September 8, 2009
STEVEN DYLNICKY, WILLIAM RICHIE, JAMES HUNTER, DENNIS ROYER AND KEVIN SCHRODER, PLAINTIFFS-RESPONDENTS,
PORT AUTHORITY OF NEW YORK AND NEW JERSEY, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-5758-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 6, 2009
Before Judges Rodríguez, Payne and Waugh.
Plaintiffs Steven Dylnicky, William Richie, James Hunter, Dennis Royer and Kevin Schroder (collectively "plaintiffs") are electricians, formerly employed by the Port Authority of New York and New Jersey ("Port Authority"). They worked the night shift in the Lincoln Tunnel. In 2002, the Port Authority found that plaintiffs had, on numerous occasions, secreted themselves in an unauthorized room, equipped with bunk beds, to which they repaired during work hours. Records were falsified to hide the fact that they were there. The Port Authority pursued disciplinary actions against plaintiffs for sleeping on the job and not doing their assigned work.
Those disciplinary charges were the subject of an arbitration pursuant to the governing collective bargaining agreement ("CAB") between the Port Authority and plaintiffs union, the International Brotherhood of Electrical Workers ("IBEW"). Arbitrator Stuart Bauchner resolved the disciplinary charges against plaintiffs. The plaintiffs were terminated effective May 14, 2004.
In the course of the disciplinary proceedings, the IBEW brought a grievance on plaintiffs' behalf in which it claimed that the failure to identify an impartial hearing officer and set a hearing date for the charges against plaintiffs constituted a violation of the CBA. Arbitrator Eric Schmertz heard that grievance on December 11, 2002. At that time, the IBEW argued that the lengthy suspensions had become constructive discharges, transforming the grievances into a case of "just cause," warranting a determination on the merits of the charges. The Port Authority contended that Schmertz had jurisdiction only to determine whether the suspensions were procedurally proper. Schmertz issued his opinion and award ("Schmertz award") on February 19, 2003. In it, he adopted the Port Authority's position, finding that the suspensions without pay were properly authorized. However, he found that the length of the suspensions without resolution of charges was unreasonable and constituted a denial of due process, despite the Port Authority's arguments that the delay was caused by the need to conclude a pending criminal proceeding. Schmertz thus ordered that the disciplinary proceedings commence within two weeks. After some delay, Bauchner was selected as the arbitrator, and he eventually found against plaintiffs.
An interim issue was raised due to the delay as to whether Bauchner had jurisdiction to consider the merits of the disciplinary charges. In a decision dated July 11, 2003, he found that he did, finding that the Port Authority had complied with the Schmertz award, and, if it hadn't, that Bauchner would still have jurisdiction under the CBA to determine the merits of the charges.
In his May 14, 2004 arbitration award, Bauchner found that: plaintiffs occupied the south tower room at the dates and times alleged; plaintiffs were not performing any job duties while they occupied the south tower room; plaintiffs' presence in the south tower room was improper because the room was not the sanctioned break room (which existed in the Lincoln Tunnel administration building); plaintiffs were not authorized to use the room while they were on standby; on many of the dates that they used the room plaintiffs were "sleeping, dozing, or otherwise being inattentive to their assigned work duties" and were absent without leave from their assigned work areas; plaintiffs submitted falsified time cards in which they claimed to have worked eight hours on their job assignments when in reality they had not; and plaintiffs violated the Port Authority's security access system, taking steps to avoid creating a computer record of the time they spent in the south tower building by having one employee card into the building, wait between thirty seconds and one minute, and then card out while remaining in the building with the others.
In addition to the disciplinary proceedings, the Port Authority also referred the matter to the Hudson County Prosecutor, who presented the matter to the grand jury and obtained an indictment for theft by deception, N.J.S.A. 2C:20-4.
However, the indictment was dismissed by the State on the day of trial for unstated reasons.
Plaintiffs then brought a civil action against the Port Authority and Kenneth Sagrestano, manager of the physical plant at the Lincoln Tunnel facility, for intentional infliction of emotional distress, malicious prosecution and violation of the Schmertz award. The Port Authority moved in limine, asking the court to give preclusive effect to Bauchner's findings of fact with respect to the plaintiffs' conduct. The judge reserved decision, stating that he would "make a decision prior to the opening statements." The appellate record contains no ruling from the court. However, the court clearly denied the motion, because plaintiffs were permitted to introduce many facts that were contrary to Bauchner's findings.
The malicious prosecution claim was tried to a jury, which awarded each plaintiff $650,000 in compensatory damages, for a total award of $3,250,000. The claim of intentional infliction of emotional distress was dismissed on summary judgment. The claim alleging violation of the Schmertz award was dismissed by a pretrial motion in limine and remanded for further arbitration. The Port Authority moved for judgment notwithstanding the verdict (JNOV) and contested the judge's pretrial ruling that the claim of violation of the Schmertz award should be remanded for additional arbitration. Both motions were denied.
On appeal, the Port Authority challenges the decision remanding for further arbitration the claim that it violated the Schmertz award. Specifically, the Port Authority argues that the count should have been dismissed with prejudice because arbitrator Bauchner, in an award dated July 11, 2003, found that the Port Authority had not violated the Schmertz award. Bauchner issued that ruling upon plaintiffs' request, after they challenged his jurisdiction to consider the merits of the disciplinary charges brought against them. We agree and hold that plaintiffs consented to conferring jurisdiction to Bauchner by raising the compliance issue before him.
The Port Authority also contends on appeal that the malicious prosecution claim should be reversed because the trial court erred by not giving preclusive effect to the findings of fact made by Bauchner. In particular, at trial, plaintiffs were allowed to contend that: the south tower room was sanctioned by Port Authority management as a reserve room; on the nights they spent in the room, they had completed all of their assigned work; and their use of the security access cards was not an attempt to create a false record or hide their whereabouts on the nights in question. The Port Authority argues that, pursuant to the doctrines of collateral estoppel (issue preclusion) and res judicata (claim preclusion), the trial court erred by not giving preclusive effect to the findings Bauchner made in his May 14, 2004 arbitration award on the disciplinary charges. It further contends that the proper remedy for the trial court's error is to enter judgment in its favor, because, through his findings, Bauchner rejected the entire premise of plaintiffs' malicious prosecution case. We agree.
The doctrine of collateral estoppel prevents the relitigation of any issues determined in a prior action involving the same parties but a different claim or cause of action. Zirger v. Gen. Accident Ins. Co., 144 N.J. 327, 337-38 (1996). The policy goals served by the doctrine include: "finality and repose; prevention of needless litigation; avoidance of duplication; reduction of unnecessary burdens of time and expenses; elimination of conflicts, confusion and uncertainty; and basic fairness...." City of Hackensack v. Winner, 82 N.J. 1, 32-33 (1980). See also Hennessey v. Winslow Twp., 183 N.J. 593, 599 (2005).
In applying the doctrine, New Jersey courts follow the Restatement of Judgments. See Hernandez v. Region Nine Housing Corp., 146 N.J. 645, 659 (1996), which provides that:
When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim. [Restatement (Second) of Judgments § 27 (1982).]
There are five prerequisites to collateral estoppel: (1) the issue to be precluded is identical to the issue decided in the prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) there was a final decision on the merits in the prior proceeding; (4) determination of the issue was essential to resolution of the prior proceeding; and (5) the party against whom the doctrine is to be applied is the same as in the prior proceeding, or in privity thereto. Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521 (2006); Hennessey, supra, 183 N.J. at 599.
The doctrine is an equitable one, however. Therefore, even if all of these prerequisites have been met, it will not be applied where it would be unfair to do so. Olivieri, supra, 186 N.J. at 521-22. In this regard, the Restatement provides for exceptions to the general rule of issue preclusion, stating:
Although an issue is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, relitigation of the issue in a subsequent action between the parties is not precluded in the following circumstances:
(1) The party against whom preclusion is sought could not, as a matter of law, have obtained review of the judgment in the initial action; or
(2) The issue is one of law and (a) the two actions involve claims that are substantially unrelated, or (b) a new determination is warranted in order to take account of an intervening change in the applicable legal context or otherwise to avoid inequitable administration of the laws; or
(3) A new determination of the issue is warranted by differences in the quality or extensiveness of the procedures followed in the two courts or by factors relating to the allocation of jurisdiction between them; or
(4) The party against whom preclusion is sought had a significantly heavier burden of persuasion with respect to the issue in the initial action than in the subsequent action; the burden has shifted to his adversary; or the adversary has a significantly heavier burden than he had in the first action; or
(5) There is a clear and convincing need for a new determination of the issue (a) because of the potential adverse impact of the determination on the public interest or the interests of persons not themselves parties in the initial action, (b) because it was not sufficiently foreseeable at the time of the initial action that the issue would arise in the context of a subsequent action, or (c) because the party sought to be precluded, as a result of the conduct of his adversary or other special circumstances, did not have an adequate opportunity or incentive to obtain a full and fair adjudication in the initial action.
[Restatement (Second) of Judgments § 28 (1982). See Olivieri, supra, 186 N.J. at 523; Zirger, supra, 144 N.J. at 337-38.] Determinations made by entities other than a court, for example, administrative agencies and arbitrators, may be granted preclusive effect if the proceedings before those entities warrant such deference. Olivieri, supra, 186 N.J. at 522-23; Hennessey, supra, 183 N.J. at 599-601; Hernandez, supra, 146 N.J. at 660-61.
With respect to arbitrations in particular, the Restatement provides that:
(1) Except as stated in Subsections (2), (3), and (4), a valid and final award by arbitration has the same effects under the rules of res judicata, subject to the same exceptions and qualifications, as a judgment of a court.
(2) An award by arbitration with respect to a claim does not preclude relitigation of the same or a related claim based on the same transaction if a scheme of remedies permits assertion of the second claim notwithstanding the award regarding the first claim.
(3) A determination of an issue in arbitration does not preclude relitigation of that issue if:
(a) According preclusive effect to determination of the issue would be incompatible with a legal policy or contractual provision that the tribunal in which the issue subsequently arises be free to make an independent determination of the issue in question, or with a purpose of the arbitration agreement that the arbitration be specially expeditious; or
(b) The procedures leading to the award lacked the elements of adjudicatory procedure prescribed in § 83 (2).
(4) If the terms of an agreement to arbitrate limit the binding effect of the award in another adjudication or arbitration proceeding, the extent to which the award has conclusive effect is determined in accordance with that limitation. [Restatement (Second) of Judgments § 84 (1982).]
The Restatement (Second) of Judgments, § 83(2) (1982) provides that, to qualify for issue preclusion treatment, an administrative determination should be final and entered consistent with due process, in other words, with adequate notice to the persons bound by it, a formulation of issues for decision, and the right to present evidence and legal argument.
Here, the record supports applying collateral estoppel to prevent plaintiffs from relitigating the facts resolved by Bauchner in the arbitration of the disciplinary charges. The transcript of the arbitration proceedings, and the rules applicable to the arbitration, are not part of the appellate record. However, the collective bargaining agreement required that a stenographic record, transcript, and tape recordings, be kept, and the arbitrator's decision states that the hearing was transcribed. And, pursuant to the CBA, the arbitration was governed by written rules set forth in Port Authority Instruction 20-1.10.
Moreover, plaintiffs had notice of the disciplinary charges made against them, and they had a full and fair opportunity to contest those charges. They had the right to participate, through their union, in the selection of an independent hearing officer; they were represented by privately retained counsel at the arbitration, which extended over five days and included a site visit and inspection of various parts of the Lincoln Tunnel facility; they cross-examined witnesses, presented witnesses on their own behalf (although they did not choose to testify); and they made legal arguments. Also significant to the court's consideration, plaintiffs had a very strong interest in vigorously contesting the disciplinary charges because their jobs were at stake.
At the close of arbitration, Bauchner issued a lengthy written opinion in which he detailed the charges made against plaintiffs, the contractual provisions governing his decision, the parties' respective positions on the charges, the evidence adduced at the hearing, his findings of fact and conclusion that most, although not all, of the charges had been sustained, and his conclusion that plaintiffs' employment should be terminated. His decision was final and binding. Moreover, the findings of fact were essential to his resolution of the disciplinary charges, and they are the same findings as to which the Port Authority sought issue preclusion in the subsequent malicious prosecution litigation.
Finally, also significant to the court's consideration, plaintiffs had the right to appeal from Bauchner's ruling. They could have asked the arbitrator to reopen the matter and review his findings and recommendations, and they had the right to move before the judiciary to vacate the arbitration award. The lenient standard of review applicable to such appeals is not a valid objection to issue preclusion. Olivieri, supra, 186 N.J. at 522 (citing Zoneraich v. Overlook Hosp., 212 N.J. Super. 83, 94 (App. Div.), certif. denied, 107 N.J. 32 (1986)).
In our review of the record, we find that the trial court erred by not applying the doctrine of collateral estoppel, giving preclusive effect to the findings of fact Bauchner made in his final arbitration award. The basis for plaintiffs' malicious prosecution claim was that the Port Authority withheld crucial testimonial and documentary information from the Hudson County Prosecutor's Office regarding the Port Authority's alleged knowledge of, and acquiescence in, plaintiffs' use of the south tower room. However, Bauchner rejected plaintiffs' contention that their use of the south tower was appropriate or in any way authorized by Port Authority management. Therefore, without the ability to contest the findings of fact made by Bauchner, plaintiffs' malicious prosecution claim cannot be sustained.
Where, as here, there are no material facts in dispute, and the only question is the correct application of the law, the court's review is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). We therefore reverse the judgment and enter judgment in favor of the Port Authority, on the ground that, without the ability to contest Bauchner's findings of fact on the issue of whether they were authorized to use the south tower room, plaintiffs could not make out their claim of malicious prosecution. See Zoneraich, supra, 212 N.J. Super. at 93.
Reversed and remanded for the entry of a judgment in favor of the Port Authority.
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