Hamilton Park Health Care Ctr. Ltd. v. 1199 SEIU United Healthcare Workers E.

• Decision Date: 01 April 2016
• Docket Number: No. 15–2595.,15–2595.
• Citation: 817 F.3d 857
• Parties: HAMILTON PARK HEALTH CARE CENTER LTD., Appellant v. 1199 SEIU UNITED HEALTHCARE WORKERS EAST.
• Court: U.S. Court of Appeals — Third Circuit

817 F.3d 857

HAMILTON PARK HEALTH CARE CENTER LTD., Appellant
v.
1199 SEIU UNITED HEALTHCARE WORKERS EAST.

No. 15–2595.

United States Court of Appeals, Third Circuit.

LAR 34.1a Feb. 29, 2016.
Opinion filed: April 1, 2016.

Submitted Under Third Circuit

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David Jasinski, Esquire, Jennifer C. Van Syckle, Esquire, Rebecca D. Winkelstein, Esquire, Jasinski, P.C., Newark, NJ, for Appellant.

Katherine H. Hansen, Esquire, William S. Massey, Esquire, Gladstein, Reif & Meginniss, LLP, New York, NY, for Appellee.

Before: AMBRO, JORDAN, and SCIRICA, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

Hamilton Park Health Care Center filed a petition to vacate an arbitration award in a dispute with the 1199 SEIU United Healthcare Workers East union. The District Court denied the petition and confirmed the award. On appeal, Hamilton Park asserts that the Court erred by approving a multi-year arbitration award when the parties' collective bargaining agreement ("CBA") only contemplated a single-year award. Because the parties consented at arbitration to a multi-year award, we affirm this portion of the Court's order.

Hamilton Park also argues that, even if a multi-year award is permissible, the Court should have severed a provision authorizing a new round of arbitration at a later date. We agree; thus we reverse and remand as to this portion of the order.

I. Background

Hamilton Park is a long-term care facility that was previously a member of a multi-employer bargaining group. Morris Tuchman, Esq. represented the group (referred to as "Tuchman Homes") in negotiations with 1199 SEIU, which was the exclusive bargaining agent for the group's employees (subject to exceptions not at issue here).¹ In 2008, Tuchman Homes and the union agreed to a CBA beginning on March 13 of that year and extending through February 28, 2013. The CBA gave the union the option to reopen negotiations in November 2011 to bargain for new wages, hours, and general terms and conditions of employment for the CBA's last year (February 28, 2012–February 28, 2013). If the union exercised its right to

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reopen and the parties did not agree to terms by February 28, 2012, they could submit any unresolved items to binding interest arbitration.²

The CBA provides that it cannot be changed "unless in writing, and signed by the authorized representatives of the parties." It also says that the arbitrator cannot "add to, subtract from, or otherwise amend or modify the terms of this Agreement." Although the CBA only authorizes interest arbitration for the contract's last year, it does not expressly bar any other types of arbitration. Finally, the CBA empowers the arbitrator to "determine his jurisdiction" and grant "all appropriate remedies."

In November 2011, the union invoked its right to reopen negotiations. The parties reached an impasse, and they submitted the unresolved issues to arbitration. One of the main sticking points was the 4.5 percentage point increase in contributions that was necessary to maintain the level of health benefits that employees received. The union wanted Tuchman Homes to cover the entire increase, but the latter opposed paying any of it. During a hearing on March 26, 2012, the arbitrator, Martin Scheinman, Esq., suggested that the parties consider allowing him to fashion a multi-year award that went beyond the scope of the February 28, 2012–February 28, 2013 jurisdiction provided by the CBA. The purpose of this would be to spread out increased employer contributions over a longer period of time. As Scheinman recounted in the award he ultimately issued, the parties "tentatively" agreed to the request for expanded jurisdiction. He said that, in subsequent ex parte meetings, they firmly committed to this plan. Specifically, he said that "[b]oth sides agreed my jurisdiction permitted a multi-year Award, at my discretion." However, these agreements were never in writing.

In November 2012, Scheinman issued a multi-year award that extended through June 2016. It dealt with, among other topics, wages and health benefits contributions. With respect to the dispute over health benefits, the award called for a 2 percentage point increase in employer contributions at the outset followed by a further 2.5 percentage point increase in March 2014.

Scheinman also included a provision allowing the union to reopen negotiations for the contract's last year (June 30, 2015–June 30, 2016) and to submit any resulting disputes to binding interest arbitration. The effect of Scheinman's award was to create what courts frequently call a "second generation" interest arbitration agreement. See, e.g., Globe Newspaper Co. v. Int'l Ass'n of Machinists, 648 F.Supp.2d 193, 198 (D.Mass.2009). As the name implies, this refers to a scenario where an arbitrator uses his authority to decide a particular dispute to impose a requirement, not previously agreed upon by the parties, to arbitrate future disputes.

Scheinman did not address why he included the second generation interest arbitration provision. Nor did he ever conclude that the parties consented to it. He did, however, explain his reasoning for including a reopener provision. He said he "followed the parties' format," derived from the 2008–2013 CBA, of permitting

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the union to reopen negotiations for the contract's last year. In both the 2008–2013 CBA and Scheinman's award, the reopener and arbitration provisions work in tandem (reopening followed, if need be, by arbitration). It appears that Scheinman presumed that the parties, having once (in the 2008–2013 CBA) elected to resolve disputes through interest arbitration, would continue to choose that model for future disputes.

Hamilton Park responded to the award by filing a petition in the District Court to vacate it. The crux of its argument was that Scheinman exceeded his authority under the CBA by issuing a multi-year award instead of confining himself to the year ending February 28, 2013 and by inserting a second generation interest arbitration provision. Hamilton Park's position was that it did not provide oral consent for Scheinman's actions and that, even if it had, it would be insufficient because the CBA requires written authorization.

In support of the contention that it never provided consent, Hamilton Park submitted to the Court a letter its counsel had written to Tuchman along with an unsigned declaration from Tuchman that was attached to the letter. The letter stated that Hamilton Park's counsel had spoken with Tuchman and prepared the declaration on his behalf based on that discussion. It closed by asking Tuchman to execute the declaration, which asserted that he "never consented to any modification of the CBA authorizing Scheinman to issue an award beyond one year." However, Hamilton Park later informed the Court that Tuchman refused to sign the declaration.

Hamilton Park also submitted declarations from its chief financial officer, Donald Wuertz, and from Jacqueline Cousins, an administrator at Cranford Health and Extended Care, another member of the Tuchman Homes multi-employer bargaining group. The declarations said that neither the group as a whole nor Hamilton Park individually gave Scheinman or Tuchman authorization for a multi-year award. But they are silent on whether Tuchman, as the group's representative, authorized Scheinman to issue such an award.

II. Jurisdiction and Standard of Review

The District Court had jurisdiction under 9 U.S.C. § 10and 9 U.S.C. § 11, and we have jurisdiction per 9 U.S.C. § 16(a)(1)(D)and 28 U.S.C. § 1291. "When reviewing a district court's denial of a motion to vacate an arbitration award, we review its legal conclusions de novo and its factual findings for clear error." Whitehead v. Pullman Grp., LLC, 811 F.3d 116, 119 n. 23 (3d Cir.2016).

III. Discussion

"There is a strong presumption under the Federal Arbitration Act ["FAA"] in favor of enforcing arbitration awards." Brentwood Med. Assocs. v. United Mine Workers of Am., 396 F.3d 237, 241 (3d Cir.2005)(internal citation omitted). We review them under an "extremely deferential standard," the application of which "is generally to affirm easily the arbitration award." Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir.2003). This deference, of course, is subject to certain limitations. Indeed, "[e]ffusively deferential language notwithstanding, the courts are neither entitled nor encouraged simply to 'rubber stamp' the interpretations and decisions of arbitrators." Matteson v. Ryder Sys. Inc., 99 F.3d 108, 113 (3d Cir.1996).

For instance, the FAA gives district courts the authority to vacate awards where arbitrators "exceeded their powers, or so imperfectly executed them that a

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mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10(a)(4). Also subject to vacatur are awards that "do[ ] not draw [their] essence from the terms of the collective bargaining agreement," Jersey Nurses Econ. Sec. Org. v. Roxbury Med. Grp., 868 F.2d 88, 88 (3d Cir.1989), that result...