Champion Intl Corp v. United Paperworkers

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CHAMPION INTERNATIONAL

CORPORATION,

Plaintiff-Appellant,

v.

No. 98-1148

UNITED PAPERWORKERS

INTERNATIONAL UNION, AFL-CIO;

UNITED PAPERWORKERS

INTERNATIONAL UNION, LOCAL 507,

Defendants-Appellees.

Appeal from the United States District Court

for the Western District of North Carolina, at Asheville.

Max O. Cogburn, Magistrate Judge.

(CA-96-280-1-C)

Argued: October 28, 1998

Decided: February 23, 1999

Before NIEMEYER and MICHAEL, Circuit Judges, and

BOYLE, Chief United States District Judge for the

Eastern District of North Carolina, sitting by designation.

_________________________________________________________________

Vacated and remanded by published opinion. Judge Niemeyer wrote

the opinion, in which Judge Michael and Chief Judge Boyle joined.

_________________________________________________________________

COUNSEL

ARGUED: Gregory Phillip McGuire, HAYNSWORTH, BALDWIN,

JOHNSON & GREAVES, Greensboro, North Carolina, for Appel-

lant. Joyce Murphy Brooks, Charlotte, North Carolina, for Appellees.

OPINION

NIEMEYER, Circuit Judge:

As a result of a general reduction in force implemented by Cham-

pion International Corporation at its Canton Mill facility in Canton,

North Carolina, 17 employees, whose "general utility" crew positions

had been eliminated, filed a grievance alleging the impairment or

abrogation of job bidding rights given them under their collective bar-

gaining agreement. The arbitrator misinterpreted the grievance and

issued an award under a separate and special plant-modernization

agreement negotiated by Champion and the Union to compensate

only those employees whose positions were eliminated by the earlier

shutdown of a specific paper-making machine at the plant.

On appeal from the district court's affirmance of the award, we

conclude that although the grievants' claim remains arbitrable, any

remedy must derive from the collective bargaining agreement and not

from the special plant-modernization agreement. Accordingly, we

vacate the award and remand to enable the grievants to commence a

new arbitration of their grievance if they so choose.

I

In 1991, Champion International Corporation, a paper manufac-

turer, undertook to modernize its Canton Mill facility. The modern-

ization project involved permanently shutting down"No. 14

Machine" and opening up a new, smaller pulp mill. At the time of its

decision, Champion was party to a collective bargaining agreement

with the United Paperworkers International Union, AFL-CIO, and its

affiliated Local 507 (hereafter collectively, the"Union"). Accord-

ingly, Champion negotiated with the Union a specific agreement to

address the procedures for compensating those hourly employees at

the Canton Mill whose positions would be eliminated as a direct

result of the modernization project. This agreement, executed on Sep-

tember 19, 1991, was known as "Policy 683."

Policy 683, which was to be in effect only until December 31,

1993, authorized either severance pay or stabilization bonuses to

2

workers whose jobs were directly affected by the modernization proj-

ect. The severance pay provisions entitled employees to receive a

lump sum severance payment equal to three weeks' pay plus one

week's pay for each year of service and one additional week's pay for

each year of service over 15 years. By receiving a severance payment,

the employee agreed to waive all "recall and/or bumping rights" under

the collective bargaining agreement. Policy 683 also provided for sta-

bilization bonuses as an "incentive to keep people in the old manufac-

turing facility" -- a way to maintain the productivity of the soon-to-

be retired No. 14 Machine by retaining the employees who operated

it until the new mill was ready. Without the monetary inducement of

the stabilization bonus, employees would likely bid out for other jobs

within the mill. In effect, the bonus compensated employees for

delaying exercise of their job bidding rights under the collective bar-

gaining agreement. The stabilization bonuses ranged from $1,000 to

$10,000, depending on how long the employee remained at work on

No. 14 Machine.

Specific procedures for making claims for payment under Policy

683 and for reviewing denials of claims were set out in the Policy.

Policy 683 provided that all claims were to be made to an administra-

tor and that appeals from denials of claims could be taken internally.

It also provided that if an employee were denied a claim "in whole

or in part," the employee could "seek assistance from the United

States Department of Labor, or such employee [could] file suit in state

or federal court." Policy 683 did not mention arbitration.

A year after Policy 683 was executed, Champion undertook an

independent, across-the-board reduction in workforce in response to

the deteriorating overall financial condition of the Canton Mill facil-

ity. Again, Champion negotiated an agreement with the Union to

implement the reduction in force. This agreement provided for sever-

ance payments to employees who elected to be severed and a proce-

dure for filling the vacancies created by those elections through the

"normal posting and [job] bidding process." The agreement did not,

however, provide for any kind of stabilization bonus comparable to

those provided for in Policy 683.

As a result of the general reduction in force, the entire "general

utility" workgroup was notified in February 1994 that their positions

3

were to be eliminated in June 1994. The 17 employees in that group

then filed a grievance against Champion under the collective bargain-

ing agreement, claiming that because they did not learn soon enough

of the elimination of their workgroup, they lost job bidding rights. In

their grievance, they stated:

Company representatives admittedly knew that the Gen.

Util. crew would be eliminated in June '94. By not sharing

this info., and deliberately covering up the matter, crew

employees were not given the right to explore alternative

avenues of employment within the mill. (Job bidding).

Request displacement compensation equal to #14 for each

crew member $7,000. We request total of $119,000.00.

Although these 17 employees alluded in their grievance to compensa-

tion "equal to #14 for each crew member $7,000" (emphasis added),

it is undisputed that these 17 employees were not terminated by the

shutdown of Machine No. 14 and therefore were not identified in Pol-

icy 683 as those who were entitled to compensation as a direct result

of modernization.

These employees' grievance was denied at each step of Champi-

on's internal grievance procedure provided by the collective bargain-

ing agreement and then was submitted to final, binding arbitration in

May 1996. The arbitrator to whom the matter was assigned undertook

to decide the following two issues:

[Is] the Grievants' claim for Stabilization Bonus payments

under Severance Plan No. 683 substantively arbitrable?

Whether the Company violated the Collective Bargaining

Agreement by withholding the Stabilization Bonus pay-

ments provided in Severance Plan No. 683 to the utility

crew employees in the Paper and Board department?

In rendering an award for the 17 employees, the arbitrator concluded

that "the Grievants' claim for stabilization bonus payment is arbitra-

ble" and that Champion "violated the Agreement by withholding the

Stabilization Bonus payments provided in Severance Plan No. 683 to

the utility crew employees in the Paper and Board department."

4

Seeking review of the award in the courts, Champion filed this

action under § 301 of the Labor Management Relations Act, 29

U.S.C. § 185(a), to bar enforcement of the award, and the Union filed

a cross-claim for enforcement. On cross motions for summary judg-

ment, the district court entered judgment in favor of the Union,

enforcing the award of stabilization bonuses to the 17 employees.

On this appeal, Champion contends (1) that because there was no

evidence of economic loss by the grievants, the $119,000 award was

punitive, and punitive damages were not authorized by either the col-

lective bargaining agreement or Policy 683; (2) that the 17 grievants

were not covered by Policy 683 and therefore not entitled to the stabi-

lization bonuses provided for in the Policy; and (3) that disputes aris-

ing under Policy 683 are not arbitrable.

II

The logical order for review of the district court's judgment affirm-

ing the arbitration award in this case suggests that we determine first,

whether the grievance filed by the 17 employees is a matter for arbi-

tration, and second, whether the arbitration award itself draws its

essence from the agreement providing for the arbitration. The control-

ling principles for addressing these questions are well established.

Because the requirement to submit to arbitration is solely a matter

of contract, arbitrability is a matter of contract interpretation which is

"undeniably an issue for judicial determination." AT&T Technologies,

Inc. v. Communications Workers, 475 U.S. 643, 648-49 (1986).

Therefore, "[u]nless the parties clearly and unmistakably provide oth-

erwise, the question of whether the parties agreed to arbitrate is to be

decided by the court, not the arbitrator." Id. at 649; see also Brown

v. Trans World Airlines, 127 F.3d 337, 340 (4th Cir. 1997) ("The

determination of the arbitration provision's scope and meaning is for

the court to resolve"); Local 637, Int'l Bhd. of Elec. Workers v. Davis

H. Elliot Co., 13 F.3d 129, 132 (4th Cir. 1993) ("Were arbitrators

given the authority to decide their own jurisdiction, arbitration clauses

would be far less popular").

But for matters within the scope of an arbitration clause, the arbi-

trator's award is final and binding. A court does not "sit to hear

5

claims of factual or legal error by an arbitrator," and must defer to the

arbitrator "as long as the arbitrator is even arguably construing or

applying the contract." United Paperworkers Int'l Union v. Misco,

Inc., 484 U.S. 29, 38 (1987); see also Mountaineer Gas Co. v. Oil,

Chemical & Atomic Workers Int'l Union, 76 F.3d 606, 608 (4th Cir.

1996) (describing the court's role as determining"only whether the

arbitrator did his job -- not whether he did it well, correctly, or rea-

sonably, but simply whether he did it" (citing Remmey v. PaineWeb-

ber, Inc., 32 F.3d 143, 146 (4th Cir. 1994))).

The court nevertheless retains the obligation to insure that the arbi-

trator has acted within the contractually-drawn boundaries of his

authority. This is important because

an arbitrator . . . does not sit to dispense his own brand of

industrial justice. . . . [H]is award is legitimate only so long

as it draws its essence from the collective bargaining agree-

ment. When the arbitrator's words manifest an infidelity to

this obligation, courts have no choice but to refuse enforce-

ment of the award.

United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593,

597 (1960). Thus, a court must vacate an arbitrator's award if it vio-

lates clearly established public policy, fails to draw its essence from

the collective bargaining agreement, or reflects merely the arbitrator's

personal notions of right and wrong. See Mountaineer Gas, 76 F.3d

at 608.

While an arbitrator is generally under no obligation to provide rea-

sons for his decision, Enterprise Wheel, 363 U.S. at 598, a court

reviewing an arbitration award must satisfy itself that the award is

grounded in the collective bargaining agreement rather than in the

arbitrator's "own brand of industrial justice," id. at 597. One way to

test the validity of an arbitration award on this basis is to ask "whether

the award ignored the plain language of the [collective bargaining

agreement]." Mountaineer Gas, 76 F.3d at 608.

III

Turning now to the case before us, the 17 grievants complained

that Champion's delay in informing them that the"general utility"

6

crew jobs would be eliminated by the across-the-board reduction in

force interfered with their ability to bid for other jobs. They requested

compensation for this alleged abridgement of rights guaranteed by the

collective bargaining agreement in an amount equal to the stabiliza-

tion bonuses provided for under Policy 683, but they did not request

the actual bonuses. The arbitrator first misinterpreted this grievance

to present the question of whether the grievants' claims for "Stabiliza-

tion Bonus payments under Severance Plan No. 683 [were] substan-

tively arbitrable." (Emphasis added). The arbitrator concluded that

Policy 683 was a continuing negotiation with respect to the underly-

ing collective bargaining agreement and that upon its execution, Pol-

icy 683 became a part of the collective bargaining agreement. In

addition to concluding that Policy 683 was not an independent agree-

ment, the arbitrator also concluded that Policy 683 did not modify the

collective bargaining agreement's arbitration clause. Accordingly, the

arbitrator relied on the arbitration clause of the underlying collective

bargaining agreement for jurisdiction to enter his award of stabiliza-

tion bonuses under Policy 683.

While it is true that the collective bargaining agreement provided

the arbitrator with jurisdiction to "interpret, apply, or determine com-

pliance with the provisions of this [collective bargaining] Agree-

ment," it does not follow that disputes under Policy 683 must

therefore be resolved through arbitration. On the contrary, Policy 683

provided that initial claims for stabilization bonuses were to be made

to Champion's plan administrator who was given, under Policy 683,

"the power and authority in its sole, absolute and uncontrolled discre-

tion to control and manage the operation and administration of the

Policy." Any disagreement with the decision of the administrator

would have to be resolved by appeals, first to the vice president of

"Benefits" and then to the vice president of"Employee Staffing and

Development." Policy 683 then provided that a claimant could seek

further relief from the Department of Labor or from state or federal

courts.

The confusion surrounding the arbitrability of this dispute stems

from the arbitrator's misinterpretation of the grievance as arising

under Policy 683 rather than under the job bidding procedures of the

collective bargaining agreement and then his further misinterpretation

that disputes over Policy 683 benefits are arbitrable under the collec-

7

tive bargaining agreement without regard for the dispute resolution

mechanisms provided by Policy 683. If he had correctly read the

grievants' claim as arising under the job-bidding provisions of the

collective bargaining agreement, the nature of Policy 683's benefits

and their arbitrability would never have come under consideration.

Although it is true that the grievants did request damages in an

amount "equal to" the stabilization bonuses awarded to employees

whose employment was terminated by the close of No. 14 Machine,

it is also clear that they neither claimed those specific benefits nor

explicitly mentioned Policy 683. Their reference to"#14" was merely

an attempt at valuing compensation for a waiver of job bidding rights

by alluding to a measure agreed upon in another, nonapplicable agree-

ment.

On its face, the grievance rested on the collective bargaining agree-

ment without regard to Policy 683. A grievance claiming lost or com-

promised job bidding rights could only be made under Article VIII(F)

of the collective bargaining agreement and under Article XXX(B)

which requires notice of "change [in] methods of operation . . . which

may result in elimination of jobs." Although the grievants -- who

completed the grievance form without the assistance of counsel -- did

not invoke these specific articles of the collective bargaining agree-

ment, they did use the term "Job Bidding" to specify the contractual

rights they claim were abridged by Champion. In their own words, the

employees identified their claimed harm as a loss of the "right to

explore alternative avenues of employment within the mill." In

essence, the grievants claimed that in reliance on Champion's state-

ments that their jobs were not in jeopardy in the across-the-board

workforce reduction, "general utility" crew members refrained from

using their often considerable seniority to bid out to other jobs at the

Canton Mill. Had they been advised otherwise, the grievants alleged,

they would have exercised their bidding rights under the collective

bargaining agreement and would consequently have enjoyed greater

seniority, wages, or promotion potential. They allege that by failing

to disclose timely the necessity of eliminating the"general utility"

classification, Champion caused the grievants involuntarily to waive

their job bidding rights.

This claim, whether meritorious or not, clearly arises under collec-

tive bargaining agreement provisions unrelated to Policy 683, and

8

therefore the 17 grievants' claim is a matter suitable for arbitration as

provided in the collective bargaining agreement. In reaching this con-

clusion, we look not to the arbitrator's framing of the issue, but

instead to whether the factual situation that gave rise to the complaint,

as well as the rights that were allegedly abridged, are within the scope

of the collective bargaining agreement's arbitration clause as inter-

preted by the court. See J. J. Ryan & Sons, Inc. v. Rhone Poulenc Tex-

tile, S.A., 863 F.2d 315, 319 (4th Cir. 1988) (noting that the

arbitrability determination centers on "whether the factual allegations

underlying the claim are within the scope of the arbitration clause,

regardless of the legal label assigned to the claim").

IV

Having thus concluded that the grievance in this case was arbitra-

ble, we must still determine whether the arbitrator's award drew its

essence from the collective bargaining agreement. See Misco, 484

U.S. at 36 (noting that an arbitrator's award must"draw[ ] its essence

from the collective bargaining agreement" and not from "his own

brand of industrial justice" (internal quotation marks omitted)). On

this issue, the arbitrator continued to misconstrue the grievants' claim

as actually demanding stabilization bonuses under Policy 683, and

through that misconstruction, the arbitrator exceeded the scope of his

authority when he actually awarded those stabilization bonuses to the

17 grievants. Regardless of whether the arbitrator relied on the collec-

tive bargaining agreement or on Policy 683, his award failed to draw

its essence from either agreement.

The arbitrator recognized that Policy 683 was executed between

Champion and the Union to provide severance payments and stabili-

zation bonuses to specific employees whose employment was termi-

nated as a result of the shutdown of No. 14 Machine. Policy 683

provides explicitly that its benefits apply only to employees "whose

employment is or will be terminated as a result of the Modernization

Project" and can be granted only through December 31, 1993. Thus,

the arbitrator correctly concluded that "[t]he only place the Stabiliza-

tion Bonus is provided for is in [Policy No. 683], [and] [t]o qualify

for the bonus, it must be shown that these employees were covered

by [Policy 683]." The arbitrator also recognized that the 17 grievants

before him were not terminated by the shutdown of No. 14 Machine

9

but were reclassified as a result of the across-the-board reduction in

force. He found this as a fact, stating that the restructuring was

undertaken "solely for economic purposes unrelated to the moderniza-

tion project [represented by the close of No. 14 Machine]." But in

order to circumvent the obvious conclusion that the grievants there-

fore were not eligible for stabilization bonuses under Policy 683, the

arbitrator bypassed the language of Policy 683 and generally linked

the reasons for Policy 683 to the reason for the general reduction in

force. The arbitrator stated:

[Policy No. 683] directly caused the closing of the No. 14

Pulp machine. This closing resulted in the actions taken

against these employees. Thus, indirectly, these employees

were affected by the closing of the No. 14 Pulp machine.

The entire process is intricately intertwined. It is difficult to

claim and justify not covering these employees under the

stabilization bonus plan of [Policy 683].

Through this reasoning, the arbitrator concluded that employee bene-

fits awardable under Policy 683 should be given to any employee

whose job was eliminated, regardless of the employee's eligibility

under the Policy. And in doing so, he went beyond the authorizing

boundaries of that agreement and awarded stabilization bonuses to

non-qualifying employees whose jobs were eliminated as a result of

general economic conditions after the time for payment of the

bonuses had expired. The arbitrator had no contractual authority from

Policy 683 to make his award, and thus the award could not be justi-

fied by that Policy.

Because the award of stabilization bonuses to these grievants does

not draw its essence from Policy 683, the award is only legitimate if

it is derived from the terms of the underlying collective bargaining

agreement. But this agreement makes no provision for stabilization

bonuses of any kind. It is therefore not surprising that nowhere in his

confusing and internally inconsistent ruling does the arbitrator men-

tion any provisions of the collective bargaining agreement to support

the award. In a section entitled "Relevant Contract Provisions" earlier

in his written opinion, the arbitrator cites, without comment, Article

XXX(B), the collective bargaining agreement's provision requiring

communication between Champion and the Union on projected job

10

eliminations, but he never refers to it in the merits section of the

award. See Clinchfield Coal Co. v. Dist. 28, United Mine Workers,

720 F.2d 1365, 1369 (4th Cir. 1983) (noting that"stating an issue

without discussing it" does not provide an adequate contractual basis

for an arbitration award).

Equally problematic is the arbitrator's failure to mention and to

address Article VIII(F), the job bidding procedures actually invoked

by the grievants and spelled out in the collective bargaining agree-

ment. See Mountaineer Gas, 76 F.3d at 608 (noting that an arbitration

award that "ignore[s] the plain language" of the collective bargaining

agreement cannot stand). These procedures delineate the rights the

grievants may have under the collective bargaining agreement. Fail-

ure to construe these contractual provisions is evidence of a basic

abdication of an arbitrator's duty to apply the contract that governs

the grievance. See Clinchfield Coal, 720 F.2d at 1369 ("Where, as

here, the arbitrator fails to discuss critical contract terminology, which

terminology might reasonably require an opposite result, the award

cannot be considered to draw its essence from the contract").

Because the arbitrator failed to apply the underlying collective bar-

gaining agreement and instead attempted to apply the terms of Policy

683 which, as he explicitly recognized, did not apply, the only infer-

ence we can draw is that his award was based on something other the

collective bargaining agreement or Policy 683. It appears most likely

that he drew on his own notions of fairness as revealed by his state-

ment, "It is difficult to claim and justify not covering these employees

under the stabilization bonus plan [of Policy 683]." Difficult or not to

justify, these employees' grievance did not arise under Policy 683,

and the arbitrator's personal notions of fairness cannot be the basis for

awarding compensation to them under Policy 683. Because the arbi-

trator's award of stabilization bonuses failed to draw its essence from

any applicable agreement, it is illegal and must be vacated.

V

This conclusion, however, does not end the matter. The 17 griev-

ants filed an arbitrable claim for impairment of job bidding rights,

which has not yet been arbitrated under the collective bargaining

agreement. Having filed a grievance under the collective bargaining

11

agreement, the grievants are now entitled to pursue arbitration of that

still-pending claim.

Accordingly, we vacate the arbitration award and remand this case

to enable the 17 grievants to pursue a new arbitration of their griev-

ance if they wish to do so.

VACATED AND REMANDED

12