But for the
sake of future litigants, the ground rules ought to be clarified as
far as possible, so that in similar circumstances the parties to
arbitrations know who is to appeal.
To understand the forfeiture issue, one must take several
steps back. Where a collective bargaining agreement includes an
arbitration clause, the arbitration award is treated as a
contractual obligation that can be enforced through a section 301
suit. Lincoln Mills, 353 U.S. at 451. But this leaves unanswered
a host of questions concerning the powers of arbitrators and the
mechanics of judicial review of labor arbitration awards.
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To resolve such issues, federal courts could conceivably
borrow from the Federal Arbitration Act ("FAA"), which does not
apply of its own force, 9 U.S.C. § 1 (2000); or they could create
a common law of labor arbitration; or they could borrow from
analogous state law. The practice has developed in labor
arbitration cases of borrowing the forum state's law to fix the
limitations period for seeking judicial review of an arbitration
decision. Posadas de Puerto Rico Assoc. v. Asociacion de Empleados
de Casino de Puerto Rico, 873 F.2d 479, 483 (1st Cir. 1989).
Consonantly, federal courts have adopted the general rule
that "[a] party who fails to initiate an action to vacate or modify
an award" within the applicable state time limit--thirty days in
Massachusetts, Mass. Gen. Laws ch. 150C § 11(b) (2004)--"is barred
from asserting those claims as defenses to a later action to
confirm." Derwin v. General Dynamics Corp., 719 F.2d 484, 489 (1st
Cir. 1983). This rule serves "to cut off stale defenses[, ] to
encourage parties to forego merely formal judicial proceedings
aimed at obtaining confirmatory orders," and to advance "the
federal policy of according finality to labor awards." Id. at 490.
Such a rule is easily enough administered where there is
only one pronouncement by the arbitrator and where it is clear from
the outset who has won and who has lost. But here Verizon could
hardly be expected to seek review of the June award within 30 days
of its issuance; the award did not mention back pay, and the first
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clear statement that the arbitrator wanted Verizon to provide back
pay came only in August. However, by or shortly after August 16,
2004, Verizon did have such notice in definitive form.
Yet Verizon then failed to bring suit to challenge either
the allegedly clarified June award or the explicit August letter.
Verizon says that it had no obligation to sue because the original
award was in Verizon's favor, and that the August letter was
ineffective to alter the award under the doctrine of functus
officio. It concludes that it is free now to raise this objection
as a defense in the union's suit to enforce the award.
In its classic form, the common law doctrine of functus
officio bars arbitrators from reconsidering or revising final
awards. Glass Molders, Pottery, Plastics & Allied Workers Int'l
Union v. Excelsior Foundry Co., 56 F.3d 844, 845 (7th Cir. 1995).
This restriction was traditionally cast in jurisdictional terms.
As commentators have explained, "[A]n arbitrator's jurisdiction
ends when a final award is issued." Elkouri & Elkouri, How
Arbitration Works 325 (6th ed. 2003). Arbitrators are thus said by
some (our own case law is not so clear) to be without power to
"revisit[] the merits of an award once it has issued." Office &
Prof'l Employees Int'l Union, Local No. 471 v. Brownsville Gen.
Hosp., 186 F.3d 326, 331 (3d Cir. 1999).
The current vitality of the doctrine is disputed by the
union, which says that it is "long dead" in labor arbitration.
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Judge Posner, who sums up much of what is worth saying about the
doctrine, is more circumspect: he says that "[t]oday, riddled with
exceptions, [functus officio] is hanging on by its fingernails and
whether it can even be said to exist in labor arbitration is
uncertain," Excelsior, 56 F.3d at 846. But he did not hold it to
be dead in Excelsior, id. at 848, nor has this court done so. Red
Star Express Lines v. Int'l Bhd. of Teamsters, Local 170, 809 F.2d
103, 106 (1st Cir. 1987).
After an arbitrator issues an award, various questions
can arise as to his subsequent authority: notably, whether he has
power to clarify an award, to alter or undo it, to fill in details
not addressed, or to suspend it while any of these other steps are
being considered; how long these powers continue (if they exist);
and how they interact with the judicial review process. Even if
one abolished the functus officio doctrine, such problems would
remain for the courts to resolve (absent agreement by the parties).
In this circuit, the question whether and when an
arbitrator may reverse or substantially alter his ruling is perhaps
an open one; we have not needed to resolve the issue. See Red
Star, 809 F.2d at 106; Courier-Citizen Co. v. Boston Electrotypers
Union No. 11, 702 F.2d 273, 279 (1st Cir. 1983). But we have
decided that "a labor arbitrator may . . . interpret or amplify his
award, functus officio notwithstanding." Red Star, 809 F.2d at 106
(quoting Courier-Citizen, 702 F.2d at 278-80).
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It might seem natural to extend the authority to clarify
(per Red Star) to allow as well an arbitrator to alter an award on
rehearing, were it not for the lack of time limits and clear
standards as to the grounds for such action. (By contrast, in
federal courts, Fed. R. Civ. P. 59 and 60 provide a carefully
calibrated set of rules for whether a court may alter or undo a
previously entered judgment). Also, in arbitrations, the
uncertainty as to finality caused by clarification requests would
be magnified if outright alterations of a prior award were also
permitted.
It is enough in this instance that, as permitted by Red
Star, the union promptly sought clarification of the June award.
In turn, the August letter was unequivocally adverse to Verizon on
the back pay issue. In our view, Verizon was then obligated to
seek judicial review of the August letter if it wanted to argue
that the August letter was an impermissible change in the original
award rather than a reasonable clarification. There may be limits
to this obligation--suppose Verizon was never a party to an
arbitration agreement but finds an award entered against it--but
that is not this case.
Verizon protests that if (as it believes) the June award
was altered in August rather than merely clarified, then--on
Verizon's premise that the arbitrator had no power to alter an
award--the original June award remained effective (favoring Verizon
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on the back pay issue); the August modification was a "nullity" as
beyond the arbitrator's power; and Verizon had no obligation to do
anything to preserve its right to defend against enforcement on
that ground.
The pivot point of this argument is the claim of nullity
--the implied connotation being that nothing happened of legal
significance and that Verizon therefore needed to do nothing to
preserve its position. Lawyers like to argue from abstractions
like "nullity" or "jurisdiction," but they are rarely self-
executing,1 and it is perilous to ignore pertinent policy and the
actual consequences of one course as compared with another.
Here, we hold that--even assuming arguendo (as we do)
that the arbitrator could only "clarify" and not "alter" his
original award--Verizon was compelled to seek review once it became
clear that the clarification was adverse to Verizon. There may be
exceptions--for example, if Verizon showed that court review was no
longer available or perhaps if it had never been a party to the
arbitration--but such issues can be considered if and when they
arise. Our reasons for our holding are as follows.
1
"But to say that a man is a fiduciary only begins analysis;
it gives direction to further inquiry. To whom is he a fiduciary?
What obligations does he owe as a fiduciary? In what respect has
he failed to discharge these obligations? And what are the
consequences of his deviation from duty?" SEC v. Chenery Corp.,
318 U.S. 80, 85-86 (1943)(Frankfurter, J.).
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In arbitration, and not just labor arbitration, it is
common to require the losing party to seek review or be foreclosed
from objecting to an award.2 A major reason is that policy favors
swiftness of resolution--one of the main attractions of
arbitration, see Posadas de Puerto Rico, 873 F.2d at 483--and
forcing the objecting party to sue within the time allowed serves
this interest. The objecting party would otherwise have an
incentive to sit on its hands until the favored party brings a
confirmation action, delaying for as long as possible the
implementation of the award.
Several other circuits are generally in accord with the
approach we take, although they address a variety of different
kinds of objections. See, e.g., Local 802, Assoc. Musicians of
Greater New York v. Parker Meridien Hotel, 145 F.3d 85, 88-89 (2d
Cir. 1998) (objection to arbitrator's jurisdiction); Teamsters
Local No. 579 v. B & M Transit, Inc., 882 F.2d 274, 276-77 (7th
Cir. 1989) (same); Prof'l Adm'rs Ltd. v. Kopper-Glo Fuel, Inc., 819
F.2d 639, 642 (6th Cir. 1987) (claims should not have been
submitted to arbitration); Int'l Bhd. of Elec. Workers, Local Union
2
The FAA, for example, provides that the court must grant
confirmation of an arbitral award unless the award is vacated,
modified or corrected on motion of one of the parties. 9 U.S.C.
§§ 9-10. See also Mass. Gen. Laws ch. 150C § 10 ("Upon application
of a party, the superior court shall confirm an award, unless
within the time limits, hereinafter imposed grounds are urged for
vacating, modifying or correcting the award . . .").
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No. 969 v. Babcock & Wilcox, 826 F.2d 962, 965-66 (10th Cir. 1987)
(grievance committee lacked jurisdiction to decide dispute).
By contrast, in Domino Group, Inc. v. Charlie Parker
Mem'l Found., 985 F.2d 417 (8th Cir. 1993), the Eighth Circuit did
allow an arbitrator's alleged alteration of an award to be
challenged in a later enforcement action even though the objecting
party had not sought direct review of the decision containing the
alteration. It is not clear from the opinion whether this
opportunity was a holding or simply an unchallenged assumption.
But Domino Group was complicated by a further wrinkle:
the court viewed the arbitrator's action as also precluded by an
earlier remand order from a reviewing court. Domino Group, 985
F.2d at 420. In all events, the court did not explain its reasons
for allowing the "alteration" claim to be raised as a defense; if
it intended to adopt a general rule favoring that course, we read
the decision with respect but decline to follow it.
Admittedly, where an alleged clarification is sought,
whether it is denied or granted, problems may arise as to the time
period within which review must be sought, including questions of
tolling and accrual. Because Verizon never sought review at all,
we need not address them in this case. If (improbably) such rules
operated so as to deprive a party of a reasonable opportunity to
seek review of an adverse clarification, that would be the time to
argue that in such unusual circumstances "alteration" should be
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allowed as a defense to an enforcement action. Cf. Fradella v.
Petricca, 183 F.3d 17, 20-21 & n.4 (1st Cir. 1999).
Although Verizon forfeited its functus officio defense,
a brief word about "the merits"--whether the August letter was a
reasonable clarification rather than an alteration--is warranted.
Specifically, if Verizon's position on the merits were completely
unreasonable, this might itself be an adequate basis for an award
of attorneys' fees against it. Conversely, if the union's position
made no sense whatever, we might consider whether our ruling on the
forfeiture issue should be made prospective only to avoid any
unfairness to Verizon.
In fact, each side has possible arguments on the merits.
The June award said nothing about back pay and might have seemed to
negate back pay for December 3 by referring to that day in the
first sentence ("The one-day suspension . . . was not for just
cause.") and then saying: "The day shall be converted to leave
without pay and the discipline removed from his file." But a
closer reading suggests that while the first sentence clearly
referred to December 3, the second could easily have referred to
December 2–-the day of the funeral.
Specifically, for December 2 it made sense to say in the
second sentence that Ouellette should be unpaid ("leave without
pay") since he did not work but should not be regarded as seriously
at fault ("the discipline removed from his file"). And, while the
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first sentence of the June award did not order that back pay should
be provided for December 3, this could be viewed as a natural and
intended consequence of the ruling that the suspension for that day
was "not for just cause."
On the other hand, the union's demand for arbitration
requested both that the suspension be rescinded and that Ouellette
be made whole; the June award said nothing about the latter and,
given the arbitrator's view that both Ouellette and his supervisor
were somewhat at fault, a compromise remedy could have been
intended: no disciplinary black mark but also no pay for December
3. The line between clarification and alteration can be, and here
was, a reasonably disputable issue.
Indeed, cases will often lie somewhere along a spectrum
between patent alteration and plainly reasonable clarification,
depending not only on the facts but also the precise meanings one
could choose to give to fairly general terms like "alter" and
"clarify." This is a further reason in support of our view that
Verizon had to appeal. The question who ought to appeal should
depend on an easily discernable fact and not on a distinction that
can only be drawn definitively after the merits have been
considered.
One might ask whether our holding that Verizon has
forfeited its alteration claim should be applied only
prospectively, but we think this has the question backwards. To us
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the baseline rule is that in arbitration the dissatisfied party
must ordinarily seek review and is barred from reserving objections
to the arbitrator's decision until enforcement is sought. Derwin,
719 F.2d at 489. In this case, we see no unfairness in applying
this baseline rule to Verizon.
As for attorneys' fees, they were rightly denied by the
district court. Under federal common law, a court may award fees
and costs to the winning party in a section 301 action if the
losing party's position was "frivolous, unreasonable, or without
foundation."3 Ordinarily, the test on review is whether a grant or
denial constitutes a "manifest abuse of discretion." Gay Officers
Action League v. Puerto Rico, 247 F.3d 288, 292 (1st Cir. 2001).
Verizon's main position-–that the clarification was an
alteration--was at least colorable and not frivolous (after all,
the June award did not say that back pay was ordered). Similarly,
whether a "true" alteration by an arbitrator is impermissible may
well be a debatable issue in this circuit. It was not unreasonable
for Verizon to urge that to this extent the functus officio
doctrine is still good law.
The union argues at least for a remand, saying that the
district court erred as a matter of law in failing to consider its
3
Local 285, Serv. Employees Int'l Union AFL-CIO v. Nonotuck
Resource Assoc., Inc., 64 F.3d 735, 737 (1st Cir. 1995) (quoting
Washington Hosp. Ctr. v. Serv. Employees Int'l Union, 746 F.2d
1503, 1510 (D.C. Cir. 1984)).
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main argument for legal fees, namely, that Verizon had forfeited
its defense and so should not have litigated the case at all. But
Verizon had support from at least one circuit (the Domino Group
case) in thinking that it could reserve its alteration claim as a
defense, and it was not frivolous to urge a similar approach in
this court.
Affirmed.
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