Res judicata, CWA and Southwestern Bell, and a question of timeliness of a Loudermill hearing

Arbitrator's award given res judicata effect in subsequent suit for recovery of misappropriated funds

Peter Gibson was fired from his job after he was accused of receiving almost $200,000.00, allegedly from funds misappropriated by his ex-wife from their employer and directed to an account that he and his ex-wife shared. That termination was submitted to arbitration, and Arbitrator Mattye Gandel issued an award finding "beyond a reasonable doubt" that, while Gibson may not have participated the misappropriation of funds, he "knew about the fraudulent wire transfer, maybe not that day, but certainly in the following days and months and benefited from the fraudulent wire transfer" Accordingly he found just cause forth termination and denied the grievance.

Subsequently the company filed suit against Gibson, seeking recovery of the funds. It sought summary judgment, arguing that the arbitrator's award should be given preclusive effect. The Court granted the Motion for Summary Judgment. Sterling Equipment, Inc. v. Gibson 

The Court found that while Gibson was technically not a party to the arbitration his interests were represented by the Union, that the issues were actually litigated in the arbitration  and that the facts found by the arbitrator were "dispositive" of the claim that Gibson had been unjustly enriched by receipt of money belonging to the Company. The Court concluded:

In short, because the arbitration award is entitled to preclusive effect, and the Arbitrator specifically found that Gibson benefitted from his wife's fraudulent wire transfer, SEI is entitled to summary judgment on its claims of money had and received (Count I) and unjust enrichment (Count II). See Manganella v. Evanston Ins. Co., 700 F.3d 585, 591 (1st Cir. 2012) ("Generally, final arbitral awards are afforded the same preclusive effects as are prior court judgments."); Miles v. Aetna Cas. & Sur. Co., 412 Mass. 424, 427 (1992) ("An arbitration decision can have preclusive effect in a subsequent suit between the same parties or their privies."). The court will schedule a hearing to determine the amount of SEI's damages

Communications Workers of America and Southwestern Bell Telephone

Two recent decision address arbitration issues arising between CWA and Southwestern Bell Telephone Company. 

The Fifth Circuit denied the appeal of CWA from the District Court's dismissal of its complaint for lack of jurisdiction. Communications Workers of America v. Southwestern Bell Telephone Company CWA had sought to litigate an alleged violation of a provision of its cba with Southwestern concerning "Responsible Union-Company Relationship" which it asserted required the parties to deal with each other "in good faith and respect." The Union alleged that layoffs announced by the Company were not based on a lack of work, and that the Company was subcontracting work the laid off employee were trained and qualified to perform. The responsible relationship provision of the agreement was not subject to arbitration, and the Union's sued to enforce its claim that the Company had violated that  provision.

 The Company sought dismissal of the complaint, arguing that the disputes underlying the complaint were addressed in other provisions of the cba that were subject to arbitration and that the Union had failed to exhaust the grievance and arbitration procedure. The District Court agreed and dismissed the complaint. Here and here

The Fifth Circuit affirmed, concluding:

  To recap, the Union's federal complaint identifies two areas of conduct that are covered by the arbitration provision: Southwestern Bell's plan to lay off Union employees and Southwestern Bell's plan to contract out their jobs. Furthermore, the relief the Union requests is reinstatement of the laid off Union employees and a declaration that Southwestern Bell's layoffs and contracting out violated the CBA. In short, notwithstanding the Union's framing of its case, the resolution of the Union's lawsuit is impossible without resolving the merits of issues that are plainly within the CBA's agreement to arbitrate. See Nat'l Football League Players Ass'n v. Nat'l Football League, 874 F.3d 222, 227 (5th Cir. 2017) ("[W]here the contract provides grievance and arbitration procedures, those procedures must first be exhausted and courts must order resort to the private settlement mechanisms without dealing with the merits of the dispute." (quoting United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 37 (1987))). Accordingly, the magistrate was correct in finding that the Union's lawsuit is "clearly and unambiguously challenging" conduct covered by the CBA's grievance and arbitration provisions

In a different case,  the District Court has rejected CWA's claim the Arbitrator Samuel J. Nicholas acted in contravention of AAA Rule 40 and the final and binding language of the cba when, on the Company's Motion for Reconsideration, he revised his award to correct what he described as a technical error. Arbitrator Nicholas' original award can be found here. The corrected award here. The correction changed the award from one sustaining the grievance to one denying it. The error related to the Arbitrator's reliance on a document he initially described as limiting the scope of work of Premises Technicians. The Company's Request for Reconsideration pointed out that the document in fact related to a different bargaining unit. The Arbitrator acknowledged his error and agreed that this correction changed his analysis. 

CWA filed a complaint seeking to vacate the modified award and seeking to enforce the initial one.

 The District Court adopted the Report of Recommendation of the magistrate rejecting the Union's claim (here) and concluded (here) that the Arbitrator had not exceeded his powers in applying Rule 40 to correct a technical error and that his interpretation of that rule was supported by Fifth Circuit precedent. 

Update: The Fifth Circuit affirmed the District Court, concluding that because Arbitrator Nicholas' award stemmed from a colorable interpretation of the parties' CBA, including AAA Rule 40 which was included in the Agreement, the award drew its "essence" from the parties' agreement and was not in excess of his authority.

Arbitrator rejects claim that Sheriff's Deputy was terminated prior to Loudermill hearing 

Arbitrator Peter Prosper rejected a claim that the Flagler County Sheriff's Office terminated the employment of a Deputy before giving him a Loudermill hearing. Coastal Florida Police Benevolent Association and Flagler County Sheriff's Office 

On April 16, 2018, the Deputy was responding to a request for assistance call when he passed a vehicle entering the wrong way on to Interstate 95. He did not take action regarding the car but continued on to his original destination. While the Deputy was there, a call came from Dispatch about a two car collision on I-95. The Deputy responded to that call. While at the scene, he informed his Commander that the had previously passed one of the vehicles involved entering the wrong way onto the highway. An investigation was conducted, and a report presented to the Undersheriff. 

On July 9, 2018, a Notice of Intent to Discipline was presented to the Deputy with a recommendation for termination. The Deputy was given 10 working days (until July 23) to schedule a Loudermill hearing. The hearing was conducted on July 20, and on July 24 the Deputy was informed that his termination "stands as recommended."

The Union filed a grievance challenging the termination on the merits but also asserting that the Sheriff's Office had made the decision to terminate before the Loudermill hearing.

That argument appears to be based in part on a press release (here) issued by the Sheriff's Office on July 9. The full release is not reproduced in the award, but is headlined "FCSO Deputy Terminated After Failure to Take Action to Prevent Fatal Crash." The Union also pointed to what it described as the admissions of both the Sheriff and the Undersheriff that they had made the decision to terminate on July 9.  

In rejecting the Union's argument, Arbitrator Prosper noted that the text of the release indicated that the Deputy had been served a  "notice of intent to discipline with termination," and that he had been continued on payroll until July 23.  He therefore concluded that the Deputy had not been terminated until the end of the Loudermill hearing.

On the merits, the Arbitrator converted the termination to a suspension without pay. 

Arbitrator's failure to follow prior award not a basis for setting aside award

So held  the Eight Circuit in SBC Advanced Solutions v. Communications Workers of America. The grievance in issue involved a claim by employees that they were performing work of a higher classification and were entitled to a pay differential. The cba called for such a differential when "qualified" employees were "temporarily scheduled or assigned" to perform such work for a period of two or more hours in a week. Arbitrator William McKee sustained the grievance. He initially rejected the Employer's assertion that the employees must be test qualified to perform the higher level work to be eligible for compensation. In doing so he relied in part on prior awards he had issued as well as evidence of bargaining history to conclude that the Union had rejected a Company proposal during contract negotiations that would have required test qualification.

 He then turned to the question of whether the employees had been "temporarily assigned" to perform the higher level work. He concluded that "a]n assignment of higher-level work is temporary until such time as the Company chooses to change the job description of the lower titles to include those duties." In reaching this conclusion Arbitrator McKee "respectfully depart[ed]" from the awards  of two prior arbitrators who had determined that work assignments ceased to be temporary once they became a permanent part of an employee's workload. Arbitrator McKee found that these earlier awards would allow the Company to violate the contract as long as it maintained a violation long enough for the assignment to be deemed permanent. Accordingly he sustained the grievance and retained jurisdiction to resolve disputes about individual employees eligibility for the differential.

The Company sought to set aside the award, arguing that the award failed to draw its essence from the cba and that Arbitrator McKee had erred in failing to follow the earlier awards. The District Court rejected these claims (here), and the Eighth Circuit has now affirmed.

 With specific reference to the argument that the Arbitrator erred in failing to follow the earlier awards on the question of when an assignment was "temporary," the Court concluded:

Arbitrator McKee recognized ... that [his] interpretation was contrary to the interpretation of temporariness in the Heinz and Fowler awards. As we stated in Trailways  "we recognize that there may be situations where an arbitrator will refuse to defer to a prior award involving the same issue," including when "`(1) [t]he previous decision was clearly an instance of bad judgment; (2) the decision was made without the benefit of some important and relevant facts or considerations; or (3) new conditions have arisen questioning the reasonableness of the continued application of the decision.'" 807 F.3d at 1425 n.16 (quoting F. Elkouri & E. Elkouri, How Arbitration Works 428 (BNA 4th ed. 1985)).

Arbitrator McKee explained his declination of deference to a prior award involving a similar dispute by stating his disagreement with the prior decisions's interpretation of the contract's provisions. According to Arbitrator McKee, the Heinsz and Fowler Awards interpreted temporariness in a manner that gave the Company an incentive to violate the CBA as long as they violated it consistently for a given amount of time (or at least until the higher-classified job functions were performed long enough by lower-classified employees to be considered a permanent part of their job). Arbitrator McKee concluded that this interpretation was erroneous because it gave the Company the unilateral ability to render the temporariness requirement meaningless. In sum, Arbitrator McKee's decision to follow certain arbitration awards and not others, based upon those awards' factual and legal differences, does not authorize us to vacate his award under Trailways.


The Court acknowledged that on a second issue, i.e. what constituted an employee performing higher level work, the Arbitrator had not explained his decision not to follow an earlier award under the same contract. While finding that the Arbitrator "should have" explained his departure from the earlier award, his failure to do so did not compel a conclusion that his award should be set aside.

  Finally, the Court rejected the Company's contention that the doctrine of functus officio preluded the Arbitrator from retaining jurisdiction on the remedial issues, finding that while the award determined the Company's liability, it was not a final award triggering application of the doctrine.

"Functus officio" precludes arbitrator from substituting new award for an earlier one

Ruling on cross motions for summary judgment, the District Court for the Middle District of Florida addressed the "unique question" of:

whether an arbitrator, having finally addressed the merits of a CBA grievance, may reconsider and substitute an award which substantively changes the result, after being mistakenly persuaded that he had addressed an issue which was not to be arbitrated. 

Concluding that the arbitrator's first award was intended to be final, the Court determined that the doctrine of functus officio precluded the arbitrator from reconsidering the award and substituting a new one.

The dispute arose after several employees of Verizon Florida were declared surplus. The cba provided (in Article XI, Section 2) that surplus employees could bump junior employees within the same or lower wage progression schedule. Article XI also provided that an employee seeking to bump another

must have the ability to perform any job which he/she seeks to obtain through bumping. If it is a job which the employee has previously held, the employee will be allowed a reasonable period of time for re-familiarization and, if the job is one which he/she has not previously held, the employee must be able to perform the job with minimum additional training.

At the arbitration hearing the parties declined to stipulate an issue. The arbitrator framed the issue and, after reviewing the evidence and the cba, concluded that two of the nine grievants had previously held the position they sought to bump into and that they should have been allowed to bump into those positions. He rejected the grievance as it applied to the other grievants.

After the award, the Union requested clarification, maintaining that two additional employees had also previously held the position they sought to bump into and should therefore have been allowed to bump. Verizon opposed this request and also sought reconsideration, claiming that the issue of whether grievant's had previously held the job they sought to bump into was not properly before the arbitrator, and that the only issue was whether the grievants would require more than minimal training to perform the job. Three days after Verizon sought reconsideration the arbitrator issued a substituted decision, captioned "Order on Cross-Motions for Clarification/Change and Substituted Arbitrator's Award. In the new award the arbitrator indicated he had been persuaded that his earlier award had, in fact, relied on a contract provision not submitted for consideration. His new award deleted reference to whether the grievants' had previously held the position and rejected the grievances of all employees. 

The Union sought to vacate the second award while Verizon sought to confirm the second. 

Ruling on both motions the Court concluded:

the issue which the original arbitration award addressed had been presented to the arbitrator through the Union's broadly worded grievance and he was therefore well within his authority in his original determination of the merits. And contrary to the common law doctrine of functus officio, the arbitrator exceeded his authority when he reconsidered and issued the substituted award. The substituted award is therefore due to be vacated and the initial award confirmed.

The court explained:

The doctrine of functus officio ("a task performed") provides that an arbitrator may not revisit the merits of an award once it has issued. Office & Prof'l Emps. Int'l Union, Local No. 471 v. Brownsville Gen. Hosp., 186 F.3d 326, 331 (3d Cir. 1999). Because the arbitrator acts only as judge for a particular case, the doctrine arises "based on the analogy of a judge who resigns his office and, having done so, naturally cannot rule on a request to reconsider or amend his decision." Glass, Molders v. Excelsior Foundry Co., 56 F.3d 844, 846-47 (7th Cir.1995) (observing that an additional rationale is an arbitrator's susceptibility to ex parte communications, absent the constraint of judicial ethics). There are three established exceptions to functus officio, which allow an arbitrator to: (1) correct a mistake that is apparent on the face of the award; (2) rule upon an issue presented but not adjudicated; and (3) clarify an ambiguity in an otherwise complete award. Brown v. Witco Corp., 340 F.3d 209, 219 (5th Cir. 2003); Office & Prof. Emps., 186 F.3d at 331.

Finding that the question initially decided by the arbitrator was within the issue submitted, and that none of the exceptions applied, the court concluded that the arbitrator was without authority to reconsider his decision as Verizon had requested. 

The Court's opinion in IBEW, Local 824 v. Verizon Florida,LLC can be found here.