Opinion ID: 6984389
Heading Depth: 2
Heading Rank: 2

Heading: The “Public Policy Exception”

Text: Although courts accord nearly total deference to arbitral decisions, a court “may not enforce a collective-bargaining agreement that is contrary to public policy.” W.R. Grace & Co. v. Local Union 759, Int’l Union of United Rubber Workers, 461 U.S. 757, 766, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983). This so-called “public policy exception” is extremely limited, and the party seeking the benefit of the exception must establish its existence. Cf. Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp. 103 F.3d 9, 12 (2d Cir.1997) (noting that “party moving to vacate [an arbitration] award has the burden of proof’). A court may vacate an arbitral award on public policy grounds only if it can “demonstrate that the policy is one that specifically militates against the relief ordered by the arbitrator.” Niagara Mohawk I, 143 F.3d at 716 (quoting Stead Motors v. Automotive Machinists Lodge No. 1173, 886 F.2d 1200, 1212-13 (9th Cir.1989) (in banc)). “Public policy,” in this context, “is to be ascertained ‘by reference to the laws and legal precedents and not from general considerations of supposed public interests.’” W.R. Grace, 461 U.S. at 766, 103 S.Ct. 2177 (quoting Muschany v. United States, 324 U.S. 49, 66, 65 S.Ct. 442, 89 L.Ed. 744 (1945)). While the question of whether enforcement of an award would violate public policy “is ultimately one for resolution by the courts,” id., authority to answer that question does not afford courts “authority to disagree with [the arbitrator’s] honest judgment” about the proper remedy to be awarded in a given case. Misco, 484 U.S. at 38, 108 S.Ct. 364. To the contrary, the court must determine “whether the award itself, as contrasted with the reasoning that underlies the award, ‘ereate[s][an] explicit conflict with other laws and legal precedents’ and thus clearly violates an identifiable public policy.” Niagara Mohawk I, 143 F.3d at 716 (quoting Misco, 484 U.S. at 43, 108 S.Ct. 364 (quoting W.R. Grace, 461 U.S. at 766, 103 S.Ct. 2177)) (alterations in Niagara Mohawk I). In Niagara Mohawk I, decided after the district court issued its opinion in this case, 5 we attempted to identify the limits of the public policy exception in the context of nuclear safety regulations. There, an employee, Rando, adulterated a urine sample to circumvent Niagara Mohawk’s NRC-mandated drug testing policy. Niagara Mohawk terminated Rando and the matter was submitted to an arbitration panel that awarded the employee conditional reinstatement premised on his compliance with rehabilitative programs and future negative testing. As in this case, Niagara Mohawk refused to reinstate the employee and the Union brought an action in the district court to confirm the award. Niagara Mohawk argued, as it does in this case, that reinstatement of the employee would offend public policy of ensuring strict compliance with nuclear safety rules, in particular by rendering the Company in violation of the “trustworthy and reliable” requirement found at 10 C.F.R. § 73.56. The district court agreed and vacated the award, finding that the employee’s adulteration of the sample rendered him “untrustworthy” within the meaning of the NRC regulations. Int’l Brotherhood of Electrical Workers, Local 97 v. Niagara Mohawk Power Corp., 950 F.Supp. 1227, 1236 (N.D.N.Y.1996), rev’d, 143 F.3d 704 (2d Cir.1998). We reversed. 143 F.3d 704. We attempted to reconcile the “deference that must be accorded an arbitrator’s judgment” with the “substantial public interest in nuclear safety.” Id. at 717. To this end, we acknowledged the important safety issues involved in security at a nuclear power plant but remained cognizant of the narrow scope of review that courts employ when reviewing arbitral awards. We thus stated that “[i]n determining whether an arbitral award which orders reinstatement of an employee previously discharged from a nuclear power plant violates public policy, the issue should be whether the reinstatement itself specifically contravenes a ‘well defined and dominant public policy.’ ” Id. (quoting Misco, 484 U.S. at 44, 108 S.Ct. 364). Noting that the question reduces to whether the employee’s actions “render[ed] him an inherently untrustworthy person within the meaning of the NRC regulations when read as a whole,” id. at 720, we observed that the public policy that mandated drug testing of nuclear plant employees also stressed the value of rehabilitation. In particular, the NRC regulations left punishment for first time drug offenses to the discretion of the employer, as long as the punishment imposed involved at least a two week denial of unescorted access and referral to a rehabilitative program. See id. at 709. Because there was evidence that the NRC drug testing regulations extended their rehabilitative approach to employees who acted to conceal their drug use, we were unable to say with certainty that conditional reinstatement of an employee who, like Rando, had adulterated a drug test specimen in order to conceal drug use and then lied when first confronted about that drug use would pose an “explicit conflict” with the public policy promoting nuclear safety. Id. at 722. Because the arbitrator’s findings—to which the district court was bound—did not permit an “unequivocal showing” that reinstatement would violate clearly defined and well articulated public policy, we were constrained to let the award stand. Id. at 721. The principles articulated in Niagara Mohawk I—a case decided after the district court rendered its decision in this case—dictate the result here.