Centerra Group, Llc v. The Moffett Field Firefighters Association Iaff Local I-79

MOTION for Summary Judgment

N.D. Cal.August 30, 2016

Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DYLAN B. CARP (SBN 196846) JACKSON LEWIS P.C. 50 California Street, 9th Floor San Francisco, California 94111-4615 Telephone: (415) 394-9400 Facsimile: (415) 394-9401 Email: carpd@jacksonlewis.com PAUL DECAMP (SBN 195035) JACKSON LEWIS P.C. 10701 Parkridge Boulevard, Suite 300 Reston, Virginia 20191 Telephone: (703) 483-8305 Facsimile: (703) 483-8301 E-mail: DeCampP@jacksonlewis.com KIRSTEN A. MILTON (Admitted Pro Hac Vice) JAMES D. THOMAS (Admitted Pro Hac Vice) JACKSON LEWIS P.C. 150 North Michigan Avenue, Suite 2500 Chicago, Illinois 60601 Telephone: (312) 787-4949 Facsimile: (312) 787-4995 E-mail:kirsten.milton@jacksonlewis.com james.thomas@jacksonlewis.com Attorneys for Petitioner Centerra Group, LLC UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA CENTERRA GROUP, LLC, Petitioner, v. THE MOFFETT FIELD FIREFIGHTERS AS- SOCIATION IAFF LOCAL I-79, Respondent. ) ) ) ) ) ) ) ) ) ) ) ) CASE NO.: 5:16-cv-01530-NC PETITIONER’S MOTION FOR SUMMARY JUDGMENT Hearing Date: December 14, 2016 Hearing Time: 2:00 p.m. Courtroom: 7, 4th Floor Complaint Filed: March 28, 2016 NOTICE OF MOTION AND MOTION TO RESPONDENT THE MOFFETT FIELD FIREFIGHTERS ASSOCIATION IAFF LOCAL I-79 AND ITS ATTORNEYS OF RECORD: Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 1 of 29 ii Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLEASE TAKE NOTICE that on December 14, 2016, at 2:00 p.m. before the Honorable Na- thanael Cousins, Courtroom 7, 4th Floor, 280 South 1st Street, San Jose, California 95113, Petitioner Centerra Group, LLC will and hereby does move for summary judgment against Respondent. Petitioner Centerra Group, LLC (“Centerra”) hereby moves for summary judgment pursuant to Federal Rule of Civil Procedure 56 on its petition to vacate an arbitration award pursuant to Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185 et seq. (“LMRA”), and alternatively pursuant to the California Arbitration Act, Cal. Code Civ. P. § 1280 et seq. (“CAA”), or the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). This motion is based upon this notice of motion and motion, the fol- lowing memorandum of points and authorities, the Joint Appendix, the pleadings on file with this Court, oral argument of counsel, and any other matters that this Court may properly consider. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 2 of 29 iii Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page INTRODUCTION .......................................................................................................................................1 FACTUAL BACKGROUND......................................................................................................................2 I. The Parties’ Relationship.....................................................................................................2 II. The Grievance and Arbitration ............................................................................................4 ARGUMENT...............................................................................................................................................6 I. The Court Must Vacate Arbitrator Hales’ Award Because It Is Contrary To Public Policy And Does Not Draw Its Essence From The Parties’ Collective Bargaining Agreement............................................................................................................................6 A. The Hales Award Directly Violates the Clear Public Policy Expressed in the Portal-to-Portal Act of 1947...............................................................................7 B. The Hales Award Does Not Draw Its Essence from the 2013 CBA and Must Be Vacated Under Section 301 of the LMRA. .............................................16 II. The Court Must Vacate The Hales Award Under The CAA Because Arbitrator Hales Made A “Clear And Substantial Mistake” As To The Law And Facts Affecting The Ultimate Outcome Of The Dispute. ...........................................................19 A. The Court Should Review Arbitrator Hales’ Award Because there Can Be No Dispute that, in Reaching his Conclusion, Arbitrator Hales “Made a Clear and Substantial Mistake” as to the Law. ......................................................19 B. At a Minimum, Arbitrator Hales’ Award Warrants Modification Eliminating the Fourth Year of Damages Because California’s Overtime Statute Cannot Apply to Work Performed at Federal Enclave Moffett Field. ......................................................................................................................20 III. The Hales Award Fails Under The FAA For The Same Reasons It Fails Under The CAA............................................................................................................................22 CONCLUSION..........................................................................................................................................23 Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 3 of 29 iv Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Federal Cases Allison v. Boeing Laser Tech. Servs. 689 F.3d 1234 (10th Cir. 2012) ...........................................................................................................22 Arrington v. Nat’l Broad. Co. 531 F. Supp. 498 (D.D.C. 1982) ....................................................................................................11, 13 Boehringer Ingelheim Vetmedica, Inc. v. UFCW Dist. Union Local Two 739 F.3d 1136 (8th Cir. 2014) .......................................................................................................15, 19 Cameron-Grant v. Maxim Healthcare Servs., Inc. 347 F.3d 1240 (11th Cir. 2003) ...........................................................................................................10 Collins v. D.R. Horton, Inc. 505 F.3d 874 (9th Cir. 2007) ...............................................................................................................23 Comedy Club, Inc. v. Improv West Assocs. 553 F.3d 1277 (9th Cir. 2009) .............................................................................................................22 De Braska v. Milwaukee 11 F. Supp. 2d 1020 (E.D. Wis. 1998).................................................................................................11 Ervin v. OS Rest. Servs., Inc. 632 F.3d 971 (7th Cir. 2011) ...............................................................................................................10 Ethyl Corp. v. USW 768 F.2d 180 (7th Cir. 1985) ...................................................................................................17, 18, 19 Gani v. Guardian Serv. Indus., Inc. 10 Civ. 4433, 2011 U.S. Dist. LEXIS 4353 (S.D.N.Y. Jan. 13, 2011)................................................11 Hall Street Assocs., LLC v. Mattel, Inc. 552 U.S. 576 (2008).............................................................................................................................22 Harry Hoffman Printing, Inc. v. Graphic Commc’ns Int’l Union, Local 261 950 F.2d 95 (2d Cir. 1991)...................................................................................................................18 Hoffman-LaRoche v. Sperling 493 U.S. 165 (1989).................................................................................................................10, 11, 14 I.U.B.A.C. Local Union #31 v. Anastasi Bros. Corp. 600 F. Supp. 92 (S.D. Fla. 1984) .........................................................................................................15 ILWU Local 32 v. Pac. Maritime Ass’n 773 F.2d 1012 (9th Cir. 1985) .............................................................................................................15 Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 4 of 29 v Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Immersion Corp. v. Sony Computer Entm’t Am. LLC 16-cv-00857-RMW, 2016 U.S. Dist. LEXIS 66938 (N.D. Cal. May 19, 2016) ...................................8 Johnson v. Gruma Corp. 614 F.3d 1062 (9th Cir. 2010) .............................................................................................................20 Knepper v. Rite Aid Corp. 674 F.3d 249 (3d Cir. 2012).............................................................................................................8, 10 Local N. P-1236, Amalgamated Meat Cutters of N. Am. v. Jones Dairy Farm 680 F.2d 1142 (7th Cir. 1982) .............................................................................................................15 Long John Silver’s Rests. v. Cole 514 F.3d 345 (4th Cir. 2008) ...............................................................................................................14 Mich. Mut. Ins. Co. v. Uniguard Sec. Ins. Co. 44 F.3d 826 (9th Cir. 1995) .................................................................................................................22 Nev. Employees’ Ass’n, Inc. v. Bryan 916 F.2d 1384 (9th Cir. 1990) .............................................................................................................10 Pac. Coast Dairy v. Dep’t of Agric. of Cal. 318 U.S. 285 (1943).............................................................................................................................21 Pac. Motor Trucking Co. v. Auto. Machinists Union 702 F.2d 176 (9th Cir. 1983) ...............................................................................................................16 Paul v. United States 371 U.S. 245 (1963).......................................................................................................................21, 22 Sw. Reg’l Council of Carpenters v. Drywall Dynamics, Inc. 823 F.3d 524 (9th Cir. 2016) .................................................................................................................7 UFCW Local 1564 v. Albertson’s, Inc. 207 F.3d 1193 (10th Cir. 2000) ...........................................................................................................10 UFCW Local 588 v. Foster Poultry Farms 74 F.3d 169 (9th Cir. 1995) ...................................................................................................................8 UPIU v. Misco, Inc. 484 U.S. 29 (1987)...........................................................................................................................7, 15 USW v. Enter. Wheel & Car Corp. 363 U.S. 593 (1960).............................................................................................................................16 W.R. Grace & Co. v. Rubber Workers 461 U.S. 757 (1983).....................................................................................................................1, 7, 15 Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 5 of 29 vi Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 California Cases Bd. of Educ. v. Round Valley Teachers Ass’n (1996) 13 Cal. 4th 269.......................................................................................................................................7 Cable Connection, Inc. v. DirectTv, Inc. (2008) 44 Cal. 4th 1334...................................................................................................................................20 Cal. Dep’t of Human Res. v. SEIU Local 1000 (2012) 209 Cal. App. 4th 1420..........................................................................................................................7 Richey v. Autonation, Inc. (2015) 60 Cal. 4th 909.......................................................................................................................................8 Federal Statutes 9 U.S.C. § 1 et seq. ..............................................................................................................................20, 22 29 U.S.C. § 201 et seq. ...................................................................................................................... passim 29 U.S.C. § 185 et seq. ..................................................................................................................1, 7, 8, 16 California Statutes California Labor Code § 1194 ........................................................................................................... passim Cal. Code Civ. P. § 1280 et seq. .........................................................................................................20, 21 Other Authorities 93 Cong. Rec. 2182, 80th Cong., 1st Session ......................................................................................10, 13 93 Cong. Rec. 2194, 80th Cong., 1st Session ..............................................................................................8 Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 6 of 29 1 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION Nearly 70 years ago, Congress outlawed exactly the kind of claim that the arbitrator here allowed to proceed to not just a hearing, but a multi-million-dollar award. Adding insult to injury, the arbitrator awarded substantial damages under state law in a misunderstanding of federal enclave pre-emption that defies rational explanation. The arbitrator’s award is nothing short of a miscarriage of justice. Over Centerra’s objection regarding the scope of the proceeding, Centerra and the Union arbi- trated the Union’s grievance alleging that Centerra violated various provisions of the parties’ collective bargaining agreement, the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”), and the Califor- nia Labor Code by failing to pay overtime to bargaining unit employees. Arbitrator Edward E. Hales, ordered Centerra to pay the Union more than $5.4 million under the FLSA, reflecting an extra year of damages under California law. Because the entire award stems from claims Congress barred long ago, fails to draw its essence from the parties’ contract, and allows recovery for unambiguously preempted state-law claims, the Court should enter summary judgment in Centerra’s favor. First, it is well established under Section 301 of the LMRA that “a court may not enforce a col- lective-bargaining agreement that is contrary to public policy.” See W.R. Grace & Co. v. Rubber Work- ers, 461 U.S. 757, 766 (1983). Here, Arbitrator Hales’ Award is directly contrary to well-defined public policy. As explained below, in 1947 Congress passed the Portal-to-Portal Act to eliminate representa- tive actions under the FLSA by organizations such as unions. And, for the last nearly 70 years, the Su- preme Court, five courts of appeals, and district courts across the country have uniformly interpreted federal law as barring unions from bringing FLSA claims on behalf of their members. Yet, if the Union has its way, enforcement of Arbitrator Hales’ Award will bind Centerra to a result that is expressly pro- hibited by the FLSA. On this basis alone, Centerra respectfully requests that the Court adhere to the Su- preme Court’s directive and “oblig[e]” itself to “refrain from enforcing” the Hales Award. Id. Second, the Hales Award is invalid under Section 301 of the LMRA for the additional reason that it fails to draw its essence from the parties’ collective bargaining agreement. In his Award, not only does Arbitrator Hales specifically recognize that the parties’ collective bargaining agreement does not require payment of overtime for the hours claimed by the Union—payment he later awards anyway— Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 7 of 29 2 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 but also his entire Award rests on the FLSA, not the parties’ collective bargaining agreement. Third, in the alternative, Arbitrator Hales made a “clear and substantial mistake” as to the law and facts. Indeed, he created a claim that does not exist under the FLSA. Thus, his award fails under the CAA and the FAA. At the very least, the Court should modify the Award to eliminate the fourth year of damages erroneously awarded under California law for work indisputably performed for a feder- al agency on a federal enclave and thus not subject to state law. For these reasons, and the reasons discussed in more detail below, Centerra respectfully requests that the Court grant its motion for summary judgment and vacate Arbitrator Hales’ Award. FACTUAL BACKGROUND I. The Parties’ Relationship Moffett Field is a federal enclave established in 1933 and currently run by the National Aero- nautics and Space Administration (“NASA”). Sept. 4 Award at pp. 1, 10 (App. 3, 10). The Moffett Firefighters provide firefighting, paramedic, hazardous materials, aircraft rescue, and other emergency services to Moffett Field. Before 2004, the State of California, Air National Guard employed the Mof- fett Firefighters. Answer, Dkt. 21, at ¶ 12. Beginning in 2004, the government privatized firefighting services at Moffett Field. Id. at ¶ 13. SecTek, Inc. received the initial contract for these services. Id. SecTek and the Union entered into a collective bargaining agreement for the Moffett Firefighters com- mencing on June 3, 2005. Id. at ¶ 14. In 2006, Wackenhut Services, Inc. (“Wackenhut”) received the firefighting contract and thereafter assumed employment of the Moffett Firefighters under the existing collective bargaining agreement. Wackenhut and the Union entered into a series of collective bargain- ing agreements covering various periods between August 1, 2006 and September 30, 2014. Id. at ¶¶ 16, 18. During this time, Wackenhut changed its named twice, first to G4S Government Solutions, Inc. (“G4S”) and then to Centerra Group, LLC. The collective bargaining agreement in effect at the time of the grievance in this case covered the period from October 1, 2013 to September 30, 2014 (“2013 CBA”). Id. at ¶ 18. With the privatization in 2004, the Union sought and obtained in collective bargaining a schedule referred to as the “48/96,” under which a firefighter spends 48 consecutive hours on-duty followed by 96 consecutive hours off-duty. Id. at ¶ 20. The Moffett Firefighters accordingly live on Moffett Field for Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 8 of 29 3 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 their two consecutive on-duty days and return home for their four off-duty days. Id. During the two days in which the firefighters are on-duty at Moffett Field, they have substantial time off to eat, rest, ex- ercise, and sleep. Id. The rotating 48 hours on-duty and 96 hours off-duty schedule continuously re- peats throughout the year. Id. When Wackenhut won the contract to provide firefighting services in 2006, Wackenhut and the Union agreed to keep the 48/96 schedule in place. Id. at ¶ 22. The Union and Centerra engaged in four rounds of collective bargaining negotiations before the filing of the grievance underlying this proceed- ing, and the Union never proposed altering the 48/96 schedule. Id. at ¶ 22. Since the implementation of the 48/96 schedule in 2004 (at the Union’s request), the Moffett Firefighters have received overtime pay under the contract for hours worked outside their regularly scheduled shifts but not for hours worked during their regularly scheduled shifts.1 Id. at ¶ 23. In the four rounds of collective bargaining negotia- tions between the Union and Centerra prior to the grievance underlying this proceeding, the Union never proposed that the Moffett Firefighters receive an overtime rate for regularly scheduled hours beyond 40 hours in a workweek. Sept. 4 Award at p. 52 (App. 54). The 2013 CBA contains an arbitration procedure for resolution of disputes between the Union and Centerra relating to applying and interpreting the 2013 CBA. See 2013 CBA at pp. 3-6 (App. 396- 98); Answer, Dkt. 21, at ¶ 28. In addition to this grievance procedure covering contractual disputes, a provision that is a feature of virtually all collective bargaining agreements, the 2013 CBA contains a somewhat unusual arbitration procedure requiring the individual Moffett Firefighters and the Union to submit to binding arbitration all statutory claims either might have against Centerra arising out of or re- 1 Section 12.2 of the 2013 CBA explains the 48/96 schedule and sets forth the parties’ agreement that Moffett Fire- fighters be paid at an overtime rate only for hours worked outside their regular schedule: The normal work schedule shall be 48 hours on, then 96 hours off, commonly referred to as 48/96, indicating the employee works two consecutive days and then had four days off, then returns for two consecutive work days and then four days off, in continual sequence throughout the year. In the event an employee is scheduled to work on their [sic] normally scheduled day off. [sic] Such work shall be at the overtime rate of one and one half pay. See 2013 CBA, at p. 12 (App. 405); Answer, Dkt. 21, at ¶ 25. Section 14.2 of the 2013 CBA reiterates this basic agreement about overtime: “Overtime will be paid at one and one half (1.5) times the employee’s basic hourly straight time rate for all hours MFAA members work beyond normal scheduled work. This excludes additional hours worked for employee initiated shift trades.” 2013 CBA at p. 14 (App. 407); Answer, Dkt. 21, at ¶ 26. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 9 of 29 4 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 lating to employment with Centerra. Id. The arbitration procedure for the Union’s grievances about ap- plying or interpreting the 2013 CBA appears in Sections 6.1 through 6.13 of the 2013 CBA. Id. The arbitration procedure for claims by the Union or a Moffett Firefighter about alleged violations of state or federal law appears in Sections 6.1 through 6.5 and Section 6.14 of the 2013 CBA. Id. II. The Grievance and Arbitration On June 19, 2014, the Union filed a grievance against Centerra (the “June 19 Grievance”). An- swer, Dkt. 21, at ¶ 30 (App. 429). Citing Sections 12.3 and 14.3 of the 2013 CBA, 29 U.S.C. § 207(a)(1), 29 C.F.R. § 541.4, and California Labor Code § 1194, the Union alleged that Centerra failed to pay bargaining unit members at an overtime rate for hours worked in excess of 40 in a work- week. Id. The Union advanced its June 19 Grievance through the steps of the grievance procedure set forth in the 2013 CBA, and, on August 29, 2014, the Union sent a letter to Centerra demanding arbitra- tion of the June 19 Grievance, stating, in part: Pursuant to Article 6.8 of the collective bargaining agreement (CBA) between the Moffett Field Firefighters Association, International Association of Firefighters (IAFF) Local I-79 (the Association), and G4S Governmental Solutions (the Com- pany), the Association hereby invokes arbitration on the Grievance submitted by Local I-79 on June 19, 2014 for the Employers [sic] failure to pay employees overtime compensation for all hours worked over 40 in a workweek in violation of the Fair Labor Standards Act (FLSA) and California Law. Id. at ¶¶ 31, 32; August 29, 2014 Letter at p. 1 (emphases added) (App. 433). As a remedy for Center- ra’s alleged violation of the FLSA and California law, the Union made the following request in its Au- gust 29 letter: “the Association requests that each eligible bargaining unit member be made whole by payment of unpaid wages, an equal amount in liquidated damages, interest, and attorneys’ fees and ex- penses pursuant to 29 U.S.C. § 216(b) and California law.” Answer, Dkt. 21, at ¶ 34; August 29, 2014 Letter at p. 1 (App. 433). Centerra and the Union selected Arbitrator Edward E. Hales to decide the June 19 Grievance. Answer, Dkt. 21, at ¶ 38. On June 2 and 3, 2015, Arbitrator Hales held hearings in Sunnyvale, Califor- nia during which the parties presented evidence about the June 19 Grievance. Id. The parties agreed during the hearing to bifurcate the case into two phases: liability and damages. Id. Both Centerra and the Union subsequently submitted post-hearing briefs about the merits of the June 19 Grievance. Id. On September 4, 2015, Arbitrator Hales issued an interim award on the issue of liability, finding Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 10 of 29 5 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 in favor of the Union. Arbitrator Hales unambiguously found that the 2013 CBA did not require Center- ra to pay overtime for hours worked in excess of 40 in a workweek that were not outside an employee’s regular schedule: “The evidence presented in this case reveals that the Parties negotiated over the past 10 years a number of CBA’s [sic] that did not provide for the payment of overtime compensation to the Firefighters when working more than 40 hours during a work week while working the 48/96 schedule.” Sept. 4 Award at p. 52; (App. 54). Despite this finding, Arbitrator Hales inexplicably disregarded the parties’ negotiated language and at the same time radically expanded the scope of rights and claims supposedly contained in the con- tract. Arbitrator Hales accomplished this fundamental transformation of the 2013 CBA by grossly mis- interpreting Section 1.2 of the agreement as importing into the substantive terms of the contract the en- tirety of the substance of the FLSA and California wage and hour law. Section 1.2 states in full: The Association the Company and all employees are bound by and herby [sic] pledge their cooperation in observing all provisions of this Agreement con- sistent with applicable State and Federal Law. Both parties recognize the principle of a fair days [sic] work for a fair days [sic] pay. See 2013 CBA, at p. 1 (App. 394) (emphasis added). Notwithstanding the unambiguous contractual language addressing the specific schedule and pay rates that the parties intended, accompanied by a clear and consistent course of dealing extending roughly a decade, Arbitrator Hales took it upon himself to construe a “pledge” of “cooperation” in “observing” the terms of the contract “consistent with” the law as somehow expressing the parties’ agreement to incorporate into the contract itself wholesale innumer- able unspecified federal and state-law rights. See Sept. 4 Award at p. 56 (App. 58). Of course, there was zero evidence at the arbitration suggesting that the parties ever agreed this innocuous provision would function as such a Trojan Horse. Specifically, in the award portion of his September 4 Award, Arbitrator Hales set forth six sub- stantive conclusions, all of which derive from the FLSA or California law and none of which stems from the 2013 CBA: 2. The Company is liable for the violation of 29 U.S.C. Section 207(a) of the FLSA by not paying overtime for all hours worked over 40 during a work week. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 11 of 29 6 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3. The computation of the overtime pay shall include all items of compensation in the Firefighters’ regular rate of pay for the purpose of computing overtime pay pursuant to the FLSA. 4. The Company shall be liable for the payment of liquidated damages pursuant to the FLSA along with the attorneys’ fees and costs incurred by the Union in pursuing the Firefighters’ claim. 5. The Statute of limitations recovery period for back overtime pay shall be for three years pursuant to applicable provisions of the FLSA and shall run from June 11, 2011 to the present. 6. Pursuant to applicable California state law the recovery period shall be ex- tended to four years and shall run from June 19, 2010 to the present. 7. The parties are to meet within 30 days after the date of this award to calculate the damages payable in this case for the violation of the FLSA. Sept. 4 Award at p. 66 (emphases added) (App. 68). Arbitrator Hales retained jurisdiction over the June 19 Grievance until the parties were able to resolve the question of damages allegedly owed. Id. Because the parties were unable to agree on dam- ages, Centerra and the Union submitted post-hearing briefs on the issue. Answer, Dkt. 21, at ¶ 45. On February 27, 2016, Arbitrator Hales issued a “Supplemental Award on Damages” (the “February 27 Supplemental Award”) (collectively, the September 4 Award and February 27 Supplemental Award hereinafter referred to as the “Hales Award” or “the Award”), which essentially adopted the Union’s ar- guments on damages in their entirety and awarded allegedly unpaid wages starting four years before the filing of the June 19 Grievance, three years of liquidated damages on those allegedly unpaid wages, in- terest on the fourth year of alleged damages, attorneys’ fees, and costs, totaling more than $5.4 million. See February 27 Supplemental Award at p. 61 (App. 131). On March 28, 2016, Centerra timely filed its petition to vacate the Hales Award, and the Union thereafter filed a Cross-Petition to confirm the Award. ARGUMENT I. The Court Must Vacate Arbitrator Hales’ Award Because It Is Contrary To Public Policy And Does Not Draw Its Essence From The Parties’ Collective Bargaining Agreement. Although this is nominally a motion for summary judgment under Federal Rule of Civil Proce- dure 56, the parties have submitted a joint record, and there are no issues of fact before the Court. The sole question is one of law: whether the Hales Award should be vacated, modified, or enforced. The parties do not dispute that the Hales Award is a labor arbitration award issued pursuant to a collective Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 12 of 29 7 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 bargaining agreement, and therefore review of the Award should proceed under Section 301 of the LMRA. Answer, Dkt. 21, at ¶ 56; see, e.g., W.R. Grace, 461 U.S. at 765. Although courts afford signif- icant deference to labor arbitration awards, there are four bases upon which court may vacate a labor ar- bitration award under Section 301: (1) when the award does not draw its essence from the collective bargaining agreement and the arbitrator is dispensing his own brand of industrial justice; (2) where the arbitrator exceeds the boundaries of the issues submitted to him; (3) when the award is contrary to public policy; or (4) when the award is procured by fraud. Sw. Reg’l Council of Carpenters v. Drywall Dynamics, Inc., 823 F.3d 524 (9th Cir. 2016). The Hales Award fails for two of these reasons. First, there can be no dispute that the Award is contrary to public policy. Second, the Hales Award plainly does not draw its essence from the 2013 CBA. Accordingly, the Award must be vacated. A. The Hales Award Directly Violates the Clear Public Policy Expressed in the Portal- to-Portal Act of 1947. The Supreme Court has warned that “a court may not enforce a collective-bargaining agreement that is contrary to public policy.” See W.R. Grace & Co., 461 U.S. at 766. Indeed, the Court made clear in W.R. Grace that a court “is obliged to refrain from enforcing” an arbitration award that is based on an interpretation of a contract that violates an explicit public policy. Id. (emphasis added) (cautioning that a court may not abdicate its duty to consider public policy to an arbitrator because “the question of pub- lic policy is ultimately one for resolution by the courts”). An arbitrator exceeds his powers by issuing an award that bases a cause of action “upon an immoral or illegal act.” UPIU v. Misco, Inc., 484 U.S. 29, 42 (1987); see, e.g., Bd. of Educ. v. Round Valley Teachers Ass’n, (1996) 13 Cal. 4th 269, 272-77 (arbi- trator exceeds powers by giving effect to collective bargaining provisions that violate statutory rights in Education Code); Cal. Dep’t of Human Res. v. SEIU Local 1000 (2012) 209 Cal. App. 4th 1420, 1434 (arbitrator lacks power to make an award that violates explicit public policy favoring legislative over- sight of state employee contracts when he interprets a memorandum of understanding between union and state to require salary increases the legislature did not approve). To vacate an arbitration award on public policy grounds, a court must “(1) find that an explicit, Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 13 of 29 8 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 well defined and dominant public policy exists here and (2) that the policy is one that specifically mili- tates against the relief ordered by the arbitrator.” UFCW Local 588 v. Foster Poultry Farms, 74 F.3d 169, 173 (9th Cir. 1995).2 In other words, a court should vacate an arbitration award that run “contrary to” an “explicit, well defined and dominant public policy,” as ascertained by reference to the laws and legal precedents and not from “[g]eneral considerations of supposed public interests.” Id. (internal quo- tations omitted). Here, the Hales Award violates a clear public policy barring unions from prosecuting FLSA claims on behalf of their members. 1. Congress enacted the Portal-to-Portal Act of 1947 with the express purpose of barring unions from pursuing FLSA claims on behalf of their members. In 1947, Congress passed the Portal-to-Portal Act in response to a flood of lawsuits under the FLSA, a situation seen as an “appalling national problem.” 93 Cong. Rec 2194, 80th Cong., 1st Session (Remarks of Senator Wheeler). One of Congress’s primary purposes in enacting the Portal-to-Portal Act was to eliminate representative actions under the FLSA. When originally enacted in 1938, the FLSA’s remedial provision, Section 16(b), permitted an employee to designate an agent to maintain an FLSA action on his or her behalf: Any employer who violates the provisions of section 6 or section 7 of this Act shall be liable to the employee or employees affected . . . . Action to recover such liability may be maintained in any court of competent jurisdiction by any one or more employees for an in behalf of himself or themselves and other employees similarly situated, or such employee or employees may designate an agent or representative to maintain such action for and in behalf of all employees sim- ilarly situated. 52 Stat. 1060, Sec. 16(b) (1938) (emphasis added). As a result, labor organizations could obtain the consent of a few members and pursue significant actions against employers with little to no involvement by or knowledge of the employees on whose behalf they purported to act. See Knepper v. Rite Aid Corp., 674 F.3d 249, 254 (3d Cir. 2012) (“Workers responded to the Mt. Clemens decision by initiating 2 Analysis of the public policy basis to vacate an arbitration award is the same under Section 301 of the LMRA and the FAA. See, e.g., Immersion Corp. v. Sony Computer Entm’t Am. LLC, 16-cv-00857-RMW, 2016 U.S. Dist. LEXIS 66938, at *12-17 (N.D. Cal. May 19, 2016). The California Supreme Court has held that the CAA prohibits enforcement of an arbi- tration award that violates public policy: “Arbitrators may exceed their powers by issuing an award that violates a party’s unwaivable statutory rights or that contravenes an explicit legislative expression of public policy.” Richey v. Autonation, Inc. (2015) 60 Cal. 4th 909, 916. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 14 of 29 9 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 thousands of § 16(b) FLSA suits seeking back pay for ‘portal-to-portal’ violations. Nearly all of the suits filed under § 16(b) were brought by unions.”). But, in 1947, in a section of the Portal-to-Portal Act entitled “Representative Actions Banned,” Congress deliberately removed the language of Section 16(b) that permitted an employee to designate a representative to pursue FLSA claims on his or her behalf and instead required that an employee person- ally participate in an action claiming a violation of the FLSA. See 61 Stat. 87, Sec. 5(a).3 Indeed, a re- view of the legislative history surrounding the amendment underscores that the potential champerty that resulted from these representative actions was a clear driving force in Congress’s efforts to amend the FLSA. According to the Chairman of the Senate Judiciary Committee, Senator Donnell, the rationale behind the ban of representative actions was as follows: It will be observed, Mr. President, that two types of action are permitted under this sentence in section 16(b) of the Fair Labor Standards Act of 1938: First, a suit by one or more employees, for himself and all other employees similarly situ- ated. That I shall call the purpose of identification a collective action, a suit brought by one collectively for himself and others. The second class of actions authorized by that sentence embrace those in which an agent or a representative who may not be an employee of the company at all can be designated by the em- ployee or employees to maintain an action on behalf of all employees similarly situated. In illustration of this latter category—which category for purposes of identifica- tion I call a representative action, as distinguished from a collective action— suppose that everyone here present this afternoon were employed by the X steel company, and we all belonged to a labor union, and gave a power of attorney to the district director of the labor union who might live 500 miles away and not be employed at all in the plant in which we were employed. He could file a suit there as a representative of all of us. We would not be in that case at all except as he is our representative. It will be noted, therefore, Mr. President, that in those two classes of cases there is this difference: In the first case, an employee, a man who is working for the X steel company can sue for himself and other employees. We see no objection to that. But the second class of cases, namely, cases in which an outsider, perhaps someone who is desirous of stirring up litigation without being an employee at all, is permitted to be the plaintiff in the case, 3 As amended by the Portal-to-Portal Act, Section 16(b) of the FLSA now states, in pertinent part: An action to recover such liability in either of the preceding sentences may be maintained against an employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and on behalf of himself or themselves and other employees simi- larly situated. No employee shall be a party plaintiff to any such action unless he gives his con- sent in writing to become such a party and such consent is filed in the court in which such action is brought. 29 U.S.C. § 216(b). Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 15 of 29 10 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 may result in very decidedly unwholesome champertous situations which we think should not be permitted under the law. So section 8 amends the Fair Labor Standards Act by eliminating that por- tion of section 16(b) which permits employees to designate an agent or repre- sentative to maintain an action for and in behalf of all employees similarly situated. 93 Cong. Rec. 2182, 80th Cong., 1st Session (Remarks of Senator Donnell) (emphasis added). The Supreme Court, courts of appeals, and district courts across the country have agreed that Congress intended the Portal-to-Portal Act to bar unions from maintaining FLSA claims on behalf of members. Over 25 years ago, the Supreme Court expressly reiterated that the Portal-to-Portal Act was the result of Congress’s decision to abolish representative actions under the FLSA: In 1938, Congress gave employees and their “representatives” the right to bring actions to recover amounts due under the FLSA. No written consent requirement of joinder was specified by the statute. In enacting the Portal-to-Portal Act of 1947, Congress made certain changes in these procedures. In part responding to excessive litigation spawned by plaintiffs lacking a personal interest in the outcome, the representative action by plaintiffs not themselves possessing claims was abolished, and the requirement that an employee file a written consent was added. See 93 Cong. Rec. 538, 2182 (1947) (remarks of Sen. Don- nell). The relevant amendment was for the purpose of limiting private FLSA plaintiffs to employees who asserted claims in their own right and freeing employers of the burden of representative actions. Hoffman-LaRoche v. Sperling, 493 U.S. 165, 173 (1989) (emphases added). As the Ninth Circuit has stated, “[t]he Portal-to-Portal amendments barred unions from bringing representative actions for employees who were union members under § 16(b).” Nev. Employees’ Ass’n, Inc. v. Bryan, 916 F.2d 1384, 1391 (9th Cir. 1990). The Third, Seventh, Tenth, and Eleventh Circuits have reached the same conclusion. See Knepper, 675 F.3d at 254-57 (reviewing history of Portal-to- Portal Act and concluding that congressional purpose was to prevent representative actions by unions); Ervin v. OS Rest. Servs., Inc., 632 F.3d 971, 978 (7th Cir. 2011) (Portal-to-Portal Act “was designed to eliminate lawsuits initiated by third parties (typically union leaders) on behalf of a disinterested employ- ee (in other words, someone who would not otherwise have participated in the federal lawsuit)”); UFCW Local 1564 v. Albertson’s, Inc., 207 F.3d 1193, 1202 (10th Cir. 2000) (“Given the overwhelming sup- port in the case law for the conclusion that Congress intended § 216(b) to prohibit labor organizations from suing on behalf of their members for damages under the FLSA . . . .”); Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1248 (11th Cir. 2003) (“the Portal to Portal Act aimed to ban Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 16 of 29 11 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 representative actions that previously had been brought by unions on behalf of employees”). In fact, at least one district court rejected an employer’s opposition to certification of an FLSA collective action due to a pending labor arbitration about overtime because “[t]he arbitration does not purport to relate to FLSA claims, nor could it, since it is well settled that Section 5 of the Portal-to- Portal Act bars unions from bringing representative actions under the FLSA.” Gani v. Guardian Serv. Indus., Inc., 10 Civ. 4433, 2011 U.S. Dist. LEXIS 4353, *4 (S.D.N.Y. Jan. 13, 2011); see, e.g., Arring- ton v. Nat’l Broad. Co., 531 F. Supp. 498 (D.D.C. 1982) (engaging in exhaustive discussion of history of the Portal-to-Portal Act with respect to representative actions); see also De Braska v. Milwaukee, 11 F. Supp. 2d 1020, 1023 (E.D. Wis. 1998) (collecting cases). Thus, the Portal-to-Portal Act embodies a clear, well defined, and dominant public policy prohib- iting representative actions under the FLSA by groups such as labor organizations. For almost seven decades, the plain language of the FLSA, as amended by the Portal-to-Portal Act, has “limit[ed] private FLSA plaintiffs to employees who asserted claims in their own right and free[d] employers of the bur- den of representative actions,” instead requiring an employee with a personal stake to participate as a plaintiff in the litigation. Hoffman-La Roche, 493 U.S. at 173.4 Unions have no standing whatsoever to pursue FLSA claims for their members, and such representative FLSA actions by unions directly violate both the letter of, and the public policy embodied in, the Portal-to-Portal Act. 2. The Hales Award violates the clear public policy prohibiting a union from pursuing FLSA claims on behalf of its members. The Hales Award plainly fails because it expressly violates well-defined public policy prohibit- ing a union from pursuing FLSA claims on behalf of its members. In pursuing this grievance, the Union 4 Section 6.14 of the 2013 CBA does not change this fact. In its post-hearing brief, the Union first argued that Section 6.14 required “the Union to redress violations of the FLSA through mandatory arbitration under the grievance procedure set forth in Article 6.” Union’s Post-Hearing Brief on Liability at p. 18 (App. 154). The Union cannot plausibly expect the Court to believe that a clause providing for alternative dispute resolution for claims between an “Employee and the Compa- ny” requires the Union to undertake responsibility for prosecuting every claim that a current or former employee has against Centerra. The mere fact that the Union agreed to alternative dispute resolution on behalf of its members does not mean that the Union has a substantive right or the responsibility to pursue those claims. Rather, Section 6.14 does not create any claims; it simply provides that if an employee were to have a potential common law or statutory claim against Centerra (for example under the FLSA or federal discrimination laws), the employee must pursue the claim in arbitration rather than in court. See 2013 CBA at pp. 5-6 (App. 398-99). Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 17 of 29 12 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 unabashedly sought to enforce FLSA statutory rights on behalf of, and as a representative of, its mem- bers.5 The Union’s grievance claimed failure to pay bargaining unit members at an overtime rate for hours worked in excess of 40 in a workweek alleged in violation of Sections 12.3 and 14.3 of the 2013 CBA, as well as the FLSA and the California Labor Code. Answer, Dkt. 21, at ¶ 30. In its letter to Cen- terra demanding arbitration, the Union reiterated: the Association hereby invokes arbitration on the Grievance submitted by Local I-79 on June 19, 2014 for the Employers [sic] failure to pay employees overtime compensation for all hours worked over 40 in a workweek in violation of the Fair Labor Standards Act (FLSA) and California Law. Id. at ¶¶ 31, 32; Aug. 29, 2014 Letter at p. 1 (emphasis added) (App. 433). As a remedy for Cen- terra’s alleged violation of the FLSA and California law, “the Association request[ed] that each eligible bargaining unit member be made whole by payment of unpaid wages, an equal amount in liquidated damages, interest, and attorneys’ fees and expenses pursuant to 29 U.S.C. § 216(b) and California law.” Answer, Dkt. 21, at ¶ 34; August 29, 2014 Letter at p. 1 (App. 433) (emphasis added). Likewise, the Union’s post-hearing brief and Answer to Centerra’s Petition confirm that it was the Union, not its individual members, which filed the grievance underlying the Hales Award, the Union which advanced the grievance to arbitration, and the Union which “requested that [Centerra] make whole each eligible bargaining unit member pursuant to 29 U.S.C. § 216(b).” Answer, Dkt. 21, pp. 6-7, ¶¶ 30-34; Union’s Post-Hearing Brief on Liability, pp. 1-2, (App. 137-38). The problem, of course, is that the statutory right the Union sought to enforce in the arbitration did not belong to the Union, as Congress made crystal clear back when Harry Truman was President. Yet, Arbitrator Hales erroneously permitted the Union to enforce the purported FLSA rights of its members. See Sept. 4, 2015 Award at pp. 65-66, (App. 67-68). Specifically, Arbitrator Hales found that the Union could recover years of back pay on behalf of its members against Centerra based on an alleged violation of Section 7 of the FLSA. See id. at p. 65, ¶ 2, (App. 67). In doing so, however, the Hales Award violates the express provisions of the FLSA and the Portal-to-Portal Act that the award 5 At the arbitration hearing, the first statement made on the record by the Union’s counsel was: “This grievance arbi- tration is somewhat unusual, Arbitrator Hales, because it involves enforcement of a statutory right. Simply put, this case is a Fair Labor Standards Act overtime case.” June 2, 2015 Transcript, p. 8, (App. 836) (emphasis added). Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 18 of 29 13 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 purports to be enforcing. The Hales Award further violates the policy expressed by Congress in enact- ing the Portal-to-Portal Act and recognized by the Supreme Court, the Ninth Circuit, and courts across the country prohibiting representative actions by a labor organization to enforce members’ purported FLSA rights. It is hard to imagine a labor arbitration award that more squarely violates a well- established and dominant public policy and therefore must be vacated. 3. Whether or not individual firefighters filed opt-in forms with Arbitrator Hales is irrelevant to the Hales Award. The Union engages in legerdemain, distorting Centerra’s argument and devoting a substantial portion of its Answer to the incorrect and irrelevant assertion that “Centerra now claims that the arbitra- tion award is unenforceable because the individual fire fighters did not file opt-in forms with the Arbi- trator.” Answer, Dkt. 21, p. 34, ¶ 65. This argument is a red-herring and conflates two distinct con- cepts. Contrary to the Union’s contention, Centerra’s petition has nothing to do with “opt-in” forms;6 instead, Centerra specifically asks the Court to vacate the Hales Award as contrary to the clear public policy of the Portal-to-Portal Act banning representative actions of the type brought by the Union. As discussed above, Congress enacted the 1947 amendments with the express purpose of: (1) banning the representative actions permitted under the original version of the FLSA and (2) amending Section 16(b) of the FLSA to limit suits to those brought by employees with a personal stake in the litigation who file a consent in writing. See Arrington, 531 F. Supp. at 502 (analyzing legis- lative history of the Portal-to-Portal Act and finding that “[c]learly then, the ‘consent in writing’ re- quirement is a parallel provision to the ban on representative actions; together they seek to eradicate the problem of totally uninvolved employees gaining recovery as a result of some third party’s action in fil- ing suit.”); see 93 Cong. Rec. 2182, 80th Cong., 1st Session (Remarks of Senator Donnell) (“[I]n those two classes of cases there is this difference: In the first case, an employee, a man who is working for the X steel company can sue for himself and other employees. We see no objection to that. But the second class of cases, namely, cases in which an outsider, perhaps someone who is desirous of stirring up litiga- 6 Centerra does not dispute that none of Union’s members consented in writing to be a part of the arbitration, which in-and-of-itself presents a substantial hurdle were the Court to award damages to any of them under Section 16(b) of the FLSA. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 19 of 29 14 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 tion without being an employee at all, is permitted to be the plaintiff in the case, may result in very de- cidedly unwholesome champertous situations which we think should not be permitted under the law.”). The lone case cited by the Union in support of its “opt-in” form argument is of no help to the Un- ion here. Unlike the instant case, the arbitration proceeding at issue in Long John Silver’s involved claims filed by employees and advanced through arbitration pursuant to an arbitration agreement. Long John Silver’s Rests. v. Cole, 514 F.3d 345, 348 (4th Cir. 2008). Specifically, the Fourth Circuit exam- ined whether employees can pursue FLSA claims in an opt-out, rather than opt-in, class arbitration, or whether Section 16(b)’s written consent requirement was mandatory in arbitration, issues not remotely related to whether a union may pursue an FLSA representative action in arbitration. Ultimately, the Union’s reliance on Long John Silver’s is of no import because, unlike the Fourth Circuit’s finding that uncertainty exists about the extent to which Congress intended to apply “consent in writing” requirements to arbitration, there is no doubt that Congress acted to prohibit unions from pursu- ing FLSA claims in a representative capacity on behalf of members. Id. at 352. In the words of the Su- preme Court, the Portal-to-Portal Act “was for the purpose of limiting private FLSA plaintiffs to em- ployees who asserted claims in their own right and freeing employers of the burden of representative actions.” Hoffman-La Roche, 493 U.S. at 173. It is therefore unsurprising that the Union failed to cite even one post-1947 court decision holding that a union may bring an FLSA claim on behalf of its mem- bers. The Union’s argument about opt-in forms is unavailing. 4. Centerra did not waive its argument that the Hales Award is contrary to public policy by not explicitly raising it at the arbitration. The Union’s argument regarding waiver, likewise, does not save its claim. Putting aside that the Union incorrectly characterizes Centerra’s public policy argument, in its Answer, the Union claims that Centerra’s public policy argument “has been waived” because it was not previously raised. Answer, Dkt. 21, pp. 35-36, ¶¶ 65-68. But, Centerra asserted from the very beginning that “the Union ha[d] not alleged a violation of the CBA by the Company resulting in the grievance not being arbitrable.” Sept. 4 Award at pp. 7-8 (App. 9-10). Regardless, where, as here, a party to an arbitration raises a public policy argument, that argu- ment is not waivable. The Supreme Court has consistently held that a court’s power to vacate an arbitra- Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 20 of 29 15 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 tion award flows from the general doctrine that a court may refuse to enforce any contract that violates law or public policy and that the question of public policy is one for resolution by courts: “[The arbitra- tor’s] view of his own jurisdiction precluded his consideration of this question, and, in any event, the question of public policy is ultimately one for resolution by the courts. If the contract as interpreted by [the arbitrator] violates some public policy, we are obliged to refrain from enforcing it.” W.R. Grace, 461 U.S. at 766; see also Misco, 484 U.S. at 42. Relying on this language from W.R. Grace¸ courts have rejected the argument that a party waives a claim that an award violates public policy by not first raising the issue with the arbitrator: “We do not agree with the Union and the district court that BVI waived its right to challenge the award on public policy grounds by not raising this issue to the arbitrator.” Boehringer Ingelheim Vetmedica, Inc. v. UFCW Dist. Union Local Two, 739 F.3d 1136, 1142 (8th Cir. 2014); see also I.U.B.A.C. Local Union #31 v. Anastasi Bros. Corp., 600 F. Supp. 92, 94-95 (S.D. Fla. 1984) (employer cannot waive argument that contract upon which arbitration award was based was ille- gal); see ILWU Local 32 v. Pac. Maritime Ass’n, 773 F.2d 1012, 1020-21 (9th Cir. 1985) (quoting Kai- ser Steel Corp. v. Mullins, 455 U.S. 72, 83-84 (1982)) (holding that an employer’s failure to file a peti- tion to vacate within the statute of limitations does not preclude a court from refusing to enforce an award on public policy grounds because “‘[t]he power of the federal courts to enforce the terms of pri- vate agreements is at all times exercised subject to the restrictions and limitations of the public policy of the United States’”); Local N. P-1236, Amalgamated Meat Cutters of N. Am. v. Jones Dairy Farm, 680 F.2d 1142, 1144 (7th Cir. 1982) (rejecting argument that public policy concerns are subject to standard rules for vacating an arbitration award because “[p]ublic policy considerations are wholly independent of the collective bargaining agreement. When an arbitrator bases his award on public policy considera- tions, he had overstepped his authority and the court may review the substantive merits of the award”). In sum, the issue of public policy is an issue of whether a collective bargaining agreement as in- terpreted by an arbitrator violates the law. By asking this Court to enforce the Hales Award, the Union requests that this Court place judicial imprimatur on an award that directly contradicts federal law and public policy. Unlike Arbitrator Hales, who was not authorized or equipped to consider the public poli- cy ramifications of his decision, the Court can and must, and these consideration warrant vacatur of the Award. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 21 of 29 16 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. The Hales Award Does Not Draw Its Essence from the 2013 CBA and Must Be Va- cated Under Section 301 of the LMRA. Arbitrator Hales committed the cardinal sin for a labor arbitrator: He ignored the plain language of the 2013 CBA and looked outside its terms for the source of his award. Because the Hales Award does not draw its essence from the 2013 CBA, it must be vacated for this additional reason. Although courts afford significant deference to a labor arbitrator’s decision, the Supreme Court long ago explained that a labor arbitrator is confined to interpreting the terms of the parties’ collective bargaining agreement and may not impose his own brand of industrial justice. USW v. Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960) (“[H]is award is legitimate only so long as it draws its essence from the collective bargaining agreement. When an arbitrator’s words manifest an infidelity to this ob- ligation, courts have no choice but to refuse enforcement of the award.”). When an arbitrator issues an award that conflicts with the express language of the parties’ agreement, the award does not draw its es- sence from the agreement and must be vacated. See Pac. Motor Trucking Co. v. Auto. Machinists Un- ion, 702 F.2d 176, 177 (9th Cir. 1983) (“The arbitrator disregarded a specific contract provision to cor- rect what he perceived as an injustice . . . . Because the award conflicts directly with the contract, the court properly vacated the award”). Here, Arbitrator Hales specifically recognized that the express language of the 2013 CBA does not require payment of overtime for the hours claimed by the Union: The evidence presented in this case reveals that the Parties negotiated over the past 10 years a number of CBA’s [sic] that did not provide for the payment of overtime compensation to the Firefighters when working more than 40 hours dur- ing a work week while working the 48/96 schedule. Sept. 4 Award at p. 52 (App. 54). This finding should have ended Arbitrator Hales’ analysis. Once he interpreted the parties’ agreement not to require payment of overtime for the hours claimed by the Un- ion, Arbitrator Hales exhausted his authority under the agreement, demanding vacatur of the Award. Section 6.12 of the 2013 CBA circumscribes the arbitrator’s authority, spelling out the power he may not exercise: “The arbitrator cannot modify, amend, add to, detract from or alter the provisions of this Agreement nor substitute his judgment for that of management.” 2013 CBA at p. 5 (App. 398). Permitting Arbitrator Hales’ Award to stand grants the arbitrator power the parties expressly withheld. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 22 of 29 17 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 None of Arbitrator Hales’ analysis is based on a purported violation of the 2013 CBA. An arbi- tration award must be vacated when an arbitrator bases his award “on some body of thought, or feeling, or policy, or law that is outside the contract.” Ethyl Corp. v. USW, 768 F.2d 180, 184-85 (7th Cir. 1985) (emphasis added). This is exactly what Arbitrator Hales did when he imported the entire substance of the FLSA into the 2013 CBA, explaining that that the FLSA, not the 2013 CBA, provided the substan- tive basis for the Union’s grievance. Sept. 4 Award at p. 55 (App. 57) (“The Union’s basic argument in this case asserts that the Company violated the FLSA when it neglected to pay overtime to the Firefight- ers.”). Specifically, Arbitrator Hales: • Used Section 7 of the FLSA as the source of Centerra’s alleged liability to the Union. Id. at p. 57 (App. 59); • Applied the statute of limitations from the FLSA to the Union’s grievance and then added an additional year to the recovery period based on an incorrect reading of California law. Id. at pp. 57, 61 (App. 59, 63); • Ordered Centerra to pay liquidated damages to the Union based on Sections 16 and 60 of the FLSA. Id. at p. 62 (App. 64); and • Ordered Centerra to pay attorneys’ fees to the Union based on Section 16 of the FLSA. Id. Nothing in the 2013 CBA, however, incorporates the terms of the FLSA, provides for a four-year statute of limitations for grievances (to the contrary, the 2013 CBA requires grievances to be filed within 10 working days), provides for liquidated damages, or requires Centerra to pay attorneys’ fees to the Union. In short, nothing in the 2013 CBA arguably can be said to form the basis of the Hales Award. A court must vacate an arbitration award when an arbitrator bases his award “on some body of thought, or feeling, or policy, or law that is outside the contract.” Ethyl Corp. v. USW, 768 F.2d 180, 184-85 (7th Cir. 1985). This is exactly what Arbitrator Hales did when he imported the entire substance of the FLSA into the 2013 CBA. Recognizing his dilemma, Arbitrator Hales’ attempt to find some con- tractual basis for his use of the substantive terms of the FLSA fails: The Company’s position, that a violation of the CBA has not been alleged, appears to completely ignore the plain language in the Union’s grievance. Likewise, a specific allegation in the grievance states, “it has come to the attention of the MFFA that our CBA with G4S is in direct violation of Federal and State law.” Further, as indicated in Article 1.2 of the CBA, the Parties are to observe all provisions of the “State and Federal Law.” Additionally, it is reasonably suggested by the language in Article 1.2, Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 23 of 29 18 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 that only an alleged violation of the FLSA in the grievance would con- stitute a violation of the CBA, although no provision of the CBA is al- leged to have been violated. Therefore, it is found that the Company’s argument is not persuasive, and the evidence in this case does not support the Company’s position that a violation of the CBA has not been alleged. Thus, it is found that the grievance does allege a violation of the CBA. Sept. 4 Award at pp. 55-56 (App. 57-58) (emphasis added). It is Arbitrator Hales’ analysis, not Centerra’s position that is not only not persuasive, but defies logic. Arbitrator Hales apparent reliance on the parties’ agreement to “pledge their cooperation in ob- serving all provisions of this Agreement consistent with applicable State and Federal Law,” 2013 CBA at p. 1 (App. 394), as authority for his review of the grievance, is insufficient to establish that every fed- eral and state law is somehow incorporated into the 2013 CBA. Language pledging “cooperation” by observing the actual terms of the agreement in compliance with law certainly does not accomplish that task and does not transform an arbitrator into an omnipotent overseer. In fact, the parties expressly in- corporated the terms of certain federal statutes (USERRA and the FMLA) into the 2013 CBA, demon- strating that they knew how to incorporate the terms of a specific law when they so desired. See, e.g., id. at pp. 18-19 (App. 411-12). Had the parties wanted to provide that the 2013 CBA would require over- time in accordance with the terms of the FLSA, they easily could have done so. Indeed, permitting an arbitrator to add the substance of every federal and state law to the provisions of the 2013 CBA directly contradicts the express restriction imposed by Section 6.12. The mere fact that Arbitrator Hales mentioned a provision of the parties’ agreement does not make his decision unreviewable: “That is not to say that simply by making the right noises— noises of contract interpretation—an arbitrator can shield from judicial correction an outlandish disposition of a grievance.” Ethyl Corp., 768 F.2d at 187. Arbitrator Hales admitted in his September 4 Award that “no provision of the CBA is alleged to have been violated” and that “the CBA’s [sic] did not provide for the payment of overtime compensation to the Firefighters when working more than 40 hours during a work week while working the 48/96 schedule.” Sept. 4 Award at pp. 52, 55-56 (App. 54, 57-58). By adding the substance of the FLSA to the 2013 CBA, Arbitrator Hales “was doing something other than inter- preting the contract,” and instead was dispensing his own brand of industrial justice untethered to the parties’ actual contract, and his award fails accordingly. See, e.g., Harry Hoffman Printing, Inc. v. Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 24 of 29 19 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Graphic Commc’ns Int’l Union, Local 261, 950 F.2d 95, 99 (2d Cir. 1991) (“Here, it is unmistakable that, in reaching its decision, the Panel did not merely misapply principles of contractual interpretation or misinterpret the CBA, but drew upon a concept upon which it was not entitled to rely.”); Ethyl Corp., 768 F.2d at 185. II. The Court Must Vacate The Hales Award Under The CAA Because Arbitrator Hales Made A “Clear And Substantial Mistake” As To The Law And Facts Affecting The Ulti- mate Outcome Of The Dispute. A. The Court Should Review Arbitrator Hales’ Award Because there Can Be No Dis- pute that, in Reaching his Conclusion, Arbitrator Hales “Made a Clear and Sub- stantial Mistake” as to the Law. Even assuming arguendo that the Hales Award somehow does not violate public policy or fail to draw its essence from the 2013 CBA, the Award still fails. As discussed at footnote 4 above, in its post- hearing brief, the Union argued that Section 6.14 of the 2013 CBA required “the Union to redress viola- tions of the FLSA through mandatory arbitration under the grievance procedure set forth in Article 6.” Union’s Post-Hearing Brief on Liability at p. 18 (App. 154) (emphasis added). But, the Union cannot plausibly expect the Court to believe that a clause providing for alternative dispute resolution for claims between an “Employee and the Company” requires or empowers the Union to undertake responsibility for prosecuting every claim that a current or former employee has against Centerra. The mere fact that the Union agreed to alternative dispute resolution on behalf of its members does not mean that the Union has a substantive right or the responsibility to pursue those claims. Rather, Section 6.14 does not create any claims; it simply provides that if an employee were to have a potential common law or statutory claim against Centerra (for example under the FLSA or federal discrimination laws), the employee must pursue the claim in arbitration rather than in court. See 2013 CBA at pp. 5-6 (App. 398-99). Nonetheless, if the Court determines that the proceeding before Arbitrator Hales was an arbitra- tion of statutory rights under the FLSA pursuant to Section 6.14 of the 2013 CBA, Arbitrator Hales made a clear and substantial mistake as to the law and facts—indeed, he created a claim that does not exist under the FLSA—and his Award must be vacated. If Section 6.14 of the 2013 CBA creates this right, review of the Hales Award is appropriate under the CAA because the parties agreed to arbitration in accordance with the Employment Dispute Resolution Rules of JAMS. Those rules permit a party to seek vacatur under either the FAA or applicable state law. Rule 25 of the Employment Dispute Resolu- Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 25 of 29 20 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 tion Rules of JAMS provides that “[p]roceedings to enforce, confirm, modify or vacate an Award will be controlled by and conducted in conformity with the Federal Arbitration Act, 9 U.S.C. Sec 1, et seq., or applicable state law.” Employment Dispute Resolution Rules of JAMS at Rule 25 (App. 955). Alt- hough a default presumption exists that the FAA provides the applicable rules for arbitration when the FAA applies, that presumption is overcome when, as here, the parties clearly contracted for the applica- tion of state law rules. See Johnson v. Gruma Corp., 614 F.3d 1062, 1066-67 (9th Cir. 2010). In the event that state law rules apply, the Court should look to Section 1286.2(a)(4) of the CAA. Section 1286.2(a)(4) of the CAA permits vacatur if an arbitrator exceeds his power and allows parties to “obtain judicial review of the merits [of an arbitration] award by express agreement.” Cable Connec- tion, Inc. v. DirectTv, Inc. (2008) 44 Cal. 4th 1334, 1340. Centerra and the Union made such an express agreement in Section 6.14 of the 2013 CBA: “In the event either party seeks judicial review of any arbi- trator’s award (and in addition to any other basis for vacating an arbitration award provided by applica- ble statute or common law) the parties consent to the court vacating or modifying such award if, in the court’s opinion, the arbitrator made a clear and substantial mistake as to either the law or the facts affecting the ultimate outcome of the dispute.” See 2013 CBA at pp. 5-6 (emphasis added) (App. 398- 99). As discussed at length above in Section I.A.1, the law is clear that labor organizations have no standing to pursue representative actions under the FLSA on behalf of their members. The Union had no cause of action of its own against Centerra under the FLSA and no standing to pursue the substantive FLSA rights its members might have had against Centerra. Arbitrator Hales could not have made a clearer and more substantial error of law. By permitting a claim that not only does not exist, but was specifically banned by Congress almost seven decades ago, Arbitrator Hales erroneously and substan- tially affected the outcome of the arbitration, and the Court must vacate his Award. B. At a Minimum, Arbitrator Hales’ Award Warrants Modification Eliminating the Fourth Year of Damages Because California’s Overtime Statute Cannot Apply to Work Performed at Federal Enclave Moffett Field. If for some reason the Court does not vacate the Hales Award in its entirety, the Court should, at a minimum, modify the Hales Award pursuant to the CAA because Arbitrator Hales erroneously ordered Centerra, which operated on a federal enclave, to pay a fourth year of damages to the Union under clear- Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 26 of 29 21 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ly pre-empted state law. Section 1286.6 of the CAA permits a court to modify an arbitration award if “[t]he arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted.” Cal. Civ. Proc. Code § 1286.6. Arbitrator Hales’ funda- mental misunderstanding of the interplay of Section 1194 of the California Labor Code and federal en- clave pre-emption was a “clear and substantial mistake as to . . . the law” and therefore cannot stand un- der the agreed standard of review in Section 6.14 of the 2013 CBA. Centerra and the Union stipulated during the arbitration that Moffett Field, where the firefighters worked, is a federal enclave established in 1933. Answer, Dkt. 21, ¶ 11. As a federal enclave under ex- clusive federal jurisdiction, only federal law applies to work performed on Moffett Field unless Con- gress has otherwise provided. Pac. Coast Dairy v. Dep’t of Agric. of Cal., 318 U.S. 285, 294 (1943). In addition to federal law, any state laws not inconsistent with federal policy that existed at the time the parcel of land became a federal enclave remain in effect unless abrogated by Congress. Pacific Coast Dairy, 318 U.S. at 294. State laws enacted after creation of a federal enclave have no effect with- in the enclave unless (1) Congress adopts them or (2) the same basic scheme of laws was in effect at the time the land became a federal enclave. Paul v. United States, 371 U.S. 245, 269 (1963). In direct con- tradiction to these established principles, Arbitrator Hales inexplicably reached the conclusion that Sec- tion 1194 of the California Labor Code applied within Moffett Field because a historical derivative of that provision predated the creation of Moffett Field. See Sept. 4 Award at p. 61 (App. 63); February 27 Supplemental Award at p. 42 (App. 112). Although a historical derivation of Section 1194 of the California Labor Code predates Moffett Field becoming a federal enclave in 1933, the portion of Section 1194 on which the Union relies did not exist until long after Moffett Field became a federal enclave. The predecessor of Section 1194, which dates back to 1913, dealt solely with the payment of a minimum wage: “Any employee receiving less than the minimum wage applicable to such an employee shall be entitled to recover in a civil action the unpaid balance of the full amount of such minimum wage, together with costs of suit, notwithstanding any agreement to work for such lesser wage.” Stats. 1913, ch. 324, § 13, p. 637. It was not until 1961— 28 years after Moffett Field became a federal enclave—that the California legislature amended Section 1194 to require the payment of overtime. Amended Stats. 1961, ch. 408, § 3. Although Arbitrator Hales Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 27 of 29 22 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 claims to have reviewed the history of Section 1194, he failed to recognize that the basic regulatory scheme in place under Section 1194 (or its historical derivations) prior to Moffett Field becoming a fed- eral enclave dealt exclusively with the payment of a minimum wage. The addition of a requirement for overtime pay to a minimum wage statute is far from the “minor regulatory changes” that courts have said can qualify as being part of the same basic regulatory scheme. See Allison v. Boeing Laser Tech. Servs., 689 F.3d 1234, 1238 (10th Cir. 2012). When the California legislature amended Section 1194 in 1961 to include the payment of overtime, it created an entirely new substantive right. Such a wholesale adoption of a new right does not qualify under the “basic scheme” exception recognized by the Supreme Court. Allison, 689 F.3d at 1243 (“Even if Paul gave states some authority to modify existing regulatory programs, the causes of action here represent the wholesale adoption and application of a new body of substantive state employment and tort law where none previ- ously existed”). Because any requirement to pay overtime under Section 1194 of the California Labor Code became part of California’s law long after Moffett Field became a federal enclave and is not part of the same basic regulatory scheme that existed before 1933, Arbitrator Hales made a “clear and sub- stantial error” of law by awarding a fourth year of damages under the California Labor Code. Thus, the Court should modify his Award accordingly. III. The Hales Award Fails Under The FAA For The Same Reasons It Fails Under The CAA. If this Court chooses to review the Hales Award under the FAA rather than the CAA, the Court must vacate the award in its entirety or, at a minimum, modify the award to eliminate the fourth year of damages. Unlike the CAA, the FAA sets forth the exclusive bases for vacatur of an arbitration award, and parties to an arbitration agreement cannot contract for a modified standard of review. Hall Street Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 584 (2008). Under Section 10 of the FAA, one of the bases for vacating the Award is “where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). In the Ninth Circuit, an arbitrator exceeds his power and his award fails when the arbitrator acts in manifest disregard of the law. Comedy Club, Inc. v. Improv West Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009) (holding that manifest disregard of law standard survives the Supreme Court’s decision in Hall Street Associates). An arbitrator manifestly disregards the law if it is “clear from the record that the arbitra- tor[] recognized the applicable law and then ignored it.” Mich. Mut. Ins. Co. v. Uniguard Sec. Ins. Co., Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 28 of 29 23 Centerra’s Motion for Summary Judgment Case No.: 5:16-cv-01530-NC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 44 F.3d 826, 832 (9th Cir. 1995). The ignored law must be “well defined, explicit, and clearly applica- ble.” Collins v. D.R. Horton, Inc., 505 F.3d 874, 879-80 (9th Cir. 2007). As previously discussed, the law has been crystal clear for almost seven decades that a labor organization cannot pursue the purported FLSA rights of its members in a representative action. Arbitrator Hales recognized Section 16(b) as the remedial provision of the FLSA but permitted the Union to prosecute its members’ purported FLSA rights in total disregard of that provision. In so doing, Arbitrator Hales committed a manifest disregard of the law, and his Award fails under the FAA. CONCLUSION For the reasons set forth herein, Centerra respectfully requests that this Court grant its motion for summary judgment and grant its petition, and thereby vacate the Hales Award or, at a minimum, modify the Hales Award to eliminate the fourth year of damages erroneously awarded pursuant to Section 1194 of the California Labor Code. Dated: August 30, 2016 JACKSON LEWIS P.C. By: /s/ Dylan B. Carp DYLAN B. CARP PAUL DECAMP KIRSTEN A. MILTON (Admitted Pro Hac Vice) JAMES D. THOMAS (Admitted Pro Hac Vice) Attorneys for Petitioner CENTERRA GROUP, LLC Case 5:16-cv-01530-NC Document 37 Filed 08/30/16 Page 29 of 29