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United Steel Workers, Local 10-00086 v. Merck & Co., Inc.

United States District Court, E.D. Pennsylvania

January 26, 2017

UNITED STEEL WORKERS, LOCAL 10-00086, Plaintiff,
v.
MERCK & CO., INC., Defendant.

          MEMORANDUM

          Gerald Austin McHugh United States District Judge

         This case involves the appeal of an arbitrator's award entered pursuant to a collective bargaining agreement. The Union, represented by able and experienced counsel, contends that this is one of the rare instances where such an award is subject to reversal, because the effect of the arbitrator's ruling is to amend the terms of the agreement, clearly exceeding the scope of his authority. I recognize the Union's concern over the potential implications of the arbitrator's conclusions, and if the record established that the arbitrator had in fact re-written the contract in making his award, this case might fall within the scope of a judge's limited authority to set it aside. But based on the specific facts of this case, I am persuaded that the arbitrator's ruling is within the range of reasonable interpretations of the agreement. Summary judgment must therefore be granted in favor of Defendant.

         I. Standard of Review

         Because this case has been adjudicated by an arbitrator under a collective bargaining agreement (CBA), the scope of review is extraordinarily limited. Unless the arbitrator's award fails to “draw its essence” from the parties' CBA - such that there is “absolutely no support at all in the record justifying the arbitrator's determinations” - I must enforce the award reached through arbitration. United Transp. Union Local 1589 v. Suburban Transit Corp., 51 F.3d 376, 379 (3d Cir. 1995); see also Akers Nat'l Roll Co. v. United Steel, Paper and Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union, 712 F.3d 155, 165 (3d Cir. 2013) (“The sine qua non of judicial review of an arbitration award is a heavy degree of deference to the arbitrator.”)

         “‘[I]f an arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, the fact that a court is convinced he committed serious error does not suffice to overturn his decision.'” Akers Nat'l Roll Co., 712 F.3d at 160 (quoting Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509 (2001)). To vacate, a court must find that the arbitrator's award “ignore[s] the plain language of the contract.” United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987)).

         II. Background of the Dispute

         The Union filed for arbitration in this case after a cadre of Union workers in West Point, PA, lost their jobs. These workers had produced a blood-sugar regulation pill named Janumet for Defendant Merck at its West Point facility, and they were fired after Merck decided to cease Janumet production at the plant. The Union filed for arbitration alleging that the layoffs violated Article 15 of the parties' CBA - an anti-subcontracting clause that has been in place since 1984.

         Article 15 of the CBA prohibits Merck from “contract[ing] out work to individuals or to other companies which is normally performed by bargaining unit(s) employees where the necessary equipment is at hand, qualified employees are available, project completion dates can be met and results would otherwise be consistent with efficient and economic operations.” CBA, Art. 15, Plf.'s Exh. A at 56. The Union alleges that Merck subcontracted - i.e., outsourced - its members' jobs by contracting with foreign manufacturers to produce Janumet and then discontinuing Janumet production at West Point. Merck counters that it did not outsource the Union's jobs because it did not move jobs at all; it just hired workers (at West Point and elsewhere) when Janumet demand rose, and fired workers when demand fell.

         A. The Grievance

         The Union's argument at arbitration was straightforward: Merck promised that it would not outsource Janumet production jobs. Then, Merck contracted with other corporations to manufacture Janumet in other factories. After those contracts became active, Merck downsized - and then closed - its Janumet production wing at West Point, while other manufacturers continue to produce Janumet.

         Merck's response was twofold. First, it made clear that West Point workers only ever produced Janumet in a “backup” capacity. From the time West Point workers first contracted with Merck to make Janumet, their production was secondary in nature; indeed, by contract they could produce at most 20% of Merck's Janumet needs. Thus, Merck argued, Janumet production at West Point could not be considered “work normally performed by bargaining unit employees.” CBA; Award at 15. Second, Merck maintained that the West Point jobs were not moved, or - in the language of the CBA - “contracted out, ” because it ceased production at West Point without hiring elsewhere. According to Merck, it was simply reacting to the global rise and fall of Janumet both when it hired workers (at West Point and elsewhere) in 2012-2013 and when it fired workers in 2014.

         B. The Arbitrator's Decision

         On October 7, 2014, December 9, 2014, and March 23, 2015, Arbitrator Shyam Das held a full arbitration hearing at which the parties argued and submitted evidence about the alleged CBA violation. At this hearing, the parties presented evidence about Merck's history of Janumet production, both at West Point and at other facilities. In finding for Merck, the arbitrator concentrated on two main points.

         1. Merck's Other Janumet Production

         Merck has always produced Janumet in places other than its West Point plant. Its first and largest producer of Janumet was a U.S. company with production facilities in Puerto Rico named Patheon, which Merck contracted with in early 2006 to produce at least 80% - and up to 100% - of Merck's demand for the drug. Merck first contracted with West Point in 2007, ...


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