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6th Circuit changes test for reviewing arbitration awards
January 29, 2007 by Ross Runkel at LawMemo
After 21 years of using a highly interventionist test for reviewing labor arbitration awards, the 6th Circuit has overruled a key case and adopted the "arguably construing or applying the contract" test.
Michigan Family Resources v. SEIU (6th Cir en banc 01/26/2007)
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."
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