Does the FAA Apply to Collective Bargaining Arbitrations After 14 Penn Plaza?

Your client has just been involved in an arbitration proceeding under a collective bargaining agreement (CBA), and the arbitrator has issued an award. Whether the question involves the statute of limitations for initiating court proceedings or the standards for challenging the enforceability of the arbitration award, the answers have, in the past, been found only in case law. That is because it has been the longstanding view of most federal courts that the Federal Arbitration Act (FAA) does not apply to arbitration provisions in CBAs. The U.S. Supreme Court's recent decision in 14 Penn Plaza v. Pyett, 129 S. Ct. 1456 (2009), suggests a different answer.

The Status Quo Prior to 14 Penn Plaza

Under the traditional view, your arbitration award, arising from a CBA, will be governed by the federal common law of labor arbitration under the Labor Management Relations Act of 1947 (LMRA). The federal common law of labor arbitration finds its genesis in the Supreme Court's holding in Textile Workers Union of America v. Lincoln Mills of Alabama, 353 U.S. 448, 455-58 (1957). That case held that the LMRA, which on its face simply granted exclusive subject-matter jurisdiction over disputes involving CBAs to federal courts, empowered those courts to create and apply federal common law to interpret and enforce arbitration provisions in CBAs and confirm or vacate arbitration awards resulting from these agreements.

The Supreme Court decision in Lincoln Mills did not mention the FAA even though the parties' briefs discussed it and it was discussed by the lower courts. Justice Frankfurter in dissent (See Id. at 466) understood the majority's silence as implicitly holding that the FAA did not apply to arbitration provisions in CBAs, an understanding adopted by the majority of federal courts of appeals that have ruled on the question. See, e.g., IBEW, Local Union No. 545 v. Hope Elec. Corp., 380 F.3d 1084, 1097-98 (8th Cir. 2004); International Chem. Workers Union, Local 683c v. Columbian Chems. Co., 331 F.3d 491, 494 (5th Cir. 2003); Coca-Cola Bottling Co. v. Soft Drink & Brewery Workers Union Local 812, 242 F.3d 52 (2d Cir. 2001), Cf. Briggs & Stratton Corp. v. Local 232, International Union, Allied Indus. Workers of Amer., 36 F.3d 712, 715 (7th Cir. 1994) (“our circuit is among the minority that applies the [FAA] to most collective bargaining agreements”).

As a result, once the arbitrator makes an award at the end of the arbitration proceeding, you must look to the case books, rather than the statute books, to find out the statute of limitations for seeking to confirm or vacate an award, and the answer often will be elusive. In United Parcel Service v. Mitchell, 451 U.S. 56 (1981), the Supreme Court held that under the LMRA, state law should be used to determine the statute of limitations for vacating an arbitration award. But in DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151 (1983), the Court held that the LMRA's six-month statute of limitations for bringing unfair employment practice complaints to the National Labor Relations Board should apply to certain motions to vacate an arbitration award under that statute. There is a split among the federal courts of appeals about whether DelCostello overruled Mitchell or whether the federal statute of limitations identified in DelCostello applies in only a subset of actions brought under the LMRA. Compare Derwin v. General Dynamics Corp., 719 F.2d 484, 487 (1st Cir. 1983) (“[DelCostello] was not intended to weaken the ordinary presumption of state law primacy in resolving section 301 limitations questions”), with Martin v. Pullman Standard, 726 F.2d 101, 101 (3d Cir. 1984) (stating that the Supreme Court overruled Mitchell and that the six-month statutory limitation period rather than the state limitation period was the appropriate one to use).

You must file a summons and complaint in federal court to confirm, vacate, or modify the award, and you are thus subject to the normal scheduling conference and pre-trial case management tools fashioned by the courts, and your opponent can raise counterclaims in its answer. If your opponent wants to challenge your complaint, it must do so through a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).

If you wish to vacate or modify an award, you must rely on the substantive grounds established by the Supreme Court in the Steelworkers Trilogy. See United Steelworkers of Am. v. American Mfg. Co., 363 U.S. 564 (1960); United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960); United Steelworkers of Am. v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960). In such a challenge, you must show that the award does not draw its “essence” from the CBA. Or, perhaps, you can prevail if you show that the award violates public policy. See United Paperworkers v. Misco, 484 U.S. 29 (1987) (approving, at least in concept, the “public policy” exception to enforcement of a labor arbitration award).

The Alternative Statutory Arbitration Regime of the FAA

But what if there were another regime under which your arbitration could take place? What if the FAA applied to the arbitration provision in your CBA?

Under the FAA, there are clear and relatively short limitations periods for motions to vacate (three months after the award is made) and confirm (one year from issuance of the award). See 9 U.S.C. ” 12, 9.

In Sections 9 and 10 of the FAA, Congress established streamlined processes for having judgment rendered on, and challenging the enforcement of, an award. Instead of filing a complaint, you could file an “application,” which is treated as a motion, instead of a complaint (9 U.S.C. ' 6). Your application would not be subject to a motion to dismiss under Rule 12(b)(6). See IFC Interconsult, AG v. Safeguard Int'l Partners, LLC, 438 F.3d 298, 308 (3d Cir. 2006). The application would also not be subject to scheduling conferences and other pretrial case-management tools under the rules of civil procedure. See D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 108 n.2 (2d Cir. 2006); Health Servs. Mgmt. Corp. v. Hughes, 975 F.2d 1253, 1257-58 (7th Cir. 1992). Further, your opponent could not raise any counterclaims other than other FAA applications. See Booth v. Hume Pub., Inc., 902 F.2d 925, 931-33 (11th Cir. 1990).

In addition, the grounds for vacating or modifying an arbitration award under the FAA are identified in the statute itself, and do not include an “essence” or public policy ground. See 9 U.S.C. ” 10, 11. The Supreme Court held, in Hall Street LLP v. Mattel Inc., 128 S. Ct. 1396, 1403 (2008), that the grounds to vacate or modify an arbitration award in Sections 10 and 11 of the FAA are narrow and exclusive.

An Unlikely Harbinger of Change

So is this possible? The U.S. Supreme Court's recent decision in 14 Penn Plaza v. Pyett, suggests that it may be because it can be read to imply that the FAA does apply to arbitration provisions in CBAs.

14 Penn Plaza may seem like an unlikely case to generate such a vast change in the legal underpinnings of labor-management arbitration. The major legal issue was very specific: Could unions and employers negotiate an arbitration clause that required employees who belonged to the union to arbitrate, and thereby give up their right to litigate in court, the claim that the employer discriminated against them in violation of federal and/or state discrimination laws? The Court answered in the affirmative, but the important point for this article is that the FAA was the backdrop for the Court's 14 Penn Plaza decision.

First, the Court noted that when the employees initially filed their discrimination lawsuit in federal court, the employer unsuccessfully invoked Sections 3 and 4 of the FAA in attempting to obtain an order staying the litigation and compelling the arbitration promised by the CBA. Section 3 requires a district court to stay a lawsuit and Section 4 requires the court to compel arbitration if the parties have entered into an arbitration agreement.

The Supreme Court had previously held that Section 3 only applies to arbitration agreements that are otherwise governed by Sections 1 and 2 of the FAA. See Bernhardt v. Polygraphic Co. of Amer., 350 U.S. 198, 201 (1956) (“Sections 1, 2, and 3 [of the FAA] are integral parts of a whole. [Section 3 applies only to] agreement[s] which [Sections] 1 and 2 have brought under federal regulation.”)) and lower courts have extended that holding to Section 4. See Metro Indust. Painting Corp. v. Terminal Construction. Co., 287 F.2d 382, 384 (2d Cir. 1961); Local 19 v. Buckeye Cotton Oil Co., 236 F.2d 776, 784 (6th Cir. 1956). The Court nonetheless accepted the employer's invocation of Sections 3 and 4 in 14 Penn Plaza. Thus, it implicitly held that the arbitration provision in the CBA was governed by the FAA.

The Court also acknowledged that the court of appeals' jurisdiction to hear the employer's interlocutory appeal was tethered to the FAA. Section 16(a) permits an immediate appeal of district court orders refusing to stay litigation “under section 3 of this title” or compel arbitration “under section 4 of this title.” In another very recent case, Arthur Andersen LLP v. Carlisle, 129 S. Ct. 1896, 1900 (2009), the Court confirmed that it is the fact that the motion is brought under Sections 3 or 4 of the FAA that triggers Section 16 appellate jurisdiction.

Finally, in discussing the enforcement of the arbitration provision against a union member with a statutory discrimination claim, the Court noted that Section 10 of the FAA would prevent the deprivation of substantive statutory rights when the arbitration award is reviewed.

The casual repeated discussion of the FAA in the 14 Penn Plaza decision (none of which was challenged in the dissenting opinions) demonstrates that the Supreme Court viewed the arbitration provision in the CBA to be an agreement to arbitrate under Section 2 of the FAA.

This view about the scope of the FAA would not be limited to the particular circumstances of individual employee's suits against employers. If arbitration provisions that are in CBAs fall within the scope of the FAA, there is no reason why the arbitration provision should not be enforceable through the FAA by an employer against a union or by a union against an employer.

Conclusion

In light of the 14 Penn Plaza decision, the view that arbitration provisions in CBAs are outside the ambit of the FAA may be ripe for revisiting. 14 Penn Plaza can be read to sweep aside the lower court decisions that have refused to allow the parties to rely on the FAA to enforce arbitration agreements in CBAs and to seek to confirm, modify or vacate any ensuing award.

If 14 Penn Plaza can be read as a retreat from the Court's implicit holding in Lincoln Mills, the Supreme Court has signaled a broader role for the FAA and a diminished role for federal common law standards. We think this reading of the Court's decision should be embraced because it would bring coherence to the law, reduce the need for federal courts to invent common law doctrines that are not anchored in any statutory language, and encourage federal courts to give greater deference to labor arbitrators' awards.

Seth M. Galanter is Of Counsel in Morrison & Foerster LLP's Washington, DC, office, where he works on appellate matters, including arbitration issues. Jeremy M. McLaughlin is an associate at the firm in the Appellate Practice Group.

Your client has just been involved in an arbitration proceeding under a collective bargaining agreement (CBA), and the arbitrator has issued an award. Whether the question involves the statute of limitations for initiating court proceedings or the standards for challenging the enforceability of the arbitration award, the answers have, in the past, been found only in case law. That is because it has been the longstanding view of most federal courts that the Federal Arbitration Act (FAA) does not apply to arbitration provisions in CBAs. The U.S. Supreme Court's recent decision in 14 Penn Plaza v. Pyett , 129 S. Ct. 1456 (2009), suggests a different answer.

The Status Quo Prior to 14 Penn Plaza

Under the traditional view, your arbitration award, arising from a CBA, will be governed by the federal common law of labor arbitration under the Labor Management Relations Act of 1947 (LMRA). The federal common law of labor arbitration finds its genesis in the Supreme Court's holding in Textile Workers Union of America v. Lincoln Mills of Alabama , 353 U.S. 448, 455-58 (1957). That case held that the LMRA, which on its face simply granted exclusive subject-matter jurisdiction over disputes involving CBAs to federal courts, empowered those courts to create and apply federal common law to interpret and enforce arbitration provisions in CBAs and confirm or vacate arbitration awards resulting from these agreements.

The Supreme Court decision in Lincoln Mills did not mention the FAA even though the parties' briefs discussed it and it was discussed by the lower courts. Justice Frankfurter in dissent (See Id. at 466) understood the majority's silence as implicitly holding that the FAA did not apply to arbitration provisions in CBAs, an understanding adopted by the majority of federal courts of appeals that have ruled on the question. See, e.g., IBEW, Local Union No. 545 v. Hope Elec. Corp. , 380 F.3d 1084, 1097-98 (8th Cir. 2004); International Chem. Workers Union, Local 683c v. Columbian Chems . Co., 331 F.3d 491, 494 (5th Cir. 2003); Coca-Cola Bottling Co. v. Soft Drink & Brewery Workers Union Local 812 , 242 F.3d 52 (2d Cir. 2001), Cf. Briggs & Stratton Corp. v. Local 232 , International Union, Allied Indus. Workers of Amer. , 36 F.3d 712, 715 (7th Cir. 1994) (“our circuit is among the minority that applies the [FAA] to most collective bargaining agreements”).

As a result, once the arbitrator makes an award at the end of the arbitration proceeding, you must look to the case books, rather than the statute books, to find out the statute of limitations for seeking to confirm or vacate an award, and the answer often will be elusive. In United Parcel Service v. Mitchell , 451 U.S. 56 (1981), the Supreme Court held that under the LMRA, state law should be used to determine the statute of limitations for vacating an arbitration award. But in DelCostello v. International Brotherhood of Teamsters , 462 U.S. 151 (1983), the Court held that the LMRA's six-month statute of limitations for bringing unfair employment practice complaints to the National Labor Relations Board should apply to certain motions to vacate an arbitration award under that statute. There is a split among the federal courts of appeals about whether DelCostello overruled Mitchell or whether the federal statute of limitations identified in DelCostello applies in only a subset of actions brought under the LMRA. Compare Derwin v. General Dynamics Corp. , 719 F.2d 484, 487 (1st Cir. 1983) (“[ DelCostello ] was not intended to weaken the ordinary presumption of state law primacy in resolving section 301 limitations questions”), with Martin v. Pullman Standard , 726 F.2d 101, 101 (3d Cir. 1984) (stating that the Supreme Court overruled Mitchell and that the six-month statutory limitation period rather than the state limitation period was the appropriate one to use).

You must file a summons and complaint in federal court to confirm, vacate, or modify the award, and you are thus subject to the normal scheduling conference and pre-trial case management tools fashioned by the courts, and your opponent can raise counterclaims in its answer. If your opponent wants to challenge your complaint, it must do so through a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).

If you wish to vacate or modify an award, you must rely on the substantive grounds established by the Supreme Court in the Steelworkers Trilogy. S ee United Steelworkers of Am. v. American Mfg. Co. , 363 U.S. 564 (1960); United Steelworkers of Am. v. Warrior & Gulf Navigation Co. , 363 U.S. 574 (1960); United Steelworkers of Am. v. Enterprise Wheel & Car Corp. , 363 U.S. 593 (1960). In such a challenge, you must show that the award does not draw its “essence” from the CBA. Or, perhaps, you can prevail if you show that the award violates public policy. See United Paperworkers v. Misco , 484 U.S. 29 (1987) (approving, at least in concept, the “public policy” exception to enforcement of a labor arbitration award).

The Alternative Statutory Arbitration Regime of the FAA

But what if there were another regime under which your arbitration could take place? What if the FAA applied to the arbitration provision in your CBA?

Under the FAA, there are clear and relatively short limitations periods for motions to vacate (three months after the award is made) and confirm (one year from issuance of the award). See 9 U.S.C. ” 12, 9.

In Sections 9 and 10 of the FAA, Congress established streamlined processes for having judgment rendered on, and challenging the enforcement of, an award. Instead of filing a complaint, you could file an “application,” which is treated as a motion, instead of a complaint (9 U.S.C. ' 6). Your application would not be subject to a motion to dismiss under Rule 12(b)(6). See IFC Interconsult, AG v. Safeguard Int'l Partners, LLC , 438 F.3d 298, 308 (3d Cir. 2006). The application would also not be subject to scheduling conferences and other pretrial case-management tools under the rules of civil procedure. See D.H. Blair & Co. v. Gottdiener , 462 F.3d 95, 108 n.2 (2d Cir. 2006); Health Servs. Mgmt. Corp. v. Hughes , 975 F.2d 1253, 1257-58 (7th Cir. 1992). Further, your opponent could not raise any counterclaims other than other FAA applications. See Booth v. Hume Pub., Inc. , 902 F.2d 925, 931-33 (11th Cir. 1990).

In addition, the grounds for vacating or modifying an arbitration award under the FAA are identified in the statute itself, and do not include an “essence” or public policy ground. See 9 U.S.C. ” 10, 11. The Supreme Court held, in Hall Street LLP v. Mattel Inc. , 128 S. Ct. 1396, 1403 (2008), that the grounds to vacate or modify an arbitration award in Sections 10 and 11 of the FAA are narrow and exclusive.

An Unlikely Harbinger of Change

So is this possible? The U.S. Supreme Court's recent decision in 14 Penn Plaza v. Pyett, suggests that it may be because it can be read to imply that the FAA does apply to arbitration provisions in CBAs.

14 Penn Plaza may seem like an unlikely case to generate such a vast change in the legal underpinnings of labor-management arbitration. The major legal issue was very specific: Could unions and employers negotiate an arbitration clause that required employees who belonged to the union to arbitrate, and thereby give up their right to litigate in court, the claim that the employer discriminated against them in violation of federal and/or state discrimination laws? The Court answered in the affirmative, but the important point for this article is that the FAA was the backdrop for the Court's 14 Penn Plaza decision.

First, the Court noted that when the employees initially filed their discrimination lawsuit in federal court, the employer unsuccessfully invoked Sections 3 and 4 of the FAA in attempting to obtain an order staying the litigation and compelling the arbitration promised by the CBA. Section 3 requires a district court to stay a lawsuit and Section 4 requires the court to compel arbitration if the parties have entered into an arbitration agreement.

The Supreme Court had previously held that Section 3 only applies to arbitration agreements that are otherwise governed by Sections 1 and 2 of the FAA. See Bernhardt v. Polygraphic Co. of Amer. , 350 U.S. 198, 201 (1956) (“Sections 1, 2, and 3 [of the FAA] are integral parts of a whole. [Section 3 applies only to] agreement[s] which [Sections] 1 and 2 have brought under federal regulation.”)) and lower courts have extended that holding to Section 4. See Metro Indust. Painting Corp. v. Terminal Construction. Co. , 287 F.2d 382, 384 (2d Cir. 1961); Local 19 v. Buckeye Cotton Oil Co. , 236 F.2d 776, 784 (6th Cir. 1956). The Court nonetheless accepted the employer's invocation of Sections 3 and 4 in 14 Penn Plaza. Thus, it implicitly held that the arbitration provision in the CBA was governed by the FAA.

The Court also acknowledged that the court of appeals' jurisdiction to hear the employer's interlocutory appeal was tethered to the FAA. Section 16(a) permits an immediate appeal of district court orders refusing to stay litigation “under section 3 of this title” or compel arbitration “under section 4 of this title.” In another very recent case, Arthur Andersen LLP v. Carlisle , 129 S. Ct. 1896, 1900 (2009), the Court confirmed that it is the fact that the motion is brought under Sections 3 or 4 of the FAA that triggers Section 16 appellate jurisdiction.

Finally, in discussing the enforcement of the arbitration provision against a union member with a statutory discrimination claim, the Court noted that Section 10 of the FAA would prevent the deprivation of substantive statutory rights when the arbitration award is reviewed.

The casual repeated discussion of the FAA in the 14 Penn Plaza decision (none of which was challenged in the dissenting opinions) demonstrates that the Supreme Court viewed the arbitration provision in the CBA to be an agreement to arbitrate under Section 2 of the FAA.

This view about the scope of the FAA would not be limited to the particular circumstances of individual employee's suits against employers. If arbitration provisions that are in CBAs fall within the scope of the FAA, there is no reason why the arbitration provision should not be enforceable through the FAA by an employer against a union or by a union against an employer.

Conclusion

In light of the 14 Penn Plaza decision, the view that arbitration provisions in CBAs are outside the ambit of the FAA may be ripe for revisiting. 14 Penn Plaza can be read to sweep aside the lower court decisions that have refused to allow the parties to rely on the FAA to enforce arbitration agreements in CBAs and to seek to confirm, modify or vacate any ensuing award.

If 14 Penn Plaza can be read as a retreat from the Court's implicit holding in Lincoln Mills, the Supreme Court has signaled a broader role for the FAA and a diminished role for federal common law standards. We think this reading of the Court's decision should be embraced because it would bring coherence to the law, reduce the need for federal courts to invent common law doctrines that are not anchored in any statutory language, and encourage federal courts to give greater deference to labor arbitrators' awards.

Seth M. Galanter is Of Counsel in Morrison & Foerster LLP's Washington, DC, office, where he works on appellate matters, including arbitration issues. Jeremy M. McLaughlin is an associate at the firm in the Appellate Practice Group.