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
1
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
2
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
4
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
5
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
6
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
7
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
8
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.
9
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
10
For the foregoing reasons, the decision of the district court
granting Beaird summary judgment and vacating the award of the
Arbitrator is
AFFIRMED.
11