UNITED STEEL, PAPER AND FORESTRY v. WISE ALLOYS Nos. 10-11961, 10-13596.
642 F.3d 1344 (2011)
UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION AFL-CIO-CLC, Local 320 International Union of Operating Engineers, United Brotherhood of Carpenters and Joiners, Local 1209, Plaintiffs-Counter-Defendants-Appellees, v. WISE ALLOYS, LLC, Defendant-Counter-Claimant-Appellant.
United States Court of Appeals, Eleventh Circuit.
June 9, 2011.
Daniel M. Kovalik , United Steelworkers of America, AFL-CIO-CLC, Pittsburgh, PA, Richard P. Rouco , Quinn, Connor, Weaver, Davies & Rouco, Birmingham, AL, for Plaintiffs-Appeliees.
William George Miossi , Matthew M. Lewis , Andrew C. Nichols , Winston & Strawn, LLP, Washington, DC, Derek G. Barella , Winston & Strawn, LLP, Chicago, IL, Stephen E. Brown , Maynard, Cooper & Gale, PC, Birmingham, AL, for Defendant-Appellant.
Before CARNES, PRYOR and COX, Circuit Judges.
Three unions representing different groups of employees of Wise Alloys, LLC ("Wise") sued Wise under § 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, seeking to enforce an arbitration award. The district court granted summary judgment in favor of the unions, enforcing the award. Wise appeals. We affirm.
Wise operates an aluminum rolling mill and related facilities in Muscle Shoals and Sheffield, Alabama. The Plaintiffs are: the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union AFL-CIO-CLC; the International Union of Operating Engineers, Local 320; and the United Brotherhood of Carpenters and Joiners, Local 1209 (collectively, "the Unions"). The Unions represent different groups of employees at Wise's Muscle Shoals and Sheffield plants. In November 2007, the Unions entered into materially identical collective bargaining agreements with Wise ("the Agreements"). The Agreements provide for a grievance procedure that includes final and binding arbitration.
Each Agreement includes identical language regarding a quarterly Cost of Living Adjustment ("COLA"). The COLA provision provides, in relevant part:
(Dkt. 1, Complaint at ¶ 10.) In negotiating these Agreements, the parties agreed to increase the employees' health insurance premiums from $2.50 to $20.00 per week with annual $5.00 increases up to $45.00 per week through November 2012. In connection with this change, the parties agreed that the COLA would be applied to offset these premiums. (Dkt. 1-1, Arbitrator's Award at 13.)
II. FACTS AND PROCEDURAL HISTORY
In the months following ratification of these 2007-2012 labor agreements, a dispute arose over how the COLA was to be calculated. Wise was calculating the COLA on a weekly basis and maintained that the adjustment was only $0.08 per week. Wise maintained that the Agreements contained a typographical error and that the COLA should be calculated on a weekly basis, not on the hourly basis indicated in the Agreements. The Unions disagreed with Wise's calculations and complained that the adjustment should be calculated at $3.20 per week ($0.08 × 40 hours per week), consistent with Section 2 of the COLA provision. The parties submitted this dispute to arbitration on July 23, 2008. All parties agree that this dispute was subject to binding arbitration. (Dkt. 1, Complaint at 4, ¶ 15; Dkt. 6, Answer, Affirmative Defense and Counterclaims at 5, ¶ 15.) The question for the arbitrator was whether the COLA should be calculated on an hourly basis or a weekly basis to offset the employees' health insurance premiums. In terms of dollars and cents, the dispute was whether Wise's contribution to the employees'
At the arbitration hearing Wise asserted that there was a scrivener's error in drafting the COLA language of the Agreements, with the result that the words "per hour" were placed in the COLA clause rather than the correct words "per week." But Wise did not introduce any testimony or evidence at the hearing that a scrivener's error had occurred. (Dkt. 1-1, Arbitrator's Award, at 14-15.) Instead, in a post-hearing brief filed with the arbitrator, Wise asserted that the Unions collaborated to undermine Wise's scrivener's error defense by calling witnesses during the hearing who intentionally gave false testimony in an effort to convince the arbitrator to issue an award against Wise. Wise alleged in its post-hearing brief, as it does on this appeal, that the Unions also submitted a fabricated document alleged to have been drafted in the presence of two Wise managers that "purported to reflect an admission by Wise management that the Unions' version of events was true and accurate, while, in fact, [a union representative had] created the document much later and solely for the purposes of carrying out the Unions' deceptive scheme." (Dkt. 6, Answer, Affirmative Defense, and Counterclaims at 10, ¶ 11.) Wise contends that, as a result of the Unions' deception and false testimony, the arbitrator ruled against Wise on November 21, 2008, ordering Wise to pay the COLA provision on an hourly, rather than weekly, basis.
Wise raised the issue of the Unions' deceit at arbitration. The arbitrator found it significant that Wise drafted the disputed COLA language and that Wise alone, rather than the Unions, failed to include language reflecting the alleged intent that the COLA payment be calculated on a weekly basis. Additionally, the arbitrator found Wise's position on the interpretation of the COLA provision untenable because he did not believe that the Unions would have agreed to increases in their contribution to their healthcare premiums (from $2.50 per week to $20.00 per week, eventually rising to $45.00 per week) had Wise's position on the COLA been correct. (Dkt. 1-1, Arbitrator's Award at 13.) Furthermore, the arbitrator concluded that the Unions' testimony was irrelevant given the unambiguousness of the relevant language of the Agreements:
(Dkt. 1-1, Arbitrator's Award, at 15.) The arbitrator entered a written award in favor
In April 2009, the Unions filed suit in the district court under § 301 of the LMRA alleging breach of contract by Wise in failing to abide by the award and seeking to enforce the arbitration award. Wise's first challenge to the award was filed on April 30, 2009, in its Answer. Its Answer included an affirmative defense alleging that the award was procured by fraud. The Answer also included counterclaims asserting state-law claims of fraud and conspiracy to defraud, based on Alabama law. The court dismissed the state-law counterclaims as preempted by § 301. Later, Wise filed a motion to compel discovery. In its motion to compel, Wise sought to have Plaintiffs respond to Wise's interrogatories directed at the issue of fraud. The court denied Wise's motion. The court agreed with Plaintiffs that Wise was not entitled to the requested discovery because Wise had waived any fraud defense to the enforcement of the arbitration award. The court, borrowing from § 12 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 12, held that Wise had only three months from the date of entry of the arbitrator's award to move to vacate the award and, because it had failed to do so, Wise was time-barred from raising the invalidity of the award as a defense to the Unions' action to enforce the award.
In April 2010, the court granted the Unions' motion for summary judgment and ordered Wise to comply with the arbitrator's award. Wise appeals.
III. ISSUES ON APPEAL
Wise raises the following issues on appeal: whether the district court erred in ruling that § 301 of the LMRA preempted Wise's state-law counterclaims; whether the district court erred in denying Wise an opportunity to present its defense that "the award does not derive its essence from the labor agreements"; whether the court erred in holding that Wise was time-barred by a three-month statute of limitations from raising its fraud defense to the arbitrator's award; and whether the court erred in denying Wise's motion to compel discovery on the issue of fraud.
IV. STANDARD OF REVIEW
We review de novo the district court's grant of summary judgment. Gish v. Thomas, 516 F.3d 952, 954 (11th Cir. 2008) (citation omitted). "We apply the same legal standards as the district court and view all facts and reasonable inferences in the light most favorable to the nonmoving party." Id. (citation omitted). Our de novo review includes a determination of whether the LMRA preempts Wise's state-law claims, as this is a question of law. Bartholomew v. AGL Resources, Inc., 361 F.3d 1333, 1337 (11th Cir.2004) (citation omitted). A district court's denial of a motion to compel discovery is reviewed for an abuse of discretion. Holloman v. Mail-Well Corp., 443 F.3d 832, 837 (11th Cir. 2006).
The district court correctly found that § 301 of the LMRA preempted Wise's state-law counterclaims.
An arbitration award pursuant to an arbitration provision in a collective bargaining agreement is treated as a contractual obligation that can be enforced through a § 301 lawsuit. Textile Workers Union of Am. v. Lincoln Mills of Ala., 353 U.S. 448, 451, 77 S.Ct. 912, 915, 1 L.Ed.2d 972 (1957). Section 301 of the LMRA
Wise argues that its state-law counterclaim alleging that the award was procured by fraud is independent from the parties' Agreements because its claim is not based on the substance of the written agreements. Wise argues that the Unions' witnesses testified that all parties intended the Agreements to be interpreted as written, and that the arbitrator relied upon this false testimony in ruling in favor of the Unions. As a result, Wise argues, its state-law fraud counterclaim does not depend upon the language of the Agreements or an interpretation of the language.
In support of its position, Wise argues that "[f]or purposes of establishing the fraud claim, the contracts do not even need to exist." (Appellant Br. at 34.) We disagree. As the district court noted, there is no way to evaluate the fraud counterclaim without determining the intended interpretation of the Agreements. The alleged false testimony of the Unions' witnesses about how the parties agreed the COLA was to be calculated directly relates to what the parties agreed to and a proper interpretation of the COLA sections of the Agreements. Because the resolution of Wise's state-law fraud claim "is substantially dependent upon analysis of the terms" of the Agreements, it is preempted. Lueck, 471 U.S. at 220, 105 S.Ct. at 1916.
The district court did not err in denying Wise an opportunity to present its "essence of the agreements" defense.
Wise argues on appeal that "[r]egardless of the limitations period that may apply to a lawsuit seeking to vacate an arbitration award, Wise should be permitted to defend the Unions' action on the grounds asserted in its answer, wherein it expressly denied that the award derived its essence from the parties' labor agreements." (Appellant Br. at 29-30.) Proof that the award derived its essence from the parties' labor agreement, Wise argues, is an element of the Unions' claim seeking enforcement. Thus, Wise argues, there should be no statute of limitations for this defense.
Essential to the enforcement of an arbitration award is that the arbitrator's interpretation of the collective bargaining agreement must be derived from the language of the agreement. "[A]n arbitrator is confined to interpretation and application of the collective bargaining agreement; he 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 agreement." United Steelworkers of Am. v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960). "[A] labor arbitrator's award does draw its essence from the collective 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. . . ." Int'l Union of Dist. 50, Mine Workers of Am. v. Bowman Transp., Inc., 421 F.2d 934, 936 (5th Cir.1970) (internal quotation and citation omitted). Wise's "failed to derive its essence" defense to the award is grounded solely on the assertion that the award was "premised on fraudulent testimony." (Appellant Br. at 16.) This defense is not an "essence of the agreements" defense. The award in this case is based upon the arbitrator's findings about what the parties agreed to and how that agreement should be interpreted. It clearly "derives its essence" from the parties labor agreements.
Wise's defense is more properly characterized as a federal common law defense based upon fraudulent procurement of the award. Any such defense is an affirmative defense. Whether federal common law would recognize a fraud defense of this kind in an action to enforce this award is an issue we need not decide.
C. The district court correctly concluded that Wise's fraud challenge to the arbitrator's award based on fraud was time-barred.
The district court correctly held that Wise had only three months from the date of entry of the arbitrator's award to judicially challenge the award. And, because Wise failed to do so, its fraud defense was time-barred.
Wise's first legal challenge to the arbitrator's November 21, 2008, award was on April 30, 2009, in its Answer to this lawsuit seeking enforcement of the award. In § 301 arbitration cases, federal courts apply statutes of limitation to both suits and defenses. Sheet Metal Workers Int'l Ass'n, Local No. 359 v. Ariz. Mech. & Stainless, Inc., 863 F.2d 647, 650 (9th Cir. 1988). "Ordinarily, a party opposing an arbitration award must move to vacate the award or be barred from further legal action." Sheet Metal Workers' Int'l Ass'n, Local No. 252 v. Standard Sheet Metal, Inc., 699 F.2d 481, 482 (9th Cir.1983) (citation omitted). Though this circuit has not addressed the issue, other circuits have held that a party's failure to move to vacate a § 301 arbitration award bars all defenses to the award. See Local 2322, Int'l Bhd. of Elec. Workers v. Verizon New England, Inc., 464 F.3d 93, 97 (1st Cir. 2006); Standard Sheet Metal, 699 F.2d at 483; Serv. Emps. Int'l Union, Local No. 36 v. Office Ctr. Servs., 670 F.2d 404, 412 (3d Cir.1982); Chauffeurs, Teamsters, Warehousemen & Helpers, Local Union No. 135 v. Jefferson Trucking Co., 628 F.2d 1023, 1025, 1027 (7th Cir.1980). The Seventh Circuit explained in Jefferson Trucking that statutes of limitations apply to defenses as well as suits because arbitration awards are themselves the creatures of statute, not common law. Consequently, the common law exception that excludes defenses from limitation periods does not control because "[i]t is settled that where by statute a right of action is given which did not exist by the common law, and the statute giving the right fixes the time period within which the right may be enforced, the time so fixed becomes a limitation on such right." Id. at 1027.
We adopt the view of our sister circuits and hold that a party adversely affected by an arbitration award in § 301 arbitration cases must challenge the award by judicial action within the statute of limitations or else be barred from raising any defenses to the award. An aggrieved party may not wait to attack the award in a subsequent suit to confirm the award after the statute of limitations has run. Having so held, we turn now to consideration of what is the applicable statute of limitations.
Section 301 of the LMRA governs suits to enforce or vacate an arbitration award arising out of a collective bargaining agreement.
The district court based its decision on Cullen v. Paine, Webber, Jackson & Curtis, Inc., 863 F.2d 851 (11th Cir.1989). In Cullen, we determined that a party is time-barred from raising any defense to an arbitration award when it has not moved to vacate the award within the three-month time prescribed by § 12 of the FAA. 863 F.2d at 854; 9 U.S.C. § 12.
Cullen, however, was a FAA case, and did not invoke an award pursuant to a collective bargaining agreement calling for binding arbitration of disputes. Wise argues that "[g]iven the substantive differences between Section 301 and the FAA, the district court erred by applying Cullen to preclude Wise from asserting its defense." (Appellant Br. at 35-36.) In support of this argument, Wise points out that § 301 actions can be defended on broader grounds than those permitted under the FAA. While we agree that there are defenses that can be asserted under § 301 that are different from those that can be asserted under the FAA, it does not follow that we cannot borrow the three-month limitation on filing from the FAA. Section 301 is silent on the time for filing a motion to vacate. But there must be a limitation on when a motion to vacate can be filed in order to provide finality to the parties. As stated by the Seventh Circuit, the enforcement of a specific time period within which a party may move to vacate an arbitration award under the LMRA "is intended to enhance the speed and effectiveness of arbitration, to provide fair review of the arbitrator's decision, and to preclude the
We were faced with essentially the same issue presented in this case more than twenty years ago in American Postal Workers Union v. United States Postal Serv., 823 F.2d 466 (11th Cir.1987). In American Postal Workers, as here, we were tasked with determining the appropriate limitations period to govern a suit to vacate an arbitration award rendered under a collective bargaining agreement. Unlike this case, however, the statute under which the action was brought was the Postal Reorganization Act of 1970 ("PRA"), 39 U.S.C. § 101 et seq., not the LMRA. Id. at 469. As we noted in American Postal Workers, however, the PRA was designed by Congress to have the same effect on postal employees as § 301 has on labor law. Id. And, our analysis in American Postal Workers focused on the interaction between the FAA and § 301. Id. As we stated, "[w]e believe that the time period during which an arbitration award is vulnerable to attack is a[ ] . . . crucial matter of federal labor policy . . . [and] federal labor policy . . . requires a uniform federal limitation for suits to vacate arbitration awards under collective bargaining agreements. . . ." 823 F.2d at 475. We therefore held that the appropriate limitations period for a "straightforward union (or employer) challenge to an arbitration award" was the FAA's three-month period because "adoption of the limitation period in that statute serves the federal interest of `relatively rapid disposition of labor disputes.'" Id. at 475-76 (quoting United Auto. Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 707, 86 S.Ct. 1107, 1114, 16 L.Ed.2d 192 (1966)).
Though our holding in American Postal Workers addressed cases brought under the PRA,
In applying the three-month limitations period to this case, the district court properly concluded Wise's federal common law fraud defense was untimely. In order to properly raise the defense, Wise needed to timely challenge the award. See Occidental, 853 F.2d at 1317 ("[T]he settled rule [is] that objections that might have formed the basis for a timely action to vacate an award may not be raised as defenses in an action to confirm the award after the limitations period for an action to vacate has expired.") (citation omitted). The arbitrator
For the reasons stated above, the judgement of the district court is AFFIRMED.
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