Avis Rent A Car System, Inc. v. Garage Employees Union, Local 272, 1255

• Decision Date: 20 May 1986
• Docket Number: D,No. 1255,1255
• Citation: 791 F.2d 22
• Parties: 122 L.R.R.M. (BNA) 2861, 104 Lab.Cas. P 11,966 AVIS RENT A CAR SYSTEM, INC., Plaintiff-Appellant, v. GARAGE EMPLOYEES UNION, LOCAL 272, Defendant-Appellee. ocket 86-7162.
• Court: U.S. Court of Appeals — Second Circuit

Page 22

791 F.2d 22

122 L.R.R.M. (BNA) 2861, 104 Lab.Cas. P 11,966

AVIS RENT A CAR SYSTEM, INC., Plaintiff-Appellant, v. GARAGE EMPLOYEES UNION, LOCAL 272, Defendant-Appellee.

No. 1255, Docket 86-7162.

United States Court of Appeals Second Circuit.

Argued May 1, 1986.

Decided May 20, 1986.

Jerome A. Hoffman, New York City (Dechert Price & Rhoads, of counsel), for plaintiff-appellant.

Bruce J. Cooper, New York City (Dublirer, Haydow, Straci & Victor, of counsel), for defendant-appellee.

Before FEINBERG, Chief Judge and LUMBARD and OAKES, Circuit Judges.

FEINBERG, Chief Judge.

Avis Rent A Car System, Inc. (Avis) appeals from an order of Judge Shirley Wohl Kram of the United States District Court for the Southern District of New York, 626 F.Supp. 1293, confirming a labor arbitration award in favor of the Garage Employees Union, Local 272 (the Union). Avis contends that the award is unenforceable because the arbitrator was not chosen in conformity with the collective bargaining agreement he purported to interpret. We agree that the arbitrator was without power to enter the award, and that the district court should have vacated it. We reverse and remand so that the parties may bring their dispute before a properly selected arbitrator.

I.

In 1983, Avis operated a car rental facility located in a building at 240 East 54th Street in New York City. Avis was then a member of the Metropolitan Garage Owners Association (the Association), and party to a collective bargaining agreement between the Union and the Association (the Association Agreement). However, the Avis employees at the East 54th Street building were covered by a separate contract between Avis and the Union (the Avis Agreement). Meyer Brothers Parking (Meyer) ran a parking garage in the same building. Meyer belonged to the Association as well, and its employees came under the Association Agreement.

In November 1983, Avis took over Meyer's lease at the East 54th Street premises and hired all of the Meyer employees working there. A dispute soon arose over the appropriate rate of pay of the Avis employees formerly employed by Meyer. The Union took the position that the rate provided in the Association Agreement controlled. Avis contended that the ex-Meyer employees, like the other Avis employees working in the building, should receive pay at a lower rate set by the Avis Agreement.

The Union and Avis were unable to agree on the wage question. Both collective bargaining agreements called for arbitration of disputes in such an event. Article XX of the Avis Agreement contemplated that problems would be settled by arbitration under the rules of the American Arbitration Association (AAA).

Section 3. Any dispute, difference controversy [sic] or grievance which cannot be mutually settled under the grievance procedure ... shall be submitted to the American Arbitration Association under its rules of procedure.

The Association Agreement provided in Article XXIV that disputes "arising out of" that contract would go to an arbitration panel composed of "representatives" designated by the parties to the agreement. It went on to specify the scope of the panel's authority and the procedure to be followed in the event of deadlock:

5. Said Board is hereby empowered to rule on the application intent, interpretation or effect of any of the provisions of this Agreement on any issue submitted to it, such ruling to be final and binding on all parties. Said Board shall formulate and establish its own rules of procedure. In the event of a deadlock, either the Association members of the Board, or the Union members of the board by their respective counsel may submit the unresolved issue to the American Arbitration Association in the City of New York for disposition in accordance with its rules and regulations then obtaining; except that upon the consent of both parties the unresolved issue may be submitted to arbitration, to the New York State Board of Mediation.

The Union sought arbitration of the pay controversy in the spring of 1984 by writing to the New York State Mediation Board (the Mediation Board). Invoking a collective bargaining agreement "effective February 6, 1983," which was the effective date of the Association Agreement, and which provided for arbitration by consent under Mediation Board rules, the Union asked that the Mediation Board appoint an arbitrator. Avis replied with a letter to the Mediation Board objecting to the Union's request and claiming that the Avis Agreement applied. Under that contract, Avis argued, arbitration was to proceed under AAA rules and not those of the Mediation Board.

Notwithstanding Avis's protest, the Mediation Board appointed an arbitrator. He heard argument from both parties, who presented him with copies of the Avis Agreement and the Association Agreement. Avis maintained that the Avis Agreement set the pay rates for all the Avis employees at East 54th Street. The Union argued that the ex-Meyer employees should receive the higher Association Agreement rates. A short time later, the arbitrator issued a written award which cited "Article XX" of "a Collective Bargaining Agreement" as the apparent source of his jurisdiction to arbitrate. The arbitrator concluded that the employees who had worked for Meyer should receive the higher wage due to the failure of the parties to discuss wages with them before Avis assumed the Meyer lease.

Avis then brought this action before Judge Kram to vacate the award pursuant to 29 U.S.C. Sec. 185 and the United States Arbitration Act, 9 U.S.C. Secs. 1-14. Avis claimed that the arbitrator had exceeded his authority by basing his award on a contract he lacked power to interpret. According to Avis, the arbitrator had determined that the Avis Agreement was the controlling contract. But an arbitrator appointed by the Mediation Board had no power to enter an award based on that agreement, which provided for arbitration only under AAA rules, not those of the Mediation Board. The Union counterclaimed for confirmation of the award, contending that the arbitrator had acted within his powers and that in any event Avis had waived its objections to the selection procedure. The parties each moved for summary judgment.

Judge Kram adopted neither of these positions fully. She agreed with Avis that the arbitrator had founded his jurisdiction on the Avis Agreement, and that the method used to select the arbitrator had not conformed to Article XX of that agreement. However, the district judge ordered the award confirmed because the parties had received the essence of their bargain by proceeding to arbitration in New York, and because Avis had not shown that arbitration under AAA rules would be better or that Avis had been prejudiced. This appeal followed.

II.

Avis renews its attack on the arbitrator's power to enter an award. Avis argues that the arbitrator should have stopped once he found the Avis Agreement to be controlling, since that agreement gave the power to settle disputes arising under it only to a person appointed under AAA rules. This is a claim of fundamental error, since the collective bargaining agreement is the source of the arbitrator's power to render an award. The Avis Agreement provided solely for arbitration of disputes arising out of that agreement. The Association Agreement contained an identical limitation. Appointment under only one of the contracts therefore could not give an arbitrator the power to render an award arising under the other. See Laborers International Union Local 309 v. W.W. Bennett Constr. Co., 686 F.2d 1267, 1276 (7th Cir.1982).

It is clear from the Union's letter to the Mediation Board and the Board's response to it that the arbitrator was appointed under the Association Agreement. However, it also is clear that he went on to interpret the Avis Agreement, a point made obvious by the...