Opinion Clarifies Limited Role Played By Courts In Reviewing Labor Arbitration Awards.
In Southwest Regional Council of Carpenters v. Drywall Dynamics, Inc., No. 14-55250 (9th Cir. May 19, 2016) (Berzon, Owens, Marbley), the Ninth Circuit reverses a district court order vacating an arbitration award in a labor case, along the way criticizing use of “plausibility” as a guide to review, and pointing out that the so-called “public policy exception” allowing for review of an arbitrator’s award, is in fact a limited exception requiring violation of an “explicit, well-defined, and dominant public policy.”
Perhaps the facts troubled the district court judge. Respondent Drywall Dynamics, Inc., (“Drywall”) entered into a labor agreement with petitioner Southwest Regional Council of Carpenters (“SWRCC” or “Union) by which Drywall assigned to a contractors’ association authority to bargain on its behalf. Drywall attempted to terminate the agreement, but the Union and association had executed a Memorandum of Understanding (“MOU”) extending the agreement before Drywall could terminate it – something that happened more than once. The arbitrator found in favor of the Union, in particular finding that the termination was not timely.
The district court ruled that the arbitration panel’s interpretation of the contracts was not “plausible” – the first problem. The Ninth Circuit has now clarified that “plausibility” is not the standard of review, to the extent that “plausibility” requires looking at the merits of the decision. Instead, the question is “whether [the arbitrator] made any interpretation or application of the agreement at all,” adding: “If so, the court’s inquiry ends.” Another formulation of this is: “Did the arbitrator look at and construe the contract, or did he not?”
The second problem arose when “the district court determined that the arbitrator’s award violated ‘a clear public policy in favor of voluntary relationships among employers and multi-employer bargaining units’.” The district court had in mind “the voluntary nature of multiemployer bargaining.” However, the Ninth Circuit found no such clear public policy, but rather competing interests that include the right to withdraw from a multiemployer unit and the stability of multiemployer units. With competing policies, no clear public policy exists, thus, no violation of a clear public policy, thus, no exception allowing for review of the arbitrator’s award. Query whether Drywall is in a sort of Catch-22 situation -- stuck with outcomes it does not like, and unable to find a simple way to extricate itself from multiemployer bargaining.