Federal Arbitration Case Update | The Powers that Be

Following are two interesting and recent federal court rulings related to arbitration.

Arbitrator Has Authority to Rule on Whether He Can Change His Mind United Brotherhood of Carpenters and Joiners v. Tappan Zee Constructors

When the general contractor for the rebuilding of the Tappan Zee Bridge gave a portion of the job to the carpenters (at $70/hr.) rather than the dock builders (at $94/hr.), a jurisdictional dispute arose between two unions. The two unions agreed that the dock builders would get the work, but the GC disagreed and brought the case to arbitration pursuant to the plan agreement covering the project.

In his interim award, the arbitrator stated that he planned to apply the “local standards” test in the plan agreement and that the outcome would favor the dock builders. However, in his final award, nine days later, the arbitrator stated that there were no local standards and that the GC was free to employ the lower-wage carpenters. The district court confirmed the award and the carpenters appealed.

The United States Court of Appeals for the Second Circuit affirmed. The contract governing the arbitration required an interim award and a later final award. By definition, the interim award was not a final award and the arbitrator was free to change his mind based on newly heard evidence or reconsideration of the matter. Moreover, the contract’s language was sufficiently ambiguous to allow the arbitrator to determine the circumstances that would give rise to a permissible re-visitation of his interim award. “It was because he concluded that he had initially failed to consider certain evidence under the Section 8 criteria that he rendered a written decision different from his short-form decision.”

The Court concluded, “Because we must defer to the arbitrator’s interpretation of the rules by which the parties agreed the arbitration would be conducted, and because the arbitrator interpreted the rules as allowing him to fashion the second decision as he saw fit, the order of the District Court confirming the May 13th Award and vacating the May 4th Award is affirmed.”

Arbitrator Who Held He Had Exceeded His Powers in Prior Award Exceeded Them Again in Issuing Second Award IBEW Local 824 v. Verizon Florida

The CBA between Verizon Florida and its union had a provision that allowed members with one-year seniority to bump existing workers with certain exceptions. When bumps were denied to certain workers, the union sought arbitration.

The theory presented by the union was based on a clause that required a bump be given if the worker needed only “minimal additional training.” The company maintained that was in controversy.

The arbitrator interpreted the “minimal additional training” requirement to mean four weeks or less. As many of the would-be bumpers in the case in arbitration required more, the award was in favor of the company.

The union then sent a letter to the arbitrator asking for a “clarification.” The union argued that two additional would-be bumpers whose bumps were denied fell into the exact categories as the two workers whose bumps were allowed. The company argued that the award be rewritten to exclude consideration of the “previously held” aspects of the case.

The arbitrator then issued a substitute award in which he stated that he had exceeded his powers in the original award and he struck out the portions of the award dealing with the “previously held” clause. The union moved to vacate and when that motion was denied, it appealed.

The company argued that the arbitrator was free to change the opinion, functus officio didn’t apply in a labor context and that the union invited the substitute opinion. However, the U.S. Court of Appeals for the Eleventh Circuit found that the union asked a narrow question that assumed that the award was valid, e.g., if the first two got it, why not the second two? The Court found that the company responded with a full frontal attack on the award itself.

The Court determined that the award was proper in the first instance, and that the arbitrator exceeded his powers by issuing the substitute award.

The company argued that the award be rewritten to exclude consideration of the “previously held” aspects of the case.

The arbitrator then issued a substitute award in which he stated that he had exceeded his powers in the original award and he struck out the portions of the award dealing with the “previously held” clause. The union moved to vacate and when that motion was denied, it appealed.

The company argued that the arbitrator was free to change the opinion, functus officio didn’t apply in a labor context and that the union invited the substitute opinion. However, the U.S. Court of Appeals for the Eleventh Circuit found that the union asked a narrow question that assumed that the award was valid, e.g., if the first two got it, why not the second two? The Court found that the company responded with a full frontal attack on the award itself.

The Court determined that the award was proper in the first instance, and that the arbitrator exceeded his powers by issuing the substitute award.