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United States Supreme Court Update: Union Pacific and Granite Rock Labor Arbitration Cases

October 11th, 2009 Authority of Arbitrators, Labor Arbitration, United States Court of Appeals for the Ninth Circuit, United States Court of Appeals for the Seventh Circuit, United States Supreme Court 1 Comment » By Philip J. Loree Jr.

Introduction

So far the United States Supreme Court has agreed to hear only one arbitration case governed by the Federal Arbitration Act:  Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198), which has been set for oral argument at 10:00 a.m. Eastern Standard Time, December 9, 2009.   (See Russ Kunkel’s LawMemo Arbitration Blog  here.)  We have written extensively on Stolt-Nielsen, which concerns whether class arbitration may be imposed on parties whose contracts are silent on that point.  (Posts available here,  here, here, here, here, here, here, here and here.)

The Supreme Court has also agreed to hear two labor arbitration cases.  The first is Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers & Trainmen (08-604), which is governed by the the Railway Labor Act (“RLA”), 45 U.S.C. §§151 et seq.  The RLA, among other things, requires arbitration before the National Railroad Adjustment Board (“the Board”) of labor disputes involving railway workers.  Union Pacific, for all practical purposes, is therefore not a contractual arbitration case, but an administrative law one, and the outcome will likely have  little or no effect on Federal Arbitration Act jurisprudence.  The Court held oral argument on October 7, 2009.  (Oral argument Tr. here

The second is Granite Rock Co. v. International Brotherhood of Teamsters (08-1214), which arises under Section 301 of the Labor Management Relations Act.  The Court is expected to set argument for later this Fall.  (See Russ Kunkel’s LawMemo Employment Law Blog here.)   Though not governed by the Federal Arbitration Act, Granite Rock, unlike Union Pacific, is a contractual arbitration case.  And the outcome may be relevant to cases falling under the Federal Arbitration Act. 

We briefly summarize below the issues the Court will presumably address in these labor arbitration cases and discuss why Granite Rock may be more controversial than it appears at first blush.   

Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers & Trainmen (08-604)

Union Pacific, which arose under the RLA, concerns an administrative law question.  The RLA provides that the Board’s decisions “shall be conclusive … except … for”: (1) “failure … to comply” with the Act, (2) “failure … to conform or confine” its order “to matters within … the [Board’s] jurisdiction,” and (3) “fraud or corruption” by a Board member. 45 U.S.C. §153 First (q).  The Board denied certain employee grievance claims because the claimants had not complied with a Board rule requiring them to prove that the pre-grievance, statutory requirement of a “conference” between the parties had been met.  See 45 U.S.C. §152.  The United States Court of Appeals for the Seventh Circuit vacated the decision of the Board, holding that it violated due process by adopting a “new,” retroactive interpretation of the standards governing its proceedings.   

Before the Supreme Court are two questions: 

  1. Whether the RLA includes a fourth, implied exception that authorizes courts to set aside final arbitration awards for alleged violations of due process; and
  2. Whether the Seventh Circuit erroneously held that the Board adopted a new, retroactive interpretation of the standards governing its proceedings in violation of due process.

You can read the briefs here and the oral argument transcript here

Granite Rock Co. v. International Brotherhood of Teamsters (08-1214)

Granite Rock concerns a dispute between an employer and a union over whether the parties entered into a collective bargaining agreement containing a no-strike clause.  The disputed CBA contains an arbitration agreement, which requires arbitration of all disputes “arising under” the agreement.  The union’s position on the merits is that it never ratified the CBA.

The employer brought an action in district court to enforce the CBA, and the union argued that the dispute over whether the CBA was concluded was subject to arbitration.  In response to the union’s contention, the employer argued that the question whether the CBA was concluded was one of arbitrability for the court to decide.

The Ninth Circuit held that there was no dispute over whether the arbitration agreement – as opposed to the CBA as a whole – was entered into because:  (a) the employer sued to enforce the CBA, which contained the arbitration agreement; and (b) the union sought to enforce the arbitration agreement, albeit not the rest of the CBA.  The Ninth Circuit also held that the dispute over the formation of the CBA fell within the terms of the arbitration agreement.   

The case presents an interesting twist on the severability doctrine.  Ordinarily, where a party contends that a contract containing an arbitration agreement was never concluded, the argument applies equally to the arbitration agreement, which means the court must decide whether the parties agreed to arbitrate before it can order arbitration.  Presumably for this reason, in Buckeye Check Cashing v. Cardegna, 546 U.S. 440, 444 n.1 (2006) (citations omitted), the Supreme Court did not extend the doctrine of severability to require arbitration when there is an issue concerning whether the contract containing the arbitration agreement  — and thus the arbitration agreement itself — was ever concluded:       

The issue of the contract’s validity is different from the issue whether any agreement between the alleged obligor and obligee was ever concluded. Our opinion today addresses only the former, and does not speak to the issue decided in the cases cited by respondents (and by the Florida Supreme Court), which hold that it is for courts to decide whether the alleged obligor ever signed the contract, whether the signor lacked authority to commit the alleged principal, and whether the signor lacked the mental capacity to assent.  

But the unusual procedural posture of the case lends support to the Ninth Circuit’s holding because the parties’ respective litigation positions, taken together, and divorced from the dispute on the merits, indicate that the parties do not dispute that an arbitration agreement agreement was concluded.  And because the severability doctrine posits that an arbitration agreement is severable from the contract in which it is contained, the notion that an arbitration agreement came into existence without the parties entering into the CBA is not all that farfetched. 

On the other hand, the union appears to be taking inconsistent positions in an effort to gain what it apparently perceives to be a tactical advantage.  In response the Ninth Circuit has effectively said that the union can have its cake and eat it,  too.  It held that after the employer sued to enforce the contract, the union, through its own litigation position, could ratify the arbitration agreement while rejecting the balance of the agreement, including the no-strike provision.  It seems questionable whether the severability doctrine was designed to allow a party to argue on the one hand that a CBA containing an arbitration agreement was never concluded, and yet reap the benefits of that arbitration agreement by effectively “accepting” one aspect of the other party’s litigation position – the arbitration agreement’s existence – while rejecting the rest of it – the existence of a binding CBA containing a no-strike clause. 

It will be interesting to see how the Supreme Court decides this case.  Copies of petitioner’s briefs and amicus briefs in support of petitioner can be found here.

         

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One Response to “United States Supreme Court Update: Union Pacific and Granite Rock Labor Arbitration Cases”

  1. […] (08-1214) (arising under Labor Management Relations Act (”LMRA”) Section 301).  (Post here)  On December 8, 2009 the Supreme Court issued its unanimous opinion in Union Pacific […]