Case: 13-60382 Document: 00512534158 Page: 1 Date Filed: 02/17/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 13-60382
United States Court of Appeals
Fifth Circuit
FILED
February 17, 2014
DANNY L. GRIMES,
Lyle W. Cayce
Clerk
Plaintiff–Appellant,
versus
BNSF RAILWAY COMPANY, a Delaware Corporation,
Defendant–Appellee.
Appeal from the United States District Court
for the Northern District of Mississippi
Before SMITH, DeMOSS, and HIGGINSON, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Danny Grimes appeals a judgment giving collateral-estoppel effect, in
his Federal Railway Safety Act (“FRSA”) suit, to a finding of fact made by a
Public Law Board (“PLB”) in the course of Grimes’s pursuit of his rights under
a collective bargaining agreement (“CBA”) with BNSF Railway Company
(“BNSF”). Concluding that the application of collateral estoppel was error, we
vacate and remand. We also conclude that the election-of-remedies provision
in the FRSA does not bar Grimes’s suit.
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I.
Grimes, a BNSF employee, was injured in an accident while working
with two co-employees on a nonmoving train. The accident occurred because
one of the other employees operated one of the cars even though he was not
certified to do so. Grimes initially reported that he could not recall what had
happened, and only after an investigator questioned him the next day did he
acknowledge that the other employee was operating the train. After the inves-
tigation and a hearing by BNSF, the company terminated all three employees
after concluding that they had covered up for each other, thereby violating a
company rule that “[e]mployees must not withhold information, or fail to give
all the facts to those authorized to receive information regarding unusual
events, accidents, personal injuries, or rule violations.”
During BNSF’s investigation and hearing, Grimes was represented by a
union representative and had opportunities to cross-examine and call wit-
nesses and introduce evidence. Pursuant to the CBA and the Railway Labor
Act (“RLA”), which renders the CBA and its arbitration proceedings enforcea-
ble, the case was appealed to a PLB that decided the case after reviewing the
records of the investigation and hearing. The PLB found that Grimes had been
dishonest but thought the punishment too harsh given his otherwise spotless
record. It therefore ordered him reinstated but without compensation for the
lost time.
Grimes sued alleging a violation of 49 U.S.C. § 20109(a), a part of the
FRSA that provides that a “railroad carrier engaged in interstate or foreign
commerce . . . may not discharge . . . an employee due, in whole or in part, to
the employee’s lawful, good faith act done . . . to notify the railroad carrier . . . of
a work-related personal injury . . . .” BNSF counters that it fired Grimes for
dishonesty, a direct violation of company rules. Although the parties disagree
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as to which burden-shifting framework applies, both agree that to make out a
prima facie case of unlawful discharge Grimes has to prove that he engaged in
a “protected activity,” which requires that he have reported the incident hon-
estly and in good faith.
The district court gave preclusive effect to the arbitral finding of fact—
made by the PLB—that Grimes had been dishonest. Because that fact issue
determined the rest of the statutory claim, the court granted summary judg-
ment to BNSF. On appeal, Grimes contends that findings in arbitration pro-
ceedings cannot be used collaterally to estop decisions in federal-court proceed-
ings based on independent federal claims and, alternatively, that collateral
estoppel was inappropriate because the arbitral procedures were inadequate.
Agreeing that they were inadequate, we remand for the district court to make
its own determination as to whether there is a genuine issue of material fact
for trial. We also hold, consistently with a new decision of the Seventh Circuit,
that the FRSA’s election-of-remedies provision does not bar this suit.
II.
Grimes urges that a trilogy of cases—McDonald v. City of West Branch,
Mich., 466 U.S. 284 (1984), Barrentine v. Arkansas-Best Freight System, Inc.,
450 U.S. 728 (1981), and Alexander v. Gardner-Denver Co., 415 U.S. 36
(1974)—precludes the application of collateral estoppel here. We agree with
BNSF, however, that those cases counsel against only claim preclusion, not
issue preclusion.
In Gardner-Denver, the district court had decided that a Title VII dis-
crimination claim was precluded because an identical nondiscrimination claim
under the CBA had been submitted to final arbitration. The Supreme Court,
415 U.S. at 60, held that “the federal court should consider the employee’s
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claim de novo” but added, “The arbitral decision may be admitted as evidence
and accorded such weight as the court deems appropriate.” The Court
explained that a trial court has discretion as to how much weight to afford the
arbitral decision and that “[r]elevant factors” include the similarity of claims,
the “degree of procedural fairness in the arbitral forum,” the “adequacy of the
record,” and the “special competence of particular arbitrators.” Id. at 60 n.21.
Moreover, a court may afford great weight to the arbitral decision “espe-
cially . . . where the issue is solely one of fact, specifically addressed by the
parties and decided by the arbitrator on the basis of an adequate record.” Id.
In Barrentine, the plaintiff had submitted a contract-based wage claim
to arbitration pursuant to a CBA, and the arbitrator rejected the claim without
opinion. The district court refused to address the Fair Labor Standards Act
(“FLSA”) claim subsequently filed because it was based on the same underlying
facts. The Supreme Court, 450 U.S. at 745, reversed, but its holding was only
that the claim was not precluded. The Court again distinguished between fac-
tual and legal claims: “Although an arbitrator may be competent to resolve
many preliminary factual questions, such as whether the employee ‘punched
in’ when he said he did, he may lack the competence to decide the ultimate
legal issue whether an employee’s right to a minimum wage or to overtime pay
under the statute has been violated.” Id. at 743. The Court cited its admoni-
tion in Gardner-Denver: “We do not hold that an arbitral decision has no evi-
dentiary bearing on a subsequent FLSA action in court.” Id. at 743 n.22. 1
Finally, in McDonald, the Supreme Court determined that arbitration
under a CBA could not preclude a 42 U.S.C. § 1983 suit in federal court even if
1 It may be that today the Supreme Court would not say that an arbitrator is not as
competent as a judge to decide ultimate legal issues. It is sufficient for our purposes, how-
ever, to note that the Court at least recognized an arbitrator’s competence to find facts.
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the underlying facts were the same. Although the Court held that neither “res
judicata” nor “collateral estoppel” could apply, 466 U.S. at 292, it relied on
Gardner-Denver and Barrentine and again noted that the arbitral proceedings
can have evidentiary weight, id. at 292 n.13. In short, there is no reason to
believe that McDonald was intended to be a departure from the prior two
decisions. 2
It follows that these Supreme Court decisions do not prohibit a court
from applying collateral estoppel. BNSF, for its part, also posits the other
extreme—that collateral estoppel must apply because the RLA, and specifically
45 U.S.C. § 153, First (m) and (q), makes the findings of the arbitral panel
“conclusive on the parties” and its award “final and binding.” We disagree:
The RLA makes the arbitral findings conclusive on the parties in the dispute
governed by the RLA. Grimes does not disagree that the arbitral findings of
fact are conclusive on his CBA claim that he pursued with the PLB. Those
findings are not, however, necessarily conclusive in a suit brought under
another statute.
III.
The answer lies somewhere in the middle. As a general matter, arbitral
proceedings can have preclusive effect even in litigation involving federal stat-
utory and constitutional rights, and the decision to apply it is within the dis-
cretion of the district court. As acknowledged in Universal American Barge
Corp. v. J-Chem, Inc., 946 F.2d 1131, 1136 (5th Cir. 1991), the Court held in
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 223 (1985), that collateral
2 Additionally, insofar as all of these cases were based on a distrust of the arbitration
process, the Court has disavowed and limited them. See 14 Penn Plaza LLC v. Pyett, 556
U.S. 247, 260–72 (2009).
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estoppel may apply in federal-court litigation to facts found in arbitral
proceedings as long as the court considers the “federal interests warranting
protection.” In Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352,
1358–62 (11th Cir. 1985), the court discussed Byrd and concluded that the
determination of fact issues in the arbitration of state-law claims should have
preclusive effect in a subsequent federal RICO suit where those fact issues
determined the existence of predicate acts for purposes of RICO.
A district court has “broad discretion” to decide whether to apply the doc-
trine, “at least when the arbitral pleadings state issues clearly, and the arbi-
trators set out and explain their findings in a detailed written opinion.” Uni-
versal Am. Barge, 946 F.2d at 1137. Additionally, “[a] district court in exercise-
ing its discretion must carefully consider whether procedural differences
between arbitration and the district court proceeding might prejudice the party
challenging the use of offensive collateral estoppel.” Id. If the procedural
differences “might be likely to cause a different result,” then collateral estoppel
is inappropriate. Id. at 1138. The arbitrators also ought to be “experienced
and disinterested individuals.” Cf. id. at 1137.
The decision in Universal American Barge was based largely on Green-
blatt. See Universal Am. Barge, 946 F.2d at 1137. Greenblatt provides us with
similar guidance and establishes at least two prongs of the inquiry: Collateral
estoppel is not improper regarding underlying acts “particularly if such find-
ings are within the panel’s authority and expertise” and where the arbitration
procedures “adequately protected the rights of the parties.” Greenblatt, 763
F.2d at 1361. As to the second prong, “[w]hen an arbitration proceeding affords
basic elements of adjudicatory procedure, such as an opportunity for presenta-
tion of evidence, the determination of issues in an arbitration proceeding
should generally be treated as conclusive in subsequent proceedings . . . .” Id.
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at 1360. In the arbitration in Greenblatt specifically, both parties had been
represented by counsel, made opening and closing arguments, and were per-
mitted to examine and cross-examine witnesses and to present relevant evi-
dence. Id. at 1361. Therefore, and because the arbitrators were also experts
in the matter, the court gave preclusive effect to the arbitral findings of fact.
Here, on the other hand, the investigation and hearings were conducted
by the railroad. The actual arbitrators—the PLB—only reviewed the record
from that investigation. Collateral estoppel was inappropriate because the
procedures of the PLB did not afford Grimes the basic procedural protections
of a judicial forum. The fact that a subsequent panel of neutral arbitrators
reviewed the record of the internal investigation and hearing and concluded
that the railroad had reached the correct result is not enough to insulate the
underlying, employer-conducted proceedings from scrutiny.
Two Federal Employers’ Liability Act (“FELA”) cases are particularly
helpful. Those courts held in essentially identical circumstances that where
the arbitral panel relies on a hearing conducted by the defendant, the arbitral
findings of fact do not have preclusive effect. In Graves v. Burlington Northern
& Santa Fe Railway Co., 77 F. Supp. 2d 1215 (E.D. Okla. 1999), a terminated
employee sued under the FELA after the PLB had upheld the railroad’s finding
that the employee had filed a false injury report. Id. at 1217. As here, the PLB
had relied on the investigation conducted by the railroad. Also as here, the
employee was represented at the investigation by a union representative and
had the opportunity to cross-examine and call witnesses and to present other
evidence. Id.
The court held, in an opinion that could be applied almost word-for-word
here, the following:
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First, it should be noted, the hearing was conducted by Mr.
Mike Black, a terminal manager for Burlington Northern, the
defendant, instead of a judge. Second, the plaintiff was repre-
sented by [a union official]. The notice of investigation seems to
indicate plaintiff was only entitled to be represented by a Union
official, not an attorney, at this proceeding. Third, the decision to
terminate plaintiff and that the plaintiff’s report of injury was fal-
sified was made by Mr. Black and not an impartial fact finder such
as a judge or jury. Fourth, it did not appear the rules of evidence
were utilized at the hearing. Finally, the [PLB’s] affirmance of the
board’s findings was based only upon materials exchanged
between the parties and from the transcript of the investigation.
While the plaintiff was allowed to call and cross-examine wit-
nesses and submit evidence for consideration, this court finds the
nature of the proceedings as well as the procedures used in the fact
finding process were insufficient to protect the plaintiff’s statutory
and constitutional rights. The plaintiff did not have the benefit of
an attorney to represent him. Further, the hearing was conducted
and the decision was made by an employee of the defendant.
Finally, the entity that reviewed this decision was limited to the
materials exchanged between the parties and the evidence sub-
mitted at the hearing. Defendant had the burden of proving res
judicata, estoppel or collateral estoppel barred this FELA action.
Defendant has failed to meet this burden. This court finds plain-
tiff’s claim for personal injuries due to the negligence of the defen-
dant are not barred by the previous disciplinary hearing conducted
pursuant to the [RLA] and the [CBA].
Id. at 1218–19 (internal citations omitted). Here, similarly, (1) the hearing
was conducted by the railroad; (2) the plaintiff was represented by the union
rather than an attorney; (3) the termination decision was made by a railroad
employee, not by “an impartial fact finder such as a judge or jury”; (4) the rules
of evidence do not appear to have been controlling; (5) and most crucially, the
PLB’s affirmance was based solely on the record.
The court in Kulavic v. Chicago & Illinois Midland Railway Co., 1 F.3d
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507 (7th Cir. 1993), came to the same conclusion in another FELA case. Kula-
vic relies heavily on the Gardner-Denver trilogy that the Supreme Court has
since limited, but the decision is about collateral estoppel rather than claim
preclusion and is thus on point. In Kulavic, the PLB had found that the rail-
road was justified in terminating Kulavic for malingering, where he did not
have proper medical documentation of his illness and injury. The railroad
wanted some of the PLB’s factual determinations to have preclusive effect in
the FELA negligence case before the district court. Id. at 509–11.
The court of appeals reversed, rejecting the application of collateral
estoppel. It noted that the investigation was an “on-premises” investigation
conducted by the railroad; that the termination was decided by the railroad;
that a union member, rather than an attorney, had represented Kulavic; that
no discovery was available before the hearing; and “most importantly” that the
railroad “was both judge and jury.” Id. at 515–16. Additionally, the court noted
that the PLB was limited to reviewing only the evidence from the investigatory
hearing. Id. at 516–17 & n.4. For all of these reasons, the railroad had not
carried its burden of demonstrating that the procedures “were sufficiently
protective” of the plaintiff’s “federal statutory right to recover under the
FELA.” Id. at 517.
The only case cited by BNSF that might support application of collateral
estoppel is Gonzalez v. Southern Pacific Transportation Co., 773 F.2d 637 (5th
Cir. 1985), where this court gave preclusive effect to an arbitrator’s factual
finding that Gonzalez had filed a false report. The court relied on the repeated
statement in the Gardner-Denver trilogy that a court could give factual find-
ings evidentiary weight. Id. at 644. Ultimately, however, Gonzalez does not
control because in that case the court allowed collateral estoppel partly for the
reason that “[n]either party contend[ed] that the arbitration was procedurally
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unfair . . . .” Id. at 645. Here, to the contrary, that is a central issue of dispute.
Indeed, Gonzales gives us no indication of what arbitral procedures were used.
We agree with the reasoning in Graves and Kulavich. We add that
although it seems likely that Grimes was able to adduce all the evidence he
could wish to present, to call all the witnesses that he wished to call, and to
cross-examine all the opposing witnesses, our decision rests primarily on the
lack of neutral arbitrators. That is, because it was the railroad that conducted
the investigation and hearing and terminated Grimes, and because the PLB
only reviewed a closed record, the procedures were not adequate for collateral
estoppel to apply.
There are good reasons to require such neutral arbitrators: The
employer may have already developed opinions about the employee before the
ultimate hearing and may have other motives (irrespective of whether they
existed here) to dismiss a particular employee. Thus, the employer’s decision-
maker might assess the credibility and weight of the various evidence differ-
ently than would a neutral arbitrator.
Although Graves and Kulavich depended on other factors as well—
including the lack of legal counsel and the absence of evidence rules—our
caselaw does not necessarily require the presence of legal counsel or the use of
the rules of evidence. Nor does it require that Grimes have had an opportunity
to depose witnesses before cross-examining them at the official hearing. The
decision in Greenblatt, 763 F.2d at 1360, requires only that “an arbitration pro-
ceeding afford[] basic elements of adjudicatory procedure.” We express no opin-
ion on whether the procedures used by BNSF, if they had been used by the
PLB itself, would have been sufficient for collateral estoppel to apply. Remand
is appropriate so that the district court can decide for itself whether there is a
genuine issue of material fact for trial.
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IV.
BNSF claims that this suit is precluded by the FRSA’s election-of-
remedies provision, 49 U.S.C. § 20109(f), which states that a railroad employee
“may not seek protection under both this section [of the FRSA] and another
provision of law for the same allegedly unlawful act of the railroad carrier.”
We agree with Reed v. Norfolk Southern Railway Co., No. 13-2307, 2014 WL
117479 (7th Cir. Jan 14, 2014), and conclude that the election-of-remedies pro-
vision does not bar the present suit.
BNSF argues that Grimes initially sought protection under the RLA
arbitration provisions by following the RLA-mandated grievance procedure
and arbitration established in the CBA. Grimes contends that he sought pro-
tection under the CBA for his contractual claims, and even though this contract
is enforceable by the RLA, the RLA is not itself the source of law under which
he seeks protection. The Seventh Circuit held in its FRSA case,
[A]lthough the Railway Labor Act is indeed a federal statute—and
thus, we may assume, another provision of law—it is strained to
say that [plaintiff] sought protection under it by appealing his
grievance to the special adjustment board. Rather, [he] sought
protection under his collective bargaining agreement. The plain
meaning of the statute therefore tells us that [he] is not precluded
from obtaining relief under FRSA simply because he appealed his
grievance to Public Law Board 6394.
Id. at *4.
We agree and pause only to illustrate the point: Under BNSF’s reading
we can imagine a contract that does not give any protection for the activity
undertaken here, in which case the election-of-remedies provision would not
bar the suit. According to BNSF, Grimes’s FRSA suit is barred because
Grimes’s contract does give protection for the activity. But if the election-of-
remedies bar rises and falls with the provisions of the CBA, that conclusion
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necessarily acknowledges that Grimes’s claim pursued in front of the PLB also
rises and falls with those same provisions. Thus, Grimes is seeking protection
under the agreement and not under the RLA, which “is entirely agnostic as to
the content of any collective bargaining agreement.” Id. at *3.
For the foregoing reasons, we VACATE and REMAND for the district
court to make its own determination as to whether there is a genuine issue of
material fact for trial.
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