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International Union of Painters and Allied Trades District Council 5 v. Alliance Partitions Systems

United States District Court, W.D. Washington, Seattle

July 26, 2019

INTERNATIONAL UNION OF PAINTERS AND ALLIED TRADES DISTRICT COUNCIL 5, Plaintiff,
v.
ALLIANCE PARTITION SYSTEMS, et al., Defendants.

          ORDER VACATING ARBITRATION AWARD

          ROBERT S. LASNIK, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on “Defendants' Motion to Confirm the Arbitration Award Pursuant to Fed.R.Civ.P. 12(c)” (Dkt. # 26) and “Plaintiff IUPAT District Council 5's Motion for Judgment on the Pleadings to Vacate Arbitration Award” (Dkt. # 47). The plaintiff union seeks to vacate the arbitrator's finding that it violated the most favored nation clause of the parties' collective bargaining agreement (“CBA”) and the chosen remedy for that breach. The defendant employers seek to have the arbitration award confirmed.

         Having reviewed the memoranda and exhibits submitted by the parties, along with the remainder of the record, [1] the Court finds as follows:

         BACKGROUND

         Plaintiff is a labor union representing, inter alia, workers involved in the commercial drywall industry. Defendants are commercial drywall contractors who employ plaintiff's members. They are also members of an industry association, the Northwest Wall & Ceiling Contractors Association (“NWCCA”). The NWCCA utilizes an “Industry Fund” to pay for its operations and activities and to contribute to the Northwest Wall & Ceiling Bureau (“NWCB”), another trade association that provides resources and services for all industry members and their customers.

         NWCCA, representing defendants, negotiated a CBA with the union effective July 1, 2016 - June 30, 2019. The CBA requires each signatory employer to contribute 35¢ to the “Industry Fund” for every hour of compensable bargaining unit work. Article I, Section 1.5 of the CBA contains what is commonly referred to as a “most favored nation” clause. Essentially, the union promised that it would require any other drywall contractors with whom it contracted to pay the same “total employer cost” package as defendants and, if the union were to negotiate a contract with another contractor that had more favorable economic terms, defendants would get the benefit of those favorable terms. Dkt. # 1 at 15.

         Performance Contracting Incorporated (“PCI”) withdrew from the NWCCA prior to completion of the negotiations over the 2016-2019 CBA. The company no longer considered membership in NWCCA a net benefit when it compared the cost of membership with the services provided. Because NWCCA no longer represented PCI, it negotiated its own labor agreement with the union. The PCI agreement is similar in all relevant respects to the one negotiated by the NWCCA for defendants, including a requirement that PCI contribute 35¢ to an industry fund for every hour of compensable bargaining unit work.[2] This industry fund is administered by PCI, however, rather than by NWCCA.

         On October 11, 2016, defendants filed a grievance against the union, asserting that the union violated Article I, Section 1.5 of the CBA. Defendants argued that, because the agreement the union entered with PCI allowed PCI to administer its industry fund, PCI could and did use those monies to offset overhead costs rather than to pay for industry-wide resources and services, resulting in a “more favorable” economic term than that negotiated by defendants. The union denied any breach or violation, but offered to permit defendants to create and fund their own self-administered “industry funds.” That offer was not accepted, and the dispute was submitted to arbitration.

         Following an evidentiary hearing, the arbitrator found that the union had failed to vigorously enforce contractual provisions governing PCI's use of its industry fund. According to the arbitrator, a Memorandum of Understanding (“MOU”) the union had with PCI required PCI to expend some portion of its industry fund on promotional activities related to the drywall industry, but the union allowed PCI to use the vast majority of the fund to pay for training and other overhead expenses with no discernable benefit to the industry in general. The arbitrator found that this allocation of fund monies resulted in an economic benefit to PCI over defendants and constituted a violation of Article 1.5 of the CBA. The arbitrator concluded that, had PCI paid a portion of its industry fund to the NWCB for some other industry-wide benefit, “it would not have been disproportionately advantaged from its self-administered fund.” Dkt. # 1 at 114. Because the arbitrator did not have any authority over PCI or the union's contractual relationship with PCI, he directed the union to encourage PCI to make a retroactive payment to NWCB of 15¢ per compensable hour for the entire term of the CBA (2016-2019) or, if its efforts were unsuccessful, to make the payment itself.

         The union argues that the arbitrator's award is not based on the collective bargaining agreement and represents nothing more than his own brand of industrial justice. In particular, the union argues that any violation of the most favored nation clause arose from PCI's internal business decisions regarding how to allocate its industry fund. In addition, plaintiff challenges the remedy crafted by the arbitrator, arguing that he ignored the clear and specific remedial provision found in the relevant section of the CBA.

         STANDARD OF REVIEW

         In the labor context, the grievance mechanisms specified in a collective bargaining agreement, including arbitration, are not only a means of resolving disputes, but also “a vehicle by which meaning and content are given to the collective bargaining agreement.” Sw. Reg. Council of Carpenters v. Drywall Dynamics, Inc., 823 F.3d 524, 529-30 (9th Cir. 2016) (quoting United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 581 (1960)).

Because of the centrality of the arbitration process to stable collective bargaining relationships, courts reviewing labor arbitration awards afford a nearly unparalleled degree of deference to the arbitrator's decision. This deference applies both to the arbitrator's interpretation of the parties' agreement and to his findings of fact.
With regard to contractual interpretation, as the Supreme Court has admonished, the parties have authorized the arbitrator to give meaning to the language of the agreement, so a court should not reject an award on the ground that the arbitrator misread the contract. We have taken this instruction to heart, explaining that even if we were convinced that the arbitrator misread the contract or erred in interpreting it, such a conviction would not be a permissible ground for vacating the award. Indeed, since the labor arbitrator is designed to function in essence as the parties' surrogate, he cannot “misinterpret” a collective bargaining agreement. In this sense, his award ...

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