Beaird Industries, Inc. v. Local 2297, International Union

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
March 29, 2005
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 04-30333
_____________________

BEAIRD INDUSTRIES, INC.,

Plaintiff - Counter Defendant - Appellee,

versus

LOCAL 2297, INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND
AGRICULTURAL IMPLEMENT WORKERS OF AMERICA,

Defendant - Counter Claimant - Appellant.

__________________________________________________________________

Appeal from the United States District Court
for the Western District of Louisiana
_________________________________________________________________

Before JOLLY and DAVIS, Circuit Judges, and ENGELHARDT, District
Judge.1

E. GRADY JOLLY, Circuit Judge:

Beaird Industries, Inc. (“Beaird”) and the Local 2297 of the

International Union, United Automobile, Aerospace and Agricultural

Implement Workers of America (“Union”) are parties to a valid

collective bargaining agreement (“CBA”), which contains a binding

arbitration provision and in which Beaird reserves the right to

subcontract work. The Union grieved Beaird’s subcontracting

decision in relation to certain landscaping work, and the

Arbitrator found in favor of the Union, ordering Beaird to return

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District Judge of the Eastern District of Louisiana, sitting
by designation.
the work to the bargaining unit. Beaird sought vacatur of the

arbitration award in the United States District Court for the

Western District of Louisiana. The district court granted summary

judgment in favor of Beaird, vacating the award. We hold that the

Arbitrator exceeded his authority by finding in favor of the Union

and thus AFFIRM the district court’s vacatur of the arbitral award.

I

The facts of this case are not complex. Beaird operates a

manufacturing plant in Shreveport, Louisiana. Beaird and the Union

are parties to a valid CBA that includes a final and binding

arbitration procedure for settling grievances. It is undisputed

that the CBA covers the grievance at issue here.

A new ownership team took over Beaird in December 2001 and

conducted an analysis of non-revenue producing activities,

including Beaird’s buildings and grounds department. Following the

review in January 2002, Beaird sought bids from landscaping

contractors to perform landscaping work outside of the fence line

of the facility. On January 11, Beaird met with the Union to

discuss its intent to subcontract that landscaping work, and on

January 17, Beaird accepted the low bid and reassigned three

bargaining unit employees to do building and grounds work inside

the fence line.

The Union grieved Beaird’s decision to subcontract and

appealed the grievance to arbitration in accordance with the CBA.

Following a hearing, the Arbitrator issued his decision on November

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26. The Arbitrator sustained the Union’s grievance and ordered

Beaird to restore the outside of the fence line landscaping work to

the bargaining unit.

In his decision, the Arbitrator recognized that the

reservation of the right to subcontract in the CBA is “without any

specific limitation” and “without any specific words of

enhancement.” He then noted that the right to subcontract is “not

exercised or found in a vacuum. It is done in the context of a

complex, and in this case a ‘complete’ and ‘entire’ Collective

Bargaining Agreement, and as such it is not a completely

unqualified right.” He reasoned that although “[t]he Company had

a legitimate concern and interest in reducing costs,” “it had a

responsibility not to act in this direction at the sacrifice of

interests protected by the CBA.” In the end, the Arbitrator was

“not convinced that the cost savings realized from the

subcontracting out-weighed the adverse impacts on the CBA and the

Unit structure, particularly in view of other options the Company

had under the CBA to reduce the outside-the-fence landscaping costs

and minimize the stress on the CBA protections.”

On January 6, 2003, Beaird filed a complaint in federal

district court seeking vacatur of the arbitration award. The

district court ruled on cross-motions for summary judgment on March

11, 2004. The district court denied the Union’s motion for summary

judgment and granted Beaird’s motion for summary judgment, vacating

the arbitration award. The district court held that the Arbitrator

3
exceeded his authority by construing the subcontracting clause to

limit Beaird’s right to subcontract bargaining unit work. The

district court reasoned that “[t]he clear and precise language of

the CBA reveals that the arbitrator was not acting within the scope

of his authority by ignoring the unequivocal reservation of the

right to subcontract. Despite the restricted standard of review

that this court must employ of the arbitrator’s decision, this

court cannot overlook the flagrant violation by the arbitrator of

his authority by expanding the precise language of the CBA.”

The Union now appeals the district court’s grant of summary

judgment to Beaird.

II

A

We review a district court’s grant of summary judgment in a

suit to vacate an arbitration award de novo. Weber Aircraft Inc.

v. Gen. Warehousemen & Helpers Union Local 767, 253 F.3d 821, 824

(5th Cir. 2001). Summary judgment is appropriate if the record

discloses “that there is no genuine issue as to any material fact

and the moving party is entitled to judgment as a matter of law.”

FED. R. CIV. P. 56(c).

Where, as here, an arbitration decision arises from the terms

of a CBA, judicial review is narrowly limited. Courts should

afford great deference to arbitral awards. See Int’l Chem. Workers

Union v. Columbian Chems. Co., 331 F.3d 491, 494 (5th Cir. 2003).

Accordingly, a court must affirm an arbitral award “as long as the

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arbitrator is even arguably construing or applying the contract and

acting within the scope of his authority . . . .” United

Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 38 (1987).

If the arbitrator has not exceeded his authority, a court may not

vacate the resulting award just because the court is convinced that

he “committed serious error.” Id. Courts likewise should not

overrule the arbitrator’s decision simply because they might

interpret the contract differently. Int’l Chem. Workers Union, 331

F.3d at 495. “As long as the arbitrator’s decision ‘draws its

essence from the collective bargaining agreement’ and the

arbitrator is not fashioning ‘his own brand of industrial justice,’

the award cannot be set aside.” Weber Aircraft, 253 F.3d at 824

(citing Misco, 484 U.S. at 38).

B

(1)

We begin our analysis with the language of the CBA at issue.

Importantly, it provides that “[t]he specific terms of this

Agreement shall be the sole source of any rights that may be

asserted by the Union against the Company.” The subcontracting

rights in contention are defined as follows:

Except as otherwise specifically provided in
this agreement, the Company has and retains
and the Union recognizes the sole and
exclusive right of the Company to exercise all
the rights or functions of management which
the Company may exercise within its sole and
exclusive discretion without any prior

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 negotiations. The term “rights of management”
includes the following:

***
B. . . . the decision to subcontract out work
presently performed in any area of the
facility to an independent contractor or
another company. (However, work force
augmentation by outside contractor employees
on the scope of work assigned to bargaining
unit employees inside Beaird’s facility will
not be undertaken prior to the Union and
Company discussing the matter.)

The arbitrator’s powers are limited by the CBA: the arbitrator

“shall have no power to add to, subtract from, or modify any terms

and conditions of this Agreement,” and he “shall have no authority

to substitute his discretion on cases where the Company is given

authority to decide those issues by this Agreement.”

In considering the Union’s grievance, the Arbitrator framed

the pertinent issue as whether Beaird violated the CBA by

subcontracting the landscaping work. The Arbitrator opined that

Beaird would have a residual right to subcontract even if this

right was not explicitly listed in the CBA and that the language of

the CBA did not limit Beaird’s right to subcontract. As we noted

above, he also found that Beaird had “a legitimate concern and

interest in reducing costs,” but that Beaird “had a responsibility

not to act in this direction at the sacrifice of interests

protected by the CBA.” The Arbitrator was “not convinced that the

cost savings realized from the subcontracting outweigh[ed] the

adverse impact on the CBA.” Consequently, he decided that Beaird

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had violated the CBA by subcontracting the landscaping work and

sustained the Union’s grievance.

(2)

Beaird argues that the Arbitrator exceeded his authority by

ignoring the plain language of the CBA, by deciding the appeal

based on his own opinions and judgment, and by ignoring Beaird’s

reservation of the right to subcontract. Beaird contends that the

Arbitrator’s decision should be vacated because it does not “draw

its essence” from the CBA. The district court agreed.

The Union counters that the Arbitrator did not exceed his

authority. The Union argues that the Arbitrator properly construed

the subcontracting clause in the context of the entire CBA and that

he properly relied upon his judgment and experience to determine

that the ambiguous subcontracting clause did not give Beaird the

unfettered right to subcontract. The Union notes that the

Arbitrator acknowledged the language of the CBA and quoted it in

his decision. The Union draws support from this Circuit’s decision

in Folger, which upheld an arbitrator’s award in favor of the

union, requiring an employer to assign yard maintenance work to

union employees despite a provision in the CBA giving the employer

the right to subcontract. Folger Coffee Co. v. Int’l Union United

Auto., Aerospace & Agric. Implement Workers of America-UAS, Local

Union No. 1805, 905 F.2d 108 (5th Cir. 1990).

Although at first blush Folger appears strongly to support the

Union’s position, a closer examination reveals that the CBA at

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issue here is distinguishable from the Folger CBA. The relevant

language of the Folger CBA stated:

The company shall continue to have all the
rights which it had prior to the employees’
selection of the Union as the collective
bargaining agent, except those that are
specifically given up or modified by the
express written terms of the Agreement.
Included in the rights reserved to the Company
except where they are given up or modified by
any of the express written provisions of this
Agreement are . . . the determination of the
nature and extent of work, if any, to be
contracted or transferred out and the persons,
means and methods to be utilized.

Id. at 109 n.3 (emphasis added). The court focused on the

“exception” language as limiting the subcontracting right, finding

that another provision of the Agreement, which stated that

subcontracting cannot be used to undermine the Union where the

bargaining relationship is already established, limited the

subcontracting right. Id. at 111. Taking these two provisions

together, the court held that “absent a specific provision which

completely and explicitly entitles the Company to contract out

regardless of its effect on the bargaining unit, a reasonable

interpretation of the contract is that subcontracting must be

balanced against the rights of the employees, the Company and the

Union. The subcontracting clause is neither specific nor

unambiguous.” id. at 111. Because arbitrators need only show that

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the award is rationally inferable in some logical way from the

agreement, the arbitrator’s award was valid in Folger.2

In contrast, the CBA at issue here does not limit the

subcontracting right. In fact, the Arbitrator recognized as much

by stating that the language of the CBA does not limit Beaird’s

right to subcontract. In other words, the subcontracting provision

is unambiguous.3 It is well-established that courts may set aside

awards when the arbitrator exceeds his contractual mandate by

2
Inasmuch as the Union draws support from Folger, it is our
understanding that Folger represents the outer limits of the
deference that our court should give to arbitral awards. Although
we need not do so in this particular instance because the Beaird
CBA is distinguishable, it may be appropriate under other
circumstances to reexamine Folger to determine whether this level
of deference is warranted by Supreme Court precedent and § 301 of
the Labor Management Relations Act. 29 U.S.C. § 185(a).
3
This court has not often considered the question of an
arbitrator’s interpretation of a subcontracting clause. Folger is
the only published case on point, but this court has also
considered the issue in one unpublished opinion. Rock-Tenn Company
v. Paper, Allied-Industrial, Chemical and Energy Workers
International Union, AFL-CIO, CLC, and Local Union No. 4-0895, No.
03-11062 (5th Cir. Sept. 2, 2004). Although this opinion lacks
precedential value, we find its reasoning persuasive and pertinent
to the question at hand. The subcontracting language in Rock-
Tenn’s CBA provided:

Nothing in this Agreement shall limit in
anyway [sic] the Company’s subcontracting work
or shall require the company to perform any
particular work in this plant rather than
elsewhere.

Id. at 4. The court found that the language of the CBA “is clear
and express,” leaving the arbitrator “without authority to ignore
its terms and pursue his ‘own brand of industrial justice.’” Id.
at 5. The CBA at issue in this proceeding is more akin to the CBA
in Rock-Tenn than it is to the one in Folger.

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acting contrary to express contractual provisions. Delta Queen

Steamboat Co. v. Dist. 2 Marine Eng’rs Beneficial Ass’n, 889 F.2d

599, 604 (5th Cir. 1989). Although an arbitrator may look beyond

the written CBA if it is ambiguous or silent upon a precise

question, id. at 602, the Arbitrator has expressly recognized that

the CBA is not ambiguous on Beaird’s subcontracting right.

Although the CBA does qualify the management rights if

“specifically provided in this agreement,” the Arbitrator points to

no provision in the agreement that limits the subcontracting

rights. Simply referencing the agreement is insufficient for this

court to uphold the award. The Arbitrator must show that the award

is rationally inferable in some logical way from the agreement.

Folger, 905 F.2d at 111. No such inference can be drawn here to

support the Arbitrator’s award.

The conclusion that the subcontracting rights were not limited

by the CBA should have ended the Arbitrator’s inquiry -- the

remainder of his decision, which balanced the interests of the

Union with Beaird’s economic savings, can only be characterized as

the Arbitrator’s “own brand of industrial justice”. We do not

affirm the district court’s decision to vacate the Arbitrator’s

award because we disagree with the outcome, but because the

Arbitrator has failed utterly to draw his conclusions from the

essence of the CBA.

III

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 For the foregoing reasons, the decision of the district court

granting Beaird summary judgment and vacating the award of the

Arbitrator is

AFFIRMED.

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