SIU de Puerto Rico v. V.I. Port Auth.

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit

12-13-1994

SIU de Puerto Rico v. V.I. Port Auth.
Precedential or Non-Precedential:

Docket 94-7217

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 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 94-7217

SIU DE PUERTO RICO,
CARIBE Y LATINOAMERICA,
AFFILIATED TO SEAFARERS INTERNATIONAL UNION
OF NORTH AMERICA, AFL-CIO,
Appellant

v.

VIRGIN ISLANDS PORT AUTHORITY

On Appeal from the District Court of the Virgin Islands
(D.C. Civ. No. 92-cv-00186)

Submitted Pursuant to Third Circuit LAR 34.1(a)

December 5, 1994

Before: SLOVITER, Chief Judge,
SCIRICA and COWEN, Circuit Judges

(Filed December 13, 1994)

Archie Jennings
Charlotte Amalie, USVI

Attorney for Appellant

Don C. Mills
Virgin Islands Port Authority
Charlotte Amalie, USVI

Attorney for Appellee

OPINION OF THE COURT
SLOVITER, Chief Judge.

Appellant SIU de Puerto Rico, a union that is the

exclusive representative of certain employees of the Virgin

Islands Port Authority (VIPA), appeals from the district court's

dismissal of its claim against VIPA to enforce an arbitration

settlement awarding payment for accumulated sick leave to

retiring employees represented by SIU. This court has

jurisdiction under 28 U.S.C. § 1291.

I.
FACTS AND PROCEDURAL HISTORY

On December 23, 1987, SIU and VIPA entered into a

collective bargaining agreement (Agreement), effective from

October 1, 1987 to September 30, 1990. The Agreement specified

that "[a]ll sick leave in excess of 90 days shall be paid in lump

sum as compensation" to retiring employees at their rate of pay.

App. at 16. Sometime after signing the Agreement, VIPA stopped

paying retirees for accumulated sick leave, claiming that the
sick leave provision of the Agreement violated Virgin Islands

law. SIU filed a grievance against VIPA and submitted it to

arbitration. SIU and VIPA then settled, agreeing that VIPA would

comply with the sick leave provision. The arbitrator approved

the agreement on September 18, 1991.

However, VIPA continued to refuse to pay for

accumulated sick leave. SIU then filed a complaint in the
district court to enforce the arbitration settlement. The

district court denied VIPA's motion to dismiss for lack of

subject matter jurisdiction, and SIU moved for summary judgment.

In response, VIPA argued that at the time the Agreement was in

place it lacked statutory authority to pay for accumulated sick

leave and that the inclusion of the sick leave provision was

inadvertent. VIPA also claimed that it had entered into the

stipulated settlement only because of an "abrupt change in

personnel." App. at 84. The district court denied summary

judgment for SIU and dismissed its claim with prejudice because

it found that VIPA lacked legal authority to pay for accumulated

sick leave. SIU filed a timely appeal.

II.
DISCUSSION

A.

Although VIPA has not filed a brief with this court and

thus has not renewed its argument that the district court lacked

subject matter jurisdiction, we must assure ourselves of

jurisdiction.

The district court asserted subject matter jurisdiction

under section 301 of the Labor Management Relations Act of 1947,

29 U.S.C. § 185, which confers jurisdiction on federal courts to

hear suits between labor organizations and employers for
violations of collective bargaining agreements.1 VIPA had argued

that section 301 did not confer jurisdiction on the district

court because VIPA's dispute with SIU concerned a violation of an

individual employment contract, not a violation of the collective

bargaining agreement.2 In Smith v. Evening News Ass'n, 371 U.S.
195 (1962), the Supreme Court said, "The concept that all suits

to vindicate individual employee rights arising from a collective

bargaining agreement should be excluded from the coverage of

section 301 . . . has not survived." Id. at 200. It follows

that the district court had jurisdiction under 29 U.S.C. § 185.

VIPA also argued without merit that SIU lacked standing

to vindicate the rights of an individual employee. We agree with

the district court that unions have standing to vindicate

individual employee rights under a collective bargaining

agreement negotiated by the union. See UAW v. Hoosier Cardinal

Corp., 383 U.S. 696, 699-700 (1966).

B.

On the merits, SIU argues that the district court erred

in holding that VIPA lacked statutory authority to pay for

1
. The district court of the Virgin Islands exercises the same
jurisdiction as a district court of the United States. See 48
U.S.C. § 1612(a); 4 V.I.C. § 32.
2
. VIPA relied on Association of Westinghouse Salaried Employees
v. Westinghouse Elec. Corp., 348 U.S. 437 (1955), a case the
Supreme Court later declared had been undermined by subsequent
cases and was "no longer authoritative as a precedent." Smith v.
Evening News Ass'n, 371 U.S. 195, 199 (1962).
accumulated sick leave. Our standard of review on this question

of law is plenary. Epstein Family Partnership v. Kmart Corp., 13
F.3d 762, 765-66 (3d Cir. 1994).

VIPA is an instrumentality of the Virgin Islands

government, 29 V.I.C. § 541(e), a characterization that by

express statute applies for purposes of public employee labor

relations. 24 V.I.C. § 362(i). In 1986, the Virgin Islands

legislature eliminated the authority of public employers

participating in the Employees Retirement System of the Virgin

Islands (ERSVI) to pay retirees for accumulated sick leave. See

3 V.I.C. § 731(a).3 Because section 731(a) authorized VIPA only

to credit accumulated sick leave to a retiree's retirement

annuity as of 1987, the date of the Agreement, the district court

was correct in holding that VIPA acted beyond the scope of its

3
. Section 731(a) provides:

Any member [of ERSVI] having accumulated and unused
sick leave at date of retirement shall be entitled to
service credit towards the service retirement annuity
to which the member may be entitled. The credit for
accumulated and unused sick leave shall be 1 month for
any period of 14 to 26 days inclusive of such leave and
½ month for any period of 5 to 13 days inclusive. Less
than 5 days of such unused sick leave shall not be
considered for such credit.
authority in agreeing to pay accumulated sick leave "in lump sum

as compensation" to retirees.

It is "well-settled law" that neither the United States

nor the Virgin Islands government is bound by a contract entered

into by an agency acting beyond the scope of its authority. In
re Penn Cent. Transp. Co., 831 F.2d 1221, 1229 (3d Cir. 1987);

accord Heyl & Patterson Int'l, Inc. v. F.D. Rich Hous. of Virgin

Islands, Inc., 663 F.2d 419, 428-29 (3d Cir. 1980), cert. denied,

455 U.S. 1018 (1981); In re Hooper's Estate, 359 F.2d 569, 577

(3d Cir.), cert. denied, 385 U.S. 903 (1966). It follows that

VIPA acted beyond the scope of its authority in agreeing to pay

accumulated sick leave to retirees, and the sick leave provision

of the Agreement is void ab initio and cannot be enforced. See

Smith v. Department of Educ., 942 F.2d 199, 201-02 (3d Cir. 1991)

(where agent of Virgin Islands government failed to execute

agreement in compliance with applicable statutes, "no valid

contract was ever created"); Heyl & Patterson, 663 F.2d at 432

(agreement by government that did not meet statutory requirements

"null and void ab initio"); Hooper's Estate, 359 F.2d at 577 (no
contract existed when agents of Virgin Islands government acted

beyond scope of authority in granting tax subsidy).

Nor is VIPA estopped from claiming that the sick leave

provision of the Agreement exceeded its authority. The

government cannot be estopped from denying the validity of an

agreement unless it engaged in "'affirmative misconduct,' as
opposed to mere omission or negligent failure." United States v.
Pepperman, 976 F.2d 123, 131 (3d Cir. 1992). Cf. Office of

Personnel Management v. Richmond, 496 U.S. 414, 421 (1990)

("[S]ome type of 'affirmative misconduct' might give rise to

estoppel against the Government."). In its response to SIU's

motion for summary judgment, VIPA claimed that it "inadvertently

permitted" the inclusion of the invalid sick leave provision in

the Agreement and that it stipulated to the arbitration

settlement only because of "an abrupt change of personnel." App.

at 84. SIU produced no evidence of affirmative misconduct. In

the absence of any such showing, VIPA is not estopped from

denying the validity of the sick leave provision of the

Agreement.

SIU argues that for the purposes of negotiating the

Agreement VIPA was not an agent of the Virgin Islands government.

However, VIPA's enabling statute specifically provides that all

VIPA employees "shall be covered by and subject to the Employees

Retirement System of the Virgin Islands." 29 V.I.C. § 573(a).

Though VIPA is a semi-autonomous public corporation with "legal

existence and personality separate and apart from the

Government," id. § 541(e), it must be considered an agent of the

Virgin Islands government when it bargains with its employees.

This court reached the same conclusion twenty years ago

in a case between the same parties. See Virgin Islands Port

Auth. v. SIU de Puerto Rico, 494 F.2d 452 (3d Cir. 1974) (VIPA
I). SIU went on strike against VIPA after its collective

bargaining agreement with VIPA expired. The district court

enjoined the strike because Virgin Islands law prohibited strikes

by public employees. On appeal, SIU argued that VIPA was

effectively a private employer for the purpose of bargaining with

its employees. This court disagreed, holding that VIPA is

"expressly made a government instrumentality," id. at 453, and

that nothing placed VIPA's employees on a "different footing from

other government employees." Id. at 454. SIU then argued that

the expiration of the collective bargaining agreement, which

prohibited strikes, implicitly authorized SIU's strike. Again,

this court disagreed, concluding that even if the parties

intended that expiration would create a right to strike, such an

agreement would be unenforceable because Virgin Islands law

prohibited strikes by public employees. Id. at 455. VIPA I

therefore stands for the dual propositions that VIPA is an agent

of the Virgin Islands government in bargaining with its employees

and that VIPA cannot contract with its employees beyond the scope

of its authority. Specifically, VIPA cannot confer a benefit on

its employees that Virgin Islands law prohibits, and any attempt

to do so is void ab initio.
We do not condone VIPA's actions in its dealings with

its union and its employees.4 As the district court recognized,

4
. Indeed, VIPA has demonstrated the same nonchalance in dealing
with the arbitrator, failing to appear at a scheduled
arbitration, and with this court, having failed to file a brief
SIU presents a "sympathetic" case. App. at 90. However, the

employees' rights to enforce their contract with VIPA is a matter

which lies in the hands of the Virgin Islands legislature.

III.
CONCLUSION

For the foregoing reasons, we will affirm the judgment

of the district court dismissing SIU's claim.

(..continued)
in this court to defend its position and the district court's
order.