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In re Application of Port Authority of New York and New Jersey

Supreme Court, New York County

August 16, 2013

Application of The Port Authority of New York and New Jersey, Petitioner, For an Order Pursuant to Article 75 of the Civil Practice Law and Rules Vacating an Arbitration Opinion and Award of a Certain Controversy
v.
The Port Authority Police Sergeants Benevolent Association, Respondent.

Unpublished Opinion

For Petitioner: James M. Begley By: Toby Jon Russell, Esq.

For respondent: Detzky & Hunter, LLC by: Michael L. Detzky, Esq.

Michael D. Stallman, J.

Petitioner The Port Authority of New York and New Jersey seeks to vacate an arbitration award dated July 12, 2012, which sustained a grievance filed by respondent The Port Authority Police Sergeants Benevolent Association. Respondent opposes the petition.

BACKGROUND

On November 18, 2010, the Board of Commissioners of the Port Authority of New York & New Jersey voted to discontinue the E-Z Pass Program, effective January 1, 2011, for employees who were not represented by any union and for all retirees (which would also include those who had belonged to a union before they retired).

On January 28, 2011, respondent filed a grievance (Grievance No. 2S-11) alleging that the Port Authority violated a collective bargaining agreement, a Memorandum of Agreement dated April 12, 2005 between petitioner and respondent, which was to commence as of January 21, 2003 and was set to expire January 20, 2010. (Verified Petition, Ex A.) Specifically, respondent contended that petitioner violated Section XXXI and "Document L" of the Memorandum of Agreement.

A hearing was held before a single arbitrator, Jack Tillem, on the following issue:

"Did the Port Authority of New York and New Jersey violate the Memorandum of Agreement with the Sergeants Benevolent Association when the Port Authority eliminated E-Z Pass privileges for currently employed sergeants, which upon their retirement from Port Authority services provided for free passage on Port Authority tunnel and bridge crossings and for the free use of parking lots at Port Authority airports? If so, what shall be the remedy?"

(Verified Petition, Ex E.) [1]

In the opinion and award dated July 12, 2012, the arbitrator quoted Article XXXI of the Memorandum of Agreement in its entirety, and quoted portions of PAI 40-1.01, entitled "Issuance and Use of Port Authority Passes." (Verified Petition, Ex E, at 3.) [2] The opinion and award recites those provisions as follows:

"XXXI. Personal and Commutation Passes
Personal passes and commutation passes for free use of Port Authority tunnel and bridge facilities shall continue to be provided in accordance with PAI 40-1.01 revised December 20, 1973. At any time following the execution of this Memorandum of Agreement, at the Port Authority's sole discretion, the Port Authority may replace this benefit with an E-Z Pass based program upon the following terms and conditions:
A.The number of free passages at Port Authority tunnel and bridge facilities and the free use of parking lots at [P]ort Authority airports for Police Sergeants shall not be less under the E-Z Pass based program than under said PAI 450-1.01 [ sic ].
B.Until such time as the E-Z Pass program is implemented at Port Authority airport parking lots for which free use is provided under PAI 40-1.01 the Port Authority will continue to make passes available to Police Sergeants for such parking in accordance with PAI 30-1.01. [ sic ]

PAI 40-1.101 (Document L) (Part of Article XXXI)

I. Introduction

This introduction sets forth the policies and procedures governing the issuance and use of Port Authority passes:

II. B2 (Personal Passes)

a. Form PA 378. Personal passes are issued upon request, in accordance with the pass allowance schedule given below, to Port Authority permanent and project employees, retired employees, and employees on military leave for use at tunnels, bridges and some air terminal parking lots.

The calendar year pass allowance is:

Number

Length of P.A. Serviceof Books

Less than 9 monthsNone

9 months bu[t] less than 1 year1

1 year but less than 7 years4

7 years and over5

Retired employees and employees on military leave receive the same allowance to which they would be entitled if their Port Authority service was not interrupted.

V. Issuance of Passes

c. (Personal Passes)

2. Passes for retired employees and employees on military leave are issued by the Personnel Benefits and Activities Division, Personnel Department upon request of individuals."

(Verified Petition, Ex E.)

Petitioner contended at the arbitration that

"the benefit is restricted to the life of the contract. The governing MOA continues in effect until the parties execute a new MOA at which point, the Port Authority asserts, the benefit would terminate. In other words, the Port Authority says that it is neither legally nor contractually committed to providing the benefit until a retiree's death. Since this case does not fall within the purview of ERISA and is neither a retirement nor welfare plan, the Port Authority reasons it has the unfettered discretion to alter a retiree's benefit unless it imposes a contractual limitation upon itself.

Put another way, in order to prevail on the premise that the Port Authority promised to provide SBA retirees a lifetime of E-Z Pass benefits, the Port Authority says the SBA must identify language that clearly expresses such an intent. It cannot be done, the Port Authority says, for the reason that no such language exists."

(Verified Petition, Ex E, at 7.)

The arbitrator rejected these arguments, stating,

"There is no doubt what retirement meant when Article XXXI was drafted — or what it means today. It means for life. Standing alone devoid of any adjective or conditional phrase, that is the only understood common sense way of interpreting it. The purpose of the provision and the inducement was to provide the benefit for the life of the retiree. Surely neither side at the bargaining table when the benefit was negotiated understood that it was for anything less. Having never fixed an ending time or date, it had to mean for life.

The Port Authority takes the position that in any event the benefit expires when the current MOA does. Just so it's clear, we're talking in this case about sergeants who retire during the current MOA. In other words, the SBA at the bargaining table for the successor agreement, as the Port Authority would have it, must obtain a renewal of the retiree benefit for those sergeants no longer on the payroll. This poses a real difficulty since the SBA would be attempting to bargain for people who are not in the bargaining unit anymore. And for those retirees — assume one of them retired six months before the MOA expired — that means he had his E-Z Pass retirement benefit for all of a half of a year."

(Id. at 11.)

The arbitrator sustained the grievance. The opinion and award states, in pertinent part:

"1. The grievance is sustained.
2. The E-Z Pass benefits shall continue to be afforded to all currently employed sergeants upon their retirement in the same manner as they have been afforded to all other retirees prior to their elimination on January 1, 2011.
3. Should any of the sergeants employed during the current MOA [Memorandum of Agreement] have already retired and been denied the E-Z Pass benefit, they shall be whole [ sic ] for their losses."

(Id.)

Petitioner seeks to vacate the arbitrator's opinion and award on the ground that the arbitrator exceeded his authority.

It appears that several unions similarly filed grievances challenging petitioner's decision to discontinue E-Z Pass benefits, and that the arbitrators who heard those grievances similarly sustained those grievances. Petitioner has brought petitions to vacate those awards, and those five proceedings are assigned to other justices of this court; [3] four of those proceedings have been decided.

In three proceedings, the petitions to vacate the arbitration awards were denied, and the awards were confirmed. (Port Auth. of NY & N.J. v Local Union No. 3, Intl. Brotherhood of Elec. Workers, Sup Ct, NY County, Dec. 21, 2012, Kern, J, index No. 450991/2012; Port Auth. of NY & N.J. v Port Auth. Police Lieutenants Benevolent Assn., 39 Misc.3d 1239 (A) (Singh, J.); Port Auth. of NY & N.J. v Port Auth. Police Sergeants Benevolent Assn., Sup Ct, NY County, July 30, 2013, Kern, J., index No. 450825/2013.) However, in another proceeding, the award was confirmed in part, and vacated in part. (Port Auth. of NY & N.J. v The Union of Automotive Technicians, July 12, 2013, Tingling, J., index No. 451628/2012.)

DISCUSSION

"Collective bargaining agreements commonly provide for binding arbitration to settle contractual disputes between employees and management. In circumstances when the parties agree to submit their dispute to an arbitrator, courts generally play a limited role. Courts are bound by an arbitrator's factual findings, interpretation of the contract and judgment concerning remedies. A court cannot examine the merits of an arbitration award and substitute its judgment for that of the arbitrator simply because it believes its interpretation would be the better one. Indeed, even in circumstances where an arbitrator makes errors of law or fact, courts will not assume the role of overseers to conform the award to their sense of justice.

Despite this deference, courts may vacate arbitral awards in some limited circumstances. A court may vacate an award when it violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on an arbitrator's power under CPLR 7511 (b) (1)"

(Matter of New York State Correctional Officers and Police Benevolent Assn. v State of New York, 94 N.Y.2d 321, 326 [1999] [internal citations omitted].)

Here, petitioner contends that the arbitrator exceeded a limitation of his power contained in the Grievance-Arbitration/Disciplinary Procedure of the parties' Memorandum of Agreement. The Grievance-Arbitration/Disciplinary Procedure, which is set forth in Appendix G to the Memorandum of Agreement, states, in pertinent part:

"The arbitrator shall not have the power to add to, subtract from or modify the provisions of the Memorandum of Agreement and shall confine his decision solely to the interpretation and application of the Memorandum of Agreement. He shall confine himself to the precise issue presented for arbitration and shall have no authority to determine any other issues not so presented to him nor shall he submit observations or declarations of opinion which are not essential in reaching the determination."

(Verified Petition, Ex A at 213.) Petitioner also relies upon Matter of Riverbay Corp. v Local 32-E (91 A.D.2d 509 [1st Dept 1982]), which ruled that "an arbitrator does exceed his power when he gives a totally irrational construction to the contractual provisions in dispute and, thus, makes a new contract for the parties."

The arbitrator's decision rested on two key determinations: (1) pursuant to the Memorandum of Agreement, a sergeant is entitled to E-Z Pass benefits after retirement; and (2) such a retiree is entitled to E-Z Pass benefits for his/her lifetime.

According to the award, petitioner had argued at the arbitration that "a careful reading of Article XXXI [of the Memorandum of Agreement] does not include sergeant retirees." (Verified Petition, Ex E.) However, in this proceeding, petitioner does not take issue with the arbitrator's determination that Article XXXI of the Memorandum of Agreement applies to sergeant retirees. Rather, petitioner takes issue with the arbitrator's determination that such a retiree is entitled to lifetime E-Z Pass benefits. (See Russell Reply Affirm. ¶ 8 ["the crux of the instant petition rests with whether the express terms of the MOA constitute a contractually vested promise to provide a lifetime E-Z Pass benefit"].)

As petitioner indicates, nothing in Article XXXI of the Memorandum of Agreement nor in PAI 40-1.01, which were both quoted extensively in the opinion and award, expressly states how long a retiree is entitled to receive E-Z Pass benefits. That is, those provisions do not expressly state, for example, that the retiree will receive E-Z Pass benefits for only a year, two years, or three years after retirement. Neither do those provisions expressly state that the retiree will receive E-Z Pass benefits until the retiree dies. There is no specified duration.

Petitioner points out that Article X of the Memorandum of Agreement expressly stated a duration for dental benefits "throughout the Police Sergeant's retirement", if petitioner changes the dental insurance provider. [4] Thus, petitioner concludes that the absence of similar language in Article XXXI of the Memorandum of Agreement meant that the arbitrator had added the words "through the Police Sergeant's retirement" to Article XXXI in his interpretation. Petitioner argues that the arbitrator acted irrationally because he did not follow federal case law holding that, if a collective bargaining agreement is silent on the specific duration of retiree benefits, the "[s]ilence on the duration... may not be interpreted as an agreement by the company to vest retirement benefits in perpetuity." (International Union, United Auto., Aerospace & Agr. Implement Workers of America, U.A.W. v Skinner Engine Co., 188 F.3d 130, 147 [3rd Cir 1999], citing Bidlack v Wheelabrator Corp., 993 F.2d 603 [7th Cir 1993].) Finally, petitioner contends that the arbitrator referred to the parties' past practice, which it asserts was "patently outside the Arbitrator's jurisdiction." (Petitioner's Mem. at 10-11.)

It is apparent from the opinion and award that the arbitrator used well-established legal principles of contract interpretation to determine the duration of E-Z Pass benefits for a retiree. The arbitrator looked at the terms contained in Article XXXI of the Memorandum of Agreement, and looked at PAI 40-1.01, which was incorporated by reference into Article XXXI. The arbitrator determined that a retiree is entitled under those provisions to receive E-Z Pass benefits during retirement. The arbitrator then looked at the plain, ordinary meaning of retirement, stating, "It means for life. Standing alone devoid of any adjective or conditional phrase, that is the only understood common sense way of interpreting it." (Verified Petition, Ex E, at 10.) The arbitrator also looked at the purpose of Article XXXI and at the possible intentions of the parties. The arbitrator stated, "The purpose of the provision and was to provide the benefit for the life of the retiree. Surely neither side at the bargaining table when the benefit was negotiated understood that it was for anything less." (Id.)

The arbitrator also considered petitioner's alternative interpretation of the Memorandum of Agreement, that the E-Z Pass benefits for a retiree would be for the duration of the collective bargaining agreement then in effect. The arbitrator rejected this interpretation, stating, "This poses a real difficulty since the SBA would be attempting to bargain for people who are not in the bargaining unit anymore. And for those retirees — assume one of them retired six months before the MOA expired — that means he had his E-Z Pass retirement benefit for all of a half of a year." (Id. at 12.) This reasoning appears to follow another well-established principle of contract interpretation, which disfavors an interpretation that would lead to unreasonable or absurd results.

The arbitrator distinguished federal cases upon which petitioner relied, stating

"The Port Authority turns to judicial precedent involving ERISA, the federal legislation governing pension plans and their vesting requirements. ERISA, however, as the Port Authority acknowledges, is not applicable to government agencies and the E-Z Pass benefit is neither a pension nor a welfare plan subject to federal oversight.... Hence it remains unclear what relevance ERISA and federal case law dealing with pension and welfare funds can bring to this issue."

(Id. at 12.)

Petitioner argues, as it did at the arbitration, that the parties could easily have specified that a retirement benefit of free E-Z pass be for the retiree's lifetime. However, it could just as easily be said that the parties, which are sophisticated and experienced entities, could have easily specified a fixed duration other than retirement for that retirement benefit. The arbitrator reasoned, "Having never fixed an ending time or date, it had to mean for life." (Id. at 10.) Had petitioner sought to limit retirees' E-Z Pass benefits to the term of the Memorandum of Agreement, the Port Authority could have negotiated a provision that expressly stated such a limitation.

Because well-established legal principles of contract interpretation appear to have been at work in the arbitrator's interpretation of the provisions of the Memorandum of Agreement, petitioner fails to demonstrate that the arbitrator's construction was totally irrational. By determining that Port Authority retirees of respondent's union are entitled to receive free E-Z Pass benefits from the Port Authority for life, the arbitrator did not act irrationally. " [T]he mere fact that a different construction could have been accorded the provisions concerned and a different conclusion reached does not mean that the arbitrator[ ] so misread those provisions as to empower a court to set aside the award.'" (Eighty Eight Bleecker Co., LLC v 88 Bleecker Street Owners, Inc., 51 A.D.3d 507, 508 [1st Dept 2008], quoting Matter of National Cash Register Co.. (Wilson), 8 N.Y.2d 377, 383 [1960].)

The arbitrator's interpretation does not contravene any express terms of the provisions of the Memorandum of Agreement at issue, i.e., Article XXXI and Document L. It does not appear that the arbitrator disregarded any express terms of Article XXXI and Document L. Although petitioner contends that the arbitrator, in essence, added the terms "through the Police Sergeant's retirement (or words to that effect) to Article XXXI or Document L, [5] petitioner does not specify the provision of Article XXXI or Document L to which such words were purportedly added, so as to change or alter the meaning of the particular provisions. Therefore, the arbitrator did not "add to, subtract from or modify the provisions of the Memorandum of Agreement" in violation of the Grievance-Arbitration/Disciplinary Procedure of the parties' Memorandum of Agreement. In sum, the arbitrator did not exceed his powers.

Petitioner's argument that the arbitrator's reference to past practice was "patently outside the Arbitrator's jurisdiction" is without merit. First, to the extent that petitioner might be arguing that this particular grievance should not have been subject to the grievance-arbitration procedure, such an argument does not appear to have been raised before the arbitrator. Therefore, it does not constitute a ground for challenging the arbitration award. (See Stephens v Prudential Ins. Co. of Am., 278 A.D.2d 16 [1st Dept 2000] [public policy ground not raised in the arbitration proceeding does not constitute ground for challenging arbitration award]; see also Matter of G.K. Las Vegas Ltd. Partnership v Boies Schiller & Flexner LLP, 96 A.D.3d 538 [1st Dept 2012] [arguments were not sufficiently brought to the attention of the arbitrator].) Second, Article II of the Memorandum of Agreement does not apply to this grievance. It states, in pertinent part:

"A charge or complaint that the Authority has unilaterally limited, restricted, impaired removed or abolished such a practice, procedure, or policy governing an existing term and condition of employment which is not specifically enumerated or set forth in this Memorandum of Agreement shall not be subject to or processed through the grievance-arbitration procedures referred to in Section XXII of this Memorandum of Agreement."

(Verified Petition, Ex A [emphasis supplied].) As the arbitrator noted, "PAI 40-1.01 makes no less than three references to retired employees as beneficiaries of the Port Authority Passes" (Verified Petition, Ex E, at 8), and Document L was incorporated by reference into Article XXXI of the Memorandum of Agreement. The E-Z Pass benefits for retirees are therefore specifically set forth in the Memorandum of Agreement.

In any event, even where a collective bargaining agreement states that the arbitrator "shall have no power to add to, subtract from, or change any provisions" of that collective bargaining agreement, "the Court of Appeals has explained that a past practice, [even] independent of any contract term, may be relied upon by an arbitrator in resolving disputes which have been submitted under the grievance machinery of a collective bargaining agreement'" (Matter of Windsor Cent. School Dist. (Windsor Teachers Assn.), 306 A.D.2d 669, 670-671 [3d Dept 2003], lv denied 100 N.Y.2d 510 [2003].) This means that the arbitrator may, but is not required, to consider past practice in resolving disputes of interpretation of the collective bargaining agreement. Here, the arbitrator stated, "[p]ast practice is not a player in this dispute. The practice for over forty years having tracked Article XXXI, a call to the bullpen by the SBA for past practice relief is rendered unnecessary." (Verified Petition, Ex E, at 13.)

CONCLUSION

Accordingly, it is hereby

ADJUDGED that the petition is denied and the opinion and award dated July 12, 2012 is confirmed.


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