9th Circuit upholds arbitrators’ discretion

Labor arbitrators can amend agreements with "no add" clauses when the case involves a mutual mistake, preserving a long-held deference to such arbitrators by district and federal courts, a 9th Circuit Court of Appeals panel ruled Tuesday in a 2-1 opinion.

"We are very pleased with the decision. The 9th Circuit applied many decades of Supreme Court and circuit court precedent, finding that the decisions of labor arbitrators are entitled to a very high degree of deference, and we think it's obviously correct," said Michael D. Weiner, who represented the respondent, a union representing employees of smelting and refining company ASARCO.

"We are disappointed by the 9th Circuit's decision and believe that Judge [Sandra S.] Ikuta's dissent is correct. We are considering our appellate options," said Rex S. Heinke, who represents ASARCO in the appeal.

In the underlying case, ASARCO negotiated a labor agreement for its employees with a union. In the most recent iteration of the contract, employees hired after its effective date in July 2011 were made ineligible to participate in the company pension. However, neither party noticed the elimination of the pension also made a particular bonus unavailable to hires under the new deal. The bonus was preserved but tied to participation in the pension, effectively disqualifying it for such employees.

When the union noticed the issue, they sued ASARCO over the company's refusal to pay the bonus to members who could not participate in the company pension. The parties agreed to arbitrate the issue, where the union argued the only solution was to reform the agreement to reflect both sides' original intent, which was that the bonus be available to all employees.

"The mutual mistake doctrine is a venerable one of contract law applied when the written contract that the parties enter into does not reflect the true agreement," Weiner said. "The true agreement was to continue to provide the bonus to all employees."

The arbitrator agreed in finding the issue arose from a mutual mistake, amending the agreement to restore new hires' eligibility for the bonus. ASARCO argued unsuccessfully that a no-add clause in the agreement prevented the arbitrator from altering the contract.

ASARCO then filed a petition to vacate the arbitration award on the same grounds but was rejected by U.S. District Judge for the District of Arizona Stephen M. McNamee. The company appealed that decision to the 9th Circuit.

In the split decision affirming McNamee's ruling, the panel noted ASARCO never disputed the arbitrator's factual findings that the bonus ineligibility was accidental, just the arbitrator's powers.

"Additionally, ASARCO's decision to argue the issue to the arbitrator suggests that it never really objected to the arbitrator's jurisdiction at all, but rather objected only to the arbitrator crafting the remedy that the union sought," wrote U.S. District Judge Robert W. Gettleman in the opinion. ASARCO LLC v. United Steel, Paper and Forestry, Rubber Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC, 2018 DJDAR 5827 (9th Cir. June 19, 2018).

Gettleman added that ASARCO effectively waived its right to dispute the arbitrator's jurisdiction by allowing the dispute to proceed to an award before raising the issue. However, he wrote that the court's traditional deference to labor arbitrators made the issue moot.

"Even if ASARCO did not waive its right to contest the arbitrator's jurisdiction, which it did, we would defer to the arbitrator's judgment, as we must," he wrote.

Circuit Judges Richard A. Paez concurred with Gettleman, while Ikuta dissented.

Ikuta wrote that the alteration to the labor agreement put in place by the arbitration award is a plain violation of the no-add clause, regardless of mutual mistakes, echoing ASARCO's position.

"While arbitrators may have power to reform an agreement where permitted to do so by the collective bargaining agreement, the arbitrator in this case clearly lacked that power," she wrote. "The majority fails to explain why the arbitrator here could exercise a power directly contrary to the express restrictions on the arbitrator's authority."