It’s Not About Football, But . . . Arbitrator’s Decision Vacated, then Upheld, on Issue Not in Original Reference

Football fans on either side of Deflategate will see the corollaries here. Over a span of years, a drywall company made several attempts to withdraw from the contractors’ association that bargains with particular unions. The company ended up in arbitration with the union, though, on six rather routine grievances. On the first day of hearings, the union asked the arbitrators to also determine the validity of the company’s requests to withdraw. Understanding the pending arbitration to be focused on much more narrow issues, the company objected. But the arbitrators included in their decision that the company’s purported termination of the labor agreement was untimely. The lower court sided with the company and vacated the arbitrators’ decision. But the Court of Appeals for the Ninth Circuit has upheld the arbitration decision, citing the “unparalleled degree of deference” given to arbitrators.

The Court of Appeal noted four circumstances when it may be appropriate to vacate an arbitration award:

(1) when the award does not draw its essence from the collective bargaining agreement and the arbitrator is dispensing his own brand of industrial justice; (2) where the arbitrator exceeds the boundaries of the issues submitted to him; (3) when the award is contrary to public policy; or (4) when the award is procured by fraud.

The court first noted that arbitrators are allowed to address procedural issues that arise from the pending dispute. Thus, the arbitrators could decide that timeliness of the request to withdraw affected their decision on the other issues.

Second, as to whether the arbitrators’ decision was “plausible” under the collective bargaining agreement, the court noted that “as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision.” In other words, no second-guessing the arbitrators.

Third, the lower court determined that the award violated a public policy in favor of voluntary relationships. But the Court of Appeal noted that there are two public policy issues, the other being the stability of multi-employer units in the collective bargaining process. And neither policy was “dominant.”

Thus, whether the Court of Appeal would have ruled in the same manner as the arbitrators was not in consideration. Rather, the narrow grounds for overturning the arbitrators’ decision were not supported here. With a nod to the “unparalleled degree of deference” afforded to arbitrators as noted above, the Court of Appeal upheld the arbitrators’ decision, that the company’s efforts to withdraw were not properly carried out.

The case is Southwest Reg'l Council of Carpenters v. Drywall Dynamics, Inc., 2016 U.S. App. LEXIS 9205 (9th Cir., May 19, 2016).