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City of Scranton v. E.B. Jermyn Lodge No. 2 of the Fraternal Order of Police

February 6, 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 14

1. Scope and Standard of Review 14

2. Available Remedies 15

C. Unlawful Act 18

1. Amendment of Recovery Plan 18

2. Terms of Award 19

a. Expiration of Recovery Plan 19

b. Wages 21

c. Health Care 24

d. Police Department Administration 28

i. Provisions of Award, Recovery Plan 28

ii. Contentions 35

iii. SIT Agreement, Management Rights 35

iv. Minimum Manning 37

e. Other Provisions of Recovery Plan Not Adopted 38

3. Waiver by Failure to Raise Arguments 41

D. Illegality of Recovery Plan 41

1. State Adverse Interest Act 42

2. Recovery Plan Conflict with Act 111 43

E. Preclusion by Conduct 46

V. Conclusion 47

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 E.B. Jermyn Lodge No. 2 of the Fraternal Order of Police (FOP) 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 FOP 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 71a.

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 165a. It contains detailed estimates of revenues and expenditures for 2003 through 2005 based on compliance with the 2002 Recovery Plan, resulting in no deficits.

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 184a (emphasis added). The chapter contains mandatory provisions applying to all City employees, R.R. at 184a-91a, provisions specifically for the fire employees, R.R. at 191a-94a, provisions specifically for the police, R.R. at 194a-99a, and provisions specifically for other employees.

II. Arbitration Award

Pursuant to Act 111, the City and the FOP 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 police personnel. A similar panel was selected to establish the terms and conditions for fire fighters.

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 FOP on April 7, 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. Nevertheless, the majority stated, "This Award is intended to reflect the intent of the Recovery Plan even though the recommendations will not be followed to the letter." R.R. at 23a. The majority concluded a certain amount of flexibility is contemplated; otherwise, a municipality subject to Act 47 can reach impasse and impose terms without the processes afforded by Act 111. The panel majority's solution to this problem was for the municipality to amend the Recovery Plan to coincide with the specific provisions of an interest arbitration award. R.R. at 24a. With regard to the Recovery Plan's contemplation of broad management rights, the panel majority stated that the City's obligation to work with the FOP in resolving reorganization and health care cost accounting issues should not be written out of the CBA. Id.

As to wages, the panel majority awarded retroactive lump sum bonuses to all bargaining unit members of $1000 for 2003, $1250 for 2004, $1500 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 25a. Further, the majority adjusted health insurance deductibles and provided health benefits to officers retiring after January 1, 2007 for five years. R.R. at 25a-27a.

Separately, the panel majority addressed the administration of the police department in general and the Strategic Implementation Team Agreement with the FOP in particular. R.R. at 27a-30a. The majority allowed 10 hour shifts, modified manning schedules, and addressed assignment of detectives, drug and alcohol testing.

Finally, the panel majority determined that all other proposals for change submitted by the City and the FOP which were not expressly addressed were nevertheless considered and denied. R.R. at 30a.*fn7

III. Petition to Vacate or Modify

The City filed a petition to vacate or modify the award with the common pleas court. The FOP answered and raised new matter. At about the same time, the City filed a similar petition with regard to the parallel arbitration involving its fire fighters. 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 FOP's 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 FOP 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.

The FOP assigns six primary errors in its 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 the FOP; 6) rather than vacating the award, the appropriate remedy was remand to the arbitration panel.

In its reply brief, the FOP assigns 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.

The FOP contends 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, the FOP argues 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. It contrasts agreements and settlements, which connote voluntary undertakings, with awards, which arise when the parties fail to reach an agreement. The FOP also points 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, the FOP argues that the purposes of Act 47 do not include the nullification of the duty to bargain under Act 111. Relying on the same cases, the FOP contends that Act 111 is merely limited by Act 47, not erased or overturned by it. Further, the FOP passionately argues 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. For the reasons more fully discussed in our recent decision regarding the parallel arbitration involving the City's fire fighters, City of Scranton v. Fire Fighters Local Union No. 60, of the International Association of Fire Fighters, AFL-CIO, ___ A.2d ___ (Pa. Cmwlth.) (Nos. 2314 C.D. 2007, 213 C.D. 2008, filed January 23, 2009) we hold that Section 252 of Act 47 applies to interest arbitration awards.

In rebuttal to charts appended to the City's brief detailing numerous failures of the award to include provisions of the 2002 Recovery Plan, the FOP argues 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. The FOP relies 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, the FOP refers 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 the FOP's 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 the FOP 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 and Standard 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.

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).

2. 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.

The FOP reminds 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 rather than to remand, no abuse of discretion is present. Given the unconscionable delay during the arbitration process and the parties' unwillingness to streamline the issues for review, the common pleas court had good reason to decline the "start-from-scratch" approach to modification.

In sum, while we respect the need for judicial restraint in a court's limited review of Act 111 arbitration awards, we discern no error in the breadth or manner of the common pleas court's review here.

Similarly, authority for this Court's appellate review of the orders of the common pleas court is also set by statute. "An appellate court may affirm, modify, vacate, set aside or reverse any order brought before it for review, and may remand the matter and direct the entry of such appropriate order, or require such further proceedings to be had as may be just under the circumstances." 42 Pa. C.S. §706 (emphasis added).

Therefore, we may modify the orders of the common pleas court. As noted above, the court issued its first order vacating award provisions which violated the 2002 Recovery Plan. Unfortunately, the court never specified which award provisions were vacated. Also, the court issued its second order generally modifying the arbitration award to incorporate the terms of the 2002 Recovery Plan. The court, however, never explained how the incorporation of the Recovery Plan into the award was to be accomplished. To the extent necessary to clarify the relations between the parties, we will modify the orders of the common pleas court, as discussed more fully below.

C. Unlawful Act

The FOP argues that the award does not require an unlawful act necessitating its vacation.

1. Amendment of Recovery Plan

The FOP asserts the City can voluntarily amend the 2002 Recovery Plan to bring the award into compliance with the plan. Also, relying on language in Act 111, they argue that an interest arbitration award is a mandate compelling a municipality to take legislative action such as amending the Recovery Plan. 43 P.S. §217.7 (a) (determination by arbitration panel shall constitute mandate to appropriate body to take action necessary to carry out award); see Washington Arbitration Case (public employer may not hide behind self-imposed legal restrictions; if award requires affirmative action by legislative body it must take such action if within its power).

The City contends that under Act 47 only the entity that developed the recovery plan has the authority to initiate amendments to it. Because the Act 47 Coordinator developed the 2002 Recovery Plan here, only the Act 47 ...

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