Court Opinion

ID: 3183574
Source: CourtListenerOpinion
Date Created: 2016-03-08 20:04:59.752964+00
Date Added: 2024-06-11T07:38:58.561142
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 14-2032

PEABODY HOLDING COMPANY, LLC, Delaware Limited          Liability
Company; BLACK BEAUTY COAL COMPANY, LLC, now            known as
Peabody Midwest Mining, LLC, Indiana Limited            Liability
Company,

                Plaintiffs − Appellants,

           v.

UNITED MINE WORKERS OF         AMERICA,     INTERNATIONAL   UNION,
Unincorporated Association,

                Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.     Leonie M. Brinkema,
District Judge. (1:13-cv-00458-LMB-IDD)

Argued:   January 27, 2016                   Decided:   March 8, 2016

Before WILKINSON, SHEDD, and AGEE, Circuit Judges.

Vacated and remanded by published opinion.       Judge Wilkinson
wrote the opinion, in which Judge Shedd and Judge Agee joined.

ARGUED: John R. Woodrum, OGLETREE, DEAKINS, NASH, SMOAK &
STEWART, P.C., Washington, D.C., for Appellants.         Arthur
Traynor, III, UNITED MINE WORKERS OF AMERICA, Triangle,
Virginia, for Appellee.   ON BRIEF: W. Gregory Mott, Zachary S.
Stinson, OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C.,
Washington, D.C., for Appellants. Diana Migliaccio Bardes, John
Robert Mooney, MOONEY, GREEN, SAINDON, MURPHY & WELCH, P.C.,
Washington, D.C., for Appellee.

                             2
WILKINSON, Circuit Judge:

     In   this   case      we   must       decide    when       and   under     what

circumstances    courts      should     review       a        labor   arbitrator’s

decision. For the reasons given below, we hold that judicial

involvement in the labor dispute in this case was premature.

Under the complete arbitration rule, the arbitrator should have

been given the opportunity to resolve both the liability and

remedial phases of the dispute between the Companies and the

Union before it moved to federal court. We therefore vacate the

district court’s order confirming the merits of the arbitrator’s

liability decision and direct that court to return the dispute

to the arbitrator to allow him to rule on the remedial issues

and otherwise complete the arbitration task.

                                       I.

     The dispute in this case arises out of a 2007 Memorandum of

Understanding    Regarding      Job    Opportunities           (the   “Jobs    MOU”)

signed by the United Mine Workers of America (the “Union”) and

Peabody   Coal   Company    (“Peabody       Coal”)       as    part   of   a   wider

collective bargaining agreement. Peabody Coal signed the Jobs

MOU on behalf of itself and as a limited agent of its corporate

parent, Peabody Holding Company (“Peabody Holding”), and several

of Peabody Holding’s other subsidiaries, including Black Beauty

Coal Company (“Black Beauty”). The principal purpose of the Jobs

MOU was to require non-unionized companies within the Peabody

                                       3
corporate family to give preferential hiring treatment to coal

miners who were either working for or laid off by Peabody Coal.

An arbitration clause in the Jobs MOU provided that a “Jobs

Monitor” was to resolve any disputes involving the Jobs MOU, and

that his decisions would be “final and binding on all parties”

to the dispute. J.A. 79. The Jobs MOU was to expire on December

31, 2011.

       Later     in   2007,    Peabody       Energy     Corporation     (“Peabody

Energy”), the corporate parent of Peabody Holding and thus the

ultimate parent of Peabody Coal and Black Beauty, initiated a

spinoff of some of its mining operations to form a new entity

called Patriot Coal Corporation (“Patriot”). In conjunction with

the spinoff, Peabody Coal became part of Patriot. All but one of

the Peabody Holding subsidiaries on whose behalf Peabody Coal

had signed the Jobs MOU also became part of Patriot. The one

exception was Black Beauty, which, along with Peabody Holding

itself,    was    retained    by   Peabody     Energy.    Thus,    following   the

spinoff,       Peabody   Coal      no    longer       shared      any   corporate

relationship with Peabody Holding or Black Beauty.

       In 2008, Black Beauty hired private mine operator United

Minerals Company (“United Minerals”) to conduct surface mining

on Black Beauty’s property. Black Beauty and United Minerals

were      non-unionized.       United        Minerals     had     no    corporate

relationship with Peabody Coal and was thus not subject to the

                                         4
Jobs MOU. Shortly after Black Beauty began its work with United

Minerals, the Union sent a letter to Peabody Energy and Peabody

Holding stating that Peabody Holding and Black Beauty were still

bound     by   the   Jobs     MOU’s    preferential         hiring   requirements.

Peabody Holding disagreed. It took the view that the spinoff of

Peabody Coal from the rest of the Peabody corporate family ended

any     obligation    that    Peabody      Holding     or    Black   Beauty      (the

“Companies”) had under the Jobs MOU. Because the Union and the

Companies could not resolve this dispute among themselves, the

Union submitted the dispute to the Jobs Monitor.

       The Companies initially argued that the dispute was not

even    arbitrable    under    the    Jobs     MOU’s   arbitration     clause.     It

ultimately took a decision from this Court to confirm that the

dispute was in fact arbitrable. Peabody Holding Co. v. United

Mine Workers, 665 F.3d 96, 103 (4th Cir. 2012). The Union and

the Companies thus returned to arbitration to argue the merits

of the dispute before the Jobs Monitor.

       When    the   Union   and     the   Companies      returned   to   the    Jobs

Monitor they decided to bifurcate the dispute. As recounted by

the Jobs Monitor in his written decision, the parties asked him

to “treat[] in this proceeding solely the question of whether

[Peabody Holding] and Black Beauty continued to be bound by the

[Jobs] MOU after the . . . spinoff.” J.A. 57. The Jobs Monitor

noted    further     that    “[i]f    that     question     is   resolved   in    the

                                           5
Union’s favor, and the parties cannot agree on an appropriate

remedy for the [Peabody Holding]/Black Beauty refusal to abide

by   the   [Jobs]     MOU,    resolution          of     the    remedy      issue    will    be

submitted to the Jobs Monitor.” J.A. 57.

      After    receiving       arguments          from       both   the     Union    and    the

Companies, the Jobs Monitor ruled that the Jobs MOU remained in

force   even    though       Peabody    Coal       no    longer       had    any    corporate

relationship       with   Peabody       Holding         or    Black     Beauty.     The    Jobs

Monitor     then      made    a   few     related            rulings,       including      that

continued enforcement of the Jobs MOU would not run afoul of the

National      Labor     Relations       Act       (“NLRA”).         The     Jobs     Monitor,

however, deferred his decision on one notable issue. During the

proceedings, the Companies had argued that Black Beauty’s work

with United Minerals was actually exempt from the Jobs MOU by

virtue of the fact that Black Beauty had signed its contract

with United Minerals before it became bound by the Jobs MOU. The

Union responded by noting that even if Black Beauty’s work with

United Minerals was exempt, Black Beauty or Peabody Holding may

have contracted for other jobs that should have been covered by

the Jobs MOU. The Jobs Monitor determined that he would defer

answering      this    question        “until      the        remedy      stage     of    these

proceedings.” J.A. 70. At the conclusion of his decision, the

Jobs Monitor stated that he would “retain jurisdiction over this

                                              6
matter for the limited purpose of resolving any remedial issues

on which the parties cannot agree.” J.A. 70.

     Unhappy that the Jobs Monitor had found them subject to

liability under the Jobs MOU, the Companies sought to vacate the

Jobs Monitor’s decision by filing a declaratory judgment action

in   the   Eastern    District       of       Virginia.    The    Union   filed    a

counterclaim to enforce the decision. The Union also moved to

dismiss the Companies’ complaint, arguing that judicial review

of the Jobs Monitor’s decision was not proper until arbitration

before the Jobs Monitor was complete. Both parties then filed

cross motions for summary judgment on the merits of the Jobs

Monitor’s liability decision.

     The district court denied the Union’s motion to dismiss. It

first noted that there was “some disagreement” in the case law

as to the nature of the judicial review provision on which the

Companies had premised their suit -- Section 301 of the Labor

Management Relations Act (“LMRA”), 29 U.S.C. § 185(a). Peabody

Holding Co. v. United Mine Workers, 41 F. Supp. 3d 494, 499 n.4

(E.D. Va. 2014). While some courts describe their jurisdiction

under Section 301 as limited to “review of final arbitration

awards,”   other     courts     believe        Congress     conferred     “sweeping

jurisdiction”      under   Section        301     and     “merely    contemplated

judicial   application     of    a    prudential          rule”   that    would   in

practice limit review to final awards. Id.

                                          7
      The district court ultimately decided that it did not need

to determine if any limitation on judicial review under Section

301   to   final       awards    was       jurisdictional         strictly     speaking      or

merely prudential. It simply determined that the Jobs Monitor’s

“award is final as to liability and therefore reviewable.” Id.

The district court reached this conclusion largely because the

parties    had     agreed       to    bifurcate       the    liability        and    remedial

facets of their dispute, and the Jobs Monitor’s decision had

conclusively resolved the liability facet. Id. at 500-01.

      Proceeding to the merits, the district court granted the

Union’s     motion       for    summary       judgment       by    enforcing        the    Jobs

Monitor’s decision as to the Companies’ liability under the Jobs

MOU. Id. at 507. The Companies timely appealed this order. The

Union did not cross appeal the district court’s denial of its

motion     to    dismiss,       and     instead      sought       only   to    defend       the

district    court’s       summary       judgment          order   confirming        that    the

Companies       were    liable       under    the    Jobs    MOU.    After     the    parties

briefed    this        question,      we     asked    for    additional        briefing     on

whether    we     should       even    review       the    Jobs     Monitor’s       liability

decision in light of the fact that arbitration before the Jobs

Monitor was not complete. It is on this threshold question that

we now focus.

                                               8
                                            II.

                                             A.

       This case came to federal court by way of Section 301 of

the LMRA. Section 301 gives federal district courts jurisdiction

over “[s]uits for violation of contracts between an employer and

a   labor      organization       representing         employees          in    an    industry

affecting      commerce       .   .   .   without      respect       to    the       amount    in

controversy         or    without      regard     to    the        citizenship         of     the

parties.”       29       U.S.C.   § 185(a).       Long-standing            Supreme          Court

precedent provides that a party may utilize Section 301 to seek

judicial enforcement of an arbitration award made pursuant to an

arbitration clause in a collective bargaining agreement. Gen.

Drivers Local Union No. 89 v. Riss & Co., 372 U.S. 517, 519

(1963)       (per    curiam).     Before     a    court      may    review       the      award,

however,       it    must     determine      that      the    award        is    “final       and

binding.” Id. In line with this directive, many courts have held

that     a    federal       district      court     should     not        review      a     labor

arbitrator’s decision under Section 301 until the arbitrator has

ruled on both liability and remedies -- a procedural requirement

commonly referred to as the complete arbitration rule. E.g.,

Local 36, Sheet Metal Workers Int'l Ass'n v. Pevely Sheet Metal

Co., 951 F.2d 947, 949-50 (8th Cir. 1992); Union Switch & Signal

Div. Am. Standard Inc. v. United Elec. Workers, Local 610, 900

F.2d 608, 612-14 (3d Cir. 1990); Millmen Local 550, United Bhd.

                                             9
of Carpenters v. Wells Exterior Trim, 828 F.2d 1373, 1375-76

(9th Cir. 1987).

       As    the    district      court    noted,       there     appears     to   be       some

uncertainty as to the nature of the complete arbitration rule.

Some decisions have described the complete arbitration rule as a

restriction of a federal court’s jurisdiction under Section 301.

Pub. Serv. Elec. & Gas Co. v. Sys. Council U-2, Int'l Bhd. of

Elec.    Workers,         703   F.2d    68,    70     (3d    Cir.    1983).      But     other

decisions      have    noted      Section      301’s    broad       language,      and      have

accordingly taken the complete arbitration rule to be only a

prudential         limitation      on     judicial       involvement        in     a     labor

arbitration. Union Switch, 900 F.2d at 612-14.

       Both in briefing and during argument, the Companies claimed

and the Union agreed that the complete arbitration rule does not

concern federal subject matter jurisdiction in the strict sense.

We   agree    with     the      parties.      Unlike,       for   instance,      28    U.S.C.

§ 1291,      the    statute      conferring         appellate     jurisdiction         on    the

federal circuit courts of appeals, Section 301 itself does not

contain language limiting review to a “final decision” or some

other similarly definitive event. Its jurisdictional grant is

couched in much broader terms. 29 U.S.C. § 185(a).

       Indeed,      even     courts     that    have    referred      to    the    complete

arbitration rule in jurisdictional terms appear to acknowledge

that    it    is    not    a    hard    and    fast     jurisdictional        limitation,

                                               10
because      those    courts    have    noted     exceptions    to    the    rule    in

“extreme cases.” Millmen Local 550, 828 F.2d at 1377. But of

course there can be no exception from the fact that federal

courts are courts of limited jurisdiction and thus do not have

authority      to    resolve    a     dispute     unless   that      authority      has

specifically been given to them. Home Buyers Warranty Corp. v.

Hanna, 750 F.3d 427, 432 (4th Cir. 2014). All of this is to say

that the complete arbitration rule necessarily constitutes only

a prudential limitation on a court’s authority to review a labor

arbitrator’s decision.

       Although      only    prudential,    the    complete     arbitration       rule

nonetheless draws from the same well of policy rationales as its

strictly     jurisdictional         relatives.    As   noted,    under      28   U.S.C.

§ 1291, a district court generally must have entered a final

judgment or order before a court of appeals can take the case.

Goode v. Cent. Va. Legal Aid Soc'y, Inc., 807 F.3d 619, 623 (4th

Cir.   2015).       This    requirement    “preserves      judicial      economy     by

ensuring that a district court maintains authority over a case

until it issues a final and appealable order, thus preventing

piecemeal litigation and repeated appeals.” Id. at 625.

       The   complete       arbitration    rule    promotes     similar     ends.    It

ensures that courts will not become incessantly dragooned into

deciding narrow questions that form only a small part of a wider

dispute otherwise entrusted to arbitration. And it mitigates the

                                          11
possibility of one party using an open courthouse door to delay

the arbitration. See Union Switch, 900 F.2d at 611. Finally, it

makes good sense, when working within a hierarchical system, to

give the decision maker at each level a full and fair say as to

the whole problem before passing the case on to the next stage

of   review.     Internal    appeals         in    the     state      and       federal         courts

generally abide by this principle, and there is no reason that

it should not operate as a presumptive maxim in this context as

well. With this background in mind, we examine why the facts in

this case counsel us to adhere to the complete arbitration rule

and withhold judicial involvement until the arbitration before

the Jobs Monitor is complete.

                                              B.

       This case calls for a straightforward application of the

complete arbitration rule. As noted, the complete arbitration

rule    provides     that        a       federal     court          asked       to        review   an

arbitrator’s decision should refrain from doing so until the

arbitrator has decided all facets of the dispute. Savers Prop. &

Cas. Ins. Co. v. Nat'l Union Fire Ins. Co., 748 F.3d 708, 719

(6th   Cir.    2014).     Accordingly,            when     a    labor       arbitrator           first

decides liability questions and reserves jurisdiction to decide

remedial    questions       at       a   later     time,       as    appears         to    be    quite

common,    see    Union   Switch,          900     F.2d    at       611,    a   federal          court

should generally withhold review of the arbitrator’s liability

                                              12
decision until the arbitrator has had the opportunity to rule on

the remedial questions as well. See McKinney Restoration Co. v.

Ill. Dist. Council No. 1 of Int’l Union of Bricklayers, 392 F.3d

867, 872 (7th Cir. 2004); Pub. Serv. Elec. & Gas Co., 703 F.2d

at 70.

      Here the Jobs Monitor issued a decision as to the liability

phase of the parties’ dispute, but retained jurisdiction over

the remedies phase should the Union and the Companies fail to

agree on a remedy on their own. J.A. 69-70. Because the Jobs

Monitor     was    not     finished       with        the     dispute,      the     complete

arbitration rule counsels that we refrain from stepping in at

this juncture. If this dispute is destined to eventually make

its way to court, it is far better for it to come in one whole

piece than in dribs and drabs.

      The   Companies          argue,    however,       that        application     of     the

complete     arbitration           rule      to        this        case     is     not     so

straightforward,         and    offer    reasons       why     we    should      review    the

merits of the Jobs Monitor’s liability decision. First among

those    reasons    is    that     the    Companies         and     the   Union    chose    to

bifurcate    their       dispute    into    separate          liability     and     remedial

proceedings.       The      Companies       highlight             decisions       permitting

judicial review of a labor arbitrator’s liability decision when

the   parties      decide       beforehand       to    deal       separately      with     the

liability and remedial aspects of their dispute. Smart v. Int'l

                                            13
Bhd. of Elec. Workers, Local 702, 315 F.3d 721, 726 (7th Cir.

2002); Providence Journal Co. v. Providence Newspaper Guild, 271

F.3d 16, 19-20 (1st Cir. 2001).

       It   is    true        that    the    parties         agreed       to    bifurcate        their

dispute into two proceedings, one to address liability, and one

to    address     remedies,          if   necessary.             Given    the    nature     of    the

dispute, this seems like a sensible approach. It is unsurprising

that the parties could not find common ground on the question of

whether the Jobs MOU survived the spinoff -- this is a zero sum

liability question on which neither party would want to give in.

No     doubt,     though,           the   parties           at    least        contemplated       the

possibility of some compromise as to the remedies question once

they received a definitive answer as to liability. One of the

many    virtues        of    arbitration       is   that          parties       can    segment     the

dispute       resolution        process       in        a    manner       that        enhances    the

prospects for settlement.

       That      the    parties       agreed       to       bifurcate         their     arbitration

proceedings does not change the fact that they also agreed to

submit the entire dispute -- both the liability and remedies

questions -- to arbitration. The arbitration clause in the Jobs

MOU    provides        that    “[a]ny       dispute         alleging      a     breach    of     th[e]

[Jobs] MOU” may be submitted to the Jobs Monitor for resolution.

J.A.    79.      And    it     is    clear    from          the    Jobs       Monitor’s     written

decision that the “matter” given to him by the parties included

                                               14
both the liability and remedial facets of the dispute. J.A. 57.

For understandable reasons, the parties asked the Jobs Monitor

to deal with each question in a separate “proceeding.” J.A. 57.

That is, the parties gave the Jobs Monitor one large task, and

then asked him to deal with that task in a specific, segmented

manner. There is nothing unjust about a decision to withhold

review until the arbitrator has completed both segments of the

whole task that was given to him.

     The   Companies        also     argue    that       we   should     proceed     to   the

merits   because      it     would    be     more    efficient      to      have   judicial

review now rather than later. The Companies essentially contend

that it would be a waste of resources to force the parties to

proceed through the remedial phase of the arbitration if the

Companies’      position      on     the    liability         question      is   eventually

determined by a court to be correct. This argument sweeps too

broadly.      It    could    in    principle        be    applied      to    all    but   the

simplest cases, because it could always be claimed that judicial

review   of    an    arbitrator’s          liability      ruling    might        potentially

save the parties and the arbitrator remedial time. In fact, the

Companies’ argument could even be used to support one party’s

right to claim immediate recourse to court in disputes where

there is no semblance of bifurcation.

     Moreover, the Companies’ efficiency argument overlooks the

widely   held       view    that   the      sort    of    interlocutory          appeal   the

                                             15
Companies    are       requesting     can,        if   not   circumscribed,    become

“inherently ‘disruptive, time-consuming, and expensive.’” Prado-

Steiman ex rel. Prado v. Bush, 221 F.3d 1266, 1276 (11th Cir.

2000) (quoting Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d

288,   294   (1st      Cir.   2000)).    One       notable    reason   interlocutory

appeals tend to reduce rather than promote efficiency is that

they often “require[] the appellate courts to consider issues

that   may   be   rendered     moot     if    the      appealing   party    ultimately

prevails in or settles the case.” Id.

       Were we to review the merits of the liability decision now,

we   may   end    up   considering      an    issue      later   rendered    moot.    As

noted, the Jobs Monitor has yet to decide if Black Beauty’s work

with United Minerals is exempt from the Jobs MOU. And as far as

we are aware, Black Beauty’s work with United Minerals is the

only potential breach of the Jobs MOU that the Union has thus

far identified. If, therefore, the Jobs Monitor finds that Black

Beauty’s work with United Minerals is exempt, and if the Union

does not identify other potential breaches of the Jobs MOU, then

our review of the liability decision will have had no practical

impact on the parties’ dispute. And no matter what the Jobs

Monitor might do during the remedial phase, settlement is always

a    possibility.       Dollars   and    cents         are   fertile   subjects      for

compromise. Having lost on the liability question, the Companies

                                             16
may decide to negotiate an alternative jobs agreement or reach

some other monetary agreement with the Union.

        In addition, the Companies’ efficiency argument is undercut

by the particularized nature of this dispute. It is not as if a

court ruling on the liability question now would settle a common

issue     for    multiple       cases          proceeding        simultaneously       before

different       arbitrators.         The       liability     question       is    instead    of

concern only to Peabody Holding and Black Beauty.

      And even if a court ruling at this juncture would in some

way advance systemic efficiency, we would hesitate to make such

a ruling in light of the fact that the Jobs Monitor’s decision

on the liability question will not have any real-world effect

until    either    the    parties          or    the   Jobs       Monitor    decide     on   a

corresponding      remedy.          One    rationale       that     has    been    given    for

allowing a court to review an arbitrator’s liability decision in

a   bifurcated     arbitration            is    that   the    liability      decision       was

“expressly      intended       to    have       immediate     collateral         effects”    in

another    proceeding.         Trade       &    Transp.,     Inc.    v.    Nat.     Petroleum

Charterers      Inc.,    931    F.2d       191,      195   (2d    Cir.     1991).    But    the

Companies have identified no similar adverse consequences here.

That the Jobs Monitor’s decision has no such immediate impact

bolsters our decision to withhold judicial review in this case.

      Finally,      the     Companies’            whole      line     of     argument       for

immediate judicial review runs awkwardly into a first principle

                                                17
of arbitration: that “arbitration is a matter of contract.” Am.

Exp. Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013).

Because    arbitration          is    contractual        in    nature,    parties      to    an

arbitration agreement are generally free to fashion the arbitral

process to best suit their needs. See Vulcan Chem. Techs., Inc.

v. Barker, 297 F.3d 332, 340 (4th Cir. 2002). For instance, they

may     agree     among     themselves         which          questions       will     go    to

arbitration,       which        law    the    arbitrator          will    apply       in    the

arbitration, and which procedural rules the arbitrator will use

to    manage    the   arbitration.           The       agreement      fashioned       by    the

parties deserves judicial respect. Here, we have done nothing

more or less than honor the arbitral ground rules the Companies

and the Union have established for themselves.

                                             III.

      Arbitration plays a critical role in our nation’s system of

labor    relations.       By     providing         a    forum    in    which     labor      and

management      can   meet       to    peaceably        resolve       their    differences,

labor arbitration serves as a “substitute to industrial strife.”

Gateway    Coal    Co.     v.    United      Mine      Workers,    414    U.S.       368,   378

(1974) (quoting United Steelworkers v. Warrior & Gulf Nav. Co.,

363 U.S. 574, 578 (1960)). For this reason, Congress has adopted

a    “federal     policy       favoring      arbitration         of    labor     disputes.”

Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 299

(2010) (quoting Gateway Coal Co. 414 U.S. at 377). The Companies

                                              18
have given us no reason to disrespect the important place that

labor   arbitration      occupies   in    our   economy    by   intervening

prematurely and hearing this dispute before the arbitrator has

completed   his   job.   We   therefore   vacate   the    district   court’s

ruling and direct that court to remand this case to the Jobs

Monitor for further proceedings.

                                                    VACATED AND REMANDED

                                    19