GREATER NANTICOKE AREA SCHOOL DIST. v. GREATER NANTICOKE AREA …

• Decision Date: 19 October 2000
• Citation: 760 A.2d 1214
• Parties: GREATER NANTICOKE AREA SCHOOL DISTRICT, Appellant, v. GREATER NANTICOKE AREA EDUCATION ASSOCIATION.
• Court: Pennsylvania Commonwealth Court

760 A.2d 1214

GREATER NANTICOKE AREA SCHOOL DISTRICT, Appellant, v. GREATER NANTICOKE AREA EDUCATION ASSOCIATION.

Commonwealth Court of Pennsylvania.

Argued May 16, 2000.

Decided October 19, 2000.

Ellis H. Katz, New Britain, for appellant.

Charles L. Herring, Ambler, for appellee.

BEFORE: McGINLEY, Judge, LEADBETTER, Judge, JIULIANTE, Senior Judge.

LEADBETTER, Judge.

The Greater Nanticoke Area School District appeals from the order of the Court of Common Pleas of Luzerne County, which denied its petition to vacate the arbitration award adjudging the school district in violation of the "no furlough" provision of the collective bargaining agreement (CBA) for demoting ten teachers to part-time positions. The school district contends that the award does not draw its essence from the CBA because the arbitrator improperly relied upon parol evidence to interpret the parties' intent regarding the meaning of the word "furlough." For the reasons which follow, we affirm.

In July of 1997, the school district demoted ten teachers from full-time to part-time status. Shortly thereafter, the Greater Nanticoke Area Education Association filed a grievance contending that the demotion violated the "no furlough" clause of the CBA. The 1991-1996 CBA, as modified and extended until August 31, 1998, provided in relevant part as follows, "It is agreed between the parties that in recognition of the salary modifications, the Greater Nanticoke Area School District shall not involuntarily furlough any current bargaining unit member during the term of the modified agreement." The school district maintained that this prohibition against involuntary furlough had no bearing on reductions in status from full to part-time. In opposition, the Association contended that the term "furlough" encompassed any action adversely affecting employment status, including the demotion to part-time. Pursuant to the CBA, the matter was submitted for binding arbitration in accordance with Section 903 of the Public Employee Relations Act (Act 195).¹ Following a hearing, the arbitrator found the term "furlough" to be ambiguous in the context of the CBA. Based on testimony about the negotiations underlying the furlough prohibition,² he determined that the parties intended that the prohibition applied to the demotions at issue here. Consequently, the arbitrator sustained the grievance. The court of common pleas denied the school district's petition to vacate the award. The school district filed the present appeal.

The proper scope of judicial review of a grievance arbitration award has been the subject of several recent opinions of our Supreme Court. In State System of Higher Education (Cheyney University) v. State College University Professional Association, 560 Pa. 135, 743 A.2d 405 (1999), the court noted that the essence test has long been established as the appropriate standard of review of an Act 195 arbitrator's interpretation of a CBA. However, based as it is upon concepts as slippery as "rationally derived" and "logically flowing from," the essence test standard has been susceptible to interpretational drift. As a conceptual anchor, the court reviewed the analytical principles underlying the decision in Community College of Beaver County v. Community College of Beaver County, Society of the Faculty (PSEA/NEA), 473 Pa. 576, 375 A.2d 1267 (1977), wherein Pennsylvania adopted the essence test announced by the United States Supreme Court in United Steelworkers v. Enterprise Wheel & Car Corp.:

[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. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement.

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[T]he question of interpretation of the collective bargaining agreement is a question for the arbitrator. 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.

363 U.S. 593, 597-99, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). The court in Beaver County further equated the essence test with the statutory standard of review articulated in the Arbitration Act of 1927,³ which it recognized as applicable to arbitration pursuant to collective bargaining agreements under Act 195. 473 Pa. at 585, 375 A.2d at 1271. While the Arbitration Act of 1927 was repealed three years after the decision in Beaver County, its provisions were largely reenacted by the Uniform Arbitration Act, 42 Pa.C.S. §§ 7301-7362. In particular, the standard of review now appears at 42 Pa.C.S. § 7302(d)(2), as follows:

Where this paragraph is applicable a court in reviewing an arbitration award pursuant to this subchapter shall, notwithstanding any other provision of this subchapter, modify or correct the award where the award is contrary to law and is such that had it been a verdict of a jury the court would have entered a different judgment or a judgment notwithstanding the verdict.

As the court in Beaver County noted, this standard of review establishes between the reviewing court and the arbitrator's award the same relationship as traditionally exists between a reviewing court and a jury's verdict and dictates a level of scrutiny not very different from the essence test. Beaver County, 473 Pa. at 589, 375 A.2d at 1273. See also Upper St. Clair Sch. Dist. v. Upper St. Clair Educ. Support Personnel Assoc., 168 Pa.Cmwlth. 1, 649 A.2d 470, 471 (1994)

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Based upon the teachings of Beaver County, the court in Cheyney University rejected both what it characterized as the "extreme deference" standard, under which "as long as the issue is covered by the agreement, the inquiry is at end"⁴ and "language used by our court indicating a standard of review looking to the `reasonableness' of the arbitrator's award."⁵ It reaffirmed the "rationally derived" standard articulated in Ludwig Honold Manufacturing Company v. Fletcher, 405 F.2d 1123, 1128 (3d Cir.1969), quoted with approval in Beaver County, and concluded:

The arbitrator's award must draw its essence from the collective bargaining agreement. Pursuant to the essence test as stated today, a reviewing court will conduct a two-prong analysis. First, the court shall determine if the issue as properly defined is within the terms of the collective bargaining agreement. Second, if the issue is embraced by the agreement, and thus, appropriately before the arbitrator, the arbitrator's award will be upheld if the arbitrator's interpretation can rationally be derived from the collective bargaining agreement. That is to say, a court will only vacate an arbitrator's award where the award indisputably and genuinely is without foundation in, or fails to logically flow from, the collective bargaining agreement.

Id. at 149-50, 743 A.2d at 413.

The school district acknowledges that the usual scope of review of a grievance arbitration award under Act 195 calls for deference to the arbitrator's award so long as it draws its essence from the CBA. However, the school district contends that deference is not appropriate here because the arbitrator looked outside the confines of the CBA to find and resolve ambiguity as to the meaning of the word "furlough." The school district asserts that the word "furlough" is not ambiguous and means, as a matter of law, an impermanent separation in the nature of a suspension or lay-off. The district therefore seeks our plenary review of the arbitrator's finding of ambiguity and his reliance on extrinsic evidence to determine the parties' intent.

We believe that in making its argument the district fails to appreciate the differences between the similar but quite distinct procedures appropriate in the arbitration and trial court settings. While the ultimate question remains the same— the intent of the parties—its determination is reached by different paths. Where a contract case is tried to a judge and jury, the trial judge determines as a threshold issue whether the contract language is ambiguous or unambiguous as a matter of law. If the court finds the language to be clear and unambiguous, it does not submit the issue to the jury, but itself decides the question of the parties' intent based exclusively upon the terms of the agreement. Steuart v. McChesney, 498 Pa. 45, 48-49, 444 A.2d 659, 661 (1982); Seven Springs Farm, Inc. v. Croker, 748 A.2d 740, 744 (Pa.Super.2000). On the other hand, if the court finds the language to be ambiguous, the jury may hear and consider extrinsic evidence to determine the parties' intent. Hutchison v. Sunbeam Coal Corp. 513 Pa. 192, 200-01, 519 A.2d 385, 390 (1986); Smith v. SEPTA, 707 A.2d 604, 609 (Pa. Cmwlth.1998); Metzger v. Clifford Realty Corp., 327 Pa.Super. 377, 476 A.2d 1, 5 (1984). As noted in Beaver County, however, (in spite of considerable appellate language to the contrary) whether decided by judge or jury, the ultimate question of the parties' intent is one of fact. 473 Pa. at 592-94,375 A.2d at 1274-75.⁶

Conversely, in the arbitration context the distinction between ambiguous and unambiguous contracts is of no evidentiary significance. As the court opined in Beaver County:

To ... imply that the standard of review of an arbitrator's interpretation of a collective bargaining agreement turns on the common law question of whether the agreement is "ambiguous" and therefore to be interpreted by the finder-of-fact (jury) or "unambiguous" and to be interpreted by the court ... is not the correct approach.

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The division effected by the common law between ambiguous writings (interpreted by the jury) and unambiguous writings (interpreted by the court as a "question of law") is logically inapplicable to interpretation questions which arise in arbitration....

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To state the

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