Opinion ID: 2998888
Heading Depth: 2
Heading Rank: 1

Heading: Arbitrability Issue

Text: CUNA’s ability to avoid Rule 11 sanctions is difficult not only because of the deferential standard by which we evaluate a district court’s award of such sanctions, but also because both our court and the Supreme Court have held that judicial review of arbitration awards is limited. See Baravati v. Josephthal, Lyon & Ross, Inc., 28 F.3d 704, 706 (7th Cir. 1994) (“Judicial review of arbitration awards is tightly limited; perhaps it ought not be called ‘review’ at all.”). A court must uphold an arbitrator’s decision as long as it “draws its essence from the collective bargaining agreement” and is not merely the arbitrator’s “own brand of industrial justice.” United Paper Workers Int’l Union et al. v. Misco, 484 U.S. 29, 36 (1987), quoting Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 596 (1960). An award does not draw its essence from the collective bargaining agreement “only when the arbitrator must have based his award on some body of thought, or feeling, or policy, or law that is outside the contract.” Arch of Illinois v. District 12, United Mine Workers of America, 85 F.3d 1289, 1292 (7th Cir. 1996), quoting Polk Bros v. Chicago Truck Drivers Union, 973 F.2d 593, 597 (7th Cir. 1992). An arbitrator may, however, look to sources other than the CBA for guidance. Anheuser-Busch, Inc. v. Beer, Nos. 05-1021 & 05-1226 9 Soft Drink Local Union No. 744, 280 F.3d 1133, 1137 (7th Cir. 2002) (quoting Tootsie Roll Indus., Inc. v. Local Union #1, 832 F.2d 81 (7th Cir. 1987)). This court has ruled that it is not our job to decide if an arbitrator erred in interpreting a labor contract, even if the error was significant. Instead, we will only determine if the arbitrator did indeed interpret the contract. Hill v. Norfolk & Wesleyan Railway Co., 814 F.2d 1192, 1195 (7th Cir. 1987). Thus, a petitioner will not prevail unless he can prove that “there is no possible interpretive route to the [arbitrator’s] award, so a non-contractual basis can be inferred.” Arch of Illinois, 85 F.3d at 1293-94, quoting Chicago Typographical Union No. 16 v. Chicago Sun-Times, Inc., 935 F.2d 1501, 1506 (7th Cir. 1991). Here, the interpretive route is easy to follow. CUNA argues that Arbitrator Cohen exceeded his authority by finding that CUNA’s outsourcing violated contractual provisions because his ruling considered provisions of the CBA other than those cited by Local 39 in its grievance. However, Arbitrator’s Cohen’s decision to consider the outsourcing issue is reasonable and clearly “draws its essence from the collective bargaining agreement,” and is not merely Arbitrator Cohen’s “own brand of industrial justice.” United Paper Workers Int’l Union et al., 484 U.S. at 36. Arbitrator Cohen found that because Local 39 alleged in the grievance that CUNA failed to show that the layoffs were necessary, he had to examine CUNA’s reason underlying the layoffs to determine whether or not the layoffs were necessary. Since the plaintiff claimed the layoffs were necessary due to outsourcing, outsourcing was within the scope of what Arbitrator Cohen had to address to deal thoroughly with the grievance. There was no provision in the articles cited in the grievance that specifically endorsed outsourcing. Thus, Cohen looked to other articles in the CBA. 10 Nos. 05-1021 & 05-1226 This reasoning fits within the guidelines of the provision in question, the scope of authority provision in Article XIX, Section 4 of the CBA. The layoffs did constitute the formal framing of the issue, but since the necessity of the layoffs was also at issue per the grievance, and outsourcing was cited by CUNA as the reason the layoffs were necessary, outsourcing was necessarily at issue as well. Nothing in the CBA said that an arbitrator could not consider other parts of the agreement. The CBA simply said that all considerations must relate to what was in the grievance, and here they did so relate. In other words, the layoffs (and their necessity) constituted the “formal framing” of the issue being arbitrated, but since outsourcing was related to the necessity of the layoffs, the arbitrator was able to address outsourcing as well. Because Arbitrator Cohen’s interpretive route was easy to follow and the case law upholding the deferential treatment courts accord arbitration awards is clear, extensive, and readily available, the district court’s decision to apply Rule 11 sanctions to CUNA was proper. CUNA attempts to sidestep the deferential standard under which arbitration awards are reviewed and to justify its challenge to the arbitration award, by arguing that it was not challenging Arbitrator Cohen’s interpretation of the CBA, but instead whether the issue of its subcontracting was arbitrable. A question of arbitrability, as opposed to an interpretation of a CBA, is “undeniably an issue for judicial determination. Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.” AT&T Technologies v. Communications Workers, 475 U.S. 643, 649 (1986). Thus, if there were a true question of arbitrability, our analysis Nos. 05-1021 & 05-1226 11 might be different.1 However, we agree with the district court that there was not a true question of arbitrability in this case. Instead, CUNA “dresses up its arguments about the scope of the arbitrator’s authority in arbitrability clothing.” CUNA Mutual Insurance Society v. Office and Professional Employees International Union, Local 39, 2004 U.S. Dist. LEXIS 24120, at  (W.D. Wis. Nov. 29, 2004). CUNA’s argument that the clause in question is an arbitration clause is, to put it mildly, stretching a point. The provision at issue, Article XIX, Section 4 of the CBA, reads, “the article and section cited [in the grievance] shall be considered a formal framing of the issue or remedy if the issue is arbitrated.” CUNA argues that the above language results in a case-by-case substantive limit on disputes that can be submitted to arbitration. Thus, CUNA reasons, because Local 39’s grievance did not mention subcontracting, but instead 1 We note that even if there was a question of arbitrability in this case, Rule 11 sanctions may still apply. The Supreme Court held, “where the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that ‘[an] order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” AT&T Technologies Inc. v. Communications Workers of America et al., 475 U.S. 643, 650 (1986), quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960). Here, it would be difficult to argue with “positive assurance” that the provision of the CBA at issue is not susceptible to an interpretation that covers the asserted dispute. The provision does not state that arbitrating the subcontracting issue is prohibited. It merely states that the article and section cited in the grievance should be the “formal framing” of the issue or remedy. In other words, the article and section cited need only provide an orderly outline of the issue. 12 Nos. 05-1021 & 05-1226 mentioned only layoffs, Article XIX, Section 4 prevented the arbitrator from reaching the subcontracting issue and it was not arbitrable. But CUNA’s interpretation of the language of this provision is erroneous. The final part of the clause, “if the issue is arbitrated,” implies that the clause in question applies to issues that have already been designated as arbitrable. Additionally, true arbitrability clauses tend to use language that excludes specific subject matters from arbitration. Here, the provision only defines the scope of the arbitrator’s inquiry; it does not impose a substantive limit on what is to be arbitrated. This scope is open to interpretation by the arbitrator, and as we have discussed above, Arbitrator Cohen’s interpretive route was reasonable and easy to follow. Case law supports the above reasoning and not that of CUNA. In Dreis & Krump Manufacturing Co. v. Int’l Assoc. of Machinists, 802 F.2d 247, 253 (7th Cir. 1986) an employer argued that even though there was no express language in the agreement that limited subcontracting, the management rights clause of the contract allowed the company to subcontract and precluded the issue from arbitration. Like the present case, the company argued that a clause that did not specifically address subcontracting (the management rights clause) nonetheless made subcontracting non-arbitrable. However, the court found the issue was really one of interpretation of the agreement and not one of arbitrability, stating “[a]ll the company is left with is a disagreement with the arbitrator over the precise meaning of the agreement in the circumstances of the present case.” Id. at 253. The court then applied the deferential standard of review used in arbitration cases which involve CBA interpretations and found against the employer, ruling that Rule 11 sanctions in the form of attorneys’ fees should apply. Nos. 05-1021 & 05-1226 13 CUNA argues Dreis can be distinguished from the present case because, unlike the company in Dreis, CUNA raised its arbitrability objection prior to the hearing and therefore preserved judicial review. This argument involves a hasty reading of Dreis. The court there explicitly rejected this argument, stating that even assuming arguendo the employer had timely challenged the arbitrability of the dispute, “the management rights clause does not so clearly withdraw the subject of subcontracting from the scope of the arbitration clause as to deprive the arbitrator of jurisdiction.” Dreis, 802 F.3d at 252-53. Thus, a thorough reading of Dreis should have provided CUNA with further evidence that a challenge to the Arbitrator Cohen’s decision would fail. CUNA’s strongest argument regarding arbitrability is that in 2002, a different arbitrator issued an arbitration award involving the same parties, but with respect to a different issue. This arbitrator interpreted Article XIX, Section 5 of the agreement (the clause at issue here) as prohibiting the resolution of an issue not expressly raised in the grievance. CUNA reasons that based on this decision, it had reason to believe that Cohen exceeded his authority by arbitrating the subcontracting issue. However, the precise circumstances and facts surrounding the earlier grievance were presumably different. More significantly, we have held that it does not matter if an arbitrator’s interpretation of a CBA is flawed, just so long as it is an interpretation. See, e.g., E.I. DuPont de Nemours & Co. v. Grasselli Employees Independent Ass’n of East Chicago, Inc., 790 F.2d 611, 614 (7th Cir. 1986) (“[T]he judiciary has no power to reach and determine the merits of arbitration awards merely because of disagreement, even strong disagreement, with the arbitrator’s interpretation of the contract. As here, so long as the arbitrator interpreted the contract in making his award, his award must be affirmed even if he clearly misinterpreted the contract.”). Even if one arbitrator 14 Nos. 05-1021 & 05-1226 interpreted the agreement one way, and a different arbitrator interpreted the agreement another way, we need not decide which interpretation is correct. Case law could not be more clear: courts should not overrule an arbitrator’s interpretation of an arbitration agreement unless “there is no possible interpretive route to the [arbitrator’s] award, so a non-contractual basis can be inferred.” Arch of Illinois v. District 12, United Mine Workers of America, 85 F.3d 1289, 1293-94 (7th Cir. 1996), quoting Chicago Typographical Union No. 16 v. Chicago Sun-Times, Inc., 935 F.2d 1501, 1506 (7th Cir. 1991).