United States District Court, W.D. Kentucky, at LouisvilleAug 13, 2004
Civil Action No. 3:03CV-584-S (W.D. Ky. Aug. 13, 2004)

Civil Action No. 3:03CV-584-S.

August 13, 2004



This matter is before the court on cross-motions of the parties for summary judgment. The action arose from an arbitration award entered in favor of the defendant, Kentucky State District Council of Carpenters, AFL-CIO ("the union") over an alleged breach of a collective bargaining agreement between the union and the plaintiff, Abel Construction Company, Inc.

A party moving for summary judgment has the burden of showing that there are no genuine issues of fact and that the movant is entitled to summary judgment as a matter of law. Adickes v. S.H. Kress Co., 398 U.S. 144, 151-60, 90 S. Ct. 1598, 16 L. Ed. 2d 142 (1970); Felix v. Young, 536 F.2d 1126, 1134 (6th Cir. 1976). Not every factual dispute between the parties will prevent summary judgment. The disputed facts must be material. They must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2510 (1986). The dispute must also be genuine. The facts must be such that if they were proven at trial, a reasonable jury could return a verdict for the non-moving party. Id. at 2510. The disputed issue does not have to be resolved conclusively in favor of the non-moving party, but that party is required to present some significant probative evidence which makes it necessary to resolve the parties' differing versions of the dispute at trial. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968). The evidence must be construed in a light most favorable to the party opposing the motion. Bohn Aluminum Brass Corp. v. Storm King Corp., 303 F.2d 425 (6th Cir. 1962).

There is no genuine issue of material fact which would preclude summary judgment in this matter. The parties agree on the essential underlying facts. The suit seeks to vacate the decision of the arbitrator concerning the grievance which arose from those events.

Abel is a contractor which performs work throughout Kentucky. Abel and the union were parties to a collective bargaining agreement effective June 1, 2000 through May 21, 2003 which contained a number of provisions concerning subcontracting:

Article 1.10


The signatory Employer, who subcontracts any portion of the work within the jurisdiction of the Union, agrees he/she will not subcontract to any person, firm, or corporation, unless the aforesaid person, firm, or corporation performing the subcontract work in question agrees to observe and be bound by all of the terms and conditions of this Agreement.

Article 1.10(a)


An Employer acting in the capacity of a construction manager agrees that he/she, or any of his/her subcontractors, will not contract or subcontract carpentry work to be done at the site of construction, alteration, or repair of the building, or structure, except to a person, firm, or corporation, party to a current Labor Agreement with the Union.

Abel was hired by Gene Harrington in Louisville to serve as construction manager on a project called the Airport Expo Suites Hotel. On February 8, 2002, Abel and Harrington signed the American Institute of Architecture (AIA) Standard Form of Agreement between Owner and Construction Manager. This standard agreement states, with respect to subcontracting, that Those portions of the Work that the Construction Manager does not customarily perform with the Construction Manager's own personnel shall be performed under subcontracts or by other appropriate agreements with the Construction Manager. The Construction Manager shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated to a special design for the Work from the list previously reviewed and, after analyzing such bids, shall deliver such bids to the Owner and Architect. The Owner will then determine, with the advice of the Construction manager and subject to the reasonable objection of the Architect, which bids will be accepted. The Owner may designate specific persons or entities from whom the Construction Manager shall obtain bids. The Construction Manager shall not be required to contract with anyone to whom the Construction Manager has reasonable objection.

Abel obtained subcontractor bids for the truss and deck work on the project and submitted them to Harrington. Harrington rejected all of the bids as too high. Harrington then entered into his own contract with Donald Hubert, a non-union subcontractor. When a union representative discovered non-union workers performing work, he filed a grievance dated April 29, 2002 challenging the action as violative of the union's agreement with Abel.

On May 9, 2002, Abel responded to the union grievance letter that it had contracted with Harrington to operate as Construction Manager, but that Harrington had retained the right to subcontract portions of the project as necessary. This position was affirmed by a letter from Harrington to Abel dated May 6, 2002 which stated that

Upon working with ABEL Construction Company, Inc. as construction managers at my facility, the Airport and Expo Best Suites, I have reviewed their solicited quotes for various phases of work. I believe that economically, it is in my best interest to use Hubert Construction for installation of roof trusses, roof deck, doors and hardware along with other phases of work. Please respect my decision.

This evidences that the decision to hire the non-union subcontractor was made by Harrington alone. The union does not contend otherwise. The subcontract was signed by Harrington and Donald Hubert.

Whether the right of Harrington to subcontract the truss and deck work on his own was proper under the AIA standard agreement was not in issue in the arbitration and thus is not before this court. Clearly, Harrington believed that he had every right to hire his own subcontractors other than the ones presented by Abel. Earlier, on February 27, 2002, Harrington had sent a letter to Abel which stated:

This letter is to clarify our relationship with Abel Construction Company, Inc. and Gene Harrington/Harrington Properties on our building project at 4125 Preston Highway, Louisville, Kentucky 40213.

From the inception of this project, Abel Construction Company, Inc. was hired as a construction manager. Harrington Properties is involved in the solicitation and the final selection of all subcontractors for this project. Also, Harrington Properties reserves the right to subcontract portions of this project as deemed necessary.

The sole question before the arbitrator was whether Harrington's act of subcontracting with a non-union company constituted a violation by Abel of the its agreement with the union. The arbitrator held that it did. The arbitrator found that "[a]t first glance, it would appear that the Company did not breach ARTICLE 1.10(a) of the Agreement, because the Project Owner contracted with the non Union subcontractor for the truss related work, not the Company." Arbitration Award, pg. 15, ¶ 4. The arbitrator went on to find that

7. There was no dispute whatsoever that the truss related work was the type of work that was within the "jurisdiction of work" as provided for in the Agreement. The Company was acting as a "Construction Manager" for the Project. As noted above, Article 1.10(a) CONSTRUCTION MANAGER (Joint Exhibit 1) provides:

An Employer in the capacity of a construction manager agrees that he/she, or any of his/her subcontractors, will not contract or subcontract carpentry work to be done at the site of construction . . . except to a person, firm, or corporation, party to a current Labor Agreement with the Union.

Thus the Company, as Construction Manager, was bound by the Agreement to subcontract the truss related work to a Union subcontractor. The Company could not circumvent, terminate, or delegate this obligation by unilaterally entering into the subsequent agreement with the Project Owner, allowing the Owner to subcontract work within the "jurisdiction of work." The Company could not exercise its management rights, "in any manner contrary to the provisions of this Agreement." (ARTICLE 1.11 MANAGEMENT RIGHTS, Joint Exhibit 1, pg. 11). The provisions of ARTICLE 1.10 (a) (noted above) to which the Company agreed, go to the essence of the Agreement between Union and Company — procuring carpentry work for the members of the Union on projects for which the Company is the Construction Manager.

The arbitrator found that, while Abel had not violated the express terms of the agreement, its failure to prevent Harrington from contracting with a non-union company violated the essence of the agreement to procure union carpentry work when Abel was acting as Construction Manager on such projects.

The scope of review of the arbitrator's decision is limited to whether the award "draws its essence from the collective bargaining agreement," and is not merely "his own brand of industrial justice." United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 36, 108 S.Ct. 364, 370, 98 L.Ed.2d 286 (1987), citing, Steelworkers v. Enterprise Wheel Car Corp., 363 U.S. 593, 596, 80 S.Ct. 1358, 1360, 4 L.Ed.2d 1424 (1960). If the award draws its essence from the collective bargaining agreement, the award cannot be overturned.

The court agrees with the arbitrator's finding that Abel had not violated the express terms of its agreement with the union. It did not subcontract with Donald Hubert. Therefore, Article 1.10 (a) was not implicated in any act done directly by Abel.

We disagree, however, with the arbitrator's determination that Abel violated the collective bargaining agreement as a result of the act of Harrington, the owner. We conclude, for the following reasons, that the award does not draw its essence from the collective bargaining agreement and must therefore be vacated.

The union contends that Article 1.11 of the agreement limited Abel's management of its business affairs to decisions which were not contrary to the terms of the agreement. This is, in fact, a correct statement concerning the Management Rights provision. The rights of Abel were constrained by that bargained-for provision in the agreement. However, that was not the framework used by the arbitrator in reaching his decision. The arbitrator specifically stated in his analysis that "it would appear that the Company did not breach ARTICLE 1.10 (a) of the Agreement, because the Project Owner contracted with the non Union subcontractor for the truss related work, not the Company." Abel's management of its business was not contrary to the provisions of the Agreement; specifically, the subcontracting provision Article 1.10 (a), as the arbitrator so found. Thus the arbitrator should have concluded, based upon his own fact-finding, that Abel had not breached the agreement.

Instead, he found that the "essence" of the agreement, which he defined as "procuring carpentry work for the members of the union," required Abel to prevent Harrington from subcontracting with a non-union company. This interpretation added an affirmative obligation to the agreement which was not bargained for by the parties.

There is no question that Abel submitted appropriate bids to Harrington, in its capacity as construction manager. Were Abel permitted to subcontract the truss and deck work for Harrington, it would have been required to hire union workers, under Article 1.10 (a). However, the bids were all rejected by the owner as too high. The owner, then acting as his own construction manager, found other labor sources and subcontracted non-union labor for the work. There was no contention that Abel had any input or involvement in that process. The subcontracting provision did not, by its terms, apply to subcontracting done by an owner.

The arbitrator found that Abel's management rights had been exercised contrary to the provisions of the agreement because it did not act to prohibit the owner from subcontracting with a non-union company. The subcontracting provision required that, when acting as Construction Manager, Abel and his subcontractors utilize union labor for work within the scope of the agreement. The arbitrator specifically found that the subcontract was solicited by and entered into by Harrington with Hubert. Therefore, the arbitrator's additional findings that Abel was acting as Construction Manager with respect to that arrangement and that Abel violated the provisions of the agreement are not rationally supported by or derived from the agreement. The essence of the award is not drawn from the collective bargaining agreement.

The arbitrator attempted to satisfy a stated agenda to preclude Abel from "circumventing, terminating, or delegating" (see Arbitration Award, pg. 16, ¶ 7) its contractual obligation by adding to and changing the effect of the subcontracting provision of the agreement. Such an award is improper and amounted to an imposition of the arbitrator's own brand of industrial justice.

In Sears Roebuck Company v. Teamsters Local Union No. 243, 683 F.2d 154 (6th Cir.), cert. denied, 460 U.S. 1023, 103 S.Ct. 1274, 75 L.Ed.2d 495 (1983),

The arbitrator recognized that the collective bargaining agreement does not, on its face, limit Sears' authority to subcontract in the interest of efficiency and economy, provided it does not do so in a effort to undermine the bargaining unit . . . Nevertheless, the arbitrator declined to rely on the "plain language" of the agreement . . . The District Judge, in a thorough opinion, found that the arbitrator had exceeded his authority when he inferred limitations on subcontracting beyond those contained in the collective bargaining agreement itself. We must agree, even though the result in this case is harsh.

This court concludes, as did the court in Sears, that the arbitrator exceeded his authority when he inferred limitations on subcontracting beyond those contained in the collective bargaining agreement itself. See also, Eisenmann Corp. v. Sheet Metal Workers Int'l Assn. Local No. 24, 323 F.3d 375, 380 (6th Cir. 2003) (an arbitration award may be declared invalid and vacated if (1) it conflicts with express terms of the agreement; (2) it imposes additional requirements not expressly provided for in the agreement; (3) it is not rationally supported by or derived from the agreement; or (4) it is based on general considerations of fairness and equity instead of the exact terms of the agreement.)

We find the case of United Transportation Union v. CSX Transportation, Inc., 902 F.2d 36 (6th Cir. unpubl.), cert. denied, 498 U.S. 1026, 115 S.Ct. 677, 112 L.Ed.2d 669 (1991), relied upon by the union to be distinguishable. In United Transportation the court upheld a challenge to the arbitrator's factual finding that the railroad's procedures at construction sites, while not designated as such, were the equivalent of flagging, work which was to be performed by UTU employees. By contrast, there is no factual question subject to an arbitrator's permissible analysis in the case at bar. Rather, the arbitrator was required to look at the collective bargaining agreement and determine whether the terms of the agreement afforded liability as against a signatory to the agreement for the acts fo a third party.

The arbitration award must therefore be vacated and the grievance denied. A separate order will be entered herein this date in accordance with this opinion.