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Fourth Circuit Approves Complete Arbitration Rule, Holds it is a Prudential Rule
Practical Law Legal Update w-001-5117 (Approx. 5 pages)
Fourth Circuit Approves Complete Arbitration Rule, Holds it is a Prudential Rule
by Practical Law Labor & Employment
| Published on 14 Mar 2016 • USA (National/Federal) |
In Peabody Holding Company, LLC v. United Mine Workers of America, the US Court of Appeals for the Fourth Circuit held that the "complete arbitration rule" that limits district courts from reviewing arbitration decisions under Section 301 of the Labor Management Relations Act (LMRA) until the arbitrator has ruled on both liability and remedies is a broad prudential rule, not a hard and fast jurisdictional restriction.
On March 8, 2016, in Peabody Holding Company, LLC v. United Mine Workers of America, the US Court of Appeals for the Fourth Circuit adopted the "complete arbitration rule" that limits district courts from reviewing arbitration decisions under Section 301 of the Labor Management Relations Act (LMRA) until the arbitrator has ruled on both liability and remedies, holding that the rule is a broad prudential limitation, not a hard and fast jurisdictional restriction ( (4th Cir. Mar. 8, 2016)).
Background
As part of a larger collective bargaining agreement (CBA), certain subsidiaries of Peabody Holding Company including Peabody Coal entered into a memorandum of understanding (MOU) with the United Mine Workers of America. The MOU required non-unionized companies within the Peabody corporate family to give preferential hiring treatment to coal miners who were either working for or laid off by Peabody Coal.
After a corporate spinoff that separated Peabody Coal from the holding company and other subsidiaries, disputes arose over:
- Whether the holding company and a non-union subsidiary, Black Beauty (Employers), were bound by the MOU after their respective ties to Peabody Coal ended.
- The arbitrability of the dispute over whether the holding company and former sibling company were bound by the MOU.
The Fourth Circuit held that the dispute was arbitrable (Peabody Holding Co. v. United Mine Workers, 665 F.3d 96, 103 (4th Cir. 2012)).
Following the Fourth Circuit's decision, the parties agreed to bifurcate arbitration on whether the Employers were bound by the MOU from arbitration on the appropriate remedies, if any, if the Employers were bound but did not abide by the MOU. The arbitrator:
- Ruled that the Employers were bound by the MOU.
- Retained jurisdiction over the case if the parties required arbitration to decide the appropriate remedies.
Before the remedy stage of the arbitration proceedings, the Employers filed an action in district court seeking to vacate the arbitrator's decision on the liability issue, while the union cross-petitioned for enforcement. The district court:
- Decided that:
- it did not need to address whether there was any limitation under LMRA Section 301 on it reviewing the arbitrator's decision at this stage; and
- the arbitrator's decision was reviewable.
- Enforced the arbitrator's decision that the Employers were bound by the MOU.
The Employers appealed.
Outcome
The Fourth Circuit:
- Adopted the "complete arbitration rule."
- Joined the circuit courts that hold that the rule is a broad prudential limitation, not a hard and fast jurisdictional restriction.
- Held that a district court prematurely reviewed the merits of an arbitrator's award on employers' liability while the arbitrator retained jurisdiction to rule on remedies, if the parties could not resolve those issues.
- Vacated the district court's order and directed it to remand the matter to the arbitrator for further proceedings.
The Fourth Circuit noted that:
- Section 301 of the LMRA confers jurisdiction on federal courts over lawsuits involving alleged violations of contracts between employers and labor organizations, including reviewing labor arbitration awards concerning those disputes (29 U.S.C. § 185(a)).
- The complete arbitration rule has been applied under Section 301 of the LMRA to limit federal district courts in reviewing a labor arbitrator's decision until the arbitrator has ruled on both liability and remedies (see Local 36, Sheet Metal Workers 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, Carpenters v. Wells Exterior Trim, 828 F.2d 1373, 1375-76 (9th Cir. 1987)).
- Circuit Court decisions have viewed the complete arbitration rule either as a:
- hard and fast jurisdictional restriction on federal courts' ability to review arbitrator decisions; or
- prudential limitation on courts becoming involved in arbitration matters.
- The parties agreed that the complete arbitration rule did not directly relate to federal courts having subject matter jurisdiction.
- Unlike other statutes that confer appellate jurisdiction on federal courts, Section 301 of the LMRA does not contain specific language limiting judicial review to arbitration matters where:
- an arbitrator has issued a final decision; or
- a definitive event has occurred.
- Like statutes that specifically confer jurisdiction on federal courts, the complete arbitration rule is intended to:
- promote judicial efficiency; and
- avoid piecemeal decisions that invite repeated appeals and arbitration delays.
Practical Implications
The Fourth Circuit adopted the complete arbitration rule and held that it is prudential, not a strict jurisdictional rule. Although other courts applying the rule have taken the opposite view, the issue does not necessarily reflect a circuit court split as much as a lack of clarity among circuit courts (and even within the same circuit) about how to characterize the rule (compare Union Switch, 900 F.2d at 612-14 with Pub. Serv. Elec. & Gas Co. v. Sys. Council U-2, Elec. Workers, 703 F.2d 68, 70 (3d Cir. 1983). The Fourth Circuit's decision may add clarity to this jurisprudence.