Finding that some of its previous pronouncements were leading district court judges astray, the Ninth Circuit clarified its precedent regarding the scope of review of labor arbitration awards. “We conclude that it is time for us to retire the use of ‘plausibility’ as a term to describe the courts’ role in reviewing labor arbitration awards.” Southwest Regional Council of Carpenters v. Drywall Dynamics, Inc., 2016 WL 2909241 (9th Cir. May 19, 2016).
In Drywall Dynamics, the district court had vacated the arbitration award for two reasons. It found the arbitration panel’s interpretation of the labor contracts was not “plausible”, and it found the award violated a clear public policy. The Ninth Circuit un-vacated the arbitration award, and took the occasion to clarify the limited bases for vacating labor arbitration awards.
First, the court tackled its precedent. Although there are “a long line of” cases that required an arbitrator’s decision to be based on a “plausible interpretation of the contract,” the court found that was “in sharp contrast to the judicial ‘hands off’ approach long required in labor arbitration cases.” Therefore, the court took the opportunity to make clear that the only relevant inquiry on the merits of the award is whether “the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority.”
With respect to the public policy exception, the court noted that is also narrow. When there are “countervailing policy considerations,” it is not appropriate to vacate an arbitrator’s decision on public policy grounds.
In this case, the court found the panel did construe and apply the contract, and that there were competing policy considerations, so the award must be affirmed.
The Ninth Circuit is not the only appellate court affirming arbitration awards (and clarifying bases for vacatur). The Supreme Court of Oregon affirmed an arbitration award last month, over an objection that the arbitrator did not have authority to grant the awarded remedies. Couch Investments, LLC v. Peverieri, 2016 WL 1593701 (Or. Apr. 21, 2016). And last week the Supreme Court of Texas affirmed an arbitration award in a trust dispute. In its opinion, Texas’s highest court held that the bases for vacatur set forth in the Texas General Arbitration Act are exclusive. “[A] party may avoid confirmation only by demonstrating a ground expressly listed in” that statute. Hoskins v. Colonel Clifton Hoskins, 2016 WL 2993929 (Tex. May 20, 2016). (Read more at Disputing.)