ConocoPhillips, Inc. v. Local 13-0555 United Steelworkers International Union, No. 12-31225 (5th Cir. Jan. 30, 2014) [click for opinion]

ConocoPhilips, Inc. operated a refinery in Louisiana that employed members of Local 13-0555 United Steelworkers International Union ("USW").  In June 2010, a USW member who worked at the refinery failed a random drug test and was later terminated pursuant to the company's substance abuse policy. 

The collective bargaining agreement between Conoco and USW specified that "[d]ischarge for a confirmed positive test under the substance abuse policy shall not be subject to grievance or arbitration."  The agreement did, however, permit arbitration of issues concerning the integrity and handling of the test samples "relative to such discharge."  USW commenced an arbitration against Conoco on behalf of the employee for wrongful discharge, claiming that the test results were a false positive.  Over Conoco's objections, and following briefing on the merits, the arbitrator determined that he had authority to consider the dispute, concluded that the dispute was arbitrable, and entered an award for the employee, holding that his termination had been wrongful.  Conoco then filed an action in the U.S. District Court for the Western District of Louisiana seeking to vacate the award on the grounds that Conoco never consented to arbitrate the dispute and never agreed to allow the arbitrator to decide the issue of whether the dispute was arbitrable.  The district court granted Conoco's motion, and USW appealed to the Fifth Circuit.

The Fifth Circuit affirmed vacatur of the award.  The threshold issue, the court explained, was whether the parties granted the arbitrator the authority to decide whether USW's claim was arbitrable.  Under the Supreme Court's decision in First Options of Chicago, Inc. v. Kaplan, "courts should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so."  514 U.S. 938, 944 (1995).  Here, USW failed to meet its burden of showing that Conoco had clearly and unmistakably agreed to arbitrate arbitrability. 

First, the court found that Conoco had repeatedly objected to the arbitrator's determination of any issue beyond chain of custody of the drug sample.  Two of these objections arguably went specifically to the issue of the power to decide arbitrability, and at the very least, the statements were too ambiguous to say that Conoco had utterly failed to raise the issue. Second, merely by challenging the arbitrator's authority Conoco did not impliedly consent to the arbitrator's jurisdiction to decide arbitrability, as USW claimed.  Quoting First Options, the court stated that "'[m]erely arguing' the issue [of the power to decide arbitrability] is not enough, even if the issue is competently and consistently presented." 

The court also dismissed USW's argument that Conoco had consented to the arbitrator's jurisdiction by failing to object to certain indications that the arbitrator would consider the issue of its power to decide arbitrability, particularly the arbitrator's statement it would "go ahead and hear the merits and then I'll decide the Arbitrability later."  To accept USW's argument, the court stated, would be to flip the burden of proof on its head.  USW was required to prove that Conoco had "clearly and unmistakably" agreed to arbitrate arbitrability, not that it failed to object to the arbitrator's power to decide arbitrability.  The court added that, underFirst Options, ambiguity and silence favor having the dispute heard by the courts, not the arbitrator. 

Finally, the court rejected USW's argument that, by presenting arguments on the merits of the dispute, Conoco had demonstrated an intent to be bound by the arbitrator's decision.  The court observed that, even if Conoco believed that the arbitrator lacked jurisdiction to decide the arbitrability issue and Conoco intended to appeal that issue, presenting merits arguments to the arbitrator was the only prudent course of action under the circumstances. 

In holding for Conoco, the court recognized that its ruling was at odds with two decisions from sister circuits, which had found that a party's failure to object to an arbitrator's power to decide arbitrability could lead to a finding of a clear and unmistakable intent to arbitrate.  The court found those decisions "difficult to reconcile with First Options."