Local 15, Intern. Broth. Elec. Workers v. Exelon

• Decision Date: 31 July 2007
• Docket Number: No. 05-4175.,05-4175.
• Citation: 495 F.3d 779
• Parties: LOCAL 15, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, Plaintiff-Appellant, v. EXELON CORPORATION, and its wholly owned subsidiaries, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

495 F.3d 779

LOCAL 15, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, Plaintiff-Appellant, v. EXELON CORPORATION, and its wholly owned subsidiaries, Defendant-Appellee.

No. 05-4175.

United States Court of Appeals, Seventh Circuit.

Argued April 9, 2007.

Decided July 31, 2007.

John J. Toomey, Arnold B. Sanders (argued), Arnold & Kadjan, Chicago, IL, for Plaintiff-Appellant.

Brian M. Montgomery (argued), Exelon Business Services Company, Chicago, IL, for Defendant-Appellee.

Before EASTERBROOK, Chief Judge, and KANNE and WILLIAMS, Circuit Judges.

KANNE, Circuit Judge.

The Local 15, International Brotherhood of Electrical Workers, AFL-CIO (Union) objected to Exelon Corporation and its wholly owned subsidiaries' (Company) implementation of an Automated Roster Call Out System (ARCOS) used to summon employees who are not already working to respond to an electrical outage. Under the terms of the parties' Collective Bargaining Agreement (CBA), the matter was submitted to arbitration after the grievance procedure failed to resolve the dispute. The arbitrator concluded that the Company did not violate the terms of the parties' CBA by implementing ARCOS. The Union filed suit in federal district court challenging the arbitration award. The district court granted the Company's motion to dismiss for failure to state a claim. We affirm.

I. BACKGROUND

When a storm or other event disrupts the service provided by a public utility, the utility must summon, or "call out", employees who are not at work to quickly restore service to its customers. The Company, in its several forms and locations, and the Union have tried various approaches to the call out problem. Following major power outages to the City of Chicago in the Summer of 1999, the Company attempted to boost call out response rates, but its efforts were unsuccessful. In 2002, the Company developed ARCOS and began discussions with the Union regarding its implementation.

ARCOS sends an automated phone message to employees indicating that there is an electrical outage and need for response. As required by the parties' CBA, the order of the calls gives priority to those employees with the least amount of overtime for that pay period. Employees are required to give the Company three numbers at which they may be reached, and the Company does not provide employees with pagers or cell phones.

Unlike previous call out procedures, ARCOS includes a disciplinary feature. Each employee's call out response rate is tracked, and when it falls below a certain percentage in any three-month quarter, the employee is subject to progressive discipline. Discipline related to call out response rates is on a separate track from other discipline administered by the Company. However, response rates are not considered for those employees who receive fewer than five calls in a quarter. Thus, an employee who receives fewer than five calls is not eligible for discipline, even if he fails to accept any of them.

The Company initially indicated that the required call out response rate for each employee would be thirty percent. But, following a major storm over the 2003 Fourth of July weekend, the company raised the required response rate to fifty percent. The minimum response rates were not, however, required from the start of the new system. Rather, required response rates were ratcheted up over time.

In response to what it thought was the unauthorized implementation of ARCOS, the Union submitted an unfair labor practice (ULP) charge to Region 13 of the National Labor Relations Board (NLRB) alleging violations of 29 U.S.C. §§ 158(a)(1), (3), and (5). The NLRB deferred the charge to the parties' arbitration procedure. The arbitrator issued an award after briefing and a five-day hearing. The Union next submitted the arbitration award to NLRB Region 13 and requested that the NLRB not defer to the award, issue an ULP on the grounds that the award was repugnant to the National Labor Relations Act (NLRA), and resume prosecution of the matter. Region 13 denied the request and the NLRB's General Counsel affirmed Region 13's dismissal.

The Union filed a timely action in federal district court challenging the arbitrator's award. The Company filed a motion to dismiss under FED.R.CIV.P. 12(b)(6), and the district court granted the motion finding that: (1) the arbitrator interpreted the contract; (2) the arbitrator did not exceed the scope of his power; and (3) the arbitration award did not violate public policy.

Two provisions of the CBA are relevant to our analysis. First, CBA, Art. II: Union-Company Relationship: 1. (management rights provision), states: "The management of the Company and the direction of the working forces covered herein, including the right to hire, suspend, discharge for proper cause, promote, demote, transfer, and lay off because of lack of work or for other proper reasons, are vested in the Company, except as otherwise specifically provided in this agreement."

Second, Art. V: Working Conditions: 6, states: "If the Company, in writing, requires an employee to have a higher type of telephone service than the employee now has, the Company will reimburse the employee for the additional cost of the higher type of service."

II. ANALYSIS

The Union argues that it has stated a claim upon which relief may be granted based upon three separate allegations: (1) that the arbitrator evidenced manifest disregard for the law; (2) that the arbitrator exceeded the scope of his authority; and (3) that the arbitration award is against public policy.

We review de novo a district court's dismissal for failure to state a claim under FED.R.CIV.P. 12(b)(6). Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir.2007); Moranski v. Gen. Motors Corp., 433 F.3d 537, 539 (7th Cir.2005). We accept "as true all well-pleaded allegations in the complaint and draw[] all reasonable inferences in the plaintiff's favor." Id. at 539 (citing Cler v. Illinois Educ. Ass'n, 423 F.3d 726, 729 (7th Cir.2005)). Any written instrument, such as an arbitration award, that is attached to a complaint is considered part of that complaint. FED.R.CIV.P. 10(C); Papapetropoulous v. Milwaukee Transp. Servs., Inc., 795 F.2d 591, 594 (7th Cir.1986) ("[I]n considering whether the complaint states a cause of action we must also consider the arbitrator's decision attached to the complaint. . . .").

Notice pleading requires only that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief . . .". FED.R.CIV.P. 8(a)(2); Cole v. U.S. Capital, Inc., 389 F.3d 719, 724 (7th Cir.2004) ("A complaint should not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.") (citations and quotations omitted). But see Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007) ("[The] `no set of facts' language has been questioned, criticized, and explained away long enough.... The phrase is best forgotten as an incomplete, negative gloss on an accepted pleading standard: once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.")

The liberal notice pleading standard, however, stands in contrast to the great deference accorded to arbitration awards. "[I]f an arbitrator is even arguably construing or applying the contract and acting within the scope of this authority, the fact that a court is convinced he committed serious error does not suffice to overturn his decision. It is only when the arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice that his decision may be unenforceable." Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509, 121 S.Ct. 1724, 149 L.Ed.2d 740 (2001) (citations and quotations omitted); see also Wise v. Wachovia Sec., LLC, 450 F.3d 265, 269 (7th Cir.2006) ("[T]he issue for the court is not whether the contract interpretation is incorrect or even wacky but whether the arbitrator has failed to interpret the contract at all. . . ."); Ganton Techs., Inc. v. Int'l Union, United Auto., Aerospace and Agric. Implement Workers of Am., U.A.W., Local 627, 358 F.3d 459, 462 (7th Cir.2004) ("[O]nly if there is no possible interpretive route to the award, so that a noncontractual basis can be inferred, may the award be set aside.") (internal quotations and alterations omitted).

A. Manifest Disregard for the Law

The Union argues that the arbitrator evidenced manifest disregard for the law under both the Fair Labor Standards Act (FLSA) and the NLRA. The FLSA claim is easily disposed of. The Union neither raised this argument in its complaint, nor in response to the Company's motion to dismiss. "A party waives any argument that it does not raise before the district court or, if raised in the district court, it fails to develop on appeal." Williams v. REP Corp., 302 F.3d 660, 666 (7th Cir.2002) (quoting Hojnacki v. Klein-Acosta, 285 F.3d 544, 549 (7th Cir.2002)). The Union has waived its argument that the arbitrator has evidenced a manifest disregard for the law by issuing an award that violates the FLSA.

The Union's NLRA claim requires more attention. The NLRA requires employers to bargain with unions over significant changes in working conditions. 29 U.S.C. § 158(a)(1), (5); see ATC Vancom of California, L.P. v. N.L.R.B., 370 F.3d 692, 696 (7th Cir.2004). The Union argues that the arbitrator's award violates the NLRA by permitting the implementation of ARCOS without requiring the Company to bargain with the Union. The arbitrator's decision specifically addressed this issue: "The Unilateral adoption and Implementation of the new Call Out Policy was not prohibited by any provision of the Labor Agreement or any other agreement, side letter or local...