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City of Scranton v. Fire Fighters Local Union No. 60

January 23, 2009


The opinion of the court was delivered by: Judge Simpson

Argued: September 10, 2008



Table of Contents

I. Background 3

II. Arbitration Award 5

III. Petition to Vacate or Modify 7

IV. Issues on Appeal 8

A. Section 252 of Act 47 10

B. Judicial Review 15

1. Scope of Review 15

2. Standard of Review 15

3. Available Remedies 16

C. Unlawful Act 19

1. Amendment of Recovery Plan 19

2. Terms of Award 22

a. Expiration of Recovery Plan 22

b. Wages 23

c. Health Care 27

d. Staffing and Management 31

i. Provisions of Award, Recovery Plan 31

ii. Contentions 37

iii. Management Positions, Paid Leave 38

iv. Minimum Manning 39

v. Managerial Rights 40

e. Other Provisions of Recovery Plan Not Adopted 41

3. Waiver by Failure to Raise Arguments 43

D. Illegality of Recovery Plan 44

1. State Adverse Interest Act 44

2. Recovery Plan Conflict with Act 111 46

E. Preclusion by Conduct 49

V. Conclusion 50

These appeals originating in an interest arbitration award involving public safety employees of a distressed municipality require this Court to again examine the effect of the Municipalities Financial Recovery Act (Act 47)*fn2 on collective bargaining rights under the statute known as the Policemen and Firemen Collective Bargaining Act (Act 111).*fn3

In particular, the Fire Fighters Local Union No. 60 (Fire Fighters) appeals from two orders of the Court of Common pleas of Lackawanna County (common pleas court),*fn4 in favor of the City of Scranton (City) and its allied intervenors.*fn5 The first order, entered October 23, 2007, vacated unspecified provisions of an interest arbitration award between the Fire Fighters and the City because the award violated the City's 2002 Recovery Plan enacted under Act 47. The second order, entered January 15, 2008, attempted to clarify the first order by generally modifying the arbitration award "to incorporate the terms of the [2002] Recovery Plan, until the Recovery Plan is amended or the [City's] designation as 'distressed' under Act 47 is removed." Reproduced Record (R.R.) at 19a.

I. Background

The largely uncontested history of this vigorous collective bargaining litigation has roots in 1992, when the City was determined to be financially distressed under Act 47. The Commonwealth of Pennsylvania, Department of Community and Economic Development (DCED) appointed an Act 47 Coordinator for the City. The Coordinator developed several financial recovery plans for the City. The third and most recent recovery plan was adopted in 2002 (2002 Recovery Plan), and it was overwhelmingly approved by referendum. The City remains a financially distressed municipality, and it continues to operate under Act 47 and the 2002 Recovery Plan.

Chapter I-B of the 2002 Recovery Plan is titled "CURRENT AND PROJECTED FINANCIAL OUTLOOK." It contains detailed estimates for essentially flat revenues and increasing expenditures from 2002 through 2007 under the prior administrations. The Plan concludes that in the absence of corrective action, the City faces sizeable and growing deficits, resulting in a cumulative deficit in 2007 of $7.21 million. R.R. at 77a.

Chapter II-A of the 2002 Recovery Plan is titled 'OVERVIEW OF REVISED AND UPDATED RECOVERY PLAN FOR 2002, 2003, 2004, 2005, AND BEYOND." In this chapter the Act 47 Coordinator offers an overview of planned corrective action "for the period 2002, 2003, 2004, 2005 and beyond." R.R. at 171a. It contains detailed estimates of revenues and expenditures for 2003 through 2005 based on compliance with the 2002 Recovery Plan, resulting in no deficits. R.R. at 171a-72a.

Chapter II-B of the 2002 Recovery Plan is titled "LABOR RELATIONS, COST CONTAINMENT, AND RELATED PROVISIONS." It sets forth specific requirements for the City's employees. This section of the 2002 Recovery Plan states in part:

However, to the extent that the City is unable to reach agreement with any of its Unions, resulting in interest arbitration or other legal proceedings, it is the express intention of the City that the implementation of these cost containment provisions is mandatory. All costs containment provisions must be addressed. The only exception to the mandatory intent and nature of these provisions will be by amendment to said provisions, based upon approval from the Coordinator, in conjunction with the Pennsylvania Department of Community and Economic Development. Any such change must be in conformance with the financial parameters of the Recovery Plan.

R.R. at 190a (emphasis added). The chapter contains mandatory provisions applying to all City employees, R.R. at 190a-97a, provisions specifically for the fire employees, R.R. at 197a-200a, provisions specifically for the police, R.R. at 200a-205a, and provisions specifically for other employees.

II. Arbitration Award

Pursuant to Act 111, the City and the Fire Fighters operate under a collective bargaining agreement (CBA). The last CBA expired as of December 31, 2002. Because collective bargaining for a new CBA reached an impasse, a panel of arbitrators was selected to render an arbitration award that would establish the terms and conditions of employment for fire personnel. A similar panel was selected to establish the terms and conditions for police.

After extensive hearings throughout 2003 and 2004, at which the impact of Act 47 and the 2002 Recovery Plan was hotly contested, and after more extensive deliberations, a divided arbitration panel issued an award regarding the Fire Fighters on May 30, 2006.*fn6 The award covered the period January 1, 2003 through December 31, 2007.

In the award, the panel majority acknowledged the City's status under the 2002 Recovery Plan but concluded that Fire Fighters wages and other benefits fell significantly below that paid to other fire fighters throughout the state. The majority was "convinced that the modifications to those wages and benefits set forth herein can be implemented, on balance, in concert with the [2002 Recovery] Plan .." R.R. at 22a. The majority believed "this Award is not violate [sic] of the Plan, but is in harmony with the Plan's objectives." Id. The panel majority awarded retroactive lump sum bonuses to all fire personnel of $1000 for 2003 and again for 2004, a retroactive lump sum bonus of $1250 for 2005, a salary increase of 5.5% as of the last day of 2005, a salary increase of 3.5% for 2006, and a salary increase of 4% for 2007. R.R. at 24a. Further, the majority adjusted health insurance deductibles and provided health benefits to fire personnel retiring after January 1, 2007 for five years. R.R. at 24a-26a. The majority opined that the changes will not violate the City's maximum health care costs permitted in Section II-B of the 2002 Recovery Plan. R.R. at 26a.

Separately, the panel majority expressed concern over the safety of Fire Fighters. Accordingly, the majority abolished the 150 person department limit in the previous CBA and replaced it with various manning requirements. R.R. at 26a-29a.

Finally, the panel majority determined that all other proposals for change submitted by the City and the Fire Fighters which were not expressly addressed were nevertheless considered and denied. R.R. at 29a.*fn7

III. Petition to Vacate or Modify

The next day, the City filed a petition to vacate or modify the award with the common pleas court. The Fire Fighters answered and raised new matter. At about the same time, the City filed a similar petition with regard to the parallel arbitration involving its police union. The common pleas court handled both petitions together. The court permitted intervention by DCED and the Act 47 Coordinator. After argument on both arbitration awards, and after deliberation, the common pleas court issued its first order, which vacated both arbitration awards.

The common pleas court summarized the positions of the parties, and it reviewed cases addressing the interplay between Act 47 and Act 111 collective bargaining.*fn8 Ultimately, the court concluded the awards violated the 2002 Recovery Plan, and it generally vacated those award provisions, although the violations were not detailed. The court also rejected the Fire Fighters' argument that any violations of the 2002 Recovery Plan could be cured by plan amendment. The court concluded that under Section 249 of Act 47, 53 P.S. §11701.249, the City cannot unilaterally amend the 2002 Recovery Plan; rather, the Act 47 Coordinator must initiate an amendment. To the extent the award required the City to amend the 2002 Recovery Plan, the award required the employer to perform an illegal act.

Thereafter, the City sought clarification of the first order. In response, the common pleas court issued its second order generally modifying the awards "to incorporate the terms of the [2002] Recovery Plan, until [the Plan] is amended or the [City's] designation as 'distressed' under Act 47 is removed." R.R. at 19a.

IV. Issues on Appeal

The Fire Fighters appealed from each of the two common pleas court orders. Although Section 7(a) of Act 111, 43 P.S. §217.7(a), states that no appeal shall be allowed to any court from the determination of a board of arbitration, courts have limited jurisdiction, in the form of narrow certiorari, to review arbitration awards. City of Scranton v. Fire Fighters Local Union No. 60, 923 A.2d 545 (Pa. Cmwlth. 2007) (similar contentions about grievance arbitration award based on CBA executed before 2002 Recovery Plan adopted). Thus, our review is limited to questions concerning: (1) the arbitrators' jurisdiction; (2) the regularity of the proceedings; (3) an excess of the arbitrators' powers; and (4) deprivation of constitutional rights. Id. An arbitrator who mandates that an illegal act be carried out exceeds his or her powers. Id.

Fire Fighters assign six primary errors in their main brief: 1) Section 252 of Act 47, 53 P.S. §11701.252, does not by its terms apply to interest arbitration awards; 2) the court wandered beyond its narrow review; 3) the court erred by concluding the arbitration award required an unlawful act; 4) the court erred by giving any legal effect to the 2002 Recovery Plan, which is void because the Act 47 Coordinator violated the State Adverse Interest Act;*fn9 5) the court erred by giving any legal effect to the 2002 Recovery Plan because by its inconsistent conduct the City is precluded from asserting the Plan against Fire Fighters; 6) rather than vacating the award, the appropriate remedy was remand to the arbitration panel.

In their reply brief, Fire Fighters assign several more primary errors: 7) the court erred by giving any legal effect to the 2002 Recovery Plan because many provisions are so inconsistent with the statutory right of collective bargaining as to render the entire Plan illegal as a matter of law; 8) Section 252 of Act 47 does not apply to various provisions of the 2002 Recovery Plan which are not economic in nature, so that the arbitration award may properly disregard them; and, 9) many of the City's assertions regarding conflict between the award and the 2002 Recovery Plan were not raised before the arbitrators and are therefore waived.

To the extent possible, we will address related issues together.

A. Section 252 of Act 47

Section 252 of Act 47 provides: "A collective bargaining agreement or arbitration settlement executed after the adoption of a plan shall not in any manner violate, expand or diminish its provisions." 53 P.S. §11701.252. This provision is a limitation on the statutory rights to collective bargaining by public safety personnel. Wilkinsburg Police Officers Ass'n v. Commonwealth, 535 Pa. 425, 636 A.2d 134 (1993). The limitation does not violate the Pennsylvania constitution. Id.

Fire Fighters contend this provision does not apply to interest arbitration awards, such as the award in this case. They assert the common pleas court erred when it applied the provision here. More particularly, Fire Fighters argue that by its plain terms Section 252 applies only to CBAs and arbitration settlements after the execution of a recovery plan. Because the provision does not contain the word "award," it should not be construed as applying to awards. They contrast agreements and settlements, which connote voluntary undertakings, with awards, which arise when the parties fail to reach an agreement. Fire Fighters also point to other labor statutes which specifically address arbitration awards, arguing that the absence of the term here demonstrates the General Assembly's intent that Section 252 not apply to arbitration awards.

In contrast, the City primarily relies on case law addressing Section 252 and specifically rejecting an identical argument. Pittsburgh Fire Fighters, Local No. 1 ex rel. King v. Yablonsky, 867 A.2d 666, 671 (Pa. Cmwlth. 2005) (en banc) (in Section 252 of Act 47, General Assembly was referring to arbitration awards, whether it used the word settlement or determination) (Fire Fighters v. Yablonsky); see City of Farrell v. Fraternal Order of Police Lodge No. 34, 538 Pa. 75, 645 A.2d 1294 (1994) (after recounting lower courts' decisions referring to Section 252's effect on arbitration awards, Court applied Section 252 to interest arbitration award); Wilkinsburg, 535 Pa. at 435, 636 A.2d at 139 (even if section 252 of Act 47 operates as a bar to prospective bargaining agreements or arbitration awards, it would not violate the Pennsylvania Constitution); Fraternal Order of Police, Fort Pitt Lodge No. 1 v. Yablonsky, 867 A.2d 658 (Pa. Cmwlth. 2005) (en banc) (Section 252 of Act 47 is express limitation on collective bargaining process) (FOP v. Yablonsky). Further, noting the General Assembly's failure to amend Section 252 in the 14 years after the Supreme Court's application of it to an interest arbitration award in City of Farrell, the City urges a presumption that the decision is consistent with legislative intent.

As to the plain language of Section 252, the City posits that the language is intended to limit the actions of a distressed municipality. Thus, Section 252 makes it unlawful for a distressed municipality to voluntarily violate or diminish an existing recovery plan during collective bargaining. Because an arbitration award may only require a public employer to do that which it could do voluntarily, Section 252 thereby limits arbitration awards even though the word "award" is not present in the text.

In reply, Fire Fighters argue that the purposes of Act 47 do not include the nullification of the duty to bargain under Act 111. Relying on the same cases, Fire Fighters contend that Act 111 is merely limited by Act 47, not erased or overturned by it. Further, Fire Fighters passionately argue that the City's interpretation of Section 252 would allow it to dictate the terms of collective bargaining agreements, a result supported by neither the language of Act 47 nor labor law.

We discern no error in the decision of the common pleas court to apply Section 252 of Act 47 to this interest arbitration award. The court's decision was consistent with this Court's en banc holding in Fire Fighters v. Yablonsky, which specifically rejected a very similar argument. Moreover, the court's decision is consistent with this Court's recent holding in Borough of Greenville v. International Association of Firefighters Local 1976, 952 A.2d 700 (Pa. Cmwlth. 2008) (Section 252 of Act 47 applied to interest arbitration award involving fire fighters). Further, there is no language in the Supreme Court's decisions in City of Farrell and Wilkinsburg that compels a different conclusion.

We accept the City's reading of the plain language of Section 252: the statutory provision acts to prohibit a distressed municipal employer from voluntarily making concessions during collective bargaining which violate or diminish a recovery plan under Act 47. This express prohibition has an effect on interest arbitration awards, whether or not the term "award" is present in the text. This is because of the long-standing rule that an arbitration award may only require a public employer to do that which it could do voluntarily. Washington Arbitration Case, 436 Pa. 168, 259 A.2d 437 (1969). When an arbitration award goes beyond this limitation, it may be reviewed under the narrow certiorari standard for excess of the arbitrators' powers. FOP v. Yablonsky.

In rebuttal to charts appended to the City's brief detailing numerous failures of the award to include provisions of the 2002 Recovery Plan, Fire Fighters argue that Act 47 was intended to only apply to economic terms of public employment; therefore, several provisions of the Plan which are not economic in nature are not entitled to deference under Section 252. Fire Fighters rely on the legislative intent stated in Act 47, 53 P.S. §11701.102, and on the criteria for evaluating a municipality's financial stability set forth in Section 241 of Act 47, 53 P.S. §11701.241. Without identifying the specific provisions of the 2002 Recovery Plan of which they complain, Fire Fighters refer to the requirements that employees submit doctors' notes,*fn10 changes in the grievance procedures which require more specificity,*fn11 and requirements that employees record leave time on an absence report copied to the department director.*fn12

Section 241 of Act 47 specifies the contents of a recovery plan. The section empowers the Act 47 Plan Coordinator to formulate a recovery plan which shall include any of the enumerated factors as relevant to alleviate financially distressed status, including possible changes in collective bargaining agreements and permanent and temporary staffing level changes or changes in organization.

53 P.S. §11701.241(3). This enabling language contains no further qualification.

We reject Fire Fighters' argument on this issue. Having reviewed the 2002 Recovery Plan in its entirety, we are satisfied that all its provisions bear some rational relationship to cost containment and improved efficiency. The provisions generally referenced by Fire Fighters relate to discovering and controlling leave abuse and to reducing administrative time and professional costs incurred in determining the nature of vague grievances. In the absence of express statutory limitation, there is no legal basis to distinguish between economic provisions and administrative provisions of the 2002 Recovery Plan.

B. Judicial Review

1. Scope of Review

As stated above, the scope of review of an Act 111 arbitration award is in the nature of narrow certiorari. However, one of the elements of such review is for excesses in the exercise of the arbitrators' powers, such as requiring an illegal act or an act which a municipality may not do voluntarily. Washington Arbitration Case; FOP v. Yablonsky. We discern no error in the common pleas court's review of the award to determine whether it compelled the City to act in a manner proscribed by Act 47 or whether it required the City to do something it could not do voluntarily.

2. Standard of Review

As to the standard of review, courts afford deference to Act 111 arbitrators' findings of fact, but review of questions of law within the elements of narrow certiorari is non-deferential. Town of McCandless v. McCandless Police Officers Ass'n, 587 Pa. 525, 901 A.2d 991 (2007) (unless determination depends on arbitral fact-finding or construction of CBA, no reason why court should defer to arbitrator on questions of whether there was an excess of the arbitrator's powers).

The panel majority here opined that their award does not violate the 2002 Recovery Plan, but is in harmony with the Plan's objectives. R.R. at 22a. The panel majority also stated that the award's "increase in wages do not exceed the increase in costs permitted under Chapter II-B of the Plan," R.R. at 24a, and that "the record does not indicate that the [health insurance provisions of the award] will violate the City's maximum health care costs permitted by Section II-B of the Plan." R.R. at 26a. These statements are not based on findings of evidentiary fact; rather, they involve a question of law within our narrow scope of review for excess of arbitrators' powers. As such, the statements are not entitled to deference. Town of McCandless; cf. City of Farrell (distinction between specific recovery plan recommendations and general assumptions).

3. Available Remedies

The parties raise challenging arguments on the question of how to remedy an Act 111 interest arbitration award that is determined to violate an Act 47 recovery plan.

Fire Fighters remind us the General Assembly intended there to be minimal, if any, judicial interference with the Act 111 arbitration process. Should a court decide that an interest arbitration award runs afoul of an Act 47 recovery plan, the award should be sent back to the arbitration panel with instructions for modification. Otherwise, a reviewing court would become a "super arbitrator."

Conversely, the City argues that the arbitration panel lacks authority to modify its decision.

The authority of the common pleas court to vacate an arbitration award under certain conditions is founded in statutory and common law. The Uniform Arbitration Act*fn13 applies to collective bargaining agreements to arbitrate where the arbitration is consistent with any statute regulating labor and management relations. 42 Pa. C.S. §§7302(b), (d); Bar Association Comment (subsection d is intended to preserve without change the scope of review which presently exists over awards of arbitrators such as those appointed under Act 111). The Uniform Arbitration Act expressly permits a court to vacate an arbitration award where the arbitrators exceeded their powers. 42 Pa. C.S. §7314(a)(1)(iii). Also, the Uniform Arbitration Act allows a court to modify an arbitration award under certain circumstances. 42 Pa. C.S. §§7302(d), 7315. These statutory authorizations to common pleas courts are consistent with long-standing direction from our Supreme Court:

In the instant case the adjudicatory power is an arbitration panel. Since it is a creature of the Legislature we must look to see if its powers were restricted in any way. If they were, and if the panel went beyond the limits of its authority, then it committed an excess in the exercise of power and the tainted portions of its mandate may be reviewed and corrected.

Washington Arbitration Case, 436 Pa. at 174-75, 259 A.2d at 441 (emphasis added).

Neither legal error nor abuse of discretion is evident in the common pleas court's decision to vacate and modify the award without remand to the arbitrators. As to legal error, the common pleas court's action is authorized by the Uniform Arbitration Act and by Supreme Court precedent. As to the court's decision to modify by itself rather than to remand, no abuse of discretion is present. Given the unconscionable delay during the arbitration process and the parties' unwillingness to ...

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