Court Opinion

ID: 9474829
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:10:11.206754+00
Date Added: 2024-06-11T17:44:21.908496
License: Public Domain

EASTERBROOK, Circuit Judge,
concurring.
“Public policy” is an ambiguous term. A court that sets aside an arbitrator’s award could mean: “Whether or not the award carries out the contract, there is a rule against this outcome.” An arbitrator’s reinstatement of white employees in preference to identically-situated black employees would violate public policy in this sense. If *618the contract does not authorize this differential treatment, the award fails because inconsistent with the contract; if the contract does authorize the difference, the award fails because several statutes prohibit racial discrimination in employment. DuPont does not argue, however, that its collective bargaining agreement with the union violates public policy in this way. If the agreement stated that “Employees who go berserk as a result of a psychiatric episode that is unlikely to recur may remain with the firm”, this clause would not violate any rule of law.
Public policy is pertinent to an arbitrator’s award in a second way. “When an arbitrator bases his award on public policy considerations, he has overstepped his authority and the court may review the substantive merits of the award.” Local No. P-1236, Amalgamated Meat Cutters v. Jones Dairy Farm, 680 F.2d 1142, 1144 (7th Cir.1982). The arbitrator’s job is to enforce the parties’ bargain. An arbitrator is not authorized to substitute his own view of wise policy for that of the parties. Ethyl Corp. v. United Steelworkers, 768 F.2d 180, 183-85 (7th Cir.1985). So if the contract had contained the hypothetical clause giving an employee one free rampage, and the arbitrator had said “This violates public policy because it may reduce the level of safety in the plant”, a court would set the award aside and instruct the arbitrator to carry out rather than frustrate the parties' lawful bargain.
Public policy is used in still a third way when a court claims the right to do what the arbitrator may not, to decide whether an award cuts at cross purposes with a policy the court thinks valuable. If an arbitrator reinstates an employee caught using drugs, the court may say that this undermines the public policy of deterring the use of drugs, so the award cannot stand. Misco, Inc. v. United Paperworkers International Union, 768 F.2d 739, 743 (5th Cir.1985). In this case, in which the arbitrator reinstated an employee whose behavior threatened the safety of other people, the district court concluded that the interest in the safe operation of the plant is more important that the employee’s interest in working at DuPont, and it set aside the award.
The court today approves this inquiry in principle, although it disagrees with the district judge’s implementation of the principle. I find the principle itself objectionable. A power to set aside awards on grounds of public policy, as distinct from rules of law, is too sweeping. A court lacks this power for the same reason the arbitrator does — the function of arbitrator and court is to carry out a contract, and contracts bind unless made unlawful by rules of positive law. There is a graver difficulty with the invocation of this loose use of “public policy” to set aside an award. It conflicts with a real public policy, one expressed in positive law. Section 9 of the Arbitration Act, 9 U.S.C. § 9, states that a beneficiary of an arbitration award may apply to a court “for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title” (emphasis added). This statute abrogates any equitable power courts formerly enjoyed to decide which awards to enforce. The only provision in § 10 or § 11 authorizing review of this award is § 10(d), which states that a court may vacate an award “[wjhere the arbitrators exceeded their powers”. This makes enforcement of the award turn on the meaning of the contract, not on equitable notions about public policy. If the contract violates a rule of law, then the contract itself may be set aside; this is the first use of public policy I discussed. But if the contract is lawful, and the arbitrator follows or interprets the contract within his authority, the court “must grant ... an order” enforcing the award.
Appellate courts, including this one, have not kept these meanings of public policy separate. But the distinction flows from the nature of the arbitrator’s job and the command of the Arbitration Act. This may be clearer if we return to the case of the explicit contractual term. Suppose DuPont’s contract expressly excused a single *619psychotic tantrum, provided the problem was unlikely to recur, or suppose a contract excused a single episode of larceny from the employer. If the firm, honestly implementing its contract with the employees, reinstated the berserker or the thief (or never discharged him), no public policy would stand in the way. If the person’s immediate supervisor fired him, and someone higher in the line of command reversed that decision as a result of a grievance, there would be no greater reason for review. A contract of arbitration transfers the power of this manager to the arbitrator. If the arbitrator carries out the contract, the decision should be treated the same as the management’s own. Firms may place decisionmaking authority where they please, and the Arbitration Act restricts the court to ascertaining that the arbitrator was a faithful agent of the contracting parties. This does not mean that public policy is irrelevant. If the contract violates a rule of law, it must be set aside. That is what happened in Local P-1236, on which the majority relies. The firm forbade its employee to report violations of safety rules to federal safety inspectors, the arbitrator enforced the rule, and the court held that the rule violated public policy. Local P-1236 does not support the majority’s broader proposition that a court may set aside an award even when the arbitrator accurately construes the contract and the contract, so construed, is lawful.
Of course most collective bargaining agreements are not as detailed as the one I have been discussing. They provide, as this one did, that employees may be discharged for “just cause.” The arbitrator must define just cause. He may infer that “fault” is a component of just cause, as the arbitrator in this case did, so that the contract then becomes just like my hypothetical — an employee who loses control of his actions without moral culpability (fault) may not be fired, unless recurrence is likely. The court must decide under § 10(d) of the Arbitration Act whether this is a permissible reading of the contract rather than a frolic of the arbitrator’s. If the reading is within permissible bounds — quite expansive, as Ethyl demonstrates — the case is identical to the one in which the clause is explicit. The public policy inquiry should be the same whether the arbitrator is applying an express clause of the contract or applying a general one (such as “just cause”) that he has made concrete.
Whether the arbitrator deals with a general or a specific clause also makes no difference to the second stage of the judicial inquiry, whether the arbitrator has found facts that bring the employee within the clause. Here the arbitrator found that there is but a remote chance that the psychotic condition will recur. The majority hints that “public policy” might allow this finding of fact to be reviewed more liberally than other findings — such as, for example, a finding that the employee was not asleep on the job when the supervisor said he was. No other court has drawn this distinction, which would be both inconsistent with the Arbitration Act and also impossible to carry out when an arbitrator writes a brief opinion or none at all. Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960). True, an arbitrator’s decision may get little or no weight when the public policy is a law. For example, an arbitrator’s decision that a person was not the victim of racial discrimination will get only the weight its persuasive force deserves. McDonald v. City of West Branch, 466 U.S. 284, 104 S.Ct. 1799, 80 L.Ed.2d 302 (1984); Alexander v. Gardner-Denver Co., 415 U.S. 36, 60 n. 21, 94 S.Ct. 1011, 1025 n. 21, 39 L.Ed.2d 147 (1974). This limitation on review comes from the rule that an arbitrator’s decision, like the contract on which it was based, must conform to law. If the decision, right or wrong, would be a lawful one — if, by hypothesis, the employer may retain thieves as well as sluggards on its payroll — there is no occasion for more searching review of a decision that the employee has learned his lesson and will not steal again than there is of a decision that he was not asleep on the job.
*620Considerations of public policy may have a different, less direct, influence on the decision to deny enforcement to an award when the terms of the contract are unclear. Suppose the contract says only that employees may be fired for “just cause,” and the employer fires someone for theft. It is exceptionally unlikely that any (sane) employer would agree to keep thieves on the payroll. Theft is hard to detect. A thief caught in the act may have stolen before and might do so again. A stiff punishment for theft is in order. If no rational firm would enter into a contract expressly excusing theft, then a court should conclude that an arbitrator who does this is indulging a personal quirk, has succumbed to the desire to give someone a “second chance” and has abandoned his role as honest interpreter of the contract. Similarly, if because of potential liability to its workers for having an unsafe working environment no firm would adopt a clause giving a psychotic worker a second chance, an arbitrator who provides a second chance is expressing sympathy, administering home-brewed justice rather than the contract. Public policy may be a useful guide to the sorts of provisions that will not appear in contracts, and when no one will write the provisions expressly arbitrators may not infer them. If a court concludes, however, that the implication of a rule by the arbitrator is not a frolic, that a rational firm could have such a rule and apply it prospectively, then the only further role for public policy is to determine whether the rule violates positive law. A court may not engage in especially searching review of factual findings.
I therefore agree with Judge Stapleton “that the district court [is] bound to enforce the award unless it could be said that the collective bargaining agreement, as construed, [is] contrary to law or against public policy.” Local 863 International Brotherhood of Teamsters v. Jersey Coast Egg Producers, Inc., 773 F.2d 530, 536 (3d Cir.1985) (concurring opinion) (emphasis added). This is also, I think, the view of the Supreme Court. The Court has never held that an arbitration award that complies with the contract and positive law may be set aside on the basis of vague beliefs about public policy. This is the Court’s position:
As with any contract, however, a court may not enforce a collective-bargaining agreement that is contrary to public policy. [The arbitrator’s] view of his own jurisdiction [in this case] precluded his consideration of this question, and, in any event, the question of public policy is ultimately one for resolution by the courts. If the contract as interpreted by [the arbitrator] violates some explicit public policy, we are obliged to refrain from enforcing it. Such a public policy, however, must be well defined and dominant, and is to be ascertained “by reference to the laws and legal precedents and not from general considerations of supposed public interests.”
W.R. Grace & Co. v. Local Union 759, International Union of Rubber Workers, 461 U.S. 757, 766, 103 S.Ct. 2177, 2183, 76 L.Ed.2d 298 (1983) (citations omitted). This passage makes all my points. The question is whether the contract, as construed, violates positive law; “general considerations of supposed publie interests” do not justify setting aside an award. Public policy in this loose sense is off limits to courts and arbitrators alike.
Ours is therefore an easy case. The arbitrator was entitled to interpret the contract as establishing a “fault” standard. It is not irrational for an employer to excuse a single bizarre episode if signs point to recuperation. DuPont does not argue that employing a person with a history of psychotic behavior violates any rule of law, such as the Occupational Safety and Health Act; for all we know, DuPont can give McClendon a job far away from acids and other dangerous substances. The record discloses enough, given the exceptionally deferential standard of review, to permit the arbitrator to find that McClendon is unlikely to have a relapse. I therefore concur in the judgment, although not in any suggestion that courts may patrol arbitral decisions for compliance with “general *621considerations of supposed public interests” as opposed to compliance with law.