By Joyce Hanson

Law360 (February 4, 2021, 6:23 PM EST) -- A New York Hilton hotel operator and union workers have settled the company's lawsuit in federal court over a severance pay dispute with workers laid off due to COVID-19, saying they have voluntarily dismissed the suit and each party will bear its own costs and fees.

MP Bedford Property LLC, operator of Hilton's Renwick Hotel in Manhattan, and the New York Hotel and Motel Trades Council AFL-CIO did not say what the settlement terms were in their Wednesday joint stipulation of voluntary dismissal with prejudice. The company filed suit in October, petitioning the New York federal court to throw out an arbitrator's order to pay severance.

Representatives for the hotel and union did not respond immediately Thursday to requests for comment about the settlement terms.

In January, MP Bedford had claimed in a brief opposing the union's motion to dismiss its suit that the arbitrator, Elliott Shriftman, had unfairly applied his version of "rough industrial judgment" when making the hotel pay severance to workers laid off due to the pandemic.

Shriftman's two arbitration awards in September and December favoring laid-off workers suffered from substantive errors because they required the Renwick Hotel to make payments not authorized by an industrywide collective bargaining agreement with the New York Hotel and Motel Trades Council AFL-CIO, the hotel operator said in its Jan. 22 bid to vacate the award and to ditch the union's dismiss motion.

"The awards must be vacated because they amount to rough industrial justice divorced from contractual right," the hotel said.

The hotel then went on to argue that the words of an industrywide agreement must be the basis of any award, pointing to a 1986 Second Circuit decision in Avis Rent A Car System Inc. v. Garage Employees Union Local 272 . And an arbitrator for the Office of the Impartial Chairperson of the Hotel Industry of the City of New York, such as Shriftman, may not impose his own understanding of rough industrial justice, the operator added, citing a 1987 U.S. Supreme Court ruling in United Paperworkers International Union AFL-CIO v. Misco Inc .

"The union's only substantive response to Renwick's arguments on this point is that [Shriftman] has been consistent in his interpretation of severance obligations, but a decision that makes up new legal obligations never contemplated by the parties in their contract does not draw its essence from that contract, and repeating that error does not remedy it," the hotel said.

Shriftman issued the first arbitration award on Sept. 11, and the dispute landed in federal court on Oct. 28, when the Renwick Hotel petitioned to throw out his order to pay severance to workers who were laid off in March due to COVID-19, arguing that the award ignored the hotel's contract with the union.

The petition accused the arbitrator of unfairly favoring the union by awarding the laid-off workers severance pay despite what it described as a provision in the collective bargaining agreement with the union that severance triggers only when a hotel permanently closes, citing the CBA's Article 52, which says that employees receive severance pay "in the event of termination resulting from the closing of a hotel or a restaurant therein or a department thereof, or a concession."

"The award is subject to vacatur because it does not, as required by the Labor Management Relations Act, 'draw its essence from the contract' but instead 'simply reflects the arbitrator's own notions of industrial justice,'" the hotel said.

In the Sept. 11 arbitration proceedings, Shriftman agreed with hotel operators that severance is normally awarded for permanent hotel closures, according to the suit. But Shriftman said because layoffs would be long-term, "the circumstances of the COVID-19 crisis warrant severance pay for employees who have not yet been recalled" under the industrywide agreement, the suit said.

Renwick and other hotels in the city temporarily suspended hosting guests in March in response to government emergency declarations due to the novel coronavirus, leading to the layoffs. Under the September arbitration award, hotels must pay severance to laid-off employees in either a lump sum or a weekly bridge payment by Oct. 1 or soon after, according to the suit.

To date, the Renwick Hotel remains closed, the union said in its Jan. 8 motion to dismiss. The union argued that Shriftman's second arbitral award again favoring the laid-off workers stemmed from his view that the hotel closure is effectively permanent.

The hotel is represented by Paul Rosenberg and Andrew M. Grossman of BakerHostetler.

The union is represented by Barry N. Saltzman and Andrew D. Midgen of Pitta LLP.

The case is MP Bedford Property LLC v. New York Hotel & Motel Trades Council AFL-CIO, case number 1:20-cv-09050, in U.S. District Court for the Southern District of New York.

--Additional reporting by Michael Joe. Editing by Jay Jackson Jr.

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