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Teamsters Local 331 v. Borough of West Wildwood


May 24, 2011


On appeal from the Superior Court of New Jersey, Law Division, Cape May County, Docket No. L-802-09.

Per curiam.


Argued February 9, 2011

Before Judges Axelrad, R. B. Coleman and Lihotz.

Defendant Borough of West Wildwood (the Borough) appeals from a Law Division order entered in the summary action filed by plaintiff, the International Brotherhood of Teamsters, Local #331 (Local #331), to confirm an arbitration award. The award directed the Borough to reinstate William Null as the foreman in the Borough's Department of Public Works (DPW). Null had been terminated for allegedly misappropriating municipal property. Local #331 filed a grievance challenging Null's termination, which was reviewed in arbitration. The trial court denied the Borough's motion to vacate and confirmed the arbitration award in favor of Null. On appeal, the Borough argues the Law Division erred in failing to set aside the arbitrator's award because the arbitrator refused to consider material evidence and applied the incorrect standard of proof. We affirm.

These facts are taken from the administrative record. Null was hired by the Borough in 1999 as a laborer in the DPW, and promoted to foreman in 2005. On September 17, 2008, Null was suspended with pay, pending completion of the Borough's investigation of whether he and other DPW employees had used Borough funds to purchase auto parts for equipment the Borough did not own.*fn1

Null was a member of Local #331, which negotiated a Collective Negotiations Agreement (CNA) governing the terms of employment of the Borough's employees, effective from January 1, 2007 through December 31, 2011. We review the CNA clauses relevant to Null's suspension.

Article XIII set forth the basis for employee discipline, requiring written warning notices to the employee, with a copy to Local #331, before any discharge or suspension. Exceptions to this provision were made for certain defined conduct, including "[p]roven theft or dishonesty." Article XV delineated a four-step grievance procedure, which "constitute[d] the sole and exclusive method for resolving grievances between the parties covered by this Agreement[.]" If a grievance was not settled after steps one through three, step four allowed either party to "submit the dispute to arbitration pursuant to the rules and regulations of the Public Employee Relations Commission [(PERC).]"

The Borough hired retired State Police Major James Fallon of Fallon Associates to investigate whether there were irregularities in the DPW's records. Fallon identified seventy auto parts purchases whose application did not match the Borough's vehicles. He further narrowed the group of invoices seemingly unrelated to the DPW equipment to twenty-four signed by Null. The total expenditure of municipal funds for these twenty-four invoices was $495.97.

Upon review of the conclusions set forth in Fallon's investigative summary, the Borough notified Null that the "unauthorized use of [Borough] purchase accounts and . . . property"*fn2 resulted in the conversion of his suspension to one without pay. Null was formally terminated on January 21, 2009.

In accordance with the terms of the CNA, Local #331 filed a grievance on behalf of Null. The matter proceeded to step four arbitration, which commenced on June 26, 2009. Prior to the arbitration hearing, the parties mutually agreed to define the issue for determination: "Was the suspension and termination of William Null for just cause? If not, what should be the remedy?"

As stated in the CNA, the arbitrator was bound by the terms of the CNA and was restricted to the application of the facts presented to him/her involved in the grievance. The arbitrator shall not have the authority to add to, modify, detract from or alter in any way the provisions of [the CNA] or any amendment or supplement thereto. The decision of the arbitrator shall be final and binding.

During the arbitration, in addition to Fallon, the Borough offered testimony from the Mayor, the Chief Financial Officer, the Borough Clerk and the Commissioner of Public Works. Null testified on his own behalf and presented testimony from the Borough Commissioner in charge of revenue and finance.

The Borough's proofs predominately relied on Fallon's investigative findings and conclusions. Fallon related the methodology he utilized to review the hundreds of parts purchased by the DPW from Christman Auto Parts between 2004 and 2008. Fallon described how he matched the invoices with the Borough's vehicles and identified those invoices that had no relationship to Borough equipment.*fn3 Fallon was questioned on direct examination using specific vouchers the Borough sought to bring to the attention of the arbitrator. He generally noted that Exhibits 18 and 20 of his report listed the non-matching parts purchased by Null, but did not address every purchase made that was listed in his report. From his investigation, Fallon concluded Null misappropriated Borough funds to purchase auto parts for vehicles not owned by the Borough. Fallon's 1,509 page report was admitted into evidence.

Null acknowledged he had purchased parts for his 1994 Plymouth Sundance at the same time he purchased parts for the Borough. The sale was listed in error on a Borough invoice. When he realized the mistake, he returned to the store and was given a cash receipt, which he presented during the hearing.

Although he did not remember the specifics of each part purchased, Null refuted the examples detailed by Fallon, asserting his assumption that the parts were not for Borough vehicles was incorrect. Null proceeded to clarify the DPW's use of the other parts identified by Fallon. For example, Null stated the Borough owned a 1993 Ford Explorer and assumed that the parts listed by Null as matching a 1997 Explorer were likely used for that truck, which had the same engine as a 1997 Explorer.*fn4 Also illustrative was Null's explanation for purchases of Kenworth wiper blades at a time when the DPW did not have a Kenworth vehicle. Null stated, "Because . . . we had a [1978] dump truck. We just measured the wiper blades on it, and they would match up [with] whatever closest size wiper blade would fit." Null assumed the Kenworth blades were in that category. Null testified that everything he purchased was for the Borough's use and denied ever selling wiper blades or spark plugs "on the side" or using DPW purchases to fix vehicles not owned by the Borough.

The single arbitrator issued a written decision. He determined Null "persuasively explained virtually all of the challenged purchases" set forth on the nine invoices on which Null was questioned. The arbitrator noted the two invoices related to a Ford Explorer were withdrawn, further enhancing Null's credibility. Given that the Borough had the burden of proof to defeat the grievance, the arbitrator found only one invoice for which Null did not provide "a totally convincing explanation," but nevertheless found his account "reasonable." Accordingly, he sustained the grievance, finding the "suspension and termination of William Null were not for just cause." The Borough was directed to issue Null's "immediate reinstatement to his position as foreman in the [DPW] and to make him whole for lost wages, benefits, seniority and other benefits of employment."

On November 18, 2009, Local #331 filed a summary action in the Law Division, pursuant to Rule 4:67-1(a), to confirm the arbitration award and enter judgment. The Borough opposed the action and sought to vacate the award.

In her written July 7, 2010 opinion, Judge Valerie H. Armstrong focused on the Borough's challenges: (1) that the arbitrator failed to consider evidence of other invoices included in Fallon's report but which were not specifically discussed in the arbitration hearing by either party; and (2) that the arbitrator failed to apply the appropriate standard of proof, using "too stringent a standard in examining the proofs," by concluding the Borough had not conclusively proven Null misappropriated public funds or engaged in theft rather than using the preponderance of the credible evidence standard.

Judge Armstrong set forth her findings and conclusions, stating:

The arbitrator carefully considered every voucher which the Borough "pulled out" from the report and questioned Fallon on direct examination. In an action as serious as this one, where the Borough terminated Null for misappropriation of Borough funds . . . , it was incumbent upon the Borough to address each voucher which it believed supported its decision to terminate Null.

It was not for the arbitrator to independently surmise and divine from a massive exhibit introduced at the hearing other instances of alleged misappropriation of funds without the Borough specifically addressing each such alleged incident on its direct case at the arbitration hearing. As set forth in Article XV of the Agreement, the arbitrator is "restricted to the application of the facts involved" in the grievance presented to him.

This court is satisfied that the appropriate burden of proof for the instant matter is the "preponderance of the evidence standard." In Re Polk License Revocation,

90 N.J. 550 (1982); Borough of Park Ridge v. Salamone, 21 N.J. 28 (1956); Matter of Tenure Hearing of Tyler, 236 N.J. Super. 478 (App. Div. 1989).

Even if [the arbitrator] applied the "clear and convincing evidence standard" in rendering his Opinion and Award, upon review of the transcript of the arbitration hearing and a review of [his] factual findings which are adequately supported by the record, the Borough's case fails under the preponderance of the evidence standard. Under either burden of proof, there was no credible evidence in the record of misappropriation of Borough property for non-Borough purposes by Null.

For all of the foregoing, the September 2, 2009 Arbitrator's Opinion and Award are hereby confirmed. The award is reasonably debatable, not violative of public policy, and does not amount to "undue means" under the law. The Borough's request to vacate the Opinion and Award is hereby denied. Pursuant to the arbitrator's Opinion and Award, the Borough is directed to comply with the remedy set forth therein.

This appeal ensued. On appeal, the Borough renews the two arguments presented to Judge Armstrong.

"[T]here is 'a strong preference for judicial confirmation of arbitration awards.'" Linden Bd. of Educ. v. Linden Educ. Ass'n, 202 N.J. 268, 276 (2010) (quoting Middletown Twp. PBA Local 124 v. Twp. Of Middletown, 193 N.J. 1, 10 (2007)). Arbitration is a vehicle by which meaning and content are given to the collective bargaining agreement. Ibid. Accordingly, an "arbitrator's award is not to be cast aside lightly[,]" which strictly limits "judicial interference[.]" Cnty. Coll. of Morris Staff Ass'n v. Cnty. Coll. of Morris, 100 N.J. 383, 390 (1985).

"In the public sector, an arbitrator's award will be confirmed 'so long as the award is reasonably debatable.'" Linden, supra, 202 N.J. at 276 (quoting Middletown, supra, 193 N.J. at 11). See also Policeman's Benevolent Assoc. v. City of Trenton, __ N.J. __ (2011) (slip op. at 6). Under this standard, we "may not substitute [our] judgment for that of the arbitrator, regardless of the court's view of the correctness of the arbitrator's interpretation." Linden, supra, 202 N.J. at 277 (quoting N.J. Transit Bus Operations, Inc. v. Amalgamated Transit Union, 187 N.J. 546, 554 (2006)).

The New Jersey Arbitration Act, N.J.S.A. 2A:24-1 to -11, dictates that a reviewing court may vacate an arbitration award in the following instances:

a. Where the award was procured by corruption, fraud or undue means;

b. Where there was either evident partiality or corruption in the arbitrators, or any thereof;

c. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause being shown therefor, or in refusing to hear evidence, pertinent and material to the controversy, or of any other misbehaviors prejudicial to the rights of any party;

d. Where the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award upon the subject matter submitted was not made. [N.J.S.A. 2A:24-8.]

In light of these limitations, we reject the Borough's claims of error. We are not persuaded that the award was procured by "undue means" because the arbitrator "purposefully refused to consider material evidence contained in attachment 18 of Fallon's investigation report." Nor do we conclude there was an application of the incorrect standard of proof.

During the arbitration hearing, the Borough offered testimony and documentary evidence relative to Null's problematic purchases. The Borough claims four invoices found in Exhibit 18 of Fallon's report were ignored. The Borough suggests the arbitrator's failure to consider this evidence amounted to "undue means" under the statute necessitating the award must be vacated.

The phrase "undue means," as used in N.J.S.A. 2A:24-8(a), "ordinarily encompasses a situation in which the arbitrator has made an acknowledged mistake of fact or law or a mistake that is apparent on the face of the record." N.J. Office of Emp. Relations v. Commc'ns Workers of Am., AFL-CIO, 154 N.J. 98, 111 (1998) (citation omitted). When parties have entered into a CNA and have agreed upon "a defined set of rules that are to govern the arbitration process, an arbitrator exceeds his powers when he ignores the limited authority that the contract confers. The scope of an arbitrator's authority depends on the terms of the contract between the parties." Cnty. Coll. of Morris, supra, 100 N.J. at 391.

The Borough bore the burden of persuasion to defeat Local #331's grievance. See Cnty. of Essex v. First Union Nat'l Bank, 373 N.J. Super. 543, 555 (2004) (stating the burden of establishing a fact is on the person relying thereon), aff'd, remanded by 186 N.J. 46 (2006). The CNA mandated that "[t]he arbitrator shall be . . . restricted to the application of the facts presented to him/her involved in the grievance."

During the hearing, the Borough identified those invoices contained in Fallon's report asserted to support the contention that Null misappropriated DPW resources. The arbitrator reviewed each item that was the subject of testimony. In a footnote, the arbitrator stated: "Counsel for the Borough said he pulled out each of the disputed invoices of purchases allegedly made by Null . . . . I shall only consider these invoices in my decision."

Although Fallon's entire 1,509 page report was part of the record, a page of invoices alone is not dispositive without more. Exhibit 18 contained a list of parts with handwritten notations of four purchases attributed to Null. It appears five of the same items were purchased because three items cost $12.34 and the fourth, $24.68, is two times the single expense of $12.34. Another notation on the page states "93 Exp," which to us suggests the parts were for a 1993 Ford Explorer. The four items not raised were not discussed by Fallon. His report narrative merely states the parts do not match DPW vehicles. Moreover the items appear to relate to a Ford Explorer. The Borough withdrew its contentions on this vehicle when Null's assertion that the Borough in fact owned an Explorer proved accurate.

The second item asserted to have been ignored by the Arbitrator regards the wire test set for a 1997 Ford Explorer, which Fallon's report states could not be used on a 1993 Ford Explorer, as Null suggested. This evidence was considered by the arbitrator who concluded that, although not "totally convincing[,]" Null's explanation, in light of his overall testimony, was reasonable and therefore accepted.

Following of our review of the record, we concur with Judge Armstrong's determination that there was no evidence of an award rendered by "undue means." We find no error in the denial of the Borough's motion to vacate the award.

Next, we examine the Borough's assertion that the arbitrator inappropriately applied the incorrect standard when evaluating the evidence and determining it failed to show just cause to terminate Null. The basis for this argument results from the arbitrator's statement in his written opinion "that the Borough did not 'conclusively' prove the charges against Null." The Borough believes the arbitrator mistakenly required "clear and convincing" evidence rather than merely a preponderance of the evidence to reject Local #331's grievance. Further, the Borough asserts the Law Division "fail[ed] to recognize" this clear error that "exceeded his powers under the collective bargaining agreement" warranting reversal of its determination.

The Borough correctly recites the applicable standard of proof, which is a preponderance of the credible evidence. See e.g., In re Bridgewater, 95 N.J. 235, 244 (1984) (stating in PERC's review of unfair labor practice, once an employee establishes a protected activity was a substantial factor in the termination, the burden of proof shifts to the employer to show, by preponderance of evidence, legitimate business reasons for the firing); Ho-Ho-Kus v. Menduno, 91 N.J. Super. 482, 485 (App. Div. 1966) (removal of police officer for cause requires municipality to establish by a preponderance of the credible evidence that defendant was guilty of the offenses asserted).

We, like Judge Armstrong, determine the arbitrator's comment did not reflect the application of a stricter standard of proof. Rather, following our assessment of the record, we conclude the arbitrator appropriately considered the evidence using the preponderance of the evidence standard and found the Borough's proofs wanting. The arbitrator separately considered each of Null's purchases that were challenged by the Borough. Null's refutation of the evidence proffered by the Borough to show misappropriation was found credible. In weighing all of the evidence, the arbitrator found Null's testimony fully explained the application for the parts purchased by the DPW. The use of the word "conclusively" in this description meant only that the allegations of the Borough's expert did not overcome Null's credible clarifications. We find no basis pursuant to N.J.S.A. 2A:24-8 to disturb the order confirming the arbitration award.


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