The opinion of the court was delivered by: BECKER
The issue is whether the award should be set aside because: (1) it was beyond the power of the arbitrator; or (2) it violated the national labor policy; or (3) it was arrived at by reasoning that was so arbitrary and capricious as to violate due process. After reciting the facts in detail and disposing of the first two objections of the Employers, we will address this latter contention which we view as the principal and most difficult issue in the case.
On August 1, 1959, the Employers and the Union entered into a collective bargaining agreement for a period of two years. The contract included, inter alia, provisions for recognition of the union, union security, dues checkoff, contributions to a medical center, and a grievance procedure culminating in submission of grievances and disputes to arbitration. The dues checkoff provision also stipulated that the Union would submit signed authorization cards to the Employers before the Employers would be obligated to withhold the employee's union dues.
This agreement expired on July 31, 1961 and a prolonged strike ensued. On January 23, 1962, a new collective bargaining agreement was signed which reinstated the 1959 contract with provision for automatic yearly renewal on each June 15th, subject to a right of either party to terminate on any subsequent June 15th with 30 days' notice. (This new collective bargaining contract is hereinafter referred to as the 1962 contract.) The Employers filed such notice of termination on May 10, 1963, stating that the contract would be terminated on June 15, 1963.
The Employers concededly failed to collect the initiation fees and dues for the Union or to make payments to the AFL medical center, or to comply with the Union security provisions under the 1962 contract. The Employers also refused to submit the dispute over their compliance to an arbitrator. Those actions by the Employers clearly violated the collective bargaining agreement and undermined the Union's bargaining position. While the Union was unable to demonstrate its majority representation by either forcing compliance with the contract or by negotiating a new contract, it did commence an action in the Court of Common Pleas of Philadelphia County, complaining of the Employers' refusal to comply with the 1962 contract. On October 9, 1970, the Pennsylvania Supreme Court found, inter alia, that the 1962 contract was valid and binding upon the parties, that the Employers breached said contract, and that the extent of damages incurred by the Union as a result of the Employers' breach was a matter properly to be determined by the arbitrator. The Court ordered that:
. . . the parties submit to arbitration in accordance with the agreement, the question of the extent of past damages suffered by the Union as a result of Employers' failure to fullfil their obligations under the agreement.
Building Service Employees Int'l Union Local 252 v. Schlesinger, 440 Pa. 448, at 455, 269 A.2d 894, at 898 (1970).
The matter of damages was submitted to arbitration before Louis M. Gill, Esq., who, on June 15, 1972, awarded $29,500 to the Union. The award was composed of damages of $7,000 for the net loss of dues and initiation fees for the period from March 15, 1962, to June 15, 1963, when the contract was in effect, and of $22,500 for the consequential damages arising from lost dues and initiation fees for the period from June 15, 1963 up to the time of the award on June 15, 1972. In determining the $7,000 portion, the arbitrator relied on data furnished to the Union by the Employers. He rejected the Employers' arguments that the damages for the March 1962 to June 1963 period should be eliminated or mitigated because the Union failed: (1) to send the Employers signed authorization cards or (2) to make demands for discharge of employees who failed to pay their dues or initiation fees or (3) to collect such dues and initiation fees directly from the employees. In computing this $7,000 portion, the arbitrator counted only the net loss of income to the Union, and excluded that portion ($15,500) of the gross amount of dues and initiation fees that would have been turned over to the International Union and would have gone toward servicing the membership of the Employers. The arbitrator also excluded from the $7,000 portion of his award any damages based upon failure of the Employers to make contributions to the AFL Medical Center, since such breach did not result in any loss of income to the Local Union itself.
In calculating the consequential damages of $22,500, the arbitrator looked at the nine-year period from June 1963, when the 1962 contract was terminated, to June 1972, when he issued his award. He calculated that the net income from dues and initiation fees which the Local would have realized had it continued as bargaining agent with a check-off provision would have been about $5,000 per year or $45,000 for the nine-year period. He concluded (see discussion infra) that there was about a 50-50 chance of the Union surviving for this period, and accordingly awarded consequential damages of $22,500, i.e. half the $45,000 figure. Adding the $22,500, consequential damages to the $7,000 damages for the period from March 1962 to June 1963, the total award was $29,500.
In addressing the contentions of the parties, we must first review the relevant case law in order to chart the bounds of the arbitrator's authority and the scope of our review of his award. In the Steelworkers trilogy, United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S. Ct. 1358, 4 L. Ed. 2d 1424 (1960); United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 80 S. Ct. 1343, 4 L. Ed. 2d 1403 (1960); United Steelworkers of America v. Warrior and Gulf Navigation Company, 363 U.S. 574, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960), which established the primacy of arbitration in the resolution of labor disputes, the Supreme Court set forth the principal limitations on an arbitrator's authority:
[An] arbitrator is confined to interpretation and application of the collective bargaining agreements; he does not dispense his own brand of industrial justice. . .. His award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity ...