Duty To Arbitrate Can Survive Expiration Of Contract

A collective bargaining agreement between Baltimore County and Baltimore County Fraternal Order of Police (FOP) contained an arbitration clause and a retiree health insurance provision. The FOP believed the provision locked in place the health insurance subsidy, as it existed at the time of an officer’s retirement. After the agreement expired and the County decreased the health insurance subsidy, the FOP initiated arbitration.

The County protested, arguing that it had no duty to arbitrate because the collective bargaining agreement had expired. The County also maintained that the health insurance subsidy was not locked in place but was subject to change from year to year. When the FOP was successful in arbitration, the County challenged the decision in court, and the matter wound up in the Maryland Court of Appeals (Maryland’s equivalent of a Supreme Court).

After an extensive review of the law in neighboring states, the Court decided to adopt the approach followed under the National Labor Relations Act, and held that “a broad arbitration clause may survive expiration of the underlying agreement when the dispute arises under the agreement. This may happen when the dispute (1) involves facts and occurrences that arose before expiration of the agreement, (2) where the rights that are the subject of the dispute accrued or vested during the life of the agreement, or (3) where, under normal principles of contract interpretation, the disputed contractual right survives expiration of the remainder of the agreement.”

The Court then had to determine who decides whether an arbitration clause survives expiration of the underlying agreement, an arbitrator or the court. The Court noted that “the only circumstance in which courts play a leading role in cases involving arbitration is in deciding arbitrability of a dispute. Courts have a prerogative in that instance because the existence of an agreement to arbitrate is a threshold issue, and the courts must have authority to assess, independently of the arbitrator’s point of view, whether or not the parties ever reached such an agreement. Even in deciding arbitrability issues, however, courts are limited to determining only one thing: whether a valid arbitration agreement exists and must be careful not to stray into the merits of any underlying agreements. Where the language of the arbitration clause is clear, and it is plain that the dispute sought to be arbitrated falls within the scope of the arbitration clause, arbitration should be compelled. If it is apparent, on the other hand, that the issue sought to be arbitrated lies beyond the scope of the arbitration clause, the opposing party should not be compelled to arbitration, since there is no agreement to arbitrate.

“With these principles in mind, we turn to the arbitrability issue in this case. If one could decide that FOP’s grievance was arbitrable without interpreting the underlying MOU or addressing the merits of FOP’s claims, the arbitrability issue in this case was an issue for the Court to decide initially. But if the arbitrability issue cannot be so decided, it was within the Arbitrator’s purview.

“The arbitration clause here was part of the 2006-2007 MOU. It defined as a grievance any dispute concerning the application or interpretation of the terms of the MOU and subjected to binding arbitration any grievance that was not settled through other internal mechanisms. The same MOU that contained the arbitration clause also stated that the County shall provide the same health insurance benefit plans offered to active employees for retirees not eligible for Medicare.

“The FOP’s grievance is arbitrable if the rights that are the subject of the FOP’s grievance vested during the MOU’s term. As the FOP’s arguments underscore, in its view, the health insurance clauses contained in the respective MOUs reflect binding and irrevocable promises by the County to maintain the 85/15 split, but in the County’s view, they did not. Thus, the parties’ dispute regarding the vesting of retiree health benefits…arises from conflicting interpretations of the retiree health care provision of the MOUs. Accordingly, in this case, whether the retirees’ rights to the 85/15 split vested during the MOU’s term provides both the answer to the arbitrability issue and the merits of FOP’s grievance.

“Maryland’s arbitrability precedents prohibit courts from considering the merits of the dispute. Thus, because both the arbitrability and the merits of FOP’s grievance depend on whether retirees’ rights in the 85/15 health insurance premium split vested prior to the MOU’s expiration, we conclude that in this case the issue of whether FOP’s grievance was arbitrable was an issue for the Arbitrator to decide in the first instance. The MOU’s arbitration clause was broad. It did not exclude grievances arising after the expiration of the MOU but pertained to any dispute concerning the application or interpretation of the MOU. The Arbitrator found that FOP’s grievance was arbitrable even after the MOU’s expiration because – based on the Arbitrator’s reading of the MOU’s health insurance clause – retirees’ rights to an 85/15 health insurance premium split had vested at the time of their retirement. The trial court was legally correct in granting judgment in the FOP’s favor.”

Baltimore County Fraternal Order of Police Lodge No. 4 v. Baltimore County, 57 A.3d 425 (Md. 2012).