Filed 5/30/17 Operating Engineers Local Union No. 3 v. City of Stockton CA3
NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.



IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(San Joaquin)
----



OPERATING ENGINEERS LOCAL UNION NO. 3, ETC.,

Plaintiff and Appellant,

v.

CITY OF STOCKTON,

Defendant and Respondent.
C080925

(Super. Ct. No. 39201500328385CUPTSTK)





Ralph Handel worked for defendant City of Stockton (the city) as a member of a bargaining unit covered by a memorandum of understanding between the city and plaintiff Operating Engineers Local Union No. 3, International Union of Operating Engineers, AFL-CIO (the union). After the city discharged Handel from his employment, the union filed a grievance that went to arbitration. The arbitrator found that Handel had violated the sexual harassment policies of the city, but the city did not have cause to discharge him; accordingly, the arbitrator ordered him reinstated.
In the present action, the union petitioned to confirm the arbitrator’s decision. The city opposed the union’s petition and filed its own petition to vacate the portion of the decision reinstating Handel on the ground that the arbitrator had exceeded his powers in ordering Handel’s reinstatement. The trial court agreed with the city, denied the union’s petition to confirm the arbitration decision, and granted the city’s petition to vacate that portion of the decision reinstating Handel to his employment with the city.
On the union’s appeal from the trial court’s order, we conclude the trial court erred: the arbitrator did not exceed his powers by ordering Handel’s reinstatement. As we will explain, because the memorandum of understanding did not explicitly and unambiguously limit the arbitrator to determining whether the city had cause to discipline Handel, as opposed to determining whether the city had cause to impose the specific discipline of discharge, the arbitrator did not exceed his powers when he interpreted the memorandum of understanding as giving him the power to order Handel’s reinstatement even though he found Handel had violated the city’s sexual harassment policies. Accordingly, we will reverse and remand with instructions to the trial court to grant the union’s petition and deny the city’s.
FACTUAL AND PROCEDURAL BACKGROUND
In July 2014, Handel, who worked for the Stockton Municipal Utilities District, engaged in certain objectionable conduct toward a coworker. The city conducted a thorough investigation, and both the director of the utilities district and the city’s supervising human resources consultant concluded that Handel had violated the city’s sexual harassment policies.
Under the city’s Progressive Discipline Policy (HR-08), violation of the sexual harassment policies qualifies as cause for discipline. Permissible discipline includes a letter of reprimand, suspension, reduction in base pay, demotion, or discharge.
Ultimately, the city decided to discharge Handel as discipline for his conduct. The union filed a grievance on Handel’s behalf challenging his discharge. Under the memorandum of understanding between the union and the city, if the parties are unable to reach a mutually satisfactory accord on a grievance by means of departmental review or director of human resources review, the grievance may be referred to arbitration. In this case, Handel’s grievance was referred to arbitration before Robert M. Hirsch. The parties stipulated to the following issue for resolution by the arbitrator: “Was the Grievant, Ralph Handel, discharged for just cause? If not, what is the appropriate remedy?” In arbitration, the city argued that Handel’s conduct constituted sexual harassment, and the union argued it did not. The arbitrator agreed with the city. The city also argued that if the arbitrator found that the city had cause to discipline Handel, the arbitrator was bound to sustain his discharge. The city based this argument on the first paragraph (and first sentence) of section 8.5 of the memorandum of understanding--“Other Provisions”--which reads as follows: “If the Director of Human Resources or City Manager, in pursuance of the procedures outlined above, resolves a grievance which involved suspension or discharge, they may agree to payment for lost time or to reinstatement with or without payment for lost time, but in the event the dispute is referred to arbitration and the arbitrator finds that the City had cause to take the action complained of, the arbitrator may not substitute his judgment for the judgment of management and if the findings are that the City had such right, the arbitrator may not order reinstatement and may not assess any penalty upon the City.”
The arbitrator disagreed with the city’s interpretation of section 8.5, explaining as follows: “[The city’s] reading of the [memorandum of understanding] neuters the provision, Section 8.5, by stripping away the words ‘action complained of.’ The labor agreement stipulates that the City must have cause to take the action complained of--the termination of Handel’s employment. Part of an arbitrator’s consideration in analyzing whether an employer had cause to terminate an employee is whether the level of discipline is appropriate under the circumstances presented. I cannot accept the City’s reading of the [memorandum of understanding], as that reading renders the agreed upon language meaningless. We are not free to do that. The question remains, did Stockton have cause to take the action complained of--termination of Handel’s employment.” The arbitrator proceeded to find that the city did not have cause to discharge Handel because of various mitigating factors. Accordingly, while finding that Handel violated the city’s sexual harassment policies, the arbitrator also found that the city did not have cause to discharge Handel from his employment for that violation, and as a result the arbitrator ordered the city to reinstate Handel to his prior position without back pay, effectively converting his discharge into a suspension without pay.
In August 2015, the union filed a petition to confirm the arbitrator’s decision. The city opposed that petition and filed its own petition to vacate the portion of the decision reinstating Handel on the ground the arbitrator had exceeded his powers. The city argued the arbitrator exceeded his powers “when he utilized his own independent definition of ‘cause’ ” and when he “took it upon himself to evaluate the discipline imposed and substituted his judgment for the judgment of management.”
Implicitly, the trial court agreed with the city, because without explanation the court denied the union’s petition to confirm the arbitrator’s decision and granted the city’s petition to vacate that portion of the decision that reinstated Handel to employment with the city.
The union timely appealed.
DISCUSSION
“On petition of a party to an arbitration (see [Code Civ. Proc.,] §§ 1285, 1286.4),[ ] the superior court is to vacate an arbitrator’s award if ‘[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.’ (§ 1286.2, subd. (a)(4).) . . . [H]owever, this provision does not supply the court with a broad warrant to vacate awards the court disagrees with or believes are erroneous.
“When parties contract to resolve their disputes by private arbitration, their agreement ordinarily contemplates that the arbitrator will have the power to decide any question of contract interpretation, historical fact or general law necessary, in the arbitrator’s understanding of the case, to reach a decision. [Citations.] Inherent in that power is the possibility the arbitrator may err in deciding some aspect of the case. Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error, for ‘ “[t]he arbitrator’s resolution of these issues is what the parties bargained for in the arbitration agreement.” ’ [Citations.]
“An exception to the general rule assigning broad powers to the arbitrators arises when the parties have, in either the contract or an agreed submission to arbitration, explicitly and unambiguously limited those powers. [Citation.] ‘The powers of an arbitrator derive from, and are limited by, the agreement to arbitrate. [Citation.] Awards in excess of those powers may, under sections 1286.2 and 1286.6, be corrected or vacated by the court.’ [Citation.] The scope of an arbitrator’s authority is not so broad as to include an award of remedies ‘expressly forbidden by the arbitration agreement or submission.’ ” (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1184-1185.)
“The principle of arbitral finality, the practical demands of deciding on an appropriate remedy for breach, and the prior holdings of this court all dictate that arbitrators, unless expressly restricted by the agreement or the submission to arbitration, have substantial discretion to determine the scope of their contractual authority to fashion remedies, and that judicial review of their awards must be correspondingly narrow and deferential.” (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376.) Thus, “ ‘[i]n determining whether an arbitrator exceeded his powers, we review the trial court’s decision de novo, but we must give substantial deference to the arbitrator’s own assessment of his contractual authority.’ ” (Kelly Sutherlin McLeod Architecture, Inc. v. Schneickert (2011) 194 Cal.App.4th 519, 528.)
Here, the arbitrator decided he had the power to order Handel’s reinstatement notwithstanding his finding that Handel violated the city’s sexual harassment policies. The arbitrator reached this conclusion by interpreting the phrase “action complained of” as meaning, in this case, Handel’s discharge. Thus, the arbitrator read the memorandum of understanding as giving him the authority to decide whether the city had cause to discharge Handel for his conduct, and, implicitly at least, the arbitrator concluded that because he found the city did not have cause to take the action complained of, the memorandum of understanding did not preclude him from substituting his judgment for the judgment of management or from ordering reinstatement.
On appeal, the union contends the arbitrator’s interpretation of the phrase “ ‘action complained of’ ” to mean the discharge of the employee “is entitled to deference in that it concerns construction of the contract even if this Court disagrees with his interpretation.” We agree. The arbitrator based his decision to reinstate Handel on his construction of the memorandum of understanding. He interpreted the phrase “action complained of” to mean Handel’s discharge, and thus he understood the memorandum as giving him the power to determine whether the city had cause to discharge Handel. Having determined that the city did not have such cause, the arbitrator implicitly concluded that he was not barred by the memorandum from “substitut[ing] his judgment for the judgment of management” or from “order[ing] reinstatement,” because those bars apply only if “the arbitrator finds that the City had cause to take the action complained” or “if the findings are that the City had such right.” Thus, the arbitrator’s decision to reinstate Handel was based on the arbitrator’s interpretation of the memorandum of understanding, and “[i]nterpretation of the [memorandum of understanding] being within the matter submitted to arbitration, such an interpretation could amount, at most, to an error of law on a submitted issue, which . . . is not in excess of the arbitrator’s powers within the meaning of sections 1286.2 and 1286.6.” (Moshonov v. Walsh (2000) 22 Cal.4th 771, 779.)
In response, the city “contends that [section 8.5 of the memorandum of understanding], together with HR-08 [the city’s Progressive Discipline Policy], limited the Arbitrator to determining if the City had ‘cause’ to discipline Mr. Handel. That is, did he engage in sexual harassment? Having confirmed that the City had ‘cause’ to discipline Mr. Handel . . . the Arbitrator was prohibited from substituting his judgment for that of the City Manager with respect to the proper discipline.” Stated another way, the city contends that “[u]se of the Arbitrator’s own definition of ‘cause’ is the basis upon which the Arbitrator relied to do what he was expressly not authorized to do: substitute his judgment for that of the City Manager.” This argument rests on the premises that (1) “cause” is defined in HR-08, the city’s Progressive Discipline Policy, and (2) under section 8.5 of the memorandum of understanding, the parties “expressly and unambiguously agreed” that that definition would apply to the arbitration here.
The city’s argument is correct in one, limited aspect: If the arbitrator had been required to apply the definition of “cause” found in the city’s discipline policy in determining whether the city had “cause to take the action complained of,” then the arbitrator would have been limited to determining whether the city had cause to discipline Handel, without respect to the level of discipline the city chose to impose. This is so because the city’s policy speaks strictly of “[c]ause for discipline,” not cause for any particular level of discipline. Applying this definition of “cause” to the phrase “cause to take the action complained of” would necessarily cause the words “action complained of” to mean discipline in general rather than the particular discipline the city chose to impose. And if the arbitrator was limited to determining whether the city had cause to discipline Handel, then the restrictions against the arbitrator “substitut[ing] his judgment for the judgment of management” and “order[ing] reinstatement” clearly would have applied, because the arbitrator determined that the city did have cause to discipline Handel because he violated the city’s sexual harassment policies.
Beyond that one aspect, however, the city’s argument is entirely without merit because nothing in the memorandum of understanding “expressly and unambiguously” provided that in determining whether the city had “cause to take the action complained of,” the arbitrator was bound to use the definition of “cause” found in the city’s discipline policy. The city’s argument to the contrary is mere ipse dixit--in other words, it is so because the city says it is. The city cannot point to any express and unambiguous direction to the arbitrator that he was limited to determining whether the city had cause to impose discipline on Handel, using the term “cause” as it is defined in the city’s discipline policy. And absent an express and unambiguous limitation of this kind, the arbitrator’s decision to interpret the phrase “cause to take the action complained of” as authorizing him to determine whether the city had cause to discharge Handel was one that cannot be second-guessed by the courts, because, as we have noted already, “ ‘we must give substantial deference to the arbitrator’s own assessment of his contractual authority.’ ” (Kelly Sutherlin McLeod Architecture, Inc. v. Schneickert, supra, 194 Cal.App.4th at p. 528.) Giving that deference here, the arbitrator’s decision to reinstate Handel is not subject to judicial interference because that decision “bear[s] some rational relationship to the contract”--specifically, “to the contractual terms as actually interpreted by the arbitrator.” (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 381.) As we have explained, the arbitrator implicitly concluded that he was not barred by the memorandum from “substitut[ing] his judgment for the judgment of management” or from “order[ing] reinstatement” because those bars apply only if “the arbitrator finds that the City had cause to take the action complained” or “if the findings are that the City had such right,” and here the arbitrator found that the city did not have cause or the right to take the action complained of--that is, to discharge Handel from his employment. Because the arbitrator’s decision was, at the very least, “arguably based on the contract,” that decision must be upheld. (Ibid.) Consequently, the trial court erred in ruling otherwise.
DISPOSITION
The trial court’s order is reversed, and the case is remanded to the trial court with directions to enter a new order granting the union’s petition to confirm the arbitrator’s decision and denying the city’s petition to vacate that portion of the decision reinstating Handel to his employment with the city. The union shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)




/s/ ,
Robie, Acting P. J.



We concur:



/s/
Mauro, J.



/s/
Renner, J.