Desert Palace, Inc. v. Local Joint Executive Bd. of Las Vegas, 80-5945

• Decision Date: 15 June 1982
• Docket Number: No. 80-5945,80-5945
• Citation: 679 F.2d 789
• Parties: 110 L.R.R.M. (BNA) 2811, 94 Lab.Cas. P 13,670 DESERT PALACE, INC., d/b/a Caesars Palace, Plaintiff-Appellee, v. LOCAL JOINT EXECUTIVE BOARD OF LAS VEGAS, and Culinary Workers Union, Local 226, and Bartenders Union, Local 165, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 789

679 F.2d 789

110 L.R.R.M. (BNA) 2811, 94 Lab.Cas. P 13,670

DESERT PALACE, INC., d/b/a Caesars Palace, Plaintiff-Appellee, v. LOCAL JOINT EXECUTIVE BOARD OF LAS VEGAS, and Culinary Workers Union, Local 226, and Bartenders Union Local 165, Defendants-Appellants.

No. 80-5945.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 2, 1982.

Decided June 15, 1982.

Nancy S. Roberts, Davis, Cowell & Bowe, San Francisco, Cal., for defendants-appellants.

William J. Rosenthal, Shawe & Rosenthal, Baltimore, Md., for plaintiff-appellee.

Appeal from the United States District Court for the District of Nevada.

Before POOLE and BOOCHEVER, Circuit Judges, and SOLOMON, ^* District Judge.

SOLOMON, District Judge:

Desert Palace, Inc. (the Hotel), which owns and operates Caesars Palace in Las Vegas, brought this action under Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185, to vacate an arbitration award in favor of the Local Joint Executive Board of the Culinary Workers and Bartenders Locals (the Union). The district court entered summary judgment for the Hotel. The Union appealed. We reverse.

I.

The Hotel has a large showroom where it stages two shows a night featuring well-known entertainers. Before May 18, 1978, patrons made show reservations with a Hotel reservations clerk. The charge for the show was the same for each patron, regardless of the seating location. The price of the show included two or three drinks. The patron could order additional drinks at regular Hotel bar prices. At the end of the show, the cocktail server would give the patron a bill that included the charge for the show plus the charge for the extra drinks. Most patrons gave the server a tip. Patrons usually computed their tips based on the total bill, which averaged about $25 a patron.

Some patrons used tickets, coupons, or package prices to pay for the show. When the ticket, coupon, or package price constituted a "special event" as defined in the collective bargaining agreement, the agreement required the Hotel to pay the cocktail server 15 percent of the charge to the general public for the show.

On May 18, 1978, the Hotel adopted a computerized "Ticketron" system. Under the new system, patrons continued to make reservations through the Hotel reservations clerk, but they paid for the show ticket before instead of at the end of the show. The price of the ticket varied with the location of the table. The price of the ticket did not include drinks. The patron could order drinks at $1.00 instead of the $2.00 to $3.50 charge at the Hotel bars. As a result of this change, the bill presented at the end of the show included only the drinks the patron had ordered. There was evidence that the servers who had formerly averaged $78 to $125 a week in tips were now only averaging from $20 to $25 a week.

The Union, under it's collective bargaining agreement, filed a grievance against the Hotel. The agreement provided a grievance and arbitration procedure for a "dispute or difference of opinion between the Union and the Employer involving the meaning, interpretation, application to employees covered by this Agreement, or alleged violation of any provision of this Agreement".

The Union asserted that ticket sales under the Ticketron system were "special events" that entitled the servers to 15% of the price of show tickets. Pursuant to the provisions of the collective bargaining agreement, when the grievance was not resolved by the parties, it was submitted to arbitration.

The dispute in this case centers on the interpretation of sections 18.01 and 18.03(a) of the collective bargaining agreement. Section 18.03(a) provides:

Cocktail servers serving guests included in a special event .... show in the main showroom shall be guaranteed a minimum gratuity per person served of fifteen percent (15%) of the then current minimum charge to the general public for the second show.

"Special event" is defined in section 18.01 as:

any event for a person, persons, group or groups, arranged by a travel agent, booking agent, hotel sales representative, convention agent, promotional representative, operator or any other individual or agency where tickets, coupons or package prices for food and/or beverages to be served to patrons of such events are involved and where regular employees of an establishment covered by this Agreement provide such service.

The arbitrator found that Ticketron ticket sales were "special events" that entitled the cocktail servers to the guaranteed 15 percent gratuity under section 18.03(a).

The Hotel then petitioned the arbitrator to clarify or modify the method of calculating the amount of the award. The arbitrator denied the petition. The Union threatened to strike to enforce collection of the award. The Hotel then paid the award in full after the Union stipulated that payment would not prejudice the Hotel's rights to seek judicial review. Thereafter the Hotel stopped using Ticketron.

The Hotel filed this action in the district court against the Union to vacate the award. Both parties moved for summary judgment. After a hearing, the court granted the Hotel's motion and vacated the award. The court held that: (1) the arbitrator's interpretation of "special event" ignored the plain and unambiguous meaning of the contract language; and (2) the arbitrator's calculation of the amount of the award under section 18.03(a) was based on an implausible interpretation of "minimum charge" and constituted punitive damages. Desert Palace, Inc. v. Local Joint Executive Board, 486 F.Supp. 675 (D.Nev.1980). The Union appealed.

II.

The scope of review of an arbitration award is limited to whether the award "draws its essence from the collective bargaining agreement" and does not "manifest an infidelity" to the agreement. United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960). "It is the arbitrator's construction which was bargained for; and so far as the arbitrator's decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his." Id. at 599, 80 S.Ct. at 1362.

The key question is "whether the arbitrator's interpretation could in some rational manner, be derived from the collective bargaining agreement, viewed in light of its language, its content, and any other indicia of the parties' intention." Local 1020, United Brotherhood of Carpenters v. FMC Corp., 658 F.2d 1285, 1294 (9th Cir. 1981). If, on its face, the award "represents a plausible interpretation of the contract in the context of the parties' conduct", judicial inquiry ceases and the award must be affirmed. Edna H. Pagel, Inc. v. Teamsters Local 595, 667 F.2d 1275, 1278-9 (9th Cir. 1982). The correctness of the arbitrator's reasoning and conclusion "is not relevant to a reviewing court so long as the award complies with these standards." Local 1020, United Brotherhood of Carpenters, 658 F.2d at 1294.

The rationale for this method of interpretation was set forth by Judge Learned Hand in American Almond Products Co. v. Consolidated Pecan Sales Co., 144 F.2d 448, 451 (2nd Cir. 1944), when he wrote

Arbitration may or may not be a desirable substitute for trials in courts; as to that the parties must decide in each instance. But when they have adopted it, they must be content with its informalities; they may not hedge it about with those procedural limitations which it is precisely its purpose to avoid. They must content themselves with looser approximations to the enforcement of their rights than those that the law accords them, when they resort to its machinery.

The district court concluded that the definition of "special event" in section 18.01 plainly did not include Ticketron sales because: (1) Ticketron sales are not "arranged" within the meaning of section 18.01; (2) the price of a Ticketron ticket does not include "food and/or beverages"; and (3) Ticketron sales are not "special."

In our view, all three of these contract terms are ambiguous and the arbitrator's construction of these terms is plausible.

A. "Arranged"

To be a special event under the collective bargaining agreement, the ticket sale must be "arranged by a travel agent, booking agent, hotel sales representative, convention agent, promotional representative, operator or any other individual or agency." Under the Ticketron system, patrons made reservations through the Hotel reservations clerk. Although the Union argued that "any other individual or agency" is broad enough to include a Hotel reservations clerk, the district court disagreed and interpreted "special event" to mean an event arranged by someone other than the Hotel reservations clerk. Desert Palace, 486 F.Supp. at 681. The interpretation disregards the fact that before May 18, 1978 the Hotel treated ticketed show reservations made through the Hotel reservations clerk as "special events."

B. "Food and/or Beverages"

The district court held that the "special event" provision in the collective bargaining agreement applied only when the ticket price included the price of beverages or food. Desert Palace, 486 F.Supp. at 683. It is uncertain whether the words "for food and/or beverages" modify the entire phrase "tickets, coupons or package prices" or whether they modify only "package prices." The arbitrator concluded that the price of a ticket need not include the cost of any food or beverage for the ticket to fall within the definition of "special event". He therefore held that a special event included a Ticketron ticket even though the ticket did not include the cost of cocktails.

The district court rejected this interpretation. It concluded that to constitute a special event, a ticket must include the cost of food or beverages and must also be either complimentary or part of a package price. 486 F.Supp. at 681-83. Because Ticketron tickets did not include...