Employment Law Daily Court shouldn’t have intervened in labor dispute; arbitrator’s work wasn’t done
Thursday, March 10, 2016

Court shouldn’t have intervened in labor dispute; arbitrator’s work wasn’t done

By Lisa Milam-Perez, J.D. A district court weighed in prematurely in a labor dispute between a coal company and the United Mine Workers union, the Fourth Circuit found, noting that the arbitrator’s work in the bifurcated labor dispute was only half-finished. Consistent with the complete arbitration rule, the arbitrator should have been afforded the opportunity to resolve both the liability and remedial phases of the dispute before it moved to federal court, the appeals court explained. Thus, it vacated the lower court’s order affirming an arbitration award as to liability and instructed the court below to return the matter for the arbitrator to rule on the remedial issues at hand (Peabody Holding Company, LLC v. United Mine Workers of America, March 8, 2016, Wilkinson, J. III). Dispute under MOU. The underlying dispute arose out of a Memorandum of Understanding (MOU) between the union and Peabody Coal Company—signed by the company on its own behalf, on behalf of its parent holding company, and several other subsidiaries—that required nonunion companies within the corporate family to give preferential hiring treatment to coal miners who were either working for or laid off by Peabody Coal. The MOU, reached in 2007, provided that any disputes arising from the agreement would be resolved through final and binding arbitration. Later that year, the corporate family welcomed a new addition: the Peabody parent company spun off some of its mining operations into Patriot Coal Corporation. And Peabody Coal, the MOU’s signatory, became a part of Patriot—along with all but one of the entities that had signed onto the MOU. Consequently, Peabody Coal no longer shared any corporate relationship with Peabody Holding or with Black Beauty, the lone entity left behind. The union took the position, however, that Peabody Holding and Black Beauty were still bound by the MOU, and its preferential hiring provision. So when Black Beauty hired a nonunion mine operator to conduct surface mining on its property, the union submitted the dispute to a “jobs monitor,” consistent with the arbitration procedure set forth in the MOU. After feuding over whether the dispute was even arbitrable under the MOU’s arbitration clause (in a 2010 ruling, the Fourth Circuit held that it was) the parties went before the jobs monitor to argue the merits. Importantly, they agreed to bifurcate the proceedings so that the arbitrator would first resolve the underlying issue—whether the MOU remained in effect after the spin-off—and then, if resolved in the union’s favor, to determine the proper remedy (if the parties could not otherwise reach accord on this point). The job monitor found the MOU remained in force. Displeased, the employer filed a declaratory judgment action seeking to vacate the job monitor’s decision. The district court found that the job monitor’s award was final—at least as to liability—and thus reviewable, given that the parties had bifurcated the liability and remedial issues. Then, on the merits, the court sided with the union and enforced the decision. On appeal, the Fourth Circuit was now faced with the threshold question: Should it even review the liability determination given that the arbitrator’s work was not yet done? Complete arbitration rule. As the district court rightly noted, there is uncertainty among the courts as to whether the complete arbitration rule—which provides that a federal court asked to review an arbitrator’s decision should refrain from doing so until the arbitrator has decided all facets of the dispute—works as a restriction on federal court jurisdiction under LMRA, Section 301. Ultimately, the parties and the appeals court agreed that the rule did not impose a hard and fast limitation on federal subject matter jurisdiction “in the strict sense.” At most, the rule operates merely as “a prudential limitation on a court’s authority to review a labor arbitrator’s decision.” Yet it “draws from the same well of policy rationales as its strictly jurisdictional relatives,” the appeals court observed, and those rationales led the court to conclude that judicial involvement ought to have been withheld here. The jobs monitor issued a decision as to liability, and retained jurisdiction over the remedies phase in the event the union and companies couldn’t agree on a remedy on their own. As such, the jobs monitor was not finished with the dispute, so the court should not have stepped in at that juncture. “If this dispute is destined to eventually make its way to court, it is far better for it to come in one whole piece than in dribs and drabs,” the appeals court pointed out. The companies argued that the complete arbitration rule didn’t necessarily apply since the parties had bifurcated the dispute, but “this does not change the fact that they also agreed to submit the entire dispute—both the liability and remedies questions—to arbitration,” the appeals court noted. “There is nothing unjust about a decision to withhold review until the arbitrator has completed both segments of the whole task that was given to him.” The companies’ “efficiency” argument WAS equally unavailing. As the court noted, were it to review the merits of the liability decision alone, it might end up weighing in on an issue that is later rendered moot. Moreover, the underlying dispute was a quite particularized one, of concern only to the immediate parties; thus, “[i]t is not as if a court ruling on the liability question now would settle a common issue for multiple cases proceeding simultaneously before different arbitrators.” Finally, citing the adage that arbitration “is a matter of contract,” the appeals court found it best to “honor the arbitral ground rules” to which the parties had agreed.

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