Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-16-1995

United Transp v. Suburban Tran
Precedential or Non-Precedential:

Docket 94-5336




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            UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT

                     ___________

                     No. 94-5336
                     ___________


   UNITED TRANSPORTATION UNION LOCAL 1589


                   vs.

   SUBURBAN TRANSIT CORP.


   SUBURBAN TRANSIT CORP., a corporation of the
   State of New Jersey

                   vs.

   UNITED TRANSPORTATION UNION LOCAL 1589,
   AFL-CIO

          United Transportation Union Local 1589,

                          Appellant.


                     ___________


   APPEAL FROM THE UNITED STATES DISTRICT COURT
          FOR THE DISTRICT OF NEW JERSEY

   (D.C. Civil Nos. 93-cv-05728 and 93-cv-05769)

                     ___________


               ARGUED DECEMBER 6, 1994

BEFORE:   STAPLETON, ROTH and LEWIS, Circuit Judges.

                (Filed March 16, 1995)

                     ___________
Timothy R. Hott (ARGUED)
Hott & Margolis
591 Summit Avenue, Suite 300
Jersey City, NJ 07306

          Attorney for Appellant


Francis A. Mastro (ARGUED)
Apruzzese, McDermott, Mastro & Murphy
25 Independence Boulevard
Post Office Box 112
Liberty Corner, NJ 07938

          Attorney for Appellee


                            ___________

                        OPINION OF THE COURT
                            ___________



LEWIS, Circuit Judge.

          United Transportation Union, Local 1589, AFL-CIO (the

"Union") appeals a district court order vacating an arbitration

award in favor of Joseph Nagy, a former employee of Suburban

Transit Corporation ("Suburban").   Because we agree with the

Union that the district court failed to accord the arbitration
award proper deference, we will reverse.
                                  I.

                                  A.

             Suburban and the Union are parties to a collective

bargaining agreement ("CBA").     Under the CBA, Suburban is given

certain rights to discipline and discharge its employees, and the

Union is entitled to contest any disciplinary action of

management.    The parties agreed in the CBA to submit to

arbitration any grievance that they cannot resolve.

             More specifically, Article I, Section 5 of the CBA

states that "[t]he Union recognizes the right of the Company to

exercise all functions of management, including . . . the right

to hire, promote, demote, transfer, and discipline or discharge

for proper cause."    CBA, art. I § 5.   The same provision explains

that "[t]he Union shall retain the right to contest any action of

management in accordance with the appropriate provisions of this

contract."    In Article IV, entitled "Discipline Procedure," the

CBA sets forth eleven sections describing a variety of

disciplinary procedures.     For most alleged infractions, an

employee is entitled to a hearing before discipline is imposed.

However, in certain circumstances, Suburban has the right to

suspend the employee immediately and then promptly hold a

hearing.   In virtually all circumstances, an employee may appeal

from his hearing to "the highest officer of Suburban" (CBA art.

IV, § 3), and if the parties cannot resolve their differences

even at this stage, "the dispute may be presented to an

arbitrator selected through the rules of the American Arbitration

Association or the N.J. State Board of Mediation . . . ."       

§ 1(d).    With respect to arbitration, the parties agree

that "[t]he determination of th[e] arbitrator shall be final and

binding on both parties" (id.), but the CBA also explains that

the arbitrator's authority is not plenary; rather,
          [a]uthority of the arbitrator shall be
          limited to the determination of the dispute
          or grievance arising out of the
          interpretation, application or operation of
          the provisions of this agreement on
          submission of the issues involved by the
          parties to this agreement. He shall not have
          any authority whatsoever to alter, amend or
          modify any of the provisions of this
          agreement.

§ 3.

                                  B.

             On December 15, 1992, Nagy was involved in a bus

accident on the New Jersey Turnpike:     he rear-ended a tractor

trailer because he was tailgating.     In his 12 years of

employment, he had been involved in 24 accidents, nine of which

were deemed preventable.     This was his third preventable rear-end

collision.

             Suburban fired Nagy, and the Union protested.   When the

parties could not resolve their dispute, the matter was submitted

to arbitration on the following questions:

             Was the discharge of Joseph Nagy for just cause?

             If not, what shall be the remedy?

             After a hearing, the arbitrator ruled that Nagy was

responsible for the accident, but that Suburban should not have

fired him.    Instead, the arbitrator concluded, discharge was too

harsh a sanction for a long term employee where the employee had
been afforded no opportunity to improve his driving skills

through a retraining program.

          Pursuant to 9 U.S.C. § 10(d), the Union and Suburban

moved in the district court to enforce and vacate, respectively,

the arbitrator's award.   The district court, in a written

opinion, denied the Union's motion to enforce and granted

Suburban's motion to vacate the award, reasoning that the

arbitrator had read into the CBA terms that were not there.       The

district court had jurisdiction under 29 U.S.C. § 185(a), and we

have jurisdiction under 28 U.S.C. § 1291.

                                II.

          On appeal, the Union argues that because the

arbitrator's award was at least arguably based on a construction

of the CBA, the district court erred when it granted Suburban's

motion to vacate the award.   We agree.

                                 A.

          District courts have very little authority to upset

arbitrators' awards.   As we explained in News America

Publications, Inc. v. Newark Typographical Union, Local 103, 

(3d Cir. 1990), "courts play an extremely limited role in

resolving labor disputes."    

  "A court may not overrule

an arbitrator simply because it disagrees with the arbitrator's

construction of the contract . . . or because it believes its

interpretation of the contract is better than that of the

arbitrator."   

omitted).   Rather, "[a]s

long as the arbitrator has arguably construed or applied the
contract, the award must be enforced, regardless of the fact that
a court is convinced that [the] arbitrator has committed a

serious error."   

must be absolutely no support

at all in the record justifying the arbitrator's determinations

for a court to deny enforcement of an award."    

there is a manifest disregard of the agreement, totally

unsupported by principles of contract construction and the law of

the shop, may a reviewing court disturb the award."     

omitted).    Thus, as we wryly concluded, "[i]t

should be clear that the test used to probe the validity of a

labor arbitrator's decision is a singularly undemanding one."

America is notable for the thoroughness

of its exposition, it is by no means the only source of our

longstanding disinclination to allow district courts to overturn

arbitration awards.     To the contrary, our case law is uniform on

this point.   E.g., Roberts & Schaefer Co. v. Local 1846, UMW, 

, 885 (3d Cir. 1987) ("[e]ven when the award was dubious,

and the result one that we would not have reached had the matter

been submitted to the court originally, we have upheld the

arbitrator's decision"); United Indus. Workers v. Government of
the Virgin Islands, 

, 170 (3d Cir. 1993) (scope of

review is "narrowly circumscribed"); Newark Morning Ledger Co. v.

Newark Typographical Union, 

, 165 (3d Cir. 1986) (our

"strict standard means that a reviewing court will decline to

sustain an award `only in the rarest case'").    As long as an

arbitrator's decision arguably construes or "draws its essence"

from the CBA, a district court is not permitted to vacate the
award.   "An arbitration award draws its essence from the

bargaining agreement if `the interpretation can in any rational

way be derived from the agreement, viewed in the light of its

language, its context, and any other indicia of the parties'

intention."    Tanoma Min. Co., Inc. v. Local Union No. 1269, UMWA,

, 748 (3d Cir. 1990), quoting and adding emphasis to

Ludwig Honold Mfg. Co. v. Fletcher, 

, 1128 (3d Cir.

1969).   Only when an arbitrator "acted in manifest disregard of

the law, or if the record before the arbitrator reveals no

support whatsoever for the arbitrator's determination," may a

district court invade the province of the arbitrator.    United

Indus. 

.

            The reason for such a lenient standard is not difficult

to discern.    "[F]requent judicial disapproval of the awards of

labor arbitrators would tend to undermine a system of private

ordering that is of the highest importance to the well-being of

employer and worker alike."    Newark Morning 

.

                                 B.

            With these considerations in mind, we turn to the

district court's decision to vacate the arbitration award in this

case.    Although the district court recognized that it had limited

authority to review in this case, the court nevertheless found

that the arbitrator's award did not draw its essence from the CBA

here because the arbitrator "read[] into" the CBA terms that were

not there -- specifically, provisions dealing with retraining,

progressive discipline, setting criteria for retraining, and
defining who is entitled to retraining.    This conclusion,

however, was inaccurate.

          Contrary to the district court's reasoning, the

arbitrator did not impermissibly "read into" the parties'

agreement terms that were not there.    Rather, the arbitrator

simply interpreted the ambiguous term "proper cause" in a manner

unsatisfactory to management.    The CBA allows Suburban to

discipline or discharge for "proper cause" (art I, § 5), but does

not define the phrase.    When the grievance was submitted to

arbitration, the arbitrator was forced to decide what "proper

cause" meant (or "just cause" according to the language of the

questions submitted to arbitration, supra p. 4).   We cannot say

that the arbitrator was engrafting provisions onto the CBA when

he evidently decided that he must decide whether it was fitting

(a synonym for "proper") and fair or equitable (two synonyms of

"just," the term used in the actual submission to the arbitrator)

for Suburban to have discharged a long-term employee for the

accident in question.    In making this determination, the

arbitrator wrote that although it was clear that Nagy had been

negligent, what was not clear was the "validity of the

punishment" imposed by Suburban.    He noted that although Nagy had

been involved in many accidents, some were minor and occurred

shortly after he was hired, and he had also received three annual

safety awards.   The arbitrator also explained that Nagy had never

been offered any retraining despite Suburban's recent decision to

implement such a program.   This surprised and concerned the

arbitrator because Nagy was a "veteran employee who has given
loyal service to his company for some twelve years."   Taking all

of this into account, the arbitrator apparently determined that

Suburban had proper cause to punish Nagy in some manner, but not

to discharge him.   Thus, the arbitrator concluded that Nagy was

properly punished through the suspension he had served, "it being

understood that [Nagy] shall cooperate with management in

undergoing a retraining program."

           Suburban protests that this interpretation of the

phrase "proper cause" imposed upon the company a "progressive

discipline" system not bargained for by the parties.   The

complete answer to this contention is that the parties bargained

for contractual ambiguity instead of defining "proper cause" in

the CBA.   Having decided not to define the phrase, Suburban

cannot escape the results of that bargain simply because the

arbitrator has chosen to interpret that phrase differently than

Suburban may have wanted -- even if Suburban's interpretation of

the CBA is more reasonable than the result announced by the

arbitrator.   News 

("[i]n reviewing an

arbitral award, courts must recognize that the parties bargained

for the arbitrator's construction of the agreement"); Roberts &
Schaefer Co. v. Local 1846, UMW, 

, 885 (3d Cir. 1987)

("after bargaining for the decision of this arbitrator, the

Company cannot avoid his decision merely because the arbitrator

may have reached an incorrect result").   To the extent the

arbitrator's award was based upon a theory that the parties

intended "proper cause" to incorporate some form of progressive
discipline, that interpretation has some basis in the CBA.1    And

in any event, even if the arbitrator's interpretation of the

phrase "proper cause" did, in effect, impose a progressive

discipline system upon the parties, we have recognized that such

a result can be a justified interpretation of a "just cause"

provision.   See Arco-Polymers, Inc. v. Local 8-74, 

(3d Cir. 1982) ("`[i]n a proper case an arbitrator . . . may

construe a "just cause" provision of a labor contract to include

a progressive discipline requirement and may determine that

certain conduct is "just cause" for discipline but not for

discharge'" (quoting Mistletoe Express Service v. Motor

Expressmen's Union, 

, 695 (10th Cir. 1977))).

          In sum, that the arbitrator's interpretation of "proper

cause" was a legitimate reading of that phrase compels the

conclusion that the arbitrator's award both construed and drew


1
 .   The CBA itself could be read to require differing gradations
of punishment based upon different degrees of culpability. The
CBA discusses "minor infractions," which have less formal
adjudicative procedures, and more serious infractions, including
rear-end collisions, which trigger Suburban's right to
immediately suspend the driver, but which also trigger a driver's
right to a hearing if suspension is imposed. See CBA art. IV,
§§ 5, 7, 8. The procedures for resolving these more serious
infractions do not state that a driver must be fired if he is
found responsible for wrongdoing; in fact, the phrasing clearly
contemplates that suspension is a punishment short of -- and only
potentially leading to -- discharge. See 

Thus, the CBA
contemplates that some actions that may be cause for suspension
will not be cause for discharge, and the arbitrator did not
manifestly disregard the CBA in taking into consideration the
context in which the dispute arose (Nagy's conduct, his tenure,
his overall driving record, and Suburban's recent adoption of a
driver retraining program) in deciding Nagy's culpability and the
propriety of firing him, as opposed to merely suspending him.
its essence from the CBA.    That being the case, the district

court had no grounds to vacate the award.

                                  C.

           Suburban urges that if we find that the district court

erred in vacating the arbitration award, we should nevertheless

affirm the district court on the ground that the award violates

public policy.     Essentially, Suburban argues that public policy

demands that common carriers provide safe carriage to their

passengers, and that the arbitration award undermines this

policy.   However, we decline Suburban's invitation to invalidate

the award on public policy grounds.

           Arbitration awards rendered pursuant to collective

bargaining agreements can be vacated when such awards violate

public policy.   W.R. Grace & Co. v. Local Union 759, 

, 766 (1983).    However, the public policy "must be well

defined and dominant, and is to be ascertained `by reference to

the laws and legal precedents and not from general considerations

of supposed public interests.'"     

quoting Muschany v.

United States, 

, 66 (1945).     Although we have rejected

the argument that an arbitration award may be set aside on public

policy grounds only when it "violates positive law," we have

stressed that a public policy must be "well defined and dominant"

before it may be used to upset an arbitrator's award.     Exxon
Shipping Co. v. Exxon Seamen's Union, 

, 1192, 1194

(3d Cir. 1993) (arbitration award vacated as against public

policy when it required shipping company to reinstate able bodied

seaman on oil tanker after seaman was found to be highly
intoxicated while on duty); see also Exxon Shipping Co. v. Exxon

Seaman's Union, 

(3d Cir. 1993); Stroehmann Bakeries,

Inc. v. Local 776, Int'l Brotherhood of Teamsters, 

(3d Cir. 1992).     In determining whether a public policy exists,

federal courts must use common sense, keeping in mind that "a

formulation of public policy based only on `general

considerations of supposed public interests' is not the sort that

permits a court to set aside an arbitration award that was

entered in accordance with a valid collective bargaining

agreement."     United Paperworkers Int'l Union, AFL-CIO v. Misco,

Inc., 

, 44 (1987).

           We have addressed the public policy exception to

enforcement of arbitration awards in light of W.R. Grace and

Misco in two recent decisions discussed by the parties here:

United States Postal Service v. National Assn of Letter Carriers,

(3d Cir. 1988), and Service Employees Int'l Union

Local 36 v. City Cleaning Company, Inc., 

(3d Cir.

1992).   In Service Employees, we explained that "[t]he public

policy exception" to the enforcement of arbitration awards "is

slim indeed."     Service 

.   The exception

is available only when "the arbitration decision and award create

an explicit conflict with an explicit public policy . . .."      

Letter Carriers, despite recognizing that customer and

co-worker safety may be valid public policy, we determined that

"a policy in favor of protecting co-workers and customers from

[an employee's] violent conduct (assuming, arguendo, that such a
policy is properly ascertained) does not require his discharge

for its fulfillment."   Letter 

.2

          We acknowledge that public transportation safety is a

valid public concern, but Suburban has failed to demonstrate that

public policy requires vacation of the arbitrator's award here.

Suburban has not provided us with "laws and legal precedents"

which describe an "explicit" public policy; rather, what Suburban

has described as putative public policy is more akin to the

amorphous "public interests" that were deemed insufficient to

articulate public policy in W.R. Grace.3   Furthermore, even if we
2
 .        In three recent cases not discussed by the parties, we
found that arbitrators' awards should be vacated on public policy
grounds. See Exxon Shipping Co. v. Exxon Seamen's Union, 

(3d Cir. 1993) (Exxon Shipping II); Exxon Shipping Co. v.
Exxon Seaman's Union, 

(3d Cir. 1993) (Exxon
Shipping I); Stroehmann Bakeries, Inc. v. Local 776, Int'l
Brotherhood of Teamsters, 

(3d Cir. 1992). In each
of those cases, however, the public policy was much more explicit
and the conflict between it and the particular award much more
pronounced than is the case here.
3
 .   In an effort to demonstrate that the arbitrator's award
would conflict with explicit public policy, Suburban cites 49
C.F.R. § 391.25, a Department of Transportation regulation
requiring motor carriers to review annually their drivers'
records to ascertain whether any of their drivers are
disqualified to drive a motor vehicle under 49 C.F.R. § 391.15.
Suburban cannot contend that the arbitrator's award prevents the
company from making its annual review under § 391.25, however,
nor can it suggest that the award forces the company to keep Nagy
on the road in violation of § 391.15. Section 391.15
disqualifies a driver in only two circumstances: (1) if the
driver loses his or her driving privileges, as discussed in §
391.15(b); or (2) if the driver commits certain "criminal [or]
other offenses" as detailed in § 391.15(c). Furthermore,
citation to section 391.25 demonstrates that any "public policy"
in favor of driver safety is much more lenient than Suburban
would have it. Only in egregious cases do federal regulations
disqualify drivers. Neither condition appears to have been met
in Nagy's case.
found that Suburban had articulated a public policy which could,

in some cases, undermine an arbitration award, we still would not

vacate the award here.   Suburban simply has not shown that the

arbitrator's award in this case would explicitly conflict with

the public policy championed by the company.   Nagy has obviously

had many accidents, but he has also won a number of safety

awards.   Additionally, the arbitrator's award seeks to encourage

driver retraining; thus, it seems that the arbitrator had an eye

toward public safety when he rendered his decision.   Therefore,

Suburban's public policy argument fails to persuade us that the

arbitrator's award must be vacated.

                               III.

          For the foregoing reasons, we will reverse and remand

with instructions to confirm the arbitration award.