13‐2579‐cv
Am. Postal Workers Union, AFL‐CIO v. U.S. Postal Serv.,
In the
United States Court of Appeals
For the Second Circuit
________
AUGUST TERM 2013
No. 13‐2579‐cv
AMERICAN POSTAL WORKERS UNION, AFL‐CIO,
Plaintiff‐Appellee,
v.
UNITED STATES POSTAL SERVICE,
Defendant‐Appellant.
________
Appeal from the United States District Court
for the Southern District of New York.
No. 12 Civ. 7896 (KBF) ― Katherine B. Forrest, Judge.
________
ARGUED: MAY 19, 2014
DECIDED: JUNE 6, 2014
________
2 No. 13‐2579‐cv
Before: WINTER, WALKER and CABRANES, Circuit Judges.
________
Defendant United States Postal Service appeals from the May
16, 2013 judgment of the United States District Court for the
Southern District of New York (Katherine B. Forrest, Judge) granting
the motion of plaintiff American Postal Workers Union (“APWU”)
to vacate an arbitral award on the basis that the arbitrator exceeded
his powers under the relevant agreement by applying the doctrine of
collateral estoppel against APWU.
We hold that the arbitrator’s decision to apply collateral
estoppel―which was based on his interpretation of particular
provisions of the arbitration agreement, and is within an arbitrator’s
authority to decide under a broad arbitration agreement―did not
exceed his powers under the arbitration agreement as would be
required to justify vacating the award.
Accordingly, we REVERSE the May 16, 2013 judgment of the
District Court and REMAND with instructions to confirm the
arbitral award.
________
SARAH T. KANTER (Darryl J. Anderson, on the
brief), O’Donnell, Schwartz & Anderson, P.C.,
Washington, DC, for Plaintiff‐Appellee American
Postal Workers Union, AFL‐CIO,
3 No. 13‐2579‐cv
MICHAEL J. BYARS (Emily E. Daughtry, on the
brief), Assistant United States Attorneys, for Preet
Bharara, United States Attorney for the Southern
District of New York, New York, NY, for
Defendant‐Appellant United States Postal Service.
________
JOSÉ A. CABRANES, Circuit Judge:
Defendant United States Postal Service (“USPS”) appeals from
the May 16, 2013 judgment of the United States District Court for the
Southern District of New York (Katherine B. Forrest, Judge) granting
the motion of plaintiff American Postal Workers Union (“APWU”)
to vacate an arbitral award on the basis that the arbitrator had
exceeded his powers under the relevant agreement by applying the
doctrine of collateral estoppel against APWU.1
We hold that the arbitrator’s decision to apply collateral
estoppel―which was based on his interpretation of particular
provisions of the arbitration agreement, and is within an arbitrator’s
authority to decide under a broad arbitration agreement ―did not
exceed his powers under the arbitration agreement as would be
required to justify vacating the award.
1 The doctrine of collateral estoppel, also known as issue preclusion, provides
that a judgment in a prior action may preclude relitigation of issues in a second action, if
those issues were actually litigated and necessary to the outcome of the first action.
Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5 (1979).
4 No. 13‐2579‐cv
Accordingly, we reverse the May 16, 2013 judgment of the
District Court and remand with instructions to confirm the arbitral
award.
BACKGROUND
Carla LaGreca, a former USPS employee, was initially
employed as a Mail Processing Clerk. Around 1986, she applied for
workers’ compensation benefits for carpal tunnel syndrome
developed in connection with her job. In 2007, the USPS reassigned
LaGreca to a limited‐duty position consistent with her work
restrictions. In September 2008 the USPS concluded that it no longer
had work available consistent with LaGreca’s condition and placed
her on leave‐without‐pay/injured‐on‐duty status. LaGreca then
initiated the grievance and arbitration proceedings giving rise to this
case.
A. The Grievance and Arbitration Procedures
The APWU and the USPS are parties to a Collective
Bargaining Agreement (“CBA”) pursuant to which LaGreca may
challenge USPS employment decisions that allegedly violate the
CBA. The CBA provides for a four‐step grievance process
culminating in arbitration.
5 No. 13‐2579‐cv
As set forth in the Postal Reorganization Act, 39 U.S.C.
§ 1005(c),2 postal employees like LaGreca also receive workers’
compensation protection under the Federal Employees’
Compensation Act, 5 U.S.C. §§ 8101 et. seq. Under this Act, USPS
employees with job‐related disabilities may seek relief for alleged
violations of their rights by appealing to the Merit Systems
Protection Board (“MSPB”) for a determination of whether the USPS
acted “arbitrarily [or] capriciously” in making its employment
decisions (an “MSPB appeal”). 5 C.F.R. § 353.304.3 The MSPB has
held that USPS employees “have the right to file both a grievance
[under the CBA] and [an MSPB] appeal concerning the same agency
action.” Latham v. U.S. Postal Serv., 117 M.S.P.R. 400, ¶ 29 (2012).
On September 16, 2008, LaGreca initiated a grievance
pursuant to the CBA, which culminated in arbitration. The APWU
argued, on LaGreca’s behalf, that the elimination of her position
violated the CBA, and was based on retaliatory and discriminatory
motives.
2 39 U.S.C. § 1005(c) provides: “Officers and employees of the Postal Service shall
be covered by subchapter I of chapter 81 of title 5, relating to compensation for work
injuries.”
5 C.F.R. § 353.304(c) provides: “An individual who is partially recovered from a
3
compensable injury may appeal to MSPB for a determination of whether the agency is
acting arbitrarily and capriciously in denying restoration.” Restoration rights under the
Federal Employees’ Compensation Act include the creation of limited duty assignments
for employees with temporary or permanent compensable injuries. 5 U.S.C. § 8151(b); 5
C.F.R. § 353.301(d).
6 No. 13‐2579‐cv
On December 29, 2008, while the grievance process was
ongoing, LaGreca filed an MSPB appeal, claiming that the USPS
acted arbitrarily and capriciously in eliminating her position. On
August 14, 2009, her MSPB appeal was denied based on the
conclusion of an Administrative Law Judge (“ALJ”) that the USPS
had properly eliminated LaGreca’s position because LaGreca’s
doctor had declared her totally disabled as of September 2, 2008.
LaGreca’s appeal from that decision was dismissed as untimely.
On March 23, 2012, LaGreca’s CBA grievance was submitted
to Arbitrator Randall Kelly. The USPS argued that the matter was
not arbitrable because the ALJ had already resolved the issue by
concluding during the MSPB appeal that LaGreca was totally
disabled. Over the objection of the APWU, Arbitrator Kelly agreed
to bifurcate the proceeding and first address the question of whether
collateral estoppel was applicable in the circumstances presented
here.
On this subject, Arbitrator Kelly noted that “[t]he [CBA]
specifically recognizes the concept of res judicata when a matter is
simultaneously before the MSPB and arbitration; albeit for veterans.”
Joint App’x 26 (emphasis supplied). Specifically, Article 16.9
provides that an “employee appeal[ing] under the Veterans’
Preference Act” waives his right to invoke the CBA arbitration
process if: (1) “an MSPB settlement agreement is reached”; (2) “a
hearing on the merits before the MSPB has begun”; or (3) “the MSPB
issues a decision on the merits of the appeal.” Id. at 101. Arbitrator
Kelly then recognized that Article 16.9 does not apply to LaGreca,
7 No. 13‐2579‐cv
but concluded that this provision, as well as other awards where the
doctrine of collateral estoppel was applied, supported the
conclusion that the CBA embraces the application of preclusion
principles. Id. at 26.
In applying collateral estoppel to LeGreca’s claim, Arbitrator
Kelly first determined that the ALJ’s decision denying her appeal
was the final decision of the MPSB, a matter not disputed on appeal.
He then stated that the “undeniable conclusion to be derived from
the MSPB decision” was that “[LaGreca] [wa]s totally disabled as of
September 2, 2008.” Id. at 27. Accordingly, “[USPS] could not have
been arbitrary and capricious when it terminated her Modified Duty
Assignment” and “the matter is . . . therefore not arbitrable based on
the doctrine of collateral estoppel.” Id.
The APWU sought vacatur of this decision in the District
Court on the basis that Arbitrator Kelly’s decision to apply collateral
estoppel was in excess of his powers under the CBA.
B. The District Court’s Decision
In addressing cross‐motions for summary judgment, the
District Court stated: “Arbitrator Kelly found no explicit support in
the [CBA] for applying collateral estoppel to LaGreca’s case. Instead,
he purported to find implicit support in the Section 16.9 of the
Agreement [addressing claimants pursuant to the Veterans’
Preference Act].” Am. Postal Workers Union, AFL‐CIO v. U.S. Postal
Serv., No. 12‐cv‐7896 (KBF), 2013 WL 1890264, at *3 (S.D.N.Y. May 2,
2013). The District Court asserted that “[t]he [CBA] does not make
8 No. 13‐2579‐cv
any provision for the application of collateral estoppel in general,”
and the only provision that addresses preclusion does not apply to
LaGreca. Id. at *4. The District Court stated further that, if any
inference could be drawn from Section 16.9, it was that preclusion
principles do not apply in other circumstances. Id.
The District Court concluded that Arbitrator Kelly improperly
“relied on the free‐floating principle of collateral estoppel to use the
MSPB decision to preclude LaGreca from recovering in her
grievance under the [CBA] . . . without any contractual basis.” Id.
Accordingly, the District Court vacated Arbitrator Kelly’s award
and remanded the case for arbitration. This appeal followed.
DISCUSSION
The question here—whether Arbitrator Kelly had authority,
pursuant to the CBA, to apply collateral estoppel to LaGreca’s
claim—is a legal one, reviewed de novo on appeal. See Scandinavian
Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., 668 F.3d 60, 71 (2d
Cir. 2012).
Vacatur is appropriate when an arbitrator’s decision
“exceeded [his] powers” under the relevant contract. 9 U.S.C.
§ 10(a)(4).4 The crux of the excess‐of‐powers standard is “whether
4 The Federal Arbitration Act (“FAA”) provides that a district court “may make
an order vacating the [arbitral] award upon the application of any party to the arbitration
. . . where the arbitrators exceeded their powers, or so imperfectly executed them that a
mutual, final, and definite award upon the subject matter submitted was not made.” 9
U.S.C. § 10(a)(4).
9 No. 13‐2579‐cv
the arbitrator’s award draws its essence from the collective
bargaining agreement.” St. Mary Home, Inc. v. Serv. Emps. Int’l Union,
Dist. 1199, 116 F.3d 41, 44 (2d Cir. 1997) (internal quotation marks
and citations omitted). Particularly where, as here, the challenge is
to “an award deciding a question which all concede to have been
properly submitted [to the arbitrator] in the first instance,”5 vacatur
under the excess‐of‐powers standard is appropriate only in the
“narrowest” of circumstances. Jock v. Sterling Jewelers Inc., 646 F.3d
113, 122 (2d Cir. 2011) (internal quotation marks omitted).
The Supreme Court recently reaffirmed that
[i]t is not enough to show that the arbitrator committed
an error—or even a serious error. Because the parties
bargained for the arbitrator’s construction of their
agreement, an arbitral decision even arguably
construing or applying the contract must stand,
regardless of a court’s view of its (de)merits.
The arbitration here was pursuant to the Postal Service Reorganization Act
(“PRA”), not the FAA. Courts, however, have recognized that the stringent standard for
vacating an arbitration award is materially the same under the FAA, Labor Management
Relations Act (“LMRA”), and the PRA. See Oxford Health Plans LLC v. Sutter, 133 S. Ct.
2064, 2068 (2013) (relying on LMRA case law when discussing deference to FAA awards);
USPS v. APWU, 553 F.3d 686, 688‐89 (D.C. Cir. 2009) (applying LMRA standards to cases
under the PRA).
5 Although the APWU objected to bifurcation of the proceedings, there is no
indication in the record that it disputed that the applicability of collateral estoppel was an
arbitrable issue. Moreover, doing so would have been futile in light of our holding in U.S.
Fire Insurance Co. v. National Gypsum Co., that the decision whether to apply collateral
estoppel based on a prior judicial decision is within the arbitrator’s authority under a
broad arbitration agreement. 101 F.3d 813, 817 (2d Cir. 1996).
10 No. 13‐2579‐cv
Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013)
(alterations, citations, and internal quotation marks omitted).6 In
order to vacate, a court must find that “the arbitrator act[ed] outside
the scope of his contractually delegated authority.” Id. (internal
quotation marks omitted).
In Oxford Health Plans, the issue was whether the arbitrator
exceeded his authority by permitting class‐wide arbitration. Id. In
holding vacatur inappropriate the Supreme Court noted that the
arbitrator “focused on the arbitration clause’s text, analyzing
(whether correctly or not makes no difference) . . . what it sent to
arbitration.” Id. at 2069. The Court distinguished its decision in
Stolt–Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662
(2010), which “overturned the arbitral decision [to permit class
arbitration] because it lacked any contractual basis for ordering class
procedures, not because it lacked . . . a ‘sufficient’ one.” Oxford
Health Plans, 133 S. Ct. at 2069. In Stolt–Nielsen, the parties had
expressly stipulated that they had never reached an agreement
regarding class arbitration. Id. Accordingly, the arbitral decision
“was not—indeed, could not have been—based on a determination
regarding the parties’ intent.” Id. (internal quotation marks omitted).
Similarly, in Harry Hoffman Printing, Inc. v. Graphic Communications
International Union, Local 261—the case relied upon by the District
Court—we vacated an arbitral decision imposing additional due
process requirements because the arbitration panel “creat[ed]
The District Court did not have the guidance of Oxford Health Plans when
6
deciding whether to vacate the arbitral award in this case.
11 No. 13‐2579‐cv
entirely new terms” in the CBA, notwithstanding a so‐called “no
modification” clause. 950 F.2d 95, 100 (2d Cir. 1991). Simply put, as
in Stolt‐Nielsen, the arbitral panel’s decision in Harry Hoffman lacked
any contractual basis and, indeed, was expressly prohibited by the
CBA. See id. at 99‐100.
The situation here is analogous to Oxford Health Plans:
Arbitrator Kelly looked at the terms of the CBA and concluded that,
in the circumstances presented, 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. Moreover, we have held that under a broad
arbitration agreement such as the one at issue in this case, arbitrators
possess authority to apply collateral estoppel based on prior judicial
or administrative decisions. See, e.g., U.S. Fire Ins. Co. v. Nat’l Gypsum
Co., 101 F.3d 813, 817 (2d Cir. 1996) (“[A]mbiguity as to whether an
issue [of collateral estoppel] is within the scope of an arbitration
agreement is resolved in favor of arbitrability.”); Nat’l Union Fire Ins.
Co. v. Belco Petroleum Corp., 88 F.3d 129, 135 (2d Cir. 1996) (“Nothing
in the arbitration clause gives any indication that anyone other than
the arbitrator should decide the preclusive effect of a prior
arbitration.”).
In sum, Arbitrator Kelly concluded that Section 16.9
demonstrated the shared intent of the parties to the CBA to permit
decisions of the MSPB to inform, and in some cases, preclude
decisions in a subsequent arbitration. Nothing in the CBA expressly
foreclosed this conclusion. The District Court concluded that, “[i]f
12 No. 13‐2579‐cv
one were to draw any inference from [Section 16.9], it would be the
converse inference that, because the [CBA] explains where principles
of preclusion do apply, those principles do not apply elsewhere.”
Am. Postal Workers Union, 2013 WL 1890264, at *4. That is simply a
different interpretation of the contract, and while arguably a better
interpretation of the CBA, it is simply not a basis for vacatur.
Because Kelly was “arguably construing or applying the contract,”
his decisions “must stand, regardless of a [district] court’s view of its
(de)merits.” Oxford Health Plans, 133 S. Ct. at 2068 (internal quotation
marks omitted).
CONCLUSION
To summarize, we hold that:
(1) Under the broad arbitration agreement in the CBA,
the preclusive effect of a prior judicial or
administrative decision is a matter to be decided by
the arbitrator.
(2) Nothing in the CBA foreclosed application of
preclusion principles by the arbitrator.
(3) The arbitrator did not exceed his authority by
interpreting the terms of the contract, whether
correctly or not, to permit use of collateral estoppel
based on a prior administrative decision.
Accordingly, we REVERSE the May 16, 2013 judgment of the
District Court and REMAND with instructions to confirm the
arbitral award.