19-2755-cv
ABM Indus. Groups, LLC v. Int'l Union of Operating Eng'rs, et al.


                                UNITED STATES COURT OF APPEALS
                                    FOR THE SECOND CIRCUIT

                                          August Term 2019

                    (Submitted: June 25, 2020 Decided: July 29, 2020)
                                  Docket No. 19-2755-cv



                                   ABM INDUSTRY GROUPS, LLC,

                                                                    Petitioner-Appellant,

                                                 - against -

                     INTERNATIONAL UNION OF OPERATING ENGINEERS,
                             LOCAL 30, 30A, 30B, AFL-CIO,

                                                                    Respondent-Appellee.



                   ON APPEAL FROM THE UNITED STATES DISTRICT COURT
                       FOR THE SOUTHERN DISTRICT OF NEW YORK

Before:
                        WINTER, CALABRESI, and CHIN, Circuit Judges.



                 Appeal from a judgment of the United States District Court for the

Southern District of New York (Woods, J.) denying petitioner-appellant's motion

to confirm and granting in part respondent-appellee's motion to vacate an
arbitration award, pursuant to Section 301 of the Labor Management Relations

Act, 29 U.S.C. § 185. Petitioner-appellant contends that the district court erred in

denying its motion to confirm the arbitration award.

             REVERSED AND REMANDED.



                          HARRY M. WEINBERG, Law Offices of Harry Weinberg,
                              Esq., and ROBERT S. SCHWARTZ, Law Office of
                              Robert S. Schwartz, PLLC, New York, New York,
                              for Petitioner-Appellant.

                          JAMES M. STEINBERG, Brady McGuire & Steinberg P.C.,
                                Tarrytown, New York, for Respondent-Appellees.



PER CURIAM:

             Petitioner-appellant ABM Industry Groups, LLC ("ABM") appeals

the district court's judgment, entered August 5, 2019, denying its motion to

confirm an arbitration award and granting in part the motion of respondent-

appellee International Union of Operating Engineers, Local 30, 30A, 30B, AFL-

CIO ("Local 30" or the "Union") to vacate the award, pursuant to Section 301 of

the Labor Management Relations Act (the "LMRA"), 29 U.S.C. § 185. On appeal,

ABM principally argues that the district court erred in denying its motion to

confirm the arbitration award.



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            ABM provided building maintenance and janitorial services to a

commercial office building in Tarrytown, New York (the "property"). ABM

employed engineers who worked at the property and were represented by Local

30. ABM and Local 30 were parties to a collective bargaining agreement (the

"CBA") that was in effect from January 1, 2015 through December 31, 2017, which

covered the terms and conditions of employment for the Local 30 employees

working at the property. On or about March 9, 2017, the property was sold, and

ABM was informed that the new owner would no longer employ the existing

employees, including John Phillip and Eugene Clerkin, who were members of

Local 30. On April 6, 2017, ABM paid Phillip and Clerkin termination pay and

accrued vacation and sick pay, pursuant to the CBA. Unbeknownst to ABM,

Phillip and Clerkin were rehired by the new owner of the property and

continued their same job duties.

            On July 28, 2017, Local 30 filed a grievance against ABM under the

CBA on behalf of Phillip and Clerkin, alleging that the two employees were not

paid all accrued vacation credits. During this dispute, ABM learned that Phillip

and Clerkin remained employed at the property, and sent them a written

demand seeking the return of the termination and certain accrued vacation pay.



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Specifically, on August 22, 2017, ABM directly contacted Phillip and Clerkin to

advise them of the "inadvertent wage overpayment" and provided them "options

for repayment." See J. App'x at 200-01 (letter to Phillip); 197-98 (letter to Clerkin).

On August 29, 2017, on behalf of Phillip and Clerkin, Local 30 responded to ABM

to "disagree[] with ABM's characterization of the payments made to [Local 30]

members and dispute[] that any funds are owed to ABM." J. App'x at 199. Local

30 argued that the two employees were "actually owed funds under the terms of

the [CBA]." J. App'x at 199. Pursuant to the CBA's grievance procedure, Local 30

and ABM agreed to arbitrate Local 30's grievances regarding the two employees'

vacation credits and ABM's claim to claw back the termination pay.

             The arbitration hearing was held on April 4, 2018, with

representatives for Local 30 and ABM present. Although Phillip and Clerkin

were not present, they were the designated "Grievants" and were represented by

Local 30's counsel at the arbitration. The parties submitted a number of issues to

the arbitrator, including the following: "Do the Grievants, Mr. Clerkin and Mr.

Phillip, owe ABM reimbursement for termination pay already paid to each of

them?" J. App'x at 32.




                                           4
             After the arbitration, Local 30's counsel submitted a letter brief on

behalf of Phillip and Clerkin, advancing several arguments as to why the

employees were entitled to additional hours in accrued vacation, additional pay

under the CBA, and remittance of benefit contributions. Counsel also addressed

ABM's reimbursement claim on the merits, and did not argue that the arbitrator

lacked jurisdiction to decide the claim.

             The arbitrator issued an opinion and award on October 12, 2018 (the

"Award"), concluding that Phillip and Clerkin were not entitled to termination

pay and directing them to repay certain amounts to ABM.

             On November 18, 2018, ABM commenced the instant action by filing

a petition to confirm the Award. ABM moved for summary judgment

confirming the Award on January 16, 2019. Local 30 opposed the motion and

cross-moved for summary judgment to vacate the Award or, in the alternative, to

dismiss ABM's petition. The district court issued a memorandum opinion and

order on August 5, 2019, denying ABM's motion to confirm the Award and

vacating in part the Award, after concluding that the Award was "ultra vires and

unenforceable to the extent that it imposes obligations on non-parties [Phillip




                                           5
and Clerkin] to the [CBA]." J. App'x at 263. Judgment entered August 5, 2019.

This appeal followed.

                                   DISCUSSION

             "We review a district court's decision to confirm or vacate an

arbitration award de novo on questions of law and for clear error on findings of

fact." Nat'l Football League Mgmt. Council v. Nat'l Football League Players Ass'n, 820

F.3d 527, 536 (2d Cir. 2016). Our authority to review a labor arbitration award is

"narrowly circumscribed and highly deferential." Id. at 532. We may not "review

the arbitrator's decision on the merits," but "inquire only as to whether the

arbitrator acted within the scope of his authority as defined by the collective

bargaining agreement." Id. at 536. "We review a determination of an agency

relationship de novo." Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d

349, 353 (2d Cir. 1999).

I.    Applicable Law

             Arbitration is a "creature of contract," Starke v. SquareTrade, Inc., 913

F.3d 279, 288 (2d Cir. 2019); thus, "a party cannot be required to submit to

arbitration any dispute which he has not agreed so to submit," United Steelworkers

of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). Nonetheless, this



                                           6
Court has recognized five "limited theories" where non-signatories may be

bound by arbitration agreements entered into by others. Thomson-CSF, S.A. v.

Am. Arbitration Ass'n, 64 F.3d 773, 776, 780 (2d Cir. 1995) (enumerating five

circumstances binding non-signatories: "1) incorporation by reference; 2)

assumption; 3) agency; 4) veil-piercing/alter-ego; and 5) estoppel"). "Traditional

principles of agency law may bind a nonsignatory to an arbitration agreement."

Id. at 777. "Agency is the fiduciary relation which results from the manifestation

of consent by one person to another that the other shall act on his behalf and

subject to his control, and consent by the other so to act." Merill Lynch Inv.

Managers v. Optibase, Ltd., 337 F.3d 125, 130 (2d Cir. 2003) (quoting Restatement

(Second) of Agency § 1 (1958)).

             In the labor law context, of course, a labor union is the exclusive

agent for its members. The National Labor Relations Act (the "NLRA") provides

that the labor union is the exclusive representative, or agent, of employees in

collective bargaining. See 29 U.S.C. § 159(a) ("Representatives designated or

selected for the purposes of collective bargaining by the majority of the

employees in a unit appropriate for such purposes, shall be the exclusive

representatives of all the employees in such unit for the purposes of collective



                                          7
bargaining in respect to rates of pay, wages, hours of employment, or other

conditions of employment."); see also 29 U.S.C. § 158(a)(5) ("It shall be an unfair

labor practice for an employer . . . to refuse to bargain collectively with the

representatives of his employees." (emphasis added)). Importantly, the resolution

of disputes that arise under a CBA through grievance procedures is an essential

part of collective bargaining. 29 U.S.C. § 158(d) ("[T]o bargain collectively is the

performance of the mutual obligation of the employer and the representative of

the employees to meet at reasonable times and confer in good faith with respect

to wages, hours, and other terms and conditions of employment, or the

negotiation of an agreement, or any question arising thereunder." (emphasis

added)).

II.   Application

             In denying ABM's petition to confirm the Award, the district court

reasoned that no precedent or authority supported the proposition "that a union

can bind its members to make payments ordered by an arbitrator under an

arbitration agreement to which they were not signatories, following a process in

which they did not participate." J. App'x at 261. The district court plainly erred,

for the record is clear that Phillip and Clerkin did participate in the arbitration



                                          8
proceeding -- they were the Grievants who initiated the proceeding -- and the

Union possessed both agency and statutory authority to appear in the arbitration

on their behalf. 1 We conclude that the arbitrator did not exceed her authority

because under both agency law principles and federal labor law, the Union

possessed the authority to bind Phillip and Clerkin to the Award.

       A.     Agency Law

              As this Court has explained, "[a]ctual authority is created by direct

manifestations from the principal to the agent, and the extent of the agent's

actual authority is interpreted in the light of all circumstances attending those

manifestations, including the customs of business, the subject matter, any formal

agreement between the parties, and the facts of which both parties are aware."

Highland Capital Mgmt. LP v. Schneider, 607 F.3d 322, 327 (2d Cir. 2010) (quoting

Peltz v. SHB Commodities, Inc., 115 F.3d 1082, 1088 (2d Cir. 1997)). Here, Phillip

and Clerkin directly manifested their intent to be represented by Local 30 and to

be bound by the Award by authorizing the Union to submit their claims for

unpaid accrued vacation credits to arbitration. After ABM made its




1      "While the existence of an agency relationship often turns on questions of fact,
the issue is properly resolved as a matter of law where, as here, the relevant facts are
uncontroverted." Johnson v. Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir. 2013).
                                             9
overpayment claim, the parties stipulated to the submission of ABM's claim for

reimbursement from Phillip and Clerkin to the arbitrator. Counsel for Phillip

and Clerkin addressed the issue on the merits, urging the arbitrator to reject

ABM's claim for reimbursement on the grounds that the two employees were

entitled to termination pay under the CBA. The arbitrator resolved this

stipulated issue by concluding that termination pay was not owed to the two

employees, and directing them to pay ABM the amounts erroneously disbursed. 2

Accordingly, the district court erred in vacating the arbitration award in part and

concluding that the award was "ultra vires and unenforceable to the extent that it

imposes obligations on non-parties to the agreement." J. App'x at 263.

      B.     Federal Labor Law

             As discussed above, federal labor law confirms that when a union

prosecutes employees' grievances against an employer, it represents those

employees and those employees are therefore bound by the arbitral award. See

29 U.S.C. § 158(d). This basic truth has long been reflected in precedent. See

Humphrey v. Moore, 375 U.S. 335, 342 (1964) ("the union [i]s [the] exclusive



2       Because we conclude that the record contains sufficient evidence to support an
agency relationship between Local 30 and the employees, we need not address the other
grounds for binding non-signatories to a contract signed by others. See Thomson-CSF,
S.A. v. Am. Arbitration Ass'n, 64 F.3d at 776.
                                         10
bargaining agent in the negotiation and administration of a collective bargaining

contract" (emphasis added)); United Steelworkers of Am. v. Warrior & Gulf Nav. Co.,

363 U.S. 574, 581 (1960) ("[T]he grievance machinery under a collective

bargaining agreement is at the very heart of the system of industrial self-

government . . . . The grievance procedure is, in other words, a part of the

continuous collective bargaining process.").

             Precedent also makes clear that employees are bound by arbitration

decisions and settlements of grievances by union representatives. "[S]ettlement

of a grievance by the union and the employer is binding upon the individual

employee, absent evidence that the union has acted in bad faith in carrying

out its duty of full and fair representation." Suissa v. Am. Exp. Lines, Inc., 507 F.2d

1343, 1347 (2d Cir. 1974). Other courts have similarly concluded that "an

employee may not attack a final arbitration decision, . . . except on the grounds of

fraud, deceit or breach of the duty of fair representation unless the grievance was

a sham, substantially inadequate or substantially unavailable." Margetta v. Pam

Pam Corp., 501 F.2d 179, 180 (9th Cir. 1974) (internal quotation marks omitted).

             The district court ignored that Local 30 pursued the employees'

grievance as their "exclusive representative," thus binding them to the outcome.



                                          11
The CBA expressly contemplates that Local 30 will prosecute employees'

interests as their representative against ABM. The preamble to the CBA makes

this explicit:

                 The parties hereto being desirous of reducing to writing
                 the Agreement arrived at as a result of collective
                 bargaining between them, the Union representing a
                 majority of employees as hereinafter described, and
                 further, the Union by reason thereof, being the exclusive
                 bargaining agent for such employees, do agree as and for
                 their Agreement as follows.

App'x at 14 (emphasis added). Article 11, which provides an arbitral grievance

procedure for all questions arising under the CBA, is no different, as it also calls

for Local 30 to arbitrate employees' grievances through arbitration.

                 The intent of the parties here was clearly for employees' grievances

to be submitted to arbitration and for employees to be bound by the arbitrator's

decision. An arbitrator's scope of authority "'generally depends on the intention

of the parties to an arbitration, and is determined by the agreement or

submission.'" Local Union No. 38 v. Hollywood Heating & Cooling, Inc., 88 F. Supp.

2d 246, 252 (S.D.N.Y. 2000) (quoting Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d

Cir. 1987)). Because the parties' intent as revealed throughout the CBA was for




                                            12
Local 30 to represent employees' interests, Local 30 cannot now claim that the

employees were not bound by the CBA or the arbitration.

            To be sure, as described above, the record contains numerous

instances demonstrating the employees' intent to be bound by Local 30 in the

arbitration. For example, in a September 2018 letter to the arbitrator, union

counsel represented that "[o]ur office represents Grievants [Local 30] and Local 30

members John Philip and Eugene Clerkin in connection with the above- referenced

matter." App'x at 158 (emphasis added). In the same letter, counsel stated: "We

respectfully submit that the following amounts are owed by ABM to the Local 30

Trust Funds on behalf of the grievants." App'x at 162 (emphasis added).

Throughout the letter and the parties' Joint Statement of Stipulated Facts for

arbitration, counsel referred to the employees as "the grievants," undercutting

their argument on appeal -- and the district court's conclusion -- that only Local

30 was bound by the grievance procedure and a party to the arbitration. See, e.g.,

App'x at 163, 174. And finally, union counsel even sent a letter cautioning ABM

from contacting the employees directly because their interests were being

prosecuted by Local 30. Based on this extensive record evidence, Local 30 cannot




                                        13
now move to vacate the Award on the ground that the employees were not party

to the CBA and to the arbitration.

             It is, of course, true that Phillip and Clerkin were not signatories to

the CBA and the agreement to arbitrate. But it is the nature of labor agreements

and labor arbitrations that the unions are the exclusive bargaining agents for and

the agents of the union members. See generally Abdullayeva v. Attending Homecare

Servs. LLC, 928 F.3d 218, 223 (2d Cir. 2019) (a "Union [is] legally authorized to

negotiate collective bargaining agreements on [an employee's] behalf" (citing 29

U.S.C. § 159(a))). Under the CBA, Local 30 was the "sole collective bargaining

agency" for the covered employees, J. App'x at 14, and the CBA provided for

vacation, holiday, sick, and termination pay, J. App'x at 18-21. Disputes in

connection with the interpretation and application of these provisions were to be

resolved through a grievance procedure, including arbitration, with the Union

representing the employees. That was precisely the procedure that was followed

here when Phillip and Clerkin initiated -- and participated in -- the grievance

process. For these reasons, under both agency and statutory law principles, we

have little trouble concluding that Local 30 possessed the requisite authority to

bind the employees to the Award.



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                                 CONCLUSION

            For the reasons set forth above, the district court's judgment is

REVERSED and the case is REMANDED with instructions to the district court

to grant ABM's petition to confirm the Award, to deny Local 30's cross-motion to

vacate the Award, and to enter an amended judgment accordingly.




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