Collective Bargaining, Standard Of Review: 9th Circuit Concludes Arbitrator Acted Within His Authority When Reforming Labor Agreement To Cure Mutual Mistake

And Judge Ikuta Dissents.

    The Ninth Circuit affirmed the district court's order confirming an arbitration award in favor of a union seeking relief concerning a bonus provision in the parties' collective bargaining power. The employer had argued that the arbitration award was invalid because the arbitrator reformed the Basic Labor Agreement (BLA) between the Union and the employer, despite a "no-add" provision in that agreement. The district affirmed the award, and the employer appealed. ASARCO v. United Steel, et al., No. 16-16363 (9th Cir. 12/4/18) (Gettleman, McNamee; Ikuta, dsst).

    The arbitrator found that the BLA was based on a mutual mistake, because the Union was unaware of a link between a change in the pension plan and the opportunity of employees to obtain annual bonuses. The arbitrator reformed the BLA to remedy the mutual mistake. It was undisputed that the parties did not discuss the bonus when negotiating, and neither party indicated that the bonus would be impacted by modifying eligibility for the pension.

    The panel concluded "that the arbitrator was acting within his authority when he crafted a remedy to cure the parties' mutual mistake."

    In a characteristically vigorous dissent, Judge Ikuta wrote, "[t]he 'no-add' language in the collective bargaining agreement . . . is unmistakably clear. . . . . Because the arbitrator ignored the no-add provision, his award fails to draw its essence from the BLA and is invalid." She concluded, "the BLA deprives the arbitrator of the authority to rewrite the agreement, and also deprives the arbitrator of the authority to reconsider and reject this limitation on his authority."

    COMMENT: The majority usefully summarizes the standard of review: the district court's decision confirming an arbitration award is de novo, whereas the review of labor arbitration awards is extremely deferential because the courts do not hear claims of factual or legal error by an arbitrator. However, there are three exceptions to the general rule of deference to an arbitrator's decision: "(1) when the arbitrator's award does not draw its essence from the collective bargaining agreement and the arbitrator is dispensing his brand of industrial justice; (2) when the arbitrator exceeds the boundaries of the issues submitted to him; and (3) when the award is contrary to public policy."