United Food and Commercial Workers v. Illinois Amer. Water Co.

• Court: U.S. Court of Appeals — Seventh Circuit
• Writing for the Court: Kanne
• Citation: United Food and Commercial Workers v. Illinois Amer. Water Co., 569 F.3d 750 (7th Cir. 2009)
• Decision Date: 26 June 2009
• Docket Number: No. 08-3144.,08-3144.
• Parties: UNITED FOOD AND COMMERCIAL WORKERS, LOCAL 1546, Plaintiff-Appellee, v. ILLINOIS-AMERICAN WATER COMPANY, Defendant-Appellant.

569 F.3d 750

UNITED FOOD AND COMMERCIAL WORKERS, LOCAL 1546, Plaintiff-Appellee, v. ILLINOIS-AMERICAN WATER COMPANY, Defendant-Appellant.

No. 08-3144.

United States Court of Appeals, Seventh Circuit.

Argued February 17, 2009.

Decided June 26, 2009.

Charles Orlove (argued), Attorney, Jacobs, Burns, Orlove, Stanton & Hernandez, Chicago, IL, for Plaintiff-Appellee.

Terry L. Potter (argued), Attorney, Husch Blackwell Sanders, St. Louis, MO, for Defendant-Appellant.

Before POSNER, KANNE, and WOOD, Circuit Judges.

KANNE, Circuit Judge.

Illinois-American Water Company ("IAWC") terminated Glenn Williams after he failed to abide by the terms of a Last Chance Agreement ("LCA"). At the time of Williams's dismissal, United Food and Commercial Workers, Local 1546, the labor organization that represents many of IAWC's employees, was challenging the validity of the LCA. The Union grieved William's termination as well, and both grievances proceeded to arbitration, where an arbitrator found in the Union's favor.¹ The arbitrator reinstated Williams after concluding that the LCA did not contemplate his termination while the Union's grievance was pending. The district court confirmed the arbitrator's award, and IAWC appeals. We now affirm.

I. BACKGROUND

Glenn Williams worked in various capacities for IAWC and its predecessors from 1974 until his termination on March 2, 2007. For the last twenty years of his employment, Williams served as an operator, which involved the operation and maintenance of plant equipment used for treating wastewater.

Operators must be licensed by the Illinois Environmental Protection Agency ("IEPA"), which issues four levels of license: Class A, B, C, or D. Individuals with a Class D license are considered operators-in-training. Operator licenses must be renewed every three years. According to IAWC, an operator's wage depends on the level of his or her license, with Class A operators receiving the highest pay and Class D operators-in-training the lowest.² Prior to his termination, Williams's last active license was Class A, which he had earned in 1994.

In October 2006, the IEPA informed Williams that his Class A license had expired in 1997, nine years earlier, because he had failed to renew it. Williams passed this information along to his superiors at IAWC, and the company immediately reduced his compensation level to that of a Class D operator-in-training.

IAWC claimed that operating without a license fell under Offense 12 of its Employees' Guide for Conduct, which addressed the neglect of assigned duties. Williams had been suspended under this provision of the Guide the preceding August, which meant that operating without a license was his second violation of Offense 12 in three months. The Guide specified that a second such offense was punishable by termination.

In lieu of terminating Williams, IAWC offered him an opportunity to remain with the company pursuant to the terms of a Last Chance Agreement. The LCA placed several conditions on Williams's continued employment. First, IAWC suspended Williams for thirty days without pay. Second, IAWC demanded that Williams obtain at least a Class B operator license within six months of executing the LCA. And third, because Williams had been paid as a Class A operator when he was not licensed as such, he was required to repay IAWC excess compensation that he received from January 1, 2006, until IAWC began paying him at the Class D operator-in-training rate. The LCA stipulated that Williams would arrange a repayment schedule with IAWC within two weeks of signing the agreement.

The LCA contained several other provisions, two of which are relevant to our discussion. The first provision contained the following language:

Failure to comply with any of these conditions will result in immediate termination.... The Union and the Employee expressly waive any right to file a grievance or other claim regarding Employee's discharge under this Agreement, except to contest the fact of what occurred. If the conduct occurred, an Arbitrator will not have any authority to modify the discharge to a lesser penalty.

The second relevant provision stated that "[a]ny disputes regarding the meaning of this Agreement will be resolved solely through the parties' collective bargaining agreement grievance-arbitration procedure."

On November 7, 2006, Williams and IAWC signed the LCA. Also signing as a party to the agreement was the Union, which represents all operators and various other service people employed by IAWC. The Union filed a grievance contesting the LCA's validity on November 10, three days after signing.

The present dispute arose when Williams failed to make arrangements for the repayment of his excess wages as required by the LCA. On March 2, 2007, several months after Williams completed his unpaid suspension, IAWC representatives gave Williams the opportunity to sign a proposed repayment plan, which Union representatives advised Williams not to sign. According to Williams, the proposed plan would have left with him with only $125 a week on which to live. Faced with such a dire economic decision, Williams followed the Union's advice and refused to sign the plan. IAWC terminated him that same day. The Union then filed a second grievance, this time protesting Williams's dismissal.

Both of the Union's grievances — the first contesting the Last Chance Agreement, the second contesting Williams's termination — were consolidated and brought before an arbitrator, who held a hearing on November 20, 2007. In a written opinion issued February 21, 2008, the arbitrator sustained in part and denied in part the Union's grievances. Dealing first with the threshold question of the LCA's validity, the arbitrator found the agreement to be enforceable and binding upon IAWC, Williams, and the Union. Because the valid LCA contemplated Williams's suspension, obligation to repay excess compensation, and reduction in wage rate pending renewal of his license, the arbitrator denied the Union's challenges in those respects.

Turning to Williams's dismissal, the arbitrator discussed Williams's failure to enter into a repayment plan for excess wages within the time frame established in the LCA. The arbitrator then identified the agreement's pivotal provision, which stated that "[f]ailure to comply with any of these conditions will result in immediate termination." The arbitrator framed the issue as "whether this provision of the Last Chance Agreement justified discharge for failure to enter a repayment plan while a challenge to the validity of the agreement was unresolved." The arbitrator answered this question in the negative, concluding that the LCA did not provide for Williams's termination while a good faith challenge to the validity of the entire agreement was pending. The arbitrator ordered IAWC to reinstate Williams to his operator position and make him whole for lost wages.

In reaching his decision, the arbitrator discussed several issues. First, he stated that the Union's challenges to the LCA's validity, although unsuccessful, were undertaken in good faith and were far from frivolous. Next, he noted that IAWC unilaterally drafted the LCA, requiring that any ambiguities be construed against the company. Third, he characterized the challenge to the LCA as "an act of concerted activity" under the National Labor Relations Act and endeavored to interpret the LCA in a manner consistent with the Act. And fourth, he found it "grossly unreasonable" to interpret the LCA in a manner that allowed for Williams's discharge while he was challenging its overall validity.

Following the arbitrator's decision, both IAWC and the Union sought review in the United States District Court for the Northern District of Illinois pursuant to 9 U.S.C. § 10. IAWC sought to vacate the arbitrator's decision, while the Union requested that it be confirmed. Acting on cross-motions for summary judgment, the district court, in an order on July 24, 2008, found in the Union's favor and confirmed the arbitration award reinstating Williams. This appeal ensued.

II. ANALYSIS

On appeal, IAWC seeks relief under the Federal Arbitration Act, 9 U.S.C. § 10(a)(4), which states that a court may vacate an arbitrator's award "where the arbitrator[] exceeded [his] powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." IAWC claims that the arbitrator exceeded his power in two ways: (1) by ignoring unambiguous language in the LCA and looking beyond the four corners of the document; and (2) by infusing his own notions of reasonableness into his interpretation of the contract.

We review de novo a district court's decision on cross-motions for summary judgment, IBEW, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir.2002), meaning that we review the arbitrator's decision as if we were the court of first decision, see Am. Postal Workers Union, Milwaukee Local v. Runyon, 185 F.3d 832, 835 (7th Cir.1999). When parties seek judicial review of an arbitrator's award, the role of the courts, both district and appellate, is extremely limited. Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509, 532 U.S. 1015, 121 S.Ct. 1724, 149 L.Ed.2d 740 (2001); Monee Nursery & Landscaping Co. v. Int'l Union of Operating Eng'rs, Local 150, 348 F.3d 671, 675 (7th Cir.2003); see also Bhd. of Locomotive Eng'rs v. Atchison, Topeka & Santa Fe Ry. Co., 768 F.2d 914, 921 (7th Cir.1985) (calling judicial "review" a misnomer due to the extreme deference we give an arbitrator's decision).³

A reviewing court will enforce the arbitrator's award so long as it "draws its essence from the contract," even if the court believes that the arbitrator misconstrued its provisions. United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 36, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987); see also Ethyl Corp., 768 F.2d at 184 (quoting United Steelworkers v....