Opinion
No. CV 03-0829518
March 31, 2005
MEMORANDUM OF DECISION ON CROSS MOTIONS TO VACATE ARBITRATOR'S AWARD
The State Employees Bargaining Agent Coalition (SEBAC) is the bargaining agent authorized by General Statutes § 5-278(f) to bargain with the State about pension and health care on behalf of State employees. The current collective bargaining agreement concerning pension and health care, known as SEBAC 5A, incorporated previous agreements between the parties, including SEBAC 5 and the arbitration award of James Healy dated September 8, 1989. SEBAC 5A was ratified by SEBAC's constituent unions on March 13, 1997 and expires on June 30, 2017. General Provisions Section I of the SEBAC 5A agreement allow the parties to engage in interim bargaining on Early Retirement Incentive Programs (ERIPs) by mutual agreement.
In late 2002 and early 2003, the parties met to consider an ERIP as part of a concessions package to save money for the State. At that time, the State was experiencing a budget crisis. The parties failed to reach an agreement on an ERIP. On February 27, 2003, the General Assembly enacted Public Act 03-2, which was signed into law by Governor Rowland on February 28, 2003. Public Act 03-2 contained an ERIP that was not agreed to by SEBAC. The State implemented and continues to implement the ERIP contained in P.A. 03-2 without SEBAC's consent.
On March 11, 2003, SEBAC filed a grievance against the State. SEBAC's grievance stated that "SEBAC grieves the State's breach of its obligations under the SEBAC agreement through the creation of an Early Retirement Incentive Program without SEBAC's consent. Among other things, this improperly modifies contractual provisions concerning benefit computation, retirement eligibility, funding, sick leave, vacation, retirement equity, and rights upon recall from layoff." The parties submitted the matter to arbitration, before arbitrator Peter Blum, who in a decision dated October 7, 2003, decided that (1) the grievance filed by SEBAC was arbitrable, and (2) the legislative enactment and implementation of an ERIP as provided by P.A. 03-2, without SEBAC's consent, was not a violation of the agreement between the parties.
This case comes before the court on cross motions to vacate the award.
Blum decided that the matter was arbitrable because, in their agreement, the parties agreed to use the test for arbitrability found in the Steelworkers' Trilogy of cases from the United States Supreme Court. Blum found that this standard "can be succinctly stated that when a contract contains an arbitration clause, there is a presumption of arbitrability for labor disputes. An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." He pointed out that the language of the contract states that " Any dispute with regard to this Agreement, except for a claim under Section I submitted to the retirement commission pursuant to C.G.S. Sec. 5-155(j) and appealable therefrom pursuant to 5-155(k), may be submitted by any union to the labor management review committee and thereafter if not resolved to arbitration." Blum found that the State failed to meet its burden of proof with regard to the non-arbitrability of the agreement.
As to the second issue of whether the enactment of P.A. 03-2 violated the SEBAC 5A agreement, Blum concluded that the State had not violated the agreement. Blum first considered whether the enactment of P.A. 03-2 violated the contract clause of the Constitution of the United States, Article One, § 10. He found that the General Assembly ratified the contract between SEBAC and the State, and therefore a binding contract requiring arbitration was in effect at the time of the passage of P.A. 03-2. Blum then applied the three-part test found in National Educ. Ass'n — Rhode Island v. Retirement Bd., 172 F.3d 22, modified, 161 L.R.R.M. (BNA) 2256 (1st Cir. 1999), cert. denied, 528 U.S. 929, 120 S.Ct. 326, 145 L.Ed.2d 254 (1999). The elements of this test are (1) the court must decide whether the challenged law infringes a right that arises from a contract, then the court must decide (2) whether the legislative impairment of the contractual agreement is substantial in nature. However, (3) a challenged law may nonetheless survive scrutiny under the contract clause if the impairment is reasonable and necessary to serve an important public purpose.
Blum found that P.A. 03-2 did infringe on the contract and that this infringement was substantial, satisfying the first two elements of the test. However, Blum found that the State's budget crisis in late 2002 caused the enactment of P.A. 03-2 to be reasonable and necessary to serve the important public purpose of the State's financial health. On this ground, Blum decided that, because the contract clause of the Constitution of the United States was not violated, that the State did not violate the pension agreement between the parties.
On October 30, 2003, SEBAC filed an application to vacate the arbitrator's award under General Statutes § 52-418(a) on the grounds that the arbitrator erroneously decided that the State had not violated the pension agreement between the parties by enacting and implementing P.A. 03-2's ERIP plan. On February 24, 2004, the State filed an application to vacate the arbitrator's award on the ground that the issue was not arbitrable.
I.
General Statutes § 52-418 provides: "(a) Upon the application of any party to an arbitration, the Superior Court for the judicial district in which one of the parties resides or, in a controversy concerning land, for the judicial district in which the land is situated or, when the court is not in session, any judge thereof, shall make an order vacating the award if it finds any of the following defects: (1) if the award has been procured by corruption, fraud or undue means; (2) if there has been evident partiality or corruption on the part of any arbitrator; (3) if the arbitrators have been guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown or in refusing to hear evidence pertinent and material to the controversy or of any other action by which the rights of any party have been prejudiced; or (4) if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made."
General Statutes § 52-420 provides: "(a) Any application under Section 52-417, 52-418 or 52-419 shall be heard in the manner provided by law for hearing written motions on a short calendar session, or otherwise as the court of judge may direct, in order to dispose of the case with the least possible delay."
SEBAC argues that the arbitrator's award should be vacated because, in a contractual arbitration like the one in the present case, the arbitrator may not consider the Constitution of the United States, but is constrained exclusively to the language of the agreement between the parties. SEBAC argues that, under General Statutes § 52-418(4), the arbitrator exceeded his powers by deciding that P.A. 03-2 can alter the agreement under the contract clause of the Constitution of the United States.
The State argues that the arbitrator's award should be vacated because when a statute has been enacted that controls the outcome of the dispute, there is nothing for the arbitrator to decide because he cannot make an award that would invalidate a statute such as P.A. 03-2.
The party challenging an arbitration award bears the burden of demonstrating that the award violates the parties' agreement. Hartford v. IAFF, Local 760, AFL-CIO, CLC, 24 Conn.App. 254, 257, 587 A.2d 435 (1991).
General Statutes § 52-408 provides, in relevant part, that "[a]n agreement in any written contract, or in a separate writing executed by the parties to any written contract, to settle by arbitration any controversy thereafter arising out of such contract, or out of the failure or refusal to perform the whole or any part thereof . . . shall be valid, irrevocable and enforceable, except when there exists sufficient cause at law or in equity for the avoidance of written contracts generally."
`Whether a particular dispute is arbitrable is a question for the court, unless, by appropriate language, the parties have agreed to arbitrate that question, also . . . The intention to have arbitrability determined by an arbitrator can be manifested by an express provision or through the use of broad terms to describe the scope of arbitration, such as all questions in dispute and all claims arising out of the contract or any dispute that cannot be adjudicated." Welch Group, Inc. v. Creative Drywall, Inc., 215 Conn. 464, 467, 576 A.2d 153 (1990). The agreement between SEBAC and the State (SEBAC 5) provided that disputes as to arbitrability would be determined by the Steelworkers' Trilogy of U.S. Supreme Court cases.
The rules from the Steelworkers' Trilogy case pertaining to arbitrability state: "the question of arbitrability — whether a collective-bargaining agreement creates a duty for the parties to arbitrate the particular grievance — is undeniably an issue for judicial determination. Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator." ATT Technologies v. Communications Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). "[W]here the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that "[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." Id., 650.
In the present, the agreement between the parties stated that all disputes were subject to arbitration unless otherwise explicitly excluded. It is concluded that the State has not presented sufficient facts to rebut the presumption of arbitrability in the present dispute, and therefore, the State's application to vacate should be denied because the dispute is arbitrable.
II.
We turn to the second issue as to whether SEBAC's application to vacate the arbitrator's award because the arbitrator exceeded his authority under General Statutes § 52-418 should be granted.
Submissions to arbitration can take two forms: restricted or unrestricted. "Where the parties have voluntarily and contractually agreed to submit to arbitration and have delineated the powers of the arbitrator through their submission, then the scope of judicial review of the award is limited by the terms of the parties' agreement and by the provisions of General Statutes § 52-418." American Universal Ins. Co. v. DelGreco, CT Page 6773 205 Conn. 178, 185, 530 A.2d 171 (1987). "Arbitration is created by a contract between the parties, referred to as the agreement of submission. The written submission defines the powers of the arbitrator, and the parties are bound by the limits they have fixed. It is the submission that generally controls the parties' rights on judicial review." Cashman v. Sullivan Donegan, P.C., 23 Conn.App. 24, 27, 578 A.2d 167, cert. denied, 216 Conn. 821, 581 A.2d 1054 (1990). "Where the language of the arbitration clause indicates an intention on the part of the parties to include all controversies which may arise under their agreement, and where the record reveals no specific questions which the parties submitted to the arbitrator, the submission will be construed as unrestricted. A submission is deemed restricted only if the agreement contains express language restricting the breadth of issues, reserving explicit rights, or conditioning the award on court review." United States Fidelity Guaranty Co. v. Hutchinson, 244 Conn. 513, 519, 710 A.2d 1343 (1998); see also Garrity v. McCaskey, 223 Conn. 1, 5, 612 A.2d 742 (1992). "In the absence of any such restraints, it is unrestricted." Rocky Hill Teachers' Assn. v. Board of Education, 72 Conn.App. 274, 278 n. 6, 804 A.2d 999, cert. denied, 262 Conn. 907, 810 A.2d 272 (2002); see also Caldor, Inc. v. Thornton, 191 Conn. 336, 464 A.2d 785 (1983), aff'd, Estate of Thornton v. Caldor, Inc., 472 U.S. 703, 105 S.Ct. 2914, 86 L.Ed.2d 557 (1985); Carroll v. Aetna Casualty Surety Co., 189 Conn. 16, 20, 453 A.2d 1158 (1983). "If the submission does not contain limiting or conditional language, then the submission is unrestricted." Trumbull v. Trumbull Police Local 1745, 1 Conn.App. 207, 212, 470 A.2d 1219 (1984).
In Rocky Hill Teachers' Assn., the Appellate Court considered a submission to be unrestricted where "the parties agreed to submit grievances to arbitration as part of their dispute resolution process," Rocky Hill Teachers' Assn. v. Board of Education, supra, 72 Conn.App. 276; and "[t]he parties presented the following questions to the arbitrator for resolution: `Did the Board violate the contract [agreement] when it included the dental premium costs in its calculation of premium cost share dollar amounts as provided for in Article XXXI, Section F [of the agreement]? II. If so, what shall the remedy be?" Id., p. 277. This factual pattern bears striking similarities to the present case.
In the present case, the agreement between the parties was very broad in terms of which disputes would be arbitrated under the contract; only those disputes that were specifically excluded could not be arbitrated. The questions presented to the arbitrator did not contain limiting or conditional language. Furthermore, the agreement did not contain express language restricting the breadth of issues, reserving explicit rights, or conditioning the award on court review. For these reasons, it is concluded the arbitration is unrestricted.
"Under an unrestricted submission, the arbitrators' decision is considered final and binding; thus the courts will not review the evidence considered by the arbitrators nor will they review the award for errors of law or fact . . . Such a limited scope of judicial review is warranted given the fact that the parties voluntarily bargained for the decision of the arbitrator and, as such, the parties are presumed to have assumed the risks of and waived objections to that decision . . ." American Universal Ins. Co. v. DelGreco, supra, 205 Conn. 186-87. "When the parties have not restricted the scope of the arbitrator's authority, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission." Schoonmaker v. Cummings Lockwood of Connecticut, P.C., 252 Conn. 416, 427, 747 A.2d 1017 (2000). "An award will not be vacated on the ground that the construction placed on the facts or the interpretation of the agreement by the arbitrator was erroneous." Cashman v. Sullivan Donegan, P.C., supra, 23 Conn.App. 27.
"[I]n determining whether an arbitrator has exceeded his authority or improperly executed [it] under 52-418(a), the courts need only examine the submission and the award to determine whether the award conforms to the submission." American Universal Ins. Co. v. DelGreco, supra, 205 Conn. 186. "It is settled law in this jurisdiction that [any challenge to an award on the ground that the arbitrator exceeded his powers is . . . properly limited to a comparison of the award with the submission." Caldor, Inc. v. Thornton, supra, 191 Conn. 340. "The scope of judicial review of arbitration awards is very narrow. Our courts favor arbitration as a means of settling differences and uphold the finality of arbitration awards except where an award clearly falls within the proscriptions of § 52-418 of the General Statutes." (Internal quotation marks omitted.) Board of Education v. Local 818, 5 Conn.App. 636, 639, 502 A.2d 426 (1985). "Arbitration awards are generally upheld and [the reviewing court gives] deference to an arbitrator's decision since it is favored as a means of settling disputes." (Citations omitted.) Bridgeport v. Connecticut Police Department Employees Local 1159, 32 Conn.App. 289, 292, 628 A.2d 1336, cert. denied, 227 Conn. 925, 632 A.2d 703 (1993). "Every reasonable presumption will be made in order to sustain an award." Id., 293. "Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that the construction placed upon the facts or the interpretation of the agreement by the arbitrators was erroneous. Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrator's decision of the legal questions involved." Caldor, Inc. v. Thornton, supra, 191 Conn. 340-41.
In this case, the parties submitted two competing versions of the second question presented to the arbitrator. Both versions amounted to the same question, and the arbitrator elected to answer the State's version, which asked: "[i]s the legislative enactment and implementation of an Early Retirement Incentive Program as provided in P.A. 03-2 without SEBAC's consent a violation of the Pension Agreement between the parties?" The arbitrator's award found that P.A. 03-2 was not a violation of the agreement between the parties. The arbitrator's award is a direct, negative response to the submission. It is concluded that this award conforms to the submission, and the arbitrator did not exceed his authority under General Statutes § 52-418(4).
III.
The final issue is whether the arbitrator exceeded his powers as an arbitrator by considering the Constitution of the United States in his analysis. Ordinarily, an arbitrator's "quasi judicial power does not encompass a decision as to the constitutionality of" a statute. Caldor, Inc. v. Thornton, supra, 191 Conn. 343.
In Garrity v. McCaskey, 223 Conn. 1, 612 A.2d 742 (1992), our Supreme Court recognized two narrow common-law bases, as opposed to statutory bases under General Statutes § 52-418, for vacating an award rendered pursuant to an unrestricted submission: "(1) the award rules on the constitutionality of a statute; and (2) the award violates clear public policy." State v. New England Health Care Employees Union, 271 Conn. 127, 134, 855 A.2d 964 (2004). The exception for issues of constitutionality is limited to setting aside an arbitrator's award that explicitly rules on the constitutionality of a statute. Garrity v. McCaskey, supra, CT Page 6776 223 Conn. 1, 7.
In Caldor, Inc. v. Thornton, supra, the plaintiff asked the arbitrator to find that a particular statute violated the first amendment to the Constitution of the United States. The Supreme Court held that it was proper for the arbitrator to decline to decide the arbitration based on the constitutionality of the statute in question. The Constitution of the United States, Article One, § 10, clause 1 states: "No state shall . . . pass any . . . Law impairing the Obligation of Contracts . . ." The claim that arbitrator Blum erred in deciding the arbitration by finding that P.A. 03-2 was a constitutional exercise of state power has considerable merit. We therefore proceed to consider the issue of the constitutionality of P.A. 03-2 de novo as was done by the Supreme Court in Caldor, Inc. v. Thornton.
Arbitrator Blum based his analysis of the contract clause issue on National Educ. Ass'n. Rhode Island v. Retirement Bd. However, in that case, the First Circuit decided that the Rhode Island state pension plan did not create a contract within the meaning of the contract clause. National Educ. Ass'n — Rhode Island v. Retirement Bd., supra, 172 F.3d 28.
SEBAC argues that the court should consider Ass'n of Surrogates v. State of N.Y., 940 F.2d 766 (2nd Cir. 1991), as support for the proposition that state legislatures may not modify collective bargaining agreements in circumstances like the present case. That decision stated:
Despite the seemingly absolute language of the contract clause, finding an impairment of contract is merely a threshold step toward resolving the more difficult question whether that impairment is permitted under the Constitution . . . This more difficult question is resolved by balancing the contractual rights of the individual against the essential attributes of sovereign power necessarily reserved by the States to safeguard the welfare of their citizens . . . Once impairment is found, there are two further steps to our inquiry. First, we must determine whether the legislation operates to substantially impair contractual obligations . . . Then, should the impairment be more than a minimal one, we must move on to a careful examination of the nature and purpose of the state legislation . . .
[C]ourts are not so deferential when the state's legislation is self-serving and impairs the obligations of its own contracts. In this situation, a more searching analysis under the contract clause is appropriate. The Contract Clause is not an absolute bar to subsequent modification of a State's own financial obligations. As with laws impairing the obligations of private contracts, an impairment may be constitutional if it is reasonable and necessary to serve an important public purpose. In applying this standard, however, complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake . . . If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.
The Supreme Court has noted that "[t]he severity of the impairment measures the height of the hurdle the state legislation must clear . . . However, the Court in [ Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716, 57 L.Ed.2d 727 [(1978)] went on to define the severity of a contractual impairment: The severity of an impairment of contractual obligations can be measured by the factors that reflect the high value the Framers placed on the protection of private contracts. Contracts enable individuals to order their personal and business affairs according to their particular needs and interests. Once arranged, those rights and obligations are binding under the law, and the parties are entitled to rely on them." (Quotation marks omitted.) Id., 940 F.2d 771-72.
"If an impairment is found, the reviewing court next determines whether the impairment is of constitutional dimension. If the alteration of contractual obligations is minimal, the inquiry may end at this stage." National R. Passenger Corp. v. A.T.S.F.R. Co., 470 U.S. 451, 472, 105 S.Ct. 1441, 84 L.Ed.2d 432 (1985).
In Ass'n of Surrogates v. State of N.Y, the state attempted to change the law so that its employees would never be fully compensated for their work until they terminated employment. Their pay would always be behind schedule. This impairment appears to be far more severe than the impairment in this case, where the State's employees were given an incentive to retire early, which is a benefit to the individual employee accepting the plan. While there was an impairment to SEBAC's agreement with the State in that SEBAC was denied its contracted for power of rejecting the ERIP plan, this impairment was minimal, not of a constitutional dimension. Each employee had the option of accepting or declining the State's offer, therefore the employee did not lose anything of value. Because the contract clause of the Constitution of the United States was not violated by the enactment and implementation of the ERIP found in P.A. 03-2, any decision by the arbitrator was harmless.
CONCLUSION
Because the dispute between SEBAC and the State was arbitrable, and because any error in arbitrator Blum's analysis of the dispute was harmless, both SEBAC's application to vacate and the State's application to vacate is denied.
Wagner, JTR