Verizon Pa. LLC v. Commc'ns Workers of Am.

• Decision Date: 08 September 2021
• Docket Number: 20-1908
• Parties: VERIZON PENNSYLVANIA, LLC v. COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, LOCAL 13000; COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO DISTRICT 2-13, Appellants
• Court: U.S. Court of Appeals — Third Circuit

VERIZON PENNSYLVANIA, LLC
v.
COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO, LOCAL 13000; COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO DISTRICT 2-13, Appellants

No. 20-1908

United States Court of Appeals, Third Circuit

September 8, 2021

Argued on January 21, 2021

Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 2-18-cv-00394) District Judge: Honorable Cynthia M. Rufe

Laurence M. Goodman Nancy B.G. Lassen (ARGUED) Alidz Oshagan Willig, Williams &Davidson Counsel for Appellants

Meir Feder (ARGUED) Jones Day, E. Michael Rossman Samantha C. Woo Jones Day, James R. Saywell Jones Day Counsel for Appellee

Before: HARDIMAN, ROTH, Circuit Judges and ^[*] PRATTER, District Judge

OPINION

ROTH, CIRCUIT JUDGE

This appeal requires us to decide whether the well-established functus officio doctrine is still viable in labor arbitration cases. We hold that it is, and agree with the District Court that the arbitration award in this case cannot stand. The deference given to arbitration awards is almost unparalleled, but not absolute. An arbitrator's powers are derived from and limited by the parties' agreement, which is made against a background of default legal rules. Under these default rules, once the arbitrator decides an issue, the functus officio doctrine prohibits him from revising that decision without the parties' consent. He can decide other issues submitted by the parties, correct clerical errors, and even clarify his initial decision- but nothing more.

Verizon brought this action to vacate an arbitration award made pursuant to the Collective Bargaining Agreement (CBA) between it and Communication Workers of America, AFL-CIO, Local 13000 (the Union). In its Merits Award, the Arbitration Board held that Verizon violated the CBA by contracting with common carriers to deliver FiOS TV set-top boxes to "existing customers" for self-installation, work that used to be performed exclusively by Union Service Technicians (Workers). Yet, months later, the Board, under the guise of creating a "remedy," improperly expanded the scope of the violation identified in the Merits Award to include not only deliveries to both existing and new customers, but also the accompanying self-installations. Such revisions are precisely what the functus officio doctrine prohibits. Thus, we affirm the District Court's Order, vacating the Remedy Award to the extent that it awards damages for work that falls beyond the outer bounds of the Merits Award. The outer bounds were the delivery of boxes to existing customers.

We also hold that the Board improperly awarded punitive damages, which the Parties agree are not permitted under the CBA. For this reason, we will affirm the District Court's Order, remanding the case back to the Board to redetermine what compensatory damages, if any, are appropriate.

I

Article 17.01 of the CBA provides that Verizon "will maintain its established policies as to the assignment of work in connection with the installation and maintenance of communications facilities owned, maintained and operated by the Company."^[1] Article 13 provides that certain grievances, alleging violations of the CBA, must be submitted to the Board of Arbitration.

Verizon FiOS is a television, internet, and phone service. FiOS TV was first available in Pennsylvania in 2006. TV content enters the home through fiberoptic cables that lead into a "set-top box." When FiOS launched, a customer could obtain, upgrade, or replace a set-top box in either of two ways: (1) a Union Service Technician delivered the box to the customer's home and installed it (Option One), or (2) the customer picked up the box from a Verizon store and installed it herself (Option Two). In November 2007, Verizon added two more options (the mail options) for "adds, upgrades, downgrades, or swaps" for "existing customers": Verizon mails the box to the customer's home (at Verizon's expense) using a common carrier and either (3) the customer installs it himself (Option Three), or (4) a Service Technician comes to install it for a fee (Option Four).^[2]

On February 25, 2008, shortly after learning about the mail options, the Workers filed Grievance "EXBD-005-08 Self-Installation of Set Top Boxes," demanding that "all work associated with the set top boxes must be performed by" the Workers.^[3] They alleged that Verizon violated the CBA by contracting out Union work to common carriers through the mail options. They did not challenge instore pickup or selfinstallation under Option Two.

On July 7, 2016, the Board issued the Merits Award, ruling that the mail options violated Article 17.01. The Board defined the issue submitted as whether Verizon violated the CBA by "implementing a process to deliver set top boxes to existing customers by common carrier for customer selfinstallation. And if so, what shall be the remedy?"^[4] It stated that "beginning when [FiOS] was implemented," Service Technicians "were assigned to deliver set top boxes that they installed, "^[5] and that common carriers "who do the delivery work . . . are getting the advantage of work that is protected by Section 17.01."^[6] The Board concluded that Workers "who have been denied the opportunity to perform the delivery work in question are entitled to compensation" and ordered Verizon "to cease and desist from delivery of set top boxes by anyone other than" Union employees.^[7] However, "[t]here [was] no record evidence by which to assess how often [Verizon] sent out set top boxes to existing customers who wanted a different box that they did not want to install themselves."^[8] For that reason, the Board "referred [the issue of money damages] back to the parties for resolution" and retained jurisdiction in case the Parties could not agree on a "monetary remedy."^[9]

The Parties failed to reach an agreement and submitted the remedy issue back to the Board. The Parties disagreed (then and now) about the scope of the "delivery work in question" protected by the Merits Award. Specifically, Verizon argued that, under the Merits Award, the protected work assignment included only the delivery aspect of the mail options, not the self-installation aspect, and that the Merits Award allowed any Union employee to deliver the boxes. Verizon had tried to comply with the Merits Award by creating a new Union position, Assistant Technician, solely to deliver set top boxes for self-installation by customers. The Workers argued that, under the Merits Award, any time a box is delivered to (rather than picked up by) a customer, the delivery and installation are a single work "assignment" protected by Article 17.01. Thus, "unless the customer obtains the box from the Company and brings it [home], the Company's delivery of set top boxes, and the installation or maintenance (including swaps and upgrades) of those boxes must be performed by" the Workers.^[10] Because the mail options did not cause the Workers to fall below full-time employment, they sought backpay at overtime rates.

On January 10, 2018, the Board issued the Remedy Award, agreeing with the Workers that, in the Merits Award, it had ruled that both the delivery and self-installation aspects of the mail options violate the CBA. It further held that delivery by Assistant Technicians violated the CBA because the protected work assignment belonged to the Service Technicians. "[T]o compensate the[] [Service Technicians] and to deter future violations of Article 17.01, "^[11] the Board ordered Verizon to pay two hours (the average time to deliver and install a box) of backpay for each box shipment delivered by mail or an Assistant Technician, equitably distributed among the Service Technicians. Although the Workers sought overtime rates, the Board awarded only straight-time rates, stating "that there is no firm basis for awarding pay at overtime rates" because the Workers "did not lose income as they were fully employed at the time."^[12]

On January 31, 2018, Verizon filed this action, challenging both Awards. The District Court granted summary judgment in part^[13] for Verizon, vacating the Remedy Award because it (1) amended the Merits Award in violation of the functus officio doctrine and (2) awarded punitive damages. The District Court remanded the case to the Board "for calculation of a remedy consistent with [its] opinion."^[14] The Workers appeal.

II

We exercise plenary review of the District Court's decision to vacate the Remedy Award.^[15] Because parties litigating the validity of an arbitration award have bargained for the arbitrator's judgment, courts may not review the merits of the award.^[16] A court may vacate an arbitration award if "the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made."^[17] Three limits on arbitrators' powers are relevant here. First, because "arbitration is a creature of contract . . . an arbitration panel has the authority to decide only the issues that have been submitted for arbitration by the parties."^[18] Second, courts must vacate an arbitrator's award if it is "irrational."^[19] An award is irrational if it fails to "'draw[] its essence from the collective bargaining agreement'"^[20] in such a way that it "can[not] be rationally derived either from the agreement [or] the parties['] submissions to the arbitrators, "^[21] or "the record before the arbitrator reveals no support whatsoever for the arbitrator's determination."^[22] Finally, although courts must defer to an arbitrator's initial decision, the functus officio doctrine "bar[s] an arbitrator from revisiting the merits of an award once it has issued."^[23]

III

A. Functus Officio

The District Court found that the Remedy Award violates the functus officio doctrine because it expanded the protected work identified in the Merits Award by including (1) deliveries and self-installations...