United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 8, 2011 Decided March 16, 2012
No. 11-1019
UNITED STATES DEPARTMENT OF COMMERCE,
PATENT AND TRADEMARK OFFICE,
PETITIONER
v.
FEDERAL LABOR RELATIONS AUTHORITY,
RESPONDENT
PATENT OFFICE PROFESSIONAL ASSOCIATION,
INTERVENOR
On Petition for Review of a Final Decision
of the Federal Labor Relations Authority
Howard S. Scher, Attorney, United States Department of
Justice, argued the cause for the petitioner. Tony West, Assistant
Attorney General, and William Kanter and Thomas M. Bondy,
Attorneys, were on brief.
Rosa M. Koppel, Solicitor, Federal Labor Relations
Authority, argued the cause for the respondent. Joyce G.
Friedman, Attorney, Federal Labor Relations Authority, entered
an appearance.
Richard J. Hirn argued the cause for intervenor Patent
Office Professional Association in support of the respondent.
2
Gregory O’Duden, Larry J. Adkins, Peyton H.N.
Lawrimore, Andres M. Grajales and Teresa J. Idris were on
brief for the amici curiae, American Federation of Government
Employees et al. in support of the respondent.
Before: HENDERSON, ROGERS and TATEL, Circuit Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
Opinion concurring in the judgment filed by Circuit Judge
ROGERS.
KAREN LECRAFT HENDERSON, Circuit Judge: The Patent
and Trademark Office of the United States Department of
Commerce (PTO or Agency) seeks review of a decision of the
Federal Labor Relations Authority (FLRA or Authority)
upholding an arbitrator’s award in favor of the Patent Office
Professional Association (POPA or Union). U.S. Dep’t of
Commerce Patent & Trademark Office, 65 F.L.R.A. 290 (2010)
(PTO II). The arbitrator concluded PTO committed an unfair
labor practice in violation of the Federal Service
Labor-Management Relations Statute (FSLMRS or Statute), 5
U.S.C. § 7116(a)(1) and (5), when it repudiated a provision in an
agreement requiring that it make an annual request of the Office
of Personnel Management (OPM) to increase PTO’s special
schedule pay rates and, if OPM refuses, to discuss “substantially
equivalent alternatives” with POPA. Arbitration Decision in re
Patent Office Prof’l Ass’n v. U.S. Dep’t of Commerce, Patent &
Trademark Office, FMCS Case No. 04-01463-3 (Arbitral Award
of Arbitrator Arrigo) (July 25, 2006) (Award II). In particular,
PTO challenges the Authority’s determination that the provision
constitutes an “appropriate arrangement” under 5 U.S.C.
§ 7106(b)(3). We grant PTO’s petition on the ground that,
under the collateral estoppel doctrine, the Authority was bound
by its earlier decision concluding the provision did not constitute
an appropriate arrangement. See U.S. Dep’t of Commerce,
Patent & Trademark Office, 60 F.L.R.A. 839 (2005) (PTO I),
3
pet. for review dismissed, Patent Office Prof’l Ass’n v. FLRA,
180 F. App’x 176 (D.C. Cir. 2006).
I.
In 2000, PTO patent examiners’ wages, like those of most
executive branch employees, were determined pursuant to the
General Schedule (GS). Because it was experiencing problems
recruiting and retaining employees, PTO requested and obtained
OPM approval to pay employees special pay rates exceeding the
comparable GS rates by ten or fifteen per cent, depending on the
grade. Over time, however, special rates decrease in value
relative to the corresponding GS rates because, while both rates
receive annual general increases, only the latter include annual
locality increases. Accordingly, PTO and POPA negotiated the
following provision in an agreement effective January 2001:
The [PTO] shall request OPM approval for the next
five years to increase the special pay schedule so as to
maintain the 10% and 15% salary differentials relative
to the updated GS rates, in a manner consistent with
OPM regulations. If OPM refuses the request, the
Agency shall enter into discussions with POPA in
order to provide substantially equivalent alternatives.
Agreement on Initiatives for a New Millennium between [PTO
and POPA], § A.2 (JA 69) (Millennium Agreement).
In 2002, federal employees in the Washington, D.C. region
received a 3.6% general wage increase and a 1.17% locality pay
increase. Pursuant to section A.2 of the Millennium Agreement,
in February 2002, PTO requested that OPM increase the special
pay rate by 1.17% to maintain the ten and fifteen per cent
differentials, subsequently lowering the request to 1%. OPM
denied PTO’s request on the ground PTO’s filings did not show
it was “experiencing or . . . likely to experience significant
handicaps in recruiting or retaining patent professionals.”
Award II at 11 (internal quotations omitted). OPM
4
recommended that PTO explore “the strategic use of other
compensation flexibilities to address targeted recruitment and
retention problems.” Id. Accordingly, PTO entered into
discussions with the Union regarding “substantially equivalent
alternatives” pursuant to the second sentence of section A.2.
When the discussions proved fruitless, the Union filed a
grievance, which was then submitted to arbitration.
The arbitrator concluded that PTO had violated section A.2
of the Millennium Agreement and ordered it to “engage in . . .
discussions [with POPA] in good faith with a sincere resolve to
find a way to make-up for the lost locality pay.” In re
Arbitration Between Patent & Trademark Office &Patent Office
Prof’l Ass’n, FMCS Case No. 04-00138 at 16 (Oct. 1, 2001)
(Arbitral Award of Arbitrator Evans) (Award I). In his order,
Arbitrator Evans “found that Section A.2 was intended to
address the adverse effect of special rate erosion that would
occur over time as non-special rate employees received locality
pay increases.” PTO I, 60 F.L.R.A. at 842 (citing Award I at
12).
On review, the Authority set aside the arbitral award as
violating section 7106 of the FSLMRS. The Statute generally
imposes on a federal agency a duty to bargain in good faith with
a public employee union over conditions of employment but
section 7106(a) exempts from the duty certain “management
rights,” including the right to retain its employees. See U.S.
Dep’t of the Treasury v. FLRA, ___ F.3d ___, ___; No. 11-
1102, slip op. at 4 (D.C. Cir. Feb. 7, 2012); 5 U.S.C.
§ 7106(a)(2)(A). Nonetheless, an agency must bargain over a
proposal—including one that affects a management right—if the
proposal constitutes an “ ‘appropriate arrangement[] for
employees adversely affected’ by the exercise of management
rights.” Nat’l Ass’n of Gov’t Emps., Inc. v. FLRA, 179 F.3d 946,
948 (D.C. Cir. 1999) (quoting 5 U.S.C. § 7106(b)(3)). In PTO
I, the Authority concluded section A.2 affected PTO’s
5
management right to retain employees and was not an
“appropriate arrangement” within the meaning of 5 U.S.C.
§ 7106(b)(3) because, “as interpreted and enforced by the
Arbitrator,” it sought to “ameliorate[] adverse effects” that result
not from the exercise of a management right but from “the
operation of law, specifically, the fact that under 5 C.F.R.
§ 531.606, special rate employees are not permitted to receive
locality pay adjustments.” 60 F.L.R.A. at 842. Thus, the
Authority concluded section A.2 was not a statutory
“arrangement” at all and set aside the arbitral award as “contrary
to management’s right to retain employees under
§ 7106(a)(2)(A).” Id. at 842, 843. In making this determination,
the Authority specifically rejected as “unsupported” POPA’s
claim that section A.2 was intended as an arrangement for
employees adversely affected by PTO’s decision “to eliminate
paper files and to include a customer service element in the
performance plans.”1
In 2003, the locality pay rate for the Washington, D.C.
region again increased by 1.17%. PTO determined it could not
certify to OPM that a special pay rate increase was “critical to
the mission of the Agency” and, accordingly, notified POPA it
would not submit a request that OPM increase the rate. PTO II,
1
According to the FLRA, POPA asserted in PTO I
that elimination of the paper files adversely affects
employees by requiring them to spend virtually their entire
work day tethered to a computer screen[,] that computer
images of patents are inferior to paper copies, that there are
problems with conducting key word searches of old patents
on computers, and that computer patents do not include
examiners’ notes that were in paper patents and which
facilitated the patent search for examiners.
60 F.L.R.A. at 842 (quotation marks omitted; brackets in original).
6
65 F.L.R.A. at 291. POPA again filed a grievance, which was
again submitted to arbitration.
Arbitrator Arrigo found section A.2 affected the Agency’s
management right to retain employees because “ ‘the essential
facts and circumstances’ ” were “ ‘substantially identical’ ” to
PTO I. Id. at 292 (quoting Award II at 24). He further
concluded that section A.2 was an “appropriate arrangement”
because “ ‘the entirety of [§] A,’ including § A.2, ‘was
negotiated as a quid pro quo for the elimination of paper patents
and the addition of customer service duties for employees[,]’
two changes desired by the Agency and opposed by the Union.”
Id. (quoting Award II at 24) (alteration in original). Arbitrator
Arrigo specifically found that “the linkage between a special pay
schedule and the paper file and customer service issues was
established ‘in every document concerning the discussions
between the parties,’ ” id. (quoting Award II at 25), and the
special pay rate provisions were “a ‘balm’ to ‘ameliorate the
adverse effects upon employees for the Union’s acceding to the
Agency’s desire to exercise its management rights regarding the
elimination of paper files . . . and employees being assigned
additional duties’ and were enforceable as appropriate
arrangements under § 7106(b)(3).” Id. (quoting Award II at
25-26). He further determined PTO’s breach of both sentences
of section A.2—by declining to submit a request to OPM, then
failing to enter discussions with POPA—“ ‘went to the heart of
the parties’ agreement’ ” because it was a “ ‘critical part’ of § A,
which was, in turn, necessary to [POPA’s] acceptance of the rest
of the [Millennium Agreement].” Id. (quoting Award II at 27).
Accordingly, Arbitrator Arrigo concluded PTO repudiated the
agreement in violation of 5 U.S.C. § 7116(a)(1) and (5).2 He
2
The two subsections provide:
(a) For the purpose of this chapter, it shall be an unfair labor
practice for an agency—
7
decided that “the appropriate remedy was to ‘require the Agency
to fulfill its obligations under the agreement and to “enter
discussions with [the Union] in order to provide substantially
equivalent alternatives” to the erosion of the agreed-upon pay
differentials set forth in the agreement,’ ” to include “interest
‘on any money the employees might receive pursuant to the
discussions envisioned in [§] A.2.’ ” Id. at 292-93 (quoting
Award II at 29-30 (quoting § A.2)).
PTO excepted to the award and the FLRA sustained it. The
FLRA first upheld Arbitrator Arrigo’s unchallenged finding that
section A.2 affected management’s right to retain employees.
The Authority further affirmed his determination that section
A.2 was an arrangement, relying on his finding “that the entire
subject of special pay was negotiated ‘to provide a “balm” to the
Union which would ameliorate the adverse effects upon
employees’ of ‘the Agency’s desire to exercise its management
rights regarding the elimination of paper files.’ ” 65 F.L.R.A. at
295 (quoting Award II at 25-26). Finally, the Authority
considered whether the arrangement was “appropriate” under
the “abrogation” standard, which it recently re-adopted in U.S.
Environmental Protection Agency, 65 F.L.R.A. 113 (2010) (U.S.
EPA).3 Under the abrogation standard, the Authority assesses
(1) to interfere with, restrain, or coerce any employee
in the exercise by the employee of any right under
this chapter;
. . . [or]
(5) to refuse to consult or negotiate in good faith with
a labor organization as required by this chapter; . . . .
5 U.S.C. § 7116(a)(1), (5).
3
Before its decision in U.S. EPA, the Authority reviewed arbitral
awards using its “excessive interference standard” under which the
enforcement of a contract provision in the award is appropriate unless
8
“whether the arbitration award ‘precludes [the] agency from
exercising’ the affected management right”—if it does not, the
Authority will “find that the arrangement is appropriate within
the meaning of § 7106(b)(3).” PTO II, 65 F.L.R.A. at 296
(quoting Dep’t of the Treasury, U.S. Customs Serv., 37 F.L.R.A.
309, 314 (1990)) (alteration in PTO II). In PTO II, the
Authority decided section A.2 satisfied the standard because
PTO “provided no basis for finding that the award precludes the
Agency from exercising its right to retain employees.” Id. at
296. Having approved section A.2, the Authority upheld
Arbitrator Arrigo’s finding that PTO repudiated the first
sentence of section A.2 in failing to submit a request to OPM
and thereby committed an unfair labor practice in violation of
7116(a)(1) and (5) of the Statute. Asserting that Arbitrator
Arrigo’s “finding of repudiation of the first sentence of § A.2
provides a separate and independent basis for his finding of a
violation of § 7116(a)(1) and (5),” the Authority found it
“unnecessary to determine whether the Arbitrator erroneously
found a repudiation of the second sentence of § A.2.” 65
F.L.R.A. at 297. PTO filed a timely notice of appeal.
II.
PTO contends, inter alia, that collateral estoppel precluded
the Authority from finding section A.2 constituted an
it “excessively interferes with management’s rights.” U.S. Dep’t of
Justice, Fed. Bureau of Prisons, 58 F.L.R.A. 109, 111 (2002). In U.S.
EPA, the Authority re-adopted the abrogation standard, which it had
previously applied to arbitral awards from 1990 until 2002. See Dep’t
of the Treasury, U.S. Customs Serv., 37 F.L.R.A. 309, 313-14 (1990)
(replacing excessive interference standard with abrogation standard);
Fed. Bureau of Prisons, supra (reinstating excessive interference
standard).
9
“arrangement.” We agree.4
Under FLRA precedent, collateral estoppel, or issue
preclusion, requires a showing of five elements:
Before the doctrine of collateral estoppel can be
applied, it must be demonstrated that: (1) the same
issue was involved in both cases; (2) that issue was
litigated in the first case; (3) resolving it was necessary
to the decision in the first case; (4) the decision in the
first case, on the issue to be precluded, was final; and
(5) the party attempting to raise the issue in the second
case was fully represented in the first case.
U.S. Dep’t of Energy W. Area Power Admin., Golden, Colo., 56
F.L.R.A. 9, 11 (2000) (citing U.S. Dep’t of the Air Force, Scott
Air Force Base, Ill., 35 F.L.R.A. 978, 982 (1990)). If all five
elements are met, the Authority is bound by its findings in the
earlier case. See Scott Air Force Base, 35 F.L.R.A. at 981. All
five are met here.
Regarding the first and second elements, in each proceeding
the parties litigated the issue whether section A.2 constituted an
appropriate arrangement or, more fundamentally, whether it
constituted an arrangement at all. In Award I, Arbitrator Evans
“found that Section A.2 was intended to address the adverse
effect of special rate erosion that would occur over time as
non-special rate employees received locality pay increases.”
PTO I, 60 F.L.R.A. at 842 (citing Award I at 12). The Authority
upheld this finding of intent but concluded that section A.2 was
not—indeed, could not—be an “arrangement” within the
meaning of section 7106(b)(3) because it “ameliorate[d] adverse
4
In light of our disposition, we do not address PTO’s alternative
grounds for review, including its challenge to the Authority’s adoption
of the abrogation standard. See supra p. 7 note 3 & accompanying
text.
10
effects that result from the operation of law, not the exercise of
a management right.” Id.
In Award II, Arbitrator Arrigo addressed the same issue,
reaching a contrary conclusion. Recognizing that “ ‘the
essential facts and circumstances’ in the case before him were
‘substantially identical’ to those found by the Authority in PTO
I,” he therefore “found, in accordance with that decision, that
§ A.2 of the [Millennium Agreement] affected management’s
right to retain employees.” PTO II, 65 F.L.R.A. at 292 (quoting
Award II at 24-25). He nonetheless found that section A.2 was
indeed an arrangement because “ ‘the entirety of [§] A,’
including § A.2, ‘was negotiated as a quid pro quo for the
elimination of paper patents and the addition of customer service
duties for employees’[—]two changes desired by the Agency
and opposed by the Union.” Id. (quoting Award II at 24)
(bracketed material deleted).5 In PTO II, the Authority upheld
this determination notwithstanding it had rejected the very same
finding in PTO I “as unsupported.” 60 F.L.R.A. at 842-43. In
short, despite contrary outcomes, the two FLRA decisions
involved the same issue—namely, whether section A.2
constitutes an (appropriate) arrangement.
The FLRA contends the two cases did not involve the same
issue because they involved different arbitrators interpreting
5
The “entirety” of section A covers the “Uniform Special Pay
Schedule,” including the directive in section A.1 that PTO submit an
initial request for special rates in 2001 as well as the language in
section A.2 governing the request procedure for subsequent years. In
PTO I, the Authority stated: “Special rates are, by law, a means to
ameliorate recruitment and retention problems.” (citing 5 C.F.R.
§ 530.303(a) (“OPM may increase the minimum rates otherwise
payable under the pay schedules . . . to the extent it considers
necessary to overcome existing or likely significant handicaps in the
recruitment or retention of well-qualified personnel . . . .”)). 60
F.L.R.A. at 841.
11
section A.2 in different awards under different circumstances.
According to the Authority, one arbitrator’s interpretation of a
contract provision should not be binding on a subsequent
arbitrator’s interpretation in a different proceeding. But it is not
Arbitrator Evans’s interpretation in Award I that is binding
here—rather, it is the Authority’s legal conclusion in PTO I that
section A.2 does not qualify as an appropriate arrangement
because it “ameliorates adverse effects that result from the
operation of law, not the exercise of a management right.” 60
F.L.R.A. at 842; see Scott Air Force Base, 35 F.L.R.A. at 981
(on exceptions from arbitrator decision, “Authority is bound by
its finding” in previous decision reviewing administrative law
judge’s unfair labor practice decision); Resp’t’s Br. 21 (“The
Authority’s decision in PTO I set aside the First Award as
contrary to law . . . .”). The force of the Authority’s conclusion
applies no less to the facts in PTO II as to those in PTO I.
The Authority further attempts to distinguish the cases by
asserting that PTO I involved a violation of section A.2’s second
sentence while PTO II found a breach only of its first sentence
only. PTO I, however, made no distinction between the intent
behind the first and the second sentences, stating: “Section A.2,
as interpreted and enforced by the Arbitrator, ameliorates
adverse effects that result from the operation of law, not the
exercise of a management right.” 60 F.L.R.A. at 842.
Moreover, we do not see how the two intertwined sentences can
be viewed in isolation from each other (or assigned different
purposes) inasmuch as they operate together, in sequence, to
offset the annual pay erosion resulting from “the fact that under
5 C.F.R. § 531.606, special rate employees are not permitted to
receive locality pay adjustments,” 60 F.L.R.A. at 842; see also
Award I at 12 (“Section A.2 set up a two-track process to deal
with the potential of locality pay erosion. The first track is set
forth in the first sentence of Section A.2. It requires PTO to
submit a request to OPM for a special pay rate adjustment to
keep-up with the locality pay awarded in the Washington, DC
12
metropolitan area to GS employees. If that failed, which
happened here, the parties ultimately agreed to go down a
second track to find an alternative way to make-up for locality
pay erosion (for 5 years).”). Thus, the “arrangement” issue was
both involved and litigated in each proceeding.6
The third through fifth collateral estoppel elements are
plainly satisfied: In PTO I, the resolution of the “arrangement”
issue was necessary in order to decide whether section A.2 was
an appropriate arrangement so as to be enforceable under section
7106(b)(3) notwithstanding it affected the management right to
retain employees; PTO I was a final FLRA decision which was
judicially unreviewable, see Patent Office Prof’l Ass’n v. FLRA,
180 F. App’x 176 (D.C. Cir. 2006) (dismissing petition for
review for lack of jurisdiction because “FLRA decision
reviewing an arbitration award is statutorily foreclosed ‘unless
the order involves an unfair labor practice under section
711[6].’ ” (quoting 5 U.S.C. § 7123(a)(1))); see also Scott Air
Force Base, 35 F.L.R.A. at 983 (“[U]nless and until a Federal
court of appeals denies enforcement to a decision of the
Authority, that decision must be treated as a final adjudicatory
action.”); and POPA and PTO were fully represented by counsel
throughout each proceeding.
Finally, we reject Intervenor POPA’s claim that the court
lacks jurisdiction to address the collateral estoppel claim
because PTO failed to raise it before the Authority. See 5
U.S.C. 7123(c) (“No objection that has not been urged before
6
POPA argues the appropriate arrangement issue was not
“litigated” in the first proceeding, asserting: “In PTO I, Arbitrator
Evans did not address the issue of whether the [Millennium
Agreement], or any part of it, was intended as an ‘appropriate
arrangement’ within the meaning of § 7106(b)(3). It simply was not
an issue in the first arbitration case.” Intervenor’s Br. 24-25 (emphasis
in original). The issue was thoroughly addressed, however, on review
before the Authority.
13
the Authority, or its designee, shall be considered by the court,
unless the failure or neglect to urge the objection is excused
because of extraordinary circumstances.”). Unlike our
concurring colleague, we do not find it “questionable” whether
PTO adequately raised the objection below. See Concurrence
at 2-3. While it did not use the magic words “collateral
estoppel,” PTO nonetheless argued the substance of a collateral
estoppel defense in its exceptions to Award II. There, it cited
PTO I as “binding Authority precedent,” in which “[t]he
Authority has already determined that Section (A)(2) of the
Millennium Agreement is not an arrangement” because it
“ ‘ameliorates adverse effects that result from the operation of
law, not the exercise of a management right.’ ” Agency’s
Exceptions to Arbitrator’s Award at 14, PTO II (Aug. 28, 2006)
(JA 14) (quoting PTO I, 60 F.L.R.A. at 842). The Authority
understood this argument to implicate collateral estoppel. See
PTO II, 65 F.L.R.A. at 295 n.5 (rejecting argument “Arbitrator
was collaterally estopped from finding § A.2 to be an
appropriate arrangement” “[t]o the extent that the Agency’s
exceptions can be construed as [so] arguing”); id. at 301
(Member Beck, dissenting in part) (“[T]he arbitral proceedings
and the Agency’s exceptions are rife with collateral estoppel
implications. Both parties and the Arbitrator recognized the
implications of the Authority’s prior decision and the Agency
addressed the impact of that decision throughout its exceptions.”
(internal citations omitted)). We do as well.
For the foregoing reasons, we conclude that POPA was
estopped from arguing section A.2 is an appropriate
arrangement intended to lessen the adverse effects from the
elimination of paper files and addition of customer service
14
duties and that the Authority should have so held.7 Accordingly,
we grant PTO’s petition for review.
So ordered.
7
We see no reason to deviate, as our concurring colleague
suggests, from the general rule that “a valid and final adjudicative
determination by an administrative tribunal has the same effects under
the rules of res judicata, subject to the same exceptions and
qualifications, as a judgment of a court.” Restatement (Second) of
Judgments § 83(1). It is true that that the rules are “ ‘applied more
flexibly to administrative adjudications than to judicial proceedings,’ ”
Concurrence at 8-9 (quoting Clark-Cowlitz Joint Operating Agency v.
FERC, 826 F.2d 1074, 1080-81 n.5 (D.C. Cir. 1987) (en banc))—to
take into account that “an ambiguous or broadly worded statute may
admit of more than one interpretation.” Id. at 1080-81 n.5 —but the
rules nonetheless are applied. And this case involves no
administrative peculiarity requiring that they be modified. Nor does
this case suffer from the flaw—fatal in Clark-Cowlitz that the party
asserting preclusion (a losing power plant license applicant) was not
a losing party in the earlier proceeding on which preclusion was
premised. Rather, the applicant and the Commission had been “fellow
travelers” on the prevailing side of the earlier proceeding. Id. at 1080.
Accordingly, the purpose underlying preclusion—which is “meant to
provide an affirmative defense that one party to a prior proceeding
may raise against another party that took an adverse position in that
proceeding” and “to prevent parties from rearguing issues they have
already lost,” id. at 1080 n.5—would not have been served. See id.
Here, by contrast, the POPA sought to relitigate in PTO II the issue it
had lost in PTO I. We thus face the classic issue preclusion scenario.
ROGERS, Circuit Judge, concurring in the judgment: I write
separately regarding the distinction between the collateral
estoppel doctrine and the Administrative Procedure Act’s
requirement, as part of the prohibition on arbitrary or capricious
agency action, that if an agency departs from its precedent it
must provide a reasoned explanation for its decision to do so.
Traditionally, precedent binds adjudicators and collateral
estoppel precludes parties, yet the Authority conflates the two
doctrines. Because the Authority has not provided a reasoned
explanation for its departure from its precedent in U.S. Dep’t of
Commerce, Patent & Trademark Office, 60 F.L.R.A. 839 (2005)
(“PTO I”), pet. for review dismissed, Patent Office Prof’l Ass’n
v. FLRA, 180 F. App’x 176 (D.C. Cir. 2006), I would grant the
petition for review without reaching the question of whether the
Authority was arbitrary and capricious in its application of its
own collateral estoppel doctrine.
I.
The Patent and Trademark Office (“the PTO”) makes two
distinct, but related, claims regarding the Authority’s treatment
of its precedent. The court’s review of both is to determine
whether the Authority’s order was “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.” 5
U.S.C. § 7123(c) (incorporating 5 U.S.C. § 7106's standards);
Nat’l Treasury Emps. Union v. FLRA, 399 F.3d 334, 337 (D.C.
Cir. 2005). First, the PTO contends that the Authority
unlawfully departed from its precedent in PTO I without
providing a reasoned explanation. The Authority “must either
follow its own precedent or ‘provide a reasoned explanation for’
its decision to depart from that precedent.” Nat’l Fed’n of Fed.
Emps. v. FLRA, 412 F.3d 119, 124 (D.C. Cir. 2005) (quoting
Local 32, Am. Fed’n of Gov’t Emps. v. FLRA, 774 F.2d 498, 502
(D.C. Cir. 1985)). Second, the PTO contends that the Authority
erred in applying its collateral estoppel doctrine, which it first
adopted in Dep’t of the Air Force, Scott Air Force Base, Ill., 35
2
F.L.R.A. 978, 982–83 (1990). Here, the PTO observes that the
Authority accepted the PTO’s “binding precedent” argument as
a collateral estoppel argument. The second contention, however,
only needs to be considered if the court rules in favor of the
Authority as to the first. If the Authority did not provide a
reasoned explanation for its departure from its precedent, our
inquiry ends. If it did, then the court must determine if the
Authority was arbitrary and capricious in applying its collateral
estoppel doctrine.
A.
The court grants the petition on the basis of collateral
estoppel. See Op. at 10–12. There are good reasons not to
address this argument.
First, it is questionable whether the PTO sufficiently raised
the issue in its exceptions to the PTO II arbitrator’s award, and
thus whether the court has jurisdiction to address this argument.
“No objection that has not been urged before the Authority, or
its designee, shall be considered by the court, unless the failure
or neglect to urge the objection is excused because of
extraordinary circumstances.” 5 U.S.C. § 7123(c). The PTO
referred to PTO I as “binding precedent” in its exceptions but
did not mention “collateral estoppel” or “issue preclusion.”
Agency’s Exceptions to Arbitrator’s Award at 14, PTO II (Aug.
28, 2006). The Authority’s collateral estoppel doctrine, which
it seemingly applies to itself, see infra Part I.B.,involves a five-
part test, see Scott Air Force Base, 35 F.L.R.A. at 982–83, no
factor of which was expressly mentioned in PTO’s exceptions.
A “generalized objection” that “implicitly” raises arguments is
insufficient to satisfy the jurisdictional requirement. See U.S.
Dep’t of Commerce, Nat’l Oceanic & Atmospheric Admin. v.
NLRB, 7 F.3d 243, 245 (D.C. Cir. 1993); see Nat’l Ass’n of
Gov’t Emps., Local F5-136 v. FLRA, 363 F.3d 468, 479–80
3
(D.C. Cir. 2004) (construing NLRB and FLRA jurisdictional
statutes identically).
Although the dissenting Member in PTO II would have
ruled that the Authority was bound by collateral estoppel to
apply its decision in PTO I, he noted only that the PTO’s
exceptions were “rife with collateral estoppel implications.”
PTO II, 65 F.L.R.A. at 301 (Member Beck, dissenting)
(emphasis added). The majority’s discussion appears only in a
brief footnote, dismissing the claim “[t]o the extent that the
[PTO]’s exceptions can be construed as arguing” collateral
estoppel. Id. at 295 n.5 (emphasis added). Even though the
Authority may have addressed the issue, “[s]ection 7123(c)
requires a party to present its own views to the Authority in
order to preserve a claim for judicial review.” U.S. Dep’t of the
Treasury v. FLRA, __ F.3d __, __; No. 11-1102, slip op. at 10
(D.C. Cir. Feb. 7, 2012) (internal quotation marks and citation
omitted) (emphasis in original). “Discussion of an issue by the
[Authority] does not necessarily prove compliance with section”
7123(c), and “the most delicate [§ 7123(c)] questions arise in
cases such as the one before us, where . . . the objection is not
unmistakable.” Local 900, Int’l Union of Elec., Radio & Mach.
Workers v. NLRB, 727 F.2d 1184, 1191, 1193 (D.C. Cir. 1984).
The “delicate” nature of the issue, combined with the fact that it
is unnecessary to the disposition of this appeal, counsel against
deciding the question.
Second, the Authority’s precedent describing its collateral
estoppel doctrine implies that the Authority itself can be
collaterally estopped in its own proceedings by its prior
decisions. In adopting the collateral estoppel doctrine in Scott
Air Force Base, the Authority spoke in terms of both “the party
[being] precluded,” and “the Authority [being] estopped,” 35
F.L.R.A. at 983; see also U.S. Dep’t of Energy W. Area Power
Admin., Golden, Colo., 56 F.L.R.A. 9, 9-12 (2000) (discussing
4
whether the administrative law judge was collaterally estopped).
To the extent the Authority suggested that collateral estoppel
applies to itself, however, the Authority misconstrues the
collateral estoppel doctrine. In Clark-Cowlitz Joint Operating
Agency v. FERC, 826 F.2d 1074 (D.C. Cir. 1987) (en banc), the
court explained the difference in considering whether the
Federal Energy Regulatory Commission (“FERC”) was
“precluded” from changing its statutory interpretation of a
provision that gave licensing preference to municipal, rather
than private, power plants, after the Eleventh Circuit had already
upheld its opposite interpretation:
It is true as a general matter that preclusion principles
can apply to parties to administrative proceedings . . .
. The doctrine of preclusion is meant to prevent parties
from rearguing issues they have already lost. . . . It
was the decisionmaker, FERC, that changed its
position. Thus, to the extent preclusion analysis is
appropriate at all, it is applicable to the extent FERC
participated as a party before the Eleventh Circuit.
Preclusion principles are meant to provide an
affirmative defense that one party to a prior proceeding
may raise against another party that took an adverse
position in that proceeding.
Id. at 1080 n.5 (second emphasis in original); see also United
States v. Andrews, 479 F.3d 894, 900 (D.C. Cir. 2007) (stating
that collateral estoppel “requires that a party be estopped from
relitigating an identical issue previously decided.”) (emphasis
added); BLACK’S LAW DICTIONARY 298 (9th ed. 2009) (defining
collateral estoppel as “a doctrine barring a party from
relitigating an issue determined against that party in an earlier
action.”) (emphasis added).
5
To the extent collateral estoppel is relevant in the instant
case, it is not a question of whether the Authority is precluded
by its order as the decisionmaker in PTO I, it is instead whether
the Authority was arbitrary and capricious in not precluding the
Union from relitigating against the PTO an issue it had lost in
PTO I.1 Although the Authority, or arbitrators and
administrative law judges may reach an incorrect decision in
applying (or not applying) the collateral estoppel doctrine to
parties’ arguments, they, as adjudicators, are not themselves
“estopped” by prior decisions. Because “collateral estoppel . . .
[is an] affirmative defense[] that must be pleaded,” Rivet v.
Regions Bank of Louisiana, 522 U.S. 470, 476 (1998) (internal
quotation marks and citation omitted), or else is waived, see
Dep’t of Treasury v. FLRA, 762 F.2d 1119, 1121 (D.C. Cir.
1985), it is odd to speak of the Authority as being estopped in
its own proceedings.
This is not to say that an agency cannot ever be precluded
or estopped in administrative proceedings. Instead, an agency
may be precluded, whether in an administrative adjudication or
in court, if it was in the position of a party in an earlier
adversary proceeding and attempts, as a party in a later
1
In concluding that our precedent suggests the PTO’s
exceptions may not have sufficiently raised a collateral estoppel
argument, I suggest no deviation from the general rule that res judicata
(or claim preclusion) and collateral estoppel (or issue preclusion)
apply to final decisions of administrative tribunals. See Op. at 14 n.7.
Had the Authority provided a reasoned explanation for departing from
its precedent, it would be necessary to decide whether the court has
jurisdiction and if so to address the merits of the collateral estoppel
argument. Furthermore, Clark-Cowlitz confirms that the Authority
misapplies the collateral estoppel doctrine to itself; but neither it nor
I suggest decisions of administrative agencies cannot have preclusive
effect.
6
proceeding, to relitigate an issue. Cf. Graphic Commc’ns Int’l
Union, Local 554 v. Salem-Gravure Div. of World Color Press,
Inc., 843 F.2d 1490, 1493 (D.C. Cir. 1988); see also Drummond
v. Comm’r of Soc. Sec, 126 F.3d 837, 841 (6th Cir. 1997);
Medina v. INS, 993 F.2d 499, 503–04 (5th Cir. 1993); 18
CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL
PRACTICE AND PROCEDURE § 4475 (2d ed. 2002) (citing cases).
Because the Authority’s order in PTO I was held to be
unappealable, see Patent Office Prof’l Ass’n v. FLRA, 180 F.
App’x 176 (D.C. Cir. 2006); 5 U.S.C. § 7123(a)(1), the
Authority was not a party in any proceeding to which issue
preclusion could apply to its PTO I order. The importance of
clarity and precision in distinguishing between precedent that
may bind an adjudicator (absent a reasoned explanation for
departure) and the effect of collateral estoppel on parties is
highlighted by the operation of statutes strictly limiting judicial
review of agency adjudications to those claims specifically
urged before the agency, as illustrated above. See, e.g., 5 U.S.C.
§ 7123(c) (governing judicial review of Authority orders); 29
U.S.C. § 160(e) (governing judicial review of National Labor
Relations Board orders); 15 U.S.C. § 717r(b) (governing judicial
review of Federal Energy Regulatory Commission orders).
B.
As the court recounts, see Op. at 4–5, in PTO I, the
Authority concluded that Section A.22 of the parties’ agreement
2
Section A.2 of the parties’ agreement provides:
The [PTO] shall request OPM approval for the next five years
to increase the special pay schedule so as to maintain the 10%
and 15% salary differentials relative to the updated GS rates,
in a manner consistent with OPM regulations. If OPM refuses
the request, the Agency shall enter into discussions with [the
Union] in order to provide substantially equivalent
7
of January 4, 2001, was not an “appropriate arrangement” under
5 U.S.C. § 7106(b)(3)3 because it “ameliorates adverse effects
that result from the operation of law, not the exercise of a
management right.” PTO I, 60 F.L.R.A. at 842. In particular,
the Authority rejected the Union’s argument that Section A.2
was instead an “appropriate arrangement” in response to the
PTO’s elimination of paper patent files and inclusion of a
customer service element in performance plans. Id. To the
contrary, the Authority upheld in the instant case an arbitrator’s
conclusion that Section A.2 was an “appropriate arrangement”
aimed at ameliorating the effects of the elimination of paper
patent files and the introduction of customer service
requirements. See U.S. Dep’t of Commerce Patent &
Trademark Office, 65 F.L.R.A. 290, 295–96 (2010) (“PTO II”).
The Authority’s denial that it departed from its PTO I
precedent is unavailing. As the court explains, see Op. at 10–11,
the Authority relied on the proposition that different arbitrators
can interpret the same contract differently based on their being
“presented with different facts and arguments,” PTO II, 65
F.L.R.A. at 295, to suggest that there has been no departure from
precedent. This is plainly wrong. The Authority, not the
arbitrator, ruled in PTO I that Section A.2 was unlawful under
5 U.S.C. § 7106(b)(3). The Authority must, consistent with the
alternatives.
For purposes of the instant appeal there is no relevant distinction
between the first and second sentences. See Op. at 11–12.
3
5 U.S.C.§ 7106, “Management rights,” provides in
subsection (b)(3): “Nothing in this section shall preclude any agency
and any labor organization from negotiating . . . (3) appropriate
arrangements for employees adversely affected by the exercise of any
authority under this section by such management officials.”
8
Administrative Procedure Act’s requirements, squarely address
why this precedent should be changed: “[A]n agency changing
its course must supply a reasoned analysis indicating that prior
policies and standards are being deliberately changed, not
casually ignored, and if an agency glosses over or swerves from
prior precedents without discussion it may cross the line from
tolerably terse to intolerably mute.” W & M Props. of Conn.,
Inc. v. NLRB, 514 F.3d 1341, 1347 (D.C. Cir. 2008) (internal
quotation marks and citation omitted) (emphasis added).
Because the Authority failed to provide a reasoned analysis for
departing from its precedent, I concur in the judgment granting
the petition for review.
II.
A final note regarding the Authority’s collateral estoppel
doctrine is in order. The Union as intervenor contends that
because PTO I was held unappealable, it was not collaterally
estopped by PTO I from arguing in the instant case that Section
A.2 was an “appropriate arrangement.” Because PTO I did not
involve review of an unfair labor practice arbitration, this court
lacked jurisdiction to review the Authority’s order. See Patent
Office Prof’l Ass’n, 180 F. App’x 176; 5 U.S.C. § 7123(a)(1).
As a general matter, collateral estoppel does not apply to
preclude relitigation of an issue when the earlier determination
was unappealable. See RESTATEMENT (SECOND) OF JUDGMENTS
§ 28 (1982). “The fact that an agency adjudication was
subjected to judicial review and was upheld is a factor that
supports giving it preclusive effect.” Id. § 83, cmt. c. The
purpose of this exception is to “ensure the quality of the initial
decision,” 18 CHARLES ALAN WRIGHT & ARTHUR R. MILLER,
FEDERAL PRACTICE AND PROCEDURE § 4421 (2d ed. 2002),
before binding future litigants to it. The court’s precedent is
clear that a party is not precluded, by an unappealable agency
9
determination, from litigating an issue in a later court
proceeding. See Sea-Land Serv., Inc. v. Dep’t of Transp., 137
F.3d 640, 648 (D.C. Cir. 1998); Alabama Mun. Distribs. Grp. v.
FERC, 312 F.3d 470, 473 (D.C. Cir. 2002). Although the court
has yet to decide whether this exception applies to prevent
preclusion in subsequent administrative proceedings, it has
emphasized that “administrative proceedings vary much more
widely than judicial proceedings” and thus “as a general matter
preclusion principles are to be applied more flexibly to
administrative adjudications than to judicial proceedings.”
Clark-Cowlitz, 826 F.2d 1074, 1080–81 n.5; see also
RESTATEMENT (2D) JUDGMENTS § 83(1) & cmt. f (applying rules
and exceptions for judicial collateral estoppel, §§ 27-28, to
administrative collateral estoppel).
In Scott Air Force Base, the Authority adopted its collateral
estoppel doctrine based on the requirements that “courts have
determined . . . must be satisfied.” 35 F.L.R.A. at 982. In so
doing the Authority had no occasion to determine whether the
general exception to collateral estoppel for unappealable
determinations would also apply to the Authority’s application
of the collateral estoppel doctrine; Scott Air Force Base
involved Authority review of unfair labor practice arbitrations,
see id. at 983, cases over which judicial review is available, see
5 U.S.C. § 7123(a)(1). Similarly, the Authority had no occasion
to consider whether other general exceptions to the doctrine
would apply in its proceedings, for example where there are
intervening changes in law, where factors relating to the
allocation of jurisdiction between two adjudicative bodies are
implicated, or where the burden of persuasion has shifted
between the parties in the subsequent action. See RESTATEMENT
(SECOND) OF JUDGMENTS § 28(1)-(5) (1982), see also id. § 83(1)
& cmt. f.
10
The Union’s contention raises the appealability question
unaddressed by the Authority in Scott Air Force Base and
unanswered by this court’s precedent. The reason PTO I was
unappealable is, however, critical to whether the exception
applies. There is a “major distinction [] between decisions of a
sort that ordinarily cannot be appealed and decisions that are
ineligible for appeal only because of some special
circumstance.” 18A WRIGHT & MILLER § 4433. Preclusion is
denied to cases of the latter category, e.g., where a case becomes
moot pending an appeal. Id. On the other hand, “[d]ecisions of
a sort that ordinarily cannot be appealed may be surrounded by
alternative protections or special policies that support
preclusion.” Id. Such is the case here, where PTO I was not
made unappealable by special circumstances, but by Congress.
In enacting 5 U.S.C. § 7123(a)(1), Congress was concerned with
aligning the scope of judicial review of private and public sector
arbitrations and “the conferees determined it would be
inappropriate for there to be subsequent review by the Court of
Appeals in such matters.” H.R. Conf. Rep. No. 95-1717, at 153
(1978), reprinted in 1978 U.S.C.C.A.N. 2860, at 2887 (1978);
see U.S. Dept Navy v. FLRA, 665 F.3d 1339, 1344 (D.C. Cir.
2012).
Because Congress deemed the Authority qualified to
provide the final judgment on arbitration awards not involving
unfair labor practice allegations, the concern underlying the
general rule that only appealable decisions have preclusive
effects — i.e., that appellate review “ensure[s] the quality of the
initial decision,” 18 WRIGHT & MILLER, § 4421 — does not
apply. And so the Authority erred in failing to apply collateral
estoppel to the Union’s attempt to reargue that Section A.2 was
an “appropriate arrangement.” The broader question, whether
this and other exceptions to the collateral estoppel doctrine also
apply to agencies’ applications of the doctrine (as they do to
courts), remains to be decided another day.