Pullman Power Products Corp. v. Local 403, United Ass'n of Journeymen & Apprentices of the Plumbing & Pipefitting Industry

BEEZER, Circuit Judge, dissenting: This case presents the same fact pattern as Foley v. IBEW, Local 639, 789 F.2d 1421 (9th Cir.1986). Our holding in Foley [1213] controls. The Supreme Court’s decision in United Paperworkers Intern. Union v. Misco, Inc., — U.S. —, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987), does not affect our holding in Foley. In Foley we held that in the absence of causation, an award of damages is punitive. Because the collective bargaining agreement did not provide for punitive awards, the arbitrator’s award could not be based on the collective bargaining agreement. Foley, 789 F.2d at 1423-24. In this case, as in Foley, the company’s breach of the agreement did not cause the employee’s loss. In Foley we reasoned as follows: The award of damages in the present case does not draw its essence from the CBA, for the agreement’s essence does not contemplate punitive, but only compensatory awards. Though not termed punitive, the award here can only be such, for there is nothing in the record showing it validly compensatory. There is no causal connection between the breach and the loss since Thomas, as conceded by the Union and the arbitrator, was barred from the jobsite by PG & E, not Foley, during the time period for which the lost earnings were assessed. Both the arbitrator and Foley were powerless to return Thomas to the jobsite once PG & E ordered him barred. As such, the loss sustained by Thomas would have occurred whether or not Foley breached the CBA. Id. at 1423. As this passage shows, Foley is consistent with an earlier Supreme Court case, W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983). In W.R. Grace the Court noted that a court is not free to disagree with an arbitrator’s rejection of an employer’s impossibility defense to breach of contract. Id. at 767 n. 10, 103 S.Ct. at 2184 n. 10. In Foley we did not disturb the arbitrator’s rejection of Foley’s impossibility defense; we credited the arbitrator’s finding that a “breach” had occurred. Rather, in Foley as in this case, lack of causation of damages was the critical factor. As we said in Foley: “the loss ... would have occurred whether or not [the company] breached the CBA.” 789 F.2d at 1423. The flip side of lack of causation is not impossibility of the employer’s performance, but of the m-ployees’ performance: even if the company had not terminated the employees, they would have been unable to enter the jobsite and so could not have earned their pay. In Misco the Supreme Court never even mentioned impossibility or lack of causation. The Court was mainly concerned with whether vague public policy justified a court in overturning an arbitrator’s award. See 108 S.Ct. at 373-74. In passing, the Court also restated that a court would not be justified in doing so based on disagreement with the arbitrator’s view of evidence that a breach had occurred. Id. at 371. The Supreme Court simply repeated that a court must defer to an arbitrator’s interpretation of the collective bargaining agreement: As the Court has said, the arbitrator’s award settling a dispute with respect to the interpretation or application of a labor agreement must draw its essence from the contract and cannot simply reflect the arbitrator’s own notions of industrial justice. But as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision. Id. The award in this case does not satisfy the “draw its essence” or “arguably construing” test. In Foley, having decided that absence of causation renders an award punitive, we inevitably concluded that “[t]he award of damages in the present case does not draw its essence from the CBA, for the agreement’s essence does not contemplate punitive, but only compensatory awards.” 789 F.2d at 1423. The rule that punitive awards do not draw their essence from such a bargaining agreement is well-established, not only in our circuit but in others. See, e.g., Desert Palace v. Local Joint Executive Bd. of Las Vegas, 679 F.2d 789, 794 (9th Cir.1982); Bacardi [1214] Corp. v. Congresso de Uniones Industriales de Puerto Rico, 692 F.2d 210, 214 (1st Cir.1982); Baltimore Regional Joint Bd. v. Webster Clothes, Inc., 596 F.2d 95, 98 (4th Cir.1979) (holding, like Foley, that absence of causation renders award punitive). When the agreement makes no provision for a punitive award, an arbitrator who grants one is not “even arguably construing or applying the contract and acting within the scope of his authority.” Misco, 108 S.Ct. at 371. (emphasis added). As we instructed in Foley, a court should not sustain such an award. 789 F.2d at 1424. We are bound by Foley.