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Asarco LLC v. United Steel

United States Court of Appeals, Ninth Circuit

December 4, 2018

ASARCO LLC, a limited liability corporation, Petitioner-Appellant,
v.
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC, on behalf of itself and the other unions representing ASARCO LLC's bargaining unit employees, Respondent-Appellee.

          Argued and Submitted November 16, 2017 Pasadena, California

          Appeal from the United States District Court for the District of Arizona D.C. No. 2:15-cv-00117-SMM Stephen M. McNamee, Senior District Judge, Presiding

          Rex S. Heinke (argued), Akin Gump Strauss Hauer & Feld LLP, Los Angeles, California; Lacy Lawrence and Marty L. Brimmage, Akin Gump Strauss Hauer & Feld LLP, Dallas, Texas; for Petitioner-Appellant.

          Michael D. Weiner (argued) and Jay Smith, Gilbert & Sackman, Los Angeles, California; Daniel M. Kovalik, United Steelworkers, Pittsburgh, Pennsylvania; Gerald Barrett, Ward Keenan & Barrett P.C., Phoenix, Arizona; for Respondent-Appellee.

          Before: Richard A. Paez and Sandra S. Ikuta, Circuit Judges, and Robert W. Gettleman, [*] District Judge.

         ORDER AND OPINION

         SUMMARY[**]

         Labor Law

         The panel filed (1) an order withdrawing its opinion and dissenting opinion and denying as moot a petition for rehearing en banc, and (2) a new opinion and new dissenting opinion.

         In its new opinion, the panel affirmed the district court's order affirming an arbitration award in favor of a union, which sought relief concerning a bonus provision in the parties' collective bargaining agreement.

         The employer asserted that the arbitrator reformed the collective bargaining agreement in contravention of a no-add provision in the agreement. The district court held that the arbitrator was authorized to reform the agreement, despite the no-add provision, based on a finding of mutual mistake.

         The panel held that the arbitration award drew its essence from the collective bargaining agreement, and the arbitrator did not exceed his authority in reforming the agreement. In addition, the arbitrator's award did not violate public policy.

         Dissenting, Judge Ikuta wrote that, in light of the no-add provision, the arbitrator exceeded his authority under the collective bargaining agreement.

         ORDER

         The opinion and dissenting opinion filed June 19, 2018, and appearing at 893 F.3d 621 (9th Cir. 2018), are withdrawn. They may not be cited by or to this court or any district court of the Ninth Circuit.

         A new opinion is filed simultaneously with the filing of this order, along with a new dissenting opinion. Accordingly, the Appellant's petition for rehearing en banc is DENIED as moot. The parties may file petitions for rehearing and petitions for rehearing en banc in response to the new opinion, as allowed by the Federal Rules of Appellate Procedure.

          OPINION

          GETTLEMAN, DISTRICT JUDGE

         This appeal involves the validity of an arbitration award. ASARCO asserts that the award is invalid because the arbitrator reformed the Basic Labor Agreement ("BLA") between the Union and ASARCO in contravention of a no-add provision in that agreement. The Union argues that the arbitrator did not contravene the no-add provision because he was required to reform the BLA upon finding that the parties were mutually mistaken as to its terms when they agreed to it. The district court affirmed the award, holding that ASARCO properly preserved its objection to the arbitrator's jurisdiction, but the arbitrator was authorized to reform the BLA, despite the no-add provision, based on a finding of mutual mistake. We affirm.

         I. BACKGROUND AND PROCEDURAL HISTORY

         ASARCO is a miner, smelter, and refiner of copper and other precious metals with facilities in Arizona and Texas. ASARCO's employees are represented by the Union. ASARCO and the Union are parties to the BLA, which was originally effective January 1, 2007, through June 30, 2010. The BLA was modified and extended through two Memoranda of Agreement ("MOA") negotiated in 2010 and 2011. Article 9, Section B of the BLA provides that a Copper Price Bonus ("Bonus") will be paid quarterly to employees who participate in ASARCO's pension plan. The Bonus is calculated based on the price of copper and is significant, at times as much as $8, 000 annually per employee. The 2011 MOA modified Article 12, Section Q of the BLA to make employees hired on or after July 1, 2011 ineligible for ASARCO's pension plan, and thus ineligible for the Bonus. The Union, unaware of the link between the pension plan and the Bonus, [1] filed a grievance disputing ASARCO's refusal to pay the Bonus to employees hired after July 1, 2011. The case proceeded to arbitration.[2]

         At the beginning of the arbitration hearing the parties stipulated that the matter was properly before the arbitrator and that the arbitrator had jurisdiction to decide the grievance. The Union claimed there was a mutual mistake in the 2011 MOA: the parties failed to recognize that Article 9, Section C of the BLA tied eligibility for the Bonus to participation in the pension plan, and both parties intended for all employees to remain eligible for the Bonus when they negotiated the 2011 MOA. Accordingly, the Union argued that reformation of the BLA was the appropriate remedy. ASARCO offered no evidence to the contrary, but argued that the arbitrator lacked authority to reform the BLA because Article 5, Section I(6)(c) contained the following no-add provision: "The arbitrator shall not have jurisdiction or authority to add to, detract from or alter in any way the provisions of this Agreement." After hearing six days of evidence the arbitrator concluded that neither party anticipated that the 2011 MOA modification would impact new hires' eligibility for the Bonus. Because he found that the parties were mutually mistaken as to the terms of the 2011 MOA, the arbitrator ordered that the BLA be reformed to provide that new hires, though ineligible for ASARCO's pension plan, remain eligible for the Bonus.

         ASARCO filed a Petition to Vacate Arbitration Award in the United States District Court for the District of Arizona. ASARCO did not challenge the arbitrator's findings of fact or conclusions of law, but argued that the no-add provision deprived the arbitrator of authority to reform the BLA. The district court confirmed the arbitration award, but rejected the Union's argument that ASARCO had waived any argument regarding the limits of the arbitrator's jurisdiction. In confirming the award, the district court noted the degree of deference due to the arbitrator's decision and concluded that the arbitrator did not violate the no-add provision because the reformation corrected a defect in the BLA, which was the product of mutual mistake, to reflect the terms the parties had agreed upon. ASARCO timely appeals.

         II. STANDARD OF REVIEW

         Our review of a district court's decision confirming an arbitration award is de novo. Hawaii Teamsters & Allied Workers Union, Local 996 v. United Parcel Serv., 241 F.3d 1177, 1180 (9th Cir. 2001). "Our review of labor arbitration awards is, however, extremely deferential because 'courts do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts.'" Id. (quoting United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987)) (internal alterations omitted). Unless the arbitrator has "'dispensed his own brand of industrial justice' by making an award that does not 'draw its essence from the collective bargaining agreement, '" we must confirm the award. Id. at 1181 (quoting United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960)) (internal alterations omitted).

         The context of collective bargaining warrants this extremely limited scope of review because the parties have agreed to have their disputes decided by an arbitrator chosen by them: "[I]t is the arbitrator's view of the facts and of the meaning of the contract that they have agreed to accept." Id. "Indeed, the mandatory and prearranged arbitration of grievances is a critical aspect of the parties' bargain, the means through which they agree 'to handle the anticipated unanticipated omissions of the collective bargaining agreement.'" Stead Motors of Walnut Creek v. Auto. Machinists Lodge No. 1173, Int'l Ass'n of Machinists & Aerospace Workers, 886 F.2d 1200, 1205 (9th Cir. 1989) (en banc) (quoting St. Antoine, Judicial Review of Labor Arbitration Awards: A Second Look at Enterprise Wheel and Its Progeny, 75 Mich.L.Rev. 1137, 1140 (1977)) ("Judicial Review") (internal alterations omitted). Such omissions occur because "[u]nlike the commercial contract, which is designed to be a comprehensive distillation of the parties' bargain, the collective bargaining agreement is a skeletal, interstitial document." Id.

         Consequently, "[t]he labor arbitrator is the person the parties designate to fill in the gaps; for the vast array of circumstances they have not considered or reduced to writing, the arbitrator will state the parties' bargain." Id. He is "'their joint alter ego for the purpose of striking whatever supplementary bargain is necessary' to handle matters omitted from the agreement." Id. (quoting Judicial Review, 75 Mich.L.Rev. at 1140). Because of this role, the arbitrator "cannot 'misinterpret' a collective bargaining agreement," id., and "even if we were convinced that the arbitrator misread the contract or erred in interpreting it, such a conviction would not be a permissible ground for vacating the award." Va. Mason Hosp. v. Wash. State Nurses Ass'n, 511 F.3d 908, 913‒14 (9th Cir. 2007) (footnote omitted). This deference applies "'even if the basis for the arbitrator's decision is ambiguous and notwithstanding the erroneousness of any factual findings or legal conclusions.'" Federated Dep't Stores v. United Foods & Commercial Workers Union, Local 1442, 901 F.2d 1494, 1496 (9th Cir. 1990) (quoting Stead Motors, 886 F.2d at 1209).

         III. ANALYSIS

         Although judicial review of arbitration awards is extremely limited, the Supreme Court and this Circuit have articulated 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 own 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." Id. (internal quotation marks omitted).

         Given the great deference due to arbitrator's decisions, ASARCO wisely does not challenge the arbitrator's findings of fact or conclusions of law, but instead argues that the arbitrator's award does not warrant deference based on all three exceptions. The first two exceptions are interrelated, and we will address them simultaneously before turning to the third exception. ASARCO argues that the no-add provision in the BLA deprived the arbitrator of authority to reform the BLA, and the arbitrator's award does not draw its essence from the BLA because it ignores this provision.

         In deciding whether the arbitrator's award draws its essence from the BLA, "the quality - that is the degree of substantive validity - of [his] interpretation is, and always has been, beside the point." Sw. Reg'l Council of Carpenters v. Drywall Dynamics, Inc., 823 F.3d 524, 532 (9th Cir. 2016), cert. denied, 137 S.Ct. 829, 197 L.Ed.2d 68 (2017). "Instead, the appropriate question for a court to ask when determining whether to enforce a labor arbitration award interpreting a collective bargaining agreement is a simple binary one: Did the arbitrator look to and construe the contract, or did he not?" Id. This is because "'[i]t is only when the arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice that his decision may be unenforceable.'" Id. at 531 (quoting Major League Baseball Players Ass 'n v. Garvey, 532 U.S. 504, 509, 121 S.Ct. 1724, 149 L.Ed.2d 740 (2001)) (internal alterations omitted). Accordingly, "the court's inquiry ends" if the arbitrator "made any interpretation or application of the agreement at all." Id. at 531‒32. We therefore "must limit [our] review to whether the arbitrator's solution can be rationally derived from some plausible[3] theory of the general framework or intent of the agreement." United Food & Commercial Workers Int'l Union, Local 588 v. Foster Poultry Farms, 74 F.3d 169, 173 (9th Cir. 1995), opinion amended on denial of reh'g, (9th Cir. Jan. 30, 1996).

         We have no doubt that the arbitrator's decision was grounded in his reading of the BLA. The arbitrator acknowledged that new hires were not entitled to the Bonus under the plain language of the BLA and that he could not find for the Union based solely on the language contained in the BLA. He also recognized that arbitrators do not generally have the authority to rewrite CBAs or ignore their provisions. He noted, however, that arbitrators can reform a contract to correct an obvious mutual mistake. Citing a substantial amount of evidence that he heard over six days, the arbitrator concluded that the parties presented precisely this scenario: in negotiating the 2011 MOA, they never discussed or even acknowledged that if the BLA were amended to make new hires ineligible for the pension plan, they would also be ineligible for the Bonus. Although he did not specifically cite the no-add provision when explaining the basis of his award, the arbitrator did quote it directly as relevant language of the BLA and noted that, absent a finding of mutual mistake, he would not have the authority to reform the BLA.[4]

         Given the arbitrator's extensive treatment of the BLA and acknowledgment of the no-add provision, we agree with the district court that the arbitrator's decision was grounded in his reading of the BLA, and are "bound to enforce the award" even if "the basis for the arbitrator's decision may be ambiguous." W.R. Grace & Co. v. Local Union 759, Int'l Union of United Rubber, Cork, Linoleum & Plastic Workers of Am., 461 U.S. 757, 764, 103 S.Ct. 2177, 2182, 76 L.Ed.2d 298 (1983); see also Drywall Dynamics, 823 F.3d at 533("'[A]rbitrators have no obligation to give their reasons for an award at all, '" and a court may not "'infer the non-existence of a particular reason merely from the award's silence on a given issue.'") (quoting Stead Motors, 886 F.2d at 1208, 1213); Stead Motors, 886 F.2d at 1208 ("'[M]ere ambiguity in the opinion accompanying an award, which ...


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