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Arbitration Law Memo February 2007
by Ross Runkel at LawMemo
Arbitration Law Memo February 2007
by LawMemo - World's Best
Also available by free monthly email.
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Arbitration - Individual Contracts ***
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Arbitration - Collective Bargaining Agreements ***
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6th - En banc court overrules four-part test for reviewing arbitration awards.
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PA – Arbitrator applied wrong burden of proof; award vacated.
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8th – Interest arbitration clause survived expiration of collective bargaining agreement.
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6th - Labor-protective agreements for railroad merger were followed when employee transferred.
*** Arbitration - Individual Contracts ***
6th – Lack of findings of fact and conclusions of law didn’t prevent confirmation of arbitration award.
Electronic
Data Systems v. Donelson (6th Cir 01/18/2007)
http://caselaw.lp.findlaw.com/data2/circs/6th/061211p.pdf
Donelson and a co-worker sued the employer, asserting state law claims for race and disability discrimination. The parties agreed to submit the matter to arbitration, where Donelson prevailed. The employer petitioned for an order vacating the arbitration award, but the petition was denied by the trial court. The 6th Circuit affirmed. The employer argued that the arbitration award should have been vacated because the arbitration panel exceeded its authority by failing to include findings of fact and conclusions of law. The court rejected that argument, noting that in Detroit Auto. Inter-Ins. Exch. V. Gavin, 331 NW2d 418 (Mich. 1982) the Michigan Supreme Court held that the lack of a clear record should not be used as an impediment to confirmation of an arbitration award.
*** Arbitration - Collective Bargaining Agreements ***
6th - En banc court overrules four-part test for reviewing arbitration awards.
Michigan
Family Resources v. SEIU (6th Cir en banc 01/26/2007)
http://caselaw.lp.findlaw.com/data2/circs/6th/042564pv3.pdf
An arbitrator ruled in favor of the union on a cost-of-living pay dispute. The employer sued to vacate the award. The trial court vacated the award, and the 6th Circuit reversed. The court unanimously overruled its 21-year-old four-part test for reviewing arbitration awards, and split 8-5 in applying its new test.
The union grieved the employer's cost-of-living increase, arguing that there must be parity between union and non-union employees. The arbitrator agreed in a 10-page opinion. The arbitrator found the agreement was ambiguous, and resolved the ambiguity by relying on the employer's prior practice of granting identical increases to all employees. The company argued that the award failed to draw its essence from the agreement.
The court overruled Cement Divisions, National Gypsum Co v. United Steelworkers, 793 F.2d 759 (1986), which established a four-part test for determining whether an award "fails to draw its essence from the agreement." Instead, the court will now ask whether the arbitrator was "arguably construing or applying the contract." If so, "the request for judicial intervention should be resisted even though the arbitrator made 'serious,' 'improvident,' or 'silly' errors in resolving the merits of the dispute."
The majority said "we have an arbitrator who plainly was 'arguably construing' the contract and who perhaps just as plainly made a 'serious error' in construing the contract, a confluence of circumstances that does not invest us with authority to 'overturn [the] decision.'"
Five judges wrote two partial DISSENTS. They agreed with the overruling of the Cement Divisions case and with the newly-adopted test. However, they would have vacated the arbitrator's award. One said the arbitrator's opinion involved "a completely non-sensical construction." The other said the arbitrator ignored the plain language of the contract, which made "implausible any contention that the arbitrator was construing the contract."
6th – Court adopts “scope” test for determining whether side agreement disputes are subject to a CBA’s arbitration clause.
United
Steelworkers v. Cooper Tires & Rubber (6th Cir 01/17/2007)
http://caselaw.lp.findlaw.com/data2/circs/6th/054641p.pdf
The union and employer were parties to a collective bargaining agreement (CBA) containing an arbitration clause. They also executed a “side letter” regarding retiree health benefits. The side letter did not contain an arbitration clause. The union filed suit, seeking to compel arbitration of a grievance relating to the side letter. The trial court granted summary judgment in favor of the union on the issue of arbitrability. The 6th Circuit affirmed.
There is a split among the circuits as to how to analyze whether a dispute over a side agreement with no arbitration clause is subject to an arbitration clause in the parties’ CBA. The 2nd, 4th, and 8th Circuits apply the “collateral” test. Under the collateral test, courts consider the similarity of the side agreement’s subject matter to the subject matter of the CBA. If the subject matter is dissimilar, the side agreement is deemed collateral to the CBA (rather than “integral”) and not subject to the CBA’s arbitration clause.
The 3rd, 7th, and 9th Circuits use the “scope” test, under which disputes over a side agreement are arbitrable if the subject matter of the side agreement is within the scope of the CBA’s arbitration clause (unless the parties agree otherwise). The court adopted the scope test as applied by the 9th Circuit. The court noted that “[w]ith the scope test, the inquiry focuses on the breadth of the arbitration clause, thereby permitting parties to reference the plethora of case law interpreting arbitration clauses of other CBAs.” The court criticized the collateral test, stating “[t]he collateral test, in our opinion, creates uncertainty because parties have no gauge as to when a side agreement is similar or dissimilar to the underlying CBA.”
PA – Arbitrator applied wrong burden of proof; award vacated.
Slippery
Rock University v. APSCUF (Pennsylvania Cmwlth 01/16/2007)
http://www.courts.state.pa.us/OpPosting/CWealth/out/1515CD06_1-16-07.pdf
The public employer petitioned for review of a grievance arbitration award rendered in favor of the union. The case arose from the employer’s denial of tenure to one of its employees. The court vacated the arbitration award, agreeing with the employer that the arbitration award failed the “essence test” because the arbitrator applied the wrong burden of proof.
MA – Award cannot be vacated on the basis that arbitrator’s interpretation of agreement was erroneous.
Sheriff
v. AFSCME Council 93 (Massachusetts Ct App 02/13/2007)
http://www.socialaw.com/slip.htm?cid=16851&sid=119
A county corrections officer prevailed at a grievance arbitration and was ordered reinstated. The employer sought to vacate the arbitration award pursuant to G.L.c. 150C, Section 11, and the trial court obliged. The court reversed, concluding that the trial court “essentially ruled that the arbitrator’s interpretation was erroneous.” The court observed, “[t]he settled rule … is that a court has ‘no business overruling an arbitrator because [it] give[s] a contract a different interpretation.’”
8th – Interest arbitration clause survived expiration of collective bargaining agreement.
IBEW
v. Smart Cabling (8th Cir 02/01/2007)
http://caselaw.lp.findlaw.com/data2/circs/8th/061881p.pdf
The employer notified the union that it wanted to withdraw from the parties’ collective bargaining agreement. The parties failed to renew the agreement prior to its expiration, and the issue of renewal was submitted to binding arbitration. The arbitrator issued a decision renewing the agreement, but the employer refused to recognize that decision. The union then sued under Section 301 of the Labor-Management Relations Act (LMRA), and the trial court granted summary judgment in favor of the union. The 8th Circuit affirmed, rejecting the employer’s argument that the collective bargaining agreement’s arbitration clause expired along with the agreement. The court noted it had previously decided that “interest arbitration clauses may survive termination, and employers and eligible workers may be subject to the imposition of at least one undesired ‘successor’ agreement through interest arbitration.”
9th – Employer must arbitrate under expired CBA.
Operating
Engineers v. Newmont Mining (9th Cir 02/05/2007)
http://caselaw.lp.findlaw.com/data2/circs/9th/0416917p.pdf
The union sued to compel arbitration of a grievance relating to an employee’s discharge. The trial court compelled arbitration, rejecting the employer’s argument that it was not obligated to arbitrate because the parties’ collective bargaining agreement (CBA) expired prior to the employee’s discharge. The 9th Circuit affirmed, concluding that “the parties’ dispute arises under the expired agreement and must be submitted to arbitration.”
6th - Labor-protective agreements for railroad merger were followed when employee transferred.
Black v. Surface Transportation Bd
(6th Cir 02/09/2007)
http://caselaw.lp.findlaw.com/data2/circs/6th/063045p.pdf
Black claimed that the employer could not transfer him to another location under several labor-protective agreements which conditioned a railroad merger. The arbitration panel denied the claim. The Surface Transportation Board (STB) upheld the arbitration award. The 6th Circuit affirmed. The court found that the STB's decision to uphold the arbitration award survived "arbitrary and capricious" review. The court concluded that the arbitration panel, faced with an ambiguous provision in the labor-protective conditions, properly referred to past practices and the master agreement (New York Dock principles) in determining that Black lost benefits when he refused to fill vacancies in the rail system.
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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc.
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