Cases by Issue - Arbitration

EEOC v. Waffle House - Oral Argument

Fri, 09 Jan 2009 14:50:24 +0000

Case:

EEOC v. Waffle House

Media File:

99-1823_20011010-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Paul D. Clement

Chief Justice Rehnquist: We'll hear argument now in No. 99-1823, Equal Employment Opportunity Commission v. Waffle House, Inc.-- Mr. Clement.

Mr. Clement: Mr. Chief Justice, and may it please the Court: Respondent Waffle House and Eric Baker agreed to arbitrate rather than litigate disputes between them.

That agreement precludes Waffle House and Baker from having an action take place between them in court.

But the EEOC was not a party to that agreement.

Accordingly, the agreement does not preclude the EEOC's ability to bring a public enforcement action against Waffle House, nor does it limit the remedies available to the EEOC in such an action.

Title VII gives the EEOC a public enforcement action that's independent of and, in many respects, superior to the individual employee's cause of action.

Justice Scalia: Mr. Clement, suppose the individual employee had settled with the employer, not just an agreement to arbitrate, but there had been a complete settlement.

They said, you know, in exchange for so much money, I waive any cause of action I had.

Would the Government still has... have a cause of action for damages?

Mr. Clement: We believe the Government would still have a cause of action in that case, though we admit it would be a much more difficult case.

Justice Scalia: Wow.

Mr. Clement: Because in the case of settlement, of course, judicial or arbitral resources have already been expended.

There's an agreement of the parties that specifically extinguishes the individual's right--

Justice Scalia: What are the damages?

The Government gets damages that have already been paid to the individual to... I don't understand.

And these damages go to the individual?

Mr. Clement: --The... the damages could go to the individual.

I think, to give you an example of the kind of case--

Justice Scalia: So, if he'd settle and get the damages, and then... and then he'd get additional damages recovered for him by the EEOC.

Mr. Clement: --That's right.

But let me give you an example of the kind of case we have in mind, and it may help illustrate why the Government thinks it still may have a cause of action in that situation.

If you can imagine a case where an employer has retaliated against an employee and... simply for filing a charge with the EEOC, and then that employee settles that retaliation claim for a nominal amount of money, without any judicial supervision, let's say, it may be that in that kind of case, the EEOC has a legitimate public interest in, nonetheless, bringing an action, getting some additional amount of damages to really take the employer--

Justice Kennedy: Well, but that's... that's a separate wrong.

I don't know if that's a really fair answer to Justice Scalia's question.

If there's retaliation, I... I would think that's a separate component.

But just suppose a case with no retaliation.

The... the employee recovers $10,000 and then the EEOC can recover $20,000 more?

Mr. Clement: --Well, in a case like that, I'm sure as a matter of its prosecutorial discretion, the EEOC would not bring that case.

Justice Kennedy: Well, let's say the prosecutor doesn't exercise his discretion that way that day.

Mr. Clement: Well, in that case I think they would have cause of action.

But again, I want to make clear that we think that's--

Justice Kennedy: And what... and what happens--

Mr. Clement: --a much more difficult case.

Justice Kennedy: --What would happen... what would happen if the employee recovered $10,000 in the arbitration, then only $5,000 in the litigation?

Does he have to give $5,000 back?

Mr. Clement: I don't think that would follow.

But again, I want to make clear that's a much more difficult case because there there's been--

Justice Kennedy: Well, but... but we're asking what the... what the logical consequences of... of your position are, and that's why we're putting the more difficult case so we can test the general proposition.

And the general proposition, it seems to me, has to withstand some analysis under these more difficult instances.

Mr. Clement: --Well, let me do... let me make two responses.

One, let me try one more time to defend the general principle, which is simply that Congress in Title VII gave the EEOC a distinct cause of action, and so the extinguishment of the individual employee's cause of action shouldn't automatically extinguish the EEOC's cause of action.

But let me hone in on why I think that's so much more of a difficult case because in that case, the individuals settled their claim, so they have no claim to damages in an arbitration proceeding.

And so, it might make some sense to say that the EEOC has no claim to damages in a litigation proceeding.

What is so anomalous about the decision below and the rule that respondent seeks in this case is that it seeks to limit the EEOC's ability to get victim-specific remedies in court even though those victim-specific remedies are available to the employee in the arbitration.

All of the cases that respondent cites--

Justice O'Connor: Well, here we have a case where the employee did not settle, but we were really discussing with you the possibility not presented in this case of a full settlement or a judgment in arbitration, disposing of the victim-specific relief, and asking you why then should EEOC continue to have a cause of action for the victim-specific relief, as opposed to broad injunctive relief, to address the overall problem.

Mr. Clement: --And I guess I do think there are two reasons why they would still have a cause of action in that situation.

One is that Title VII does give the EEOC an independent cause of action.

It's quite a remarkable statute in that respect.

It's unlike statutes this Court has analyzed in, say, the Newport News Shipbuilder case where it specifically contrasted Title VII as being the rare statute that gives the EEOC a duplicative cause of action to the individual.

The second reason, though, is that generally, as a matter of privity, res judicata principles, the reason that you hold one party in... in... to a judgment that they didn't participate in to the consequences of that is because the party in the first action adequately represented the interests of the party that wasn't present.

I--

Chief Justice Rehnquist: Well, why did the EEOC decide to get into this case?

Is there some sort of a pattern or practice involved that goes beyond this individual establishment?

Mr. Clement: --My understanding is that the EEOC picked this case because this case... the events here took place in 1994.

So, the ADA was still quite new at the time that this... that this case took place, and I think the EEOC was concerned that employers were not sure of what their obligations under the ADA were.

So, they picked this case to litigate to help establish what employers' obligations were under the EEOC--

Chief Justice Rehnquist: This is... this is not any broad pattern or practice.

This is simply honing in on an individual case?

Mr. Clement: --That's fair enough.

But again, Congress has specifically allowed the EEOC to use its modest litigation resources to vindicate the public interest both in pattern and practice cases or cases that seek injunctive relief and victim-specific cases where there's some aspect of the case that helps illustrate an important principle of law.

Justice Souter: Mr.--

Justice Ginsburg: --Mr. Clement, may I ask you to back up on how we would get to the point of having a settlement after... or an arbitral determination?

I thought when the EEOC sues, then the individual has no right to come to court, that EEOC would be the exclusive litigator.

And so, I think it's clear that the... the individual employee couldn't bring a suit, a rival suit, in... in court.

Doesn't that extend to arbitration as well?

I thought that the... giving the primacy to the EEOC meant it would control this entire claim in all of its aspects, but you answered the question as though, even though the EEOC had filed, the employee could go on on a separate track.

Mr. Clement: Well, I had taken the import of the hypothetical as being that the individual had already sued and settled and then, only after that had taken place, that the EEOC decided to initiate a duplicative action.

But your question certainly highlights the anomaly of having this predispute arbitration agreement--

Justice Ginsburg: Can the individual bring a suit?

I mean, is the... within the 180 days, doesn't EEOC have total control?

Mr. Clement: --That's absolutely right.

The statute gives the EEOC the exclusive right to initiate a cause of action for the first 180 days and then, for an extended period, until a right to sue letter issues.

And that's why in light of the... the congressional determination that... that EEOC had not only a different action, but one that took primacy, that they had the right to initiate the action once they found that there was a determination that the suit would serve the public interest, it seems particularly--

Justice Scalia: Once they... once they do initiate the action, though, the individual cannot also bring an action.

Right?

So, what you're saying is that the... that the EEOC suit is independent of the individuals, but somehow the individual suit is not independent of the EEOC's.

Mr. Clement: --Well, allow... allow me to make two responses.

One is it's clear that under the ADA and Title VII, it's not that the EEOC's filing of a suit simply extinguishes the individual's cause of action entirely.

They... the individual has a absolute right to intervene in the EEOC's action.

So, if those actions were 100 percent duplicative, there would be no need to allow the individual to intervene in the suit.

Justice Scalia: Exactly.

I... I don't know why you think that cuts in your favor rather than against you.

It seems to me the whole structure of the thing indicates that there's one cause of action.

It can be brought by the EEC or by the individual, but not by both.

Mr. Clement: I mean--

Justice Scalia: Not by both successfully, anyway.

Mr. Clement: --I respectfully disagree because, unlike the ADA, the ADA does not make the EEOC suit the exclusive vehicle and extinguish any cause of action or any basis to get into court for the individual.

They can still intervene in the EEOC's action.

Chief Justice Rehnquist: So, you're saying that if the EEOC brings an action in circumstances such as this, an individual who has agreed to arbitrate the claim can intervene and not be bound?

The individual is not bound by the arbitration agreement?

Mr. Clement: No, we do not take that position.

To the contrary, we think that the arbitration agreement does preclude in this case Mr. Baker from intervening in the EEOC's action.

And I think that's quite a persuasive answer to the argument that the other side has made that somehow allowing the EEOC to sue in these circumstances renders the arbitration agreement a dead letter.

It doesn't.

Justice Kennedy: It's a very strange use of the Article III courts to have litigation proceeding in which one of the real parties in interest is not permitted to intervene.

That--

Mr. Clement: Well--

Justice Kennedy: --that strikes me as a... a distortion of the whole case in controversy rule.

Mr. Clement: --It may be, but I think that is the consequence of the arbitration agreement and the implication of the FAA.

Justice Kennedy: Well, if it is a distortion of the case in controversy rule, then we're in real trouble, aren't we?

Mr. Clement: Well, even if you disagree with me on... on that particular point and you say that the FAA does not prevent Baker from intervening on this action, it's still true that the arbitration agreement is... has a meaningful benefit to Waffle House because before Waffle House entered that arbitration agreement with Baker, it was subject to a suit in court by either the EEOC or Baker.

The agreement with Baker limited Baker to an arbitral forum.

But absent a similar agreement with the EEOC, Waffle House has simply no expectation and no basis to keep the EEOC out of court or to limit its remedies in court.

Justice Souter: Do you think it is... do you think it is going to be very comfort to Waffle House to know that, yes, it can't be sued in court by the individual, but the entire prosecutorial power of the United States can be brought to bear on it in... in a suit in court?

What Waffle House wants to do is to stay out of court, and that's what they're getting at when they talk about undercutting the... the... in effect, the arbitration agreement.

Mr. Clement: Well, with respect, if Waffle House wants to stay out of court, then it needs to reach an agreement with every party that has a statutory right to get them into court.

And as a practical matter, I still think--

Justice Scalia: Unless one statutory right is derivative of the other.

I mean, that's the... that's the whole issue in the case.

Mr. Clement: --Yes, and we think there are good--

Justice Scalia: And you... you keep saying the Government has an independent right to sue, but you know, that begs the question.

That... that's the whole issue.

It is given a right to sue, but is... is that right to sue derivative of the individual's right so that it disappears when the individual's does?

Mr. Clement: --And I do not think it is.

And it's... and I think in fact the text of Title VII is quite clear.

Justice Souter: Then I think your answer has got to be that the settlement clearly does not bind the Government.

Mr. Clement: That's exactly right, and that's... that's a well-established principle.

I mean, look at... look at Firefighters Local No. 93 against... against the City of Cleveland.

The Court says it's a fundamental principle that a settlement cannot bind non-parties to the litigation.

Justice Ginsburg: How does this compare with the Fair Labor Standards Act where the Secretary of Labor could sue or the individual could sue, say, for a wage and hour violation?

Or let's take a violation of the Equal Pay Act.

How... how does that work when the Secretary brings a suit?

Mr. Clement: I think in all of those cases, the statutory scheme works effectively the same.

There are independent causes of action given to the Government entity and to the individual.

And this Court held in the Tony and Susan Alamo Foundation case that just because the individual forswears a cause of action or right to sue under the Fair Labor Standards Act, that does not preclude the Secretary of Labor from bringing their own independent action.

Chief Justice Rehnquist: Of course, the... the cause of action for... that EEOC has could be vindicated by an equitable remedy.

Mr. Clement: I... I don't think that's necessarily true.

It's certainly not going to be true in every case.

And Congress specifically made all forms of relief available to the EEOC in its public enforcement action.

The court below drew a distinction between equitable relief on the one hand and victim-specific relief on the other hand to avoid a perceived conflict with the FAA.

But with respect, I don't think there is any conflict.

Chief Justice Rehnquist: But in this case then you say EEOC can go into court and that Baker can probably not... not intervene, but the EEOC could get whatever he could have gotten and give it to him.

Mr. Clement: That is true, but I don't think that is particularly anomalous or limited to this area of law.

Take, for example... I mean, this Court has held that an individual can agree to arbitrate his or her civil RICO claim.

I wouldn't think, though, that that agreement to arbitrate the civil RICO claim would in any way prevent the Government from bringing a criminal RICO action or prevent the Government from getting a restitution order that agreed to give restitution directly to the victim.

Justice Scalia: Who had already recovered?

Mr. Clement: No.

Let's... let's take this... let's make it parallel to this case where the individual--

Justice Scalia: No.

I'm assuming a RICO victim who's already been... been compensated, and you think the Government can bring a RICO action in which it gets not just criminal sanctions but also requires the... the RICO defendant to pay again what's already been paid.

Mr. Clement: --Well, actually they could get the order, and then there are specific provisions in the Federal restitution statute that allow a set-off for amounts that have already been paid or that will be paid.

Justice Scalia: Oh, well, that's quite different.

Mr. Clement: But I don't think it--

Justice Souter: Okay.

Then let's go back... then let's simply go back to the damages case.

You said a second ago in... in response or you... you agreed with the suggestion of mine that in fact the Government can perfectly well sue independently.

My question then is, why do you concede that the settlement case in which the individual settles for... for money in lieu of damages is a harder case?

Why don't you say no?

It's just as easy as this is.

And... and in neither case is the agreement between the individual and the defendant binding or affecting in any way what the Government can do.

Mr. Clement: --Again, we don't think the agreement is binding, but let me give you three reasons--

Justice Souter: But why... but--

Mr. Clement: --Let me give you three reasons why I think it's a harder case.

Justice Souter: --you did say earlier that you thought the settlement case more difficult.

So, I guess I want you to explain why you think it is.

Mr. Clement: Okay.

Let me give you three reasons why I think the settlement case is more difficult.

First, there's already been some expenditure of resources in that case, either... likely, either judicial or arbitral.

Second, Title VII seems to place particular importance on the EEOC's ability to be able to initiate the action and consider the early stages of litigation.

If, for whatever reason, we've gotten to the point where somebody has filed a claim and it's settled, that role has already been filled.

The third reason is another particularly important function of the EEOC under Title VII is to act as a safety valve, so if for some reason the individual is not willing or able to sue, maybe out of a fear of retaliation or something, in a particular case that vindicates the public interest, the EEOC has the ability to step in and fill that gap.

If there's already been a settlement--

Justice Souter: Well, but in each of the... in each of the cases that you posit, even the third one, the... the essence of the objection to your position is that an agreement has been made between the individual and the defendant.

And in the case of the arbitration agreement, an agreement has been made between the individual and the defendant.

And I don't see why the one class... the one kind of agreement should be treated any differently from the other kind of agreement in determining whether the Government really is in an autonomous position.

Mr. Clement: --Well, I actually think there is a reason to treat that one agreement different, which is the agreement to settle a case extinguishes any claim to relief.

An arbitration agreement does not.

It's simply a forum selection provision.

And the anomaly of the Fourth Circuit's ruling is they take an agreement that limits Baker's access to a judicial forum, but does not limit his remedies and somehow transmogrify it into a rule that limits the EEOC's available remedies but not their access to a judicial forum.

Justice Souter: Then your objection is the transmogrification, not to the... not to the recognition of the agreement as such.

Mr. Clement: Again, we have no... absolutely no objection to having the agreement bind the parties to the agreement.

Justice Ginsburg: But you do say that the employee could not proceed even in the arbitral forum once the EEOC starts.

It's clear in the statute that that's true as to a court action, but you I thought agreed with me that the employee, once the EEOC starts, can't go into the arbitral forum either.

Mr. Clement: Actually the EEOC is of the opinion that the... that the individual could bring an arbitration action at that point.

That is a consequence, though, of the view that they cannot intervene in the EEOC's enforcement action.

I think... I think they--

Justice Ginsburg: So, then the EEOC--

Mr. Clement: --they have to have one action or the other.

Justice Ginsburg: --says we can have this... we can have this... you've just told us that the substantive law is the same.

And I think you're quite right about that, and... and it's just a question of which forum.

But now you're saying it can be both forums simultaneously.

The individual can go forward in the arbitration; the EEOC can go forward in the court with all the problems that duplicative litigation can have of potentially conflicting results.

Mr. Clement: That's equally, of course... I mean, I... I agree that there is that problem.

That is equally a problem with the Fourth Circuit's rule, of course, because they said that the EEOC could be in court seeking general injunctive relief while the individual is arbitrating his claim for victim-specific relief.

Justice Scalia: Well--

Mr. Clement: But... but I think--

Justice Scalia: --that doesn't strike me as so terrible.

I mean, that... that's entirely understandable.

You have two different types of relief being sought in two different forums.

Mr. Clement: --And... and--

Justice Scalia: What Justice Ginsburg points out is... is the anomaly of... of the same relief being sought in two different forums.

Mr. Clement: --Well, and... and I think that... I mean, that may be a product of... that happens when you have an arbitration agreement that limits some parties but not others.

That seems to be the case in... in Moses Cone.

Justice Scalia: Only if we adopt your view of the thing, that the two... that the two are independent.

If... if the two are dependent, as the statute makes very clear they are when... when the Government brings... brings the suit first, barring... barring the individual from bringing a separate suit, if the two are... are dependent, then you don't face any of these problems.

Mr. Clement: Well, fair enough.

But in this case, the Government did bring suit first.

Baker has never arbitrated.

So, that position would lead you to the conclusion that the Fourth Circuit was wrong, that the EEOC can pursue this case, seek victim-specific relief and general injunctive relief, and that it's up to you to determine whether or not Baker gets to intervene in that action.

But that is... that is certainly a result that the Government is quite happy with.

It seems to me what's really sort of indefensible about the Fourth Circuit's reasoning is they take this forum selection provision and turn it into a restriction on remedies.

The... the ADA and Title VII have concurrent jurisdiction.

Suppose that an employer and an employee agreed to litigate their case in State court, not Federal court.

It wouldn't seem to me that that forum selection clause would bar the EEOC and bind the EEOC and limit them from bringing their public enforcement action in Federal court.

It certainly wouldn't seem to me that that agreement to litigate in State court would somehow prevent the EEOC from getting victim-specific damages in Federal court if in fact there was no State court action.

But... but in principle, there's no difference between the arbitration agreement and that forum selection clause agreement that picks the State court.

Chief Justice Rehnquist: Except there's a Federal Arbitration Act, and we've said it's designed to encourage arbitration of disputes.

Mr. Clement: Well, in fairness, I don't think that the FAA embodies a self-executing preference for arbitration.

The--

Chief Justice Rehnquist: No, but... a... a favoring where the... where an arbitration agreement has been entered into, as it was here.

Mr. Clement: --Well, that's true.

But I think the purpose of the FAA, as I understand it, was to put arbitration contracts on an equal footing with other contracts, not to give them some special private place.

And we think that that forum selection clause that picked the State forum would be enforceable between the parties, but we just don't think it makes any sense to say that that agreement between the parties somehow leaps out and bars the EEOC from bringing a Federal enforcement action, or even more puzzlingly I think, restricting the remedies available to the EEOC in that public enforcement action.

It seems to me that at... at bottom Title VII gives the EEOC a right to bring a public enforcement action.

Justice Scalia: The trouble is it's not a public enforcement action to the extent that it is seeking damages for this individual.

To that extent, it... it's an action that seeks to compensate this individual for the damage he has suffered.

Now, that... that has some public benefit I... I assume, just as his own suit, should he recover, would have such... some public benefit.

But to call it a public enforcement action seems to me quite unrealistic.

Mr. Clement: With fairness, I think that's a position that Congress rejected in Title VII itself.

If Congress wanted to say that the only time that the EEOC vindicates the public interest is when it seeks general injunctive relief, it would have been quite easy for Congress to limit the EEOC to general injunctive relief or limit it to bringing pattern and practice cases.

Instead, it gave it the right--

Justice Scalia: Why?

That would have been very foolish.

Why... why require two separate suits: one... one by the private individual, the other by the... by the agency?

If the agency is going to be in there, it may as well go for the whole ball.

Mr. Clement: --Well--

Justice Scalia: But... but to say that the portion of it that compensates the individual is essentially, you know, a vindication of the public doesn't seem to me... doesn't seem to me reasonable.

And... and that is demonstrated by the fact that if the agency brings the suit, the individual can't because he's going to be getting his individual relief.

Mr. Clement: --Again, with all respect, I disagree.

I think restitution statutes reflect and vindicate the public interest, even though the restitution goes to the victim, and not the Government.

It's the fact that the--

Justice Ginsburg: If the model... if the model is the Fair Labor Standards Act, which antedated these discrimination acts by many years, where the Secretary can sue for the money to go into the pocket of the employee, I thought that those were characterized as public interest actions.

Mr. Clement: --That's absolutely right.

I mean, every time a wrongdoer pays money, the payment of that money serves a public interest that's independent of the destination of the payment, whether it goes to the individual who was wronged or some sort of public enforcement action.

And again, I suggest the example of a retaliation action.

In a retaliation action, when an employer has retaliated against an employee for filing a charge with the EEOC, the EEOC clearly vindicates the public interest when it files suit to take the employer to task for the retaliation.

And that's true even if the retaliation and the most effective remedies are victim-specific.

In a case like that, you really need the victim-specific remedies because, after all, it is clear as day from Title VII itself that an employer can't retaliate against an employee for filing a charge.

So, to simply get an injunction that says that is of somewhat limited utility.

On the other hand, to get back pay, compensatory and capped punitive damages I think does vindicate the public interest.

Justice Kennedy: Well, what are your best authorities for the proposition that when litigation has been concluded, another party can recommence the litigation alleging its own injury?

Mr. Clement: I guess I would point--

Justice Kennedy: --some other areas.

You cited the Firefighters case?

Mr. Clement: --Yes.

I would... I would direct you to Local No. 93 v. City of Cleveland.

There's a statement in that case that I think was just meant to reflect a general principle that parties to a litigation can't, through a settlement, bind a non-party to the litigation.

Justice Kennedy: Well, but that was because the other parties had their own injury of a pecuniary nature, as I recall the case.

I... I don't see the case cited.

Justice Stevens: As a practical matter, how often does the EEOC seek victim-specific relief in the form of monetary damages after there's been a settlement between the victim and the other side?

Mr. Clement: I'm actually aware of no case where that's happened.

Justice Stevens: This is all a hypothetical.

Mr. Clement: This is all hypothetical.

And what we're concerned about is a case like this one where there is an arbitration agreement, but the individual has never even sought to arbitrate.

I think that's a much easier case.

I'd like to reserve the remainder of my time for rebuttal.

Justice Stevens: Very well, Mr. Clement.

Mr. Gordon, we'll hear from you.

Argument of David L. Gordon

Mr. Gordon: Mr. Chief Justice, and may it please the Court: The answer to the question presented today is found in the broad terms and policies of the Federal Arbitration Act.

The question, of course, is what effect does Mr. Baker's arbitration agreement have on the EEOC's litigation remedies.

The Fourth Circuit correctly held that the EEOC could bring in court a claim for broad-based injunctive relief and declaratory relief.

However, because Mr. Baker had agreed to arbitrate his claims, he could not seek relief in court specifically for Mr. Baker.

Now, I... I listened carefully to Mr. Clement's argument about the issue of settlement of a claim, and I must respectfully disagree with the authority and line of cases that he's citing.

As a matter of fact, the position, as I understand it from Mr. Clement, is that an individual can settle a claim and then the EEOC can later sue on behalf of that individual and recover relief for that individual.

And that particular principle, if that is what the EEOC is espousing today, contradicts their own policy guidance--

Justice Stevens: Mr. Gordon, if I understood him correctly, he did take that position, but he said you don't have to take that position to prevail in this case.

Is that right?

Mr. Gordon: --Well, perhaps I perceived it differently, Your Honor.

But I... I do think that from our position it's very important for the Court to understand that the cases are almost uniform for the proposition that if an individual settles a case--

Justice Ginsburg: Mr. Gordon, but that's so highly hypothetical because the likelihood that the employee would have proceeded... if the EEOC in the beginning is the only one who can bring an action in court, EEOC brings an action.

Now, even if it's limited only to injunctive relief, isn't it clear that the basic finding of fact, was there discrimination, has to be made for any kind of relief.

And are you going to permit a viable set of proceedings to determine that question?

Once the EEOC brings in... the case in court, mustn't its suit be given primacy to determine the basic question, was there discrimination in violation of the act?

Mr. Gordon: --Your Honor, we do not believe it should be given primacy when an individual has signed an arbitration agreement in which he says I agree that all claims arising out of my employment shall be resolved in arbitration.

We don't see any reason why that case needs to wait for the EEOC to--

Justice Ginsburg: Well, because one of them has power to bind the other.

Does it not?

I mean, suppose the EEOC proceeds and there is a finding that discrimination, unlawful under the statute, occurred.

That would be binding on the employer in any other forum, wouldn't it be?

Mr. Gordon: --Well, Your Honor, it should be, but the EEOC doesn't take that position, as I understand it.

As I understand their position, whatever happens in their court proceeding is an independent action and that Mr. Baker really doesn't have any control over.

And they're doing their own thing in court.

Justice Ginsburg: But we're not talking about Mr. Baker.

We're talking about the employer who has been found to have been a discriminator.

That would have issue preclusive effect against the employer in any other forum.

We're not talking about the individual now, but we're talking about the employer who has been found to be a discriminator in a Federal district court.

Mr. Gordon: It would, Your Honor, if there were findings of fact that were common to the other proceeding.

Justice Ginsburg: But the other way around, if the arbitrator, say, finds no discrimination in that arbitration forum, couldn't bind the EEOC because the EEOC wasn't party to that litigation.

Am I right about that?

Mr. Gordon: Well, I would have to disagree with you on that because I believe that in the arbitration, if there were... an adjudication was made as to Mr. Baker and in... as in this particular case... if I may use this case as the example, in this particular case, Mr. Baker is the only game in town here.

The EEOC is seeking relief solely on behalf of Mr. Baker.

All damages will go to Mr. Baker.

Justice Ginsburg: Let's... let's cut out the relief aspect of it and again concentrate on the issue, was there discrimination or not, as to which there might be injunctive remedies.

If Mr.... Mr. Baker loses on that, that can't preclude the EEOC from getting the determination, was there discrimination.

So, the only point I'm making is when you've got one show that will be binding and the other that can't preclude the EEOC from litigating that basic question, whatever remedies would attach to it, doesn't it follow that the EEOC's suit must be allowed to go forward and have the question of discrimination determined in that forum?

Mr. Gordon: Your Honor, I... I still believe that there's no reason to wait in this case, that the arbitration can go forward to resolve Mr. Baker's individual claims, that the EEOC, under the Fourth Circuit rule, can go forward and have the claims for broad-based injunctive relief heard there.

And I... I must say that there may be separate issues being litigated in that EEOC court proceeding because--

Justice Ginsburg: But isn't it true that for any relief, there must be a finding that the employer has violated the act?

Mr. Gordon: --There must be, but in the court proceeding, there's going to be a broader finding, that there is some pattern or practice of discrimination going on that may or... may or may not apply to Mr. Baker.

If it does apply to Mr. Baker, I would agree with you.

Then that particular ruling would have some collateral estoppel effect in the arbitration.

Justice Kennedy: Well, what... what is your position... maybe you've answered this.

What is your position if the employer and the employee arbitrate and there's a finding of no liability, no wrong on... no wrong committed by the employer?

The EEOC then sues.

Is the EEOC not bound by the liability finding?

Mr. Gordon: Your Honor, in that particular case, if the arbitrator makes a ruling that there was some practice--

Justice Kennedy: No.

My hypothetical is the arbitrator rules for the employer.

No discrimination.

There was no firing in violation of the ADA.

The employer was taking... the employee was taking money or something.

That... that was the reason.

Can the EEOC then re-litigate the issue of liability?

Mr. Gordon: --Not that particular very issue of liability, but what I'm... what I'm anticipating--

Justice Kennedy: And why... and why is that?

Mr. Gordon: --What I... what I'm anticipating--

Justice Kennedy: Why is it that the employer cannot... that the EEOC cannot re-litigate the raw finding of liability?

Mr. Gordon: --I am anticipating from your hypothetical that a specific finding is being made about Mr. Baker being discriminated against based on the facts and circumstances of his case.

What I am anticipating going in the court proceeding is some claim for broad-based injunctive relief that may... may involve Mr. Baker and may not.

Justice Kennedy: I just want to make it clear what your position is.

Is it your position that when the EEOC sues in... in the Federal court and there has been a previous finding of... of non-liability on the part of the employer, that the employer did not discriminate against this person, is the EEOC bound in court by that finding?

Mr. Gordon: Your Honor, the EEOC, to the extent that it's bringing a public enforcement action, something involving a pattern or practice of discrimination, something--

Justice Kennedy: Suppose it's not.

Suppose it's just interested in this--

Mr. Gordon: --Just--

Justice Kennedy: --employee and it's going to base the injunction on the wrong that the employer allegedly committed against this employee, but the arbitrator has found that there is no such violation.

Mr. Gordon: --If it... if the injunction is solely based on relief specific to Mr. Baker and the facts of his case, yes, it would be binding.

Justice Kennedy: And what's your authority for that proposition?

Mr. Gordon: Well, Your Honor, the... the authority would be that based on general principles of collateral estoppel where there's been... these issues have been litigated and--

Justice Ginsburg: Against a particular person.

I thought the basic principle of preclusion was that someone who has not litigated cannot be bound.

You would have to establish that there was some kind of privity between the employee and the EEOC, but I think that would be certainly unprecedented.

The main rule is you have a right to a day in court, not two days in court, and if the EEOC has not been a party in the arbitral forum, I don't see how it can be bound, unless you're making up some new preclusion rule.

Mr. Gordon: --No, Your Honor, I'm not making--

Justice Kennedy: Or unless you say the statutory scheme necessarily finds that there is privity because the EEOC's interests in this case, where there's no broad pattern or practice, are allied solely with those of the... of the employee.

But it's... it's a little odd to say that a party in privity is... is bound if that party cannot intervene in those proceedings when it's a public agency.

But it seems to me that that has to be your... your proposition.

Mr. Gordon: --Well, it is and it runs throughout our brief, Your Honor, and it runs throughout what I'm... what I'm going to say to the Court is that basically what... what is happening here, in the... in the terms of seeking individual relief, is that the EEOC is acting on behalf of Mr. Baker.

Justice Souter: Why... why--

Justice Scalia: --The EEOC is... is effectively a party to the earlier proceeding since its right in the later proceeding is purely derivative of the right of... of the individual employee.

That's essentially what you're urging.

Mr. Gordon: It is, Your Honor, and... and essentially the EEOC is standing in the shoes of Mr. Baker when you look at this case because it is... if you look at the joint appendix, page 51 and 52, the interrogatory responses from the EEOC, you see that they acknowledge they are seeking... when asked what... what damages are you seeking in this case, we are seeking relief on behalf of Mr. Baker.

Justice Breyer: That... that happens to be in this case.

They might have said that.

Doesn't the EEOC also pursue a public interest?

I mean, can't the EEOC... imagine individuals who don't want to bring suits.

They don't care.

They're cowed or they just don't care.

And the EEOC says, I don't care whether you want to bring a suit or not; we're bringing it.

Now, isn't that part of the EEOC's job to see that employers don't discriminate?

And isn't there a public interest in that, as well as the private interest?

Mr. Gordon: There is, Your Honor.

There's a public interest in a case such as that, and there's also a public interest in any claim that an individual brings to vindicate the anti-discrimination--

Justice Breyer: But isn't there a public interest?

Didn't Congress set this statute up so that it is more is involved than a simple tort action or a simple contract action?

There's a public policy in the United States against this kind of discrimination embodied in many laws, and this is one of those laws.

Mr. Gordon: --True, Your Honor, but that public interest can be vindicated just as effectively in arbitration.

Justice Breyer: That's the question.

If a person then in your view says to the EEOC, my employer discriminated against me because I'm black or because of gender or whatever, no doubt, but I like peace; I don't want to bother him; I'm a little worried about it; okay, drop it, if the EEOC says, I don't want to drop it, do they not have that right?

Mr. Gordon: They can continue to pursue that claim for broad-based injunctive relief involved.

But... but here's the rub.

Justice Breyer: I'm talking about can they not get appropriate relief.

That's what the statute says.

Mr. Gordon: It does say that, and the relief would not be appropriate where an individual has signed an agreement to arbitrate.

Justice Breyer: I'm not... I'm asking you my question, not your question.

I, at the moment, have an individual who doesn't care, doesn't really want the suit brought, says to the EEOC drop it, forget it.

The EEOC says, we don't want to forget it.

There's... I'm just repeating myself.

So, what's the answer to my case?

[Laughter]

Mr. Gordon: Well... well, the answer to your case I think is found in the Federal Arbitration Act because this individual agreed to arbitrate--

Justice Breyer: I'm not... there is no arbitration agreement in my case.

It's a person.

You're quite right.

As soon as you answer my question, I'm then going to ask you why does it matter that there's an arbitration agreement.

[Laughter]

But I'd like you to start with my case.

Mr. Gordon: --All right.

Your Honor, if... may I ask you to again assert your proposition?

Justice Breyer: The person is lazy, frightened, or whatever and says to the EEOC, I don't want you to bring this action to get me reinstated.

Forget it.

Drop it.

I'm indifferent.

Does the EEOC have the legal power to say we don't care?

We have a public interest here.

We want to bring this suit anyway because we don't think it's right for the employer to discriminate against you.

We want to make an example of him.

Okay?

Mr. Gordon: Yes.

Justice Breyer: They can do that.

Mr. Gordon: They can do that.

Justice Breyer: Fine.

Now, my question is, when they can do that, why does it matter if there's an arbitration agreement since once you... all right.

Go ahead.

Why does it matter?

Mr. Gordon: Well, there is, of course, the... the strong Federal policy favoring arbitration, the text of the Federal Arbitration Act that says, we're going to enforce agreements.

Justice Breyer: And, of course, my example is designed to show that all those interests have to do with the private interest of the individual perhaps.

Justice Scalia: Mr. Gordon--

Justice Breyer: --Not the other.

That's why I asked--

Justice Scalia: --I think... I think it is your position, is it not, that the... that the agency would not be able to bring such a suit if the individual had already sued and had been compensated, or indeed, if the... if the individual had already settled?

Mr. Gordon: True.

Justice Scalia: Isn't that your position?

Mr. Gordon: True.

Justice Scalia: And... and your further position is that the... that the conclusion of an arbitration agreement is similar to a settlement, that the agency's ability to bring the later suit depends on what the individual, on whose behalf it sues, has given away.

Mr. Gordon: That is correct.

Justice Breyer: Good.

That's perfect.

That's just my question.

Why is this arbitration agreement more like the settlement than it is like the instance we both agreed, the indifferent employee?

Mr. Gordon: Your Honor, the EEOC in these cases... and I hope I can be responsive to your question.

The EEOC in these cases takes its employee as it finds it, and in this particular case, the employee has an arbitration agreement.

And individual conduct can limit the ability of the EEOC to seek remedies in a case.

It happens in a number of different contexts.

Justice Ginsburg: But the remedy... I think we've agreed that what we're not talking about here is the substantive law... the substantive right and the remedy.

It is simply a choice of forum clause.

And if you have two parties that have a substantive right, who can assert the substantive right, one of them is bound by a choice of forum clause.

That's where that party must go.

And the other one is not so bound.

Then how do you stop the EEOC from choosing its forum?

The same question with respect to suppose it had been a State human rights commission that is going into the State court, and the employer says, no, State human rights commission, you can't do that because this employee has signed an agreement to arbitrate.

Mr. Gordon: Your Honor, the... the notion of the importance of the Federal Arbitration Act is that these agreements have to be put on the same footing as other contracts, and we must give force to an arbitration agreement such as this.

And to allow parties to come up with ways to get around these agreements completely undercuts the Federal Arbitration Act.

And I... I would disagree with your premise, if I... if I may, respectfully, that arbitration is a forum selection clause.

It's a lot more than that.

It is a... it is a method of resolving employment disputes.

Justice Ginsburg: But do you... procedural mode, but do you... you don't contest, do you, that Title VII or the disability act or the... whatever Federal law is the law that the arbitrator is to apply so that the substantive law to be applied, whether you're in court or in arbitration, is the same?

It would be Title VII.

It would be the Disabilities Act.

You're not suggesting that the arbitrator can apply some other brand of Federal law than the Federal court would apply, are you?

Mr. Gordon: No, I'm not.

But--

Justice Ginsburg: So, we're talking about the forum and forums have rules of procedure, which can be different, but the substantive law is the same.

It is Title VII or the Disabilities Act.

Mr. Gordon: --That's true, Your Honor, but... but still if we... if we go forward with the rule that's proposed by the EEOC, in... in my view we will be flying in the face of the Court's decisions in Gilmer, the Court's decision in Circuit City, the plain text of the Federal Arbitration Act.

We will be discouraging rather than encouraging arbitration, and--

Justice Scalia: Mr.... Mr. Gordon, I assume that giving up the whole cause of action is the greater and giving up the forum is the lesser.

Isn't your response that if... if the EEOC is bound by a settlement agreement, a fortiori it should be bound by an agreement only to bring the suit in a particular forum, if indeed its action is derivative of the individual's action.

The greater includes the lesser, and surely giving up the whole cause of action, if that binds the EEOC, is greater than giving up simply the forum in which the cause of action can be brought.

Mr. Gordon: --True, and if you take a step back... and let's... let's take the more general... general example where there... there hasn't been a claim filed and where an individual is having a dispute with his employer.

And the employer says, I will give you $300 in exchange for a... a settlement agreement, a release of all claims.

It doesn't involve where an EEOC charge has been filed or where there's a court case going on.

The EEOC and the courts take the position that that particular scenario would preclude it from later seeking relief on behalf of that individual in court.

Justice Breyer: Why is this greater?

You agreed that this is a... this is the greater, the arbitration.

The way I'm seeing it, which you can correct, is that the word in the statute is appropriate relief, and that there's a spectrum.

On the one hand, we have the indifferent employee.

Next is the one with an arbitration agreement who doesn't enforce it.

Next is the one who is in the middle of arbitration.

Next is the one who has been through arbitration and gotten some money, and finally, at the far end we have a settlement.

And whether each of those is appropriate, circumstances for the EEOC to proceed might differ one from the other.

But certainly the arbitration case is in the middle.

It's not way over at the extreme.

So, what... what is your response?

Mr. Gordon: I can't accept the spectrum analysis, if... if I may.

I have to revert to the fact that... that the individual signed the agreement to arbitrate.

Once signing that agreement to arbitrate, then he must pursue his individual claims in that forum and he cannot hand off the ball to the EEOC and have the EEOC do for him what he cannot do for himself, which is get individual relief in court.

That was the bargain that Waffle House made with this employee.

Justice Ginsburg: Would that carry over to, say, wage and hour claims?

Equal pay... I guess the Equal Pay Act is the closest.

Mr. Gordon: Your Honor--

Justice Ginsburg: Could the Secretary of Labor also be in privity with the individual employee who hasn't... who has been denied equal pay?

Mr. Gordon: --Under the... under the wage/hour laws--

Justice Ginsburg: Yes.

Mr. Gordon: --there... there are different interests there.

For example, the... the Department of Labor has to approve a settlement of a wage/hour claim because of the public policy involved in making sure that the lowest wage earners in our society get a particular wage.

It's different on an ADA claim, for example.

The EEOC does not have to approve the settlement of a claim.

Justice Ginsburg: How about an Equal Pay Act claim?

Mr. Gordon: Equal Play Act claim, Your Honor, I believe would be covered under the Department of Labor scenario.

Justice Souter: Mr. Gordon, may I just ask you a question sort of about the other end of this case?

Let's assume that... well, let's assume that there are parallel proceedings going on and that the EEOC suit comes to resolution first.

Now, you... you are... you at least agree that the... that the EEOC can get what I think you have described as sort of generalized equitable remedies on... on... in... in the public interest.

Would those remedies... let's... let's assume a case in which the EEOC sues on behalf of the individual who is subject to the particular arbitration agreement, say, in this case, but also brings in a... in effect, a... a class-wide claim and said, you know, there are... we'll prove that there are hundreds of other individuals who have suffered the same... what is it... Title I violation that this individual suffered.

Can the... and let's assume that in... in the... the EEOC suit, that they prove that.

Can the EEOC get generally class-wide remedy as... as part of its general equitable relief?

Mr. Gordon: Yes.

Justice Souter: Would that include back pay?

Mr. Gordon: No, it would not where there's been--

Justice Souter: Why not?

Mr. Gordon: --When there's been an arbitration agreement.

Justice Souter: Well, not back pay for this individual.

Back pay for everybody in the class except this individual.

This is just... I just want to know what your position is.

Mr. Gordon: Our position would be, Your Honor, that for those individuals who have signed arbitration agreements, then any relief specific to them must be awarded in arbitration.

For those individuals who have not signed arbitration agreements, then that EEOC class-wide relief action could encompass their claim for relief in court.

But to give force to the arbitration agreements that have been signed by the individuals, the... the general--

Justice Souter: Okay, but then... then I... is it also your position that the... that the general equitable relief could not include an injunction to rehire all of those who were improperly fired?

Mr. Gordon: --The... the equitable relief specific to the individual... specific to the individual--

Justice Souter: Well, the injunction is just a general injunction.

It says, rehire the people in this class whom you unlawfully fired in... in violation of this title.

Can... can they get that relief on your theory?

Can the EEOC get that relief on your theory?

Mr. Gordon: --It could if the relief was broad-based and not--

Justice Souter: Well, in my example, it's broad-based in the sense that it applies to everyone in the class, but in order to enforce it, it will have to be enforced against specific individuals.

Somebody quite apart from this proceeding will come forward and say, I'm one of them.

You've got to rehire me.

Can the injunction be... be enforced in that case?

Mr. Gordon: --Yes, it could, but--

Justice Souter: Then why can't back pay be enforced in that case?

Mr. Gordon: --But... but... well, it would be enforced in arbitration.

The relief specific to the individual would be enforced in arbitration.

Justice Souter: No.

You... if I... if I understood what you just said... maybe I didn't... the... the injunction to rehire those who were improperly fired could be enforced in... in court.

In other words, there's an injunction and a court that issued the injunction can enforce it.

Is that correct?

Mr. Gordon: The determination would be in court.

Justice Souter: All right.

Then why... why would not a similar determination and a similar power effect a back pay... generalized back pay order?

Give back pay to all of those... not this guy, but to all of those in the class generally who were improperly fired.

Mr. Gordon: Well, it could, Your Honor.

In court a determination such as that could be made that these individuals have been discriminated against and therefore remedies are available to them.

But the actual determination of the remedies must be made in arbitration for those individuals who signed arbitration--

Justice Souter: I can understand why you say that, but I don't understand why you say that a... a general equitable order to rehire could be enforced in court and would not have to be remitted to an arbitral forum.

Mr. Gordon: --The determination could be made in court, but the determination of what specific equitable relief, whether this person should be reinstated or... or this person should not, that should be made in arbitration.

Justice Souter: So, in... the only thing that on your theory then that is totally within the control of the court would be totally prospective relief, e.g., an order, don't do this again for anybody.

That would be enforceable in court.

Mr. Gordon: Yes.

Justice Souter: And purely in court.

Mr. Gordon: That would be.

Justice Souter: And let's say... let's say a claim is made then later on that that order has been violated, that the title has been violated again, and the injunction against violating the title has been... has been violated.

And let's assume that the employee who claims that... that he is the subject of that violation has also signed an arbitration agreement.

Does it have to go to arbitration?

Mr. Gordon: Well, in that particular case, Your Honor, I believe there would be contempt--

Justice Souter: Right.

Mr. Gordon: --of the injunction.

The contempt would be enforced in court.

Justice Souter: But why isn't your... why isn't your claim to the vindication of the arbitration agreement the same in the future case as it was in the past case?

Mr. Gordon: Because the relief that is awarded to a particular individual is awarded in arbitration.

Assuming that relief was awarded, then that would probably end the participation of the arbitrator at that point.

Justice Scalia: The contempt action wouldn't be brought by either the EEOC or... or the individual, I assume.

It would be brought by the United States attorney or, as we have said, some attorney appointed by the court.

Mr. Gordon: Your Honor, the Court... the Court should not allow... and I think this is the central... central theme of... of our argument here.

The Court should not allow the EEOC and its charging party who comes to it with an arbitration agreement to frustrate the purposes of the Federal Arbitration Act by making this end run around the agreement.

Mr. Baker entered into a private agreement with Waffle House to resolve any disputes he has arising out of his employment.

The Court--

Justice Ginsburg: Mr. Gordon, in... in the history of the anti-discrimination acts, there was legislative history that said the EEOC should be the main player; that is, they should be the main enforcer of these anti-discrimination laws.

Now, that model, which would have taken a lot more money than Congress has appropriated to carry out... but that model simply could not be realized under your view of things because the Federal Arbitration Act would always take primacy, I think you... you put it.

But the notion that the EEOC ought to be running these discrimination actions... they are the main show, and then the individual actions can supplement that.

But... but you couldn't have that model effected under your view of it because the arbitration agreement could always come in and interfere with it.

Mr. Gordon: --Well, I think we should... should take account of what the EEO still is able to do under the Fourth Circuit's rule.

The EEOC is still able to effectuate the public interest by seeking broad-based injunctive relief.

The EEOC is still able to get an injunction telling an employer that you are to certain things with the way you run your business.

The EEOC still has the opportunity to tell an employer that you must report back to us on a regular basis to tell us how you're complying with the employment discrimination laws.

Injunctive relief is not a toothless remedy.

But I will... I will say one other thing.

Justice Scalia: Excuse me.

Does it have to wait for the... for the arbitration to be completed before it brings such a suit?

Mr. Gordon: Before the EEOC brings a public--

Justice Scalia: Before it brings such a suit based upon the violation against an employee who has signed an arbitration agreement.

Mr. Gordon: --No, Your Honor.

It could... it could file its own action for broad-based injunctive relief if it wished.

Justice Scalia: And... and injunctive relief based upon the violation that is the same subject as the arbitration proceeding.

Mr. Gordon: It could if there is a pattern and practice involved in that scenario.

Justice Scalia: I don't know what you mean.

Mr. Gordon: Well, if there is a policy, for example, that is the root cause of--

Justice Scalia: Well, that's fine.

It says that policy is reflected in this one instance, and... and it's the same instance that's... that's before arbitration.

What happens?

Mr. Gordon: --Well, in that case, Your Honor, if the only... if I'm... if the only game in town is that Mr. Baker was discriminated against, and that's it, and there are no general... general... there's no general relief being sought, we're just mad about the employment decision directed toward him, then if the EEOC was in court just on that theory and was unable to show any broader application, then that... the court should dismiss that case.

Rebuttal of Paul D. Clement

Chief Justice Rehnquist: Thank you, Mr. Gordon.

Mr. Clement, you have 4 minutes remaining.

Mr. Clement: Thank you, Mr. Chief Justice.

I want to first pick up on Justice Souter's hypothetical about the contempt proceeding.

It seems to me that if that were enforced by civil compensatory contempt, rather than a criminal contempt action brought by the U.S. attorney, that he'd... he'd have the same problem at the end of the day.

Respondents invoke the proposition that the EEOC has to take the victim as we find him.

The problem with that is that principle applies with respect to damages problems, like a failure to mitigate, that apply to the individual employee whether or not he arbitrates or litigates and applies equally to an EEOC enforcement action and to the individual claim.

What's so unique about this is that respondent is attempting to take an agreement that does not restrict Baker's ability to get any remedy in the arbitration proceeding and turn it into a restriction on the remedies available to the EEOC in its action.

The problem is, this is not, at bottom, a restriction on damages or a problem with remedies.

It is a forum selection clause.

And you have a statutory structure that allows two people to initiate an action.

When one of those parties has signed a forum selection clause and hasn't even initiated the action, it seems that even in the general case there would be no reason to restrict the other party's access to forums or their remedies.

That would seem to be a fortiori true for a statute like Title VII that gives the EEOC a right of first refusal over the initiation of the action.

Another point I'd like to emphasize is that, as Justice Stevens made clear, there are currently no suits pending against employers in a situation where there has been a previous settlement.

In fact, there are only 450 suits currently in the entirety of the EEOC's docket, and I think that puts this case in perspective.

In the literally 99 cases out of 100, an employer's arbitration agreement will govern and the only Title VII claim that will be brought is the employee's claim in arbitration.

In the 1 case out of 100, in the extreme case where there's some important public principle at stake or there's particularly egregious conduct, the EEOC's public enforcement action serves as a valuable safety valve that allows it to preserve the possibility of precedent-setting in public judicial proceedings.

The third and final point I'd like to make is that whatever the answer is in the settlement context, there's absolutely no reason to take a restriction that only restricts the available forum and not the remedies and turn it into a restriction on remedies but not the forum.

Here respondent seeks not only to bind the EEOC to the results of an arbitration, but to prevent the EEOC from seeking all remedies even when there hasn't been any arbitration proceeding initiated at all.

For those reasons, we ask you to reverse.

Chief Justice Rehnquist: Thank you, Mr. Clement.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Circuit City v. Adams - Oral Argument

Fri, 09 Jan 2009 14:50:32 +0000

Case:

Circuit City v. Adams

Media File:

99-1379_20001106-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of David E. Nagle

Chief Justice Rehnquist: We'll hear argument now in Number 99-1379, Circuit City Stores v. Saint Clair Adams.

Mr. Nagle.

Mr. Nagle: Mr. Chief Justice, and may it please the Court--

The Federal Arbitration Act is a declaration of Federal policy favoring arbitration, arbitration agreements, and its coverage extends to the very limits of Congress' Commerce Clause power.

There's an exception to the act, the scope of which is in dispute today.

The respondent asserts that all contracts of employment are excluded from the coverage of the act.

That simply cannot be correct.

The act does not say that it excludes all contracts of employment.

Section 1 excludes only certain kinds of employment contracts, the contracts of employment of seamen, railroad employees, any other class of workers engaged in foreign or interstate commerce.

Beginning nearly 50 years ago, 11 courts of appeals have read that text in a uniform, consistent manner, finding it to create a narrow exclusion applicable only to those workers who are actually engaged in the movement of people or goods across State lines, and we contend that that's the only interpretation consistent with the text of the statute.

Justice Kennedy: Is the word class important to your argument?

Mr. Nagle: Your Honor--

Justice Kennedy: Or would your argument be just the same without--

Mr. Nagle: --I do not believe that it significantly alters it.

I think the class is a term which is used in the Railway Labor Act, for instance, which was under consideration and passed the following year to refer to categories of craft or class of employees.

Justice Kennedy: --Well, it would seem to me to help your argument somewhat, because we... the statute asks us to think in terms of classes of workers, rather than individual workers engaged--

Mr. Nagle: Oh, certainly, Your Honor.

It identifies a group or a category of employees in the same manner that seamen and railroad employees are grouped.

Seamen, of course, was a recognized term.

As the opinion of the Court... as Justice O'Connor's opinion for the Court in McDermott International recognized, seamen was a term having specific meaning.

Railroad employees was a term defined under the Transportation Act of 1920 and also in the Railway Labor Act, so--

Justice O'Connor: --Mr. Nagle, I guess at the time that this act was adopted in... what, 1925?

Mr. Nagle: --Yes, Your Honor.

Justice O'Connor: We had not taken as broad a view of the Commerce Clause power as is true today, is that correct?

Mr. Nagle: I would acknowledge that, Your Honor.

Justice O'Connor: And so Congress probably didn't have in mind that its jurisdiction was as broad as we would have subsequently indicated, and apparently it intended at least that the act not include or cover contracts of employment over which their authority to regulate was very clear, right?

Mr. Nagle: That is correct, Your Honor.

They were specifying seamen and railroad employees.

Justice O'Connor: And the indications were that at least then Secretary of Commerce Hoover thought employees shouldn't be covered at all, and he presented language to the Congress which approved it, and yet you want us to say that Congress did intend to include for arbitration contracts of employment over which the jurisdiction was most questionable, and yet exclude it for those where the jurisdiction of Congress was clearest at the time, which seems a little odd to me.

Mr. Nagle: Well, there are several points in response, Your Honor.

First, the letter from Secretary Hoover was a letter submitted to the committee in 1923, written on the day that it was entered, and there was no further explanation.

I would also submit that we need to look to the language of the coverage provision, section 2 of the act, and contrast that with the language contained in section 1 of the act.

I acknowledge that Commerce Clause authority over seamen and railroad employees would have been clear, but I would also point... bring to the Court's attention, of course, the fact that there were statutory mechanisms in place, and also the single item that we know most clearly is that the seamen as a group, through their representative, Mr. Bruce, have specifically asked that they be carved out.

While it may be somewhat difficult to determine exactly what Congress' motive was, they were responding to a request from a constituency group to be carved out.

Justice O'Connor: Well, the other most troublesome point for me, anyway, is this Court's decision in Allied Bruce, which dealt with section 2, and said that we're going to interpret it now as reaching the full scope of Congress' Commerce Clause power.

Why would we not do the same for this section 1?

Mr. Nagle: Well, in Allied Bruce, which is one of the cases upon which we would principally rely, that was an interpretation of section 2, the coverage, and certainly was making it clear that the Court recognized that Congress was acting to the full with respect to its Commerce Clause power.

Section 1 is an exclusion.

It is to be narrowly construed.

I would submit that there is a general policy that whenever we have a statute which clearly enunciates a public policy of broad scope that any exclusion to that should be narrowly construed.

Justice Scalia: Why is that?

I mean, it seems to me an exception is just as important as the rule.

Why should we unrealistically construe it just because it's an exception?

Mr. Nagle: I certainly would not suggest that--

Justice Scalia: Would you tell that to the members of Congress?

When you vote for this exception, bear in mind that we're not going to take it to have its most reasonable meaning.

We're going to construe it narrowly.

Why?

Why would we do that?

Mr. Nagle: --I apologize, Your Honor.

I was not suggesting that we take an unreasonable meaning.

In fact, I'm suggesting that we take the most reasonable construction that Congress--

Justice Scalia: Well then, fine, so your case really turns, it seems to me, on the point that the language used by the Congress that enacted this statute in section 1 was at that time narrower than the language used in section 2.

Mr. Nagle: --Absolutely, Your Honor.

Justice Scalia: Now, what support do you have for that?

Mr. Nagle: I would point the Court first to... for contemporaneous construction of the language I would point the Court to Illinois Central Railroad v. Behrens, a 1914 case, where the Congress clearly recognized... the Court clearly recognized that the Congress had very broad authority under the FELA statute over interstate commerce, recognized that even trains, for instance, moving in intrastate commerce were nevertheless in the channels of commerce, and so when the FELA in 1914 limited its coverage to an employee who was injured while employed in commerce, this Court found that that was a narrower construction--

Justice Ginsburg: Employed in is not the same as engaged in, but I'd like to go back, first, to the involving term.

Mr. Nagle: --Yes.

Justice Ginsburg: You're using words and say that... saying that in the second section, involved is a very broad term, and in the first section engaged is a narrow term.

Mr. Nagle: Yes, Your Honor.

Justice Ginsburg: But some of the briefs in this case tell us that involved in is not affecting commerce, that indeed this is the only piece of Federal legislation that uses the words, involved in.

Is that so?

Mr. Nagle: To my knowledge it is, and that's what the Court indicated in the Allied Bruce decision.

Justice Ginsburg: So... but you're asking us to say that Congress meant in 1925 something different in using these two words.

Mr. Nagle: In involving commerce says, as this Court found in Allied Bruce, that it's the functional equivalent of affecting commerce, which is--

Justice Scalia: Well, let's be precise about the words.

Are we talking about, involved in commerce, or involving commerce?

Mr. Nagle: --Involving commerce, in section 2, the coverage.

Justice Scalia: That's quite different than involved in commerce.

You can say someone is involved in commerce.

I think that's quite different from saying that somehow this... it's a contract involving commerce.

Mr. Nagle: I... I'm sorry, Your Honor, I'm not using the phrase, involved in--

Justice Scalia: I think it's important to your case that involving commerce is a broader concept than involved in commerce.

Mr. Nagle: --Yes, Your Honor.

I'm not aware that involved--

Justice Scalia: Involving commerce means pertaining to commerce.

Mr. Nagle: --Yes, Your Honor.

Justice Scalia: Involved in commerce means pretty much the same as engaged in commerce, it seems to me, and so if involving commerce is the same as involved in commerce, and involved in commerce is the same as engaged in commerce, you lose.

Mr. Nagle: Your Honor, I--

Justice Scalia: To put it shortly.

Mr. Nagle: --I am not referring to the phrase, involved in commerce.

Justice Scalia: Because it doesn't appear.

The phrase is involving commerce.

Mr. Nagle: Yes, Your Honor.

Justice Scalia: That's the broad coverage of section--

Mr. Nagle: Section 2, yes.

Justice Scalia: --Of section 2.

Mr. Nagle: Yes.

Section 1's exclusion is for contracts of employment of seamen, railroad employees, and other workers engaged in commerce.

Justice Scalia: And they could have said in that section, don't you think... do you think it would have been any different if they had said, seamen involved in commerce, as opposed to engaged in commerce?

Mr. Nagle: As Your Honor has recognized, they did not use involved in.

That perhaps would have supported Mr. Adams' argument that they were trying to show parallel construction.

I would submit, Your Honor, that the fact that the Congress could have ended with the phrase, contracts of employment, then we would not be here today if that was their intent, or could have used parallel language, which would have supported respondent's suggestion that they had the same meaning.

Justice Ginsburg: But isn't the Congress' notion of the limits of its power, doesn't that explain why they didn't say contract of employment, period?

Mr. Nagle: I would not, Your Honor, because if section 2 is the coverage provision and Congress was making reference to its Commerce Clause power in coverage, there would certainly be no reason for them to make reference to or be concerned by the limits of their Commerce Clause power in drafting an exclusion from the statute.

If they had--

Justice Souter: Well, can you give us a better explanation?

I mean, this goes back to Justice O'Connor's question about the oddity of an exclusion which excluded those contracts which were most obviously at the time of drafting within the congressional power, without touching those as to which the power was doubtful, or perhaps absent, and as I understood your answer, your answer was a suggestion that perhaps politics was simply the answer.

I mean, the one particular political group had asked for it.

Can you think of any other reason to draw what to me also seems like an odd distinction in the congressional mind?

Mr. Nagle: --I would point to Judge Posner's opinion in the Pryner case out of the Seventh Circuit, in which he concluded that the Seventh Circuit concluded in his opinion that this section 1 exclusion should be narrow.

He pointed again to the advocacy of the seamen's union, and the recognition that they were a heavily regulated industry that already had a statute in place that provided for an administrative process for resolution of disputes.

Justice Souter: Then why didn't they just stop with seamen?

Mr. Nagle: His... Judge Posner's suggestion is that the railroad industry, the Railway Labor Act was in the works at the time.

Justice Souter: Okay.

Mr. Nagle: It was also a similarly heavily regulated--

Justice Souter: All right.

Mr. Nagle: --heavily unionized industry, and Judge Posner's opinion goes on that Congress may have anticipated, quite correctly, that motor carriers would also become a heavily regulated industry, and in the--

Justice Stevens: What conclusion do you draw from that?

I'm wondering, under your view, are employees of travel agents covered within the exclusion, or are they covered?

Mr. Nagle: --Travel agents, I would... under our interpretation I do not believe that they would be covered because they're not engaged--

Justice Stevens: How about ticket agents for railroads?

Mr. Nagle: --Railroad employees, to the extent that they fall within the definition of employee, for instance, under the Railway Labor Act, I would submit that because railroad employees is a... or employees is a term under that statute, which includes various employees--

Justice Stevens: So you draw a distinction between ticket agents who sell them as employees of the railroad and those who sell them as employees of the travel agent?

Mr. Nagle: --I draw a distinction--

Justice Stevens: You think that's what Congress had in mind?

Mr. Nagle: --I draw the distinction because Congress specifically referred to railroad employees.

When we get into travel agents... and I apologize if you were saying employees of railroads who are travel agents, but I think--

Justice Stevens: --railroad employees engaged in foreign or interstate commerce.

Mr. Nagle: --Yes, Your Honor.

Justice Stevens: But I take it what you're suggesting, you have to give some content to other class of workers engaged in commerce.

Don't you suggest that that's engaged in transportation or something?

Mr. Nagle: Yes, Your Honor.

Certainly, in trying to read the statute--

Justice Stevens: You see, if we accept your view we have to have a jurisprudence of what transportation is.

If we accept the respondent's view, we have to have a jurisprudence on what an employment contract is.

Both require interpretation, but the latter is a statutory term.

Mr. Nagle: --Yes, Your Honor.

Justice Stevens: The former is not.

Mr. Nagle: I would acknowledge that in order to determine the meaning of the final phrase there, any other class of workers engaged in foreign or interstate commerce, that we need to... that we need primarily to recognize the doctrine of ejusdem generis, and the fact that it does follow after the references to seamen and railroad employees.

They are specific groups in a list.

They certainly have something in common, that being that they are transportation workers, and I would also submit that it's inappropriate to read a statute to eliminate the reference to seamen and railroad employees.

If reading it as respondent contends, it's essentially an exclusion for all contracts of employment of all workers engaged in foreign or interstate commerce, and that's, as Judge Edwards said in the Cole v. Burns Security case--

Justice Scalia: Well, I suppose their answer is, Congress has already regulated seamen, they're about to regulate railroad employees, so they want to make very sure that those are excluded, and then they go on to the limits of their Commerce power, which were vague at the time, and give everyone else the same protection that seamen and railroad workers have.

Mr. Nagle: --I simply don't think that that conforms with the statute.

If we are just reading the exclusion, Congress has... section 2, the coverage is very broad, using the language to demonstrate the breadth of coverage.

The exclusion is very narrow, and if one chooses to look to the legislative history that Mr. Adams and his amici point to, there's very, very limited legislative history.

There's essentially one hearing before a Senate committee in 1923 with three Senators present.

Justice Ginsburg: Well, skipping the legislative history, Mr. Nagle, why is it so narrow?

It says, engaged in commerce, and even in 1925 that extended beyond transportation workers.

You want the cutoff to be transportation workers, I take it.

Mr. Nagle: Your Honor, I'm not aware of cases that in 1925 would have said, engaged in commerce would go beyond transportation workers.

I think that involving commerce would... the section 2 language goes to the breadth of it, but in commerce, this Court, as I mentioned, Illinois Central Railroad case, the Gulf Oil Corporation case, the Bunte Brothers case, in each of those the Court said that in commerce is not the equivalent of affecting commerce.

In the Bunte Brothers case the Court said, words derive vitality from the aim and nature of the specific legislation.

Justice Ginsburg: So communications workers, those were not included as engaged in commerce?

Mr. Nagle: They would not have been included as engaged in commerce.

Justice Ginsburg: You say as of 1925, the only workers engaged in commerce were those who were engaged in the moving of goods, is that--

Mr. Nagle: In the movement of people and goods across State lines, Your Honor.

Justice Souter: --Well, if that's the case, then I think what we're faced with on your own interpretation is an exclusion which is as complete in relation to the coverage of employees as the inclusion at the beginning of the provision is in relation to commerce in general, and so it seems to me that your argument supports the interpretive theory that Congress was, in fact, in each instance, in the coverage and in the exclusion, legislating to the limits, and if the limits change as to the one, we ought to recognize a change in the limits as to the other.

Mr. Nagle: I would disagree, Your Honor, in... with respect to the example that Justice Ginsburg just gave, with respect to telephone, telegraph workers.

In 1877 this Court in the Pensacola Telegraph case had found that telephone telegraph workers affected commerce, were involved in commerce, but they were not engaged in commerce in that they were not actually moving goods... certainly we would acknowledge that telephone operators were not moving goods across State lines.

Justice Breyer: When you are talking about all workers, a lot of water has flowed over the dam or under the bridge since 1925.

Mr. Nagle: Yes, Your Honor.

Justice Breyer: I just would like to focus, you to focus for a minute on the consequences.

One of the things that's strongest for you is that in all the other circuits but the Ninth, for a long time have limited to transportation workers this exemption.

Mr. Nagle: Certainly, Your Honor.

Justice Breyer: So what bad would happen if we bought the Ninth Circuit?

That is, in thinking about it, I thought that the purpose of this act is to stop State court hostility to arbitration.

Isn't that the basic idea?

Mr. Nagle: Yes, Your Honor.

Justice Breyer: All right.

So if we read workers out of it you still have the NLRB there today, and doesn't the NLRB have the power today to protect any worker, just... you wouldn't need this... to protect them because the NLRB operating under section 301, or just its general power, could protect all these workers adequately, and therefore there's no reason not to read them out and to invent distinctions between transportation and other kinds of worker.

Now, what's your response to that?

Mr. Nagle: Well, certainly the National Labor Relations Act and the Labor Management Relations Act come into play in the collective bargaining context.

Justice Breyer: Who wouldn't they have power to protect?

Who wouldn't they have power... if the States become unreasonable in respect to arbitration, i.e., they stop enforcing arbitration agreements with workers, couldn't the NLRB come right in there and say, don't be unreasonable, we want the right rules here, and we'll both get the arbitration and protect the workers?

Is there anyone on... in other words, on the Ninth Circuit interpretation, that's somehow going to be left out in the cold when they want an arbitration agreement?

Mr. Nagle: Your Honor, certainly the Ninth Circuit started its analysis in the Craft case, which was a collective bargaining agreement case--

Justice Breyer: I mean, I'm interested in a practical fact.

This statute is to stop the hostility of the States to arbitration.

I wouldn't want workers who wanted arbitration to be left out in the cold, any more than anybody else, and then I thought, well, if we accept the Ninth Circuit they're not going to be left out in the cold, because they have the NLRB in there to protect them and, moreover, it will help them somewhat in terms of the purposes because they won't get these agreements shoved in their face and they will be able perhaps to have more freedom to choose.

But I'm not... I'm not expressing a view on that.

Whatever the right thing is, we have people there on the board to protect them.

That's... so in other words, if I deny your interpretation, am I causing any harm?

Leaving the words out of it, I want to know the consequences.

Mr. Nagle: --The consequences, Your Honor, is that arbitration and the Federal policy favoring arbitration, which is designed to reduce litigation, will lead to a period of tremendous turmoil while the courts are trying to grapple with the application and enforcement of arbitration agreements.

The extent to which they're enforceable under various laws, choice of law provisions, when arbitration agreements contain a governing law provision, the question that I think is very significant, although it's only mentioned in Mr. Adams' brief in footnote 19, the question of arbitrability of Federal employment statutes, if the FAA is taken out of the mix, where this Court relied in part on the liberal Federal policy favoring arbitration in Gilmer and used that to... as a consideration with respect to enforcement of arbitration agreements, if the FAA is taken out of the mix, I think note 19 in Adams' brief suggests that there's an effort to avoid arbitration of even the Federal claims, and--

Chief Justice Rehnquist: Well, even if the FAA doesn't apply to employment contracts, State arbitration rules can... they can be used, can they not?

Mr. Nagle: --There are State arbitration rules which vary dramatically from State to State, Your Honor, certainly.

That I think does not solve the issue, because, as this Court has recognized on a number of occasions, one of the great advantages of the broad application of the FAA is providing that substantive law of arbitrability.

If we are to revert back to the State substantive law of arbitrability, we will have the determinations made on various statutes, we'll have the issues that arise when a contract arbitration agreement is entered into in one State, performed in a third, a claim is brought in a third, we'll have removal to Federal court and a question of which State substantive statute on arbitrability--

Justice Ginsburg: Why would you have removal to the Federal court unless you had diversity if it's State law that controls?

Mr. Nagle: --In... there may be cases where there is diversity, just a--

Justice Ginsburg: Well, if these are employment relations, wouldn't most of them be diversity... most of them be nondiverse, that is, a worker and employer in the same State?

Mr. Nagle: --I would disagree, Your Honor.

I think there are many large national corporations that... such as Circuit City which is primarily... principal place of business is in Virginia, and so to the extent that large companies have employees in many States there may very well be diversity, and then when the matter is removed on diversity grounds there will be the question as to which State substantive law of arbitrability would apply.

Justice Ginsburg: Wouldn't it be the place where the work is performed?

Mr. Nagle: Well, it may be, Your Honor.

On some occasions this Court has had arbitration agreements such as in Allied Bruce, where it was essentially one sentence in a termite prevention contract.

A number of employers since Gilmer, and in reliance on Gilmer, have developed very sophisticated arbitration programs which include, among other things, governing law provisions, and so you may have a corporation which is based in one State, has a detailed arbitration rules and procedures, as Circuit City does--

Justice Ginsburg: Nevertheless, it would be State law that would control, some State law.

Mr. Nagle: --It will be some State law.

One of the issues that the courts will need to determine is when we have a governing law provision such as in the Circuit City agreement, specifying that the Virginia Uniform Arbitration Act would apply, and then the question will arise whether, for instance, California would honor that reference to that State statute.

I think it's simply an issue that the courts will have to grapple with for a number of years until someone returns here on that issue.

Justice Souter: Mr. Nagle, at the time this... the exclusion was passed, can you tell me whether it was customary to require each party to bear a portion of the cost of the arbitration, so was it... would it have been customary at that time to require employees to pay part of the up front arbitration costs?

Mr. Nagle: Your Honor, I didn't hear the beginning.

Are you saying in 1925--

Justice Souter: Yes.

Mr. Nagle: --would it have been customary?

Justice Souter: Yes.

Mr. Nagle: It was an administrative machinery that was put in place.

I cannot represent to the Court that it would have been customary on that.

I do not know, Your Honor.

Justice Scalia: Could you tell me just for the record, what are the best cases that you have to establish the proposition that at the time this legislation was enacted it was already well established that engaged in commerce was not the limit of the Congress' power over interstate commerce?

What are your best cases?

Mr. Nagle: Illinois Central Railroad v. Behrens, the Shanks v. Delaware, the railroad case.

Those are pre FAA cases.

Certainly subsequent interpretation, if you look at Bunte Brothers case, which was involving... I'm sorry.

In commerce was not equivalent to affecting commerce.

It was sometime later, but it referred to the Clayton Act, which had been passed in 1908.

In fact, another point to note on that case is that they noted where it was reenacted in 1950, and that Congress did not change the language, despite the fact that this Court had made clear there was a difference between in commerce and affecting commerce.

The reenactment without change seemed to suggest that Congress had acquiesced in that.

I would point out that the Federal Arbitration Act was reenacted in 1949 without change, after the law had become quite clear over that respect.

Justice Stevens: Have you... just, I want to be sure you give us your best answer to Justice O'Connor's initial question as to the reason why there's this rather narrow exception from a broad provision.

Mr. Nagle: I would say that while Congress' motives are not always clear, and the very limited legislative history doesn't provide any guidance on that, what we know is that Mr. Furiceff of the Seamen's Union specifically asked that his union be carved out.

We know that seamen and railroad employees were groups that already had by statute an administrative mechanism for resolution of disputes.

Pryner and Asplundh Tree both point out that they were heavily regulated, and that there... I would conclude, if I could, that there is nothing in the legislative history to suggest that Congress was contemplating the scope of its authority when it crafted the words in section 1.

If I may reserve the remainder of my time.

Justice Ginsburg: Very well, Mr. Nagle.

Mr. Rubin, we'll hear from you.

Argument of Michael Rubin

Mr. Rubin: Mr. Chief Justice, and may it please the Court--

We agree with petitioner in response to the question from Justice Scalia that the focus of the Court's inquiry today has to be on what Congress meant in 1925, whether it intended the section 1 exclusion to go... to remain symmetrical with the section 2 coverage.

Justice O'Connor: In 19--

Chief Justice Rehnquist: --Mr. Rubin, if your position is correct, why didn't, in section 1, Congress simply stop with, shall apply to contracts of employment, period?

Mr. Rubin: Congress could have done it that way, but it used the language that was presented to it by Secretary Hoover, who stated... whose letter was both in the 1923 committee hearing and was also reprinted in the 1924 committee hearing.

Secretary Hoover--

Chief Justice Rehnquist: When was the bill actually passed?

When was the law passed?

Mr. Rubin: --It was enacted into law in February 1925.

Chief Justice Rehnquist: '25.

Mr. Rubin: Secretary Hoover, just 2 weeks after the seamen's union expressed concerns not only about its application to seamen, but according to Mr. Furiceff to seamen, railroad men and sundry other workers in interstate and foreign commerce, wrote a letter to the chair of the Senate Judiciary Committee in which he said, if there appear to be objections to the inclusion of workers' contracts, then he proposes that the following language be used.

The language that he proposed is the identical language that Congress used in the section 1 exclusion.

While--

Justice Scalia: That's very good sleuthing, but I mean, this is a letter.

This is not even a committee report.

It is a letter sent 2 years before this statute is enacted, and you want us to assume that that is the only reason, not only that Congress didn't end the sentence in section 1 with employment contracts, but it is... but also it explains why Congress didn't at least, if it was not going to end the sentence there, at least use the same language in section 1 that it did in section 2.

Mr. Rubin: --There is--

Justice Scalia: I mean, that is a very difficult thing to explain.

Mr. Rubin: --There is a linguistic explanation for what they did.

While Congress could have limited that way had it been presented in a different way, Congress'... Secretary Hoover asked Congress to expedite passage of the bill to satisfy the commercial interests who were urging it.

Chief Justice Rehnquist: I gather he failed, since he sent the letter in 1923 and the bill was passed in 1925.

[Laughter]

Mr. Rubin: He did... he was successful in getting the language that he proposed included in the bill immediately after he proposed it, but why is the additional language in there, what purpose does it serve, because that, I think, is the response to the Chief Justice's question.

Well, we start with the first two phrases, the first two classes, seamen, and railroad employees.

Now, in 1925, given how limited Congress' Commerce Clause power was, there weren't that many categories of workers who were actually covered by Congress.

In fact, the only private sector employees that were covered by any Federal statute under the Commerce Clause power in 1925 were seamen and railroad employees, so not only was--

Justice Scalia: They were covered by the Commerce Clause power, or by any Federal statutes?

Mr. Rubin: --I'm sorry.

They were covered by Federal statutes.

Justice Scalia: By Federal statutes.

Mr. Rubin: Excuse me if I misspoke.

Justice Scalia: No, I--

Mr. Rubin: Then... then, because the objection from labor, which Secretary Hoover at least urged Congress to overcome, however quickly or not it might have happened, referred more broadly to all classes of employees, because the underlying concern was the disparity in bargaining power, as this Court acknowledged in Prima Paint in its footnote 9, when it referred to the section 1 exclusion, because the disparity in bargaining power applies between all workers and bosses as perceived by labor at the time, and as reflected by Congress in 1932 in the Norris La Guardia Act.

Congress went beyond that.

Justice Scalia: --This would include an employment contract between a CEO and a corporation, I assume, right?

Unknown Speaker: You're--

Mr. Rubin: There is--

Justice Scalia: --I mean, you're painting this as--

Mr. Rubin: --Our position is yes.

Justice Scalia: --Your position is simply covering the hard hat lunch bucket worker, but I assume it would cover a contract between a CEO and his corporation.

Mr. Rubin: Just like FELA at the time, we believe, would have covered an on the job injury by a high executive of a railroad company, it is our construction that worker and employee means anyone employed by a company.

There is an amicus brief that argues otherwise.

Justice Breyer: Yes, because you'd say that it covers workers, and workers might have had a definition at the time that did not include the CEO.

Mr. Rubin: That is possible.

Justice Breyer: We don't have to decide that.

Mr. Rubin: You certainly do not have to decide that.

Justice O'Connor: Mr. Rubin, what was well established as of 1925 about the meaning of Congress' power?

Was it well established that engaged in commerce was narrower than Congress' full power?

Was there already the affecting commerce notion--

Mr. Rubin: There was not.

Justice O'Connor: --floating out there?

Mr. Rubin: There was not.

We have cited numerous statutes, as well as cases of the time.

There is not a single statute in effect in 1925 or a case describing the commerce power as it pertained to employees that used a broader term than engaged in.

Justice O'Connor: What about the case cited by opposing counsel, Behrens.

Mr. Rubin: Behrens and Shanks.

The Behrens and Shanks case arose under the amended FELA, the 1908 version of FELA.

That act referred initially to engaged in, but then on two separate occasions had what we characterize as a temporal limitation.

It said, while engaged in.

It specifically limited the scope to less than the full commerce power, as would have been expressed by the term, engaged in, and in Shanks and in Behrens, and in several other cases, this Court expressly noted that whether workers were covered by the amended FELA or not, turned upon whether the injury they suffered occurred while they were engaged in.

It didn't focus on the type of work they generally performed.

It... for instance, in Behrens, I believe, the worker was working on an interstate... intrastate traffic.

His job often included interstate traffic.

He would be engaged in commerce, but because at the time he was hit by the locomotive he was engaged in solely intrastate work, the Court said that, given the temporal limitation of FELA, it doesn't apply.

So those cases support our position.

Shanks in particular supports our position because Shanks goes to... the FELA law was very complicated.

There were many, many cases coming before this Court trying to decide who is and who is not covered by the various limitations.

Shanks goes through and summarizes the Supreme Court jurisprudence of the time under FELA and makes very clear that engaged in is as broad as it gets, because it includes not just those narrowly working on the trains as they were going down the tracks, but everyone whose job is sufficiently related as to be practically a part of the interstate commerce.

So at the time, in 1925, engaged in was a term of art.

It was a term of art that reached to the full scope of Congress' commerce power.

That is to complete the answer as to... actually, it doesn't quite complete the answer, because there are still some words that we have to address.

That explains, we believe, why there was the reference to in... engaged in foreign or interstate commerce, because that was the common use of art whenever--

Justice Scalia: But it wasn't... but then they would have used it in section 2.

I mean, you have a very difficult phenomenon to explain, that is the fact that Congress obviously and intentionally used different language in section 1 and section 2.

That is just terrible drafting, just terrible drafting if Congress was trying to do what you say they were trying to do.

Mr. Rubin: --The two sections were drafted at different times by different people.

A--

Justice Scalia: That may well be, but--

Mr. Rubin: --A--

Unknown Speaker: --that's terrible drafting.

Mr. Rubin: --The--

Justice Scalia: I mean, Congress is supposed to come up with a coherent bill, and we usually assume it was all drafted at the same time and somebody sat down and used the same words to mean the same things throughout the statute, and we usually assume that when they use different words they mean different things.

Mr. Rubin: --There is a reason why the locutions in section 2 are different from those in section 1, and that is because the language in section 2, the coverage provision refers to... and it's an odd locution, one that we've certainly not seen in other statutes... contract evidencing a transaction involving commerce.

The word engaged, had engaged come first, would not have fit in that phrase, because there can't be a contract evidencing a transaction engaged in commerce, because a transaction cannot engage in commerce.

By the same token, in the section 1 exclusion it would have made no sense to use the word, involving, because workers aren't involving commerce.

Now, perhaps they're involved in--

Justice Scalia: They're engaged in businesses involving commerce.

Workers in businesses involving commerce.

Mr. Rubin: --Then that has--

Justice Scalia: I mean, it's so easy to do.

Mr. Rubin: --It both adds more words, it does not respond to the concerns of those--

Justice Scalia: If you're worried about adding words, they could have ended it after workers and it would have achieved the same result.

Mr. Rubin: --It does not address the concerns of those who were objecting, because it used the exact language that they proposed.

There's one more phrase that I haven't addressed, and that's the any other.

I know Justice Kennedy asked about the class, but the complete phrase is, any other class of workers and, as this Court has stated on several occasions, when Congress uses terms such as... in fact, when it uses the language, any other, it means exactly that, any other.

That's as broad as it gets.

That is language without limitation, and instead of saying, any other class of workers in transportation, which is essentially what petitioner's argument would have the Court read section 1 to mean, commerce was a defined term of art.

Section 1 itself defined commerce as, interstate or foreign commerce, as broad as it gets.

It didn't say, commerce means transportation.

Petitioner would not only have the Court adopt the illogical explanation that Congress excluded from this bill those workers over whom its commerce power was the clearest and federalize the law of arbitration only those as to whom I believe Justice O'Connor said was most questionable--

Justice Ginsburg: Mr. Rubin, there's also the phrase, contract of employment.

You were candid in telling us that you consider workers to include any employee, even managerial employees.

What about collective bargaining contracts?

Are they... where do they stand as... do they fall within the section 1 exclusion?

Mr. Rubin: --Yes, and in fact the majority of the circuits agree with the proposition that collective bargaining agreements are excluded.

Various amici have totalled up, I think 5 to 3, but yes, collective bargaining agreements--

Justice Ginsburg: How was that consistent with... we're told that the Ninth Circuit is the only one that holds that all employment contracts are out under section 1, but--

Mr. Rubin: --I believe the more accurate statement would be that those circuits that focused solely on individual employment contracts drew that distinction, because in fact, going back to 20, 25 years, the majority of the circuits have said the collective bargaining agreements are excluded.

The practical effect is minimal, because the Labor Management Relations Act, Section 301, as this Court clearly held in Lincoln Mills v. Textile Workers, does ensure the Federal common law of arbitrability for collective bargaining agreements.

Justice Ginsburg: --What was the reasoning in the circuits for saying that collective bargaining contracts are excluded?

Is it that they were not contracts of employment?

Mr. Rubin: No, no, no.

It's precisely the opposite, because they were contracts of employment of any other class of workers.

Justice Souter: And some of the examples involve collective bargaining agreements outside of the transportation industry.

Mr. Rubin: Yes.

Yes.

Justice Kennedy: But why wouldn't those courts have said that the National Labor Relations Act is just a superseding statute?

Mr. Rubin: The National... the... section 301 of the LMRA is a different statute.

Justice Kennedy: Or, LMRA, yes.

Mr. Rubin: Is a... well, this Court in Lincoln Mills was faced with a choice as to whether, in deciding to hold collective bargaining agreement arbitration provisions enforceable, it should do so under the FAA, as the lower court had held, by the way, in the Fifth Circuit in Lincoln Mills, or whether to hold it enforceable under section 301, which was enacted in 1947.

The Court chose section 301.

The Court made no reference whatsoever in its opinion to the FAA, and that's where Justice Frankfurter in his dissent first laid out the argument that we're following up on in our briefs to say that the FAA is inapplicable for this--

Justice Kennedy: Why doesn't the 301 reasoning explain what the circuits have done and say, well, these are just controlled by another statute?

Mr. Rubin: --The circuits who have drawn that distinction have not relied on 301.

Sometimes the cases arise in the question of which statute of limitations applies, whether you borrow the Federal Arbitration Act statute of limitations or not, but that hasn't been the distinguishing characteristic and, of course, this case not being a collective bargaining agreement, certainly LMRA section 301 does not apply to this case.

Justice Breyer: Is it true that all the other circuits but the Ninth have restricted this to transportation workers?

Mr. Rubin: No.

Some have, as we pointed out, restricted it to employees of common carriers.

Justice Breyer: Well, all right, but I mean, restricted it, then it can't be that there are a lot of circuits that have held that collective bargaining agreements are excluded as a contract of other workers.

Mr. Rubin: Well, there are--

Justice Breyer: All right.

Mr. Rubin: --I think the First, Fourth, Fifth, Sixth, and Tenth have... and the Ninth.

Justice Breyer: I don't see the consistency there, but I need... that isn't your problem at the moment, nor mine.

The question I have is the same I addressed to your brother over... as I understand it... this is 75 years ago.

Mr. Rubin: Yes.

Justice Breyer: It's an old statute.

Mr. Rubin: Yes.

Justice Breyer: And it's possible the language is open and, given that possibility, I'd like to know what the consequence is.

As far as I understand it, when I'm focusing on workers... and I believe there still is hostility to arbitration in the States, and I also think that there are a lot of unfair arbitration agreements, but there are even more that are fair and many of them help the average worker, maybe not your client.

All right.

Given that background, who's going to be left out in the cold?

Are there a class of workers such that if we accept the Ninth Circuit they will suddenly not be able to get arbitration agreements that might help them because of State hostility or complex State rules, et cetera?

Mr. Rubin: No.

Justice Breyer: Can the NLRA, NLRB take jurisdiction over such a class?

Mr. Rubin: There--

Justice Breyer: Is there a problem?

Mr. Rubin: --There are several levels of responses, but I think to address what I understand your concern to be, workers and employers can always enter into voluntary arbitration agreements.

They can always decide between themselves after a dispute arises, for example, that they choose to pursue an arbitration mechanism rather than to go into court.

If they agree to arbitrate, there is no problem.

It's not like the old common law hostility to arbitration.

There's no question that it would be enforceable.

Justice Breyer: Your response is, then, look, they can still agree, just not in the employment contract.

Mr. Rubin: They... in a few... the ultimate issue here is whether States can determine whether the employment relationships in those States, whether an arbitration agreement is enforceable or not.

Chief Justice Rehnquist: Well, you're going to be--

Mr. Rubin: In those--

Chief Justice Rehnquist: --You're going to be arbitrating under the kind of agreements you describe simply between the... either under State law or under Federal law, aren't you?

I mean, there's no other way to do it.

Mr. Rubin: --If someone is to go to court--

Chief Justice Rehnquist: Yes.

Mr. Rubin: --to enforce an arbitration agreement that one side is objecting to--

Chief Justice Rehnquist: Right.

Mr. Rubin: --Yes.

It's either the State law or the Federal law that will apply in this case determines whether--

Justice Scalia: Mr. Rubin, your argument assumes that giving a broader modern meaning to section 2 and giving a broader modern meaning to section 1 are one and the same things.

I really don't think that that's what's going on here.

I mean, what you're really asking us to do is to change the language of section 1 in light of the fact that we now know that Congress could have gone further than it chose to go in that language.

I don't know any other case where we've done that.

You're not asking us to simply give that language its modern, more expansive meaning.

You're asking us to say, you know, in light of the fact that we now know that it's not just employees engaged in interstate commerce who can be covered.

Had Congress known that then, they would have written a different provision and so, Supreme Court, why don't you rewrite it for Congress, because they surely would have put it this way if they had known then what we know now.

Do you know any case where we've done that?

Mr. Rubin: --I'm not asking you to rewrite the language, Justice Scalia.

I'm asking you to accept that Congress in 1925 saw a symmetry, saw an objection, responded to it by making sure that any worker that might be... if there were any worker out there whose contract of employment evidenced a transaction involving commerce, they would be taken out of the act completely.

Justice Scalia: You're saying they saw a symmetry which now no longer exists because we've given the first part a much broader meaning, and now this other part, which they once thought was symmetrical, is no longer symmetrical, so now we should read it to mean something more--

Mr. Rubin: To--

Justice Scalia: --than a class of workers engaged in foreign or interstate commerce.

Mr. Rubin: --To get back to the very first question you asked petitioner's counsel, what did Congress mean by the language used in 1925.

Involving, which had never been used before in a commerce relationship and has never been used since, could not have meant anything more than engaged in, because engaged in was as far as it got.

So to the extent there has been a rewriting... and I'm not contending there's been a rewriting.

I'm contending there's been an application under the modern interpretation of the Commerce Clause.

As this Court in Terminex said, you have to look to see what Congress is trying to achieve.

What were the purposes?

And when the Court read, involved in--

Justice Scalia: Even when it doesn't achieve that by reason of future changes, future changes in the law, or future changes in circumstances.

What you're asking us to do is, in light of future changes in the law, make this statute read the way Congress thought it was going to operate when it was enacted, but we don't usually do that.

If, in fact, engaged in interstate commerce is something narrower and is no longer symmetrical, tough luck.

Congress can amend it.

But we don't go around rewriting it in order to preserve symmetry.

Justice Kennedy: Maybe your answer is, we've already rewritten section 2.

Mr. Rubin: --In fact, in Terminex in 1925, that... that's what happened.

The language in 1925 maintained that symmetry, maintained that symmetry for purposes that were stated that are in the record.

There is no indication of any reason why Congress would have disrupted that symmetry, what purposes could be served, how it could be--

Chief Justice Rehnquist: But it isn't symmetry.

I mean, there's different language used in the two sections.

Mr. Rubin: --It's symmetry, Your Honor, in the sense that because some felt that the coverage language might encompass workers' contracts of employment, Congress, to the fullest extent it could, pulled those workers out.

Chief Justice Rehnquist: That's a very odd definition of symmetry.

Mr. Rubin: Symmetry may not be the right word.

The concept is the word that I'm trying to convey to the Court, and the concept is the concept of ensuring that no contracts of employment that might be covered under Congress' commerce power would be covered.

One provision should not be read dynamically, as this Court did in Terminex, while the other is read statically.

There's no indication that Congress intended that.

Congress didn't use the word, transportation.

It had enacted numerous statutes by 1925 that had limited the scope to transportation, or to common carriers, or to common carriers by railroad.

It had that language readily available to it had it intended the carve out, but there is no gap between the section 2 coverage and the section 1 exclusion and, therefore, just as in 1925, all workers' contracts of employment were excluded, any other class of workers, the broadest possible language, so, too, we urge the Court to construe the statute that way now.

If there are no further questions--

Chief Justice Rehnquist: Thank you, Mr. Rubin.

Mr. Rubin: --Thank you.

Rebuttal of David E. Nagle

Chief Justice Rehnquist: Mr. Nagle, you have 2 minutes remaining.

Mr. Nagle: Thank you.

Very briefly, first, with respect to the particular questions that have arisen regarding our citation of Behrens, I would ask the Court to look at the sections on pages 7 and 8 of our reply brief, where we specifically tried to address that the 1925 Congress that had used the words, engaging in interstate commerce, that... I'm sorry, with respect to Behrens, had indicated that that applied only to employees who were actually engaged in interstate transportation or closely related functions, and not to other employees that Congress had the constitutional authority to regulate.

Justice Kennedy: You cite Behrens... you cite... never mind.

Go ahead.

Mr. Nagle: Yes, Your Honor.

With respect to the questions on section 301 of the Labor Management Relations Act, that, of course, affects those in the unionized context.

I would note, as Justice Scalia had pointed out, that this would lead to the anomalous result that a CEO of a multinational corporation who has an arbitration provision in his or her employment contract, that it would not be enforceable pursuant to the FAA.

I would note that in Prima Paint, at note 7, the Court made reference... albeit it in dicta the Court made reference to certain kinds of employment contracts being excluded under section 1, which is consistent with our view that it was not intended to cover the entire range of that which was covered.

Ultimately, I would suggest that as the court of appeals have consistently held, the narrow reading of section 1 is the only reason which is based on and consistent with the text, that makes use of the full text and conforms with the principles of statutory construction, so that we don't read words to be meaningless and that we do apply the canon of ejusdem generis.

As this Court noted in Allied Bruce, and particularly in Justice O'Connor's concurring opinion there, there's value in uniformity and stability of the case law which has developed.

Since Gilmer, untold number of agreements to arbitrate employment claims have been entered into in reliance, and I would suggest that Congress is certainly well aware of this case law development, has had the opportunity to correct it if they thought the Court had gotten it wrong, and they have declined to do so.

If there are no further questions--

Chief Justice Rehnquist: Thank you, Mr. Nagle.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Wright v. Universal Maritime Service Corp. - Oral Argument

Fri, 09 Jan 2009 14:50:13 +0000

Case:

Wright v. Universal Maritime Service Corp.

Media File:

97-889_19981007-argument.mp3

Related Transcript:

1998_97_889_argument.xml

Transcript:

Argument of Ray P. McClain

Chief Justice Rehnquist: We'll hear argument next in Number 97-889, Ceasar Wright v. Universal Maritime Service Corporation.

Mr. McClain.

Mr. McClain: Excuse me.

Mr. Chief Justice, and may it please the Court:

Petitioner Ceasar Wright seeks a hearing on the merits of his claim that the respondents violated his rights under the Americans with Disabilities Act when they refused to accept him for work when he was referred from the union hiring hall.

As the district court found when Mr. Wright was refused work, he took the matter to the union.

The union protested on his behalf, but when the employers would not accede to the union's protest, the union decided, as the district court found, that they would not pursue the matter as a formal grievance, and recommended that Mr. Wright should take the matter to private counsel to bring the case under the Americans with Disabilities Act.

Justice O'Connor: Do you think that the ADA claim could have been resolved in a grievance procedure?

Mr. McClain: This grievance procedure I do not believe was thought by the union to cover it.

Justice O'Connor: I'm not asking you what the union thought.

I'm asking you whether... if... suppose the union said, fine, we'll process it.

Do you think under this agreement that under the grievance procedure this claim could have been resolved?

Mr. McClain: Not with finality.

No, not binding on the petitioner, if it was... if it had been addressed, no.

Chief Justice Rehnquist: Why would it not have been binding on the petitioner?

Mr. McClain: Because the grievance procedure itself did not specifically provide for a statutory claim to be pursued through that manner.

Chief Justice Rehnquist: So then you're saying that the collective bargaining agreement, because it didn't specify statutory claims, didn't include this kind of a claim?

Mr. McClain: That's been the holding of this Court for years, Your Honor.

Chief Justice Rehnquist: In what cases?

Mr. McClain: Livadas v.... the Livadas case is the most recent one, in which it was indicated that the waiver of an individual's right to proceed under a law that was applicable to all workers would not be inferred.

Chief Justice Rehnquist: Well, you said a holding of this case, and now you say... the case you cite for the holding, you say it was indicated in the case.

Was Livadas a holding on this point?

Mr. McClain: I believe it actually was part of the holding of that case, Your Honor.

I'd have to read it more carefully to be absolutely sure of that.

Justice O'Connor: If there had been a nondiscrimination clause in the collective bargaining agreement, would that have changed the situation here?

Would that have been enough?

Mr. McClain: No, because as in Alexander the petitioner had both remedies recognized by this Court's decision.

Chief Justice Rehnquist: Well, Alexander's been cut back in later cases by our Court.

Some of the reasoning of Alexander has certainly been undercut as to arbitration not being a satisfactory way of handling these cases.

Mr. McClain: That's correct, Your Honor, but however, an essential part of the reasoning of Alexander which this Court emphasized in the decision in the Gilmer case is as applicable today as it was when Alexander was decided, and that is that Mr. Wright had no legal authority to compel a hearing on his claim.

He was at the mercy of the union's decision as to whether or not the matter would be pursued.

Justice Scalia: Why is that worse for a statutory claim than it is for... is that only bad for Federal statutory claims, or is it State statutory claims as well?

Mr. McClain: The same rule applies to the State statutory...

Justice Scalia: To State statutory claims.

Mr. McClain: Which Livadas was an example of.

Justice Scalia: Why is a State statutory claim against... well, let's assume... or a Federal, against discrimination, why is that more important to the worker than his common law right to get the money owed him for work performed under a contract?

I mean, you know, as between one and the other, which one would you rather give up?

Mr. McClain: I don't want to give up either one, Justice Scalia.

Justice Scalia: Yes, me neither, but if I had to pick I would think my right to agreed-upon contract compensation might be the more important to me, to tell you the truth.

Mr. McClain: Well...

Justice Scalia: What's the reason for this rule?

And what if California codifies its law of contract so that your right to get money for a day's work as agreed upon in the contract becomes a statutory right?

It then becomes, what, nongrievable in the union contracts?

Mr. McClain: Your Honor, basically... let me back off just a minute and try to start with the questions one at a time.

Justice Scalia: All right.

Mr. McClain: First, Congress has determined that certain minimum standards should apply to all workers, and they have determined that these minimum standards are enforceable in court, and they've determined that they're only... as this Court held in Alexander, it has been determined that there are only two jurisdictional requirements for going to court.

Justice Scalia: But congressional law is interstitial.

I mean, Federal law, especially in these areas of contract, is really not the dominant law.

The States have determined, I can say just as...

Mr. McClain: Well, I would...

Justice Scalia: just as ponderously the States have determined that a man or woman should get a day's pay for a day's work as agreed upon, and has determined that there should be a lawsuit available for that.

Mr. McClain: But in the unionized contract context, it is in fact Federal law that governs because of the statutory relationship between the union as the exclusive bargaining agent for the workers in that unit, and so the union has to be the party to enforce the rights, and the rights that it can enforce are those which it has negotiated with the employer.

That's the nature of that particular workplace.

It has been organized pursuant to Federal statute, as construed and applied for decades by this Court.

Justice Scalia: I'm not sure what you're saying.

Are you saying that the rule you're arguing for is that only Federal statutes cannot be made... cannot be disposed of in the collective bargaining arbitration process?

Mr. McClain: No, sir.

What I was stating... I was trying to answer your question about whether this was a matter of State law, the contract right, and the fact is that the contract right under the collective bargaining agreement is totally regulated by Federal law, and the rights, the manner in which those contract rights are created, and the manner in which those contract rights are enforced are thoroughly regulated by...

Justice Ginsburg: You're talking about 301.

Mr. McClain: That's correct.

Justice Ginsburg: And Lincoln Mills, and that...

Mr. McClain: Yes, ma'am.

Justice Ginsburg: And that under that whole regime you have a right to go to court but you have to use the grievance arbitration procedure...

Mr. McClain: First, under 301...

Justice Ginsburg: So that works for the whole collective bargaining regime.

Mr. McClain: That's correct.

Justice Ginsburg: And was your distinction of Gilmer primarily that the... it is not the worker that has a claim in the grievance procedure, it is the union that is in control and that's...

Mr. McClain: That's...

Justice Ginsburg: That's how you differ it from Gilmer?

Mr. McClain: That's absolutely right.

That's why the union is not capable of making the same promise that Mr. Gilmer made, because the union cannot say, under the labor grievance mechanism, that Mr. Wright will have the power to enforce this contract.

Chief Justice Rehnquist: Well, but that simply states the conclusion.

What if this case had come up under the Federal Arbitration Act, that these people were not longshoreman, but the Federal Arbitration Act would apply to their contracts?

There we would probably hold that this was arbitrable, don't you think?

Mr. McClain: Well, Your Honor, of course this Court has not decided the question of whether or not the Federal Arbitration Act applies to any contract of employment.

Chief Justice Rehnquist: No, but let's assume we did decide that point in favor of arbitration.

Mr. McClain: And then... well, no... the critical distinction between Mr. Gilmer's situation as an individual and Mr. Wright's situation as a member of an organized bargaining unit is absolutely critical.

Both Mr. Wright has not in fact...

Chief Justice Rehnquist: Are you answering my question, or...

Mr. McClain: I'm trying to.

Chief Justice Rehnquist: Okay.

Mr. McClain: Sorry.

Chief Justice Rehnquist: Keep trying.

Mr. McClain: The answer is no under the FAA, because the promise... the union just can't make the same promise.

Chief Justice Rehnquist: Well, but the union certainly is capable of enforcing the contract rights, and it may have to give away some of Mr. Wright's claims there, and you're saying that there's some magic difference between statutory rights and contract rights?

Mr. McClain: That is the case because the whole labor grievance arbitration process for enforcing the contract rights is an integral part of the bargain.

Chief Justice Rehnquist: Well, if you made the arbitration clause broader, supposing it said specifically that we include statutories, then you could say that was an integral part of the thing, too.

That just states the conclusion.

To say it's an integral part...

Mr. McClain: No, sir, I'm sorry, I didn't make myself clear.

When I say it's an integral part of the bargain I mean that the decision... in other words, the way in which disputes under the contract are to be resolved is in the contract...

Chief Justice Rehnquist: Well...

Mr. McClain: and there is... it doesn't have any source in external law, in public law.

Chief Justice Rehnquist: Well, but why does that make a difference?

Mr. McClain: As between the FAA and...

Chief Justice Rehnquist: Well, either between the FAA and the present situation or between statutory rights.

I mean, if arbitration is favored, I mean, why don't we encourage the inclusion of arbitration clauses in Federal labor contracts, allow for the arbitration and statutory rights?

Mr. McClain: Because that would threaten the union's role as the exclusive bargaining agent.

Chief Justice Rehnquist: How would it do that?

Mr. McClain: Well, the control, as this Court has emphasized in decisions such as Vaca v. Sipes, the control of the grievance process in the hands of the union subject to only an extremely limited review is essential to the union's role as... in enforcing the contract, in continuing to maintain labor peace by not only making an agreement with the employer in the first place but by then resolving disputes that arise under the agreement with that employer.

And if the union does not have the authority to make these decisions with a very limited scope of review, then it will not be able to have the same give-and-take that this Court has approved...

Chief Justice Rehnquist: Well, maybe it does have authority to make these decisions with limited scope of review.

Mr. McClain: That's correct, and then that... that deprives the individual of his right under the Federal statute.

Chief Justice Rehnquist: Well, but if his right to... if his right to contract for wages is subject to that, why shouldn't his statutory rights be subject to that?

Mr. McClain: In part because this Court concluded in Alexander that...

Chief Justice Rehnquist: Well...

Mr. McClain: that was not the case, and it has been reaffirmed in numerous cases since that time, because of the absence of the ability of the individual to control the prosecution of his claim, and Congress has approved that arrangement, and...

Chief Justice Rehnquist: How did Congress approve it?

Mr. McClain: In the same way that Congress approved this Court's decision in the Meritor case, as was discussed in the Faragher and Ellers decisions at the end of last term, that the... in the 1991 Civil Rights Act Congress specifically addressed and modified some eight decisions of this Court.

It did not address Meritor.

Chief Justice Rehnquist: So by not addressing a case Congress confirms it?

Mr. McClain: Well, in... that's... I'm simply citing the decisions of this Court.

Justice Scalia: You must not be familiar with the legislative process.

Justice Souter: Mr. McClain, I thought your argument at least in part is somewhat different from what you have been saying to the Chief Justice, and let me just put forward what I thought was at least one strand of your argument, and you tell me whether it is or it isn't.

I thought at least one strand of your argument was that the line represented in Alexander, for example, or drawn in Alexander still applied here, was that it was the only way to respect what Congress has in fact done.

And Congress has in fact given a crucial bargaining role to unions in contract formation, and therefore there's nothing really inconsistent with that with saying, okay, we're also going to give the union an equally significant role in determining how we negotiate enforcement of this contract, if you will.

But Congress has not given the union any role in the formation of the right under title... rights under title VII or the ADA, and that's why we are simply respecting the will of Congress in saying, you can't let the union bargain away what the union has had no role in giving, whereas when you have given the union a role in contract formation it is consistent with congressional intent to let the union have a role in enforcing it.

I thought that was the guts of your argument.

Mr. McClain: I think... I certainly agree with your... the case as stated, or the propositions as stated, Justice Souter.

I don't disagree with that at all.

I was trying to articulate that earlier and failed to do so as well as you have.

Justice Ginsburg: May I ask if the end result, then, is what you're saying is, in any employment covered by a collective bargaining contract you simply cannot have a Gilmer-type deal because the employer, under the NLRA the employer cannot contract with the employee, but only with the union?

Mr. McClain: Well, that is the case unless the union authorizes the employer to make a separate agreement with the individuals.

Justice Scalia: Can the union do that?

I didn't know that.

Mr. McClain: If the union and the individual agree to do so we believe that they can.

They cannot do it directly.

Justice Scalia: Do you know of any instances where they... you see, one of the things that affects me about this case is, if I were an employer, I would have a severe... and with the multiplication of Federal laws affecting the employment relationship, the ADA and a number of others, I would be very disinclined to have a unionized shop if it means that neither the union can agree to have all of these common disputes arbitrated, nor can the individual employee.

Mr. McClain: I think I'm trying to state that our position is that if the union and the individual employee concur, each individual employee as to his claims, then it can be done.

Justice Scalia: But...

Mr. McClain: It cannot be done...

Justice Scalia: I thought the rule was the individual employee cannot negotiate... in a unionized situation the negotiation between the employer must be through the union.

It cannot be with the individual.

So you cannot get each individual employee to agree, we'll go to arbitration on all these title VII claims, these ADA claims.

You can't go to the individual employees.

Whereas the employer who doesn't have a union, when he hires people as part of the employment contract, any disputes about title VII, about the ADA, will go to arbitration.

That would be lawful in that situation, wouldn't it?

Mr. McClain: Not if it's a condition of employment, Your Honor.

I don't believe that's Congress' intent.

Justice Scalia: Not if it's a condition of employment?

Mr. McClain: Not if it's a unilaterally imposed condition of employment.

There's no voluntary right...

Chief Justice Rehnquist: Maybe what you're saying is that the JI case law is for the benefit of the union, that you can't... the employer can't make individual contracts.

If the union wants to waive that benefit, and say... and agree that the individual can contract directly with the employer, that would be the only person who could complain.

Mr. McClain: That's correct, Your Honor, and... or the union could negotiate a framework and allow individual members of the union... the bargaining unit to opt into that framework.

Justice Kennedy: In that hypothetical could the employer make it a condition of employment?

Mr. McClain: Could the... well, the employer...

Justice Kennedy: Could the employer say, we've agreed on this framework and you're going to let me go to individual employees, but if they don't sign this they can't work for me?

Mr. McClain: I don't... well, he has to bargain with the union, and if the union doesn't... certainly if the union does not agree to make it a condition of employment the employer could not impose it unilaterally without the union's consent.

Justice Ginsburg: The union is in the driver's seat on all of this, so what you said is, the union if it wants to can say, we're going to give up the control rein that we hold over the grievance procedure and we're going to let this person make this deal with the employer, but the union stands at the gate, and unless the union says yes, the employer cannot make a deal with the individual employee, right?

Mr. McClain: That's the nature of the union's role...

Justice Ginsburg: Yes.

Mr. McClain: as exclusive bargaining agent.

Justice Ginsburg: So it is the case that in a collective bargaining situation the employer will not be able to make a Gilmer deal, because he can't deal, get past the union.

Mr. McClain: Well, but even if he made an agreement with the union and... that's correct, but even if he made an agreement with the union it would not be a Gilmer deal because individual employees have not...

Justice Ginsburg: Yes.

Mr. McClain: Don't have the power to enforce it.

Justice Ginsburg: What I mean is he can't get... he can't get... he can't go directly to the individual employee.

He can go only if the union says okay, which seems unlikely that the union's going to give up control over the grievance procedure.

Mr. McClain: Well, that may be, and then it's a question for bargaining between the employer and the union.

Argument of Barbara D. Underwood

Chief Justice Rehnquist: Thank you, Mr. McClain.

Ms. Underwood, we'll hear from you.

Ms Underwood: Mr. Chief Justice, and may it please the Court:

A worker's right to a judicial hearing on a claim of employment discrimination is an individual right that can't be waived by a collective bargaining agreement between the union and an employer.

This Court said so in Alexander in 1974 and has reaffirmed that principle many times since then.

It's a matter of statutory interpretation, as Justice Souter said earlier, and the Court said so recognizing a fundamental tension between individual statutory rights conferred by Congress and collective representation.

The Court said that unions are properly concerned with the collective interests of their members, and that it would be inconsistent with the individual focus of at least the antidiscrimination laws to let a union decide whether and how to enforce claims under those laws.

Justice Scalia: I know we said that, but I...

Ms Underwood: Well, I'd like to say that not...

Justice Scalia: I'm still not sure I understand why it's so.

It might seem...

Justice Breyer: And Alexander was different.

Justice Scalia: like my individual right to money is no less individual than my individual right not to be discriminated against.

Ms Underwood: Well, but your right to money, your wages and... except for the minimum wage requirements established by the Federal... by the Fair Labor Standards Act are precisely what the union was set up and authorized by Congress to negotiate.

This, as I said, is a question of interpreting statutory regimes, and this Court concluded correctly that there were two regimes here, one in which Congress conferred the power to invoke and waive both rights and procedures ancillary to those rights on individuals, and the other on unions, and there's an additional reason for adhering to that regime now, because...

Justice Scalia: Both of these laws apply to the employment relationship equally.

My right to get paid for the work I do is a right that relates to the employment... my right not to be discriminated against by the employer, not to be fired for reasons that would violate the ADA, they relate to the employment relationship just as well.

I don't know how you can...

Ms Underwood: That's true.

The question is, who did Congress intend to confer the power of enforcing those rights upon in a unionized workplace?

Justice Breyer: But wait, Alexander, I take it a different case.

In Alexander there was a question of a contractual claim, and the Court said that delegating to the union the power to settle the contractual claim did not delegate to the union the power to settle a statutory claim, which was a different claim, and so what you seem to be arguing is a different thing, which I would like to know the answer to.

If I say to you, I like you, you're my friend, I would like you to settle my lawsuit against somebody else, I can do that, no matter whether it comes under a statute or not, so why couldn't I say, the union is my friend.

I delegate to the union the power to settle my statutory claim against the employer in this area?

Now, I think there's a question of whether this has done that, but suppose it were absolutely clear.

The worker says, I delegate to my friend the union the power to meet with my employer and settle my statutory discrimination claim.

Is there something in the statute books that would prohibit that from happening?

Ms Underwood: Well, I think there's a question about whether Congress intended to permit unions to settle in advance, which is what this is, not to...

Justice Breyer: I mean in my case.

I have a piece of paper...

Ms Underwood: Oh, to settle the existing claim?

Justice Breyer: No.

They say, now, we settle the existing claim.

Fine.

What I do is, I say, it may be this employer, whom I don't trust all that much, will one day discriminate against me, and I hereby give to you, the union, the power to settle any future discrimination claim against me by this employer.

Is there something in the law that prohibits that?

Ms Underwood: Yes.

I would read the...

Justice Breyer: What?

Yes.

Ms Underwood: antidiscrimination laws as prohibiting that for several reasons.

One, the structural analysis that I believe the Court undertook in Alexander, because the Court said not only the contract did not give the union the power to settle the statutory... to waive the judicial forum for the statutory claim, but that it could not.

But beyond that, I think it's implausible to think that Congress gave unions the power to assert or waive their members' rights.

Justice Breyer: It wouldn't be a power given to the union.

The question would be, normally I take it you are my lawyer.

I could say to you, lawyer, if Mr. Smith ever does anything bad to me in a certain area, I hereby delegate to you the power to settle it.

Now, that's the normal background rule of law, and it doesn't limit it only to lawyers, so I suppose you'd have to find something that would suggest in this statute that although I could delegate this power to my lawyer, I couldn't delegate it to the union.

Ms Underwood: Well, one of the things...

Justice Breyer: And if so, what is that?

Ms Underwood: One of the things I'd point to is the fact that in the antidiscrimination laws, in title VII in the ADA and the ADEA, the unions are identified as potential defendants, and it seems implausible that Congress would, in the same statute that it... and there's a historical reason why that's so.

That is, the unions had been and perhaps still are sometimes participants in the discrimination.

Chief Justice Rehnquist: Why is that different from the Securities Act cases, where we've said you can agree to an arbitration, and the... you know, the obviously the arbitration is going to be against your employer, very often, or perhaps your broker, and you have a board of arbitrators in which the broker has a large part of saying who's going to be appointed.

Ms Underwood: Well, we're not challenging the Gilmer propositions that you can agree to arbitration of these antidiscrimination claims as well.

The point is that you can't... that Congress didn't intend that the union, who will frequently be, or sometimes be allied with the discriminator, couldn't... could make the agreement on your behalf, that the union doesn't have the same undivided duty of loyalty in relationship to employees, particularly with regard to these discrimination issues, as does your lawyer, whose obligation is entirely of direct loyalty to...

Justice Souter: What if... I'm sorry.

What if the employee knows all of that?

He says, look, I realize that our positions are not exactly right, but I don't want to have to go through this myself and hire a lawyer.

I'm willing to take my chances with you.

I make a specific agreement with you, the union, which says you can arbitrate and otherwise deal with my rights in any way you see fit.

Why, if the agreement is the kind of knowing agreement that I've just described, should that not be allowed, because the... I mean, the point of the ADA is to protect the person who is making this knowing and willing agreement, and if he wants to agree, why is there a congressional purpose to disallow it?

Ms Underwood: Well, I think the statutes, the antidiscrimination statutes are fairly read as reserving to the individual the right to assert or waive both the statutory right itself and the judicial forum for it, but it would...

Justice Souter: Well, why should that be, because there is such a danger that the union is going to be a coparticipant in the kind of discrimination?

Is that why you think Congress intended as a matter of law to disallow the kind of agreement that Justice Breyer has and, if not, what would the reason be?

Ms Underwood: Well, I think that's one of the reasons.

I think it's not just, however, being a coparticipant in the discrimination.

It is the nature of the union's obligation that it has a broad discretion, consistent with the duty of fair representation, to decide which claims to enforce, how vigorously to enforce them, that it may make a judgment, for example, that it would be more productive in the area of sexual harassment to negotiate policy changes with the employer and leave the pressing of individual claims alone for the time being while these general policy negotiations are going on.

Justice Ginsburg: Do I understand...

Justice Scalia: Am I missing... am I missing the boat here, or is it really not Justice Breyer's question that we have before us here?

As I understood his question, it was the individual employee who would agree to waive it, and that's not the situation here.

It was a collective bargaining agreement that this individual employee had no control over, right?

Ms Underwood: This individual employee... this compuls... this arbitration clause was a) agreed to by the union and not by the employee and 2) constructed an arbitration process that was controlled by the union and not by the individual.

So yes, it does not present the question, could such a contract exist, although I think that there's a serious question about whether it could.

I do want to address a question that was raised earlier about whether the union workplace would necessarily be a Gilmer-free world, that is to say, whether it would be possible to negotiate such contracts in the union workplace.

And I think... and the point was made, but I'd just like to emphasize it, that the union could, under Case, authorize such contracts.

It might in some workplaces be unlikely that it would do so.

In workplaces where individuals have a great deal of power themselves, union contracts often do reserve the possibility of individual contracts about all manner of things, to baseball players and people in the entertainment industry, perhaps not so often to longshoremen.

Chief Justice Rehnquist: Fickle workers, eh?

[Laughter]

Ms Underwood: Yes.

Yes.

But to return to Justice Souter's question, it would be possible... I believe the statutes prohibit the employee from delegating to the union the power to make these agreements, but another...

Justice Souter: Because the risk is just too great, right?

Ms Underwood: Yes.

But an alternative would be to indulge... to establish a strong presumption against such a delegation so that when the contract is being interpreted... and perhaps that was what informed Alexander.

After all, this Court said that if the Alexander did not in fact cover statutory rights...

Chief Justice Rehnquist: Thank you, Ms. Underwood.

Ms Underwood: because it could not.

Argument of Charles A. Edwards

Chief Justice Rehnquist: Mr. Edwards, we'll hear from you.

Mr. Edwards: Mr. Chief Justice, and may it please the Court:

We believe it's clearly a question presented to the Court to hear as to whether there should be two rules of law, one applicable to nonunion employees, and I mean that in the broader sense... that is, employees not covered by a collective bargaining agreement, rather than just simply union members, and one for those who actually are bargaining unit members.

The...

Justice Ginsburg: Either way we're going to have that, is that not true, unless we overrule Alexander, because Alexander says it comes in after the grievance and arbitration procedure has been used, and then the Court says, but title VII is something different, so there's already a separate regime.

Mr. Edwards: Well, Justice Ginsburg, in the Gilmer decision this Court brought up three issues which were not before the Court in Gilmer, and said that those three issues represented grounds upon which Alexander had continuing vitality.

Two of those grounds, I would respectfully submit, are distinctions without a difference, one being the presumption in favor of arbitration under the Federal Arbitration Act, which in my careful reading of this Court's decisions seems to be totally the same as the presumption in favor of labor arbitration.

The second was the question of, in Alexander and in Barrentine and in McDonald, the three cases that were characterized by this Court as Alexander and its progeny, the question was, what is the binding effect in terms of res judicata, collateral estoppel, issue preclusion, fact preclusion, whatever you want to call them, of an already completed arbitration award, or arbitration decision which you cannot tell from the record of the case considered the discrimination question whatsoever, and so it is certainly possible to continue to distinguish Alexander on those two bases or on the basis... on the second ground, and never get to a need to overrule.

The question, however, though...

Justice Ginsburg: I don't understand, because it seems to me that if... unless there's going to be very limited review of the arbitration, then all this is is a protraction thing.

It says, yeah, you've got your good old title VII right in court with a jury trial, but you have to wait and go to arbitration, and then whatever the result is, if you don't like it, come to court.

Mr. Edwards: Well, the question of scope of review was, of course, addressed in a sense in Alexander by saying there can be no estoppel effect whatsoever, so there is nothing to review, but the question of the scope of review of an arbitration award involving statutory claims is, of course, not properly presented in this case.

It is... that's one which has been litigated in great detail in other cases which I certainly presume are going to find their way in this direction sooner or later, and I think that one of the most instructive decisions in that regard is Judge Edwards' decision in the Cole case in the D.C. Circuit, in which he advocates a heightened scrutiny standard.

Because after all, rather than deferring to the arbitrator's contract interpretation in a statutory claim arbitration the arbitrator is, at least in some sense, resolving either questions of law or mixed questions of law and fact which go beyond the terms of the contract per se and, therefore, a court would be empowered to determine whether, in fact, the procedures employed in the arbitration, the remedies available to the grievant in the arbitration comported with title VII, the ADEA, and the Americans with Disabilities Act.

Justice Ginsburg: Well, instead of talking about Judge Edwards' decision, could you tell me how you think, if you prevail in this case, what happens when the employee says, I don't like what the union got for me, I'm bringing my own title VII case?

Can he do that?

Mr. Edwards: Certainly I can, Your Honor.

In that particular situation, if we're talking about a hypothetical employee rather than about the petitioner in this case, a hypothetical employee dissatisfied with the union's conduct of the arbitration would actually have, or the union's willingness to go forward with the arbitration would have several remedies available to them.

Justice Ginsburg: I'm not asking about several.

I'm asking about, does he have a title VII remedy?

I'm not asking anything about bad faith, duty of fair representation.

He... is this just a question of primary jurisdiction, as it seemed to be in Alexander?

Then you come to title VII.

The employee files his title VII claim.

He doesn't like the result of the arbitration, as the employee didn't in Alexander.

He comes to court, and then what?

Mr. Edwards: When he is in court he... the... a... the problem then is determining what standard of review, if any, applies to the prior arbitration proceeding, because he'd have to show...

Justice Ginsburg: Well, let me ask you...

Mr. Edwards: Yes.

Justice Ginsburg: a very particular question, then.

Mr. Edwards: Yes.

Justice Ginsburg: Title VII nowadays gives a plaintiff a jury trial.

In my case, yes or no, would my person who goes to title... who goes to court on his title VII after the grievance procedure and he doesn't like the result, does he get a jury trial?

Mr. Edwards: I don't believe so, Your Honor, because the same statute that afforded the title VII plaintiff a right to a jury trial, the Civil Rights Act of 1991 gave on the one hand, took away on the other by encouraging alternative dispute resolution through a section of that statute, a section of the... and an, virtually identically worded section of the Americans With Disabilities Act.

Justice Ginsburg: Well, now you're going on to another point about the... what was the ADR thing in the 1991 act, and I think Judge Posner takes a view of that quite different from the one that you...

Mr. Edwards: He certainly does, and...

Justice Ginsburg: But anyway, let's... so you're saying that in essence you are asking us to overturn Alexander, because you've given me the answer that if you prevail here you come to court and you get some kind of standard of review that's less than de novo, and you don't get a jury trial.

Mr. Edwards: The plaintiff in Gilmer didn't get a jury trial, either, so...

Justice Scalia: You're not asking us to agree with you on the second one.

Mr. Edwards: No.

Justice Scalia: You're just saying that that's what you think will happen, but we could agree with you as to what should happen to this case and disagree with you as to what happens when whatever the result of the arbitration is is brought before a court.

Mr. Edwards: Certainly.

Justice Scalia: I don't have to agree with both just because I agree with one.

Mr. Edwards: You do not have to agree with both.

Justice O'Connor: Now if... may I ask, Mr. Edwards...

Mr. Edwards: For that matter, you don't have to agree with either.

[Laughter]

Justice O'Connor: Mr. Edwards... Mr. Edwards.

Mr. Edwards: Yes.

Justice O'Connor: Hello.

May I ask...

Mr. Edwards: Pardon me, Justice O'Connor.

Justice O'Connor: May I ask a question of you?

Would this person, this employee have been entitled to go to grievance on this claim, this ADA claim?

Mr. Edwards: Independent of any action by the union?

Justice O'Connor: When the... the union says no, we're not going to do it.

Now...

Mr. Edwards: If that were the case, if the union had flatly refused, which is not established in the record, if the union had flatly refused, there is, as I read section 9(a) of the National Labor Relations Act, an opportunity for the individual to attempt to present a grievance on his own with the proviso that the union has to be given notice of his intent to do so, and I think he could have prosecuted it.

I will confess to Your Honor that I have no basis under this particular collective bargaining agreement for that...

Justice O'Connor: For saying that.

Mr. Edwards: For saying that.

Justice O'Connor: No.

Mr. Edwards: But this is the only employment discrimination claim that has ever arisen in this context.

Justice O'Connor: And could the grievance procedure deal with the ADA issue, do you think?

Mr. Edwards: The grievance procedure could deal with the ADA issue presented in this case because, and only because... I'm not making a position here that under the general language of the collective bargaining agreement in question all discrimination claims can be arbitrated.

There is no discri... no clause prohibiting discrimination per se in the agreement.

Chief Justice Rehnquist: But nothing that specifically includes statutory claims.

Mr. Edwards: Nothing that specifically includes statutory claims except that section 17 of the collective bargaining agreement requires that the agreement not be construed so as to violate any State or Federal laws, which would mean that, in Ceasar Wright's case, in order for an arbitrator to determine whether he wasto return to work from his medical leave of absence he would have... the arbitrator would have had to determine whether the plaintiff wasunder the terms of the ADA.

And therefore this is one of those instances in which the issue to be arbitrated is specific to a statutory claim, unlike the generalized kinds of discrimination claims that are more fairly presented in cases such as Austin, Pryner, Brisentine, and various other cases.

Justice Scalia: Why are they less specific?

I mean, give me an example of why they're less specific.

Mr. Edwards: Well, the agreements in many of those cases, not in Brisentine but in Austin and Pryner, specifically refer to statutory claims, say that statutory claims are dealt with by this agreement, that the affirmative obligations of Federal law with respect to discrimination specifically apply.

If Mr. Wright's claim had involved something less integral to contract language than the question of qualifications, then it is quite conceivable that this issue would not have been argued by us to be one committed to the grievance and arbitration process.

Justice Stevens: Mr. Edwards, may I ask you a question about the Civil Rights Act in 1991 to which you referred...

Mr. Edwards: Certainly, Your Honor.

Justice Stevens: and which you quote on your brief?

Would you assume for a moment that legislative history is relevant, and just take that premise.

Are you familiar with the passage in the House report that states that this provision was intended to supplement rather than to supplant the rights and remedies provided by statute, and that the minority had proposed a bill that would have made it clear that one was a substitute for the other, and they rejected that proposal?

Mr. Edwards: I'm quite familiar with that.

The same language appears in the conference report of the 1990 Civil Rights Act, and I believe also in the conference report with respect to the Americans With Disabilities Act.

That conference report goes on at one point to say that Alexander is the way the law ought to be applied.

However, by the time the Civil Rights Act of 1991 was enacted, Gilmer was the law of the land with respect to arbitration and much of that language in the legislative history becomes rather meaningless, and...

Justice Stevens: Why is it meaningless if it expresses an intent to adopt the earlier view?

There's nothing in the report suggests they favor the Gilmer view.

Mr. Edwards: There's no floor debate on any of this.

Justice Stevens: And it is clear, is it not, that the... a bill was proposed and rejected that would have clearly adopted your view?

Mr. Edwards: And it's also true, Your Honor, that there have been bills proposed since Gilmer was decided to overrule Gilmer, and those haven't been enacted.

Justice Stevens: Right.

Mr. Edwards: So...

Justice Stevens: We're talking about the history of the statute on which you rely, the 1991 act.

Mr. Edwards: That's correct, and in the... a statement by Senator Dole immediately prior to passage in the Senate, Senator Dole said that this provision on encouraging ADR is designed to further the goals expressed in Gilmer, so apparently there are legislators of different views which...

Of course, Senator Dole was speaking for the minority, and he had supported the bill that was rejected.

But he was speaking in favor of the bill that was signed by both Houses, and therefore... I'm...

Justice Scalia: It's really hard to tell, isn't it?

[Laughter]

Mr. Edwards: It's extremely hard to tell.

That's why I quoted...

Justice Scalia: Spent a lot of time on it, though.

Justice Breyer: Can I...

Mr. Edwards: I would hate to do that.

I think this is one of those...

Justice Breyer: If you would like... not like to spend more time on it, could I ask you the...

Mr. Edwards: Certainly, Justice Breyer...

Justice Breyer: sort of the second half of the question I asked Ms. Underwood.

You heard her response.

I don't know if you remember it.

But I was thinking of the individual employee, and he simply delegates expressly to the union the power to settle a discrimination claim under a statute, and she was taken a little aback, and she mentioned the history, and I take it the history shows that unions, too, are very much involved in discrimination, and that was one of the reasons why these acts were passed.

All right.

My question is, given that history, and given what Justice Scalia said, that we're not dealing with an individual here, we're dealing with a group of people who may or may not be focusing on what's in this particular collective bargaining agreement, and given ambiguous language in that agreement, why should there not be a presumption that there is no delegation of authority in the union to settle such claims, which are not like typical CBA claims.

The typical collective bargaining agreement, after all, sends to arbitration disputes arising under the agreement, not normally statutes, unless they're directly related to certain labor areas.

So given all that, why wouldn't we say under 301 in the discrimination area there is a presumption that the claim is not delegated to the union to settle unless it pretty clearly... you know, like a first options type of language, unless it pretty clearly says that it is, and that would solve the problem, perhaps not the way you would like it solved, but what is the objection, legally, to doing that?

Mr. Edwards: The critical problem there it seems to me is that then what would really be being said is that except under the most exceptional circumstances an employer which has a collective bargaining relationship with a union cannot have statutory discrimination claims for employees covered by that relationship...

Justice Breyer: It does not say that.

Mr. Edwards: with the arbitrator.

Justice Breyer: It says that it would have to be... it would have to be stated pretty explicitly, and now, if there is such a situation, if there does turn out to be a collective bargaining agreement where the union really goes to the employees and says, do you want us to settle these claims, and they write it right into there, and the employer signs it, that's the time to deal with the question that I asked Ms. Underwood.

But not here, where in fact it doesn't say anything like that.

It's very general.

It's vague.

It's like all other collective bargaining agreements but for the fact that it doesn't say, explicitly limited to arising under.

Mr. Edwards: I think the hypothetical assumes certain facts which are highly unlikely to occur in today's labor management workplace, but certainly if a union were to agree that individual employees could consent to arbitration, prospectively, of future disputes, then that would present a clearer case.

I do not necessarily think that it follows...

Justice Kennedy: No, no.

But Justice Breyer's question is, what's wrong with a decision... you would lose in this case, but from the standpoint of logic and rationality, what's wrong with our saying, look, these grievance procedures, grievance committees are not set up as adjudicative bodies.

They're set up to negotiate under the collective bargaining agreement having to do with longshore work.

These people don't know anything about adjudicating a claim under this act.

So what's wrong with saying that it simply doesn't cover such claims unless it specifically says so?

Mr. Edwards: I believe your question presumes, Your Honor, that labor arbitrators are less competent than other arbitrators to resolve statutory claims.

I think that...

Justice Kennedy: Well, that is part of my question.

After all, this is a grievance committee consisting mostly of employees and representatives of employers.

They're not an adjudicative body in the normal course, and why isn't... what's wrong with Justice Breyer's suggestion that we simply presume that claims of this type are not to be submitted to that kind of agent, absent specific language?

Mr. Edwards: Well, if all there were, Your Honor, were a grievance committee, I would agree with you.

However, we've got the further step of arbitration here by a neutral selected by the parties.

Justice O'Connor: Well, let me ask you on that precise point...

Mr. Edwards: Yes.

Justice O'Connor: I take it that this agreement isn't governed by the Federal Arbitration Act.

Mr. Edwards: I think that even under the broadest interpretation of the Federal Arbitration Act I would be hard-pressed to contend that the FAA covered...

Justice O'Connor: Yes, it's interstate or foreign commerce.

They're not covered by that.

Mr. Edwards: It's interstate or foreign commerce, and I think we... sections 1 and 2 of the...

Justice O'Connor: Right.

Mr. Edwards: Of the FAA just take us out of that loop, but the principles are, I would submit, the same, so I don't believe that the FAA or National Labor Relations Act issue is one that should be determinative.

Justice Breyer: Your answer is no, it does not cover it, the FAA?

Mr. Edwards: No, the FAA does not, not under binding Fourth Circuit precedent, which is what I'm having to deal with in the absence of any specific ruling by this Court.

Justice O'Connor: Well, in the language of the FAA itself, the...

Chief Justice Rehnquist: These people are longshoremen, are they not?

Mr. Edwards: They are longshoremen.

There...

Chief Justice Rehnquist: So...

Mr. Edwards: are arguments that have been raised and that I have seen concerning the FAA that say that the exclusion was intended to deal only with seamen and railroad workers, but I think that it's pretty hazardous for us to speculate about the legislative history of a statute enacted in 1925, which as has been interpreted by this court so many times...

Justice Kennedy: Is your answer to me that there's an independent arbitrator, that's only if the committee's unable to reach a majority decision within 72 hours.

Mr. Edwards: Well, actually there's a... there are two steps in the appeals process.

There's the port committee and then there's the district committee.

But in actual practice, the way it has always worked under this collective bargaining agreement, and under the bargaining agreement that applies in the five southeastern ports that have the same language, is that management votes one way, labor voters the other way.

There is a deadlock.

It goes to arbitration.

Justice Souter: But the...

Justice Ginsburg: May I ask you, Mr. Edwards, about some... a part of this picture that is troublesome to me, particularly in light of a case that we heard Monday and that I think really distinguishes Gilmer, however arm-twisting you think that arrangement might be, it's signed by the individual.

Now, we know that there are people covered by collective bargaining contracts who don't want to have one thing more to do with that union than they are absolutely forced by the law to do, so I'm thinking about, if you're right, what about Abood, Beck... do those people who say, I don't want the union to be my representative, have to say that the union is going to be in the driver's seat and handling all these claims?

Mr. Edwards: The nature of collective representation is that the union is in the driver's seat except to the extent that the individual can and will assert his or her rights under section 9(a) or can show, for example, that the grievance and arbitration process would be futile, which is quite another exception recognized by this Court on numerous occasions for avoiding a collectively bargained grievance and arbitration procedure altogether.

Chief Justice Rehnquist: How could you show that an arbitration process would be futile?

Mr. Edwards: If the grievant is able to show that there is a manifested hostility toward protected rights by the union in question, I think that brings us back...

Chief Justice Rehnquist: Well, but...

Mr. Edwards: Yes.

Chief Justice Rehnquist: But the union wouldn't control the arbitrator.

Mr. Edwards: No, the union doesn't control the arbitrator, but the union to some degree is involved in the presentation of the grievance.

Now, in... under this agreement there is no prohibition of the grievant being separately represented by counsel.

There are many agreements that do prohibit such activities, but this one does not, and so we're writing pretty much on a blank slate, and it's rather hypothetical to allege futility, or to conceive of futility in this context, and in fact...

Justice Ginsburg: My only question was...

Mr. Edwards: Right.

Justice Ginsburg: in deciding what these two statutes mean, putting them all together, isn't that a relevant consideration, that Gilmer is an individual who speaks for himself or herself.

Here is a collective bargaining contract, and it includes some people who may just love the union, other people who hate it.

Mr. Edwards: Actually, I believe it cuts in the other direction, Your Honor, because the employee covered by a collective bargaining agreement is given enhanced bargaining power, is given free representation, is given a representative experience...

Justice Ginsburg: But we know there are workers who say, we don't want it.

We just... we don't believe in unions.

We don't want to be represented by unions.

The Federal law forces us to some extent, but...

Mr. Edwards: Then that employee's remedy is the same as Robert Gilmer's remedy was.

He doesn't work there.

The situation with Gilmer was that he was faced with what by anything that any of us I think could conceive of would be properly characterized as a contract of adhesion.

He signed on to a forum which required a registration, which required the applicability of the New York Stock Exchange arbitration rules, and so to look at that as a knowing and intelligent waiver of a right to the choice of a forum is pretty much of a stretch, but the...

Justice Stevens: Yes, but at least...

Mr. Edwards: The question of...

Justice Stevens: At least...

Mr. Edwards: knowing and intelligent, it doesn't seem to me...

Justice Stevens: At least he individually, on his own, signed that piece of paper.

That's not true of this employee.

Mr. Edwards: No, it's not true of this employee.

He was represented by someone far more experienced than he in dealing with employers.

We're not talking about the kind of sophisticated employee that this Court deemed Mr. Gilmer to be.

Instead, we're dealing with an employee who the record shows has a functional fourth grade education level, and therefore the representation by a collective bargaining representative should have been quite beneficial to him.

Justice Ginsburg: But the union said they didn't want to take it, told him to go to court.

Mr. Edwards: That's not exactly correct, Your Honor.

The union said that... referred him to private counsel.

There's nothing in the record that specifically indicates whether the union refused to process his grievance.

There were, in fact...

Justice Ginsburg: But in any event, unions don't have to process every grievance.

Mr. Edwards: Certainly they don't, but from the very beginning the union recognized this as a potential ADA claim.

Counsel, or the...

Justice Souter: Which it did not want.

I mean, it seems to me that... you say, well, it didn't unequivocally refuse.

When the representative who would otherwise be pursuing the claim says, I advise you to bring it as a private action, the handwriting's on the wall, isn't it?

Mr. Edwards: They suggested that he go to private counsel.

Justice Souter: Yes.

Mr. Edwards: He went to Mr. McClain, and...

Justice Souter: They didn't want to press forward with it, which is a pretty good idea of the vigor with which they would have gone forward if they had had to.

Mr. Edwards: I don't necessarily accept that, Justice Souter, because...

Justice Souter: Not necessarily, but if you were a betting man, isn't that what you'd bet?

Mr. Edwards: No...

[Laughter]

No, I would not, because this local union has been enjoined under Boys Markets four or five times because they don't take anything to arbitration.

Most of these are individual claims, and they have to be required by the court to take them to arbitration, so this is a matter of conserving resources on their part, I would suppose.

[Laughter]

But in point of fact it winds up being more expensive than less, and that's the whole point of the arbitration choice.

Justice Stevens: And if you win with that history we'll surely cut down the volume of litigation, I guess.

[Laughter]

Mr. Edwards: I doubt that very seriously, because since the third Boys Markets injunction we obtained there have been no further wildcat strikes, so I think that the message has gotten across, and therefore I believe... and we've had numerous arbitrations since then that were not required by... or several arbitrations that were not required by court order.

With that in mind, I think that the appropriate focus really is, should it make any difference that Ceasar Wright was a longshoreman covered by a collective bargaining agreement rather than a foreman working for the same stevedoring contractor in the port of Charleston.

If one had an arbitration clause that was incorporated in an application for employment, or an employee handbook, or a policy and procedure manual, while this Court certainly hasn't squarely addressed any of those issues, it would seem to me that the clear weight of Gilmer would be that this agreement, quote unquote, reached without bargaining by the individual would be binding upon him or her as a forum choice.

Why should not an agreement reached between an employer and a collective bargaining representative who is obligated under statute and under Federal common law to provide a duty of fair representation to the employee receive a similar degree of deference?

We think that the result is quite clear, and that whatever continuing vitality there might be to Alexander has been so severely undermined both by the course of this Court's decisions and by changes in the historic framework, if you will.

In 1974, this Court was concerned with massive, systemic discrimination by employers and labor organizations.

We have come a long way since that time, and during that period of time it's instructive in my view to note that labor organizations have been accorded standing to represent the rights of members of collective bargaining units in asserting claims under title VII and other antidiscrimination statutes.

So if they can do that in court, why can't they do it in arbitration?

I see no basis for a distinction.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Edwards.

The case is submitted.

Justice Breyer: The honorable court is now adjourned until Tuesday, the thirteenth of October at ten o'clock.

Attribution:

The Oyez Project

Featured:

Air Line Pilots Association v. Miller - Oral Argument

Fri, 09 Jan 2009 14:50:05 +0000

Case:

Air Line Pilots Association v. Miller

Media File:

97-428_19980323-argument.mp3

Related Transcript:

1997_97_428_argument.xml

Transcript:

Argument of Jerry D. Anker

Chief Justice Rehnquist: We'll hear argument next in Number 97-428, Air Line Pilots Association v. Robert Miller.

Mr. Anker, you may proceed whenever you're ready.

Mr. Anker: Mr. Chief Justice, and may it please the Court:

Section 211 of the Railway Labor Act permits unions and employers to enter into what are you called agency, shop, or similar forms of union security agreements.

Under an agency shop agreement, represented employees are not required to become union members, but they are required to support the union financially through the payment of the equivalent of union dues, initiation fees, and assessments.

However, in a line of cases stretching back now more than 35 years, this Court has said that a union may not use such an agreement to require objecting nonmembers to pay for union activities that are political and ideological in nature or are otherwise unrelated to the collective bargaining function.

In 1986, in Chicago Teacher's Union v. Hudson, the Court went one step further and held that unions must provide three procedural safeguards to ensure that objectors' funds will not be spent improperly, and those safeguards are, first a notice containing an adequate explanation of how the fee is calculated, second, a reasonably prompt opportunity to challenge the fee before an impartial decisionmaker, and third, an escrow for the amounts reasonably in dispute while those challenges are pending.

The issue in this case is whether employees who wish to challenge the fee that they're being charged must present their claim to that impartial decisionmaker before bringing any kind of a lawsuit.

This case arose in November of 1991, when the Airline Pilots Association, or ALPA, as we called it, entered into an agency shop agreement with Delta Airlines, very much like the agency shop agreements ALPA has with most of the country's airlines.

Before the agreement even became effective, five Delta pilots, later joined by about 150 intervenors, filed a lawsuit to enjoin implementation of that agreement.

They had many grounds for their lawsuit, but for present purposes the only one that's relevant here was the allegation that ALPA does not, or does charge objectors improperly for activities which are outside the scope of collective bargaining.

Now, ALPA has written procedures in compliance with the Hudson decision that include an impartial decisionmaker for the purpose of resolving such disputes.

Unknown Speaker: Mr. Anker--

Mr. Anker: Yes.

Unknown Speaker: --would you mind telling me as a practical matter how these fee challenges typically come up?

Are they usually brought to challenge the amount of past payments, or are they typically prospective in nature?

How does the union notify people--

Mr. Anker: You're talking about specifically--

Unknown Speaker: --of the breakdown?

Mr. Anker: --in our case?

Unknown Speaker: Yes.

Well, the typical situation.

Mr. Anker: All right.

I think, Your Honor, the procedures vary from union to union.

The way it works in ALPA is the following way.

The books are closed... we're on an annual year basis, so that the books are closed at the end of each year and then there is a general audit of the books, and in connection with that audit, or once that audit is completed, then a statement is prepared and that statement itself is also audited, setting forth the germane and nongermane expenses, the major categories, which is essentially our Hudson notice.

At that point, any--

Unknown Speaker: Usually there's been some prospective estimates.

Mr. Anker: --That's correct.

Unknown Speaker: So that they're not charged the full amount.

Mr. Anker: That's--

Unknown Speaker: But then you... it doesn't get serious until after the fact.

Mr. Anker: --Let me... if I can just finish, I think I'll... you'll see that part of it.

Unknown Speaker: Yes, okay.

Mr. Anker: The statement is issued.

At that point, for the year in which it's issued, there is an immediate but only provisional adjustment put into place.

Then when that year is finished there is a final calculation and we actually either add charges or refund, depending on what the differences are.

It's at that point that the pilot has the right to challenge that calculation.

Now, when he does that, of course, he's challenging both the retrospective one and also the provisional one for the coming year, but that's the way our system works.

Other unions have a different system.

Other unions are always running 1 year behind, and they don't go back and make the retroactive adjustment, which we do.

Unknown Speaker: Have... has this Court ever required a nonsignatory to a contract to submit to arbitration rather than going to court?

Mr. Anker: No, Your Honor, not to my knowledge, and I think that--

Unknown Speaker: It's kind of a big step to do.

I mean, it may--

Mr. Anker: --Well, it's... it may--

Unknown Speaker: --help as a practical matter, but I just... I wondered what kind of authority there would be for that.

Mr. Anker: --All right.

I think that's the core of this case, and I think to call it arbitration, which in a sense it is, is also in another sense misleading, because it is really not consensual arbitration, which is what most arbitration is, although I gather there are statutes... one of the Article III cases cited by counsel involves the FIFRA statute, which has a compulsory arbitration.

I think ERISA has a compulsory arbitration that's not consensual.

But in any event--

Unknown Speaker: Of course, it is compulsory for the union here.

Mr. Anker: --That's correct.

This is a--

Unknown Speaker: I mean, we've done that half-way--

Mr. Anker: --This is a special procedure.

We call it arbitration because it most resembles arbitration, but what the Court called it in Hudson was an impartial decisionmaker, and I think the vision that the Court had is that these disputes should be decided by some form of private process, arbitration-like process, or at least they should be submitted to such a process before they go to court.

That--

Unknown Speaker: --Is this, Mr. Anker, strictly speaking, an impartial decisionmaker?

How are the people picked?

Mr. Anker: --How are they picked?

Unknown Speaker: How at the people picked for the tribunal or the--

Mr. Anker: All right--

Unknown Speaker: --person who would make this decision?

Mr. Anker: --In our case, and I think here we follow the pattern that most unions have adopted, we use a procedure which the American Arbitration Association created.

In the wake of Hudson the American Arbitration Association created a procedure specifically for this purpose called the arbitration rules for the impartial determination of union fees, and under those rules the union may request an arbitrator and invoke those procedures and then the AAA, from a panel that they have selected, designates an arbitrator.

He's not selected by either of the disputing parties.

He's designated by the American Arbitration--

Unknown Speaker: From a panel that the AAA has selected?

Mr. Anker: --That's correct.

Unknown Speaker: And do the dissidents have any part in selecting that?

Mr. Anker: No.

Neither party has.

Unknown Speaker: Neither party?

Mr. Anker: Neither party does, although there are, of course, provisions for challenging an arbitrator for cause if there's some ground to believe that he is biased in some way, or has some interest--

Unknown Speaker: Mr. Anker, can I ask you a preliminary question--

Mr. Anker: --Surely.

Unknown Speaker: --I just get out of the papers?

What are the annual dues of the pilots here?

How much money are we talking about if you change it from 15 percent to 20 percent?

Mr. Anker: In the year that this case arose, which was 1992, the fees were 2.35 percent of their airline earnings.

They've since been reduced to about 1.95, but in that year it was 2.35.

Unknown Speaker: So for each member of the union it's a different dollar figure.

Mr. Anker: It's based... it's a percentage of his earnings, right.

Unknown Speaker: And if they made, say, 100,000 a year they would get a... the dues would be--

Mr. Anker: 2,350.

Unknown Speaker: --I see, so that a... and then if you reduce that, say 10 percent was in dispute, it would be a couple of hundred dollars in dispute for each person.

Mr. Anker: That's about right.

That's about right, just... for example, in this case the arbitrator found that there were some items that had been improperly allocated and should not have been charged, and we rebated those, and it came to, I think, of the order... this is not in the record, but it's of the order of 55 on average for the individuals that were involved in this case.

Unknown Speaker: Justice O'Connor's question was, what is the source of our authority to do this?

I mean, if we think this is a good idea for national labor policy, does that give us the authority to require people who have never consented to the arbitration to arbitrate?

Mr. Anker: Well--

Unknown Speaker: Where do I have the power, does this Court have the power to do that?

Mr. Anker: --I guess I would answer it this way, Your Honor.

We are dealing here... all the statute says, as I indicated at the beginning, is that the union and the employer has a right to have this kind of an agreement, but the Court has found beneath the language of the statute and sort of in the underlying legislative history and the purpose of the statute, an intent by Congress that fees be used only for certain purposes and not for others, and based on the determination that there is such an intention, that that's what Congress wanted, there is a body of law which has had to be necessarily developed by this Court.

It's not that different from the body of law that has been developed surrounding the duty of fair representation, or surrounding collective bargaining agreements under section 301 of the Taft-Hartley Act.

Unknown Speaker: Well, I think--

Mr. Anker: It's judicially made law.

Now, in Hudson--

Unknown Speaker: --But there's almost a history or tradition that Congress sets up remedial schemes.

We don't set up remedial structures.

Mr. Anker: --Well, my answer would be, Your Honor, that that's exactly what the Court did in the Hudson case.

Unknown Speaker: But--

Mr. Anker: The Court said that the union must provide this procedure.

It's not an option.

Unknown Speaker: --But that was under the Due Process Clause, wasn't it?

You know, you go back to the Hanson case, where the Court says, well now, the Government has its hand on the scale here so there's some constitutional provisions involved.

Mr. Anker: Well, certainly in Hudson there were constitutional provisions, Your Honor.

I don't think it was the Due Process Clause.

I think it was the First Amendment.

Unknown Speaker: Well, First Amendment.

Mr. Anker: Right, which is not, of course, a procedural provision of the Constitution.

It's a substantive provision.

But the Court decided that in order to protect the substantive right which the... in that case the challengers had under the First Amendment--

Unknown Speaker: There had to be--

Mr. Anker: --There had to be these procedures.

Now--

Unknown Speaker: --But now, to me it seems there is a difference here suggested by Justice Kennedy, perhaps, that there isn't any similar constitutional compulsion to set up the procedure you want to.

Mr. Anker: --No, there's not a constitutional compulsion, but there is... the same kind of a right which exists in the public sector under the First Amendment exists under the... in the private sector under the statute, based upon--

Unknown Speaker: Yes, but this could be invoked by the dissidents--

Mr. Anker: --All right--

Unknown Speaker: --but I think not by the union.

Mr. Anker: --but the union has rights here too, Your Honor, and those are the rights after all, to collect these fees and to have a functioning agency shop agreement and to have it work without excessive burdens that make it impractical.

In the Hudson opinion the Court said... I'm not sure if I can quote it exactly, but the Court said that the object should be to ensure... define procedures which will en... protect the dissidents against having to subsidize ideological activities without impairing the right of the union to have this agency shop and to obtain these funds in timely fashion and to use them in a way that they're permitted to use them.

Unknown Speaker: May I ask--

Mr. Anker: There's a balance.

Yes, Your Honor.

Unknown Speaker: --May I ask one other detail, if I may?

This opinion said in substance the union had a duty to provide this impartial... we didn't use the word arbitrator, as I remember, just impartial person--

Mr. Anker: Correct, impartial decisionmaker.

Unknown Speaker: --to look at what was done.

But does that mean the union has to pay for the arbitration?

Mr. Anker: I suppose in practice it does.

The way we've resolved that, Your Honor, is to say that we will pay for the arbitration unless any of the dissidents wants to share the cost for some reason and then they're certainly welcome to do that.

Unknown Speaker: Well, why would they ever want to do that?

Mr. Anker: Well, they might want to--

[Laughter]

We always thought they might want to do it to be more comfortable about the impartiality of the--

Unknown Speaker: Oh, I see what you're saying.

But in practice you do pay the arbitrator.

Mr. Anker: --In practice, we do.

Unknown Speaker: Mr. Anker, if I look at Hudson and don't go any further than that, I at least find it difficult to conclude that the provision for the neutral decisionmaker was intended to be anything but a protection for the dissidents.

It was their interests that were getting litigated there, and the court mentioned the value of a speedy determination.

All of that seems to take into consideration the interests of the dissidents.

However, my question to you is going to be, should we consider other interests in going beyond Hudson?

Should we consider, for example, the impracticality, if that is true, of litigating every one of these issues first and last in the Federal courts?

With that in mind, I would like to know what the experience has been, if you can tell me, about what has happened after there has been arbitration.

Have all of the arbitrated cases then simply been litigated de novo, all over again in the Federal courts, which I doubt, but perhaps that happened.

Is there a pattern that emerges about the relationship between the arbitration that has taken place in the instances that you know of and what later happens in Federal courts?

Mr. Anker: Well, I have to say, Your Honor, that my knowledge about that is fairly limited, but I think the union that has the most experience with it is the National Education Association, which has filed a brief as an amicus here, and they have informed the Court in their brief that in... I don't remember whether they said in most, but in some large percentage of their cases their... they do not go beyond the arbitration.

Unknown Speaker: Well, what--

Mr. Anker: Now, I have no personal knowledge of that and I really can't take--

Unknown Speaker: --You wouldn't, I take it... under the system you're proposing you wouldn't have the sort of deference to an arbitrator's finding that results when consensual arbitration has been in place, is that correct?

Mr. Anker: --We would not have that degree of finality to the arbitration, no, Your Honor.

There was an issue in the lower court here as to just what degree, if any, of deference is to be given, and the district took the view which we had urged upon it that the findings of fact of the arbitrator should be given deference under a clearly erroneous standard, but not the conclusion of law.

Unknown Speaker: Do any of the other briefs expand on the question that Justice Souter asked you?

What happens to these things after the neutral decisionmaker reaches a judgment?

Mr. Anker: My recollection is that the only one that has anything to say about it was the National Education Association.

Unknown Speaker: And of course, there, at least as I remember the case, the dues are a lot lower, so the amount in dispute sometimes was just pennies on these small amounts, and it might be that it's just not worth litigating, whereas here it seems to be a little more money at stake.

Mr. Anker: It's a little more money, Your Honor, but in every case the amount of money tends to be relatively small, certainly in relation to the income of the fee-payer.

I think very often these are thought to be great issues of principle by the--

Unknown Speaker: Is it typical for union dues to be calculated as a percentage of the income of the union member?

Mr. Anker: --Yes, I think it is, Your Honor.

Unknown Speaker: It is typical?

Mr. Anker: Yes.

Either a percentage or sometimes a number of hours of pay.

I can't tell you how many unions have that, but I think it's quite a common--

Unknown Speaker: When the suit is brought, is it brought under 1983, or another statute that gives the prevailing party attorney's fees, if the suit goes to the Federal court?

Mr. Anker: --If the suit goes to the Federal court--

Unknown Speaker: Yes.

Mr. Anker: --I suppose there is provision for attorney's fees, under 1983.

Unknown Speaker: Because... Is it 1983?

Mr. Anker: 19... I'm not sure I understand what you're... if you're asking, is this case under 1983, the answer is no.

Unknown Speaker: But the union members... I mean, the nonunion members' case in court would be under 1983.

Mr. Anker: No, it would not, Your Honor, not in the... well, not in the case of a private sector, because we are not a governmental entity.

Unknown Speaker: Right.

Mr. Anker: We cannot be sued under 1983.

We... the labor organization.

In the--

Unknown Speaker: Well, then--

Mr. Anker: --In the public sector the cases are brought under 1983, perhaps because they're usually brought against the State employer as well.

Unknown Speaker: --What's the basis of any sort of Federal--

Mr. Anker: Federal question jurisdiction.

Unknown Speaker: --There will be Federal question jurisdiction in a case of a private employer?

Mr. Anker: That's right, Your Honor, because the obligation here is derived from the Railway Labor Act.

Unknown Speaker: But no attorney's... no attorney's fees under the general Federal question jurisdiction, then?

Mr. Anker: It's general Federal question jurisdiction.

Unknown Speaker: But that doesn't provide for attorney's fees for the prevailing party.

Mr. Anker: No, it does not.

No, it does not.

Unknown Speaker: Can you... you might want to elaborate a little bit--

Mr. Anker: Yes.

Unknown Speaker: --if you'd like on the question the Chief Justice asked.

Seeing this as--

Mr. Anker: On the--

Unknown Speaker: --Because it seemed to me that the real objection on the other side, what they're upset about in part is that they see the union has a right to the 2,000, but it doesn't have a right to the part of the 2,000 that might go to nongermane expenditure, and then we decide, and this Court decides in Hudson that really the union can go and spend what it wants as long as it gives them, a dissenter a fair chance to see how much of that is being spent on nongermane things, and it says you have to have an escrow.

Mr. Anker: --Correct.

Unknown Speaker: You have to give them a list of what the expenditures were, and you have to provide for a decision by an independent decisionmaker.

Having done that, you're free.

Go do what you want.

All right.

But then they say, well, how do we challenge it, and I think what they're worried about is that there will be imported into this area of the law the whole law of arbitration which, of course, gives a tremendous leg up to whatever the decision of the arbitrator is.

I mean, a leg up way beyond what a master or others have, and I think that was a concern, and therefore I want to be sure that you address that point.

Mr. Anker: I appreciate that, Your Honor.

Let me say first of all that we have never argued in this case that that standard, which essentially is a standard of finality and almost no review at all in the case of normal arbitration... we have never argued that that standard would apply.

The argument we make in this case... and by the way, this issue is not before the Court, because the Court did not grant certiorari with respect to this issue of the standard of review, but what we argued in the lower courts was that the fact-findings of the arbitrator should be given some degree of deference, and those fact-findings would normally be the bean-counting issues, as I would describe them, exactly how much did the union spend on this or that or the other activity.

Unknown Speaker: Well, under your theory that the procedure has to be expeditious and efficient, what would prevent a court from saying that the usual rules of presumptive correctness should not be applied?

Mr. Anker: I think I would rely on the advocacy of my adversary to make that clear, and I would not--

Unknown Speaker: Well, but I mean, we're testing your theory.

Under your theory we can do whatever is efficient, and if we think that a binding arbitration is the most efficient, then we can do that.

Mr. Anker: --Well, I would just suggest, Your Honor, that that would be inconsistent with this body of law, because this is statutory law, and the Court has some jurisdiction, we don't deny that, ultimately to adjudicate the rights of the parties here, but... and just to finish the standard of review as we had proposed it to the lower courts, we would say that the legal issues, which really I think are the key issues here, is, for example, in our case the issue of the chargeability of our safety activity.

That's an issue of law basically, and that would be reviewable de novo, but the Court would have a package in which the facts would be at least preliminarily resolved, the issues would be defined, and the Court in quite expeditious fashion but in effective fashion could exercise its jurisdiction and define the rights of the parties properly here.

Unknown Speaker: Mr. Anker--

Mr. Anker: Yes.

Unknown Speaker: --everything that you've said sounds logical, sensible, a regime that might be legislated.

The problem in this case is, you start with a Court decision, not something from Congress but something from this Court, the Hudson, and then you say, well, the workers were benefited by Hudson but the Court now has to rule-make a little more so that it's even on both sides.

If the employer... if the union is stuck with this procedure, the union doesn't want to arbitrate either, let's say, but the court forced it on the union, then the court must... and it's all the court doing this with... as kind of ontoward from anything that Congress has done.

Mr. Anker: Well, that's correct, Your Honor.

I think that's unavoidable, but I... my only response to that would be I don't think it's any greater an act of judicial legislation to impose on the challenger the requirement of exhaustion than it is to impose on the union the obligation to provide this procedure in the first place.

Unknown Speaker: But with the union, Mr. Anker, there was a constitutional problem.

Mr. Anker: In that case, yes, right.

Unknown Speaker: Yes, and there isn't here.

I mean, it seems to me that's one significant distinction.

In other words, the Court said there had to be an impartial reviewer of these allotments in order to protect the dissidents' First Amendment rights, but here there's no corresponding claim that if there isn't this procedure, that the dissidents are required to... the union is going to lose any constitutional right.

Mr. Anker: No, not constitutional rights, that's correct, Your Honor, but they are rights, nonetheless.

We have statutory rights that are at stake here, and the Court has created a procedure which, if exhaustion is not required, essentially doubles the burden on the union, because we have to defend these cases if they're brought against us both in arbitration and in Federal court, which is essentially what happened here.

This group of plaintiffs who are before this Court now preferred the judicial forum, and they brought a lawsuit, and they resisted arbitration, and if they had had their choice they would have avoided the arbitration, but we had another group of people who are not before the Court at all who requested arbitration, and we had to go forward with an arbitration regardless of what the desires were here, and that's going to happen in very many cases.

Unknown Speaker: Yes, but the answer to that may be to, in effect to... in effect to rethink the need for the arbitration, or the legitimacy of it.

You spoke a moment ago in response to Justice Ginsburg's question, I think, of the inevitability of there being some such arbitration scheme, but I'm not sure that I see that.

Why couldn't the Court just as well have said the interests at stake here require that cases of this sort be handled expeditiously in the Federal court so that you get a quick hearing... I mean, the civil analogue of speedy trial... and have one proceeding in a Federal court and get it over fast?

Is that any less inevitable, if you will, than the scheme that we set up in Hudson?

Mr. Anker: Oh, I... no, Your Honor, it isn't, but the Court has set up--

Unknown Speaker: So you would be... would you be happy to have us go in that direction and say we really did not think things through properly in Hudson, in fact it will be for the Federal court to provide the speedy hearing?

Mr. Anker: --Instead of arbitration?

Unknown Speaker: Yes.

Mr. Anker: I think that would certainly be much better than the situation with having to deal with both of them, that's correct.

I don't know if we had our choice what we would choose, but we would certainly prefer to have one forum rather than two, and if there is no exhaustion requirement, then we would much prefer to have a Federal court procedure than have them both.

Unknown Speaker: What is your experience, again, if you can tell me, with requests to have one or the other proceeding, either the arbitration or the judicial proceeding, stayed if the other one has already gotten underway?

Mr. Anker: Well, there was such a request in this case.

It was denied by the Federal court.

Unknown Speaker: Do you know across the board, again in a broader spectrum of cases--

Mr. Anker: I don't know of any other case, Your Honor.

If I could, I'd like to reserve the balance of my time.

Unknown Speaker: --Very well, Mr. Anker.

Mr. LaJeunesse, we'll hear from you.

Argument of Raymond J. LaJeunesse, Jr.

Mr. LaJeunesse: Mr. Chief Justice, and may it please the Court:

As is apparent from the briefs of ALPA and the amici, and from ALPA's argument here today, ALPA has no legal authority for forcing the nonmember pilots to use its unilaterally created agency fee review procedure.

Neither ALPA nor either of its amici cites a single case in which this Court has required exhaustion where there was not one of two things.

Unknown Speaker: But isn't it also true that there was no case that, before Hudson, that said there had to be an impartial decision, impartial... what did we call it, impartial person who would verify these expenditures.

Where did we get the authority to do that?

Mr. LaJeunesse: As Chief Justice Rehnquist pointed out, that requirement is a matter of First Amendment due process, and it has to be imposed on the union if it's going to be able to exercise its statutory privilege of collecting the service fee, which in itself infringes on the First Amendment rights--

Unknown Speaker: No, but would not it have complied with, literally at least, with the Hudson opinion if, instead of using the American Arbitration Association, they had just said we've got all these figures here, we'll submit them to Price Waterhouse, or Young & Young, or whatever, some independent auditors and said you... you're independent, you verify these figures and let the minority members know what you think of them.

Would that have complied with Hudson, in your view?

Mr. LaJeunesse: --No, Your Honor, because--

Unknown Speaker: Why not?

Mr. LaJeunesse: --ALPA selects the--

Unknown Speaker: They have to select a person that everyone would agree is impartial.

Mr. LaJeunesse: --And Number 2, the court of appeals here held that that independent auditor does not audit the lawfulness of the allocation of the expenses between chargeable and nonchargeable.

All the auditor does is check the numbers.

Unknown Speaker: That's what this auditor does, but I'm asking whether, just starting from scratch, instead of setting up an arbitration procedure, suppose if they thought they'd comply with the language of Hudson to just say, we'll get an independent accounting firm to verify all the figures and decide which ones are germane and which ones are not, and we'll publish it in the report and make it available to the... to everybody, the members and the union officers.

Why wouldn't that have complied with Hudson?

Of course, if the members didn't agree with it they could then have brought suit and said, well, you know, there's a violation of the First Amendment and so forth.

But I don't see anything in Hudson itself that required an arbitrator.

Mr. LaJeunesse: I'll agree with that, Your Honor.

Unknown Speaker: Yes.

Mr. LaJeunesse: What I don't agree with, Justice Stevenson, is that it does not... that Hudson did require some form of impartial decisionmaker procedure to be made available--

Unknown Speaker: Correct, and it in effect said--

Mr. LaJeunesse: --primarily... if I may--

Unknown Speaker: --It in effect said, and your cause of action would not be ripe until that has been made available for everybody to look at.

Mr. LaJeunesse: --Well, the cause of action, Your Honor, is ripe at the time the funds are taken.

There's a deprivation of property at that point, and even as a matter of pure Fifth Amendment or Fourteenth Amendment due process the employee is normally entitled to a pre-taking notice and hearing.

Now, I can't explain why the court didn't make the requirement a pre-taking hearing.

Apparently the court felt that the union should get possession of the money and hold it in escrow so that it can later spend that portion which goes to the lawfully chargeable activities.

Unknown Speaker: We did require a hearing, though.

Mr. LaJeunesse: That's correct, Justice Scalia.

Unknown Speaker: You don't accept that a Price, Waterhouse review and then just a statement issued by Price, Waterhouse saying we have audited all of this and these statements are correct, that that would suffice.

Mr. LaJeunesse: No, I don't, Justice Scalia, because that's not a hearing.

Unknown Speaker: Under the language of our opinion--

Mr. LaJeunesse: That's not a hearing.

Unknown Speaker: --it did require it.

Mr. LaJeunesse: It's not an absolute--

Unknown Speaker: I didn't think that was the point.

I thought the point was simply whether, of course that your client has a cause of action, but is... the judge isn't going to decide this matter until, for example, the union's had an opportunity to do certain things, such as present your client with a piece of paper that says how the money's spent.

You agree with that, I take it.

Mr. LaJeunesse: --Hudson requires that.

Unknown Speaker: If they do it in a timely way.

Mr. LaJeunesse: Hudson requires that that--

Unknown Speaker: Fine, and it also--

Mr. LaJeunesse: --be done before the money is collected.

Unknown Speaker: --Exactly, and then Hudson also requires that the union should have a shot... I mean, they have to run their union, and they can't have five people going to five differing courts which could... or five different decisionmakers all putting them under different, you know, conflicting obligations.

Who knows what's going to happen.

So Hudson says you can go to an independent decisionmaker first, and I took it that that was Justice Stevens' question.

Should the court act before they go to an independent person and say, independent person, look at this and give us your opinion.

You know, it may be things will work out.

It may be that all the dissidents won't have to spend their money to hire a lawyer to go to Federal court, but if they want to afterwards, let them do it.

Now, I mean, what's wrong with that?

Mr. LaJeunesse: What's wrong with that, Your Honor, is that the individual employee has a cause of action which has been given to him by Congress, and this Court has never, never held that exhaustion is required where there is not one of two situations, one, either an agreement to arbitrate, or a statutory administrative scheme involving deference to another branch of Government, and that is not this case.

Unknown Speaker: This, I think... and I'm curious about your view of this, and that's why I was pushing it... is not classical arbitration.

I take it that they're prepared to give you the district judge who would afterwards look at how this arbitrator decides the matter and review everything de novo as to whether or not the factual thing gives rise to a nongermane or germaneness.

Now, that begins to sound like Price, Waterhouse.

What the arbitrator is doing is deciding what the facts were, and we give him such deference as is due, the power to persuade but not the power to control, something like that, and then the judge decides it de novo.

Now, from the point of view... not your individual clients but as a person experienced in this area, wouldn't such a thing be better as dissidents... I mean, wouldn't dissidents prefer such a thing, rather than have to go to Federal court, because they won't even give you that, you know.

If you have a Federal court judge, and only a Federal court judge, they'll say fine, so be it.

So what's your view on... do you see... I'm being a little elliptical for--

Mr. LaJeunesse: I'm not quite sure I--

Unknown Speaker: --I'm saying, that they're trying to say that within this statute, give us a chance before the judge goes ahead to do certain things that might resolve this in order to prevent us the union from being placed under potentially conflicting obligations.

That's a practical way of working this out.

It doesn't really hurt your clients because they can go in after the court if they don't like it, and they're better off than if we don't give it to them, and when they go into court later on they'll have a judge do this de novo, you know, on the law, and he'll give such weight to factual matters as you might give to an accounting firm, knowing that they know more about it than you.

Mr. LaJeunesse: --Justice Breyer--

Unknown Speaker: That's what I took out of this, and maybe I'm being... you don't have to answer if you don't want to, but I mean, I'm trying to--

Mr. LaJeunesse: --Justice Breyer, my clients--

Unknown Speaker: --Yes.

Mr. LaJeunesse: --And the typical dissident in the case where I have represented clients, and I've represented dissidents in many places, including the Lehnert case which this Court decided.

The typical dissident wants to obtain a judicial determination of his constitutional, in this case also rights under the statute, in which he has an opportunity for discovery, which is denied in this arbitration process, in which he has a determination by an Article III judge qualified to determine what speech and association he can be compelled to support, he wants a truly adversary hearing where he has discovery in which he can vet the potential evidence in advance of the hearing, as the Sixth Circuit held in the Bromley case.

That's crucial to these cases.

Unknown Speaker: Does the American Association... American Arbitration Association which Mr. Anker says has set up these... do they require that members of those panels be trained in the law?

Mr. LaJeunesse: I don't know the answer to that question, Your Honor, but I can answer one question, and that is, if you look at the law review article by Mr. Malin, who was... one of his articles was cited by ALPA in one of its amici.

I cite another one on the post Gilmer arbitration, and Mr. Malin points out in that article that the arbitrators have to receive recommendations from four employers and four unions to get on the panel to be selected in these cases.

My clients have no say over whether it's AAA or somebody else who picks the arbitrator and they have no say in the selection of the so-called arbitrator.

The essence of arbitration--

Unknown Speaker: Mr. LeJeunesse, you're essentially saying as far as you're concerned your clients, thanks but no thanks to Hudson, that... I mean, you really didn't want any of this.

You'd rather just go straight into Federal court?

Mr. LaJeunesse: --Clients, nonmembers who are lucky enough to have an attorney represent them are going to say no thanks to this particular arbitration procedure, or this particular decisionmaking process.

Hudson... put Hudson in context.

Hudson was a case, a public sector case decided under section 1983 where this Court had already decided that you could not be required to exhaust even a State administrative remedy, and Hudson imposed... after all, in Hudson it was the State who was ultimately compelling the employees to pay the agency fee.

It was under a State statute, and an agreement with a public employer.

Hudson placed the primary burden on the State to establish this alternative procedure, and that was only 4 years after this Court's decision in Patsy saying that you can't be required to exhaust a State administrative remedy, and so therefore I find it inconceivable to think that the Court in Hudson could have been supposing that the nonmembers could have been compelled to utilize this procedure.

This procedure is made available--

Unknown Speaker: You can't say it's inconceivable when Justice White and Chief Justice Burger both said that's what it meant.

They at least conceived of it.

Mr. LaJeunesse: --They conceived of it, that's correct.

Unknown Speaker: So it was not inconceivable.

Mr. LaJeunesse: That's correct, Justice Stevens.

[Laughter]

But I... but the majority did not agree with them, because the majority did not adopt--

Unknown Speaker: They didn't say one way or the other.

The majority said nothing at all about that--

Mr. LaJeunesse: --Well, I think the majority suggested the contrary at several points in its decision.

In footnote 20 the Court presumed that ordinary judicial remedies remain available.

In footnote 16 in Hudson the Court said that the nonmember's burden is simply the obligation to make his objection known, citing the earlier--

Unknown Speaker: --What we said in footnote 20 was that we reject the union's suggestion that the availability of ordinary judicial remedies is sufficient, and this was... we were insisting that the... we were imposing obligations on the union, and the union lost that case 100 percent.

Mr. LaJeunesse: --That's correct, Justice Stevens, and what the Court was doing there, as the Chief Justice has suggested, was providing a shield for the protection of employee rights, not giving the union a sword to take another right away from the employee, which is the right of immediate access to the Federal courts guaranteed to them by Article III of the Constitution and the right to redress of grievances under First Amendment--

Unknown Speaker: May I ask you this question.

Supposing you prevail with... because of the right to access to the courts, do you think the district judge having such a case could say, I think I'll stay proceedings until I see what happens in the arbitration?

Mr. LaJeunesse: --No, I don't believe so, Your Honor.

That would be... it would be exhaustion by using another term.

Unknown Speaker: How does Article III give anybody access to courts?

Mr. LaJeunesse: Article III says that where Congress has granted jurisdiction to the courts the litigation has a right to bring his case into court.

Unknown Speaker: Well, I'd be interested in seeing exactly what provision of Article III you're quoting, because I've looked at it often and I--

Mr. LaJeunesse: I was referring, Your Honor, to what this Court said--

Unknown Speaker: --Well, I'm not talking about what this Court said.

I'm talking about what does Article III say.

Mr. LaJeunesse: --Article III places the determination of Federal causes of action in Article III judges, and this Court has held that that means that a litigant has a right to have his Federal cause of action determined by an Article III judge, and those--

Unknown Speaker: But not in reliance on Article III.

Mr. LaJeunesse: --Yes, Your Honor.

Grande Financial S.A. v. Nordberg, 492 U.S. 33, which we quote on page 23 of our brief, the Court says, if a statutory right is not closely intertwined with a Federal regulatory program... in other words, the administrative scheme, which we don't have here... Congress has power to enact, and if that right neither belongs to nor exists against the Federal Government, then it must be adjudicated by an Article III court, end quote.

Unknown Speaker: Well, that's not saying that it's... Article III requires that.

We have said many things... times that certain things are required to be adjudicated by Article III courts, but not simply because Article III says what it does.

We're... obviously you and I are both perhaps straying from the central theme of the case--

Mr. LaJeunesse: Certainly, Your Honor--

Unknown Speaker: --so let's get back to it.

Mr. LaJeunesse: --and the central theme of the case--

Unknown Speaker: While we're in that mode--

--I think maybe the Due Process Clause requires it to be determined by an Article III court.

You wouldn't care whether it's the Due Process Clause or Article III--

--Yes, but isn't the question here not whether it must be determined, but rather, when it must be determined, because I guess everybody agrees that after the arbitration you get all the discovery you want.

You get everything you want.

It's just a question of whether you can get it while the arbitration is--

Mr. LaJeunesse: --That's correct, Justice Stevens.

Unknown Speaker: --still going on.

Mr. LaJeunesse: But as this Court said in both Patsy and later in Felder v. Casey the court does not have discretion to simply require exhaustion out of questions of practicality or judicial efficiency.

Unknown Speaker: I notice the--

Mr. LaJeunesse: It has to be consistent with congressional intent.

Unknown Speaker: --I notice the one... I've been trying to think of an example of compelled arbitration without statutory authority.

I notice that the Northern District of California for some years has had a mandatory arbitration requirement before you can proceed with your civil action.

It's nonbinding.

That's the only one I can think of.

Mr. LaJeunesse: I'm not familiar with that, Your Honor.

Unknown Speaker: Is... imagine on this early dispute resolution, which is common now, but the... suppose that the union... what I want to try to find out is how you do you think this is going to work?

Imagine a union with 5,000 members and 500 dissidents, and the dissidents range from the people who really are angry, you know, at being part of this to the ones who sort of don't care, and a lot of the ones who don't care, you know, would like to have a simple way to resolve this, but some of the ones who really do care want to fight to the last ditch.

All right, on your theory of how the statute is supposed to work out, how does it work out?

I mean, the union will think well, some of the people might... you know, these things are often close.

The courts will decide one way.

The arbitrators will decide another way on many close questions.

Perhaps they're intertwined, so that the reasonableness of a relationship between germane... you know, between objective and expenditure depends on, and then we can imagine all kinds of intertwined things.

On your theory of what Congress meant to do, how was that to work out?

Mr. LaJeunesse: Justice Breyer, your example points out the need for both systems.

That is, the impartial decisionmaker required by Hudson as a matter of First Amendment due process and the ability of the individual who has an attorney and really wants a judicial determination to go to court first.

That individual is only going to be delayed by the exhaustion requirement, but you have to have the impartial decisionmaker, a simpler, less formal procedure available for the nonmember who can't afford to hire an attorney, and... plus--

Unknown Speaker: All right.

Mr. LaJeunesse: --give him due process.

Unknown Speaker: So they say, we can tell you how this works out perfectly.

Give us a reasonable time to set up our impartial decisionmaker and let ones who are hell-bent on court go there, but only after our impartial decisionmaker has decided, and that will prevent inconsistencies, and that's probably what Congress meant.

On the other hand, if you take your theme, which is the ones that are hell-bent for court go there first, we're going to get conflicting decisions.

We won't know how to plan our expenditures, and it will be a mess.

Now, I take it that that's their argument, so how... what do you say about that?

Mr. LaJeunesse: It's an argument that doesn't hold water, Your Honor, because in any event there are going to be conflicting decisions from different courts, different arbitrations.

This union has employees, airline pilots throughout the entire Nation.

Some may bring a case in one Federal district court, others in another.

Unknown Speaker: Well, can the multidistrict litigation scheme solve that?

I'm not quite sure how that works.

Mr. LaJeunesse: Yes, it could, Your Honor.

Unknown Speaker: So that would eliminate the conflict, at least among courts, wouldn't it?

Mr. LaJeunesse: But in either event you're going to have a decision by an arbitrator and then a decision by the court, whether it's sequential or--

Unknown Speaker: If the court reviews the arbitrator the court has the last word.

If they're going on simultaneously, or the arbitrator comes later, or you don't know, interspersed, then you can get I suppose a fairly good mess.

That's... and if we're trying to figure out what Congress intended, can't we assume they wanted not a mess, rather than a mess?

Mr. LaJeunesse: --No, I don't think so, Your Honor.

I think you have to look at... you have to look at the cause of action involved here.

In the public sector it's a cause of action under 42 U.S.C. section 1983, and this Court held in Patsy and later in Felder that based on legislative history that the congressional intent was that these statutes for the paramount protection of individual rights were intended by Congress to be in the courts in the first instance.

Because the parallel situation under the duty of fair representation, which is the basis of the cause of action here.

The duty of fair representation was adopted by this Court in 1944 in Steel to protect individual employees from unions abusing their power of exclusive representation.

In fact, it was adopted by the Court to avoid having to declare the statute unconstitutional.

Unknown Speaker: Well, I suppose Hudson was probably beyond the contemplation of Congress.

I mean, it was a constitutional decision.

It wasn't based on the idea that this is what Congress would have wanted, so that once we get beyond what Congress would have wanted it's hard to say, when you try to see what possible remedies exist post Hudson, to translate that into what Congress would have wanted.

We're pretty far away already from congressional intent.

Mr. LaJeunesse: Two questions, Your Honor.

One, in Steel the Court said, we have to assume that Congress intended to impose the duty of fair representation on unions, because if we don't make that assumption the statute is probably unconstitutional.

The Court then said, there's no remedy provided under the Railway Labor Act, which is the statute in this case, for vindication of an employee's rights where he's accusing the union of breach of the duty of fair representation.

Later, in Vaca and Breininger the Court held that employees have the right to take that cause of action for breach of duty of fair representation directly to the Federal courts because the purpose of the statute, paramount purpose of the statute is the protection of individual rights, just as it is under section 1983, that the nonmember... that the employee under the National Labor Relations Act doesn't have to go before the National Labor Relations Board first.

Unknown Speaker: Mr.... is it clear to begin with that Hudson applies in your situation, where it is not the State--

Mr. LaJeunesse: Yes, it is clear.

Unknown Speaker: --that is depriving these workers of their First Amendment rights?

Mr. LaJeunesse: It's clear in this case for two reasons, Justice Scalia, first because this Court held in Hanson in 1956 that the Railway Labor Act authorization of agency shop agreements is governmental action, Federal governmental action, and so constitutional limitations do apply, and--

Unknown Speaker: Well, but so then the Federal Government should set up the arbitration scheme.

I mean, what Hudson said was that the person responsible for the First Amendment violation, what would otherwise be a First Amendment violation, had to set up an arbitration scheme.

If you're telling me in this case, since it involves a private employer, the person responsible for it is the Federal Congress, by having adopted the National Labor Relations Act that enables these dues to be charged, then let the Federal Government set up an arbitration scheme.

Mr. LaJeunesse: --You're making one of the points that I wanted to make, Your Honor, is that ALPA's in the wrong place.

It is asking this Court to construct a remedy scheme that Congress has not constructed.

It should be addressing the practical concerns that it's raising to Congress, not to this Court--

Unknown Speaker: Yes, but isn't that--

Mr. LaJeunesse: --which doesn't have the discretion to impose exhaustion simply as a matter of practicalities unless it is consistent with congressional intent, and there are two aspects in which this requirement is inconsistent with congressional intent.

One is the point I was making with regard to the duty of fair representation.

That is, that this Court has already held that Congress intended that these cases be considered in the courts in the first instance, because the paramount purpose of the duty is to protect individual rights.

And the second is that beginning with Hanson this Court has said that the only incident of union membership that can be imposed on the nonmember is the payment of the cost of collective bargaining, and here you're imposing on the nonmember an additional incident of union membership, exhaustion of a union remedy.

Unknown Speaker: --Mr. LeJeunesse, one of the things that you said about why you don't like this, you said there's no discovery, and I was trying to understand what the complaint is that you come to court with when you don't have any arbitration in the picture.

You just say, we don't think they drew the line in the right place.

Do you have to be at all specific?

Do you have to say, well, we think that their expenditure for, say, safety lobbying is no good, or do you just say, we challenge the whole thing, and then we can discover?

Mr. LaJeunesse: That's correct, Your Honor.

This Court held both in the Railway Labor Act cases back in the sixties, Street and Allen, and later in Abood, that the nonmember need only state a general objection and then the union is put to its burden of proof, and in Allen--

Unknown Speaker: Wait, wait.

In general... he has to have a basis for that general objection.

You just can't come in and say, I object.

Mr. LaJeunesse: --That--

Unknown Speaker: Don't you have to plead that you have reason to believe that the union is expending--

Mr. LaJeunesse: --How is the nonmember to have reason?

The nonmember doesn't have the facts.

Unknown Speaker: --Well, he does under Hudson.

Mr. LaJeunesse: They're solely in the possession of the union.

Unknown Speaker: He does under Hudson.

See, that's the very point of... the point.

Until a member has the facts, he doesn't know whether he should spend the money to hire a lawyer and bring a lawsuit, and one of the points of Hudson was, we put the burden, as you say, squarely on the union to assemble the facts, but not only its own version of the facts, but also those of an independent verifying that version.

And if they've done that, presumably then the employee has a basis for judging whether or not he's been short-changed, and if he has, he's free to sue.

You see, the difference between this arbitration and all others is the member is not bound by the arbitration in any way.

He hasn't agreed to anything, so he's totally free to sue once he gets the facts.

The question is whether we should ask him to wait till he gets the facts before he sues.

Mr. LaJeunesse: I return Your Honor to the principle that this Court has followed consistently, which is that you cannot just as a matter of judicial discretion require exhaustion unless--

Unknown Speaker: But it's not exhaustion.

The opinion itself says he need not exhaust.

There's no requirement of exhaustion on the member, as you put it correctly.

All he has to do is complain and he has his cause of action.

He can sue.

He doesn't like the arbitration.

He starts from scratch.

He at least has the facts before he files his complaint.

That's all we held.

Mr. LaJeunesse: --Your Honor, he doesn't have the facts, because the notice that the... Hudson requires--

Unknown Speaker: He has the union's version of the facts verified by an independent appraisal.

Now, whether that... he doesn't have to accept it, but he at least has that much, and then he decides whether--

Mr. LaJeunesse: --I'm not sure I understand you, Justice Stevens.

You're saying the employee merely states an objection, the union holds its arbitration ex parte, and then the employee can go to court.

I don't see the purpose of that.

Unknown Speaker: --How does it work when a union official complains that the employer... not... sorry, when an employee thinks the employer is trying to censor him or something, or he thinks that the employer should have given him an excuse... it's related to his religion or something.

I mean, there can be thousands of grievances.

Don't people have to go through the grievance procedure?

Mr. LaJeunesse: But they've agreed to go through the grievance procedure.

The union is their agent for purposes of their--

Unknown Speaker: Oh, I see.

Mr. LaJeunesse: --relationship with their employer.

It is not their agent for purposes of their dispute with itself, and those cases, Justice Breyer, also are cases in which... they're simple contract grievance arbitration cases in which both parties know most of the underlying facts.

Here we're talking about 68 million in union expenditures.

The pilot doesn't have a basis to make a detailed complaint.

All he's required to do by this Court's decisions, beginning with Allen in the sixties, is state a general objection to the use of his money for purposes other than collective bargaining, then he's entitled to discovery in court to find out what underlies the union's calculations, and the union has the burden of proving its case.

That doesn't happen in these arbitration proceedings, the ones that occurred here.

Discovery was denied to the pilots.

They were not given the opportunity... they could not compel the testimony of union witnesses.

Without discovery, they couldn't effectively cross-examine.

They couldn't narrow the issues, because they didn't know the underlying facts.

And in conclusion, I would say that the court of appeals correctly held that the pilots were not obliged to proceed first through ALPA's review procedure because there is no legal basis--

Unknown Speaker: May I ask one other question, though?

The... in the arbitration proceeding that's all cost-free for the... they don't have to participate if they don't want to, and they won't be bound, but once you start discovery, then you have to pay your own share of the cost, don't you?

Mr. LaJeunesse: --Yes, Justice Stevens.

Unknown Speaker: Yes.

Mr. LaJeunesse: And I'm talking here about the pilots who have an attorney, who want to go to court to get a judicial determination with an Article III judge in a proceeding where they have the right to discovery, where they can compel the production of witnesses, where the proceeding is truly adversary and they can get that judicial determination of their... what we're talking about here after all is Federal statutory and constitutional rights.

Unknown Speaker: It really is an extraordinary claim, that you just come into the court and say, I think they drew the line in the wrong place.

I'm not going to tell you anything about which expenses, we just say we want to have full discovery.

And I think that the notion of the arbitration is that it would put certain limits, because the... whether it's... some kind of deference to the arbitrator's findings, and you don't want to have any findings, as I understand your position.

Mr. LaJeunesse: Justice Ginsburg, it's a truly extraordinary statutory privilege that the unions have to compel nonmembers to pay these dues, and this Court held in Hudson that First Amendment due process and fundamental fairness, which means it's also a matter of the duty of fair representation, require the union to make available a procedure which is a shield to protect the employee's rights.

Unknown Speaker: Thank you, Mr. LaJeunesse.

Mr. Anker, you have 3 minutes remaining.

Rebuttal of Jerry D. Anker

Mr. Anker: Thank you, Mr. Chief Justice.

I think I have three quick points I would like to make.

First of all, there's been a lot of discussion by Mr. LeJeunesse about the intent of the statute, and I think it's clear to say that the statute simply sheds no light whatsoever on the question that's before us, and that's not unusual.

Very often these exhaustion questions are not resolved by any statute, and certainly this one doesn't have anything whatsoever to say on the subject.

Now, when the statute is silent, what this Court has said... and I think this is really the ultimate answer to the questions that were asked of me earlier by Justice Ginsburg and others, where does the authority come from to require this exhaustion, this Court has said on several different occasions that exhaustion of an administrative remedy or an arbitration remedy, as in Hudson, as in Republic Steel v. Maddox is a matter of judicial discretion.

Unknown Speaker: But one was... certainly Republic Steel was consensual, was it not?

Mr. Anker: Well, Your Honor, one could say that on the facts of Republic Steel, but the interesting thing about the case is, when you read it, that was not the principal reliance of the Court at all.

The Court spoke about several different policy considerations.

Unknown Speaker: Yes, but another... it seems another defect in your suggestion is that this is not a remedy.

The arbitration doesn't bind the union... I mean, bind the member in the slightest.

He... it may change the calculation, but it's certainly not a remedy.

Mr. Anker: Well, I agree it doesn't bind him, Your Honor--

Unknown Speaker: Which most remedies do.

Mr. Anker: --It's maybe just simply a semantic issue between us, but it's a remedy in the sense that it's a way in which he might get what he's looking for.

He might get the adjudication of the issue in his favor, and that would resolve the problem for him, or her, and that's why I would consider it a remedy.

But if the Court doesn't like that word, I think it's still analogous to a remedy in a typical exhaustion case such that the normal judicial discretion would apply.

Unknown Speaker: What's another typical exhaustion case that you're talking about, Mr. Anker, other than Maddox?

Mr. Anker: Well, any kind of an exhaustion of administrative remedies.

Unknown Speaker: But those are governmental remedies.

Mr. Anker: They are governmental remedies, but they're nonjudicial remedies, and even where the statute doesn't require--

Unknown Speaker: But the typical reason for exhausting judicial administrative remedies is to get the view of the administrator.

In other words, the Government policy maker might rule in your favor.

But we have never done that with a private organization.

Mr. Anker: --Well, I think, Your Honor, you're making two points.

Let me take the first one first.

One of the reasons is the reason relating to the governmental decisionmaker, but the cases have stated several reasons.

Other reasons are efficiency, reasons of avoiding controversy in court if it's possible to do so.

It isn't... that isn't the only reason for exhaustion of administrative remedies.

Now, I'm not sure I can come up immediately with another example, other than Maddox, of an exhaustion of a private remedy, but Maddox is certainly a case of one, and it's one in which... actually the plaintiff in that case, the individual never consented.

The consent is only kind of a constructive consent, because of the fact that he is represented by the union.

Chief Justice Rehnquist: Thank you, Mr. Anker.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Litton Financial Printing Div. v. NLRB - Oral Argument

Fri, 09 Jan 2009 14:49:44 +0000

Case:

Litton Financial Printing Div. v. NLRB

Media File:

90-285_19910320-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Mathias J. Diederich

Chief Justice Rehnquist: We'll hear argument next in No. 90-285, Litton Financial Printing Division v. National Labor Relations Board.

Mr. Diederich, you may proceed whenever you are ready.

Mr. Diederich: Mr. Chief Justice, and may it please the Court:

In this case the National Labor Relations Board found that the employer in this case had violated section 8(a)(5) of the National Labor Relations Act by refusing to arbitrate 10 identical grievances filed by the union when the grievance events took place some 11 months after the expiration of the collective bargaining agreement.

Even though the Board found a violation of section 8(a)(5) because of the repudiation, it declined to order the parties to arbitrate because in its view it did not feel that the particular... the particular grievances, which involved a layoff and a provision in the contract dealing with layoffs, arose under the contract.

And just briefly, the reasoning of the Board was that because aptitude and ability controlled the layoffs, or order of layoffs before seniority became a factor, that the grievances did not arise under the collective bargaining agreement.

Unknown Speaker: But wasn't it the case, isn't it the case that to the extent that seniority is claimed to be a factor, it does arise under the contract?

Mr. Diederich: In the Board's view, which I think is correct, seniority does not become a factor until ability and aptitude are determined.

And ability and aptitude certainly do not arise under a contract because under the Board's view, relying on Nolde, it doesn't... a grievance does not arise under a contract unless it is some right which can be accrued or is a vested right, such as wages, pension benefits, or severance pay.

Unknown Speaker: Well, were the grievances in this case expressed solely in terms of aptitude and ability as opposed to terms of seniority on the assumption that aptitude and ability were equal?

Mr. Diederich: The grievances were expressed in terms of seniority.

Unknown Speaker: Well, then why doesn't that arise under the contract?

Mr. Diederich: Because the contract provides that aptitude and ability are the controlling factors, and seniority never becomes a factor until you prove that, or you are able to demonstrate--

Unknown Speaker: Excuse me, maybe I don't, still don't understand the grievance.

I thought you were saying or indicating in effect that the grievances claimed, that there were instances in which ability and aptitude were equal, and that therefore seniority ought to be determinative.

Is that correct?

Mr. Diederich: --No, I don't think the grievances mentioned aptitude and ability at all.

Unknown Speaker: Okay, that's maybe where we... so they were simply saying... the grievances were simply claiming that seniority and seniority alone entitled them to some consideration they didn't get?

Mr. Diederich: The exact words were "out of seniority".

Unknown Speaker: Okay.

Mr. Diederich: The court of appeals upheld the Board's determination that there was a violation of section 8(a)(5) because of the repudiation, the refusal to arbitrate, but the court reversed the Board's decision on the... arising under theory that the Board had adopted and said that was unreasonable, and directed the parties to arbitrate.

Now there is in collective bargaining a constant theme that the parties are supposed to determine what goes into a collective bargaining agreement and not the Government.

And in a case like this where we have a contract that we have to look at and interpret and there is no collective bargaining history, I think it's especially important to look at the particular contract provisions that are involved and try to determine what the intent of the parties was, if it can be determined from that language.

Unknown Speaker: Well, Mr. Diederich, had this grievance arisen during the life of the collective bargaining agreement would arbitration have been required?

Mr. Diederich: Yes.

Unknown Speaker: And there certainly is a good deal of language in this Court's decision in Nolde that suggests that, similarly, arbitration would be required if it occurs after the expiration of the agreement, as here.

Mr. Diederich: Yes, that's true, Your Honor, but Nolde was a civil action under section 301, which is a statute, I am sure as you know, which gives unions the right to sue employees and vice-versa.

And one of the reasons they can sue is to enforce a collective bargaining agreement.

That is precisely the question that I am presenting here.

Is a section 301 lawsuit properly applicable to a section 8(a)(5) unfair labor practice case, because Congress has specifically defined what is involved in a refusal to bargain.

As a matter of fact it is the only unfair labor practice of which I am aware where Congress has specifically defined what the violation is.

And I simply don't believe that if you read the statute, section 8(a)(5) and its definition in section 8(d), that you can say that the employer's conduct in this case fits within the definition of that statute.

You would have to shoehorn that conduct into that statute.

Unknown Speaker: Well, I guess the Board takes the position that some of these grievances might have to be arbitrated and some not, and in this case this one should.

I mean, Solicitor General will argue a position that differs from your own.

Isn't that right?

Mr. Diederich: No, I think the Board's position was that there was a violation in the blanket repudiation of the arbitration provision.

But the Board determined that the parties were not required to arbitrate.

So--

Unknown Speaker: This specific--

Mr. Diederich: --This specific reason... grievance.

And on that point the Board and myself are on the same side, although from my standpoint that is kind of a fall-back argument.

I have made more of a frontal attack on the applicability of section 8(a)(5) and section 8(d), whether they apply at all to this employer's conduct.

Unknown Speaker: --Well, suppose--

--Or more precisely that you don't carry Nolde over, which is a 301 case, to section 8(b)(5).

Mr. Diederich: I didn't hear the first part of the question.

Unknown Speaker: Your position also is that you don't carry over any doctrine from Nolde, which was a section 301 case, to 8(b)(5) when you have defined the refusal to bargain.

Mr. Diederich: Absolutely, because Congress has specifically defined in section 8(d) what a refusal to bar... what the obligation to bargain entails.

And if you don't meet that obligation then you have refused to bargain.

So Congress, having spoken very specifically in terms of what a section 8(a)(5) violation is, I don't... I don't believe that language in a section 301 suit, which is a suit really where you are just determining arbitrability.

Now, there's a great deal of significance and there's stigma attached to being found to have committed an unfair labor practice.

Unknown Speaker: Mr. Diederich, there is a long, long line of authority.

I mean, I thought, I had thought it was fairly well established Federal labor law that if you make a unilateral change in the provisions that you're obliged to abide by under a contract, you are not only in breach of contract, but you are also guilty of an unfair labor practice.

And your... the principle you have just espoused attacks that whole line of jurisprudence, doesn't it?

Why would you limit it to the arbitration agreement?

Mr. Diederich: I don't think it does, Your Honor, because the, the landmark case for the proposition that you cite on unilateral change of working conditions is Katz, and in Katz the theory was that while there are ongoing negotiations it is destructive of the collective bargaining process for the, for an employer to make unilateral changes.

In other words, you can't be negotiating about sick leave, and the next day institute unilaterally a brand new sick leave policy, because that disrupts... excuse me... disrupts the collective bargaining process.

In this case there were no ongoing negotiations.

11 months had elapsed without any negotiations.

Unknown Speaker: There were none, but there should have been some.

Isn't it true that under the Board's theory there should have been, because you had refused to bargain?

Mr. Diederich: Well--

Unknown Speaker: Had you obeyed the law there would have been on-going negotiations.

Mr. Diederich: --Not entirely correct.

For the first 10 months of that 11 month hiatus, the status... the representative status of the union was in doubt, because there was a Board proceeding.

Unknown Speaker: Right.

Mr. Diederich: At the end of the... around the end of the 10 month period, the Board certified the union.

At that point the company--

Unknown Speaker: But your initial refusal to bargain was for the purpose of getting that determination, wasn't it?

Mr. Diederich: --No.

Unknown Speaker: Wasn't it?

Mr. Diederich: No, no, no, no, no.

There was a petition filed by an employee seeking to decertify the union--

Unknown Speaker: Right.

Mr. Diederich: --shortly before the contract expired.

That entire proceeding, from the time that petition was filed until the Board ultimately certified the union, was 10 months after contract expiration.

At the end of that 10-month period when the union was certified, the company exercised its right to then challenge the validity of that Board certification in the Ninth Circuit court of appeals.

And that is how... 1 month of the entire 11-month period was devoted to a technical refusal to bargain, which is the only method, Your Honor, by which an employer can test the validity of a Board certification.

Unknown Speaker: Did the Board purport to rest its decision in part on Katz?

Mr. Diederich: No.

Oh, I'm sorry.

I don't think the Board did.

The union argued Katz, but I don't believe the Board argued Katz, and I don't believe the Board relied on Katz.

Unknown Speaker: But why shouldn't the Katz prohibition on unilateral changes prior to bargaining to impasse apply to arbitration?

Mr. Diederich: Because we have a long history saying that arbitration is consensual, and we have many Supreme Court cases saying that arbitration is consensual, and we have a statute which says that a part... basically it says the parties should determine what goes into an agreement and not the Government.

Unknown Speaker: Well, Katz was also during the course of bargaining.

Mr. Diederich: Yes.

Unknown Speaker: It didn't cover the situation where the contract had expired.

Mr. Diederich: Absolutely not.

There is no... this is a case of first impression in terms of whether--

Unknown Speaker: Do you think, then, even though there's a... say after a contract has expired, the employer is under a duty to bargain about wages, hours, and working conditions, but he may unilaterally change the... say, the hours of work without bargaining?

He can change it, but he has to bargain--

Mr. Diederich: --He has to bargain, yes.

Unknown Speaker: --But meanwhile he can change?

Mr. Diederich: He can bargain, and when, I think--

Unknown Speaker: Well, may he, while he's bargaining may be say well, I know what... the contract required 8 hours of work or 6 hours of work, I am going to change to 7.

I know I have to bargain about it, but until we bargain the impasse, it's going to be 8 now?

Mr. Diederich: --I don't think it's clear, Your Honor, that you have to bargain to impasse.

It's clear that you, if you're going to make a change you have to bargain.

Unknown Speaker: You agree with that?

Mr. Diederich: Yes.

Unknown Speaker: Before you make the change?

Mr. Diederich: Yes.

Unknown Speaker: Was that done here?

Mr. Diederich: Well, you asked me about wages.

You have to bargain about wages.

I don't think you have to bargain about arbitration because--

Unknown Speaker: Oh, I agree, I... that's a different thing because your obligation to bargain to the union isn't based on the contract.

Mr. Diederich: --No.

Unknown Speaker: It's based on labor law.

Mr. Diederich: Right.

Unknown Speaker: And so... and certainly the duty to arbitrate isn't based on labor law.

It's based on contract.

Mr. Diederich: True.

Unknown Speaker: Well, wages are based on contract too, aren't they?

Mr. Diederich: Not after the contract expires.

After the contract expires they exist by the obligation to maintain the wages that exist by operation of law.

Unknown Speaker: On what basis?

On the theory that the pre-existing contract continues unless you bargain to change it, no?

Mr. Diederich: No.

Not on the basis that the contract continues.

On the basis that they were working conditions, and as working conditions they cannot be unilaterally altered without giving the union an opportunity to bargain.

Unknown Speaker: What's the authority for that?

Mr. Diederich: The authority for that?

Unknown Speaker: Yes.

Mr. Diederich: Is the Board's decision in this case.

Unknown Speaker: Well, but you're... I mean, surely we deserve to be cited something better than that, don't we?

Well, that's what Katz holds, isn't it?

Mr. Diederich: That's what Katz holds.

Unknown Speaker: Katz holds in the course of bargaining the employer can't do it.

It doesn't say anything about the situation when the contract has expired.

Mr. Diederich: Absolutely not.

No case has ever come before--

Unknown Speaker: So why do you agree that an employer can't change the conditions of bargaining... can't change the conditions of employment after the contract has expired even though he continues to bargain about them?

Why is he bound to keep them the way they were?

Mr. Diederich: --I didn't say he couldn't change them.

Unknown Speaker: Well, in answer to Justice White's question, I thought you did.

Mr. Diederich: I misspoke.

He has to give the union an opportunity to bargain over the changes.

I don't think you have--

Unknown Speaker: Before he changes them?

Is that it?

Mr. Diederich: --That's my understanding of the law.

Unknown Speaker: Yes.

Mr. Diederich: But not with respect to arbitration.

Unknown Speaker: Oh, I understand that.

Mr. Diederich: Because the Board has made an exception with respect to arbitration.

Unknown Speaker: Of course it did.

But if... but the duty to maintain the existing working conditions, wages, hours, working conditions, doesn't rest on contract.

It rests on the law?

Mr. Diederich: That's my understanding, yes.

Unknown Speaker: Otherwise you could sue the employer for... under 301 for breaching the contract.

Mr. Diederich: You could sue for breach of contract.

That's right.

Unknown Speaker: And you can't?

Mr. Diederich: Pardon?

Unknown Speaker: And you can't?

Mr. Diederich: Not under the contract theory.

I think at that point when the contract has expired, the collective bargaining scheme leaves resolutions of disputes that arise to the parties and their economic power in their bargaining.

I think that's the theory of the collective bargaining scheme.

Unknown Speaker: Unless the dispute actually had its roots in the contract.

Mr. Diederich: No.

No.

Unknown Speaker: Well, what about vacation pay?

Mr. Diederich: Vacation pay is a vested right, and I have no quarrel with vacation pay.

Unknown Speaker: What you're saying is the dispute has its roots in a contract.

Mr. Diederich: Well, yes.

Yes.

But not a layoff provision such as this one.

Unknown Speaker: Thank you, Mr. Diederich.

Mr. Wallace, we'll hear from you.

Argument of Lawrence G. Wallace

Mr. Wallace: To address preliminarily a question that has arisen, the period after contract expiration is a period of bargaining prior to agreement on a new contract or the reaching of impasse.

And that is why the Board has applied Katz to the post-expiration period, but on the rationale that the employer cannot make unilateral changes during the period of bargaining.

It's only coincidental that the wages had been prescribed by the expired contract.

They happened to be the prevailing wages--

Unknown Speaker: So you say there's a duty to bargain when the contract expires, even though the employer is no longer bound by the condition, and that Katz holds that during a period of bargaining you cannot make unilateral changes?

Mr. Wallace: --Precisely so.

We explain that on page 10 of our reply brief and cite this Court's decision in Laborers Health and Welfare against Advanced Lightweight.

Unknown Speaker: But if it were not during a period of bargaining, then, the employer could make unilateral changes?

Mr. Wallace: After impasse, for example.

Unknown Speaker: And why is Katz not dispositive here?

Because the bargaining had ceased, or there had been bargaining to impasse?

Mr. Wallace: No.

Because Katz is an interpretation of how to interpret and apply the National Labor Relations Act, and it upheld the Board's view that the act ordinarily bars changes in the terms and conditions of employment during the bargaining period.

But the Board has also adopted the view that it would be inappropriate to apply Katz to certain terms because it would be contrary to other policies of the act, such as dues check-off, or union shop, and arbitration, because it would be very hard to reconcile with the strong statutory determination by Congress that compulsory arbitration is not to be required, that arbitration is solely a creature of contracts.

Unknown Speaker: Well, so are the wages.

Is there no strong feeling of contract that an employer shouldn't have to pay anymore than he agrees to pay, and that a worker shouldn't have to accept any less than he agrees to accept?

Mr. Wallace: It's only coincidental that the change would be a change in a contractually prescribed term.

It is not a matter of carrying forward the expired contract.

It is a matter of changing the existing terms and conditions of employment.

That's what we try to explain on page 10 of our Reply Brief.

Unknown Speaker: Well, I understand why an arbitration agreement isn't one of the terms and conditions of employment.

If you have a dispute you have to--

Mr. Wallace: It is, it is--

Unknown Speaker: --But you just arbitrarily say we'll change some of them and we won't change other ones.

Mr. Wallace: --It's not arbitrary, Mr. Justice, it... the point is the rationale of Katz is not based on carrying the contract obligations forward.

And arbitration cannot be compelled by law.

Arbitration is solely a creature of contract.

If the contract obligation is not being carried forward, it's inappropriate to require adherence to arbitration.

Unknown Speaker: I hear you, but I don't understand.

Everything you say could be said about wages.

Mr. Wallace: The wages are being paid.

I can't really explain it more clearly than that.

In its 1987 decision in Indiana & Michigan Electric, the Board definitively set forth the principles it would follow in implementing this Court's decision in Nolde.

Nolde's rationale readily led the Board to carry forward to the hiatus period, a period of bargaining between expiration of the contract and before renewal or impasse, the Board's longstanding rule that a wholesale refusal to arbitrate grievances under a contract to arbitrate would be an unfair labor practice.

Unknown Speaker: What is the... what did the Board base its reason for doing that on?

Mr. Wallace: Well, the rule is based on the notion that a wholesale refusal to submit grievances to arbitration is a repudiation of the bargain that was reached, and therefore an unfair labor practice.

Unknown Speaker: What bargain, if it's expired?

Mr. Wallace: Well, that is the point of trying to apply Nolde.

Nolde said that the parties are presumed to have carried... to have an intent to have carried forward the obligation to arbitrate during this hiatus period to disputes arising under the contract.

And therefore if the employer categorically repudiated its arbitration obligation during this period, taking into account the rationale of Nolde, the ordinary rule that that would be an unfair labor practice carries forward.

The more difficult question for the Board was the remedial one of how to identify whether the particular grievances asserted in the case are within the category that there is a duty to arbitrate during hiatus.

Unknown Speaker: Namely those... did the dispute arise under the contract.

Mr. Wallace: That's correct.

And in addressing this, the Board took note that in Nolde itself, before holding that contract expiration does not necessarily extinguish the duty to arbitrate, this Court very carefully described the nature of the grievances and of the union's contentions that it was addressing in that case.

And I refer the Court specifically to page 248 of volume 430 U.S. in which the Court took pains to say that the union maintained here that the severance wages at issue were accrued or vested rights earned by employees during the term of the contract, although payable only upon termination of employment, and that the union's claim was that the parties considered the severance pay as part of the employee's compensation for services performed during the life of the agreement.

And the question--

Unknown Speaker: Mr. Wallace, can I interrupt right there?

Isn't that precisely what the union claims here?

That the discharges on seniority grounds violated the contract?

And the defense to that is the contract had expired and the don't.

But in terms of the request for arbitration, if they are right that the contract did prohibit these discharges, why doesn't the language you read from Nolde apply squarely to this case?

Mr. Wallace: --Because Nolde was talking about rights that accrued during the pre-expiration period.

Unknown Speaker: Well, when did their seniority accrue here?

Mr. Wallace: Well, that gets to a question of the application of the Board's rule, whether what was involved in this case was a claim based on seniority, and the Board reasonably determined in applying its rule here to the contract provision, which is set forth at the top of page 9 of our brief, the contract provision says in case of layoffs, length of continuous service will be the determining factor if other things, such as aptitude and ability, are equal.

And in construing this, the Board reasonably determined that seniority is only a fall back criterion here and that what would have to be submitted to the arbitrator necessarily as the first question is whether aptitude and ability are equal between the more senior and the less senior person.

And that is a question to be determined with respect to aptitudes and abilities during the post-expiration period, at the time of the layoff, and with respect to the conditions at the time of the layoff, which have in this case quite dramatically changed because the employer has changed his operations.

And that would mean submitting to the arbitrator the determination of a post-expiration question as the primary question.

Unknown Speaker: Well, just generally, Mr. Wallace, wouldn't you think that if the question is whether a dispute arises under the contract, isn't that itself a issue for the arbitrator?

Mr. Wallace: The question of arbitrability under this Court's decision in AT&T Technologies against Communication Workers is a matter for the court, or in this case the Board, the decision-making tribunal to determine.

The question of arbitrability under that decision is not to be relegated to the arbitrator.

Unknown Speaker: But, suppose the argument is that the parties intended by this language in the contract to have a certain clause in the contract carry over past the normal expiration date?

Now, isn't that a question for the arbitrator as to the meaning and application of that provision?

Mr. Wallace: If there were a provision capable of being interpreted that way under the Board's rule, the case... the question would be arbitrable.

But the Board's rule is one based on whether the contract rights are rights capable of accruing or vesting to some degree during the life of the contract.

Unknown Speaker: The Board's rule purports to be an application of our decision in Nolde, and we said in Nolde specifically quoting an earlier case, the question of interpretation of the collecting bargaining agreement is a question for the arbitrator.

And all you have here is a question of interpreting the collective bargaining agreement.

Is it intended to apply post-agreement in this respect or not?

Why isn't that a question for the--

Mr. Wallace: As we explain in our reply brief, there is overlap in some cases between questions on the merits in interpreting a collective agreement and the question of arbitrability which a court, or in this case the Board, nonetheless has a duty to determine even if that involves construing relevant terms of the collective bargaining agreement.

Unknown Speaker: --But Mr. Wallace, isn't the critical term of the collective bargaining agreement the term that describes the duty to arbitrate, which says there shall be arbitration if there is an allegation the contract has been breached?

Mr. Wallace: That depends on--

Unknown Speaker: And if you say in this case they have made such an allegation, then the arbitrator could say well, they have alleged it but the contract had expired, so there is no remedy in arbitration.

Mr. Wallace: --That--

Unknown Speaker: But isn't that where we start, with the arbitration clause?

Mr. Wallace: --That is dependent on whether the Board's view of how to reconcile Nolde with the act's no compulsory arbitration provision by taking the narrower reading of the category of claims that Nolde makes it appropriate to submit to arbitration during the post-expiration period, whether that view is proper.

And the Board concluded that that view more properly reconciles the pertinent labor law considerations.

I'd like to reserve the balance of my time, if I may.

Unknown Speaker: Very well, Mr. Wallace.

Mr. Rosenfeld, we'll hear from you.

Argument of David A. Rosenfeld

Mr. Rosenfeld: Mr. Chief Justice, and may it please the Court:

Justice Stevens, you were correct.

The provision in this contract is an extremely broad one.

It's not limited solely to questions of interpretation or application of the contract, but includes, quote,

"differences that may arise between the parties hereto regarding this agreement. "

And surely between the union and Litton there is a very vigorous dispute or difference between them regarding this agreement.

And so that surely our dispute, which is were these layoffs in violation of the agreement, a matter that is a difference between us regarding the agreement, and surely it was arbitrable during the life of the agreement and remains a difference.

But our case is far stronger because I think I can demonstrate unequivocally that the parties, even based on the language of the contract in the Board's cases, intended that seniority would continue.

And that can be seen from the following.

The Board in Uppco says that one of the things you can look at, and the Board applies a sort of an any indication test, is there any indication in the contract that the parties intended that provision would continue?

Is there any indication, in the words that Justice White used, of any intent that that language would continue?

Unknown Speaker: Well, as I understand the position of the other side, it's that that's not really the issue in this case.

That they... they conceded your clients have their seniority.

The issue is not whether the seniority continues.

They acknowledge it does.

The question is what's the effect of the seniority upon this particular dismissal.

Mr. Rosenfeld: That's right.

Unknown Speaker: And that isn't covered.

Mr. Rosenfeld: That's right.

But the issue in this case that we would present to the arbitrator is whether there was any effect in the contract to be intended by the parties at some point after the contract was expired.

Unknown Speaker: Well, it may be, but you can't answer the question before us by simply saying it's clear that seniority was meant to continue after the agreement ended.

We can give you that, and you still are left with the question of whether this is an issue that under the Board's cases must be decided by the arbitrator or not.

Mr. Rosenfeld: We know under Nolde, once we make the contention that that language continues, that is the language governing the dispute continues, that whether in fact it has some effect or whether the contract has been breached is a matter for the arbitrator to determine.

Unknown Speaker: But that was a section 301 case.

Mr. Rosenfeld: That's correct.

And what the Board has done in this case and in Indiana & Michigan is it has purported to apply the same--

Unknown Speaker: It has purported to apply it.

Mr. Rosenfeld: --And more importantly, I think it's, it is in fact compelled to do so.

Unknown Speaker: Why?

Mr. Rosenfeld: Because in Lincoln Mills this Court 35 years ago said that interpretation of collective bargaining agreements is to be left to the usual processes of the law... court, and it later--

Unknown Speaker: It didn't, it didn't say it was to be left to unfair labor practice proceedings, which is what you're in here.

Mr. Rosenfeld: --That's right.

And 20 years later in C&C Plywood, when the question was before this Court could the Board even interpret a collective bargaining agreement in the course of adjudicating an unfair labor practice, what this Court said was yes, the Board could interpret it, not because it's interpreting the agreement and resolving those questions, but in adjudicating the unfair labor practice.

So what the Board has purported to do in this case is recognizing that it is subservient to this Court's interpretations of contracts under section 301, it has said we will apply the Nolde standards.

The Board has an obligation under this Court's rules to apply, in interpreting contracts, the Nolde standards or to apply this Court's standards in interpreting Section 301.

This Court also said that in Strong Roofing where it said that... that was a Board case once again where the issue was the interpretation of the contract, and this Court said that the usual manner in which contracts are interpreted is not by the Board, but by arbitration of the courts.

Unknown Speaker: And not by the Board in unfair labor practice proceedings.

Mr. Rosenfeld: That's correct.

And all that the Board--

Unknown Speaker: Which is what you have here.

Mr. Rosenfeld: --And that's what we're trying to resist.

We don't want... when this case arose the union did not go to court to compel arbitration, because we were before the Board in other unfair labor practices.

We did not ask the Board to interpret the layoff provision of the contract.

We did not ask the Board to determine whether these layoffs violated--

Unknown Speaker: Well, why didn't you?

You would have... you could have gone to court under Nolde, certainly.

Mr. Rosenfeld: --We could have.

We could have at that time gone to court to compel arbitration.

Unknown Speaker: Why didn't you?

Mr. Rosenfeld: Because at the same time that this was occurring this employer was committing a number of other unfair labor practices in refusing to arbitrate, and we saw it as an efficient method of getting the whole problem resolved of this employer's refusal to bargain by filing an 8(a)(5) charge, which was sustained.

And part of the 8(a)(5) refusal to bargain was the employer's repudiation of its obligation to arbitrate.

So that we saw that as an alternative means.

And the Board agreed with us.

The Board ultimately agreed that the employer had repudiated the arbitration provision.

And then the Board said, contrary to Nolde, looking at the seniority clause, we don't find this specific dispute to be arbitrable.

Let me explain how the Board... how the courts tell us we're supposed to do that.

What this Court said in AT&T Tech.

You look at the arbitration provision.

That's the first thing.

How broad is it?

Does it cover the dispute?

And surely the arbitration provision, that is differences between the parties regarding this agreement, is broad enough to cover the dispute.

What is the next step then under this Court's Warrior & Gulf, Nolde, and AT&T Tech cases?

The next step is to search within the agreement for some expressed exclusion or other forceful evidence that that particular dispute is not to be arbitrated.

In AT&T Tech there was an express exclusion.

The contract had an exclusion for certain management rights which the parties agreed were not subject to arbitration.

Warrior & Gulf had an ambiguous exclusion clause.

But you can find no such exclusion clause in this case.

There is nothing that Litton ever sought to exclude from arbitration.

Absent an exclusion clause, the only thing left for Litton to assert or the Board to assert would prevent arbitration is some forceful expression.

The words from AT&T Tech are an express exclusion or other forceful expression of the parties' intent to exclude a particular dispute.

And there the irony of the case is that the Board concedes that had the contract simply talked about seniority without aptitude and ability, it would be arbitrable.

What the Board is trying to convince you is that the words "aptitude" and "ability" are tantamount to an express exclusion from arbitration.

Their argument amounts to a contention that because the parties included those words, somehow they did not intend to arbitrate this dispute, because the Board concedes that absent those words it would be arbitrable.

And that's not either an express exclusion or any forceful expression on the part of the parties to exclude this dispute.

Unknown Speaker: Well, you don't... you certainly don't, aren't arguing, you don't need to argue that every, an arbitration clause always survives the termination of the contract?

Mr. Rosenfeld: No.

And in fact, part of the... one of the concerns that I think that is inherent in this case is when does the employer's obligation to arbitrate end.

Justice White, had Litton been concerned about it when this contract was initially written, he could have come to the union, as some employers do, and say we don't want to have to arbitrate grievances after the contract, so let's put an express exclusion that says any grievance which arises after the contract or which is filed after the contract shall not be arbitrable.

Which of course then leaves the union free to go to court.

And that's what Groves v. Ring Screw tells us.

Another--

Unknown Speaker: If it's, if it's suit was based on the contract.

Mr. Rosenfeld: --That's right.

Unknown Speaker: Even though the contract formally had expired you would still, to bring a 301 suit you would have to say what we're suing about is nevertheless governed by the expired contract.

Mr. Rosenfeld: That's right.

And what... for example, we could go... this is what... in Nolde Brothers, the dissent, in which Chief Justice Rehnquist joined, said explicitly that it was clear that in Nolde the union could have gone to court or the individuals could have gone to court to bring a suit to collect their severance pay.

Now I think we probably... we could not have gone to court in this case directly to sue over the seniority because we were barred because we had agreed to arbitrate those disputes.

That was our exclusive remedy.

Unknown Speaker: Could you have gone to court to compel arbitration?

Mr. Rosenfeld: Yes.

I think clearly we could have gone to court and claimed--

Unknown Speaker: You probably, certainly could have stated a cause of action in your complaint, but you might not have won.

Mr. Rosenfeld: --We could have stated a claim, and I think I could have convinced a district court, had we chosen that route, an alternative route, that the arbitration clause was broad enough, there was no expressed exclusion, and that under Nolde we had at least an entitlement to get to the arbitrator.

Unknown Speaker: But you would have to nevertheless convince the court that your cause of action really goes back to the contract, even though it's expired.

Mr. Rosenfeld: That's right.

And--

Unknown Speaker: I guess in that respect, Mr. Rosenfeld, you are in a different situation with respect to the arbitration clause than you are with respect to the other continuing terms and conditions.

That is to say if the employer didn't pay the wages that he had previously been paying and was obliged to pay under the contract, you couldn't sue him for breach of contract once the contract had expired.

Your only remedy for the wages would be an unfair labor practice proceeding, wouldn't it?

Mr. Rosenfeld: --No, for the following reason.

Unknown Speaker: No?

Why not?

Mr. Rosenfeld: That in order for us to prevail in court we have to allege that there is some understanding or agreement between the parties that that provision over which we're suing continues.

For example--

Unknown Speaker: Are you answering my question about the wages?

Mr. Rosenfeld: --Yes.

Unknown Speaker: Suppose the... all right.

Mr. Rosenfeld: For example, if I were to go to court on that theory, and wages is perhaps the most difficult because it doesn't sound like wages accrues.

Wages do to some extent accrue.

For example, this contract has a wage progression, and says if you work 3 months you get a certain wage, 6 months it increases.

And I can argue, I think, that the parties intended as part of their agreement that once you have accrued a certain level of competence--

Unknown Speaker: Well, you're changing the facts now.

Just throw that out.

Here's a contract that expired.

The wages were $100 a day.

And 6 months from then the employer unilaterally changes it to $90.

Mr. Rosenfeld: --We could not sue over the unilateral change there.

Unknown Speaker: Of course not, you couldn't.

But you could... well, next week he does.

You can... you could certainly complain, make an unfair labor practice charge that he unilaterally changed the... without bargaining.

Mr. Rosenfeld: That's right.

Unknown Speaker: But you couldn't sue on the contract?

Mr. Rosenfeld: If we could prove that the--

Unknown Speaker: Well, I know, but you don't have to prove something besides the fact that he unilaterally changed it.

Mr. Rosenfeld: --Absolutely.

We have to prove that there was some agreement between the parties--

Unknown Speaker: Exactly.

Mr. Rosenfeld: --that that wage rate... some agreement that that wage rate would continue in--

Unknown Speaker: But you have to prove that for the arbitration clause, too, don't you?

Mr. Rosenfeld: --That's right.

And that, for example--

Unknown Speaker: I mean, you have to show the arbitration clause would intend to continue.

So you're saying if you can show that the wages were intended to continue, just as you can show that the arbitration clause was, you'd be in the same boat with respect to wages as you are with respect to arbitration.

Mr. Rosenfeld: --And it's our preference, of course, to make those arguments to the arbitrator rather than the district court.

And what we would, for example--

Unknown Speaker: Yes, but it is true, isn't it, let me just get sort of a simple point out of the back of my head.

You can allege that the discharge 10 months later violated the agreement, and then presumably the court can hold yes, you're entitled to have that arbitrated because you have alleged that it violates the agreement.

But it would still remain possible for the arbitrator to say well, yes, they're claiming it arises out of the agreement, therefore I have jurisdiction to arbitrate, but I don't see how in the world something that happened 10 months later arose out of the agreement.

Therefore you lose on the merits.

That could happen, couldn't it?

Mr. Rosenfeld: --It could happen.

Surely in many cases where unions would bring grievances after the contract has expired an arbitrator would more than likely deny those grievances and say that in some cases the union is correct that that concept of that clause continues, and, Justice Stevens, in other cases we would lose.

In this particular case I think I can demonstrate in a moment that I think we'd have a strong contention before the arbitrator that this layoff provision, this seniority provision would continue.

Unknown Speaker: Of course we don't have to decide that, I don't think, do we?

Mr. Rosenfeld: Well, not only do you have to not only decide it, I in some sense should not be pressing the argument because I'd be rather making that argument to the arbitrator and letting him hear the bargaining history, letting the arbitrator hear the law of the shop, letting him hear and look at the language of the contract, and apply his special expertise or her special expertise to those questions.

But my opponent, sitting across the arbitration table, may well convince the arbitrator that the union is incorrect and that that seniority provision did not continue.

Unknown Speaker: So what do you do about the notion that courts are to decide the, whether an issue is arbitrable?

Mr. Rosenfeld: What you do is the process that this Court set in Warrior & Gulf, what this Court said in Nolde and AT&T Tech.

You look at the breadth of the arbitration clause.

You do nothing different in the Nolde situation, Justice White, than you do in--

Unknown Speaker: I know, but the court still has to come down and say we looked at this arbitration clause and we... the court has to say either it reaches this dispute or it doesn't.

Mr. Rosenfeld: --That's right.

And that's what, what Your Honor said in AT&T.

Unknown Speaker: And did the Board do any more than that in this case?

It looked at the arbitration clause, it looked at everything in sight, and said this particular issue isn't arbitrable.

Mr. Rosenfeld: What the Board said--

Unknown Speaker: Isn't that what it said?

Mr. Rosenfeld: --Yes.

Unknown Speaker: Yes.

Well, so we have to review that and decide whether the Board was wrong or right in saying it was not arbitrable.

Mr. Rosenfeld: That's right.

What you have to apply in making that decision, I submit, is what this Court has done since 1960 in Warrior & Gulf, which is to say not look at the merits--

Unknown Speaker: So there's nothing wrong with what, with the kind of decision the Board made.

You just say they were wrong?

Mr. Rosenfeld: --No.

We say they are wrong because the way they went about the analysis, the way they came to the process of making that determination, is directly contrary to--

Unknown Speaker: You ought to be satisfied if we just said they were wrong.

[Laughter]

Mr. Rosenfeld: --I'd be satisfied, but... but that's what the Ninth Circuit did.

The Ninth Circuit said they're wrong because seniority, they say the Board has already told us in Uppco and United Chrome, survives, and the Ninth Circuit said that they saw no difference between seniority in this case and in the other two cases and therefore it was arbitrable.

Unknown Speaker: Do we owe any deference to the Board?

Mr. Rosenfeld: We don't in this case because we're dealing with a question of contract interpretation of the right to arbitrate, and those doctrines come from section 301.

And even the Board concedes that, because the Board bases its decision on Indiana & Michigan, and in this case upon the question of the contract.

Unknown Speaker: Those are not questions then even that are primarily for the arbitrator?

They're for a court?

Mr. Rosenfeld: In determining arbitrability they are for the court.

Unknown Speaker: The Board works with these contracts all the time.

We give deference to the interpretation, or at least the D.C. Circuit does, I know, and it may be based on our cases, to the interpretation of power contracts, for example, by the Federal Energy Regulatory Commission.

And you don't think we should give any deference to the Board's interpretation of it?

Mr. Rosenfeld: No.

For another reason--

Unknown Speaker: No... not even respect, you wouldn't say?

Mr. Rosenfeld: --Well, actually I think what the D.C.... I suppose some respect.

But what the D.C. Circuit actually does in the IBEW case that we have cited is that--

Unknown Speaker: Well, we shouldn't presume they're wrong, anyway.

Mr. Rosenfeld: --No.

Unknown Speaker: Will you answer me this.

Suppose you have a contract that has a wage system that's just like the Federal salary level.

You're entitled to a step increase every year.

Do you know... what would the Board do if, if the contract comes to an end and the employer continues to pay everybody what they were getting before the contract ended, but stops giving them the step increases?

Mr. Rosenfeld: Yes.

Unknown Speaker: Would the Board consider that to be an unfair labor practice?

Mr. Rosenfeld: Yes.

The Board... if--

Unknown Speaker: It would?

Mr. Rosenfeld: --Yes.

The Board has traditionally taken the position that if the employer regularly gives wage increases, and Mr. Chief Justice, this arises both in the Katz situation where the employer has a regular system of giving wage increases prior to the completion of negotiations, the employer has to continue that same system in effect.

And then when the parties reach an--

Unknown Speaker: Even though it... even though there is no contractual requirement at that point that would be enforced?

Mr. Rosenfeld: --Right.

Because for example for the employers to say that during negotiations I will give no regular wage increases, although I had historically done it, is to undermine the bargaining process.

Unknown Speaker: So it is treated like arbitration.

The theory is that that was what was anticipated in the contract.

Is that the theory of it?

Mr. Rosenfeld: That... not anticipated, no.

It's that for the employer to change conditions before the contract has expired... I'm sorry, to change conditions unilaterally before the parties have reached an agreement is to undermine the bargaining process because, for example, if the employer stops giving regularly scheduled wage increases, then the union has to bargain it back in.

Unknown Speaker: So it follows from Katz, but not Nolde?

Mr. Rosenfeld: The unilateral change doctrine follows from Katz, but it is reinforced by Nolde, because what this Court said in Nolde is that once you have arbitration in the contract there is a presumption that it continues in effect after the contract expired.

And that presumption of continuation of arbitration is... it reinforces the Board's position that all terms and conditions which are mandatory subjects of bargaining continue after the contract has expired until certain things happen, primarily an impasse in negotiations is reached, at which point the employer is free to change conditions consistent with its bargaining posture.

In this case Litton comes to this Court in a very bad position, because there was in fact an election among the employees who voted in favor of the union.

It was a close vote, but that vote occurred 3 months before the contract was terminated.

And Litton had a legal choice at that point.

It could have said litigate or it could have said negotiate.

It chose to litigate and it lost 8 or 9 months later.

When it lost and the Board said that the union had won the election finally, Litton had another choice.

It could litigate or it could violate the law.

It chose to refuse to bargain.

The Board found that refusal to bargain unlawful.

And while it was breaking the law, refusing to bargain, it then laid these people off.

Unknown Speaker: You don't say that under Katz you treat the promise to arbitrate as part of the conditions of employment, do you?

Mr. Rosenfeld: Yes, I do.

Unknown Speaker: You do?

You mean that just because, automatically then you can't, the employer can't get out of arbitrating any dispute prior to impasse?

He can't get out of arbitrating any dispute that arises?

Mr. Rosenfeld: That's right.

That's our theory.

Unknown Speaker: Well, that isn't the Board's theory.

Mr. Rosenfeld: The Board, the Board comes--

Unknown Speaker: That isn't... I thought the, I thought that the labor law says after the contract expires you don't make a unilateral change--

Mr. Rosenfeld: --That's right.

Unknown Speaker: --in wages, hours, and working conditions.

Mr. Rosenfeld: And the Board said--

Unknown Speaker: But labor also... the labor law also says that you don't imply promise to arbitrate.

Once the contract is over there's no longer a promise to arbitrate.

Mr. Rosenfeld: --The Board doesn't take that position.

The Board takes the position--

Unknown Speaker: I'm talking about Katz now.

Mr. Rosenfeld: --But Katz says that all mandatory subjects of bargaining remain in effect but cannot be unilaterally reputed by the employer or unilaterally changed by the employer.

The question is whether--

Unknown Speaker: Well, on that basis the case... this case is over, isn't it?

Mr. Rosenfeld: --Yes.

That's my theory, Your Honor.

Unknown Speaker: Katz covers arbitration in that language?

Mr. Rosenfeld: Katz was not a case involving arbitration.

Unknown Speaker: I know it wasn't.

Mr. Rosenfeld: No.

Katz was a case involving changes in other... in other conditions of employment.

This Court has not yet decided the question, the precise question of whether Katz encompasses arbitration.

But Katz encompasses all conditions, and the Board's theory in Indiana & Michigan was that arbitration also could not be unilaterally changed as long as there was a consensual basis--

Unknown Speaker: But there are other forces in the labor law besides the idea of no unilateral changes during bargaining, and one of them is no compulsory arbitration.

Mr. Rosenfeld: --That's right.

But when Congress said there would be no compulsory arbitration, what Congress said was that the law does not compel Litton or any other employer to agree to arbitration.

But what the Board... what we think that Katz now says is that once you have agreed to some kind of arbitration, however expansive it is or however limited it is, once you agreed to it in the contract you cannot simply walk away from it at the expiration of the agreement.

Unknown Speaker: Well, the... it seems to me the Board in deciding this case has squarely rejected your notion about Katz.

Mr. Rosenfeld: I don't believe they have.

But I think the Board--

Unknown Speaker: Well, it must have.

Under your theory of Katz, until there has been bargaining to the impasse you have to arbitrate every dispute that arises.

Period.

And the Board has just now said that's not so.

Mr. Rosenfeld: --But the Board has said surely that some disputes are arbitrable once the contract has expired under Katz.

Unknown Speaker: I know, but you say all of them are.

Mr. Rosenfeld: That's right.

Unknown Speaker: You say that we should hold either all or none are?

Mr. Rosenfeld: What we say is that you should hold that the obligation to arbitrate, once the contract has expired, is congruent with the obligation to arbitrate during the life of the agreement, unless the parties have agreed to some other system, which the parties under our system of collective bargaining agreement, they're... entitled to do.

The parties could well agree that certain things would not be arbitrated during the life of the agreement.

For example, parties can agree that jurisdiction is not arbitrable or that wages are not arbitrable.

Unknown Speaker: And for what period of time does this obligation last?

Mr. Rosenfeld: It lasts either for the time that the parties have said in their own bargaining process--

Unknown Speaker: Well, absent... suppose they have said nothing about it, as here?

Mr. Rosenfeld: --Or it lasts until the employer takes action, and this is almost exclusively in the employer's control, until the employer takes action to propose that there be no further arbitration, bargains to an impasse, at which point there is no further obligation.

For example in this case--

Unknown Speaker: Mr. Rosenfeld, can an employer do the same for wages?

Can he bargain that these step increases that you're entitled to under this contract only continue as long as the contract is in effect, and once the contract is over no more step increases?

Mr. Rosenfeld: --Yes.

Unknown Speaker: And then, and then he wouldn't be guilty of an unfair labor practice, if he--

Mr. Rosenfeld: That's right.

What the Board says is that the parties are free in their collective bargaining, and this is our system of bargaining.

They're free to negotiate virtually anything they want.

For example, there are Board cases where the contract provides for a certain level of pension contribution, and then the employer simply stops those pension contributions at the end of the contract.

And the Board has said the employer is free to do so provided the contract clearly and unmistakably provides the employer that right.

Unknown Speaker: --What if it says clearly and unmistakably I can give any wages I want once the contract ends?

Once the contract ends all bets are off and I can reduce wages from $100 to $90.

Mr. Rosenfeld: The Board says that if that waiver is clear and unmistakable, that if--

Unknown Speaker: No unfair labor practice?

Mr. Rosenfeld: --Your Honor?

Unknown Speaker: No unfair labor practice?

Mr. Rosenfeld: No unfair labor practice.

Because the Board respects the bargaining process and the language of the contract.

Now the Board is wary of finding those clear and explicit waivers, but there are some few cases where unions and employers have agreed that once the contract has expired the employer can make certain unilateral changes.

For example, the common area where it occurs is in cost of living increases.

The union recognizes that COLA's may not be applicable after the contract.

There are cases where... for example this contract illustrates it.

There is an explicit provision that provides that the health and welfare... I'm sorry, the pension contribution... the health and welfare contribution amount lasts until 9 months after the contract expires.

It says that the level of contribution will be $55 until July of 1988, which was some 9 months after the initial contract had expired.

So the parties dealt with that problem of defining what their obligation would be.

And then they later changed the amount of pension contribution and increased it just a month before the contract had expired, obviously I think anticipating that when the contract had expired they would bargain from that level.

Now the parties could well have said that with the expiration of the contract the employer will cease contributing to the union's trust fund, because the parties had contemplated that with the next agreement they would substitute a new health and welfare or pension program.

Unknown Speaker: Mr. Rosenfeld, can you argue in this case, does it help your case to say that the Board is inconsistent in ordering steps one and two of the grievance process, but not the arbitration process?

Mr. Rosenfeld: It's not only inconsistent, Your Honor, it puts the union at a severe disadvantage because presumably during that period when we have to go through steps 1 and 2, we can't take economic action, while the Board says theoretically we can at some other point, and that process could be dragged out for some period of time.

But more importantly, going through steps 1 and 2 in this case is a useless exercise because all we do is go to the employer and if he rejects it, that's the end of it.

And even Chairman Dotson in his dissent in Indiana & Michigan said that it's like truncating this well-crafted grievance and arbitration procedure to say that there is some obligation to go through the first part of it but not the last part.

Unknown Speaker: I can't see how the Board or the Government can defend the order to go through grievance steps 1 and 2, and not arbitration.

Mr. Rosenfeld: It also creates another severe anomaly, which is that there are many grievance procedures which provide for joint adjustment boards.

The Gateway Coal case gives a very good example where there are five intermediate... five initial steps, and then a joint adjustment board composed of union officials from another union and mine officials from another mine.

And we don't know whether the Board is telling us that that step, which is like arbitration for some purposes and unlike arbitration for other purposes, is governed by this doctrine.

And yet that... and then that mineworker contract provides that there's finally a step, which is at that joint board, which is very common to contracts but not here, the final step is arbitration before a neutral party who renders a binding decision.

Unknown Speaker: I take it you would then say that the no-strike clause continues all the way?

Mr. Rosenfeld: Yes, and the Board has said that in 1978 in Goya Foods.

And once again, Chief Justice Rehnquist, when you dissented in Nolde you did for one strong... there were two reasons, but the primary reason was because of this note of the strike problem.

And a year later the Board in Goya Foods said that we will imply the continued obligation not to strike over arbitrable grievances, and we accept that.

We recognize that we can't.

And in this case this is what the union did.

The union filed a grievance asserting that the layoffs were unjust.

We asked for the benefit of our bargain, which was to go to the arbitrator and have the arbitrator make the determination whether those grievances violated the agreement.

The employer refused.

We didn't want to make the arguments about the language of the contract to the Board, and I surely don't want to make those arguments to this Court.

Because what the Board tells us and what this Court has told us since Warrior & Gulf is that those arguments as to the meaning of the layoff clause, the meaning of seniority, and whether the parties intended that language to continue, those are arguments to be made to the arbitrator and not to the court and not to the Board.

Thank you.

Unknown Speaker: Thank you, Mr. Rosenfeld.

Mr. Wallace, do you have rebuttal?

You have 2 minutes remaining.

Rebuttal of Lawrence G. Wallace

Mr. Wallace: On page 58 in Indiana & Michigan the Board specifically said that it has concluded that Katz should not apply to post-expiration withdrawal from arbitration.

And that is a matter that goes to the Board's core expertise in interpreting and applying the act itself that the union is taking issue with.

We have mentioned in our reply brief some of the pitfalls of extending Katz to this area, and we think the Board's determination there is entitled to deference.

In... we disagree also that if the Board, in reading the arbitration provisions, concludes that a matter would have been arbitrable before expiration, that necessarily means the Board has to conclude that it would be arbitrable after expiration.

If any claim invoking a provision of the contract were arbitrable, that would mean if an employee was hired after the contract expired and then discharged several months later, still during the hiatus period, his discharge would be arbitrable, even though he never worked under the contract while it was in effect.

Unknown Speaker: Well, what's the rationale for implied... for requiring the grievance process then?

How could the Board require half and not all?

Mr. Wallace: Because the Board concluded that the requirement... carrying forward the requirement of submitting decision-making authority to an outsider goes beyond a process of bargaining by the employer under the preliminary grievance procedures, and goes to the point of inconsistency with the congressional prohibition of compulsory arbitration, when the arbitration can no longer be called a creature of contract.

The earlier steps--

Chief Justice Rehnquist: Thank you.

I think you have answered the question, Mr. Wallace.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Monday next at ten o'clock.

Attribution:

The OYEZ Project

Featured:

Gilmer v. Interstate/Johnson Lane Corp. - Oral Argument

Fri, 09 Jan 2009 14:49:39 +0000

Case:

Gilmer v. Interstate/Johnson Lane Corp.

Media File:

90-18_19910114-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of John T. Allred

Chief Justice Rehnquist: We'll hear argument now in No. 90-18, Robert D. Gilmer v. Interstate/Johnson Lane Corporation.

Mr. Allred.

Mr. Allred: Mr. Chief Justice, and may it please the Court:

Cert. was granted in this case on whether a claim for violation in Age Discrimination in Employment Act is subject to compulsory arbitration.

The Fourth Circuit held that arbitration agreement in an application for employment was enforceable and denied Mr. Gilmer access to the United States district court for alleged age act violation.

This case focuses on a conflict between two national policies.

On the one hand there is the policy of favoring arbitration that has been announced in Mitsubishi and its trilogy, and then on the other hand is the national policy of eradicating employment discrimination in the work place.

Unknown Speaker: Mr. Allred, don't you have a preceding question, which is whether the Federal Arbitration Act even applies--

Mr. Allred: Yes--

Unknown Speaker: --in this case?

Now, I take it you didn't argue that below?

That was not relied upon by you below?

Mr. Allred: --That is correct.

That is correct.

Unknown Speaker: Why not?

Mr. Allred: Well, because in the... first off, we thought that the Mitsubishi... I mean, that the Gardner-Denver line of cases were dispositive of the Federal arbitration issue, and in fact... and we... we looked at Tenney, the circuit court case, and the cases that followed that, and we did not appreciate the importance of that argument.

In looking at the briefs from the AFL-CIO and the AARP and the other amicus we are convinced that it is indeed a compelling argument.

Unknown Speaker: Well, do you think we should address it here in this Court, and are you prepared to have us do so?

Mr. Allred: We think--

Unknown Speaker: And to argue the issue?

Mr. Allred: --Justice O'Connor, we think that the enforceability of the agreement under the FAA... if you're going to look at the Federal Arbitration Act, you of necessity have to look at section 1.

And so it seems to me that that issue is subsumed within the entire question that is before this Court.

And... and as, and as you look at that particular issue it seems to me that the plain language of section 1 that says that workers... that all classes of workers engaged in interstate commerce are excluded from the act is dispositive of the question on the basis of the plain language of the statute.

But furthermore, when you look at the... at the legislative history of that act, which when... was gone into in great detail in the brief of the AFL-CIO, it was... it showed to me beyond all question that it was intended that employment contracts or employment disputes were to be excluded, and that the sole purpose in 1925 of the FAA was that business people who wanted to get together and agree to arbitrate their disputes, that that would be enforceable.

Unknown Speaker: Why do you suppose the Congress referred expressly to seamen and railroad workers if the last phrase dealing with those engaged in interstate commerce would have covered all of those categories?

Mr. Allred: Well, I think... I think, Your Honor, that they referred to seamen and railroads because those were basically the two union groups that were lobbying for the exclusion, but the language went on further and said... it mentioned those two groups but then went further and said all classes of workers engaged in interstate commerce.

And the Tenney case, which limited that to transportation, is really just, was... at least in retrospect it appears that that court did not have the benefit of the legislative history that this Court has.

Unknown Speaker: Do you think your client was engaged in interstate commerce the way a railroad worker or seaman is engaged in interstate commerce?

Part of the--

Mr. Allred: Well... well, to the extent that money is engaged in interstate commerce.

A seaman or a transportation worker is not carrying goods, so to speak, but money is indeed a part of interstate commerce.

And so I don't... I would not believe that that statute is to be that strictly interpreted.

Unknown Speaker: --Well, I think he's effecting interstate commerce.

I'm not sure he's engaged in interstate commerce.

Mr. Allred: Well, I'm not... I'm not sure that... if you look at the first... at the second part of the statute, it didn't... it didn't really use the word engage, as I recall.

Engage was in the second part.

And it seems to me that what--

Unknown Speaker: But the first part is the part we're talking about, right?

Section 1?

Mr. Allred: --Section 1, yes.

Unknown Speaker: And that does say engaged in.

Mr. Allred: That is correct.

Unknown Speaker: Seamen or railroad workers or any other person engaged in interstate commerce.

Mr. Allred: Well, it seems like to me that if you are working in interstate commerce, you are indeed engaged in it.

Perhaps that may be too simplistic, but at least... at least that's the way it strikes me.

If--

Unknown Speaker: This was enacted, of course, in when?

When was... 1925, is that when it was passed?

Mr. Allred: --That is correct, Your Honor.

Unknown Speaker: And the country had, or the Congress had a quite different view of what interstate commerce was in those days.

I guess we did, too.

Mr. Allred: That may well be.

And the truth of the matter is, is that the Federal Arbitration Act hasn't really come into any real prominence until just recently.

In fact, many of the cases that have dealt with whether... with whether or not a compulsory arbitration agreement is enforceable has not even addressed the Federal Arbitration Act, just as the Gardner-Denver and the line of cases did.

Unknown Speaker: Gardner-Denver was a collective bargaining contract, wasn't it?

Mr. Allred: That is correct, Your Honor.

But it seems to me that that was only the substance in which the issue arose in that case, because... because there the... what Justice Powell said in there related to Title VII and employment discrimination.

The fact that it arose in a collective bargaining context I don't think is any disparity here.

It seems to me that that arbitration agreement that was involved in Gardner-Denver came about through equal bargaining power of the negotiation between the union on the one hand and management on the other to reach that.

When Mr. Gilmer and the likes of Mr. Gilmer go to work for the securities industry, there is no equal bargaining power there.

They have no choice.

They either... they either agree to that arbitration--

Unknown Speaker: Was the exclusion of employment contracts argued in Gardner-Denver?

Mr. Allred: --I do not believe so, Your Honor.

Unknown Speaker: And... or in any other of the cases that we have dealt with in the employment context?

Mr. Allred: No, that... that is true.

But what was addressed--

Unknown Speaker: Everybody has missed it up until this very case.

Mr. Allred: --What was addressed in Gardner-Denver was the fact that when Congress passed the Civil Rights Act of 1964, Title VII, that Congress was acting to correct an enormous national wrong that had gone on for many years.

Age was not included in Title VII, but it was mentioned in a good bit of the legislative history, and for whatever reason it was not picked up until 1967 when the ADEA was adopted.

And... but when the ADEA was adopted, it picked up, basically as this Court has said, Title VII in hoc verba, and this Court has said that when you look at precedents in... for cases involving age discrimination, you should look at Title VII because you're dealing with the same sort of insidious discrimination.

We think that from the Gardner-Denver line of cases that you have... that... there were two things that really prompted the court to operate there, was, one, was the special characteristic of employment relationship that existed, that... that... and only... and Congress felt that only the courts and the procedure that... or the adoption of the EEOC were the way in which that you could address that.

When--

Unknown Speaker: How is your client engaged in interstate commerce?

Mr. Allred: --How would I define engaged--

Unknown Speaker: No.

How is your client engaged in interstate commerce?

Mr. Allred: --Oh, well... well, he was manager of, he was hired as manager of financial services for interstate securities.

Unknown Speaker: Well, how was he himself engaged in interstate commerce?

Mr. Allred: Well, the record... there's nothing in the record on that, but he was involved in the sale of mutual funds.

Unknown Speaker: Well how would we ever decide in this case whether that's a good answer to your claim or not?

Mr. Allred: Well, what happened before Judge McMillan was that they moved to dismiss.

And we looked at Gardner-Denver, and Gardner-Denver said, and the cases that followed that said, that whenever Title VII or whenever civil rights, or whenever some... any form of employment--

Unknown Speaker: What would be your submission as to why your client was engaged in interstate commerce?

Mr. Allred: --What would be my submission?

Well, that he was managing a group of people that bought and... that sold mutual funds.

And mutual funds, the--

Unknown Speaker: In 1925 do you think that he would have been held to have been involved in interstate commerce?

Mr. Allred: --I don't know the answer to that, Your Honor.

Unknown Speaker: Maybe his actions would have... might effect interstate commerce, but... maybe Congress these days has the power to regulate what he's doing.

But does that mean that in 1925 he was engaged in--

Mr. Allred: Well, now, if you looked at it from a narrow standpoint that engaged meant that you had to be physically engaged, you had to be driving a bus or a truck or in the transportation industry, I would agree with you.

But I don't... but it seems like to me that if you were in the New York Stock Exchange and you were selling General Motors stock that emanated from Detroit, that that broker, that the people in the investment banking industry were engaged in interstate commerce.

Unknown Speaker: --But there was no evidence taken in the trial court on this point?

Mr. Allred: That is correct.

Unknown Speaker: Because you hadn't raised it?

Mr. Allred: That is correct, Your Honor.

We just... we read the Gardner-Denver line of cases and saw that this Court has held that whenever employment discrimination is at issue, that arbitration is inappropriate, and that the courts and the EEOC are the... is the way to go.

Unknown Speaker: Mr. Allred, one thing that sort of suggests that your expansive notion of engaged in interstate concept may be wrong is that, although section 1 uses the term engaged in interstate commerce, section 2, the operative provision here, says it applies to a written provision in any maritime transaction or a contract evidencing a transaction involving commerce.

Now, why would Congress say involving commerce in section 2, and say engaged in commerce in section 1, without intending a distinction between the two?

Mr. Allred: Well, Your Honor, there's a good answer to that--

Unknown Speaker: I hope so.

Mr. Allred: --in one of the briefs.

The... but I think that you can't, on the one hand, have the situation that says that you are going to allow transactions in commerce to be subjected to compulsory arbitration, and then eliminate those that are engaged in that same activity.

It seems to me that the... that you have to read both of those together.

That if... that if transactions in commerce involve that, then engaged in commerce was... that you have to read both sections equally.

But maybe Your Honor, the transactions were engaged in interstate commerce.

See, we submit that from the Gardner-Denver line, that that's dispositive.

We think that Federal Arbitration Act is dispositive of section 1.

But we also think that when you look at the Mitsubishi test and its cases, it said that you reached the same result.

There they say... Mitsubishi said that you will enforce the Federal Arbitration agreement unless Congress has manifested a contrary intent.

And then, I think it was the McMahon case, said that you can look at the manifest intent of Congress wherein something is inherently contradictory to the act itself.

I think that was McMahon.

And here Congress, in Title VII and in the age act, manifested its intent that the Federal court is an integral part of the... of instrument in the enforcement of the laws designed to eradicate discrimination based on age, race, sex, and religion.

And there is an irreconcilable conflict, we see, in the arbitration process and the enforcement of these civil rights laws.

Unknown Speaker: Mr. Allred, could I go back to the question Justice Scalia asked you about reconciling... involving... contract evidencing a transaction involving commerce in section 2 and engaged in commerce in section 1.

You said one of the amicus briefs provides a good answer to that question.

Do you which amicus brief?

We've got a lot of them.

Mr. Allred: I think that that was the AFL-CIO addressed that.

I believe it was also addressed in the Lawyers' Committee.

And... maybe I'll have an answer for you before I sit down.

At page 13 of the AFL-CIO brief the... it is said,

"We note at the outset that the different syntactical contexts of the two references to "commerce" mean that use of precisely the same connective in the two circumstances would have created a grammatical problem: a "transaction" could not be said to be "engaged in" commerce, nor would a reference to a "class of workers" as "involving commerce" make sense. "

"Thus, there is no necessary inference to be drawn from the simple fact that a different connective was used in the two contexts. "

Unknown Speaker: You can have a transaction between people engaged in commerce, or a transaction among people engaged in commerce, or a transaction concerning people engaged in commerce.

Don't you think?

Mr. Allred: Indeed.

I think that you could probably have a transaction between two people engaged in interstate commerce, and that transaction was not a commerce in interstate commerce.

Unknown Speaker: On the contrary [inaudible] in section 1 if they meant the same thing they could have referred to employees engaged in any business affecting commerce or in any business involving commerce.

Mr. Allred: I--

Unknown Speaker: It's a very strange way to say it if they meant the same thing.

Mr. Allred: --But when you look at the legislative history, though, of the Federal Arbitration Act, it is abundantly clear that it was designed only for the business entities, where, when they got together and made their contracts there to buy, sell, or what have you, they agreed to arbitrate their dispute.

And we are involved in arbitration a great deal.

And they work extraordinarily well--

Unknown Speaker: You mean only corporations, it applied... it was meant to imply only to corporations or partnerships, is that it?

Mr. Allred: --No, no, no.

I can apply... it applies to individuals.

But we're talking about a knowing, a knowing agreement to decide that if you have a dispute over your given... your given contract, that you decided at the outset that you would arbitrate rather than go to court.

Unknown Speaker: Is it your contention that your client did not knowingly agree to arbitrate?

Mr. Allred: That is correct.

Unknown Speaker: You... that was a contention you made in the district court, that he did not, he did not knowingly agree to arbitrate?

Mr. Allred: I did not... I did not say that he... we were relying on fraud in the district court.

I am saying that he had no choice--

Unknown Speaker: Well, but that's quite different than saying he didn't knowingly do it.

Mr. Allred: --Well, he knew he signed a clause that said under the New York Stock Exchange he would agree to arbitrate his disputes, but he had no idea that it would rely to any sort of civil rights that he had, when Congress has passed a law, and under the age act, that says he's entitled to a jury trial, that says that the EEOC has all of this... all of this process there to investigate, to conciliate.

And then under the age act, may be because age is so paramount, if the EEOC has not acted within 60 days, then he may go ahead and elect to bring suit.

Unknown Speaker: I still don't understand your contention, Mr. Allred.

You say that your client of course signed the agreement and that he didn't really know what its full effect would be?

Is that your contention?

Mr. Allred: It's my contention that he had no idea that it would waive his right if he were discriminated against by... on--

Unknown Speaker: And how did the lower courts resolve... we didn't grant certiorari on that question, did we?

Mr. Allred: --You granted certiorari on the question of whether or not compulsory arbitration is... will... is available here, can be enforceable here.

Unknown Speaker: Yeah.

And so don't, don't we assume for the sake of the question before this Court that your client did knowingly sign the agreement?

Mr. Allred: I have a hard time... yeah, you can certainly make that assumption, but our position is that as relates to the securities industry, that this... the entire security industry has... if you go to work for them, then you have to sign this agreement.

Unknown Speaker: That was true in the McMahon case, too.

Anyone making a deal with the brokers had to sign the same sort of agreement.

Mr. Allred: But the difference there, Mr. Chief Justice, is that that person dealing with the broker could walk away, and that was a business relationship and not an employment relationship.

And... it is true that Mr. Gilmer could walk away, but if he wanted to go to work in the securities industry he had no choice but to sign that agreement.

Unknown Speaker: Well... does the Federal Arbitration Act make the sort of distinction you're talking about, do you think?

Is that what section 1 means?

Mr. Allred: Well, I think, the way in which I read section 1 is that... is that any employment dispute, whether it's contract or not, is excluded from the Federal Arbitration Act.

Unknown Speaker: Well, is that all there is to it here, an employment agreement between your client and his employer?

Didn't he want to... what was his job?

Mr. Allred: His... he was hired as manager--

Unknown Speaker: But just anybody can't do that... walk in off the street and do it.

Don't they have to register with the Exchange and pass some... aren't they subject to some rules of the Exchange?

Mr. Allred: --That is correct, Your Honor.

Unknown Speaker: Well, isn't this an agreement, sort of a commercial agreement between someone who wants to engage in that industry and the... and the private regulatory regime?

Mr. Allred: Well, it may be a commercial agreement to the extent as it relates to the buying and selling of securities, and that's what the SEC and the SRR was all about.

Unknown Speaker: Was he required, because he registered, to sign this sort of an agreement about arbitration?

Mr. Allred: I missed... I did not get your question, Your Honor.

Unknown Speaker: Was he required by the Exchange to sign this sort of agreement?

Mr. Allred: That is correct, Your Honor.

Unknown Speaker: And so he agreed to that when he wanted into the business.

Mr. Allred: That is correct, Your Honor.

But that relates to the regulation of the buying and selling of securities.

Unknown Speaker: I know, but he agreed when he... if they were going to... he agreed, in order to be permitted to do it, to get into this business, he registered with the Exchange, didn't he?

Mr. Allred: Indeed he did.

Indeed he did, Your Honor.

But the... but the Securities and Exchange Commission and the New York Stock Exchange is not that body of law that's designed to look after civil rights for people who are discriminated against in age.

Unknown Speaker: Well, that may be.

That may be.

But you say that the arbitration... Federal Arbitration Act was just, just limited to just commercial agreements.

Mr. Allred: That's what the legislative history--

Unknown Speaker: Isn't this a pretty commercial agreement, if somebody wants to get in the securities business and he has to register and live up to their rules?

Mr. Allred: --Well, discrimination by age, Your Honor, or discrimination by sex or religion or race, it seems to me is not commercial.

And that's--

Unknown Speaker: Well on that basis, on that basis you would say, you would say the Federal Arbitration Act would never apply to these sort of things.

Mr. Allred: --I think that that's the way section 1 reads, literally, and I think that's the way the legislative history of section 1 reads.

In McDonald v. City of West Branch, a case decided in 1984, just 1 year before Mitsubishi, this Court said although arbitration is well suited to resolving contractual disputes, it cannot provide an adequate substitute for judicial proceeding in protecting the Federal statutory and constitutional rights that section 1983 of the civil rights was designed to safeguard.

And I would add to that, and the other civil rights.

And in the McMahon case they said that if the... if the enforcement scheme is inherently in conflict... if the statutory right is inherently in conflict with the arbitration agreement, then you're not required to do it.

And Mitsubishi said if you look at congressional intent, whether it's legislative history or whether it's the whole scheme of enforcement, I want... this Court well knows the entire scheme of the EEOC, that of filing a charge, and of its duty to investigate and to conciliate.

And even... and Congress did not do... make what the EEOC did binding.

That even if they found that there was no probable cause, the individual was still entitled to have access to the court.

Unknown Speaker: Are you familiar with that Signal-Stat agreement, or case, in the Second Circuit?

Mr. Allred: Mitsubishi was the case that involved--

Unknown Speaker: No.

Signal-Stat Corporation against Local 475 in 1956, a decision by the Second Circuit.

Mr. Allred: --I'm--

Unknown Speaker: Were you familiar with it?

Mr. Allred: --No.

No, I'm not familiar with it, Your Honor.

Unknown Speaker: Well, that case held that employees of an automobile [inaudible] weren't engaged in interstate commerce within the meaning of section 1.

And so that was the law of the Second Circuit.

Everybody knew it, I suppose.

Mr. Allred: Well, Tenney held--

Unknown Speaker: So it isn't the first time this issue has ever been raised.

Mr. Allred: --No, but it's... there was a case before this Court, I believe in 1988, in which neither side briefed it.

That involved a California statute.

And the question was whether or not--

Unknown Speaker: Of course, we denied cert. in that case.

Maybe unfortunately.

Mr. Allred: --The one that I was referring to, I think it was Potter, was that it held that the Federal Arbitration Act preempted a State law.

But the question of whether or not section 1 was involved was not briefed by the parties in that case.

The... the... one... arbitration just clearly is not the sort of vehicle by which employment discrimination rights can be vindicated.

There... I can go through a whole litany of--

Unknown Speaker: What about other kinds of rights?

Is it all statutory rights that are not covered by the Arbitration Act, or what?

What is your position?

Mr. Allred: --Well, as I read... as I read... as I read the cases, Your Honor, it's those cases in which the... when the Congress has passed laws protecting employees with minimum statutory standards, minimum rights, like--

Unknown Speaker: But just employees?

Nobody else?

What about the Sherman Act, for example, a dispute about whether there has been a violation of the Sherman Act?

Two businessmen--

Mr. Allred: --Well, that's covered precisely by the... by the FAA.

If the two businessmen have agreed to arbitrate, then it's therefore enforceable.

Unknown Speaker: --But that's a public policy, just as employment discrimination is a public policy.

People shouldn't be able to get out of that any easier than they get out of employment discrimination, I guess.

Should they?

Mr. Allred: Well, what the... they agreed to arbitrate those cases.

Unknown Speaker: Your client agreed here.

Mr. Allred: Well, I don't think he made... he agreed to arbitrate any... he agreed, in my judgment, to arbitrate disputes with respect to New York Stock Exchange rules, with respect to things of that nature, but not his civil rights.

And I just don't think that that... that that was a knowing waiver.

Unknown Speaker: What do you mean by civil rights?

I mean, it's not a right of his against the Government?

Mr. Allred: What I mean by civil rights is to be free from discrimination because of your age, because of your race--

Unknown Speaker: I see.

Mr. Allred: --because of your sex.

Unknown Speaker: I see, but not--

Mr. Allred: Religion.

Unknown Speaker: --Now, what do you rest that principle on?

I mean, what I don't understand... see, I can understand a principle that if it's a public policy you can't arbitrate out of it.

But you're not... you're not willing to say that.

You just... you're just going to say certain public policies, but what's the basis for distinguishing this kind of public policy from other kinds of public policies?

Mr. Allred: Well, because Congress passed the law doing it, and then passed this intricate scheme for the enforcement of it.

And as Congress recognized in the Norris-LaGuardia Act, and I think this is important here, and this is in the act itself, it said the individual unorganized worker is commonly helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby obtain acceptable terms and conditions of employment.

If this Court affirms the Fourth Circuit, then the securities industry has foreclosed the courthouse door to any person who contends that they have been discriminated against by virtue of any civil rights act, Title VII, age.

And other industries will indeed then have as a condition of employment that you will agree to arbitrate.

And I think that it will basically be the death knell of civil rights as started with the Civil Rights Act of 1964.

It's just inconceivable to me that this Court will do that, because arbitration is suitable for handling business disputes, and handling business disputes between people knowingly made the decision to opt at the outset to--

Unknown Speaker: Well, isn't the allegation here that this individual knowingly agreed to arbitration?

I mean, that's how we take the case, as the Chief Justice inquired about earlier.

Don't we have... don't we have to accept the case on that premise and go from there?

Mr. Allred: --I don't... I don't think so, Your Honor.

I think that it was... it was just as the Norris LaGuardia Act.

It was not knowing as relates to being discriminated against because of age.

It was... in the context in which you referred to it, it was knowing as relates to being employed in the securities industry, and agreeing to arbitrate any disputes that he might have with his employer over the employment, but not with respect to Title VII or with respect to the age act.

Unknown Speaker: Thank you, Mr. Allred.

Mr. Spears, we'll hear from you.

Argument of James B. Spears

Mr. Spears: Mr. Chief Justice, and may it please the Court:

There's no dispute in this case that the text and the legislative history of the act, the age act, are silent as to any congressional intent to prohibit arbitration.

The FAA in that circumstance mandates arbitration unless there exists an inherent and irreconcilable conflict between arbitration and the purposes of that age act.

That's the issue for this Court to decide.

Such a conflict cannot be shown here.

Indeed, enforcement of the arbitration agreement here complements the ADEA's purposes.

A comparison of the act's purposes with arbitration eliminates a concern about any conflict existing.

The act's purposes are contained in section 2(b) of the act.

They are threefold.

Number one, to promote the employment of older workers; number two, prohibit arbitrary age discrimination; and number three, to help employers and employees find ways of meeting the problems impacted with regard to age.

The choice of arbitration clearly does not conflict with any of these purposes.

To the contrary, the enforcement of the provisions... the enforcement provisions chosen by Congress shows that it preferred that multiple methods be available to employers and employees in meeting problems under that act.

As one alternative, Congress provided for court enforcement.

Noteworthy they provided for court enforcement in any court or competent jurisdiction.

It is not restricted to the Federal courts.

It is very similar to the '33 Securities Act which this Court addressed in the Rodriguez case.

This Court commented that the wider choice of court provision in that statute indicated a congressional intent of allowing wider choice of alternatives for resolving claims under that act.

Before any litigation, what does Congress provide?

Congress expressly favors in the statute... resolution of disputes through voluntary means.

The conciliation, conference, and persuasion mandated in the statute by Congress are certainly more akin to arbitration than they are to litigation.

In fact, Congress provides for resolution of disputes in multiple administrative and judicial forum.

It's not just limited to the courts.

Congress never said if you've got an age claim you have to go immediately to the court.

An individual, of course, is required to file an EEOC charge, but beyond that requirement, he is allowed to leave it with the EEOC for them to attempt conciliation.

The individual can file a claim with the State or local agencies.

And as noted previously, he can also file a State or Federal lawsuit.

Unknown Speaker: Mr. Spears, I gather you're arguing that the contract would be enforceable even if there were no Federal Arbitration Act?

Mr. Spears: The Federal Arbitration Act mandates enforcement of it unless there's a contrary indication in the statute, Justice Stevens.

Unknown Speaker: It mandates enforcement of a contract evidencing a transaction involving commerce.

Mr. Spears: And this clearly is.

Unknown Speaker: What is... it evident... the contract evidence the hiring agreement between the employer and the employee.

Now, how does that... that's the transaction the contract evidences, isn't it?

Mr. Spears: It's not limited to that, Your Honor.

As Justice Stevens pointed out, there's a requirement here.

This is a... one... I'm sorry, Justice White, excuse me.

Unknown Speaker: No, that's Justice Stevens.

[Laughter]

Mr. Spears: I apologize, Your Honor, but I was trying to refer to your comments earlier today--

That the registration agreement here is at the minimum and probably more than a three-party agreement.

Unknown Speaker: But are... are you suing for enforcement of that?

Mr. Spears: Yes, Your Honor.

Unknown Speaker: I thought you were suing for enforcement of the provision in the employment contract.

Mr. Spears: It's enforceable either way.

It doesn't matter--

Unknown Speaker: If he had not signed an employment contract would you still have the same claim?

Mr. Spears: --Yes, Your Honor, because--

Unknown Speaker: So you're not relying on the arbitration clause in the employment contract?

Mr. Spears: --No.

The arbitration clause is part of the rules.

The arbitration clause is imposed by the... by the... by the New York Stock Exchange.

Unknown Speaker: I understand that.

So that what you're saying is that even had he not voluntarily signed this contract, the result would be the same?

Mr. Spears: I'm not sure I understand that question, Your Honor.

Unknown Speaker: Well, I thought you were relying on the arbitration clause in the employment agreement.

And I think now you're telling me you're not.

Mr. Spears: The arbitration clause is in his registration agreement.

There is no separate written employment agreement.

The arbitration clause... agreement, is in the registration agreement with the New York Stock Exchange, which, by the way, the company is required to get him to agree to.

To allow him to engage in a transaction involving the buying and selling of securities, Congress mandates... I'm sorry, the securities, New York Stock Exchange requires that anyone that is allowed that privilege has to become registered with them, and has... and by becoming registering agrees to abide by the constitution and rules as... which includes the requirement of arbitrating any dispute.

Rule 345, with regard to the concern about any voluntariness here, rule 345 says, it is quoted at page 1 of our appendix, that any controversy between a representative and any member or member organization arising out of the employment or termination of employment, as such registered representative shall be settled by arbitration at the instance of either party.

Either party could enforce this.

It's not limited to the company.

He himself has a right to enforce this.

But aside from the employment relationship, this is a business contract that relates between at least the three party and even outside parties.

Unknown Speaker: So your answer is that the transaction involving commerce was his agreement to abide by the rules of the Exchange?

His application for... his registration is the transaction--

Mr. Spears: Is the contract evidencing the transaction involving commerce.

Yes.

Unknown Speaker: --And the involving commerce... I see.

What did the Exchange agree to do in exchange for his promise?

Mr. Spears: Agreed to allow him to buy and sell securities, or have any involvement with that.

Unknown Speaker: Does it sign the--

Mr. Spears: And they also allowed him to take advantage of the arbitration benefits here also.

Unknown Speaker: --Does he sign the agreement... does the Exchange sign the agreement, too, and he keeps a copy and they keep a copy?

Is that what happens?

Mr. Spears: It comes down from the Exchange as the rules.

They are the superior or proven authority here.

It is signed, coincidentally, Justice Scalia, by a representative from the company.

It is called a U-4 form.

It appears at page 13 of our appendix.

It is signed by--

Unknown Speaker: The thing that's running through my mind, while you're looking for it, if the transaction involving commerce is his entitlement to engage in buying and selling over the Exchange, why isn't he then a person engaged in commerce?

Mr. Spears: --He is, by virtue of this agreement.

Unknown Speaker: He is a person engaged in commerce?

Mr. Spears: He is not only... he... his contract, his agreement to be bound by arbitration and all the other rules of the Exchange is the contract involved in the transaction involving commerce.

Unknown Speaker: And it involves commerce because he then becomes a person engaged in commerce, as I understand it.

Mr. Spears: If he relates to a transaction involving commerce.

Unknown Speaker: Which then brings him squarely within the language of section 1.

Mr. Spears: Well, section 2.

Unknown Speaker: And section 1.

Mr. Spears: Well, with regard to that, I think the difference in the language that was noted intends a broad application of section 2 and a narrow, restrictive application of section 1 exclusion.

I think that difference there means something--

Unknown Speaker: Yeah, but not the way you just described it and explained it to me.

Mr. Spears: --Well, I--

Unknown Speaker: You want to change your explanation, I guess.

Mr. Spears: --Well, I guess I'll have to, Your Honor, because I... I'm more convinced that the difference in the language gives an expansive reading, and indeed the courts have applied an expansive, have given the FAA an expansive reach, not a constricted reach.

This Court in Perry v. Thomas enforced the very form, the U-4 application form involved in this case.

By the way, I found now that--

Unknown Speaker: It's not in your appendix.

It must be somewhere else.

Is it in the joint appendix?

Mr. Spears: --I'm sorry, Your Honor.

I apologize.

It is the joint appendix at page 14.

It's signed by Harry M. Boyd, the Executive Vice President of the company, which agrees not to employ him unless he, unless he becomes registered as required by the law.

So the company, above signing this, but it is signed by the company, is also bound by the rules and the restrictions included in the arbitration agreement under the New York Stock Exchange.

Now, returning to the issue that I believe is before the Court, the... section 7 of the age act provides than an aggrieved citizen may bring a civil action in a court of competent jurisdiction.

It's not mandatory.

This is permissible language.

Indeed, as Judge--

Unknown Speaker: Mr. Spears, I mean, I don't think there has ever been a statute passed that says someone has to sue.

They're all couched in that language.

Mr. Spears: --Exactly.

Well... Your Honor, and in... in the Mitsubishi case this Court noted the fact that the statute, I think it was the Sherman Act, did not require an individual to bring a lawsuit as indicative of the choices that were available.

I think it's at 473 U.S. at page 637.

It was noted in Mitsubishi that the fact that... for example, there are some administrative procedures required by Congress where the individual has no control over that, under the National Labor Relations Act, for example.

That is solely up to the NLRB.

And section 10(a) of the NLRA says that there are no agreement between any parties can divest or affect the jurisdiction of the NLRB.

That is a special situation, and therefore the FAA could not enforce any agreement to arbitrate under that act.

But the contrast is important there.

The difference between the Sherman Act, the Rico statutes, the two securities acts, that allows any individual... that allows an aggrieved individual to go not only into Federal court but to any court--

Unknown Speaker: Your point then is that the act puts it in the hands of the aggrieved individual, rather than of some agency or board?

Mr. Spears: --Yes, Your Honor, and gives them a choice to go to court or not go to court.

I guess that more precisely makes my point.

To choose other fora that are available.

This includes, of course, private settlements.

They are allowed under the age act.

Another example is, of course, arbitration.

They are encouraged by the FAA.

And arbitration is not mentioned in the statute.

Under McMahon it is not necessary to mention it in the statute.

Significantly, Congress has not eliminated arbitration as an alternative under the age act.

The silence of the age act we think is significant.

Indeed, the need for more alternatives to litigation is ever increasing in this country.

Even as far back as 1967 when Congress passed the law, they noted in section 2 of the act that the numbers of auto workers are "great and growing".

More recently, according to a U.S. Census Bureau report quoted in one of our amicus briefs, by the year 2000, 20 percent of our population will be 55 or older.

By the year 2030, almost 33 percent will be 55 or older.

Now, the Equal Employment Opportunity Commission is having difficulties... in fact they're having difficulties managing the... their work load now of EEOC charges involving age claims.

Imagine how much more difficult it's going to be.

Noted in one of our amicus briefs, in the Harvard Law Review report... article, 104 of Harvard Law Review, a startling fact where the former chairman of the Commission, Clarence Thomas, in 1988, where the Commission reported that it may have mishandled as many as over 7,500 complaints of age discrimination over the previous 5 years by failing to act on them before the 2-year statute of limitation ran.

Congress' silence says something.

It says there ought to be these alternatives available for individuals to resolve these claims.

They shouldn't be restricted to only going to court.

Arbitration can clearly help mitigate these problems.

Older workers don't have as much time to wait for a remedy.

Extended litigation deprives them of an earlier remedy.

Alternatively, quicker resolution through arbitration complements Congress' goals.

It doesn't conflict with them.

If reinstatement is found to be an appropriate remedy in arbitration, it can be quicker, cheaper, and certainly less adversarial than litigation.

Isn't that better for everyone?

It's much easier for an employer to reinstate someone within a matter of months than it is when the time, litigation cost, and yes, even the emotional involvement of litigation, have made that prohibitive.

Unknown Speaker: Well, Mr. Spears, wouldn't the arbitration award be subject to some minimum form of judicial review after it were made?

Mr. Spears: Yes.

Yes, Mr. Chief Justice, but it would be reviewed much quicker, because it would be resolved more quickly, as a general proposition.

And I'm focusing now on the time, whatever the review might be allowed.

Whether it's affirmed or overturned or sent back for a reevaluation, all the parties are better off to have that resolved sooner than it is now in litigation.

Unknown Speaker: Yes, but I'm wondering whether your analysis is accurate.

You point to the delay... are you just talking about administrative delays before a case goes to the court where you are simply suing?

Mr. Spears: No, Your Honor.

I was really comparing that with the litigation itself.

Unknown Speaker: Well, but you're going to have... litigation itself would certainly describe what you have when an arbitration award is reviewed, wouldn't you?

I mean, you have an action, the district court to review the award.

If the people are dissatisfied they could appeal to the court of appeals.

Mr. Spears: But it's not a de novo review.

It would be a far--

Unknown Speaker: A more limited inquiry?

Mr. Spears: --A more limited review, as authorized and only as authorized by section, I think it's 10 and 11 of the Federal Arbitration Act.

And the deterrence of the act, another goal of the act, another goal of encouraging people to file charges, would also be enhanced by resolution through arbitration.

Where a coworker sees that another co-worker had his age claim rights vindicated through arbitration quickly, or certainly more quickly than might be available in litigation, that co-worker, if he or she is indeed a victim of age discrimination, is going to be more likely to pursue her rights under the statute.

This is particularly important where you're talking about victims that don't have the economic wherewithal to take on expensive and time consuming litigation.

Unknown Speaker: What if the co-worker is denied relief in arbitration?

Mr. Spears: I think... I would assume the individual would understand that was based on the merits and the resolution of that particular claim.

Knowing that a co-worker... anyone can get to arbitration quicker, Justice Blackmun, is my point there, that whatever the ultimate resolution, as long as the rights can be vindicated, as this Court has said, then deterrence is also being fulfilled.

Unknown Speaker: Mr. Spears, do the arbitrators have the power to award the kind of systemic relief that might be available in court under the ADEA?

Mr. Spears: Justice O'Connor, I'm not aware of anything in these rules that would prohibit them from doing that if the facts in a particular arbitration were to justify that.

There has been a recent amendment to one of the rules... I'm sorry I can't quote you the particular rule... which does allow for multiple parties to participate in an arbitration--

Unknown Speaker: How about a class action?

Mr. Spears: --Your Honor, I think it's very similar to a class action.

In an age case, of course class members have to opt in.

They have to exercise that option to opt in.

That is very analogous to the, to this New York Exchange rule that allows multiple parties to participate.

And Your Honor, with regard to... excuse me, Mr.... Justice O'Connor, I think there... I know there are no restrictions in these rules on the power to remedy that the arbitrator has.

My view is that the arbitrator has all of the same power that to remedy that is available under the statute.

Arbitration, of course, finally, also helps reduce the overburden work load of the Commission, State, and local agencies, and hopefully the Federal courts.

The Court has found that other statutes reflecting equally important public interest to be entirely appropriate for arbitration.

The reasons are clear.

The public interest in those statutes were not diminished by arbitration.

The liberal policy favored in arbitration under the age act... I'm sorry, under the FAA, must be applied absent affirmative congressional intent to prohibit.

I would like to turn next to the argument, as I understand it, of the petitioner that somehow the age act is different.

The plaintiff, in my view, attempts to create a conflict between the purposes of the age act and the purposes of the line of cases of... the FAA cases of this Court.

Indeed, he seems to argue that unless Gardner-Denver is allowed to control the circumstances here, then Gardner-Denver must be reversed.

Well, those are two poles apart, and there's a lot of ground in between.

Our position is very clear.

There is no need to even consider reversing Gardner-Denver or any progeny of that decision.

The factual differences, the legal issue differences, and the analysis differences under the different lines of cases are so stark that there's no conflict at all, and therefore both purposes, both statutes' purposes can be satisfied.

Unknown Speaker: What would you say is the principal distinguishing feature between Gardner-Denver and this case?

Mr. Spears: Your Honor, I think at bottom it's the collective bargaining context of Gardner-Denver.

That dominated the Court's consideration, and I would submit the ultimate resolution of that claim.

The Court focus in that case upon... which by the way was an already-completed arbitration.

It was not an issue of enforcing an arbitration agreement.

The arbitration had already been done under a union's collective bargaining arbitration mechanism.

And the Court said in Gardner-Denver that only the contractual claim had been resolved.

Now, here comes the company saying well, we won the discrimination issue in arbitration, that forecloses the statutory claim.

That's what was rejected, because what you had there was a conflict between two public policies, one encouraging collective bargaining, and the salutary benefits of collective bargaining including resolution of claims through arbitration.

But that sort of arbitration has nothing in common with the arbitration under the New York Exchange rules.

Mr. Gilmer was never a member of a union.

He remains in full control of selecting the arbitrator, deciding what evidence to submit.

There is no one between him and the resolution of his claim.

Unknown Speaker: Did the arbitration in Gardner-Denver purport to determine the statutory issue?

I thought it was purely an arbitration about the contract dispute and not about any statutory violation?

Mr. Spears: That's what I meant to say, Justice Scalia, is that--

Unknown Speaker: Is that what you've been saying?

I didn't--

Mr. Spears: --No, the Supreme Court said that the arbitration only resolved the contractual claim under the collective bargaining contract.

And the company apparently was trying to take that contract resolution and saying well, then, that controls, through preclusion, that controls the results under the statute.

And that's at bottom what made the difference in that case, because you... the Court was clearly concerned about the fox in the hen house problem.

Because clearly... and it said so in that decision, that letting the two entities that are the... I'm not talking about the specific ones in that case, but the employer and the union, both of which have been accused, not in that case but in other cases, of discrimination.

And the act was passed to address that sort of stuff.

So they clearly... the Court clearly did not feel comfortable with the union being in charge of even the ultimate decision of whether it went to arbitration.

Unknown Speaker: --What about the McDonald case?

That was a statutory right issue.

Mr. Spears: Yes, Your Honor, under 1983, as I recall the facts of that case.

And it's no different than Gardner-Denver.

It also was a collective bargaining--

Unknown Speaker: I thought you said the difference in Gardner-Denver was they didn't resolve the statutory issue?

And then I asked you about a statutory case and you say they're exactly the same.

Mr. Spears: --Well, there was a collective bargaining arbitration in McDonald also, an already-completed arbitration.

And the issue there was, again, preclusion, whether or not the resolution of the contract issue controlled the statutory issue under 1983.

So the case as, I see them as just being identical to one another.

Unknown Speaker: I thought... wasn't the statutory issue submitted to the arbitrator in McDonald?

I thought it was.

Mr. Spears: Your Honor, I don't recall.

I'm sorry.

Unknown Speaker: I thought it was.

But at least it's similar to Alexander in that it involved a collective bargaining agreement, so that the person who had agreed to the arbitration was not the individual who was... whose statutory right had allegedly been taken away.

Mr. Spears: That's right.

Unknown Speaker: But rather somebody else purporting to act on that individual's behalf.

Mr. Spears: And that probably controlled whether or not the issue even went to arbitration.

That is, that is the fundamental difference, and that's of course not present here.

There is no conflict like that here.

There is not even the potential for the conflict here.

The... in closing, I want to point out certain unique facts about this case that I think fully support the compliance with the FAA's mandate for arbitration here.

The facts are peculiarly appropriate for arbitration.

Mr. Gilmer is an experienced executive.

He's not a worker moving goods in commerce.

For 20 years he has been registered with this very stock exchange that he registered with with this respondent.

He has worked in the industry for the 28 years.

The registration agreement is a customary requirement of stock brokers buying and selling securities in this highly regulated industry.

Indeed, the agreement is no different than the very type of agreement this Court has found enforceable against customers, far less sophisticated, in McMahon and the Rodriguez case.

This arbitration agreement is an integral part of the Exchange's self-regulatory--

Unknown Speaker: Mr. Spears, can I ask you this?

Would your position not be precisely the same if a nonunion employer just required all his employees to agree to arbitrate any dispute?

Statutory, civil rights, or anything else?

Mr. Spears: --If they are under... if they comply... if they come under the FAA, yes.

Unknown Speaker: Right, if they're engaged in commerce, yeah.

So you don't really need... I mean, I understand it strengthens your case, but I think your basic position is that, absent a collective bargaining agreement, an employer-employee agreement to arbitrate all disputes, including statutory disputes, is enforceable?

I think that's really what it comes down to, isn't it?

And I'm not saying you're wrong, but--

Mr. Spears: Yes.

Unknown Speaker: --I think that's what you're arguing.

Mr. Spears: Yes.

It's enforceable particularly in light of the FAA--

Unknown Speaker: Right.

Mr. Spears: --because that mandates enforcement of that.

Your Honor, one final point I would like to point out.

In their argument that the purpose of the age act is so paramount or so important that it ought to be treated differently, and I assume they feel the same way about Title VII, in our view that was rejected in Mitsubishi.

That argument was made in Mitsubishi that the importance of the act there was so paramount that, that the Court should not allow enforcement under the FAA.

In that decision Justice Blackmun pointed out that a concern for statutorily protected classes provides no reason to color the lens through which the arbitration clause is read, provides no reason.

You don't look at is the class age victims, or is the class black employees, or is the class securities customers.

That has been rejected in Mitsubishi.

Indeed, in October 1989 this Court rejected, in my view, a very analogous case, the Second Circuit case in Bird v. Shearson Lehman.

It vacated and remanded that in light of the Rodriguez decision.

While I certainly don't know the precise reasons, it seems to me that the strong language in McMahon, Rodriguez, based on Mitsubishi, has eliminated this sort of public policy, this sort of value judgment that somehow this statute is different, or this statute is so important that arbitration just should not be allowed to touch it.

I think it's implicit in the vacation and remand of that that that argument is long gone.

That, of course, is what this Court said was the primary underpinning of the Wilko v. Swan.

In fact, in Mitsubishi the Court also rejected the Second Circuit's standard known as the American Safety Equipment Standard, which was, again, a case that focused on... the Sherman Act in that case was viewed to be so different and so important that it could not be arbitrated.

In... I think it was the McMahon case or Mitsubishi, this Court took those and point by point rejected the underpinnings.

Unknown Speaker: Mr. Sherman, was that... was the Bird case an employment case?

Mr. Spears: It was an ERISA case, Your Honor.

It involved employment benefits under ERISA.

And it... the Second Circuit Bird decision, reading that is exactly... indeed it relies upon Gardner-Denver, Barrentine, and McDonald, the same way the plaintiff does here.

Unknown Speaker: Has the Second Circuit regularly had cases dealing with employees of securities companies?

Mr. Spears: Your Honor, maybe more often because of New York.

Unknown Speaker: Have they ever adjudicated one?

Mr. Spears: Not out of New York, Your Honor.

Chief Justice Rehnquist: Thank you, Mr. Spears.

The case is submitted.

Attribution:

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Featured:

Paperworkers v. Misco, Inc. - Oral Argument

Wed, 13 Apr 2011 20:11:28 +0000

Case:

Paperworkers v. Misco, Inc.

Media File:

86-651_19871013-argument.mp3

Related Transcript:

86-651_19871013-argument.xml

Transcript:

ORAL ARGUMENT OF DAVID SILBERMAN ON BEHALF OF PETITIONERS

Chief Justice William H. Rehnquist: Mr. Silberman, you may begin whenever you are ready.

Mr. Silberman: Thank you, Mr. Chief Justice, and may it please the Court:

This is an action that was commenced by the Respondent Employer under section 301 of the Labor Management Relations Act of 1947, in an attempt to overturn an arbitration award that was rendered pursuant to the collective bargaining agreement between the Petitioner Union and the Employer.

The question that is presented to this Court is whether the courts are free in such an action to relieve one party to a lawful collective bargaining agreement, as that agreement has been interpreted by the arbitrator, to relieve a party of his obligations under the contract of the theory that there is some public policy against enforcing that lawful contract.

The facts out of which that question arises can be briefly summarized, and in light of the conclusory labels that have been tossed around in the briefs, are of some particular importance here.

In February of 1983, the company discharged an employee by the name of Isiah Cooper.

The stated ground for the discharge was that Mr. Cooper had been seen possessing a marijuana cigarette in a car in the company's parking lot.

And the company maintained that that established a violation of a work rule promulgated against the company, which rule prohibits an employee from bringing marijuana onto company premises or using marijuana or alcohol.

The union filed a grievance alleging that the discharge was without just cause and therefore in breach of contract.

And that grievance was submitted to arbitration and the auspices of the Federal Mediation Conciliation Service.

The arbitrator found as a matter of fact that the company had failed to prove a violation of the work rule in the manner respected: the employee was not guilty of either bringing that marijuana cigarette onto company property or smoking that cigarette.

The arbitrator noted that the company at the hearing had attempted to defend the discharge on a new ground by claiming that there was evidence that tracings of marijuana had been found in a plastic bag in the employee's car.

But the arbitrator said that he would not consider that evidence.

He explained that the just cause provision of the contract was to be interpreted in accordance with the ordinary meaning of that phrase, "in industrial relations", and just cause prohibits an employee from introducing new grounds that were not raised at the time of the discharge or at any time in the grievance procedure.

So having therefore found that the only question that was before him... the company had failed to make out its proof... the arbitrator ordered the employee reinstated with back pay, and this lawsuit followed.

The employer succeeded in persuading the lower courts to vacate the arbitration award.

Now it is important to note that neither the District Court nor the Court of Appeals quarreled with the job that the arbitrator had done as the interpreter of the contract.

That is, they accepted the validity of his conclusion that the employer here had promised that it would not discharge an employee unless it was able to prove the grounds on which the discharge was based.

The court also did not question the fact that the employer was perfectly free to enter into that promise; there is nothing in the law to prohibit it.

And he was free in this instance to live up to his promise; there was nothing in the law that makes it unlawful for him to take this employee back.

But the courts nonetheless concluded that it was against public policy for them to hold the employer to his promise, and the particular public policy they cited is

"the public policy against the operation of dangerous machinery by persons under the influence of drugs or alcohol. "

Now it is our principal submission here that in arrogating to itself this kind of power, to refuse to enforce a lawful collective bargaining agreement, the lower courts have overstepped the limits of their authority under Section 301 of--

Unidentified Justice: You don't say that there isn't any public policy exception, you just say it is a good deal narrower than the Fifth Circuit thought it was?

Mr. Silberman: --That's correct, Mr. Chief Justice.

We say that insofar as the court is saying, that even though this is a lawful agreement, there is a public policy against enforcing this perfectly lawful agreement.

We don't think the court's authority goes that far, and we think the proper role--

Unidentified Justice: Mr. Silberman, if the finding had been that indeed this employee had had a marijuana cigarette out in the parking lot of the employer's premises, and had been smoking it, and the arbitrator had further concluded that he should be restored to his job, could the public policy exception apply there to justify saying, that's an improper remedy?

Mr. Silberman: --Your Honor, we believe not.

As we understand the public policy exception, the rule is the one stated by Judge Easterbrook in his opinion in the E. I. DuPont case in the Seventh Circuit, and it is a rule that constrains the court to enforce positive law and not to introduce its own notions in that way.

And we think that the rule that Judge--

Unidentified Justice: Do you think that there conceivably could be a valid recognizable public policy to the effect that employees will not, if they are under the influence of drugs or alcohol, be allowed to work with dangerous machines?

What about the Occupational Safety and Health Act and so forth?

Mr. Silberman: --Certainly there could be a public policy in the sense that a legislature could say that people who have committed this wrong should not be employed in that category of jobs, and we certainly have no quarrel with the notion that there could be a public policy in that sense.

We do believe, however, that if the legislature has not gone that far and has stated a public policy at the general level of, for example, the Occupational Safety and Health Act, that it is not consistent with the labor relations system, and it is not appropriate for the courts to attempt to elaborate upon that policy by trying to decide whether that policy would or would not be served or disserved--

Unidentified Justice: So that an employee, an airline pilot, who drinks, should be nevertheless allowed to fly if the arbitrator so decides?

Mr. Silberman: --Fortunately, that is precise instance where there is a Federal Aviation Administration which decides are or are not entitled to fly, if there is an FAA regulation, and there is indeed a regulation covering pilots who have been using alcohol.

So that if the FAA says that this person should not be flying, then clearly an arbitrator's award that puts that person back to work would not be entitled to enforcement.

But it is precisely our point that if the FAA has said that, yes, it's okay for this person to fly, and the employer has promised that he will take this person back... at least the arbitrator has told us that's what his promise means... that the court should not put themselves in the business of trying to... of second guessing the FAA and substituting their view of what is sound for the party's view or the FAA's view.

Unidentified Justice: If I understand Judge Easterbrook's thesis, it is that the arbitrator does nothing but give content to the words of the contract, and if the contract, as worded by the arbitrator, would not, if it had been written that way, be contrary to law, neither is the arbitrator's decision.

So that, in the instance that you just cited, if a contract is not unlawful, which does not provide for the firing of someone who smokes marijuana in the parking lot, if such a contract without that provision is lawful, then the arbitrator's statement, that you can't fire this fellow for smoking marijuana in the parking lot, is also lawful.

Mr. Silberman: That's precisely how I understand Judge Easterbrook's approach, Justice Scalia.

And we do think that that approach makes particularly good sense, I should add, in the context of a just cause discharge kind of case.

Because in that kind of case, the very question that is being decided is, what is the appropriate punishment or penalty for a particular individual who has committed a particular kind of wrong.

And there is a variety of factors that one might want to take into account in making that judgment, and that is precisely what arbitrators do.

And unless--

Unidentified Justice: There is still a good deal of room between that and saying you do nothing but enforce the statutes that are on the book.

That is to say, there are some things which you can't write into a contract, they will not be enforced even there is not provision of law which says that they are unlawful.

I mean, there is a long line of contracts cases refusing to enforce contracts as being contrary to public policy.

Not because they violate any explicit statute, but because what they permit or encourage would violate a statute.

So what Judge Easterbrook said does not go so far as to say that only when there is an explicit statute making this conduct unlawful is it bad.

Mr. Silberman: --I think Judge Easterbrook does go precisely that far, and we do think that that is indeed the appropriate in the particular 301 context in which we find ourselves here.

Unidentified Justice: What if the fellow had been a truck driver and was found two or three times to have been driving while under the influence of marijuana?

And let's say that violates Louisiana law.

The arbitrator says, take him back, that is my interpretation of the contract.

Now I suppose there is nothing in Louisiana law that says you are forbidden to re-employ someone who has been three times convicted of driving under marijuana unless his license is revoked, and let's say this fellow's license hasn't been revoked.

Now do you think a District Court must enforce that award?

Mr. Silberman: Yes, we do, Mr. Chief Justice.

We believe that if there is nothing in Louisiana law and the state is perfectly free, as you suggest, the state does license truck drivers, and it's the state's responsibility to decide whether somebody should not be on the road.

But if the employer has the lawful discretion to employ this person, and the employer has agreed by contract that it will continue to employ that person, we think it is not an appropriate role for the courts to second guess and overturn the employer's promise in that regard.

Unidentified Justice: Then there really isn't any sort of public policy... room for a court's public policy determinations under 301, in your view, as there traditionally has been in the law of contracts.

Because certainly the public policy exception in the law of contracts is much broader than you say.

Mr. Silberman: I would say two things in response, Chief Justice Rehnquist.

The first is, as we understand the common law notion, the common law notion itself always assumed that whatever common law powers the judges exercise was subject to the subordinate power of a legislature to establish public policy.

So that in so far as we are right in suggesting, if the Congress did that, when it enacted the National Labor Relations Act and when it created this system of collective bargaining and of grievance arbitration, we think our position is entirely consistent with the principle of the common law doctrine, although I certainly do concede that in a particular case a common law judge would have exercised a broader authority.

We also would note that this Court has made clear in other 301 cases that ordinary contract principles do not fit very well to this peculiar 301 context, and should not be binding in fashioning the federal law of labor contracts.

Unidentified Justice: Would you adhere to your view even in circumstances when the employer might be a public employer charged with a specific mandate or duty to provide a certain service?

For example, to provide transportation to young school children, and therefore have to re-employ a school bus driver who has been found to have been smoking marijuana.

Mr. Silberman: Section 301 does not apply to public employers.

The policies on which we are arguing are policies that only apply in private sector labor relations.

Now it seems to us that there are really two critical aspects of the National Labor Relations Act--

Unidentified Justice: What about a school bus driver for a private school?

I mean, change Justice O'Connor's hypothetical to a school bus driver for a private school.

Would you give 301 application there?

Mr. Silberman: --Our answer does not change.

That is right.

We would say in that case that if the employer is free to employ that person, public authorities have not seen fit to disqualify that individual, and if the arbitrator has concluded... taking into account all the circumstances... that this is not somebody that has done such a wrong that he should be taken from his job completely and totally and absolutely, that there is no basis in principle for the courts to second guess that kind of judgment.

And what the courts wind up doing if they do so is really substituting their judgment as to what is the sound way of treating people for either public laws judgment or the party's judgment, and that this system--

Unidentified Justice: Of course, that's what common law courts did, was to occasionally substitute their judgment for the party's judgment.

You say, in this case, Congress thought about all of this and decided that there should be no public policy exception to labor contracts?

Mr. Silberman: --We say that the principle in--

Unidentified Justice: What evidence do you have that Congress thought about this?

Mr. Silberman: --I think what we say is slightly different than that, Mr. Chief Justice.

What we say is that the policies that the Congress enacted leave no room, that it would run at cross purposes with the statute, it would fundamentally undermine the statute if the courts were to exercise that kind of power.

And it seems to us there are two interrelated aspects of labor policy that really bear on this question.

One is the policy of favoring free collective bargaining, of private autonomy and decision making.

When Congress enacted the National Labor Relations Act, it decided that instead of creating a set of substantive rules to regulate work places, that the best way to protect employees and to further labor peace, was to encourage the parties to really make their own charter for industrial relations.

And so Congress imposed the duty to bargain, and it delimited the subjects of bargaining.

And then it said to the parties that so long as the agreement you make is a lawful agreement, you are free to make that agreement and our role is to enforce the agreement, because we think that that is the way for the most conducive set of labor relations.

Unidentified Justice: Is that any different from what the law says with regard to any contract?

It favors private disposition of their affairs.

You can say the same thing about an ordinary non-labor contract: we will enforce what the parties themselves provide, up to a point.

Mr. Silberman: I think the difference is this, Justice Scalia.

In the ordinary contract context there is a principle of freedom of contract, but there is not a duty to bargain, for example, outside of the labor relations context.

Congress here commanded bargaining because it viewed contracting... not just it thought it was good for parties to do whatever they wanted, but it thought that this system of self-government was the best way to further a set of public concerns, and was preferable to imposing a set of government regulations on the work place.

So that we think that the philosophy of the NLRA goes quite beyond the philosophy of the law of contracts, and that the most concrete manifestation of that is the duty to bargain, which is unique to the labor relations context, and which, of course, is codified in Section 885.

The other aspect of labor relations policy is this encouragement of private dispute resolution, of arbitration instead of litigation, and as this Court explained in the Steelworkers trilogy, that reflects Congress's understanding that it is unrealistic to expect the parties at one time to sit down and develop a set of rules that will govern every situation that arises in this ongoing relationship.

And Congress said, that instead of encouraging you to run to the courts to resolve these matters, or moreover, instead of your resolving these matters through an ad hoc adjustment of economic forces, what we think the best way to deal with these is for you to get somebody who you trust, who you the parties trust, and empower him to elaborate on your contract and develop a set of rules, and we will do our best to enforce that system and uphold that system.

Unidentified Justice: Can he adopt the public policy principle and say he will not interpret any provision of the contract to be contrary to sound public policy?

And if he does that, can the Courts enforce it?

Mr. Silberman: The question of what the role of the arbitrator and public law is is a complex question.

At the threshold, Justice Scalia, as National Academy develops in its brief amicus curiae, in a discharge case the issue that is entrusted to the arbitrator, the just cause issue necessarily asks the arbitrator to take into account the variety of public policies.

Arbitrators treat cases that involve employees who are dangerous very differently than they treat an employee who has thrown a spitball in the plant, and they do so because they have an understanding of public policy and that the party has expected those kinds of considerations.

Certainly, arbitrators can do that, they should do that, they do do that.

And it would be part of our submission, the reason why in this case we think it is especially inappropriate to authorize the courts into this area, is that there is no principle by which a judge can say that in this particular case, this individual has done something so serious that he shouldn't be put back to work.

It requires a very particularized judgment.

You want to know what he did, were there any extenuating circumstances, what's his past record, what is his likelihood of repetition: that's precisely the question the arbitrator asks.

And the arbitrator does so because the parties have empowered him to do so because they trust him to render their judgment for them, if you will.

And if the courts get involved in this area, what the courts are going to wind up doing is simply redoing what the arbitrator has done, and substituting not some rule of law they can apply in any kind of neutral way, but their best judgment for the arbitrator's judgement and ultimately, for the parties' judgment.

And we suggest that there is no basis for taking from the parties their right to make their own decisions on, at what point is somebody sufficiently dangerous or sufficiently harmful or sufficiently evil that he shouldn't go back to work, and substituting a court's resolution of that.

A resolution which, as I say, can't be animated by any kind of principle.

Unidentified Justice: Mr. Silberman, there are example in case law where courts have overturned decisions of arbitrators for a variety of reasons, including sometimes gross misjudgment.

Aren't there examples of that found in the case law around the country?

Mr. Silberman: Certainly since this Court's decision in Enterprise Wheel, the courts have been empowered to ask, has the arbitrator gone about his job of interpreting the contract or is he substituting his own brand of industrial justice.

There is not doubt that there are cases in which the courts have found that the arbitrator was not carrying out his mission and have therefore overturned, and we obviously don't quarrel with that.

And as I said at the outset, the Court of Appeals here did not suggest that the arbitrator had done that, and indeed, the arbitrators award here draws upon the general understanding of the just cause concept.

Beyond that, there are very few cases, or at least very few cases prior to the last couple of years, in which a court would overturn an arbitrators award on public policy grounds, except in a situation where we, and we think Judge Easterbrook, acknowledge the propriety of doing that.

That is, where public law says that you can't enforce this award.

Where the arbitrator has ordered the employer to commit an unlawful act.

Unidentified Justice: Do you think that your questions presented include or subsume an issue about what the arbitrator found with respect to whether the employee was actually smoking marijuana?

Mr. Silberman: I'm not quite sure I understand the question, Justice White.

What we did, as I recall, in our questions--

Unidentified Justice: Well, the arbitrator found, in effect, there wasn't cause they hadn't proved that he was smoking marijuana.

Mr. Silberman: --Because they hadn't proved either that he was smoking marijuana or that he had brought marijuana on the plant premises.

They hadn't proved a violation of the rule.

Unidentified Justice: That's right.

But that wasn't the basis for the Court of Appeals judgment in this case.

Mr. Silberman: Well, the Court of Appeals said--

Unidentified Justice: And the only issue you've brought here is the public policy issue.

Mr. Silberman: --The Court of Appeals did base its judgment precisely on the public policy issue.

Unidentified Justice: I know, and that's the only issue you bring here.

Mr. Silberman: Correct, and we--

Unidentified Justice: Are we free to dispose of the case and say, well, the Court of Appeals really ignored what the arbitrator found?

Mr. Silberman: --I think so, Justice White.

As I recall--

Unidentified Justice: You think so what?

Mr. Silberman: --That you are free to do so.

Unidentified Justice: Well, you didn't ask us to.

Mr. Silberman: I think we did.

Unidentified Justice: Not in the questions presented.

Mr. Silberman: I think we did.

My recollection of the questions presented is that there--

Unidentified Justice: Of course, I can't find the questions presented in your brief.

You should have had them there, but they are not.

Mr. Silberman: --I was having the same difficulty.

Unidentified Justice: Exactly.

Mr. Silberman: Fortunately they are in the petition for cert., where they also should have been in ours.

We first posed the question that I have been arguing to you, as to the principled limit of the public policy exception.

The second question we raised was if you disagree with us and say that there is this kind of authority, was it appropriately exercised in this case?

Unidentified Justice: But you are still just talking about public policy.

You would never get to that issue if you said, the arbitrator found that he was never smoking marijuana.

That at least there wasn't any proof of it, or that he even brought it on the property.

That's the end of it.

There isn't any cause.

Mr. Silberman: Well, the Court of Appeals says that because of the evidence... the arbitrator also found that the company had proffered evidence of these gleanings of marijuana in the Grievant's car.

Unidentified Justice: That may be so, but the arbitrator didn't find it.

Mr. Silberman: The arbitrator did acknowledge the existence of that evidence.

Unidentified Justice: No, but he didn't find that there was cause to discharge.

He Found there wasn't any.

Mr. Silberman: Correct.

He found that that's not relevant.

What the Court of Appeals said is that as a matter of public policy, he is not free to do that.

So that we think you can go on--

Unidentified Justice: Well, but I don't think you brought that issue here.

Mr. Silberman: --I understand.

That certainly was our intent in framing the second question.

We had thought we had framed it in sufficiently general terms to enable you to consider the question, which is briefed in our brief and in Respondents' brief, of whether, assuming that there is a power of the type claimed her, its exercise in this case was appropriate.

We obviously think it was not, for the reason you state, Justice White, that on the facts there was not basis for it, but moreover, on the principles basis I have been suggesting, the courts don't have authority to do that.

We think it would do grave damage to the labor policies I have discussed if the courts were free to do that.

Because what the courts do when they say, we're not going to enforce a lawful contract, is, first, the courts get back into the business of substantively regulating the work place in precisely the way Congress said we're not going to do in this area.

Unidentified Justice: Of course, Mr. Silberman, what bothers me is that there is more than just the workplace here: there is the safety of other people also.

Now there have been some hypotheticals thrown at you.

What if this were a driver of a Greyhound bus?

Smoking marijuana is all right?

Mr. Silberman: Justice Blackmun, we are certainly not suggesting that smoking marijuana is all right or even that a school newspaper couldn't put an article against smoking marijuana.

What we are suggesting is, first, that certainly the Interstate Commerce Commission knows people who license bus drivers are perfectly free to make the judgment as to whether somebody who does that should not be allowed to drive a bus.

Unidentified Justice: And you say the same thing about a D.C. taxicab driver?

Mr. Silberman: I think so, yes, although I would not look to the ICC for help in that regard.

But yes, I mean, at first, that the public--

Unidentified Justice: And you'll be the next fare?

Mr. Silberman: --If I can get a cab after court this afternoon, Your Honor.

We do say that, yes, the public authorities have the power and the right, if they wish, to say that this person is not suited drive.

And we say that the arbitrator has that authority.

He is going to take into account what the employer has done, why he has done it, is this somebody who was under enormous pressure at home in a way that is not likely to occur again, is this somebody who has since been through rehabilitation and to whom there is no likelihood of it recurring again, is this somebody who was entrapped in a way and that this is not something likely to occur again, or is this somebody who is very much likely to do it again?

And the arbitrators take all those factors into account, and they make a judgment as to what is the appropriate disposition.

That judgment reflects, in essence, the parties' judgment.

The parties have said, we want you to do that for us rather than leaving that to the employer to decide.

Unidentified Justice: What I am saying is that there is somebody more than the parties involved.

Mr. Silberman: We suggest that the public authorities are also there to protect the public, and that the parties themselves are not going to agree to an irrational system like that.

Ultimately we suggest what Justice Trainor said in the California Supreme Court in probably one of the earliest public policy cases, and that is the case of Black v. Cutter Laboratories, where a claim was made that it was against public policy for an arbitrator to reinstate a communist, in the 1950's.

And Justice Trainor said, that it's a rash assumption that Congress and the legislature have been inept in their consideration of the problem or are incapable of meeting it, or that astride the unruly horse of public policy, the courts are better able to meet that problem.

And that is our submission as well.

Unidentified Justice: Was that the prevailing opinion in the Black case?

Mr. Silberman: No, that was the dissenting opinion, although I believe the opinion has prevailed in the verdict of history.

With the Court's permission, I would like to reserve the balance of my time.

Thank you.

Chief Justice William H. Rehnquist: Thank you, Mr. Silberman.

Mr. Gear, we will hear now from you.

ORAL ARGUMENT OF A. RICHARD GEAR ON BEHALF OF RESPONDENT

Mr. Gear: Mr. Chief Justice and may it please the Court:

Just a small point, but the evidence of the extra marijuana found in the car was not offered as a separate basis for discharge, that was there and it was offered to corroborate the fact that the grievance was smoking marijuana, because our view of the evidence was that he went to own car with the other two guys, they rolled a marijuana cigarette from the stash that he had in his car--

Unidentified Justice: Didn't the arbitrator say that there had been a failure of proof that this employee was smoking marijuana?

Mr. Gear: --He did find that, sir, but he also--

Unidentified Justice: Well, were the courts free to disregard that?

Mr. Gear: --But, the--

Unidentified Justice: Were they or not?

Mr. Gear: --The court is not free to disregard that, but the Fifth Circuit found, and the arbitrator did find that the officers found this extra quantity of marijuana in the Grievant's car.

And the basis--

Unidentified Justice: I know, but the arbitrator didn't think that was... since the employer didn't know that, he construed the collective bargaining agreement, in effect, as not saying that this wasn't cause for discharge.

Mr. Gear: --That's what the arbitrator did, Your Honor.

Unidentified Justice: Was the court really free to overturn that construction?

Mr. Gear: Well the problem was, that we argued in our brief to the arbitrator, that reinstatement was inappropriate because of this after discovered marijuana.

We did not offer this after discovered marijuana as a separate basis for discharge.

We offered it as a basis for the refusal to reinstate this man.

The Fifth Circuit--

Unidentified Justice: As a remedy--

Mr. Gear: --As a remedy problem.

The arbitrator did find that the officers in question found this marijuana in the car and that it was examined by the laboratory in Monroe, Louisiana, and it was found to be marijuana.

He made a finding as to that.

He credited the officers.

Now despite this finding, he ignored our request to impose no reinstatement because of this after discovered marijuana as a basis of public policy.

He ignored our request, didn't make a finding in his decision about it.

And in those circumstances, I think that... regardless of abstract theories about what the courts can do with arbitrated decisions... the Fifth Circuit can go in and say, Mr. Arbitrator, you ignored this issue that was presented by the company, and you have ignored this after discovered evidence, and on the basis of that, we're going to exercise our discretion to implement the public policy exception.

Unidentified Justice: --But the same limits don't apply to an arbitrator's judgment about what a remedy should be, as he isn't entitled to the same deference that he is when he construes the contract.

Mr. Gear: No, I think the courts would give the arbitrator the same deference they would normally give him, but then you've got--

Unidentified Justice: On remedy as well as--

Mr. Gear: --On remedy, and I think that Enterprise Wheel--

Unidentified Justice: --Well, they didn't give any deference here.

Mr. Gear: --But he didn't make a finding as to our remedy.

He ignored our argument--

Unidentified Justice: Well, he did: he said reinstate.

Mr. Gear: --But he didn't address the question in his decision.

Unidentified Justice: I know it.

He credited the notion that this marijuana was found in the car.

Mr. Gear: That's correct.

Unidentified Justice: And he ordered reinstatement.

Mr. Gear: You can view it that way--

Unidentified Justice: And rejected your argument.

Mr. Gear: --But he didn't even address our argument.

Unidentified Justice: Well, he rejected it.

You made it.

Mr. Gear: I understand what you are saying.

I understand what you are saying.

Unidentified Justice: Well, wouldn't it be more consistent with ordinary judicial review of arbitration if the Fifth Circuit felt that he had ignored a submission or ignored... to send it back to the arbitrator rather than for the Fifth Circuit to simply make the finding itself?

Mr. Gear: That has happened in some cases; I have seen cases do that.

I think that in this case it was such a blatant... reinstatement of this individual... violation of public policy, and the arbitrator had ignored the after discovered evidence, that they went ahead and decided the issue.

We do not suggest and no party suggested at the hearing that the matter be remanded to the arbitrator, I should mention.

Unidentified Justice: Mr. Gear, when you say it was a blatant violation of public policy, on what facts do you conclude that it was blatant?

If you limit yourself... one way to look at the case is just take the one sentence on page 58 of the arbitrator's report, the only thing the company has proven was that the Grievant was sitting in the back seat of a car in which there was found a lit marijuana cigarette in the front seat ashtray, a front seat just moments before vacated by another company employee.

Now if... and I understand you take a different... if that were the only fact, would you still make the public policy argument?

Mr. Gear: No, I wouldn't.

Unidentified Justice: So your argument depends on the fact that there was also marijuana found in the back seat?

Mr. Gear: Absolutely.

Unidentified Justice: And does it further require you to draw the inference from that that this employee was smoking marijuana?

Mr. Gear: Yes.

Unidentified Justice: And that nobody has found that?

Mr. Gear: It doesn't require it, but the rule prohibited possession of marijuana in addition to smoking marijuana, so the fact that it was in his car indicated that possession--

Unidentified Justice: No, but, marijuana was found in the back seat of his car.

A lighted cigarette was found in another employees car.

Mr. Gear: --That is correct.

Unidentified Justice: And he was sitting in the back seat of that car.

Mr. Gear: That is correct.

Unidentified Justice: So which is the blatant public policy violation?

The fact that there was some marijuana in the back seat of his car or the... his sitting in this car is totally irrelevant then, isn't it?

Mr. Gear: I would agree.

Unidentified Justice: So that the asserted basis for the discharge is no longer relied on.

Mr. Gear: Because the after discovered evidence established very clearly that he was in violation of the plant rule prohibiting possession of marijuana on the premises, and that he operated the paper mill device called a slitter-rewinder that has large circular blades about the size of cymbals that are razor sharp.

Unidentified Justice: I understand what the equipment is.

The company fired him because they thought there was ample proof that he had been smoking marijuana in that car.

Mr. Gear: That's correct.

Unidentified Justice: And that's what the arbitrator rejected.

Mr. Gear: That's correct.

Unidentified Justice: Would the arbitrator automatically sustain a dismissal for violation of a plant rule even if he had considered and credited all your evidence?

Mr. Gear: He wouldn't automatically sustain one, no.

Unidentified Justice: He normally--

Mr. Gear: I think he would, but in this case, again, we are dealing in an industry that, in Louisiana, has the highest workman's compensation rating in terms of premium cost in the whole state.

It is the highest industry; it has more accidents.

The very machine that the Grievant operated had had ten or fifteen accidents in the four years preceding this case, and the Grievant had, in the past six months before his discharge, been put on probation twice because of judgmental errors that were not atypical of a marijuana smoker.

And further, the employer had noticed that it had a drug problem.

They found marijuana cigarette butts around the plant.

They tried to find the individuals involved but couldn't.

The production supervisor even lived in a trailer on the premises to try to make surprise visits to the plant during the night shift where the problem was and where the Grievant worked, and he couldn't find the problem.

So the company had meetings with employees trying to convince the employees that safety and drugs were a matter of great concern to the company and their health and safety.

The arbitrator's decision to reinstate this individual, to us, in the face of these compelling considerations at the plant in question is against public policy.

There are several public policy grounds that the courts can rely upon to utilize the public policy exception in the field of drug abuse and safety in the work place.

The country is really in a crusade against drugs at present.

President Reagan has, in his speech and executive order, 12456, inaugurated a campaign against drug use and a prohibition of drug use in the federal government.

He has claimed that illegal drug users are not suitable to be federal employees, and that safety and health in the federal workplace is a concern of the government.

This is a policy that is exemplified by the executive order.

The studies of the effect of drugs in the American workplace have shown that probably an estimate of $26 billion a year is lost, in lost productivity and health care costs, because of drugs in the workplace.

Sixteen billion of that is lost productivity.

Drug abusers in the workplace are twice as likely to be injured, and are one third as likely to be absent as straight, non-drug users in the workplace.

Unidentified Justice: --Would you say that a contract violated public policy and was unenforceable to that extent if it failed to provide for the dismissal of an employee who had marijuana on the premises in any industry?

Mr. Gear: I don't think that you can say that an employer's failure to adopt a rule is a violation of public policy, no.

Unidentified Justice: Well, then why is it a violation of public policy here, not to have such a rule, which is all the arbitrator said.

The arbitrator said, this contract does not have such a rule.

Now maybe another contract--

Mr. Gear: In fact, the contract did such have a rule, but an employer can fire an employee for drug usage without having a specific rule in question.

I think a lot of arbitrators have upheld discharges where there was not a rule, where drug use was involved.

So that the existence of the rule isn't critical.

It helps the case, certainly, but it's not going to necessarily determine the case from the arbitrator's point of view.

Unidentified Justice: --Are you saying any factually finding that is erroneous, relating to marijuana use, by an arbitrator, is contrary to public policy?

Mr. Gear: No, I'm not saying--

Unidentified Justice: I am trying to get the nub of what it is in this thing that is contrary to public policy.

Mr. Gear: --In this case, it was clear the individual was in possession of drugs on company premises.

We have a safety rule, a rule that prohibits possession of drugs on the premises.

We have an extremely hazardous piece of equipment, the worst piece of equipment in the plant for injury.

Unidentified Justice: All right, but the arbitrator obviously didn't agree.

He thought the evidence was inadmissable or he didn't believe the evidence, one or the other.

So you really are saying that what's contrary to public policy is not accepting evidence of this degree.

Mr. Gear: Well, it's just that the clear evidence of drug usage by this individual in a safety problem industry, and his reinstatement, is against the public policy is what we believe--

Unidentified Justice: I suppose what you are saying is what really violated public policy was ordering him back on the job?

Mr. Gear: --Absolutely.

Unidentified Justice: It's like his ordering a drug addict back on the job.

Mr. Gear: Exactly right.

Now he could have provided merely for back pay, and we could have lived with that, but we can't live with him back on the job operating--

Unidentified Justice: And you say that the Court of Appeals was justified in relying on the evidence of marijuana in the back seat of his car to conclude that he was a drug user who should not be ordered back on the job.

Mr. Gear: --Absolutely.

Unidentified Justice: That just means that the Court of Appeals disagrees with the arbitrator as a fact finder, on the facts.

Mr. Gear: It means they disagreed with his remedy deriving from the facts that he found.

Unidentified Justice: Another way, what you are saying is, if the arbitrator said it for any other thing, it would have been all right, but if it's drugs, it's bad.

Mr. Gear: If... I have not thought about it much outside the drug concept.

Unidentified Justice: For example, if he had been charged with murder... for another employee it was wrong.

That would be all right.

Mr. Gear: I'm not saying that.

I would think that there might be a sever public policy against the reinstatement of a violent individual to the American workplace.

Unidentified Justice: Who is going to set up which crimes are against public policy or not?

Mr. Gear: I think the courts are going to have to do that, which is why we are here.

Unidentified Justice: I take it you want us to do that?

Mr. Gear: Yes, sir.

Unidentified Justice: Mr. Gear, I want to be sure.

The marijuana that was in his car, as I recall, was residue in the scale.

Wasn't that right?

There's not anything indicating there was enough marijuana to be smoked.

Mr. Gear: There was enough marijuana.

I saw the sample.

It was about--

Unidentified Justice: Well, the record doesn't tell us that.

Mr. Gear: --I know, but the--

Unidentified Justice: What the Court of Appeals said... now you want us to go beyond what the Court of Appeals found.

The Court of Appeals found there was a scales case containing marijuana residue.

Mr. Gear: --With marijuana residue and certainly marijuana residue can be smoked.

There was sufficient marijuana--

Unidentified Justice: We don't know how much, and it could have been just a trace, couldn't it?

Mr. Gear: --It was not just a trace, I assure you.

Unidentified Justice: Well, the record that comes to us, it could have been just a trace, and is that enough for your position?

If it were just a trace, would it nevertheless follow that he must be discharged?

Mr. Gear: Particularly with the background of the drug problems at this plant, I--

Unidentified Justice: Well--

Mr. Gear: --The Fifth Circuit commented that de minimus is sufficient to violate the rule against possession of marijuana, particularly in a state where you have criminal laws prohibiting the possession of marijuana.

That would be sufficient to go to trial on.

Unidentified Justice: --I understand that, but it would be true that even if he went to trial, found guilty, and served his sentence and all, the public policy rule for which you contend is, that if in a dangerous industry... and I agree with you it's a dangerous industry... an employee's car is found to have contained a residue of marijuana, he must be fired.

Mr. Gear: I would agree with that.

Unidentified Justice: As a matter of public policy.

Mr. Gear: I would agree with that... on the plant premises.

Unidentified Justice: And even if the contract provided, we will not fire people unless we find more than six ounces of marijuana.

If the contract said that... like the arbitrator said, here, this isn't enough... you'd say that contract is against public policy and they must contain in the contract a provision requiring discharge on these circumstances.

Mr. Gear: If the contract said that, I would have difficulty--

Unidentified Justice: Why?

Public policy overrides the contract.

That's your whole case.

Mr. Gear: --I understand what you are saying, but the public policy is, regardless of the small residue in his car that was found, he is probably going to do it again.

Unidentified Justice: Probably going to do what again?

Mr. Gear: Probably going to be using marijuana on the job again.

You have a drug user--

Unidentified Justice: Is there any finding he ever did use marijuana on the job?

Mr. Gear: --No.

Unidentified Justice: How can you say probably be doing it again if you don't have the first violation?

Mr. Gear: But that's obviously the basis of the policy against drug use in the workplace, the probability of continued usage.

There is no testimony that he used it once and never would again.

I might point that out to you.

Unidentified Justice: There is not testimony he used it once, is there?

Mr. Gear: There is testimony that he was found with two and a half ounces at his home.

Unidentified Justice: But is there testimony that he ever used it?

Mr. Gear: No.

Unidentified Justice: Did the Court of Appeals overturn this because they concluded that he was a drug user?

Mr. Gear: I would suspect so.

Unidentified Justice: Well, you suspect it.

Did they say that?

Mr. Gear: They concluded that the possession of this small amount in violation of the company's rules in a safety intense industry was sufficient basis to set it aside using the public policy exception of W. R. Grace.

Unidentified Justice: Do you think that their finding to that effect is open here under the questions that were presented by the Petitioner?

Or do we just address the public policy issue?

Is that all?

Mr. Gear: Well, if the Petitioner didn't address it and put it before the Court, I don't think it's open.

We have both discussed it somewhat in our briefs.

I have it as a backstop argument that the arbitrator did exceed the bounds of the contract and that his award was irrational, in the event that you were to rule against us on the public policy question.

Unidentified Justice: Was public policy argued to the arbitrator?

Mr. Gear: I argued it in my brief that--

Unidentified Justice: To the arbitrator?

Mr. Gear: --Yes.

And he didn't rule on that argument.

That's what concerns me and why we are here today, also.

Unidentified Justice: What if they found a case of beer in the back seat and a drunk passenger in the front seat?

Would public policy require his discharge?

Mr. Gear: In that industry, the safety industry, the rule against possession prohibited also the possession of whisky or alcoholic beverages on the premises, and that would have been sufficient.

Unidentified Justice: It would have been a mandatory discharge if he had beer in the car?

Mr. Gear: Yes.

Unidentified Justice: Including near beer?

Mr. Gear: I'm not sure about near beer.

It is our position that the public policy exception of W. R. Grace will have very little meaning if an award is limited to the violation of a positive law.

The language of W. R. Grace... written by Justice Blackmun, I believe... indicates that the courts, in defining public policy, can refer to the laws and the legal precedence.

This to me means more than merely a violation of positive law that is involved.

W. R. Grace spoke of other factors and looked at other matters of policy when they made their decision in W. R. Grace.

The Court was correct earlier in that traditionally, in the review of contracts outside of the labor field for violations of public policy, that the courts have not merely set aside those contracts when a positive law has been involved.

The courts have looked to general considerations of public policy.

The Crocker case, the Muschany case, the Sprott case, even, involving the Confederate cotton, was not decided on the basis of a specific law that held that the individual that tried to get the money for his cotton was in fact violating a positive law.

To me, we really don't need a positive law to infer a public policy against drug use in the workplace, and particularly in the hazardous industries.

The hazardous industry in this case is not so publicly involved as the hazardous industries in the airline, railway, the common carrier industry.

In an amicus curiae brief--

Unidentified Justice: Mr. Gear, let me ask you one other question.

There is a positive law prohibiting drug use in the work place.

There is a positive law prohibiting drug use.

Mr. Gear: --There is a positive law--

Unidentified Justice: So if you can prove drug use in the workplace, you have proved a violation not only of public policy but positive law.

Mr. Gear: --Louisiana statutes prohibit the possession of marijuana.

It's a six months fine for first offense and up to 20 years for the third offense.

Unidentified Justice: So a fortiori if you've got it in possession when you're working one of these slitting machines.

Mr. Gear: Then you've violated a positive law.

Unidentified Justice: But there's nothing... the arbitrator doesn't offend that sort of law, because if the guy is going to use marijuana, he offends it as much as if he has been fired as if he is still working.

The fact that he is going to use marijuana, it doesn't seem to me it increases the violation of that statute to say that he may be using marijuana at work if all you are relying on is a statute that says it's illegal to use marijuana anywhere.

And one of the penalties for violating that statute isn't to be fired, is it?

Mr. Gear: Of course not, but--

Unidentified Justice: And you don't put the employer in jail, you put him in jail.

Mr. Gear: --That's correct, but we're not going to find a law in this country, to my knowledge, that says the possession of marijuana shall bar one from employment.

Unidentified Justice: But ordering the employer to reinstate him, arguably... if you order an employer to put back to work, in an industry like this, a drug user, aren't you violating a federal statute about a safe workplace?

Mr. Gear: You are violating the Occupational Safety and Health Act--

Unidentified Justice: Exactly.

Mr. Gear: --the employer's duty to--

Unidentified Justice: That's the employer doing that, so you are ordering the employer to do something to public policy.

Mr. Gear: --You are ordering the employer to violate the federal obligation to provide a safe workplace, and a Louisiana statute also exists imposing a duty to provide a safe workplace on the employer.

That's 23: 13 of the Louisiana revised statute.

Unidentified Justice: But the question is, is that what this order was?

Mr. Gear: Sir?

Unidentified Justice: Is that what this order was, though, to put back to work a drug user?

Mr. Gear: It was to put back to work an individual that was found in the back seat of a car where an amount of marijuana smoke existed, that had marijuana found on the premises of the employer's plant in violation of the company's rule, and I think it would put back to work a drug possessor or probably drug user.

I just don't think an employer and the public can risk that in a safety intensive industry.

Unidentified Justice: What's really contrary to public policy here is to refuse to be persuaded by that degree of evidence that this fellow was a drug user.

Mr. Gear: For the arbitrator to refuse to be persuaded?

I don't know the answer to that.

Unidentified Justice: But the Court of Appeals obviously, you say, concluded that he was a drug user, and that's why they said it was contrary to public policy.

Mr. Gear: They concluded that he was a drug possessor.

I believe that's clear.

Unidentified Justice: Supposing it were a liquor... supposing the evidence shows someone saw "x" drinking liquor in a car, and there was liquor spilled in the back seat, and "y" had been sitting in the car, but there is no who actually saw "y" drinking liquor.

Do you think that a fact finder is compelled to conclude that "y" was drinking liquor just because "x" was and there was liquor in the car?

Mr. Gear: No, I don't think so, but there are cases that hold, in the area particularly, that constructive possession can be based upon similar facts to that.

Unidentified Justice: It's a bit of a jump first from use, then to possession, then to constructive possession.

You get pretty far out.

Mr. Gear: I don't think so.

Not in the Louisiana criminal decisions.

I don't think so, because they have held constructive possession when an individual has been seen in the company of folks smoking marijuana and with marijuana on the ground near him.

Unidentified Justice: Well, it is one thing to uphold a conviction based upon a conclusion to that effect by the finder of fact, but it is another thing to say the finder of fact must draw that inference.

Mr. Gear: I would agree.

The finder of fact in our case, though, did find that the individual possessed marijuana in his car, based upon the police search, though.

So we have a finding of fact we can rely on in this case.

Unidentified Justice: And the Court of Appeals said that, based on that evidence, the remedy was inappropriate--

Mr. Gear: That's correct.

Unidentified Justice: --because it was contrary to public policy to order back to work anybody whose car contains traces of marijuana.

Mr. Gear: That's correct, Your Honor.

And of course, S. D. Warren's court in the First Circuit held, also in a paper mill, also in very similar problems of marijuana usage that the public policy was not served by the arbitrator's reinstatement of drug users in that situation, on essential identical grounds to the Misco case.

The Fifth Circuit held the same thing in the context of the drinking truck driver in the over the road trucking industry.

So I think the courts are moving towards this.

The unions arguments that the floodgates will open in the event that the courts find a flexible public policy exception, I think that argument is not appropriate.

We have Rule 11 sanctions if employers seek to set aside arbitration awards without sufficient basis.

I think that is a good stop.

I think that the courts exercise judicial restraint in utilizing the public policy exception and overlooking arbitration decisions.

As Justice O'Connor pointed out, the unions and employers already are able to appeal to the courts arbitration decision which exceed the bounds of the arbitrator's power in the contract.

This is nothing new.

I don't think that a flexible public policy exception will deter or interfere with the national labor relations policy to any extent.

Really, I think what we are looking at today is, we can have a narrow positive law exception as urged by the Petitioner which doesn't protect, say, the public with the reinstatement of a dope user to operate the control room of a nuclear power plant, or puts him the control room of a refinery or some other hazardous industry, or we can be reasonable and use a common sense approach and determine that public policy is more flexible in the area of drugs and alcohol abuse.

Unidentified Justice: Mr. Gear, isn't there another protection that is available?

Can't the employers get a provision in the contract that entitles them to discharge somebody who has ever been in possession of marijuana or something like that?

Mr. Gear: They can bargain for a provision, or they can just implement work rules if they have the authority under the contract to do so, that says that the discharge of an individual for possession of marijuana is a dischargeable--

Unidentified Justice: The arbitrator could have interpreted the word cause in this case as including finding marijuana in somebody's car on the premises.

Mr. Gear: --Well, he could have, but he didn't accept that evidence.

Unidentified Justice: But he could have without any rule or anything else.

Mr. Gear: He had the view that the employer has to know exactly every piece of evidence in support of the discharge at the moment of the discharge, and would not receive the corroborating evidence which we found just a week before the arbitration hearing by going through the police records that this fellow had in fact some marijuana in his car.

The arbitrator said that if you don't know it at the time of discharge, it's all over.

Unidentified Justice: It may be for back pay, but he also said it was all over for reinstatement.

Mr. Gear: Well, he reinstated him, certainly.

I think it all gets back down to a common sense view of the national labor relations policy and the public policy exception.

We submit that the courts view below of the flexible public policy exception is the correct view, and we appreciate the Court's time.

Chief Justice William H. Rehnquist: Thank you, Mr. Gear.

Mr. Silberman, you have three minutes remaining.

ORAL ARGUMENT OF DAVID SILBERMAN ON BEHALF OF PETITIONERS -- REBUTTAL

Mr. Silberman: Your Honor, unless the Court has any further questions, I have nothing I wish to add.

Unidentified Justice: I have one question.

I am going to give you the hardest case I can think of and see whether you'll adhere to your principle.

Mr. Silberman: The answer is yes, Justice Scalia.

Unidentified Justice: Well, I want to see how your principle works out.

Let's assume that there's a state law that prevents the employment of anyone that has a history of child molestation in a day care center.

And there's a contract with the union; the contract says anyone can be fired for a history of child molestation.

But the contract also says that any disciplining for any matter that involves moral opprobrium shall only be made on the testimony of three witnesses to the event.

Now there is one individual... it is clear on the basis of a lot evidence, photographic, documentary, and everything else, the fellow has a long history of child molestation, but in no one of these instances were there three eye witnesses to the event.

And the thing goes to arbitration, the arbitrator says, that's the way the contract reads, you don't have the three witnesses, that's not the evidence the contract requires, you can't be fired.

A court would have to enforce that?

Mr. Silberman: No, I don't think our principle reaches that conclusion,--

Unidentified Justice: Why doesn't it?

Mr. Silberman: --Because if... I need to break that hypothetical down into two possible scenarios.

One is where the arbitrator has made factual findings which says that this guy is guilty of these acts, but that I don't have the authority to sustain the discharge--

Unidentified Justice: No, he hasn't made the finding, but the court that reviews the thing can see that that is absolutely the case.

But he hasn't found that, he has just said, you didn't meet the procedural rules, just as the arbitrator here said.

But the point is that those procedural rules make it so difficult for the employer to enforce the public policy that the argument is a contract with that unrealistic a condition for dismissing somebody for the reason the law requires is contrary to public policy.

You would not allow that?

Mr. Silberman: --No, I think that if... as I understand the hypothetical... there is a prohibition on employing a particular individual and a procedural rule in a contract which leads an arbitrator to order the employment of an individual who public law says is not to be employed, then it is entirely consistent with... our principle would say that award is against public policy because it is ordering the employer to do something he is not permitted to do.

Even though the contract itself was lawful, the remedy... the order there ordered the employer to do something he is not permitted to do.

Chief Justice William H. Rehnquist: Thank you, Mr. Silberman.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

At&T Technologies v. Communications Workers - Oral Argument

Fri, 09 Jan 2009 14:48:33 +0000

Case:

At&T Technologies v. Communications Workers

Media File:

84-1913_19860122-argument.mp3

Related Transcript:

1985_84_1913_argument.xml

Transcript:

ORAL ARGUMENT OF REX E. LEE, ESQ., ON BEHALF OF THE PETITIONER

Chief Justice Burger: We will hear arguments next in AT&T Technologies, Incorporated, against Communications Workers of America.

Mr. Lee, I think you may proceed whenever you are ready.

Mr. Lee: Thank you, Mr. Chief Justice, and may it please the Court, in our view this is a simple case that requires a simple solution.

The only reason the case is here is that the Court of Appeals committed an error which not even the respondents defend, and all that this Court need do and all that it should do is to reverse that error and remand the case so that the lower courts can perform the task that is properly theirs.

There is one question presented.

It concerns the correctness of the Seventh Circuit's holding that there is an exception to the foundational principal that before requiring arbitration of a collective bargaining agreement, the Court must first determine whether the parties agreed to arbitrate that issue.

In the Court of Appeals' view, the exception exists where the judge in order to decide whether there has been a promise to arbitrate, would have to consider any provision of the contract other than the arbitration clause.

The issue arose here because the petitioner laid off 79 installers at its Chicago based location.

The union claims that Article 20 of the collective bargaining agreement makes these layoffs arbitrary.

The company's answer is that Article 20 does not change Article 9's exclusion of all layoff decisions from issues that are to be arbitrated, and the company places particular emphasis on a prior judicial interpretation of this contract and other bargaining history.

Now, under those circumstances, were the parties in disagreement over whether there had been a promise to arbitrate?

What the lower courts should have done and what both parties and all three amici agreed that the lower courts should have done was to give the parties their judgment on that issue.

The issue is arbitrability, arbitrability is for the courts, and these courts should have decided it.

Had they done so, then no matter which way they decided it, this would have been in respondent's words a thoroughly uneventful case involving nothing more than the interpretation of one labor contract and eminently unworthy of review by this Court.

But that is not what happened.

Both the District Court and also the Court of Appeals would have sent the case directly to the arbitrator without performing their threshold duty of deciding whether the party ever intended this issue to be arbitrated.

The Seventh Circuit's view, this sidestepping of what it conceded was its normal duty, was required because of the interaction of two features of this case.

First, the parties have not clearly excluded the arbitrability issue from arbitration, and second, in order to determine arbitrability, the Court would have to consider not just the arbitration clause, Article VIII, but also two what the Court called substantive clauses, Articles IX and XX.

That decision is hopelessly inconsistent with this Court's holdings and opinions and also with the policy of encouraging arbitration.

I would like to examine just briefly each part of the lower court's two-part test.

The first is that the parties have not clearly excluded the arbitrability issue from arbitration.

That is just a flat misstatement of well settled law concerning who decides arbitrability.

This Court said in Warrier and Gulf not only that the Court decides arbitrability, but It went further and clarified the question of jurisdiction of the arbitrator will not be left to the arbitrator unless, and this is a quote,

"the claimant bears the burden of a clear demonstration of that purpose. "

The Court of Appeals ruling in this respect simply confuses the presumption of arbitrability with the question of who decides arbitrability.

Warrier and Gulf deals with both of these issues.

When the question is whether it is viewed as arbitrary, then the scales are weighted in favor of arbitration, but when the question is, who decides arbitrability, they are weighted in favor of the judge.

But it is the second part of the test that really demonstrates the mischief of the Court of Appeals' error.

It is disputed by no one that one of the main reasons over the past quarter-century since the Trilogy arbitration has gained such widespread acceptance in the labor field and has become so successful, is that following this Courts unequivocal assurance in Warrier and Gulf that the question of arbitrability is for the courts, employers have been willing to use arbitration because they have known that where it is really important for them to exclude a management function, or some other subject from arbitration, their agreements will be honored.

They know that the scales are weighted in favor of arbitrability, but they also know that they are judicial scales, and the presumption is not an irrebuttable one.

If their case for exclusion is strong enough, then a judge will keep the issue from ever going to arbitration.

Now, common sense teaches that when the courts perform this pivotal task, they must consider whatever provisions of the contract and whatever elements of bargaining history they can find that shed any light on the issue whether there has been a promise to arbitrate, as this Court clarified in American Manufacturing, and as clarified even better by Justice Brennan's concurring opinion in Warrier and Gulf and American manufacturing even more than the interpretation of a statute.

The words in a collective bargaining agreement are not to be interpreted in a vacuum.

They can only he understood against their background and as parts of the entire contract, so that properly interpreted, there is no tension between the two basic principals of Warrier and Gulf that the Court decides arbitrability and the arbitrator decides the merits.

They are parts of a single whole principle, and that whole goes to the parties' freedom of contract.

The respondents contend here, as they have contended at every stage of litigation, that what petitioner is really asking for is an interpretation of the substantive meaning of Article 20.

It is a confusing argument, but at bottom it is simply not true.

What we want out of this case is a judicial ruling on whether the entire contract in light of its entire historical background excludes layoffs from arbitration.

Does this involve interpretation of the contract?

Of course it does.

There is simply no way that a judge can decide whether the parties have contracted for arbitration without interpreting the contract, but the judge and the arbitrator interpret for quite different purposes, and they ask quite different questions, and this brings me to what I submit is really the key to this Court's solution of this case.

It is a careful distinction among three quite separate questions.

The ultimate issue in this case is whether the company could lay off the installers in Chicago when there was no lack of work in Chicago.

That issue, if arbitrable, is the arbitrator's issue, and no one has attempted to litigate that in any court.

There was neither evidence nor argument put forth before either the District Court or the Court of Appeals on that issue.

A second quite separate issue is whether the parties have promised to arbitrate this merits issue concerning layoffs.

That was the question that was presented to the lower courts.

That is the question they should have decided, and that is the question that ought to be remanded to them.

Now, a third, again quite separate question is the question presented to this Court.

Can a judge in considering arbitrability consider any provisions of the contract other than the arbitration clause?

And the key to this case, I submit, is for this Court simply to decide its question and then remand the case to the lower courts to decide arbitrability.

What no one at this bar is urging is that this Court should simply agree with the Seventh Circuit that the arbitrator should decide arbitrability.

The respondents do, however, suggest two possible bases for affirmance of the Seventh Circuit's holding.

Let me deal with each of those just very briefly.

They suggest first that the Court of Appeals really made findings which would support a holding of arbitrability, and in the alternative they suggest that the lower courts may have been using the word 301 law.

Those contentions simply miss the point entirely.

Whether the word "arbitrability" has one meaning or two or four is quite irrelevant.

The controlling fact is that we contend that the parties have agreed that disputes over layoffs are not to be decided by an arbitrator, and this one is no different, and that is what the parties have contracted.

We think we are right on that issue.

We think the language of the contract and the bargaining history squarely support us.

The union, on the other hand, thinks we are wrong, and the union also relies on bargaining history.

But right or wrong, we are entitled to our day in court on that issue, and to date we have not had our day in court on that issue.

Mr. Lee: Mr. Lee, I can't let you go through an entire argument without interrupting.

Mr. Lee: I was wondering if that was going to happen, Justice Stevens.

I was betting on you as the possibility.

Mr. Lee: I have to raise this question that your argument troubles me with.

You start out with your three different issues and say the ultimate issue is whether the contract, I guess you are saying, prevents the company from laying off workers in Chicago when there is no shortage of jobs in Chicago.

I suppose if you describe that as the ultimate issue, you are saying that there can be two views of whether the contract so permits.

Mr. Lee: Exactly.

Mr. Lee: If there are two views of what the contract could mean, are you not conceding that the issue is arbitrable and therefore, although the Court of Appeals adopted the wrong rationale, that your opponent is right on the issue of arbitrability?

Mr. Lee: No, I am really not, and so long as you carefully distinguish between that issue and what I prescribe, what I detailed as the second issue--

Mr. Lee: Right.

Mr. Lee: --then that really provides the answer to the case.

The issue here is, the issue here is whether the Court should have decided not whether there are two possible views as to who is right on the contract, but rather whether the parties in negotiating this contract intended that that particular issue was to be arbitrated.

Let me see if this is more helpful, because I realize that this is a difficult problem, and yet I think at the end of the day it really is not difficult.

Mr. Lee: What I have in mind, of course, is the language of Article VIII of the agreement, they failed to settle by negotiation.

Differences arising with respect to the interpretation of the contract.

It seems to me there is a difference between you and your adversary as to meaning of the contract on the ultimate issue.

That is what I am--

Mr. Lee: --See if this is helpful to you.

With respect to the question of whether there was authority to lay... whether the company did or did not have power to lay off workers at a Chicago location where there was no lack of work.

You would look at certain provisions of the contract, and you would be looking for matters in the contract that were related to that.

Here, by contrast, the evidence that was put forth before the Seventh Circuit was first of all the language of Article IX which says that management functions are not to be arbitrated, and then there is the question of whether Article XX overrides that, but even more was the matter of this New York Court of Appeals judicial decision which said that under this particular contract, or at least the predecessor of it, all layoff decisions, all termination of employment decisions are non-arbitrary.

Following that, the bargaining history shows, and it is set for in the record, and indeed in the joint appendix in this case, that the parties went into bargaining of a new contract within months after that decision came down, and the union insisted on, in effect, overruling that New York Court of Appeals decision, and they succeeded partially.

They identified three... excuse me, four separate types of termination decisions, and in Article XXII of the contract, Article XXII of the contract makes discharges, dropping and relieving, subject to arbitration, but not layoffs.

Now, those are the kinds of issues that would be considered in connection with whether it was arbitrable.

They would have nothing to do with the issue whether there was or was not a right to lay off when there was not... very often there is a real temptation to confuse those two issues, and that is why you have a split in the circuits on this issue.

But I think at the end of the day if you ask yourself that kind of evidence is it that is really relevant to the ultimate merits issue and what kind of evidence and what kind of arguments is it that is relevant to whether the parties intended that issue to be arbitrated, they are usually quite separate.

Now, I will say that this Court did say in Warrier and Gulf that it may be necessary on occasion in considering, in the discharge of the judge's responsibility--

Mr. Lee: --Are you asking us in effect to overrule Warrier and Gulf?

Mr. Lee: Of course not.

Of course not.

I am simply saying that Warrier and Gulf said that you may have to consider the merits, but what I am saying is that it will frequently be necessary.

In short, the Seventh Circuit has committed an error.

Really, in the final analysis I think what the respondents are asking is that this Court do the job that should have been done by the Seventh Circuit and decide the issue of arbitrability itself.

We would urge that this Court not do that.

It is not one of the questions presented.

It hasn't been briefed, and this Court functions best when it receives the issues that come before it after those issues have gone through the refining profess of lower court decisions.

Mr. Lee: Mr. Lee, would you care to comment on the position taken in the amicus brief filed by the National Academy of Arbitrators?

Mr. Lee: Well, they of course point but first of all that what the Seventh Circuit did was a dangerous position.

Then they urge basically that there are four possible different meanings of the word "arbitrability", and they urge that we ought no longer to use the word "arbitrability" in connection with... meaning the jurisdiction of the arbitrators which is to be decided by the courts.

My response to that is twofold.

The first is, I think it is unnecessary, quite unnecessary to the decision in this case, because regardless of whether that phrase has one meaning or three or for, the fact of the matter is, we have never had a judicial decision on whether these parties intended this dispute to be arbitrated or not.

And finally, I think it would be a bad idea and the reason it would be a bad idea is that over the years the word "arbitrability" has become a word of art.

You look through this Court's decisions, every one of them since Warrier and Gulf, and it is used as meaning, the judgment that a court makes to determine whether or not the arbitrator has jurisdiction.

Mr. Lee: Well, I wasn't as concerned about the terminology as the substance of their position.

Mr. Lee: Well, basically the substance of their position is similar to Mr. Gold's, and that is that you can interpret from some of the words that the lower court used that it perhaps did decide the arbitrability issue, and my answer to that is twofold.

The first is, I don't think there is any way that in any objective reading of the Seventh Circuit's opinion you can conclude that that court did give us the judicial judgment to which we are entitled.

If that court had decided arbitrability, there would have been no reason to label its holding an exception to the general rule.

If it had decided arbitrability, then it would not have needed to make the candid confession that what it did was inconsistent with Wiley and Sons.

If it had decided arbitrability, it would not have needed to say that the District Court properly eluded consideration of parole evidence.

And certainly if it had decided arbitrability it would not have ordered that the company is ordered to arbitrate the arbitrability issue.

But in any event, even if I am wrong on that, certainly at the very least that question is a serious one.

The Seventh Circuit's error that everyone agrees on needs to be corrected, and the case needs to be sent back to the Seventh Circuit, and if it is correct that the Seventh Circuit remanded something that I cannot believe their opinion did, then there will be ample opportunity on that occasion for them to say so.

Mr. Lee: Mr. Lee, I take it you do not disagree with the Academy's amicus brief that the decision of the jurisdiction is for the court, not the arbitrator.

Mr. Lee: That is exactly right.

That is correct.

Mr. Lee: And the court should not undertake to try to give some guidance to the arbitrator on how the merits should be decided.

On that you, I am sure, agree.

Mr. Lee: Yes, we do, Mr. Chief Justice.

Thank you.

Chief Justice Burger: Mr. Gold.

ORAL ARGUMENT OF LAURENCE GOLD, ESQ., ON BEHALF OF THE RESPONDENT

Mr. Gold: Mr. Chief Justice, and may it please the Court, the petitioner's claim here is that both the District Court and the Court of Appeals failed to fulfill their judicial functions in determining whether or not to order arbitration of the union's grievance in this case.

And in order to evaluate that claim, it seems to me one has to in a bit more detail than petitioners do and with a closer attention to the nature of the case determine what under this Court's precedence the lower courts were required to do.

We do not, and we have made it plain, agree with every word the Seventh Circuit used in stating its views, but this is not the high court of linguistic purity, and the question is whether in substance the Court of Appeals got it right.

Mr. Lee: You are concerned, I take it, only with the result, not how they got there.

Mr. Gold: Well, we are concerned that we are able to demonstrate to you that they did get to the right place, and obviously, given the function of this Court, we are concerned to be of what aid we can in assuring that both the result and the words are right here.

Mr. Lee: What you mean, I guess, is, it is a harmless error case.

Mr. Gold: We think that the Court of Appeals made this in some ways harder than it really is, and we think it would be unfortunate if that led to radically expanding the role of the courts in this error, but in the final analysis we think that what the Court of Appeals did and equally as important what the District Court did is exactly what they should have done under the Steelworkers Trilogy, given the nature of the agreement here and the nature of the contentions that both sides have made.

Mr. Lee: I take it, Mr. Gold, you feel that there is less here than meets the eye.

Mr. Gold: Yes, yes.

We do.

We do indeed.

And it is a wonderful illustration.

Mr. Lee: Which is sort of the position of your adversary.

Mr. Gold: That's right, and if we could only agree on the fact that the substance of this dispute ought to move on to arbitration, there would be great harmony here.

What the case does illustrate is that in the labor area particularly when company counsel is as able as company counsel is here, a matter can be stretched from 1982 to 1986 by determining how many angels will dance on the head of the word 1983.

With all those Preliminaries and kind words for the former Solicitor General, on Page 9 of our brief, the red brief, we set but Article VIII of the contract, and Article VIII is entitled to arbitration, and it says if the national union and the company fail to settle by negotiation any differences arising with respect to tie interpretation of this contract or the performance of an obligation hereunder, such differences shall, provided that such dispute is not excluded from arbitration by other provisions of this contract, and provided that the grievance procedures as to such disputes have been exhausted, be referred upon written demand of either party to an impartial arbitrator mutually agreed to by both parties.

This is what is called a standard form broad arbitration clause.

Exactly the kind that was before the Court in the Steelworkers Trilogy.

By its term, any difference between the parties is subject to arbitration, and there is a proviso that there are provisions in the contract which exclude disputes which would otherwise be subject to arbitration.

And we note some express exclusions, none of which the company relies on here.

Rather, in its answer, and at least until the reply brief to this Court, the company put it money on Article IX of the agreement, which we set out at Page 11 of our brief with different emphasis than in the company's brief, but otherwise word for word as it is in the contract, and that provision in its pertinent parts says that the union recognizes the right of the company subject to the limitations contained in the provisions of this contract but otherwise not subject to the provisions of the arbitration clause to exercise the functions of managing the business which involve, among other things, the termination of employment.

Now, the underlying claim by the union here is that Article XX of the agreement which we had set out earlier in our brief and is also set out in the joint appendix which provides that when lack of work necessitates layoffs there will be layoffs in a certain way is a limitation on what management can do in managing a business.

The provision requires that there be a lack of work at a particular place for management to be able to lay people off, and so the union's grievance here is predicated on Article XX, substantive provision which on its face can be read to limit what management does, and it is our view that that being so, Article IX cannot possibly be read as an express exclusion from the broad arbitration provision of Article VIII.

Mr. Lee: Mr. Gold, was your case argued this way before the Seventh Circuit?

Mr. Gold: Yes.

Mr. Lee: And was your opponent's case argued the same way before the Seventh Circuit?

Mr. Gold: I am sure that we will do this to each other, but the company's case has been argued in different ways.

The company's case as stated in its answer and elaborated in its briefs rests on Article IX.

Mr. Lee: But, you know, if the company's argument was presented in those terms to the Seventh Circuit, your argument was presented in the terms you have just presented to us.

I dare say both of you were astounded to get the Seventh Circuit's opinion.

Mr. Gold: I couldn't have been astounded because I wasn't participating at that point.

0 [Generallaughter.]

But it is very difficult for us to understand why the Court of Appeals elucidated its reasons in this way.

Mr. Lee: You are saying the agreement... the court should have said this issue was arbitrable and the company is saying the court should have said this issue is not arbitrable?

The Court of Appeals doesn't say either one.

Mr. Gold: It depends... we didn't say that the Court of Appeals should have said that the issue is arbitrable.

I do agree with counsel for the company that this camelion-like word "arbitrable" which is something like what first year law students in civil procedure learn about the word "jurisdiction" is part of the problem.

Our claim is and always has been that under the standard set out by this Court in the Steelworkers Trilogy an order to arbitrate should have issued.

We say that for two different reasons, one of which rests on the American manufacturing part of the Steelworkers Trilogy and the other, and the more directly relevant in my view, on the Warrier and Gulf case.

What we are saying particularly based on Warrier and Gulf is that the court's function when you have a broad arbitration clause of this kind is to determine whether there is some clear exclusion of the union's grievance as the union frames its grievance from arbitration.

Mr. Lee: But that wasn't what the Court of Appeals said, and that wasn't its reasoning either.

Mr. Gold: I wish that I could be more certain of what the Court of Appeals' reasoning was, because there are portions of the opinion which indicate that it went through... the Court of Appeals went through every correct element of the analysis, but I agree with you that the language of the opinion, by talking about leaving arbitrability to the arbitrator and so on makes this a harder case than a case which arose 25 years after Warrier and Gulf should be, and we are not asking the Court in any way, shape, or form to add to that unfortunate confusion.

Mr. Lee: Are you really just arguing that you want an affirmance on a different ground?

Mr. Gold: What we are arguing is that we want an affirmance on the ground of the--

Mr. Lee: Any ground you can get.

Mr. Gold: --On any ground we can get.

0 [Generallaughter.]

But we are arguing that we are entitled to an affirmance of the order.

We think we are led to an affirmance on the ground stated by the District Court, and we are not at all clear that the Court of Appeals rationale or even its reading of the District Court's opinion is the most sensible and straightforward one.

There is a footnote in the Court of Appeals' opinion... I think it is Footnote 4 in the petition, Page 3A of the certiorari petition.

Although is there some ambiguity as to whether the District Court ordered arbitration of the dispute itself or arbitration of the arbitrability issue, we think the latter is the fair reading of the order.

I don't think it is the fair reading at all.

I don't understand how this happened.

Mr. Lee: Of course, if an arbitrator was to live up to the Court of Appeals' judgment, he would first have to consider arbitrability.

Mr. Gold: But--

Mr. Lee: Wouldn't he, under the judgment?

Mr. Gold: --Yes.

Mr. Lee: All right.

Mr. Gold: But arbitrators always have, and the arbitrator as we point out--

Mr. Lee: Well, I know, but only after a court has said it is arbitrable.

Mr. Gold: --Only after a court--

Mr. Lee: And the court never said that.

Mr. Gold: --That is right.

Mr. Lee: So you would be asking for a different judgment.

Mr. Gold: I guess if, as is contrary to all my experience, I was to get exactly what I wanted, I would ask that the following portion of the Court of Appeals judgment be affirmed.

The order of the District Court is therefore affirmed.

Mr. Lee: Where are you reading?

Mr. Gold: And then there is a semicolon which goes on to say the company is ordered to arbitrate the arbitrability issue.

You can read that as adding something or taking something away.

I am not quite clear.

But the District Court--

Mr. Lee: Do you have any quarrel with the District Court's statement of it?

Mr. Gold: --No.

Mr. Lee: If they had affirmed on the District Court's opinion, everyone... perhaps not Mr. Lee, but at least we would have a clearer set of reasons, wouldn't we?

Mr. Gold: Yes, I agree with that entirely, Chief Justice, and we would have a clearer body of law exactly where it stood, I think, before the Court of Appeals... the Court of Appeals added these words.

I do want to pursue the point that Justice White made, though, because it is something that we discuss as the final point in our brief.

It is a fact that Warrier and Gulf creates a presumption, and it says that the courts in these kinds of complex cases where arbitrability is one side of the coin and the merits of the other side of the coin, and the parties, really, by the way they have written the agreement, have made questions of arbitration and questions of the merits turn on many of the same considerations are not to be trapped into using scarce judicial resources to determine whether or not the union's grievance at the bottom is meritorious, but rather the test is whether or not it can be said with positive assurance that this whole dispute should not he decided by an arbitrator.

That is in the final... the very phrasing of the test indicates that is not a final determination, and in Warrier and Gulf on remand to the arbitrator the arbitrator made, for want of a better term, an arbitrability determination.

He assured himself that not only could it not be said with positive assurance that the matter was excluded, bit really that the parties wanted him to answer the merits question, and only then did he go on to decide the merits question.

Mr. Lee: What would you say, Mr. Gold, about a district judge in the first instance being confronted with a demand for arbitration under a contract and the district judge says this is facially, obviously frivolous, nonsense, and I am not going to order an arbitration?

Could he do that?

Mr. Gold: That would be the, to take us back to the Cutler Hammer case and where matters stood before the Steelworker Trilogy, and where, at least until the reply brief in this Court, the company was trying to take us in this case, because the company's ultimate argument is, and it has to be given the language of Article IX of the contract, has to be that there is no limitation contained in the provisions of this contract on the ability to make layoffs.

But the union's claim is that there is a limitation, and the union says where the limitation is.

The union's claim is that the limitation is in Article XX, and that claim may be right and it may be wrong.

There are people in the union, as some of the documents show, who are little weak-kneed about this grievance, but that doesn't mean that it makes a particle of sense in terms of the national labor policy, in terms of industrial peace, or in terms of judicial resources to have the courts look into precisely the same question in the same depth as the arbitrator is going to have to do, and that is why the Warrier and Gulf approach is the proper one, and that brings me back to where I began.

The complaint here is that the company didn't get its day in court.

That depends what the legal standard is.

The company did get its day in court because on the face of this contract, and there is only one other point I want to cover, and with regard to this early New York Court of Appeals case--

Mr. Lee: Before you get to that, Mr. Gold, I am not sure you really responded to my question.

Mr. Gold: --Oh, I apologize.

Mr. Lee: Now let's bring us up into 1986, long after the Trilogy.

The district judge looks at it and says this is utterly frivolous nonsense, and I am not going to bother anybody.

Can he do that, or must be let the arbitrator decide that?

Mr. Gold: I believe that he must under this Court's decisions and in light of Section 203(b) which makes arbitration the preferred means of settling this dispute had the arbitrator decide it.

Mr. Lee: And the terms of the contract.

Mr. Gold: And the terms of the contract.

Have the arbitrator decide it.

That is what the arbitrators are for.

Unions are not perfect in determining what is a good grievance and a bad grievance.

The whole theory of the system, as the court explained, is to have these matters determined by the arbitrator, whether or not the union has a meritorious claim, as long as, as in this case, there is a standard broad arbitration clause, and the company cannot demonstrate, as they are required to do by the language of this contract, that there is any exclusion of this kind of Article XX claim from the provisions of the arbitration clause.

Now, the company would read a case called In Re Western Electric Company, which is a 1951 and '52 case in the New York courts as precluding the arbitration of the grievance here.

First, let me say that the only opinion in In Re Western Electric Company is a four-paragraph, very short paragraph opinion by the trial judge.

Both the Appellate Division in New York and the Court of Appeals in New York issued orders without decisions, and what is printed in the joint appendix is reporters' notes of the arguments of the parties rather than any decision of an Appellate Court.

Mr. Lee: Mr. Gold, if we bought your argument, we wouldn't be affirming the Court of Appeals, we would be modifying his judgment to some extent.

Mr. Gold: I would say that at the very least you would be clarifying, and I think in all honesty you would be modifying.

Mr. Lee: You would be striking out that one--

Mr. Gold: Yes.

Mr. Lee: --provision that directed the arbitrator to decide arbitrability.

Mr. Gold: Right.

Mr. Lee: Now, you didn't cross-petition.

Do you think you are entitled to make this argument just as respondent?

Mr. Gold: Yes, I believe that--

Mr. Lee: Because it does change the judgment.

You are getting more than you got.

Mr. Gold: --Justice White, we have no... we are not getting a thing more than we had before in terms of what arbitrators... arbitrators do.

If the Court of Appeals was ordering the arbitrator to do something that arbitrators did not do, it would seem to me that we would have a problem along the lines you--

Mr. Lee: On that theory then you shouldn't modify the judgment at all.

Mr. Gold: --But that is why--

Mr. Lee: I know, you went through this a while ago.

I guess I didn't--

Mr. Gold: --No, but that--

Mr. Lee: --I just wanted you to play it over again.

0 [Generallaughter.]

Mr. Gold: --No, but that is why I was doing more than... I hope I was doing more than being unresponsive or playing games and try and answer your question.

As we elaborate in the brief, we are not quite certain what the Court of Appeals meant when it said that the arbitrator is to decide arbitrability.

We do know this much.

What the Court of Appeals should have done is go through the analysis it did go through--

Mr. Lee: That you have just gone through.

Mr. Gold: --Right, and say the grievance is ordered arbitrated.

We don't think that the Court of Appeals did any harm.

Mr. Lee: If it had gone through this routine that you say it should have, either way it would have come out, the case probably wouldn't be here.

Mr. Gold: I believe that--

Mr. Lee: Well, may I ask--

--So why should we sit to go through this routine now?

Because it is here, I guess.

Mr. Gold: --I didn't get a vote on the certiorari.

0 [Generallaughter.]

Mr. Lee: Well, Mr. Gold, I take it the last sentence of Judge Grady's order is entirely satisfactory to you, isn't it?

Mr. Gold: Yes.

Mr. Lee: And you would just like us just to do that, and that is the end of the case.

Is that it?

Mr. Gold: Yes.

Mr. Lee: I take the essence of your argument to be that the Seventh Circuit was right for perhaps the wrong reasons, or not--

Mr. Gold: Right.

Mr. Lee: --for all the right reasons.

Mr. Gold: Not all the right reasons.

Mr. Lee: Well, before--

Mr. Gold: Yes.

Mr. Lee: --Before I leave you, that sentence was affirmed by the Court of Appeals.

Mr. Gold: That is correct, and that is why I am in a quandary on how to answer Justice White's--

Mr. Lee: What does Judge--

--Defendant is ordered to arbitrate the grievance, period.

Mr. Gold: --Is what the District Judge said.

Mr. Lee: Well, I know.

Yes.

Mr. Gold: Then the Court of Appeals comes along and says--

Mr. Lee: The Court of Appeals said the arbitrator has got to do something else.

Mr. Gold: --No, but first it said two things.

It says the order of the District Court is therefore affirmed.

Mr. Lee: Right.

Mr. Gold: Semicolon.

Mr. Lee: Yes.

Mr. Gold: The company is ordered to arbitrate the arbitrability issue.

Mr. Lee: Yes.

Mr. Gold: Now, certainly we would have been happy and perhaps the Court would have been happy and the clerk would have been happier if... in terms of managing the docket if that material after the--

Mr. Lee: Mr. Gold, can I take you back for moment to the Western Electric case?

You were telling us that it is not a very impressive body of judicial opinion.

But as I understand your opponent's use of it, he is not so much talking about it as a legal authority but rather as sort of a factual interpretation of the identical provision in the agreement that is at issue here.

And my question to you is, do you think it permissible in doing what a judge is supposed to do on a case like this to go beyond the four corners of the agreement and look at bargaining history and factual matters such as that?

Mr. Gold: --The court in Warrier and Gulf said that if the party resisting arbitration can make a... I wanted to use the exact words... a specific collective bargaining agreement may exclude contracting out from the grievance procedure or a written collateral agreement may make clear that contracting out was not a matter for arbitration, and then I will skip something.

In the absence of any express provision excluding a particular grievance, we think only the most forceful evidence of the purpose to exclude can prevail.

Now, the court doesn't say what the most forceful evidence is, but we would argue that it doesn't make a scintilla of sense to have what happened here happen in this type of proceeding, and I do think that the answer is in an agreement of this kind which says except as excluded in the contract for the parties to get into 10,000 pages--

Mr. Lee: What if this agreement turned out to be the case on all fours as far as the factual pattern, you know, moving people from one place to another, and there was another letter that said this is the way we have always interpreted this particular article for the last 20 years throughout the country and the union agreed.

Could they put that kind of evidence before the judge?

Mr. Gold: --Yes.

I really don't--

Mr. Lee: I know you don't think it's this kind of evidence.

I am not suggesting that.

Mr. Gold: --Yes.

Well, I think it would be formalism of a high degree to say that the only thing you can look at are the words of the agreement, but the common sense of the matter is that what the court seems to have had in mind in Warrier and Gulf is that it be a clear, plain exclusion.

The kind of side agreement you talk about is a clear, plain exclusion.

The problem from the company's standpoint with this earlier arbitration and the subsequent bargaining history is this.

It was a different article of the contract.

The dispute in In Re Western Electric and the New York courts pertained to Article XXII, which had to do with disciplinary actions by the company, and the method of the trial judge in New York was to evaluate whether there was anything in Article XXII which the union was relying on which provided a basis for a meritorious grievance.

So, his method is exact... and he relied on Cutlet Hammer.

His method was to make the judicial inquiry, which this Court says that under Section 301 one is not to make, and the subsequent bargaining history had to do with changes in Article XXII.

The company those what to put in from that bargaining history in the joint appendix, and it is wholly opaque, so the court below was right, we think, in saying that insofar as this evidence does anything, it goes to the merits of the union's Article XX complaint in a proper post-Steelworkers Trilogy situation.

That is a question for the arbitrator.

We are not going to bother about it.

And we do not think that it tips the scale.

So I do think that when you put aside the choice of words and get to the substance of what the District Court did and the Court of Appeals did, the company made all the arguments it had about Article IX, about the underlying New York case, put in all this material about bargaining history, and the plain fact of the matter is that after it was done, the District Court and the Court of Appeals were correct, under this Court's test, unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute, the matter should go to arbitration.

That is where this case is.

It would be a help to the labor bar and to the Court in the future to clarify that the courts have that limited function.

On the other hand, to do what the petitioners ask is to invite the courts deeply into the kinds of amorphous opaque showings that the company made here, and to assure that these matters which should go to arbitration instead turn into a waste of judicial time.

Mr. Lee: Mr. Gold--

--When you say that the labor bar, a help to the labor bar, wouldn't that be a help to everybody?

Mr. Gold: Yes.

Yes, indeed.

Mr. Lee: Mr. Gold, could I ask you a question?

Mr. Gold: Yes.

Mr. Lee: I take it no mandate has been issued by the Court of Appeals here.

I think it has been stayed, according to the--

Mr. Gold: Yes, my colleague says that that is correct.

Mr. Lee: --Sometimes a mandate is a little different from the final words of the Court of Appeals opinion.

And I wonder what would have happened if the Court of Appeals had entered a judgment and mandate, but we don't know, do we?

Mr. Gold: No.

I am advised that there was no formal separate mandate on that issue.

When I said the labor bar, Chief Justice, I meant parties on both sides of these disputes--

Mr. Lee: Of good will.

Mr. Gold: --not just union counsel.

Mr. Lee: Very well.

0 [Generallaughter.]

Chief Justice Burger: Mr. Lee, do you have anything further?

ORAL ARGUMENT OF REX E. LEE, ESQ., ON BEHALF OF THE PETITIONER -- REBUTTAL

Mr. Lee: Very briefly, Mr. Chief Justice.

The strongest statement that can be made in favor of Mr. Gold's position before reforming or whatever it is that he wants to do with this opinion, is that it is uncertain what the Court of Appeals did and what the Court of Appeals said.

Mr. Lee: If the--

--Or what it would do.

Mr. Lee: Or what it would do if it had the case.

Mr. Lee: If it were possible to take an appeal directly from the District Court here, would you have undertaken to bring the case here?

Mr. Lee: Well, what we are entitled to, of course, Mr. Chief Justice, is in any event an Appellate Court review of what the District Court did.

Mr. Lee: Well, let's suppose the Court of Appeals, then, to shorten it, said we adopt the opinion of the District Court.

Mr. Lee: Yes, we would have, Mr. Chief Justice, because I disagrees the Seventh Circuit disagrees with Mr. Gold's reading of the District Court's opinion.

Now, at the very least what you have is eight pages worth of opinion that is going to go into the Federal Reporter and has some very bad law in it, and that is the reason that this Court granted certiorari.

Mr. Lee: Mr. Gold doesn't defend it.

Mr. Lee: That's right, and Mr. Gold doesn't defend it.

Now, under those circumstances, it is obvious--

Mr. Lee: Or at least lukewarm.

Mr. Lee: --Well, and when you get a lukewarm defense, you know that he doesn't really defend it.

Mr. Lee: He is defending the result.

Mr. Lee: That is correct.

Under those circumstances, the Seventh Circuit's opinion just has to be reversed, and so it has to go back.

Mr. Lee: We don't reverse opinions.

Mr. Lee: That's correct, the judgment has to be reversed, and under those circumstances the Seventh Circuit is going to have the opportunity on remand to say what it really meant and to write a very fine order that will do just exactly the right thing.

Now, the second point is, it simply is not correct that the Seventh Circuit got to the right place by the wrong route, even if you could ignore the harm that it did along the process of going through the route.

We are entitled, and everyone in this courtroom agrees that we are entitled to a judicial judgment, and we have not had it.

The Court of Appeals in clearest possible English language says the District Court properly avoided consideration of the extensive parole evidence regarding bargaining history.

In our view, Justice Stevens, the real upshot of that Court of Appeals opinion, and particularly the bargaining history that came after it, and I won't review it, it is there in the joint appendix, is tantamount to the very thing, the very hypothetical that you are mentioning, that this really is that separate side collateral agreement, that this is what we meant all along.

Mr. Lee: But you would agree, would you not, that the bargaining history ought to relate to the question whether the dispute is arbitrable rather than the merits of the dispute?

Mr. Lee: Exactly, and there is not one word, not one word in that bargaining history that pertains to whether the company does or does not have the right to layoff when there is no lack of work in Chicago.

It has nothing to do with that.

So that maybe we are right.

Maybe we are wrong.

But our view as to the significance of that bargaining history is that it is this collateral agreement.

It is the separate letter that says this is the way we have always understood it, and we are entitled to our day in court on that issue.

I started out by saying it is a simple case.

It has now been even more simplified.

The choices are either reverse the Court of Appeals or rewrite its opinion in the event you select--

Mr. Lee: And reform its judgment.

Mr. Lee: --and reform its judgment, and in the event that you elect to rewrite its opinion, I have a number of suggestions as to how that could be done.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Mr. Lee: The Honorable Court is now adjourned until Monday next at 10:00.

Attribution:

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Featured:

Schneider Moving & Storage Co. v. Robbins - Oral Argument

Thu, 30 Aug 2012 22:14:40 +0000

Case:

Schneider Moving & Storage Co. v. Robbins

Media File:

82-1860_19840221-argument

Related Transcript:

82-1860_19840221-argument

Transcript:

ORAL ARGUMENT OF DAVID F. YATES, ESQ., ON BEHALF OF SCHNEIDER MOVING AND STORAGE COMPANY

Chief Justice Warren E. Burger: We will hear arguments next in Schneider against Robbins and Prosser against Robbins.

Mr. Yates, I think you may proceed whenever you are ready.

David F. Yates: Mr. Chief Justice, and may it please the Court, the cases before the Court today, which are consolidated, arise out of a collective bargaining relationship.

Schneider and Prosser are two independent moving companies located in St. Louis, Missouri.

Over a number of years, they entered into a series of collective bargaining agreements with a teamster's local in St. Louis.

In accordance with these agreements, they agreed that they would make contributions to the respondent trustee funds on behalf of regular employees.

The labor agreements further provided that contributions would not be made on behalf of non-regular employees, who are variously referred to in the agreements as part-time, extras, casuals, temporary, and seasonals.

I would like to emphasize at the outset that this particular dispute arises out of the terms of the collective bargaining agreements.

It does not involve the interpretation or construction of statutory rights.

In the collective bargaining agreements, Schneider and Prosser and the unions expressly reserved to themselves the right to resolve differences regarding the meaning or application of the agreements through the grievance and arbitration procedure in the contracts.

They did not provide the trustees would have the right to resolve those questions of coverage, as they are referred to, in litigation in federal court.

I will address--

Unidentified Justice: What if the collective bargaining agreement says there will be a trust agreement, and uses certain words in describing the coverage, and then there is a trust agreement, and it uses the same words about coverage?

David F. Yates: --If there is no question regarding the coverage, then I think that the--

Unidentified Justice: Well, there is a question about what the words mean.

David F. Yates: --Oh, if there is a question about what the words mean in the collective bargaining agreement--

Unidentified Justice: Well, and the same words are in the trust agreement.

David F. Yates: --With respect to the collective bargaining agreement, if the employer and the union have reserved to themselves the right to resolve the coverage question under the contract, I believe that is resolving of the contract.

Under the trust agreement, I believe the trustees of the funds would have the right to resolve that question.

Unidentified Justice: Well, what is the case in this... what is the situation in this case?

David F. Yates: In this situation, the collective bargaining agreements provided that the employers would make contributions on behalf of the regular employees--

Unidentified Justice: Right.

David F. Yates: --and not on behalf of extras, casuals, part-times, seasonal, and temporary.

Unidentified Justice: Yes.

David F. Yates: The trust agreements, on the other hand, conditioned eligibility for benefits on employees for whom contributions were required under the collective bargaining agreement, so it goes back to what the collective bargaining agreement expressly provides.

Unidentified Justice: But it is just as though the trust agreement had used the very same language as the collective bargaining agreement.

David F. Yates: Correct.

It is our position that in effect the trustees have said, we will be bound by the terms of the collective bargaining agreement with respect to the employer's obligation to make contributions.

Unidentified Justice: Mr. Yates, in this particular case involving the Schneider company, as I understand it, the union was decertified--

David F. Yates: That's correct.

Unidentified Justice: --at the time the District Court dismissed.

Now, in that situation, the union wouldn't be available for any arbitration, apparently.

David F. Yates: At the point in time when this case arose, which was 1978 and '79, the union was around.

It still is around today.

And under the decisions of this Court, including Nolde Brothers, which is a fairly recent decision, and Republic versus Maddox, the obligation on the part of the employer and the union to handle this matter through the grievance and arbitration procedure would continue beyond the expiration of the contract.

I believe that's fairly clear.

Unidentified Justice: May I ask you another question?

If you were correct in your position that there is some duty to arbitrate, does the union have a right if it got into a dispute with the employer about what employees were covered and what contributions had to be made, does the union have the right to waive the payment of some of those moneys, to enter into an agreement some way during the course of the collective bargaining period, saying, well, we understand there is a dispute, we will just give up the right to the payment of some particular moneys?

David F. Yates: I believe they do, provided they do it openly and not in a sinister fashion, and I would like to take it back to these--

Unidentified Justice: Is there any authority for that?

I mean, what do you rely on?

David F. Yates: --Okay.

I am relying on their status as the statutory exclusive bargaining representative.

When the collective bargaining agreement is first negotiated, the union at that time is doing precisely what you are addressing now.

The union at that time is deciding with the employer through collective bargaining how to divide the employer's financial pot.

In this case, for example, it was agreed that the employer would make contributions to the funds on behalf of only regular employees, and not on behalf of other non-regular employees.

So, at that point the union is in effect saying, we are waiving, if you may, our claim that the employer should make contributions on behalf of--

Unidentified Justice: Well, they obviously have the right to enter into the collective bargaining agreement in the first instance.

David F. Yates: --Yes.

Unidentified Justice: But really the question is then, is that fixed, so to speak, because of the interplay with ERISA, and so the union can't tinker around with it after that, or waive some portion of the claim, or something like that.

I believe that there are some distinctions that could be made, and the clearest distinction would be between vested pension benefits of employees which cannot be tinkered with.

I think ERISA is fairly clear there, that if the union or the employer attempt to tinker with vested pension benefits, then I think they are interfering with ERISA's statutory rights.

But here we are not talking about employee benefits.

We are talking about the funding obligation, what is the measure of the employer's obligation to make contributions to the fund?

The determination of employee benefits is reserved exclusively to the trustees.

That is up to them to decide.

Here, the employer and the union thought they had a fixed agreement as to what the measure of the funding obligation would be.

During the course of their history, the issue never arose as to whether the employer was complying with that until the trustees conducted an audit.

They believed that contributions were due on behalf of employees who the employer thought were non-regular employees.

That has raised the issue.

It is our position that that goes to the very heart of the bargain between the employer and the union.

The employer and the union reserved the right to resolve those differences between themselves.

Once those issues are resolved, then the trustees have a right to contribute whatever the fixed obligation is.

We are not arguing that.

Mr. Yates, is it not possible that in some situations, at least, that the question of coverage would be identical to the question of contribution?

In other words, if the particular temporary employee is covered, it may be in time the trustees would have to decide whether his rights are vested or not.

David F. Yates: I agree with that, yes.

Unidentified Justice: And if they decided there was vesting there, they then would... you still say they would not have the right to say, well, therefore there must be contributions made on behalf of... on account of that employee.

David F. Yates: I believe that once again there is a distinction between the funding obligation and the determination of employee benefits, and I believe it is within the discretion of the trustees to say that they will continue to provide benefits for an employee even if the union and the employer agree that contributions will not be made for that employee, just as in Kaiser the measure of the funding obligation was the number of tons of non-union coal produced.

It is simply a measure of... upon the plan.

Unidentified Justice: So you could end up with a situation in which the union and the company would agree that we don't have to make contributions on behalf of Employees A, B, and C, but yet the trustees might be convinced they had a duty to pay pensions to those employees.

David F. Yates: That's correct.

Now, it's very likely that the pension fund or the health and welfare fund might say, we will not permit participation on that basis, and that is within their right, too.

The employer and the union must strike a bargain which the trustees then accept, but once having accepted it, they are bound by that bargain.

They are, after all, the product of the collective bargaining process in the first place.

Unidentified Justice: May I ask just one other question?

Does the company have the right to have the issue arbitrated?

David F. Yates: Under this contract, the contract did not expressly provide that the company has the right to submit grievances to arbitration.

That's correct.

Unidentified Justice: The procedures I read, it has to be initiated by the employee, and then go through the--

David F. Yates: That's correct.

That raises a question which troubled the court below, and that is, can the trustees submit a claim to the grievance and arbitration procedure under this contract?

It is submitted that the trustees in this situation raised the issue and are standing in the shoes of exactly the employees who they are claiming contributions are due on behalf of.

That is the casuals and extras.

And it appears... it would seem that the trustees, if they are acting at the partial or... I'm sorry, the part-time employees' behest is... are in fact standing in their shoes.

I am reserving five minutes for rebuttal, so I will sit down--

Unidentified Justice: --Well, would they have to go to the union to get the arbitration going, I assume?

David F. Yates: --Yes.

I... Yes.

Unidentified Justice: And what if the union won't do it?

David F. Yates: I believe that the union has an affirmative duty to review why, and that goes to the heart of the entire issue here.

We think it is appropriate for the union to state why it has not made this claim prior to the trustees raising it.

We believe that the union has an affirmative duty to raise issues and to police the contract, and if there are questions of coverage, they should have been raising them a long time ago.

We believe that we are entitled to our bargain to have the co-author of the agreement involved in this proceeding.

Chief Justice Warren E. Burger: Mr. Bobinette.

ORAL ARGUMENT OF CHARLES W. BOBINETTE, ESQ., ON BEHALF OF PROSSER'S MOVING AND STORAGE COMPANY

Charles W. Bobinette: Mr. Chief Justice, and may it please the Court, the rule of the Eighth Circuit has adopted a position of a presumption against arbitration, and allows the trustees to independently sue the employer and litigation the meaning and the intent of the collective bargaining agreement.

Further, it is to the exclusion of the union, and will not be binding on the union nor its membership.

The effects on the typical labor management relationships as a result of this rule seem obvious.

First of all, it violates the intents of the parties to the collective bargaining agreement, the union and the employer.

Secondly, it invades the traditional province of the union and the employer to collectively bargain and settle their disputes as to what the meaning of that collective bargaining agreement is.

Third, it subjects the employer to inconsistent obligations, and possibly very heavy expenses for having to litigate this particular issue in a multiplicity of forums, and last but not least, it serves a disservice to the judiciary by forcing the courts to hear traditional labor disputes which are well suited for an arbitrator to decide, and which additionally are neither binding on the co-signatories to the collective bargaining agreement, the union in this particular case.

Unidentified Justice: Mr. Bobinette, in these particular cases, it appeared that both the collective bargaining agreement and the trust indenture referred to a right of the trustees to file suit for purposes of enforcing the collection proceedings and so forth.

That is a little different than if the agreements had provided, perhaps, that arbitration was required, and they are silent on that.

Does that make a difference?

Charles W. Bobinette: Well, it comes down to a question of determining what the intents of the parties are.

If you look at the collective bargaining agreement as the wishes and the desires of the settlers to the trust, you look at the intents of the settlers in establishing that particular trust.

What were the intents of the union and the employer at the time they entered into the collective bargaining agreement?

It has been some bother, particularly to the Eighth Circuit, that the trustees have no direct access to the arbitration clause.

That is, they can not flip it on and then proceed into arbitration.

I would suggest the fact that they are specifically not mentioned as parties who can trigger the arbitration provision is an indication that the parties, the union and the employer, never intended to allow them to involve themselves in interpretive disputes.

Given that, and then comparing it to the language contained within the trust indentures, the language in the trust indentures I believe presupposes that the debt or the obligation under the collective bargaining agreement is already established, and that really what is being allowed under the trust indenture is the right to collect delinquencies, and nothing more than that.

And for that reason, I would suggest that that is reasonable to determine, that it was the intent of the parties to the collective bargaining agreement to resolve all interpretive disputes under the... or through the grievance and the arbitration provisions.

These risks that I have mentioned are neither mandated nor warranted by the legislative history, nor by the language or the structure of those federal statutes dealing with the regulation of employee benefits.

Unidentified Justice: Could I ask you--

Charles W. Bobinette: Yes, Your Honor.

Unidentified Justice: --Perhaps I misunderstood you.

Suppose that the trustees lose this coverage issue in litigating with the employer.

Charles W. Bobinette: Yes.

Unidentified Justice: Do you think that finishes the issue?

Or will the employer have to litigate it in a possible arbitration procedure, too?

Charles W. Bobinette: It is very well possible.

I think that by allowing the trustees to litigate independently of the union... We had a motion to add the union in on this case, and we never got to that point.

Certainly they never--

Unidentified Justice: What do you mean, you never got to it?

Was it denied?

Charles W. Bobinette: --No, no, the District Court never ruled on that.

It deferred to arbitration before getting to that particular issue that we raised.

But to answer your question, it is very, very possible that--

Unidentified Justice: Then you lost in the Court of Appeals?

Charles W. Bobinette: --Well, that issue was... yes, we did--

Unidentified Justice: So what if it goes back now?

Can you add the union?

Charles W. Bobinette: --Well, if--

Unidentified Justice: Can you bring the union in?

Charles W. Bobinette: --It would be our position that they are a necessary party to this action, and that would certainly begin to take care of some of these possibilities of inconsistencies and multiplicity of forums.

Unidentified Justice: So that is down the line.

You are back in the District Court now, aren't you, supposedly?

Charles W. Bobinette: Yes.

Unidentified Justice: And doing what?

Litigating with the trustees.

Charles W. Bobinette: Well, waiting for the decision first, but ultimately, right.

Unidentified Justice: Excactly, yes, but if you lose here, you are back in District Court litigating with the trustees.

Charles W. Bobinette: Yes.

Unidentified Justice: And then the question is, can you bring in the union.

Charles W. Bobinette: That will be the next question.

But to answer the first question that you had, it is very, very conceivable that allowing the union... excuse me, the trustees to independently litigate simply encourages the union to sit back and to wait to see what happens.

They will incur no costs.

They will incur no risk.

All they have to do is see how the action turned out.

If they don't like it, then they can arbitrate it, or maybe they can strike.

Unidentified Justice: I know, but you think... what do you think would happen if the union sits back, they aren't made a party to this suit, you lose here, go back to the District Court, and suppose that you win in the District Court and the trustees lose?

Charles W. Bobinette: Yes.

Unidentified Justice: Now, then the union wants to arbitrate, and it says, we don't agree with the District Court.

Do you think they can arbitrate then?

Charles W. Bobinette: Under the Court's decision in W.R. Grace versus Local 759, I would think that--

Unidentified Justice: What is the arbitrator supposed to do?

Charles W. Bobinette: --The arbitrator will take evidence, and listen to it, and attempt to--

Unidentified Justice: And say, I am construing the collective bargaining agreement according to the intent of the parties, and if the federal court decided otherwise, it was just wrong.

Is that what it--

Charles W. Bobinette: --Well, just as the federal court judge has no right to substitute his judgment for that of the arbitrator, I think that we just get into the flip-flop of that.

If the federal court has no right to substitute its judgment for that of the arbitrator, then I think the arbitrator could say, I may make whatever decision I wish to as long as I draw it from the essence of the contract.

Unidentified Justice: --Well, they both can't be right, can they?

Charles W. Bobinette: No, Your Honor.

A serious question does arise, though, that if the trustees do lose in this particular case, what in fact happens?

It is very conceivable that certainly that does not bar the interest of the union or of the employer in this particular... excuse me, the union or the employees in this particular case.

Some ten years down the line it may well be that an individual who has determined through that litigation not to be covered will file a claim for benefits.

At that point in time, the trustees will be foreclosed from coming back against the employer because that issue would already have been litigated.

Any opportunity for recoupment of those benefits will have been lost at that time.

Unidentified Justice: Well, but that would be an argument for making the union a necessary party, I suppose.

Charles W. Bobinette: Yes, Your Honor.

Making them a necessary party only gets halfway there, though.

That protects the questions of multiplicity.

The question that comes back to it is when you've got the union and the employer involved, don't the union and employer have a right to have their bargain honored, and could then the union and the employer--

Unidentified Justice: But when the union and the employer have written up these agreements, and there's a trust indenture and it expressly says the trustees can sue, I think it makes your argument much tougher.

It is not a case where they said expressly arbitration is required by the trustees.

Charles W. Bobinette: --The question of whether or not they could have specifically provided for the trustees being able to arbitrate I think is a question.

Unidentified Justice: Well, but maybe that is not necessary to answer here, because--

Charles W. Bobinette: I'm sorry?

Unidentified Justice: --Maybe we don't have to answer that in this case, because the agreements don't provide for it here.

Charles W. Bobinette: Correct.

Correct.

I understand what you're saying, but I'm just saying that had they included that opportunity to arbitrate, which would in your mind make it much more clear that they wanted them to arbitrate, I doubt seriously whether or not that would be permissible.

Unidentified Justice: Mr. Bobinette, can I just ask you one question?

Charles W. Bobinette: Yes, Your Honor.

Unidentified Justice: Is there anything in the law that would prevent the companies and the union in future collective bargaining agreements from spelling out what procedure they think would be appropriate in this kind of situation?

Charles W. Bobinette: I know of none.

The only limitation that might be imposed is that which I infer from the court's decision in NLRB versus Amex Coal, and that is whether or not these trustees should be involved at all in the question of settlement of grievances, and in answering the question of Justice O'Connor, what I was attempting to allude to is, I don't think that they should have the right to trigger the arbitration clause, because I think that--

Unidentified Justice: You do not think the trustees could be given the right to seek arbitration of a dispute of this kind?

Charles W. Bobinette: --I think there are some serious questions as to whether or not involvement in the settlement of these types of disputes is alien to their fiduciary duties, and the way in which they conduct themselves.

Unidentified Justice: I thought you were arguing that they should have asked for arbitration.

Charles W. Bobinette: Pardon me?

Unidentified Justice: I thought you were arguing in this case that they should have sought arbitration.

Charles W. Bobinette: They should have asked the company to arbitrate the issue, and that the company would trigger the... excuse me.

They should have asked--

Unidentified Justice: The union.

The union.

Charles W. Bobinette: --the union to arbitrate, and the union would go in and arbitrate those particular issues if they felt as though the interpretation of the trustees was meritorious.

The basis on which the Eighth Circuit has made its decision, this is an interpretation of the intent of Congress to not... to separate the trustees from the dependents of the union.

This is drawn from 302(c)(5).

A review of the history, of the legislative history indicates the concerns of Congress were with bribery and extortion and illegal activities.

To the contrary, the Eighth Circuit was concerned with the idea that the union in good faith would not decide to otherwise arbitrate a meritorious dispute.

I don't think that the concerns of Congress were the same concerns that the Eighth Circuit had.

Specfically, I think the construction is supported by looking at the text of Section 302(c)(5) and indicating that there is nothing in the conditions for setting up these trusts which in any way indicates that Congress intended to alter the relationship between the union and the employer in terms of settling its own disputes.

Most recently, in 1980, Congress adopted the Multiemployer Pension Plan Amendments Act specifically under Section 515, and under that section it allows the trustees to institute suit for delinquent contributions.

We have submitted that these underlying contract disputes are not the kind of delinquency actions that Congress had in mind, nor are they simple collection actions that was discussed in the legislative history.

Arbitration is integrally related to determining the extent of the promise provided for in the collective bargaining agreement, and therefore they are defenses which are in fact very much related to the question of the obligation of the employer to pay benefits.

Lastly, the question that has to come up in a person's mind is whether or not Congress intended to allow trustees to involve itself in interpretive disputes under Section 515 of ERISA.

Given the fact that under this section it is mandatory that a judge impose penalties, damages, double interest payments, as well as attorneys' fees, and given the fact that Congress never addressed the question of whether or not trustees can involve themselves in interpretive disputes, it raises a serious question as to whether or not Congress intended employers to suffer the penalties provided for under this section if they in good faith involved themselves in interpretive dispute.

Thank you.

Chief Justice Warren E. Burger: Mr. Luplow.

ORAL ARGUMENT OF RUSSELL N. LUPLOW, ESQ., ON BEHALF OF THE RESPONDENTS

Russell N. Luplow: Mr. Chief Justice, and may it please the Court, the respondent's Central States Pension Fund is the largest Taft-Hartley multiemployer fund in the United States.

It has approximately half a million participants and beneficiaries.

It has over 12,000 contributing employers spread out over 40 states, and it distributes hundreds of millions of dollars to retirees and their dependents in the form of benefit payments.

I think it is important for the Court to understand that who the responsibilities are... what the responsibilities are of the respondents in its relation to... as compared to the union.

The trustees are charged under the statute, under ERISA, to represent in a fiduciary capacity retirees, of which we have approximately 116,000.

Also in our constituency we have active union participants and non-active union participants, the state right to workers.

We also have beneficiaries of the retirees and the participants which includes their spouses and their children.

Now, under ERISA, as we perceive the statute, they are our responsibility.

We have an unwavering, uncompromising duty to protect their interests within the law.

What the petitioners seek here is the imposition of compulsory arbitration upon the respondent's board of trustees.

They seek this notwithstanding the fact that the trustees have not agreed to the imposition of arbitration, notwithstanding the fact that the trustees have no access to nor can they participate in the arbitration process that is submitted by the petitioners, and notwithstanding the fact that ERISA, enacted in 1975, specifically provides, pursuant to MEPA, as it was revised in 1980, that the trustees may sue under a federal specific cause of action, Section 515, which Congress gave us under MEPA, that Congress provided for us a specific forum under ERISA, that they provided for us federal mandatory remedies in delinquent contribution cases where we are successful that are mandatory, including attorney fees and statutory liquidated damages, and nowhere, Your Honors, in the statute or the legislative history is there any mention about Congress intending at any point to insert arbitration as a condition precedent.

Unidentified Justice: Well, it sounds to me as though you would say that this collective bargaining agreement could not have expressly agreed or that the dispute in this case would be submitted to arbitration.

Suppose the collective bargaining agreement had said that the trust agreement itself will say that if there are arguments about coverage, that is arbitrable between the employer and the union.

Suppose it was just as clear as it could be what the parties intended.

Would you say the law would forbid that?

Russell N. Luplow: That, Your Honor... I am not going to dodge your question.

I will answer it very quickly.

It's an open question as the Third Circuit said.

Unidentified Justice: Yes?

Russell N. Luplow: But it is not an open question.

The Third Circuit indicated in the Seamans case that they doubted that the parties to a collective bargaining agreement could force the trustees to amend their trust agreement.

Unidentified Justice: Your argument, the way you were putting it, sounded as though you agreed with the Third Circuit.

Russell N. Luplow: Yes, I do.

Unidentified Justice: Yes.

Well, let me take it one step farther.

Supposing both the collective bargaining agreement and the trust agreement... say that was properly amended by whatever procedure you amend the trust agreement... provided that a dispute such as this should be submitted by the trustees to an arbitration in which all three parties might be heard.

Russell N. Luplow: Yes, I would--

Unidentified Justice: Would that violate any federal statute in your opinion?

Russell N. Luplow: --No, because it is something that the trustees under 404, which we believe is the heart of ERISA, the prudent man rule, is something that the trustees would be empowered to do, because in the final analysis, as we perceive the statute, we are being held accountable, that the legislative history supports the fact that Congress wanted the buck to stop somewhere, and not to have it passing back between unions, employers, and so on, and that we think that the statute therefore enacting 404 gave us some broad discretion within the confines of the common law fiduciary duties, which ERISA codified.

Unidentified Justice: Mr. Luplow--

Russell N. Luplow: Yes?

Unidentified Justice: --could the trustees on their own decide that they want to delegate their responsibility for determining these questions to the union?

Russell N. Luplow: My answer to that, Your Honor, is that we cannot delegate away core fiduciary responsibilities under ERISA, that ERISA has a specific provision that the fiduciary duties, the ultimate accountability, if you will, cannot be delegated to anyone else.

There is one exception under asset management, but beyond that we cannot delegate that authority away.

We can't pass the buck to someone else.

Unidentified Justice: All right.

Well, let me ask you another but somewhat related question.

Suppose the union decided regardless of what the trustees thought that there was a question here about coverage, and they initiated on their own an arbitration under the collective bargaining agreement about the coverage question and got a resolution of it.

Is it your position that the trustees could say, well, we don't agree with that, and we don't think the arbitrator was right, and we're going to file suit and get a different result?

Russell N. Luplow: Yes.

Unidentified Justice: You think you can do that?

Russell N. Luplow: We think that if the result of the arbitration is such that it... as prudent men we think that the procedure or the process itself is infirm--

Unidentified Justice: Or the result was wrong?

Russell N. Luplow: --Or the result was wrong.

Unidentified Justice: You base that on ERISA?

Russell N. Luplow: Yes, we do, Your Honor.

Unidentified Justice: Well, it is really, then, just wholly transformed situation where the trustee's rights are derivative under the collective bargaining agreement and under large parts of that trust agreement to where the trustees are in the driver's seat then.

They are no longer boundy the... they are no longer just third party beneficiaries.

Russell N. Luplow: Your Honor, we think that this is where the tension comes in between ERISA and Taft-Hartley.

We have in effect, as we view the statute, an unwavering obligation to do as prudent men what we think is to protect the participants and beneficiaries, and if we see that a situation has arisen that in good faith and as intelligent, prudent men under the federal fiduciary standard we think is wrong, that we think we have a duty to seek to repair that problem.

Unidentified Justice: Of course, you don't need... to win this case you don't need... we don't... you don't need to prevail on some of these more difficult issues, I take it.

I take it if you... if the collective bargaining agreement really fairly read doesn't preclude your kind of a suit, you win.

Russell N. Luplow: Yes.

Unidentified Justice: And we don't need to hassle about what the result would be if the collective bargaining agreement purported to interfere with your access to court.

Russell N. Luplow: Really, we are talking, Your Honor, about the forum here, and I know that the petitioners have suggested that this is going to open up the floodgates, but the fact of the matter is, Taft-Hartley has been around since 1947, and so have Taft-Hartley trust funds, and so have trustee lawsuits been filed since 1947, and this doctrine, which originated originally under Days Electric, is of recent vintage.

It is 1974.

And not until 1974 has the exhaustion doctrine gained any prominence at all in the federal system, and in that case, Days Electric, decide in 1974 in the Middle District of Florida, the judge there characterized the decision of this Court in Louis v. Benedict as one that this Court ruled in that case, the ruling in that case about unions not being able... or employers not being able to set off against trustees for the transgressions of unions, he said that that was a matter of substantive law, and that to require trustees under a Taft-Hartley collection action to defer to the arbitration process was a rule of procedure, and it did not subvert their rights at all to switch them from court into that forum.

That case was picked up... I'm sorry.

That's not correct.

That case was followed by a District Court in the Howard Martin case in Indiana Federal Court, and it was affirmed by the Seventh Circuit in Howard Martin, and it is interesting to point out in that case that the Seventh Circuit suggested that the trustees' argument that they didn't have access to the tribunal fell of its own weight.

Merely ask the union to file the grievance, the party of primary interest, and that will resolve the problem.

The problem is that we did that, and there was no arbitration.

It was not done, and the Howard Martin Company went into bankruptcy.

I think that one of the main problems that we see is the fact that in our constituency we represent retirees as well as active union participants.

To delegate a basic core fiduciary duty of collecting contributions which is, after all the life's blood of any pension or health and welfare fund, we have to collect the money, and we think that asking the union to handle that phase of our collection work is... creates a problem, because we think that the unions, not for sinister reasons, but for legitimate reasons, often have a dilemma or problems of their own.

We think that there are basic built-in conflicts of interest.

For example, the retirees that we represent the union owes no duty of fair representation to.

Typically what can happen is that the fund will do an audit with its auditors of a company and turn up evidence that employees maybe four or five years ago were not reported properly.

The employer asserts that.

It's a coverage question.

We go to the union and say, would you please... this dispute, we are trying to collect on employees who are no longer around.

They don't belong to the union any more.

They don't even work for the employer any more.

A union as a practical matter may have difficulty trying to do that or even wanting to do it.

There are cost factors involved, and it is sometimes very difficult, and we can't force them to do it.

Unidentified Justice: Well, suppose the union does do it, and steps in, and it is a dispute, and they reach an agreement with the employer that says no payments were due, there's no coverage, and you don't like that result, you think it's wrong under the agreement.

Are you going to live with it, or can you file suit?

Russell N. Luplow: We think that we could file suit.

We also think that the practical effect of it is, first off, the arbitration under Taft-Hartley as it has been developed by this Court and as enunciated by Congress is still, after all, a matter of contract, and the basic... the bottom line here is that we never agreed to this.

As a matter of fact, the petitioners in their collective bargaining agreements agreed in the pension and health and welfare articles which are cited in the appendix to allow the parties who founded the trust to appoint trustees and to be bound by the trust agreement that is put together by the trustees.

In addition to that, they agreed to be bound by all of the provisions of the trust agreement as part of the collective bargaining agreement.

In other words, the trust agreement is incorporated by reference into the collective bargaining agreement, and in the trust agreement itself, as is set forth in the appendix, there is a specific provision that the trustees have a right to file suit in court independent of and not to the detriment of the union.

The union has its own rights.

We think that's fairly clear, and relating to the trilogy and Justice White's opinion in Atkinson versus Sinclair, it is still a matter of contract.

As to the Congressional intent that petitioners alluded to about Congress and arbitration, Congress is no stranger to arbitration.

When it has addressed, it has spoken directly about it, for example, in the Railway Labor Act.

In the Railway Labor Act, it is set forth in our brief, in the Northwest Airlines case, arbitration is mandatory.

It is mandatory under 302(c)(5)(D), deadlock situations.

Congress said arbitration is mandatory.

They said that it is required under the Withdrawal Liability Act of ERISA, but even there Congress said that the arbitrator in that situation is not to act like the typical arbitrator in the collective bargaining sense.

He is to serve more of a judge.

You are either right or your're wrong.

And finally, the desirability of private agreements under 209(d) of Taft-Hartley, which is Congress's expression, says it is the desire, it is the preferred policy, and as this Court has developed through the Steelworkers Trilogy and the Atkinson case, that is the preference, and arbitration is a wonderful thing where the parties have agreed to it and it serves a great purpose in this nation under the labor law.

However, it is still a matter of contract, and we didn't agree to it.

Unidentified Justice: Mr. Luplow, do you think the union is a necessary party in the lawsuit below?

Russell N. Luplow: If we... I do not think so.

As indicated, I think, in the amicus brief filed by the American Federation of Labor in this case, which, while their point of view was relying principally on contract trust agreements, I don't think that they are.

I think that the Ninth Circuit suggested or... and also the Seamens case in the Third Circuit, that if the employer is concerned that the union is going to get another bite at the... to get a shot at him later, or to take him into court later, that the employer can join the union in the lawsuit, or if arbitration is proceeding, as the Ninth Circuit said in the Amaro versus Continental Can case, which we expressed to this Court last week, the court may to avoid the double forum and double exposure grant a stay of the proceedings and defer to the arbitrator.

Unidentified Justice: How does the employer get the union in?

Russell N. Luplow: He can join him as a third party defendant, which was done in... which the counsel here--

Unidentified Justice: Third party defendant?

That means that there's a right over, doesn't it?

Russell N. Luplow: --I don't know the answer to that.

Unidentified Justice: Well, if they are not a necessary party, they can't get them in, and you are saying they are not necessary, and I... you know, I just wonder whether a party shouldn't have a little something to say about the meaning of their agreement and the coverage question.

They are the people who wrote the agreement, and your position is so extreme that you are just letting the... you are saying the parties don't have anything to say about coverage.

The trust tail wags the whole dog in your view.

Russell N. Luplow: Your Honor, the parties... We don't think it's any different than a situation under 301, for example, where federal courts have interpreted contracts, where the parties haven't agreed to a grievance procedure, and the parties in this case and in other cases have agreed to a bargain, but there are some ambiguities in the bargain.

Unidentified Justice: Well, the employer is going to have plenty to say in this lawsuit about--

Russell N. Luplow: Yes, he is.

Unidentified Justice: --if you win, and you wouldn't... what if the union... What if you win this lawsuit and then the union moves to intervene, just to have its say so in the District Court at trial?

Would you oppose the intervention of the union?

Russell N. Luplow: No.

Unidentified Justice: So you think it's a proper party, at least.

Russell N. Luplow: Sure.

Unidentified Justice: But not a third party in the technical sense, where one of the parties is claiming a right over against the third party.

No.

Russell N. Luplow: Okay--

Unidentified Justice: They just intervene.

They just intervene on one side or the other.

Russell N. Luplow: --The union could intervene--

Unidentified Justice: Probably they are going to intervene on your side.

Russell N. Luplow: --Also, of course, the--

Unidentified Justice: Which I wouldn't suppose you would oppose.

Russell N. Luplow: --No.

No, I would not.

Unidentified Justice: I suppose there would be cases in which the employees might want to intervene by parity of reasoning, and I take it they are not necessarily represented by the union insofar as they are making claims against the fund, are they?

Russell N. Luplow: I am sorry, Your Honor.

Unidentified Justice: Would the individual employees necessarily be represented by the union insofar as they might assert a claim to vested rights in the fund?

You can have non-member employees--

Russell N. Luplow: Yes, they can file.

Unidentified Justice: --or employees of... defunct employers, and all sorts of--

Russell N. Luplow: Sure.

I mean, anyone that we mentioned at the top of our argument would have status to sue us under 502.

As we said before, the unions do not have a duty of fair representation to the retirees.

They don't have any duty to the beneficiaries, and they don't have a duty to the trustees, and it is the retirees and the beneficiaries who rely on the trustees.

I mean, we are their representatives.

We are the ones designated by Congress to protect the funding of that fund and their assets and their financial future.

Unidentified Justice: --Well, what kind of a suit... what is the tenor of your suit in the District... You are taking a position on the meaning there, aren't you?

Russell N. Luplow: Yes, the--

Unidentified Justice: You are not just saying like the executor of a will bringing an action to construe a will, are you?

Russell N. Luplow: --No.

Unidentified Justice: Well, why... why shouldn't your suit be more of that kind, where you say, here, we want you to tell us what this language means, judge, and then you take all the evidence and the judge decides?

Russell N. Luplow: Well, in some of the cases--

Unidentified Justice: Why should you be taking a position on it, if you are such fiduciaries?

Russell N. Luplow: --Well, if... our position is that if there is... if it is not clear, and we have potential liability, which we do under ERISA to anybody, a determination has to be made and it has to be done in good faith.

Unidentified Justice: Well, that's right, but why should you have... why should you take one side or the other?

A decision of the court would relieve you of the responsibility, would it not?

Russell N. Luplow: Yes.

Unidentified Justice: Just as a trustee would normally ask for instructions on the construction of a trust, as Justice White suggested.

Russell N. Luplow: Yes, Your Honor.

That is very correct.

That is very true.

Unidentified Justice: I thought you said that ERISA gave you that responsibility.

Is that true?

Russell N. Luplow: To get an instruction.

Unidentified Justice: Can I get an answer to my question?

Russell N. Luplow: Yes.

ERISA gives us the authority to bring an action in federal court, yes.

Unidentified Justice: And does it give you the responsibility to take care and dispose of that money and be responsible for it?

Russell N. Luplow: Yes, it does.

Unidentified Justice: You also have a duty to collect it, don't you?

Russell N. Luplow: Yes.

Unidentified Justice: When you think of it... you've got a duty to collect.

Russell N. Luplow: In order... we have, as one reviews the Congressional purposes, 1029(a), (b), and (c), the responsibilities of trustees under the statute are enormous, and as it should be.

We view it almost as a... we don't know of any higher responsibility that the Congress could place on other citizens than to safeguard the assets of people for their retirement years.

Unidentified Justice: But the discharge of that responsibility doesn't always require that you come down on the side of aggrandisement of the trust, does it?

I mean, just getting an instruction from a court one way or the other would discharge the responsibility.

Russell N. Luplow: Yes.

Another aspect of the case, and there are really two issues, in a sense, although they are interrelated, and that is in the Prosser case, where Prosser has indicated that audits, the scope of an audit is also subject to arbitration.

Our trust agreement... in other words, when we went in to perform an audit on Prosser, they said, wait a minute, you know, you can't audit, because the scope of your audit is also arbitrable, and that... and I wanted to bring that to the Court's attention, that in the trust agreement we have two provisions that address that.

One is production of pertinent records, and also the trustees' power to construe the trust agreement.

Basically, the Central States' funds with half a million people, 12,000 employers over 40 states, some people are surprised when we say this, but the fact of the matter is that we have an honor system of reporting.

There is no other practical way for us to do it.

Monthly the employers fill out a report form and send us a check, and so it is based on an honor system, and the only checks and balances we have, we perform random audits, and we do that through our audit department.

We also know that, under ERISA and also under Department of Labor advisory opinions that have been issued, that the funds must provide coverage and grant pension credits regardless of whether or not the employer makes contributions if he was obligated in the first instance.

We look upon audits as a matter of pure trust administration, and subject only to a federal court's review as to whether or not the scope of our audit was arbitrary and capricious.

Since we have literally thousands of employers and thousands of collective bargaining agreements that range in grievance resolving mechanisms from one arbitrator to a panel of three to joint committees, that it would be absolutely chaotic for a centralized fund of our size to be bound by an arbitrator's decision in Iowa that you have a right to audit for three years, someone in Indiana for one year, the joint committee says five years.

We think that that is particularly a matter of pure trust administration, and that the scope of our audits are really something that should be subject to a court's review as to arbitrary and capricious scope of conduct of it.

In concluding... I see the light is on... I would say this, that the entire statutory scheme of ERISA is to, Number One, to safeguard the assets for retirees and their dependents, and it is to make sure that there is accountability.

We think that the petitioner's position allows for a dilution of the fixing of that responsibility by requiring us to rely on the union who is not our agent under Amex Coal, whom we cannot tell what to do, who itself may have for legitimate reasons a conflict of interest as to the constituents that we represent as opposed to the ones that they represent.

We think that that together with the statutory history makes it clear that the responsibility to collect money that we are entitled to under a collective bargaining agreement is strictly with the trustees, and that any dilution or any rule of law that starts to split that responsibility is not in the best interest of the participants and beneficiaries, and contrary to Congressional intent.

Thank you very much.

Chief Justice Warren E. Burger: Do you have anything further, Mr. Yates?

ORAL ARGUMENT OF DAVID F. YATES, ESQ., ON BEHALF OF SCHNEIDER MOVING AND STORAGE COMPANY REBUTTAL

David F. Yates: Yes, I do.

Mr. Chief Justice, and may it please the Court, with respect to the alluding to the statutory rights here, I think that we are ahead of ourselves in terms of the collective bargaining agreement.

When the union and the employer sit down in collective bargaining negotiations, they at that time in this case negotiated the funding obligation of the employer to the trustees.

They limited that funding obligation to less than all employees covered by the collective bargaining agreement.

At that time they were in fact acting to a certain extent as agent of the trustees.

They were negotiating what the obligation would be.

What the respondents are suggesting here would result in the, as Justice Rehnquist suggested, the trust becoming the tail that wags the dog here.

They would have the right to come in during the term of the contract, state that they don't think that that bargain that was reached in collective bargaining is agreeable to them, is reasonable, and they are going to attempt to upset it.

The same principles--

Unidentified Justice: I don't think that's a fair statement of their position.

They are saying that they don't read the agreement the way... they don't say they have a right to amend the collective bargaining agreement, or ask a court to do that, as I understood the argument.

David F. Yates: --By taking an adversary position as to how the contract should be construed--

Unidentified Justice: They can take the position that this particular employee is in fact covered even though the union has said otherwise, but that is based on how they read the agreement, not a right to amend the agreement, isn't it?

David F. Yates: --Well, yes, that's correct.

I don't think they're saying to amend the words, but that operates as a de facto amendment to the contract if they take the contract and interpret it differently than the employer and the union understood the contract to mean when they negotiated.

After all, this Court has recognized that collective bargaining contracts are based on a history of practices between the employer and the union.

They are not negotiated in a vacuum.

They are based on what the practices have been between the parties.

It seems to me that what is happening here is that the trustees are taking the position that they have the right to come in and question the interpretation given to the collective bargaining agreement by the employer and the union, and if that happens, I think you are going to be removing the entire question of the funding obligation--

Unidentified Justice: How do you know in this case that the union disagrees with the position taken by the trustees?

David F. Yates: --We don't.

I wish we knew what the position--

Unidentified Justice: Well, then you shouldn't say that the trustees are attempting to take a position contrary to the understanding of both parties.

After all, what their suit is going to end up, if you lose this case, there is going to be a trial, and the question is going to turn about what did the parties intend by the collective bargaining agreement.

David F. Yates: --That is correct.

Unidentified Justice: So you are going to really find out just in a different forum what your client and the union meant.

David F. Yates: Our position is, the union has never raised the issue, and that, we think, is important.

Unidentified Justice: I understand that.

David F. Yates: With respect to the inconsistent results, I think there is a legitimate concern of the trustees that there not be inconsistent results.

We believe that using the arbitration process to interpret the contract, and that is what we are talking about, we are just talking about an interpretation problem, that will go further in preventing inconsistent results.

If the trustees lose in the District Court, there is nothing to prevent the union from filing a grievance and proceeding to arbitration or to prevent the union from striking and attempting to obtain something the trustees could not obtain in federal court.

There is nothing to prevent the union and the employer from negotiating an amendment to their agreement.

Unidentified Justice: Mr. Yates, is there anything to prevent you from calling up the union and saying, do you agree with the trustees' reading of this contract?

David F. Yates: Nothing at all.

Unidentified Justice: And if you did that, you told the judge you both agreed, that might be a pretty good defense.

David F. Yates: The respondents have just stated that if they disagree with that interpretation--

Unidentified Justice: I understand.

They would litigate it, but you would then let the judge know how the union felt.

David F. Yates: --Absolutely.

Most certainly.

Chief Justice Warren E. Burger: We will resume at 1:00 o'clock.

Thank you, gentlemen.

The case is submitted.

Featured:

W. R. Grace & Co. v. Rubber Workers - Oral Argument

Wed, 18 Feb 2009 07:11:13 +0000

Case:

W. R. Grace & Co. v. Rubber Workers

Media File:

81-1314_19830228-argument.mp3

Related Transcript:

1982_81_1314_argument.xml

Transcript:

ORAL ARGUMENT OF PETER G. NASH, ESQ. ON BEHALF OF THE APPELLANT

Chief Justice Burger: We will now hear argument next in W. R. Grace Company against a Local of the International Union.

Mr. Nash, you may proceed when you are ready.

Mr. Nash: Mr. Chief Justice, may it please the Court, this case arises here on a petition for certiorari of the Fifth Circuit Court of Appeals.

It involves two arbitration issues in the tension between Title VII of the Civil Rights Act of 1964 and the seniority layoff provisions of a collective bargaining agreement.

In 1973, the EEOC investigated the company's plant in Mississippi and found that there was probable cause to believe that the company had discriminated in its hiring practices on the basis of sex.

In 1974, the company and the union which whom it had a collective bargaining agreement, bargained a new collective bargaining agreement.

At the time, both the union and the company knew of the EEOC's findings, knew that the EEOC was seeking a conciliation agreement which might disrupt the seniority layoff provisions of the collective bargaining agreement, but nonetheless entered into a new collective bargaining agreement, retaining--

Mr. Phillips: Mr. Nash, you said the union had notice.

Does that suggest or do you think that the union was bound by what the company agreed to with the EEOC?

Mr. Nash: --Not necessarily so, Your Honor, but that becomes relevant later on when we get to the argument about the court order that enjoined the company and the union, and whether or not that's a valid defense to a breach of contract action.

On December 11, 1974, the company and the EEOC entered into a conciliation agreement which changed or would change the layoff provisions of the collective bargaining agreement by providing that if there is a layoff in the plant, females must be retained in the workforce in the same percentage at the end of the layoff as they were at the beginning of the layoff.

The reason for that being to protect those recently hired female employees from layoff.

On December 19, 1974, the company had a layoff of some employees.

A few more were laid off in the early part of 1975.

The union filed grievances contending that those layoffs violated the collective bargaining agreement because some more senior men were laid off whereas junior seniority women were retained.

The company amended and then complained in the then present law suit seeking to enjoin the union from processing those grievances to arbitration, added the Equal Employment Opportunity Commission as a defendant and sought a declaratory judgment from the court as to which should apply, the provisions of the EEOC conciliation agreement or the provisions of the collective bargaining agreement.

Mr. Phillips: Was the intimation of the company's position that both of them could not apply?

Mr. Nash: That is correct.

Mr. Phillips: Why did the company take that position?

Mr. Nash: Because--

Mr. Phillips: The company can bind itself with the EEOC, and I should think still continue to be bound with the union.

Mr. Nash: --Possibly, sir, but there was a tension, and I think an admitted tension between the conciliation agreement and the collective bargaining agreement.

Mr. Phillips: I don't see where you get the concept of tension.

Employer A can make an agreement to buy 1,000 bottles from a contractor, and then he can go and make an agreement with another contractor to buy 10,000 bottles.

He may not be able to use both shipments of bottles, but he is bound to both of the people that he has contracted with.

Mr. Nash: That is correct, but I think we have different facts in this case, Your Honor.

First of all, we are dealing with a collective bargaining agreement and an EEOC conciliation agreement, neither of which have historically by this Court been treated as standard commercial contracts.

Secondly, we have in this case an EEOC conciliation agreement which was sought by the Equal Employment Opportunity in order for the employer to come into compliance with the law.

Mr. Phillips: Are you saying that the EEOC agreement under these circumstances binds the union?

Mr. Nash: If the union had notice, as it did, of the EEOC conciliation process, and if the union--

Mr. Phillips: You said a moment ago in answer to my question that the mere fact that the union had notice didn't result in binding the union.

Mr. Nash: --If the union had notice of the process, of the EEOC conciliation process, and was afforded an opportunity to participate in that process, then, yes, I am saying that the conciliation agreement between the company and the Equal Employment Opportunity Commission may amend or change the collective bargaining agreement, but I am not saying that the union was without remedy in that case.

Mr. Phillips: What is your authority for the position you have just stated?

Mr. Nash: The authority for that position is, I think, multiple but primarily PEPSICO, Inc., versus FTC, 472 F2d--

Mr. Phillips: I mean a case from this Court.

Mr. Nash: --179.

Mr. Phillips: Another case from this Court.

Mr. Nash: Furthermore, I think that is consistent with what this Court held in Zipes versus TWA.

Mr. Phillips: So Zipes is your authority from this Court?

Mr. Nash: Yes.

I think the one I am arguing is consistent with that.

There is additional authority and that is the overriding premise underlying Title VII of the Civil Rights Act, that being that the preferred means of resolving Title VII liability is through the conciliation process with EEOC.

Mr. Phillips: If the employer conciliates with the EEOC, he can repudiate any inconsistent agreements he has made?

Mr. Nash: Not to the extent that it forecloses the union from having a remedy, Your Honor.

Indeed, the union does have a remedy in that case.

The remedy either is to participate in the conciliation process and agree or, failing that, to bring an action against the Equal Employment Opportunity Commission and the employer seeking to stay any conciliation agreement it believes is not necessary and not appropriate to remedy Title VII violations.

That remedy, I think, is available to the union and we are not contending that in such a law suit that either the employer or the EEOC can say, no, no, our agreement covers this and you, union, have no cause of action.

Indeed, they would have that cause of action.

Mr. Phillips: How would that cause of action be decided?

What standard of law would govern it?

Mr. Nash: It would be similar to a proceeding in a Title VII now where there is a consent decree, a reasonableness proceeding or a fairness proceeding in which it is determined whether or not the conciliation agreement entered into is in fact reasonable and fair, whether it meets the requirements of Title VII without unduly impinging upon the rights of the majority employees presently in the workforce.

As I say, the employer and the EEOC entered into this conciliation agreement.

The union, in fact, brought grievances.

The employer went into court and sought a declaratory judgment from the court as to which should apply, the conciliation agreement or the collective bargaining agreement.

The court, in November 1976... 1975, came down with a decision holding that the conciliation agreement applies and ordering both the company and the union to abide by the terms of the conciliation agreement and not to abide by the terms of the collective bargaining agreement.

Subsequently, in 1976--

Mr. Phillips: Was that an injunction?

Mr. Nash: --The court, I believe, interpreted it as an injunction, Your Honor.

The same judge heard this case, which is now before this Court, and stated in his opinion there that had the parties not complied with that order, he would have found them in contempt, and that certainly is the way in which at least the company construed that order.

In 1976, as I say, there was a layoff and there were more grievances filed.

In January 1978, the Fifth Circuit Court of Appeals reversed the injunction order that had been issued... or the order that had been issued by the District Court back in 1975.

The Fifth Circuit did on the grounds, basically, of this Court's Teamster decision holding that you can't disrupt otherwise valid seniority provisions in the collective bargaining agreement in order to remedy Title VII violations.

Immediately after the Fifth Circuit's decision, the company reinstated all of the senior men who were laid off to junior women, and the cases then went to arbitration pursuant to the statement of the Fifth Circuit Court of Appeals ordering the parties to arbitrate the company's breach of the seniority provisions of the collective bargaining agreement.

The first arbitration involved a layoff which had occurred in 1976, after the District Court's order.

Arbitrator Sabella in that case said that the company didn't violate the collective bargaining agreement, it had done exactly what the court had ordered it to do, and as a consequence the company should not be liable for back-pay for the employee involved in that case.

A second case was brought before Abitrator Barrett involving three--

Mr. Phillips: Has any remedy been worked out for Mr. Jowers at all?

Mr. Nash: --No.

Mr. Phillips: He is not working for Grace anymore?

Mr. Nash: I don't know whether he is or not.

All of these employees were returned to work immediately upon the Fifth Circuit's decision reversing the District Court's case.

There is nothing in the record.

I am assuming that if he is not working for Grace, it is for some reason other than this case.

All of the senior males were immediately returned to work, and there is no contention here that the company continued to "violate the collective bargaining agreement" after the District Court's order was reversed.

All the men were in fact brought back.

But there has been no award of back-pay for Mr. Jowers.

The second arbitrator, Mr. Barrett, was confronted by the union's contention in that arbitration that he did not have to follow the Sabella award because the Sabella award was considering or considered different factual circumstances.

The union contended in that arbitration that Sabella had dealt with a bumping.

Indeed, Mr. Jowers, rather than having been laid out of the workforce, had merely been bumped from his job down to a lower job, and then ultimately laid off.

Whereas the three subsequent cases that were now being argued before Mr. Barrett involved actual layoffs of senior males from the workforce.

The union contended that these involved different situations, different fact situations, and therefore arbitrator Barrett was not bound by the earlier award of Mr. Sabella.

The arbitrator in that case, arbitrator Barrett, found that in fact the cases involved exactly the same issues.

He found, however, that Mr. Sabella had exceeded his jurisdiction and authority by not referring to the collective bargaining agreement, but by merely finding that it wasn't fair to hold the company liable because it did what a court said it ought to do.

Mr. Barrett ordered back-pay for all of the employees affected by that layoff during the pendency of the court order.

I think it is important to note at this point that the case was tried before arbitrator Barrett and has been tried all the way through the courts as if all of the layoffs here were involved with the court order... followed the court order rather than before the court order.

Indeed, the company raised the distinction between layoffs under the conciliation agreement pre-court order and layoffs that occurred after the court order in the District Court on the initial motions for summary judgment, but noted at that time that the parties had not arbitrated the case based on those distinctions.

The union never picked up on the distinction, nor did the District Court, nor did the Fifth Circuit.

As a consequence, the case we submit comes before you as if all of these layoffs occurred following the court order.

Mr. Phillips: Can't you strip it down even further, Mr. Nash.

Isn't the basic issue here whether arbitrator Barrett's award should be enforced under the enterprise doctrine?

Mr. Nash: No, I don't believe so, Your Honor.

The parties have conceded throughout this litigation, up until the brief on the merits in this Court, that if in fact the Sabella award is "enforceable", then in fact the Barrett award must fail.

That is the agreement, and the understanding of the parties, so I think you must look to the Sabella award.

Mr. Phillips: But that concession is really partly one of fact and partly one of law, isn't it?

Certainly, if there is a concession as a fact, the parties are bound by it.

I don't think parties' concessions of law bind this Court or any other court.

Mr. Nash: I would respectfully disagree to a certain extent.

First of all, I do believe that it is a concession of fact.

Secondly, even if it is a concession of law, I believe that it is too late to change your legal concession after you have already tried the case before the District Court, the Fifth Circuit, in your op. cert memorandum to this court, and none ultimately say, Your Honors, we have got a whole different ballgame, we have got a whole different argument.

Indeed, what we have here is the union... The union filed the first motion for summary judgment in this case in the District Court.

It contended in there that the Barrett award cannot stand because the Sabella arbitration award has to fall.

It has to fall, number one... Barrett is not required to follow Sabella for two reasons.

Number one, Sabella decided a different issue, therefore, Barrett doesn't have to decide that issue.

Secondly, Sabella went beyond his jurisdiction and authority, therefore, his award is void.

The union asked the District Court to determine whether or not, as a matter of law under legal precedent, that award would have been "enforceable", and contended that it was not.

As a consequence, the Barrett award did not... Barrett did not have to follow that award.

The union started the law suit not in any way by saying that there was any reference due to Mr. Barrett.

But indeed started the whole argument and the whole law suit on the basis that if the Sabella award stands, Barrett must fall.

If the Sabella award does not stand, then Barrett must be approved and must be enforced.

That is the way in which the litigation has gone, all the way up until the filing of the briefs on the merits in this Court.

The whole issue has been was the Sabella award "enforceable".

In no instance--

Mr. Phillips: Mr. Nash, there does seem to be language in the brief that was filed by the union in the Court of Appeals that, although not crystal clear, would seem to be contrary to your position and would indicate there was not a waiver of the issue on the Barrett/Sabella award question.

Certainly language in their brief which I have examined would indicate that it wasn't waived.

Mr. Nash: --I think an examination of that language will not indicate that the union at any time argued that any deference was due to Mr. Barrett's award.

Indeed, the reason for that language, if we are talking about the same, is that the company had argued in the District Court and again in the Fifth Circuit that even Barrett couldn't determine as a procedural matter whether or not the Sabella award was valid initially because the union had never brought a law suit to set aside the Sabella award in a timely manner.

Accordingly, everybody was foreclosed from contesting whether or not the Sabella award was valid.

I believe the language you'll find in the union's brief in the Fifth Circuit says, no, that is not true.

We are not foreclosed because we didn't bring a law suit in time.

Indeed, we could give this issue to Barrett to make a determination, but, but that determination is not binding upon the court.

Ultimately, the Barrett award or whatever Barrett had to say would be determined in the courts based upon whether or not the courts, using court precedent, would have enforced the Sabella award.

Yes, I think the language might be susceptible to the question you pose, except for the fact that that was clearly in response to a totally different argument not present in this Court.

At no time did the union ever argue that Barrett's award was due any deference by the court.

It was a flat-out argument that the court must decide whether the Sabella award is valid, and on that decision rides or falls the decision on whether or not to enforce the Barrett award.

I would like to, if the Court please, save the remainder of my time for rebuttal.

Chief Justice Burger: Very well.

Mr. Phillips.

ORAL ARGUMENT OF CARTER G. PHILLIPS, ESQ., ON BEHALF OF AMICUS CURIAE

Mr. Phillips: Mr. Chief Justice, and may it please the Court.

Initially, I note that the government will only address the third issue presented in the petition for writ of certiorari because that is the only issue in which the government has a particular interest.

We do note that the resolution of the third issue is itself contingent on the proper disposition of the first two questions.

If the Court decides either of the first two issues in favor of the petitioner, then there will be no reason to address the issue of special concern to Equal Employment Opportunity Commission in this case.

The Commission is the Federal agency vested with the primary duty under Title VII to eliminate discrimination in the workplace.

In performing this mission, Congress expressly obliged the Commission to attempt in the first instance to conciliate employment discrimination disputes in order to resolve them, if at all possible, without having to resort to judicial proceedings.

Through this informal conciliation process, the Commission every year resolves literally hundreds of cases, in some years even thousands of cases, without having to consume a single second of judicial time.

Conciliation is thus properly regarded both by Congress and the Commission as the most appropriate means of resolving employment discrimination disputes.

Indeed, it is central to the Commission's ability to perform its mission, given the large number of Title VII cases that come before the Commission and the relatively limited resources the Commission has to dispose of those cases.

The Commission submits that it is central to its ability to conciliate disputes that collective bargaining agreements that conflict with arguable requirements of Title VII must be set aside, and that the conciliation agreement that is reached must be given a place of preeminence.

Thus, to the extent that an arbitrator grants the union compensation for breach of a collective bargaining agreement caused by the employer's reliance on a reasonable conciliation agreement, that award must be vacated on review by a Federal court.

In taking this position, the Commission appreciates the importance to the national labor policy both of collective bargaining agreements in general and of arbitrations.

But what is equally obvious is the importance of the national policy under Title VII of eliminating discrimination in the workplace and of remedying completely the effects of discrimination.

Both policies govern employment relationships.

Obviously, they have overlapping coverage.

In some instances they conflict.

In six circumstances where the Title VII requirements and the collective bargaining agreement conflict, this Court has made clear that the requirements of Title VII must prevail.

In the Emporium Capwell decision, the Court expressly stated that when the agreement of the union and the employer conflict with the law, even though that law is found by means of the conciliation efforts of the Commission, the agreement between the employer and the union must be set aside.

Our submission is that that ruling or that statement must apply just as much in the process of a conciliation agreement based on a reasonable determination of what the law requires at the time of the conciliation as it would if this issue were finally settled by this Court.

In our view, in following reasonable conciliation agreements in disregard of the collective bargaining agreements, the best balance is the relevant interest at stake in these kinds of cases.

The result is proper primarily because it encourages settlements with employers that otherwise might be deterred.

In addition, the process of following the conciliation agreements serves as a significant prod to the union to have it involved in the conciliation process.

Third, the expectations of the incumbent employees are adequately--

Mr. Phillips: Mr. Phillips, may I interrupt you right there.

You talk about the interest in getting the union involved in the conciliation process.

What if they called up the union and said,

"We'd like you to attend the final meeting on the conciliation agreement. "

If you asked them directly to get involved, and the union representative came over and said,

"Well, that's fine, except I think our contract is lawful and we want to defend it in the Court of Appeals. "

"So we refuse to agree to any change in it. "

Then, notwithstanding that, they entered into the agreement they did.

Do you think you would have as strong a case?

Mr. Phillips: --Maybe not as strong a case, although I don't think those facts differ... I mean, I don't think that we would set aside the conciliation agreement simply because the union declines to participate in the process.

Mr. Phillips: Even though, as I understand it, the conciliation agreement is founded on a mistake of law.

Mr. Phillips: Yes.

Mr. Phillips: It is founded on the assumption that the seniority provisions were unlawful, which of course turned out to be incorrect.

Mr. Phillips: It is true that this Court's decision in Teamsters cast some doubt on the conciliation agreement, although it is still an open question whether the kind of relief granted in the conciliation agreement might otherwise have been permissible as a remedy for any kind of hiring discrimination.

Mr. Phillips: But the violation, as I understand it, insofar as the sex discrimination charge is concerned, strictly was on the basis that the seniority provisions were unlawful, isn't that right?

Mr. Phillips: Yes, that is true, that is true, although again there was a finding of reasonable cause to believe there had been hiring discrimination, and then whether or not in the circumstances of this particular case, where you have immediate layoffs, it might well have been regarded at that time as a basis for modifying the layoff procedures, that is all.

Mr. Phillips: Is it the EEOC policy in a three-cornered situation like this just to ignore the third party, the union, or to get them involved in the situation?

Mr. Phillips: No, Your Honor, the EEOC's compliance manual expressly provides that notice should be given to the union at any time it appears that provisions in the collective bargaining agreement may conflict with proposed conciliation efforts.

The union is invited routinely to come in and participate.

Mr. Phillips: But if there was a violation here, the union would have been guilty of a violation as well as the employer?

Mr. Phillips: I am sorry.

Mr. Phillips: If the premise for the agreement, namely, illegality, if that was correct, the union would also have been guilty of a violation, would it not?

Mr. Phillips: Of Title VII?

Mr. Phillips: Yes.

Mr. Phillips: Presumably, although there was no charge against the union, so it would have been difficult... They would not have been within the proceeding itself since they had not been charged with violating Title VII, although it does seem that there is a concert of action of sorts that leads to the result that there are no women in the production units at the Southbridge plant.

We suggest that the relevant interests of the various parties at stake, in this case we submit, leads to the conclusion that the conciliation agreement ought to be followed.

We have already discussed the union's interest in this case, in having them participate in the negotiation process.

I think it is also important to realize that the incumbent employees' interests in this case are not violated by virtue of following the conciliation agreement in most instances because, as in this case, the original award in this case followed at that point the judicial decree, but presumably might very well have followed the conciliation agreement itself as a reasonable statement of what the law required.

This collective bargaining agreement contains an illegality clause in it, and thus the reasonable expectations of the employees must be that their collective bargaining rights must give way if Federal law otherwise requires.

Accordingly, by following the conciliation agreement no real violence is ofttimes done to the arbitral process at all.

On the other hand, by following the arbitral process, the employer is completely deprived of any opportunity for some sort of a safe harbor that has been called into question by the EEOC's action in asking them to agree to a particular agreement and, in turn, it will serve as, I think, a clear deterrent in most future cases for any employer to agree to any form of conciliation agreement that requires modification of the collective bargaining agreement.

That result, we submit, is just unwarranted in this context.

The Federal policy of high settlement of Title VII suits should be the controlling factor in this case.

Since the decision of the Fifth Circuit disregards the conciliation agreement for all intents and purposes, and uphold the second award strictly on the basis of the collective bargaining agreement, we submit that that decision must be reversed.

Are there any questions?

Chief Justice Burger: Mr. Gold.

ORAL ARGUMENT OF LAURENCE GOLD, ESQ., ON BEHALF OF THE RESPONDENT

Mr. Gold: Mr. Chief Justice, and may it please the Court.

As we understand this matter at this juncture, there are four questions before the Court.

The first we will label the arbitration clause question.

The second, what Mr. Nash has stated as the concession question.

Third concerns the District Court order, and the last the EEOC conciliation agreement.

I intend, if that is permissible, to address those question in that order.

With regard to the substance of the question concerning the arbitration award, this is a case by the company to overturn a particular arbitration award, the award rendered by arbitrator Barrett and called the Barrett award.

Arbitrator Barrett was faced with a threshold issue in considering the grievances filed with him, which is quite common, namely, what deference if any is to be accorded to a prior arbitrator's award in dealing with the same aspects of the contract.

Arbitrator Barrett determined not to follow the prior award, the so-called Sabella award, which had never been taken to court and was a preexisting determination concerning the meaning of the contract.

He did so after quite a painstaking and thorough evaluation of the prior award.

He did so by erecting that is a far higher standard than arbitrators normally follow in determining whether or not to follow a prior award.

He determined not to follow the prior award.

He came to the conclusion that his obligation in deciding what the express terms of the agreement meant compelled him to look at the agreement to look at the agreement itself and not to handle the matter as arbitrator Sabella had done.

His actions, as I say, were in accord with the normal way arbitrators handle this matter and, if anything, more favorable, far more favorable to the company than is the norm.

In addition, the lower court law is uniform that there is no requirement of law, no Section 301 requirement of arbitral stare decisis.

The parties can bargain about that as they bargain about other matters.

After arbitrator Barrett issued his award, the company was dissatisfied with it, and as is its right, went to court to overturn that award.

We believe that the proper question here, the analytic question that ought to be faced is what standard is the Barrett award insofar as Barrett refused to follow the earlier Sabella award to be judged by.

It is our submission that the standard is the one stated in this Court's Enterprise case.

Did arbitrator Barrett, in fulfilling his obligation, issue an award that draws its essence from the collective bargaining agreement and did he decide... did he interpret the contract since the arbitrator is charged with--

Mr. Phillips: Mr. Gold, you say that it is understood, but I don't know how.

Arbitrator No. 2, does he ignore No. 1, or does he read it in cases to decide?

Mr. Gold: What arbitrator Barrett did here, and what most arbitrators do, is to say that presumptively the prior arbitration award is to be followed, but there is a certain threshold past which an arbitrator is not required to go.

Different arbitrators state that different ways.

It may turn on the particular language of the agreement.

Arbitrators are uniform in believing that at least, absent extraordinary contract language, there is no rigid rule of stare decisis.

Indeed, I need not cite the cases to this Court that say that even in the judicial system, stare decisis is not an invariable and overriding rule.

What arbitrator Barrett did was to give the greatest weight and attention to the Sabella award, and he said... If I may, he said, "In my heart"--

Mr. Phillips: He did not ignore it.

Mr. Gold: --He said,

"In my heart I cannot believe that this award is correct. "

"I do not believe that I would be fulfilling my commission if I followed it. "

"Therefore, I do not do so, and I decide this matter on the agreement, on its language, and on the facts of the case. "

His opinion is set out in the Joint Appendix, and it is, I think you will agree, a very thorough and reasoned effort to come to grips with the issue.

The next question is, what does a court, faced with the Barrett award, supposed to do.

Mr. Phillips: Mr. Gold, before you get to the court stage, is there any established doctrine under 301 and arbitrations as to what public law limitations there may be on an arbitrator's award?

Supposing you have the Southern Steamship case versus NLRB, but instead of before the NLRB, it is before an arbitrator and the arbitrator orders a shipping employer to reinstate mutineers.

Would that be judged by exactly the same standard, simply purely contractual as any other award?

Mr. Gold: The answer to that varies at different stages of the proceeding.

Many arbitrators follow the premise that the public law is the public law, and the contract is the contract, and they are only charged as private law--

Mr. Phillips: Never the twain shall meet?

Mr. Gold: --Right.

Private and law enforcement officials to interpret the contract, that is what the parties bargain for.

They want an interpretation of the contract.

The law is perfectly well settled, however, that if an arbitration award is contrary to public law, the courts will set it aside.

So that is why I say that it depends at different stages--

We have noted in our brief, and there is simply no room, I think, either in theory or in terms of this Court's precedents, that an arbitration award that is contrary to Title VII is no good.

The question we have here posed by the government is whether an arbitration award that accords with Title VII somehow is subordinate to the EEOC on what Title VII might and ought to be.

On that we most definitely part company with the agency.

But in terms of the question you raised, there is discord and division at the arbitral stage, but none at all at the judicial stage, or in this Court's precedents.

As I started to say, we believe that the proper approach in evaluating what arbitrator Barrett did with regard to the Sabella award is stated in Enterprise Wheel.

Did the second arbitrator, the arbitrator, whose award the Plaintiff seeks to satisfy, draw the essence of his award from the contract?

If the answer to that question is, yes, we believe the proceeding is at an end.

We suggest that if that rule is not the rule, Enterprise Wheel would be severely cut back to the detriment of the arbitration system and to the detriment of the contract system... I mean the judicial system, for it is a very rare situation in which there has only been one arbitration that can even be said to arguably touch on an issue of contract interpretation.

If the courts, either in this proceeding or generally, are called upon to say, in general, interpreting the contract is for the arbitrator, but it is for us on a de novo theory to determine whether the arbitrator correctly interpreted the final and binding clause which is no more or less a part of the agreement than any other.

I can guarantee you that all the cases that used to come up to court on the theory that the Enterprise standard had not been met, that the arbitrator had failed to draw the essence of his award from the contract, will now come to the courts on a new theory to take advantage of the broader and more generous scope of judicial review, namely, that the award is inconsistent with the prior award, or that the arbitrator misinterpreted his obligations under the final and binding section of the contract.

We believe that that would be directly contrary to Congress's intent in Sections 203(d) and 301, and to the sound administration of this system of law.

Now we come to the supposed default of the union which would preclude a consideration of the argument I have just made, an argument, I would note, that is nowhere answered on its merits in the reply brief of the company, a very thorough and able reply brief.

To go back to the starting point.

This law suit is not a law suit by the union.

This is a law suit by the company, brought by the company to set aside an arbitration award.

The company had a theory.

The company came into court and said: There is arbitration award No. 1, the Sabella award, and arbitration No. 2, the Barrett award.

Unless arbitration award No. 1 is not in the refined terms used here, not subject to being overturned in court, then arbitration award No. 2 is no good.

That was the essence of the company's theory.

The union's brief, which the Court, of course, asked us for a copy of and which all parties have, dealt with that argument in two parts.

Part No. 1, looking at page 11 of the union's Court of Appeals brief is headed:

"Arbitrator Sabella's award is clearly void and unenforceable, and entitled to no binding effect on subsequent arbitrations between the parties as a result of Arbitrator Sabella exceeding his contractual authority. "

The next argument is:

"Arbitrator Barrett acted within his jurisdictional authority in determining the effect of Arbitrator Sabella's earlier award. "

I would be less than candid, and also I don't bear the burden of having had to deal with this case under the time schedules and exigencies of lower court deadlines, if I did not squarely admit that the link between argument one and argument two is not made with complete precision.

I am afraid that in the Eye of God I won't be able to link those with absolute precision either.

Mr. Phillips: Does footnote 21 at the bottom of page 15 in your brief indicate counsel has been penalized for his failings in that regard?

Mr. Gold: Counsel, to my understanding, has gone on to greater and better things.

He is now representing companies.

0 [Generallaughter.]

Not as a reward in any way for his misconduct in representing us.

The problem in terms of the link between argument one and argument two is what standard should arbitrator Barrett's award be judged by.

We have endeavored here in our brief and on argument to state that standard with as much exactness as we can.

That was not done in the Court of Appeals.

It simply was not done, but we do not believe that a Defendant by taking on the arguments made by a Plaintiff and dealing with them in turn, and by failing to spell out the precise standard... the precise interrelation between his answers to the different portions of the Plaintiff's argument ought to be said to have conceded anything.

We believe as well, in terms of the proper approach to this Court, that those who are defending a judgment have the right, and it may well be the duty, to state the principles of law which best accord with the statutory materials and this Court's precedents.

It is often true, and it is part of the system we believe, that as a case moves through the successive stages that due process provides for and that Congress has provided for, arguments become sharper and cleaner.

It would be a terrible indictment of those who have the opportunity to present cases at a higher level if they didn't try to learn from what has gone before.

We don't believe that there was any concession of fact here.

We don't believe there was concession of law here.

But if we are wrong, and if the union failed to sharpen up the issue by saying that the real question here is: Should arbitrator Barrett's award be judged, insofar as it deals with the final and binding clause, be judged de novo, or should it be judged on an Enterprise standard?

We do not believe that that is a concession which prevents this Court in developing the law from developing it according to sound principle or prevents us from arguing the matter in a way which is sound and rational, and may help in that process.

In preparing for the argument after reading the reply brief, we came across a case which I'd just like to note, called Orloff versus Willoughby, 345 U.S. 83.

It is an opinion from the Court by Justice Jackson and let me just--

Mr. Phillips: The parties have changed position as nimbly as if they were dancing a quadrille.

Mr. Gold: --Thank you, Mr. Justice Rehnquist.

But the Respondents after that dance were permitted to argue the case on its merits, and the Respondents prevailed there.

We hope we will be given that opportunity and we hope that we succeed as well as the government did in that case.

We think that what is said there is the proper approach to appellate litigation.

Mr. Phillips: The Teamsters are relying on the right to dance a quadrille?

Mr. Gold: I apologize, sir.

Mr. Phillips: I say, the Teamsters Union... Is this the Teamsters case?

No, it is not the Teamsters.

I was saying, were the Teamsters wanting to dance the quadrille?

Mr. Gold: It would be an interesting sight.

These are the Rubber Workers, and we hope that they do as well.

Mr. Phillips: I see.

Mr. Gold: The third of the questions that I have listed concerns the effect of the District Court's order on companies' contract liabilities.

The company argues that the proper rule is that once the District Court entered its order, the company could not be held liable for contract damages.

Like the first of the questions presented, we believe that that was a contract question for arbitrator Barrett to decide.

The question of when a court order is, for want of a better term, the basis of a claim of impossibility of performance which relieves one of paying damages for a contract breach is not a de novo one.

The general law is that such an order provides an impossibility defense only if the party claiming that defense has not been at any fault in securing the order.

The company plainly can't satisfy that standard here.

The original suit was brought by the company.

The company amended its original complaint to allege that the conciliation agreement was superior to the collective agreement.

I skipped a step.

The company entered into the conciliation agreement after the collective agreement.

The company amended its complaint to say that the conciliation agreement was superior.

The company aligned itself with the EEOC, when the EEOC sought an order to prevent execution of the collective agreement and to prevent the arbitration.

The company, like the union, sought no stay of the District Court order that was eventually entered.

Certainly, in terms of the equitable standard used in general, the company cannot invoke that defense as arbitrator Barrett concluded.

Moreover, this agreement has an express savings clause which provides that the agreement is not enforceable if contrary to law and, as matters have turned out, this agreement is not contrary to law.

The collective agreement is not contrary to law.

That being true, and against the background stated, again we believe that judged as it ought to be judged under the Enterprise standard, what arbitrator Barrett concluded, namely, that the company should not be relieved of its contract liability is correct.

The company argues here that collective agreements are not commercial agreements.

We could not agree more, but nothing comes of that in our view that is any help to the company because in this Court's cases, and most particularly the Carbon Fuel case in 444 U.S., the Court has made it plain that Congress's point in enacting Section 301, and indeed the point overall of the national labor policy, is to provide for stability through free collective bargaining and to provide that agreements once reached are to be followed.

So long as they are lawful, they are to be followed without administrative intervention, without executive intervention, and without judicial intervention.

We would think that the general contract rule, which embodies a good deal of wisdom in itself, applies with a vengeance in the situation of collective bargaining agreements.

Mr. Phillips: How do you respond to the S.G.'s position that, surely, you should not be freed from having the requirements of Title VII imposed?

Mr. Gold: That, Justice O'Connor, turns me to the last of what I have labeled the four questions which concerns the effect of the conciliation agreement.

First of all, as I attempted to state at an earlier point in answering Justice Rehnquist's question, we have no doubt that any collective agreement that is contrary to Title VII simply cannot be enforced.

If the company, having taken the gamble it did against the background of the law, had been proved right, this agreement would not have been... the collective agreement would not have been subject to enforcement.

Arbitrator Barrett's award would have been subject to having been overturned as contrary to Title VII.

Mr. Phillips: That would be true even if there had been no conciliation agreement.

Mr. Gold: Absolutely.

But we believe that it strains Title VII far past the breaking point to say that the EEOC, which Congress did not give the power to adjudicate claims or to enter orders... I just was looking for words of Alexander versus Gardner Denver... the Commission cannot adjudicate claims or impose administrative sanctions.

It would be extraordinarily surprising and wholly irrational to conclude that the EEOC can nonetheless enter into a conciliation agreement with A by which B's rights... contract rights are destroyed, and to say that that conciliation agreement, even though it can't stand the test of being placed against the law in a court, is superior to the collective bargaining agreement.

We think that not only did Congress not grant any such broad powers to the Commission, but as this Court has noted and most recently in the California Brewers case, again in 444 U.S., Title VII was drafted against the background of the national labor policy.

As the Court said there,

"It does not behoove the courts to second guess the processes of collective bargaining. "

Certainly this agency was not given the power to second guess those processes.

It was given the power to take people into court if they could not arrange a conciliation and to demonstrate that what they had was wrong.

Only after that is done, only after the courts have made the findings of fact necessary, is there room for a binding court order which denies somebody a contract right or a right derived from any other source.

In concluding, I would like to address the point that somehow that view will end the conciliation system with regard to situations involving collective bargaining agreements.

There is no substance to that because this is not a zero-sum game where only the employer is at jeopardy.

If the union was presented with the conciliation here, and it took the view that the agreement, the collective bargaining agreement was lawful and it wanted to stick with it--

Mr. Phillips: Suppose, Mr. Gold, that instead of joining in that conciliation agreement, the employer had said,

"I want to protect my flanks. "

and takes it to court.

Then they went into court.

Let's take one hypothesis.

First, the employer put in their defense, and then the decree was entered.

What about that?

Mr. Gold: --Well, in the situations of that kind, Your Honor, what I understand the law to be is that the courts have ample power in determining who has... who bears the liabilities stemming from an unlawful collective agreement, to impose those liabilities on whoever is at fault.

If an employer either said,

"We want to change this contract. "

or said,

"We want to enter into a conciliation agreement. "

the union is put at great jeopardy if it does not agree to do so.

So the imperatives for the union to enter into the conciliation process in many cases are precisely the same as the imperatives that drive anyone into conciliation, a desire to bring one's situation into conformity with law, a desire to avoid the cost of litigation, costs which most unions are not in as good a position as most companies to deal with, and a desire to safeguard against potential liabilities.

Mr. Phillips: Let me change that hypothetical just a little.

Instead of simply putting in no evidence, the employer had stipulated that the conciliation agreement could be the basis for a judgment of the court, in other words, a stipulated judgment.

So that the only difference from this situation that we have is that the conciliation agreement would have been ratified.

Mr. Gold: I see, Your Honor.

I apologize.

I missed the point of your first hypothetical and I apologize.

As I understand the procedural situation in cases of that kind, in any such case the union at the least would be a Rule 19 Defendant and be entitled to argue for and to defend the legality of the contract.

I was envisioning a situation in which both parties recognized that they had an unlawful contract.

Clearly, what is the essence of our concern about the last of the arguments the company makes is that it is designed to either force the union to attack a conciliation agreement to get into court, or to deny a union, which believes that its collective bargaining agreement is lawful which has the contract rights of those who are covered by the agreement to defend, any opportunity to defend them.

We don't believe that Title VII denies unions that opportunity or takes away contract rights in that way, and we would have the gravest due process doubts of the validity of any statute which had the effect of taking these contract rights away through an agreement between the government and A.

Chief Justice Burger: Do you have anything further, Mr. Nash?

Mr. Nash: --Yes, I do, Your Honor, just a couple of things.

The hypothetical you posed at the end is basically what happened in this case.

The company indeed went into court here, but the union and the EEOC joined... filed cross-motions for summary judgment, and it is they that litigated whether or not the collective bargaining agreement was valid under Title VII.

The court determined that, no, it was not valid under Title VII, and an order issued ordering both the employer and the union to comply with the conciliation agreement, not with the collective bargaining agreement.

The substance of this thing is that there was in fact a court order.

REBUTTAL ARGUMENT OF PETER G. NASH, ESQ., ON BEHALF OF THE PETITIONER

Mr. Phillips: I thought I had made my hypothetical slightly different from what occurred here.

I must have been mistaken.

Mr. Nash: I misunderstood, then, too.

Mr. Phillips: Is my hypothetical precisely what was done here?

Mr. Nash: I guess I am saying that it is analogous.

Mr. Phillips: In its effect, it is the same, is that what you are saying?

Mr. Nash: Correct.

The only difference is that this court order ultimately was reversed on appeal by the Fifth Circuit.

The question then is, is the employer or the union in this case, for they too were enjoined, to be excused from breaching the collective bargaining agreement in complying with the court order during the time that the court order was in effect.

We contend that, indeed, they were.

People have to abide by court orders unless and until they are set aside.

In fact, in this case, had the employer gone to the union and said,

"We don't want to comply with that court order. "

"Would you agree with us? "

The union could not have agreed to go back to the collective bargaining agreement because they were enjoined by the order as much as was the employer.

Mr. Phillips: Wasn't the injunction simply an injunction against arbitration, and wasn't that injunction obeyed by the parties?

Mr. Nash: It was an injunction against that, but, no, it went further, Your Honor.

It said--

Mr. Phillips: What more did the injunction say?

Mr. Nash: --It said that the parties are to abide by the conciliation agreement, not by the collective bargaining agreement.

Mr. Phillips: That was part of the injunction?

Mr. Nash: That is my understanding, yes.

That is my recollection.

Furthermore, I believe that the union cannot argue that it was the "company's fault" that this order issued.

They state two bases for that.

Number one, that the company entered into the conciliation agreement, but there is no indication in this case that that in fact was what resulted in the court order.

There was a fully litigated case between the EEOC and the union as to whether or not there had been a violation of Title VII of the Civil Rights Act.

Ultimately, the court found, yes, the District Court, and said that the remedy for that would be a conciliation agreement, but there is no indication that in fact the court would not have come up with some remedy in any event in that litigation.

It merely had the conciliation agreement to turn to, a conciliation agreement which, by the way, was relatively moderate and, indeed, might have protected more senior men than did the conciliation agreement.

Mr. Phillips: Let me ask you a question about your court order argument.

Supposing that there was a case in which A was order to pay B $100,000.

C was a party in the case and said: You really owe me the money, not to B.

C appeals and gets a reversal.

In the meantime the money has been paid to B.

Are you arguing that B can keep the money?

Mr. Nash: I don't think so, but I don't see the relationship.

Mr. Phillips: I don't see how that case is different from yours.

Mr. Nash: Because in this case what the court said was,

"This agreement between you, Mr. Union, and you, Mr. Employer is illegal. "

Mr. Phillips: In my case, it's based on a contract, an argument about what a contract means.

Mr. Nash: In this, the court said:

"That is illegal. "

"I am telling you, don't abide by it, abide by this instead. "

It told both parties to do that.

Mr. Phillips: Right.

Mr. Nash: I think that that is the distinction between our cases.

Mr. Phillips: Those are the arguments that were made in my hypothetical, and as a result the judge said, B.> ["] Then C says,

"No, the money is mine. "

As I understand it, you say that B can keep the money.

I am afraid that I don't follow that.

Okay.

Mr. Nash: Let me go one step further on the fault argument and that is that in this case the union further argues that the fault is that the employer indeed discriminated against the females, and accordingly the employer cannot get out from under its collective bargaining agreement.

Yet, the union argues that any valid, finely enforceable court order saying that there has been a violation of Title VII takes precedence over collective bargaining agreement, but there is no valid, finely enforceable Title VII order that isn't based upon the company's discrimination.

As a consequence, the union argues too much that, indeed, the company's prior discrimination cannot be a basis for saying that the employer is relieved from complying with the court order which changes that seniority system.

Thank you.

Chief Justice Burger: Okay, gentlemen, the case submitted.

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Featured:

Clayton v. Automobile Workers - Oral Argument

Wed, 18 Feb 2009 06:13:09 +0000

Case:

Clayton v. Automobile Workers

Media File:

80-5049_19810304-argument.mp3

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80-5049_19810304-argument_transcript.xml

Transcript:

ORAL ARGUMENT OF JOHN T. McTERNAN, ESQ., ON BEHALF OF PETITIONER CLAYTON IN NO. 80-5049 AND OF RESPONDENT CLAYTON IN NO. 80-54

Chief Justice Burger: We'll hear arguments first this morning in Clayton v. International Union and the consolidated case.

Mr. McTernan, you may proceed when you're ready.

Mr. McTernan: Mr. Chief Justice, and may it please the Court:

This is a Section 301 action instituted by petitioner Clayton, my client, claiming that his employer, petitioner ITT, discharged him without just cause in violation of the collective agreement and that his bargaining agent, the UAW, violated its duty to represent him fairly by withdrawing his discharge grievance from the arbitration process.

Clayton's action seeks what has been called by this Court in Vaca v. Sipes judicial enforcement of his contractual rights, and to us that means either a hearing... it means a hearing before a tribunal which can either reactivate his grievance or determine his right to reinstatement.

In the court below both the ITT and UAW asserted as affirmative defenses Clayton's failure to resort to his internal union procedures.

By virtue of an order of trifurcation that issue was tried first and the district court held that the union procedures were adequate to afford him the remedy he sought and dismiss the action against both defendants.

On appeal the dismissal of the claim against the union was affirmed and the dismissal of the claim against the employer was reversed and remanded for trial.

It is true and uncontestable that Clayton did not resort in any way to his internal union procedures.

He was justified in that, we contend, because to have done so would have been an utterly idle act.

The UAW procedures, we submit, were inadequate as a matter of law; they were inadequate in the facts of this case because they could not effect a reactivation of his grievance or his reinstatement; and they were inadequate because they were incapable of rendering a decision within the four-month period allowed in Section 411(a)(4) in the first proviso.

First, as to our position that the union procedure was inadequate as a matter of law, we rely first upon principles enunciated by this Court in NLRB v. Marine Shipbuilding Workers to the effect that where the employee's complaint raises matters in the public domain and go beyond internal union procedures, the union procedures cannot be used to delay his resort to the court, to the National Labor Relations Board, for vindication of his rights under Section 8(b)(1)(a) of the amended National Labor Relations Act.

Here, too, Clayton asserts rights in the public domain, his right to fair representation, the union's duty fairly to represent him, a duty as developed by judicial interpretation and application of Section 9(a) of the amended National Labor Relations Act.

And we think that the rights involved stand on the same footing as the rights involved in NLRB against the Marine Shipbuilders.

The principle that I have just tried to enunciate or elaborate was applied by the 9th Circuit in Bise v. the I.B.E.W. with a similar result.

But perhaps more fundamental than this and going to the competence of the union tribunal is the fact that we deal here with rights governed by federal law.

This Court has enunciated in a number of cases... Vaca v. Sipes, and Motorcoach Employees v. Lockridge, the automobile case, the name of it escapes me for a moment... Humphrey v. Moore... that there's a duty of fair representation.

The claim of the breach of that duty is part and parcel of the Section 301 action, and it is controlled by federal law, and the last formulation of that in the Lockridge case was to the effect that whether the proof established the requisites of the breach of duty is a matter of federal law.

Unidentified Justice: Well, has the Court really held that these are 301 actions?

Wasn't the genesis of the Vaca v. Sipes doctrine the cases of Tunstall and Steele, years ago, under the Railway Labor Act, when there was no 301?

That is, a failure to represent employees fairly and squarely.

Mr. McTernan: But Vaca v. Sipes, Mr. Justice Stewart, went far beyond the Steele and Humphrey v. Moore, and held that where that breach exists, that is the condition precedent to the employee's right of action under 301 in the court for breach of the collective agreement.

Unidentified Justice: Well, first of all, he has to show and prove that he was not properly represented through whatever the grievance and arbitration procedure may have been by his representative, the union organization.

Mr. McTernan: Right.

Unidentified Justice: And only then, after he's proved that, may he sue the employer.

Is that the?

Mr. McTernan: Right.

And in that--

Unidentified Justice: And any suit against the employer would be a plain vanilla 301 action.

Mr. McTernan: --Well, but the language in Vaca v. Sipes... there are two sections, and one I recall precisely is that the Court said in that opinion that the claim of the breach of the duty of fair representation is part and parcel of the Section 301 action.

And I think that there are other opinions from this Court as well as many in the courts of appeals which say that the breach of the duty claimed is part of the Section 301 action.

And as a matter of fact, it would seem to be necessary to conclude that if proving that breach is a condition precedent to going on to the claim of--

Unidentified Justice: Well, except that the Tunstall and Steele cases were decided in the total absence of anything like 301.

Mr. McTernan: --Quite so; quite so.

Unidentified Justice: And they were actions only against the union, were they not?

Mr. McTernan: That's right.

As I recall, that's true.

Unidentified Justice: I don't think you're right there.

They were up against both, the railroad and the brotherhood, weren't they?

And wasn't the action, the complaint, that then you go to the mediation board?

And the fact was the mediation board was appointed by members of the brotherhood and the employer?

Mr. McTernan: Mr. Justice Marshall, I am unable to recall whether the employers were involved in those actions or not.

Oh, excuse me, they were in Humphrey v. Moore, but in Steele I'm not sure.

But the rest of what you said I accept as true, yes.

That's the way I recall it.

But what I want to emphasize in response to Mr. Justice Stewart is that the claim of breach of the duty of fair representation is coupled with the claim of breach of the collective agreement.

And the employee is allowed to sue the employer in court, thus not being involved in the arbitration proceeding, only by virtue as proof that the union has breached its duty to him.

So I say that if we deal here with matters of federal law under Section 301 both with reference to the claim of the breach of duty and the claim of breach of the collective agreement, we deal with matters which are entrusted to the courts under Section 301, the statute explicitly to this effect, and only the courts can interpret and apply that law; the UAW tribunals are not competent to do so.

And for the courts to delegate, if you will, that responsibility to the courts would be a violation of the principles of Lincoln Mills, and therefore I say that for all of these reasons that this UAW procedure was inadequate as a matter of law.

Unidentified Justice: Well, do you concede, Mr. McTernan, that the liability of the employer under an action such as this is necessarily conditioned on the liability of the union also?

Mr. McTernan: Well, it's conditioned upon proof that the Union breached its duties, and this Court has held that the employees may sue the employer alone and prove in that action the union's breach of duty, and therefore establish his right to go ahead on the merits of his breach of the collective agreement claim.

Now, when we get to damages we have another problem and as the Court said in Vaca v. Sipes, the union's liability to the employee in these cases is only for the increases, if any, and the pecuniary damage done to the employee by reason of the union's conduct, but the union cannot be held liable on damages for the damages caused by the employer's conduct.

And so the doctrine of comparative fault, if you will, is established in Vaca so as to involve an appointment of the damages as between the employer and the union.

Have I answered your question, sir?

Unidentified Justice: Part of that, I suppose, is that if he sues the employer alone and that case went to judgment, the judgment against the employer should not include any damages that were caused by the union.

Mr. McTernan: I would think so, yes.

Well, you see, if he got a judgment against the employer, that might very well be an order of reinstatement with back pay at least up to the point where the union's conduct took over.

Unidentified Justice: Well, not if the union was responsible for the discharge.

Mr. McTernan: Oh, well, now, you've raised a different point.

Unidentified Justice: It's not a different point if the union had maliciously caused the discharge.

I don't know that the employer's going to be liable for back pay.

Mr. McTernan: Mr. Justice White, this Court has been very careful to distinguish those cases in which the conduct of the employer and the conduct of the union were independent and discrete, and where each would be then liable for his proportionate share of the damage caused.

But where they act together, as was pointed out in the opinion in Czosek v. O'Mara, there you have a different problem, and there can be joint liability because they acted jointly.

Unidentified Justice: And what if the union tells a lie to the employer about an employee and the employer discharges him?

Mr. McTernan: This Court has affirmed in a number of cases NLRB orders where it is quite clear that the employer acted under pressure from the union, but yet the employer is responsible for its conduct.

Now, the apportionment of it is a different matter and I'm not arguing that now.

But I say that the employer can be liable and has--

Unidentified Justice: Well, in those cases the employer knows that it's acting under pressure from the union.

Suppose it's acting in perfectly good faith and the union just tells it a lie about?

Mr. McTernan: --Then I think the apportionment rule would apply, but I don't think the employer would be relieved if his duty to reinstate the man.

Unidentified Justice: No, no, but the he certainly wouldn't be paying back pay.

Mr. McTernan: I think that if all of the back pay losses stemmed from the union's conduct, then I would say--

Unidentified Justice: All right, all right.

Mr. McTernan: --Yes?

Unidentified Justice: Mr. McTernan, may I ask you a kind of a preliminary question?

If you assumed, contrary to your argument, that the union did provide a completely adequate remedy, that they had some totally impartial review situation and would give an answer within two weeks, say, would you concede or would you not that in that situation there's a duty to exhaust?

Mr. McTernan: Well, sir, I don't think that it's consistent with Lincoln Mills for the judiciary to delegate to union tribunals the interpretation and application of federal law under Section 301; number one.

And number two, I think that however detached and dignified the union tribunal is and however fast it could act, it simply is unable functionally to effect the most important aspect of the restoration of this employee's contractual rights, namely, his right to have his job back.

Unidentified Justice: Well, supposing the collective bargaining agreement has a provision in it that if that review board found there was inadequate representation there's a duty to reopen the arbitration proceeding, and so on.

I want to assume for a moment that you could conceive of an adequate remedy.

I want to know whatever or not you would still argue... which I don't see why you couldn't, but I just want to know what your view is... would you still say there's no duty to exhaust?

Or does this depend on inadequacy?

And if there is a duty to exhaust, what's the source of it?

Mr. McTernan: I think that there is no unqualified duty to exhaust.

I think that exhaustion which involves the union tribunal and the interpretation and application of federal law would be a miscarriage of the doctrine under Lincoln Mills.

However, I can see the situation in which, if the union tribunal had the power to reactivate the grievant by finding that the union breached its duty, there might be some room there for requiring exhaustion, assuming that the time limitations could be satisfied.

In that we have a problem here.

In this case, Mr. Justice Stevens, there is no provision in the collective bargaining agreement for the arbitration or further processing of grievances which the union decided it had withdrawn in breach of its duty.

As a matter of fact, as I intended to say later, there is evidence in this record of an intent quite to the contrary.

There was a stipulation at the trial that one, the grievance was withdrawn from arbitration.

It was the end of the road so far as the contract remedies were concerned, and my colleagues here advised the trial court that ITT conceded that it had no obligation whatever to reconsider the grievance even if the union found that there had been a breach of its duty.

Unidentified Justice: But you do concede, do you not, under this agreement that the employee couldn't go indirectly into court?

He had to first go to the union and see if the union would press his claim to arbitration?

Mr. McTernan: I don't concede that in this case.

Unidentified Justice: Oh, yes; we're talking about the grievance procedure.

Mr. McTernan: The collective bargaining agreements procedure?

Is that what we're talking about?

Unidentified Justice: Yes; the first stage.

Mr. McTernan: Well, the grievance procedure under the collective bargaining contract provides for a three-step--

Unidentified Justice: But did the employee ask the union to take it to arbitration?

Mr. McTernan: --Oh, yes, and as a matter of fact arbitration was requested and then withdrawn by the union.

Unidentified Justice: Yes, but he had to do that, didn't he?

Mr. McTernan: Oh, no question about that.

He had to invoke his contract remedies.

Unidentified Justice: Right.

Mr. McTernan: That's very clear in all of the cases, yes.

And we don't claim that he would be entitled to side-step those at all.

Of course he's required to do that.

It's when he's deprived of those remedies by union conduct that breaches--

Unidentified Justice: Well, Mr. McTernan, in prior cases, I recall, when it was suggested that if the union breached its duty, and therefore the employee shouldn't be bound by defective grievance and arbitration procedures, I recall the arguments on behalf of the employee were that he shouldn't be sent back to arbitration either, because he would be there being represented, or at least accompanied by, or at least with a party in the picture that had shown it incapable of representing him.

Mr. McTernan: --Yes, there is that problem, and that problem exists, it seems to me, in any reactivation case.

I don't think we have to meet that problem here.

Unidentified Justice: No.

Mr. McTernan: But let me say that in your opinion in Vaca v. Sipes, you considered the question of whether the Court should decide the collective bargaining contract issue or whether it should be remanded for arbitration, and the Court held there, in your language, that this was a remedy for the trial court to consider in light of the circumstances of the particular case.

And it seems to me that's a very sound approach to it, because I don't think it's possible to make an inflexible rule.

I had hoped to save some of my time.

May I desist now and resume later?

Chief Justice Burger: Very well.

Unidentified Justice: Mr. McTernan, before you sit down, there's been called to my attention a recent 2nd Circuit case decided about two weeks ago, Johnson v. General Motors.

Are you familiar with that one at all and how it bears on this?

Mr. McTernan: No, I'm not, Your Honor, I'm sorry.

May I conserve--

Unidentified Justice: It might be worth looking into.

I'm not saying it's positive one way or the other, but I think it does bear on this issue.

Mr. McTernan: --Thank you.

Chief Justice Burger: Mr. Meiners.

ORAL ARGUMENT OF EVERETT F. MEINERS, ESQ., ON BEHALF OF PETITIONER ITT GILFILLAN, ETC. IN NO. 80-54

Mr. Meiners: Mr. Chief Justice and may it please the Court:

I would like to initially direct my comments to the very difficult if not impossible situation which the lower court decision has left the employer in.

The employer must defend the union's good faith as a result of that decision in refusing to go to arbitration.

The employer, of course, was not a party to that decision, wherein the union made the determination that there was no cause in their mind, no justification, to take that grievance that Mr. Clayton had filed and that they had initially requested arbitration.

They concluded that there was no reason to take that matter to arbitration, that they could not prevail on that case.

But the employer was not a party to that process.

In the grievance procedure and arbitration procedure the union is the party that investigates that procedure and makes that determination.

The company did not take any action and was not involved in any manner in a determination or an attempt to convince the union not to proceed to arbitration.

Unidentified Justice: I might have missed it, but the Union didn't give any reason for withdrawing, it just withdrew; isn't that right?

Mr. Meiners: Well, Your Honor, they did, the union steward did write a letter to the National Labor Relations Board advising them that they had investigated the case.

On page 78 of the Appendix there's a copy of that letter indicating that they found no just cause, or that there was just cause for the termination, and indicating also that Mr. Clayton was a union steward and was held to a high standard of care with respect to activities of that type.

Unidentified Justice: Mr. Meiners, as I've tried to think through this argument that the employer is in an impossible position because he doesn't know the facts, but isn't it correct that the employee has the burden, rather severe burden, of showing arbitrary conduct by the union and what it really amounts to is, you have two defenses?

You still have your defense that you didn't reach the contract in the first place, and you have the additional defense that maybe he can't prove arbitrary conduct.

It seems to me that's a better position than the employers are in a lot of lawsuits.

Well, but not as good a position as you're in right now, having won in the arbitration.

Mr. Meiners: Well, having there withdrawn the request for arbitration, that's correct.

The problem that you have is that the unions may get to the... or the employee may reach the underlying grievance without having to be held to the strong burden of establishing a breach of a duty of fair representation that he may have to establish with the union as party.

If the union is not a party, the employee merely has to prove to them a prima facie case.

And assuming that the prima facie case--

Unidentified Justice: Yes, but it's still a tough prima facie case.

Mr. Meiners: --Yes, I certainly admit that.

However--

Unidentified Justice: It's the same legal standard as if the union was a party.

Mr. Meiners: --That's correct.

However, there may be no one to defend against that claim.

The union may no longer have, certainly has no monetary incentive in order to participate in that proceeding.

The union members who made that decision are not under the control or direction of the company.

Unidentified Justice: The argument is made in one of the amicus briefs, I don't remember which, that suppose you have a situation in which for some reason the employee elects just to sue the union and doesn't sue the employer.

And there the union, in order to establish no damages, finds itself in the position of demonstrating there was no breach of contract.

So is it any further--

Mr. Meiners: I'm not sure that the underlying contract issue should be reached in that lawsuit where--

Unidentified Justice: --Well, as a matter of proving no damages it's certainly relevant.

Mr. Meiners: --Well, it's certainly relevant to the issue of proving no damages, but if the employee only proves that there's been a breach of the duty of fair representation, certainly under Vaca there would be this allocation problem.

But his next step then would be to establish that there has been a breach of the contract.

My personal feeling is that neither the company nor the union should be in a situation where either is required to defend the actions of the other in the discharge situation.

Unidentified Justice: Well, they don't have to.

I mean, you still have your own defense that you had no breach of contract.

Mr. Meiners: That's correct.

However, that destroys the efficacy of the arbitration grievance procedure which normally is a complete block to the issue of the underlying, reaching the issue of the underlying grievance unless there's a breach of the duty of fair representation by reason of the lower court's decision in this case.

It is true the prima facie case, is still there but there may not be a defense or if there is a defense which the employer has to present, he has to either subpoena or try and obtain the cooperation of the union in being able to present some kind of a defense to that case.

He is not the party that has the information to present a case that shows the reason why the union did not breach its duty of fair representation.

I think this illustrates from the company's viewpoint the severe problem that we see in this type of situation.

It is not a case that may occur every time by any means, but the union may for political reasons take a viewpoint that is going to remain neutral; it's not going to encourage or assist the employer in presenting a defense to the breach of the duty of fair representation.

Unidentified Justice: Is the employer put in this position you describe every time the union declines to support the employee's claim, or even assuming for perfectly valid reasons, as you do here?

Mr. Meiners: I am sorry, I don't understand, I don't follow the full question.

Unidentified Justice: Does this problem for the employer arise every time a union declines to carry the ball for the employee?

Mr. Meiners: Well, it arises only when there is a claim by the employee that there has been a breach of the duty of fair representation.

Unidentified Justice: Well, I'm assuming that.

Mr. Meiners: And in that situation if the union wants to support... the union usually would take a position, in our view, fairly... if the union is acting fairly and honestly, they would take a position that they're trying to defend and show why the action that they took was taken in good faith.

The employer had no part in that proceeding and should not be responsible, in our view, for attempting to defend a traditional party that the employer opposes.

Unidentified Justice: Except, Mr. Meiners, the real reason, as I understand the briefs, is the reason they abandoned the claim was they thought there was no merit in it.

Mr. Meiners: That's correct.

Unidentified Justice: And you're able to prove that, if the facts are as they're described in some of the briefs, it's a fairly simple case.

Mr. Meiners: Well, that may be true, yes.

We would hope so, if we were ever called upon to present that case.

But the problem here is one of whether or not the union's decision not to proceed to arbitration is one which the employee at will can avoid?

And whether or not the exclusivity that the union has is going to be affirmed, and what burden is going to be placed on the union for their actions as opposed to the company for their actions.

We're certainly more than willing and we're willing initially to defend this matter in arbitration.

But now we're six years down the road.

The back pay that Mr. McTernan referred to as early reinstatement is a situation which has a tremendous impact upon the employer at this point.

Arbitration is a speedy remedy which we would normally go through and have this matter resolved in a few months' time, as opposed to getting involved--

Unidentified Justice: You don't really have an exposure for back pay during the period that you could rely on the arbitration award, do you?

I think you have a duty... assuming he wins ultimately, you might have to reinstate, but you're not liable to back pay for the interim, I don't think.

Mr. Meiners: --That's correct.

Under Vaca, the allocations theory should place that burden on the company.

Unidentified Justice: It would seem to me, just again thinking out loud, that most of the time, I would assume, when the union abandons a claim, it's probably because it doesn't think it has any merit.

I assume it does that thousands of times around the country.

And normally the company is perfectly able to substantiate the reasons there's no merit to claim.

I'm a little puzzled about why it's such a burden.

This doesn't necessarily reach the merit of the ultimate outcome of the case.

Mr. Meiners: If you look at the practical viewpoint of presenting the defense to the breach of the duty, I think that's the... we're skipping over the defense which has to be presented or should be presented.

Why should the employee... I guess maybe we can get back to this... why should the employee be able to go to arbitration and require a resolution of this issue if the union in good faith had made a determination that this is not an issue that should be resolved in arbitration?

Unidentified Justice: Well, I thought that the employee has got the burden of proving a breach of duty, and you don't prove a breach of duty just by saying that the union failed to take it to arbitration.

Mr. Meiners: That's correct.

Unidentified Justice: So, it's a rather... if reasonable men could have differed about the validity of the claim, the union is going to win.

And it's not just a low threshold question that the employer has got to get over.

Mr. Meiners: Well, I think that for a lot of the reasons that we have indicated that this presents... puts the union and the company in a very difficult position to attempt to present a case on behalf of a party which it had no knowledge of.

For instance, we would have to, if this case were to go back down to trial or to arbitration, the company would have to commence some type of a discovery process, compulsory discovery process possibly, in order to obtain the facts which could be used to present a defense to the breach of the duty of fair representation.

Certainly, we're in possession of and would be able to present the facts with respect to the underlying grievance itself.

Unidentified Justice: But here in the discovery, presumably, is you take a deposition of the steward and he says, I investigated the claim and I thought the company was right; that's why I abandoned it.

Mr. Meiners: Except, the union may well not be in a position that they feel that it is either politically or appropriate for them to take an active role in this.

And it may be one where it is difficult for the employer to obtain the cooperation of the union in presenting their claims.

Unidentified Justice: The real issue in these breach of duty cases, as I understand it, at least in an awful lot of them, is whether or not there was real substance in the claim that the employer breached the contract.

Mr. Meiners: Well, but then, in our view--

Unidentified Justice: Your employer is the one that knows that.

And if you can substantiate, even make a reasonable case, that you fired him for cause, like the contract required, there's not going to be any breach of duty in the union, is there?

Mr. Meiners: --No.

There's not going to be a breach of the duty in the union; that's correct.

But the--

Unidentified Justice: But there's also... if one were to adopt the principle that the employee can go directly into court, you're going to inevitably be involved in a lot of line-drawing problems.

While some may be simple as Justice Stevens says, that the union simply decided there was no merit to the claim, but there could be conceivably some very complex reasons why the union decided not to process the claim.

Mr. Meiners: --Yes, there could.

And I think that from the employer's viewpoint, this gets back to the basic problem that we see whereby this type of a case may end up for resolution before a court and/or a jury.

It is our belief that the better method to resolve this controversy would be to have a remand of the case to arbitration and for the arbitrator to review the issues and to make the ultimate decision which he should have made, should have been called upon to make.

But we look at the decision of this Court in the Nolde Brothers case as possibly a basis whereby this Court can determine that there is a theory where, that the exhaustion of internal union remedies may result in the reinstatement of the grievance in the arbitration procedure.

In that case, of course, the--

Unidentified Justice: How can you get the employer back to the arbitration table when the contract time has... when all he promised to do he's done?

Mr. Meiners: --Has expired during the process of?

Unidentified Justice: How can you get him back?

Mr. Meiners: Because I believe that the Nolde Brothers decision raises a substantial question as to whether or not because of the national labor policy that is deemed to be incorporated in the collective bargaining agreement when it is written, that... and in that case the decision indicated that unless the agreement expressly or directly negated the possibility of the grievance in that instance... of course the contract had expired... I think that the same situation can be said to apply here.

There's nothing in the contract which expressly provides that if there is a violation of the breach of the duty of fair representation, that the grievance cannot be reinstated in the procedure.

That subject is not discussed, and based on the strong national policy which favors arbitration as a method of resolution of these disputes, we would suggest that the processing of Mr. Clayton's claims through the internal union procedures could resolve--

Unidentified Justice: Would you say the same thing in a joint board situation where there was no arbitrator?

Mr. Meiners: --Would I say the same thing in a joint board situation?

Well, I think that a joint board in my mind does raise some differences because it is not the normal, independent arbitrator that--

Unidentified Justice: They're in rather widespread use though, aren't they?

Mr. Meiners: --In some areas.

In construction areas they are--

Unidentified Justice: Teamsters' areas?

Mr. Meiners: --Correct.

But it's not in our area, fortunately.

So that, we can see a situation under your Nolde Brothers decision and looking at Vaca v. Sipes, that the employee does have a right that if there is a determination by an internal union remedy, that the employee does have the right to reinstitute the grievance and to proceed back into arbitration.

And I think that one of the points that needs to be examined is the posture of the employee when he goes back to the arbitration procedures.

I think that the employee should raise if... there are a number of different cases, some cases where the union is clearly discriminating against the individual.

In other cases they have merely let lapse the time limit, in a situation where they've let a time limit lapse negligently or whatever the standard is that makes that act be a breach of the duty of fair representation.

Unidentified Justice: Would you agree that after the letter that was written, Appendix page 78, that he hasn't got a very enthusiastic advocate in the arbitration proceeding?

Mr. Meiners: Yes, that's correct, I would agree with that.

Unidentified Justice: He'd have to go out and get his own counsel.

Mr. Meiners: I think that one of the possibilities is that the employee may obtain his own counsel in an appropriate case.

I think that this is a matter which should be raised before the internal union remedy, before the PRB in this instance, to determine that maybe there is an internal discrimination against him, and he needs additional protection.

Unidentified Justice: Anything in union regulations or the contract that limits his right to get independent counsel in the arbitration?

Mr. Meiners: In the arbitration?

Normally, in an arbitration he would not have that right.

Unidentified Justice: Normally... not here.

Under his contract?

Mr. Meiners: Under this contract the employee does not have a right, normally, to have a separate independent counsel.

This is a matter that when the grievance is presented at the arbitration the union of course is the exclusive agent and the only party that's authorized to have a counsel at that meeting.

Unidentified Justice: But here his advocate has in effect entered a guilty plea.

Has he not?

Mr. Meiners: It may be... yes, that's correct.

Unidentified Justice: That would go before the arbitration board, wouldn't it?

Mr. Meiners: I'm sorry?

That letter?

It may, and it may be a reason, a justification, in this type of situation for the employee to have separate independent counsel.

Unidentified Justice: Of course, you agree that the predicate to getting back to the arbitration table or getting to the contract claim at all is contingent on proving the breach of duty by the union?

Mr. Meiners: That's correct.

Unidentified Justice: Which, in the first instance, if you don't require them to... or, in any event, is going to have to be decided by a court.

Mr. Meiners: Well, I don't believe that's true that in any event it would have to be decided by a court.

I think that that is the ultimate--

Unidentified Justice: It's true that the National Labor Relations board has held in Miranda Fuel or some case that that's an unfair labor practice, too, a breach of duty by the unions?

Mr. Meiners: --Yes, that's correct.

That's a separate unfair labor practice.

Unidentified Justice: If there's a suit filed against the employer and the union claiming the union breached its duty and therefore the employer breached the contract, the courts... before there'll be a recovery against the employer there's got to be proof a breach of duty by the union.

Mr. Meiners: That's correct.

Unidentified Justice: Well, then, if that's going to have to be tried out, an awful lot of the facts in the case are going to be there.

Mr. Meiners: Well, that's true, but the court is not required to reach the ultimate issue of whether or not there was a breach of the contract.

The court only has to make a determination that it is reasonable to conclude that there may have been a breach in that the union's action was arbitrary, capricious, and was a breach of the duty of fair representation standard.

The court is not required to reach that issue.

But I'd like to--

Unidentified Justice: I don't understand that, I just don't understand that.

If I were an employer I would think that there would have to be proof of a finding by the court that the union breached its duty before the employer would ever have to face the contract provisions.

Mr. Meiners: --Yes, I agree with that.

Yes.

Unidentified Justice: Well, then, this has to be tried out in a court, and an awful lot of the facts and the circumstances will already be there on the table.

Mr. Meiners: Yes, that is correct.

Unidentified Justice: But the breach of duty concept is a fairly flexible one, is it not?

That the union is considered to have a great deal of discretion as to what claims to press and what not, and what trade-offs to make in the administration of the contract?

Mr. Meiners: Yes.

The union, of course, has a broad range of authority here and is only held to a very stringent standard, and it is generally authorized, of course, under Vaca v. Sipes to be the exclusive agent and to represent the employees in all of their cases, and to make determinations if sometimes the case that the employee is wanting to pursue through arbitration is not justified, and even though it might sacrifice some rights of his for the entire unit, that the approach taken by the union is the correct approach.

So that the union does have a broad authority in that type of determination.

Chief Justice Burger: Well, your time has expired now, Mr. Meiners.

Mr. Meiners: Thank you.

Chief Justice Burger: Mr. Whitman.

ORAL ARGUMENT OF M. JAY WHITMAN, ESQ., ON BEHALF OF RESPONDENT UAW AND LOCAL 509 IN NO. 80-5049

Mr. Whitman: Mr. Chief Justice, and may it please the Court:

The union's approach and concerns and perspectives here are quite different from those of either Mr. Clayton or ITT.

To begin with let's be clear about what this Court does and does not have to decide in this matter.

The union, particularly the UAW, is not interested in getting into the business of judging federal rights.

We are not enfranchised by Article III.

The Court needn't in the situation presented here reconsider or revisit Vaca or Maddox or Hines or any of these issues.

This is a case where Mr. Clayton made no attempt at all, where he was told he was a steward, the remedies were facially adequate.

There are really only three logically possible sorts of case that can arise.

One is this case, the no-attempt case, where no attempt was made.

The second is the case alluded, sort of case, category of case alluded to by Mr. Justice Stevens, where an attempt is made but the contractual provisions are fashioned in a way so that the grievance and arbitration procedures are perpetually open to the possibility that the union through internal review might reverse itself and order its agents to reinstitute the matter into the grievance procedure and hence to arbitration.

That's the case, for example, in the General Motors, Ford, Chrysler--

Unidentified Justice: How could you do that in this case, in the light of this letter?

How could you reverse your position in the light of this letter?

Mr. Whitman: --Mr. Justice Marshall, the answer is that that letter was written by an international representative--

Unidentified Justice: On behalf of you.

Mr. Whitman: --who is one of our line troops and is subject as the agent of a corporation is subject to the board of directors.

Our position is simply that Mr. Clayton should have asked the store manager before he brought suit.

Unidentified Justice: But that's not what this said.

This man says he hasn't got a suit.

Mr. Whitman: That's right.

Unidentified Justice: That's what he says.

You could reverse that in the light of this?

You can't eat it.

It's going to be there.

Mr. Whitman: That takes us to the third set of cases, Your Honor.

If that problem arose in the General Motors system, it would go back into the arbitration procedure.

Or if it arose in General Electric, where there are no time limits, it could be refiled without any trouble.

Or it could arise in a contract where an individual can decide to go to arbitration or not, that the union has no exclusive right to make that decision.

You are quite right; that is not this case.

This is a no-attempt case.

The third sort of case is a case where the attempt is made but if the contract procedures in the regular course of their operations were allowed to function, the grievance and arbitration procedure would close.

Those are the sorts of cases where there is a dispute as to whether or not the matter is arbitrable.

Now, I can address, if I will, all those cases, but I would like to stress that the issues that have been discussed earlier, many of the issues are issues which arise only on that third set of cases, which is not this case.

This is a case where no attempt was made of any sort.

And so the Court really needn't get into those areas, particularly on this sort of a record.

Unidentified Justice: Mr. Whitman, will you help me out on one rather simple point, I guess?

What's the source of the duty of the employee to make an attempt?

Mr. Whitman: The source of the duty, Your Honor, is the discretion of the federal judiciary in Article III.

It's an inherent discretion of the district court to stay its hand until the controversy is ripe, consistent with federal policy and consistent with Republic Steel v. Maddox, to see that individuals are told that they ought to ask the store manager, they ought to give the union a fair opportunity to take a crack at this.

Now, if the fair opportunity comes to ground, if it's futile, I mean, if he's told, as was the case in Glover, that this is not for blacks, that's a different matter.

But the federal courts ought to have the discretion and ought to apply it as a routine matter consistent with Maddox to hold their hand, at least for that period.

Unidentified Justice: Well, is the conclusion that the federal judge should reach... now, it's a kind of the federal judge is both the lawmaker and the decider under your view... that if there's no attempt whatsoever to get the union to review the decision, that ipso facto establishes an inability to prove a breach of the duty of fair representation.

Then it would necessarily follow, it seems to me, that the employer would be entitled to the benefit of that holding.

Would you agree with that at all?

Mr. Whitman: I would agree that if the man is told to go file his appeal and he does, and it comes to an end, then he ought to be able to resume his litigation.

Unidentified Justice: No, but suppose he won't do it?

Mr. Whitman: Well, then, that's a strike on him.

Unidentified Justice: And then what happens as to the suit against the employer?

Dismiss it?

Mr. Whitman: Well, what happens to the suit against the employer?

Well, typically, if... I presume he'd then proceed against the employer.

Unidentified Justice: How?

He has to, without being able to prove the breach of duty by the union, he can't proceed.

Mr. Whitman: No, the question is whether he is not able to prevail against the union because he didn't attempt the internal procedures and didn't give that opportunity to the union.

Unidentified Justice: You think this holding, this exhaustion, just protects the union, and that he could still be free to prove your breach of duty in his suit against the employer?

Mr. Whitman: I don't see any logical impediment to that possibility, Your Honor.

Unidentified Justice: How about the Steelworkers' trilogy?

The idea of keeping this whole kind of dispute out of the federal courts as much as possible?

Mr. Whitman: The better result would be for the trial bench not to rush into putting the employer in the sort of dilemma of nonfinality which was presented in the Hines v. Anchor Motor Freight.

But it may come to the point that the employer simply will not... that the union reverses itself and the employer refuses to reentertain the grievance, or insist on the contractual remedies.

The employer, at that point, it seems to me, has chosen litigation over arbitration.

Now, the employer may not do that.

The contractual provision, like the General Motors or General Electric provisions, might require him to put it back in, in which case the problem will go away.

Unidentified Justice: Does the employee have the same choice as the employer to choose litigation over arbitration?

Mr. Whitman: Your Honor, all that's required to decide this case is to decide that federal district courts have the discretion as a routine matter to require the attempt.

There was no attempt here.

Whether or not, if an attempt were made, and what follows from that is--

Unidentified Justice: Well, what would an attempt have involved, Mr. Whitman, in this case?

Mr. Whitman: --A letter to Douglas/Fraser.

Unidentified Justice: That's all?

Mr. Whitman: That's all.

Unidentified Justice: The President of the UAW?

Mr. Whitman: Yes, Your Honor.

Unidentified Justice: And does he then act on it, or is there some--

Mr. Whitman: He processes it... well, it is typically presented to the International Executive Board which sits in panels of three, and they go out to, the location and they have a hearing and they make the report--

Unidentified Justice: --Nothing of this nature goes to the general convention, annual convention, or anything?

Mr. Whitman: --The step above that, by analogy to the appeal to the stockholders in a corporate case, is to one of two places, at the option of the appellant.

One is to the Convention Appeals Committee, which originated as a standing committee of the convention.

It's a body of delegates, elected delegates, rank and file, selected by lot, that meets every six months and decides that.

Or alternatively, the man can go to the Public Review Board and tell his problems to Dean St. Antoinne and Robin Fleming and gentlemen of that sort.

The choice is the appellant's.

Unidentified Justice: What I'm trying to get at, initially, the first step would have to be a letter to Mr. Fraser?

Mr. Whitman: Yes.

Unidentified Justice: And then some proceeding occurs, and his claim is rejected at that level?

Mr. Whitman: Yes.

Unidentified Justice: Then he has to go to one or the other of two other levels, does he, or whatever it may be?

Mr. Whitman: No, it's the final level.

He has a choice of which one.

Unidentified Justice: But the second one is what, about six months or more, you suggested, to get to the appeals... convention?

Mr. Whitman: It depends on the case.

As I mentioned in the brief, if you have a 30-day time limit and he files on day two rather than on day thirty it's faster.

But we have competing values here.

In the UAW system, for example, we've been very careful to insert due process and protections at each stage.

Of course, as the Court well knows, any time you insert due process there is the prospect of litigants generating delay.

If you insist on a complete record being sent from the local union, one has to write a letter to the local union and get the record and be sure it's complete, and so on.

The same thing is true if counsel is allowed, as is the case here--

Unidentified Justice: Does the union permit counsel in this sort of thing?

Mr. Whitman: --Yes, Your Honor.

No question about that.

So, it's not as... timing of these matters is not as simple as it would appear.

There are these competing values and values which, I suggest... which would ruin a case when attempts have been made, and it was a question of the timing.

It's best left to the discretion of the trial bench; I mean, the trial bench is quite able to recognize the situation when the man is being--

Unidentified Justice: Well, I gather you do suggest that the employee says, no, I don't want to take that year and a half to do all this, I want to go ahead with my lawsuit.

What the trial judge then has to permit him to do is still establish, if he can in the suit against the employer, as I heard you, that there had been a breach of the duty of representation?

Mr. Whitman: --An employer could be... yes, Your Honor.

Unidentified Justice: No, I say, you do suggest that the employee who refuses to go through that recourse in part nevertheless may still prove, in the suit against the employer--

Mr. Whitman: Yes.

Unidentified Justice: --The breach of the duty of representation?

Mr. Whitman: Yes, Your Honor.

And if he does prove that, then he has a right under the contract.

Unidentified Justice: So, to that extent, failure to exhaust does not deny him a right to go ahead with his lawsuit, at least against the employer?

Mr. Whitman: That's right, Your Honor.

Unidentified Justice: Then he doesn't have to name the union as a party?

Mr. Whitman: This Court held in Vaca, as I read it, that he doesn't.

In Vaca, in fact, there was a separate piece of litigation pending at the trial court level.

Vaca was only brought against the union.

This can, it can occur in the reverse situation, or it can occur, and it most commonly does, these days, in the Ford v. Huftman context where both are sued.

Unidentified Justice: Dr. Whitman, then, these upper levels of the union appellate process, if I may call it that, that you've described, is the employee very often successful after defeats in the lower levels?

Mr. Whitman: Well, Your Honor, yes, he often is.

In fact, it's ironic that his percentage of success is greater before the Convention Appeals Committee and the delegates than it is before the Public Review Board.

They more frequently reverse the International Executive Board.

If I had to say as a rule of thumb, of the dozen cases that come up every six months, the national department or part of the union is probably knocked down in at least one, perhaps two of those cases, in recent times.

While this, of course, isn't in the record, some years ago I did a count of the Public Review Board decisions that reversed, and it struck me that the percentage was roughly equivalent to the percentage of trial court decisions that are reversed by this Court, if you compare it to the percentage of cases on which there is a petition for certiorari.

The difference is that the Public Review Board can't deny cert. It has to take them all.

Unidentified Justice: But there are thousands of grievances.

Mr. Whitman: Your Honor, there are very many thousands of grievances.

In the General Motors system alone, if my memory serves, there are something like a quarter of a million grievances filed every year.

Unidentified Justice: In this particular company, it shows on this one, doesn't it, that there are 4,000 already... what is it?

this number is 24,060, the number of this grievance.

So it meant that before then, there were 24,000 that were denied.

This is a lot for one company, isn't it?

Mr. Whitman: I don't know, but it's conceivable, Your Honor.

Unidentified Justice: It is?

Mr. Whitman: There is a lot of controversy, and there are a lot of meritorious and, I must say, frivolous grievances in the industrial system.

But that brings us back to the need for a delicacy in this area.

I mean, the duty of fair representation was created by this Court to preserve the delicate balance between individual rights and the collective interest, and to maintain that.

And that's what Vaca and Steele and all those cases hold, and that this is not an area, for that very reason, for sweeping and per se rules, for taking discretion from the district bench and saying that never in any situation must there ever even an attempt be made.

The only thing the Court needs to decide here is whether in the attempt case, the union should be given a fair opportunity?

Now, practically speaking, a couple of things are going to happen.

Given a man, or woman, the grievant, is going to be flatly wrong about his claim under the contract and the union is going to be able to convince him he's wrong and he'll forget about it and go away, well, he won't forget about it; he'll litigate, frivolous though it may be.

And if that happens, it happens.

There's no... I mean, I'm not going to stand here and say that this procedure is going to warranty the federal judiciary against having to see frivolous grievances--

Unidentified Justice: Mr. Whitman, to the extent that's a valid argument, and it's quite persuasive, it should be available to the employer as well.

Mr. Whitman: --Yes, and for that reason, I think, in the appropriate case the district court would be well advised to say to the employer, wouldn't it be nice if at least on an ad hoc basis you are willing to accept this back into the grievance and arbitration case, should the union reverse itself, or hold its hand to see what happens.

Bur it's a frequent practice in the trial bench now that what the Court does is, it enters a stay of the proceedings and tells the fellow to go off and take an appeal, and then sees what happens.

The problem is that Mr. McTernan's position would remove even that authority.

It's a broad position.

What it really is, is going back to Mr. Justice Black's dissent in Republic Steel v. Maddox, which as you know--

Unidentified Justice: It also goes back behind the J. I. Case case, in effect, doesn't it, where the Court said that under collective bargaining you can't have an individual employee contracting separately with the company?

Mr. Whitman: --True.

It goes back that far.

But the proposition is a simple one that's being urged by Mr. Clayton, that a fellow ought to be able to get a lawyer and sue, now, without attempting, without pausing, without asking the higher-ups in the union, without seeing if they remedy his complaint.

Even if the grievant is not wronged by this claim, there may be a greater wrong, a wrong to the collective interest.

And the union and the individual ought to have a chance to address that and see if the man can't be convinced that the union and the rest of his workers will be worse off.

It's like cross-examination.

You're very often in a position where you don't ask a question because you may be worse off asking it and having the answer than never having asked it at all.

And that's often the case with grievance and arbitration cases.

I mean, if we arbitrate a weak case, the employer may find himself armed with an invulnerable precedent for the unceremonious discharge of arguably similar cases.

And that's where this balance of collective and individual interest is important, and it's a scant price to suggest that a man must at least attempt.

Unidentified Justice: Doesn't it pervade all of the labor law of the last 40 years, more or less, that there should be exhaustion of all these intermediate efforts before getting into the judicial process?

Isn't that the whole concept of it?

Mr. Whitman: Yes, Your Honor, and it's the concept for very practical reasons.

We are dealing with an integrated complex industrial system that has wide varieties in contract language and approaches of employers, and internal union procedures, and this matter oughtn't to be decided by a get-a-lawyer-and-sue approach.

The unions of the country ought to be told that they ought to undertake procedures to get their house in order, and the employers ought to be told that they should adopt and consider situations like the General Motors and General Electric approach that puts it back into the--

Unidentified Justice: Well, Mr. Whitman, I don't understand your suggestion in that if the employee refuses to exhaust, that means he can't proceed against the union, but nevertheless he may proceed against the employer.

Why should he?

Mr. Whitman: --If he refuses to--

Unidentified Justice: If he... well, I gather your position is if the... he made no attempt, is what you said.

Mr. Whitman: --That's right, Your Honor.

Unidentified Justice: And having made no attempt, he has no further course of action against the unions.

Then, why, nevertheless, does he have a cause of action against the employer?

Why should he, if the union is to be off, because he doesn't exhaust against the union?

Why shouldn't the employer also be?

Because if he... it may be decided in the exhaustion, if he does exhaust; the union may decide and he may even agree that the union didn't breach its duty at all.

Mr. Whitman: And the problem may go away.

Unidentified Justice: Well, it won't go away if you say that he can proceed against the employer, meanwhile.

Your position is that he doesn't even need to stay the action against the employer.

He just can go right ahead.

And if in the union procedures it's decided that as between the union and this man the union did all that it was supposed to do, why shouldn't the employer be able to take advantage of that?

Mr. Whitman: The prudent course would be to hold the procedures against the employer and in that effort to see what happened, because it's really premature--

Unidentified Justice: All right, let's assume you do, and the union turns him down, and decides that we didn't breach a duty at all and we're not going to go back to arbitration.

That is all, we just--

Mr. Whitman: --Then both the union and the employer will proceed with the suit.

Unidentified Justice: --I beg your pardon?

Mr. Whitman: If the man goes to the union and the union says, you're wrong, and you won't believe you're wrong--

Unidentified Justice: Then the suit goes forward against both?

Mr. Whitman: --As I say, I can't warranty against frivolous litigation or litigation where the union isn't willing to cure a fault in--

Unidentified Justice: Then, I really don't understand, Mr. Whitman, why you can take the position, if he refuses to proceed to exhaust, that lets the union off but not also the employer?

Mr. Whitman: --Well, Your Honor, I suppose the answer is that it will depend on the factual setting and the employer's attitude and what the union will and won't do, and that is best left to the trial bench in their discretion, because situations vary.

Unidentified Justice: Of course, here, the trial judge thought they should both do likewise, is the way it looks.

Mr. Whitman: Yes, Your Honor, they did.

Thank you, Your Honors.

Chief Justice Burger: Mr. McTernan.

ORAL ARGUMENT OF JOHN T. McTERNAN, ESQ., ON BEHALF OF PETITIONER CLAYTON IN NO. 80-5049 AND OF RESPONDENT CLAYTON IN NO. 80-54 -- REBUTTAL

Mr. McTernan: Mr. Chief Justice and may it please the Court:

Mr. Justice Stevens, as I understand it, the duty to exhaust is a requirement which derives from the first proviso of 411(a)(4).

But whether the requirement will be imposed is a matter of judicial discretion.

In the trial court that requirement was imposed on the ground that the union remedy could afford this man money as a complete answer to his entire problem.

And we take the position, I think it's correct, and it follows the policy laid down in Chambers and other cases which we cite, that he may not be required to resort to a remedy that cannot give him the relief he seeks.

And to require him to take money in place of what I concede to be a unique job is certainly to deny him the relief he seeks.

This man had 8-1/2 years' seniority; he was a black worker, in a market area where the black rate of unemployment is twice that of whites, and he's thrown out and lost his 8-1/2 years and he can never regain it.

He has to have, it seems to me, a right to get at reinstatement.

Now, so far, Mr. Chief Justice, as the tradition of exhausting all of these things before resort to court is concerned, I submit to you that exhaustion cannot be imposed arbitrarily and as an empty procedure.

What can he get out of going to the store manager, as Mr. Whitman put it?

He can get from the store manager at best an admission that the store manager was wrong.

And what does that get him?

It gets him possibly damages from the union sometime, after the liability of the employer is decided, but he still has to go to court to get his reinstatement rights determined.

Unidentified Justice: Mr. McTernan, suppose we agree with you about exhaustion, is one of your questions here also that the union should not have been dismissed from the suit?

Mr. McTernan: Yes, sir, that's our point; that is our position.

Unidentified Justice: And why is that?

Mr. McTernan: Our position is that the union procedures were inadequate as a matter of law--

Unidentified Justice: And so you're just entitled to sue them, that's all.

Mr. McTernan: --Correct.

And this is not simply a matter of jump to a lawyer and sue, it's a question of going to a tribunal where you have a chance of getting what you're seeking.

Unidentified Justice: And if you're going to have to prove a breach of representation, you want the union there as a party so you have the advantages of working against the defendant, all the remedies against the defendant?

Mr. McTernan: Exactly.

Unidentified Justice: Discovery and other things?

Mr. McTernan: Exactly.

And if we were to proceed against the employer alone, as the Court of Appeals said to do, and we should win in the trial court, then we'd have to go back and sue the union again for its share of the damages.

Unidentified Justice: But I suppose there is some great advantage to having them as an opponent in the lawsuit rather than as a third-party witness?

Mr. McTernan: Indeed it is, because then we have the right to discovery under the civil rules.

I would like to close with just one observation about the ease of these union remedies.

It isn't simply a matter of writing a letter to Douglas Fraser.

It's a matter of first going to the union local and having that considered, and then going to the International Executive Board through Mr. Fraser.

Unidentified Justice: How much time does all this take, Mr. McTernan?

Mr. McTernan: Well, 45 days... the local union must decide in 45 days.

The International Executive Board is required to use its best efforts to decide in 60 days, and of course each time there has to be a step to get the appeal filed farther up.

The union president, Mr. Fraser, has unfettered discretion to take a case over and decide it himself whenever he thinks it's appropriate, and he is under no time restraint.

The top level, the Public Review Board of the Constitutional Committee is under no time restraint.

And in that connection, Mr. Justice Brennan, I'd point out to you that the counsel for the PRB has said that this appeal structure is designed to produce an effective decision in approximately nine months to approximately 12 months.

Unidentified Justice: This case has been over four years, hasn't it?

Mr. McTernan: This case has been over five years, sir.

And may I point out to you that there are a couple of judicial experiences with this time thing.

In Ruzicka, which is cited very much in my opponent's brief, the employee had gone 27 months fruitlessly without a remedy under the UAW procedure.

And in the Maxwell case we cite to you, the employee had gone 17 months fruitlessly without a remedy.

And I say that, here, Clayton, had he resorted to this remedy, no matter what time it took, it would have been fruitless because he couldn't have got the relief he needs, and that is reinstatement.

Unidentified Justice: Had he gone back for arbitration, how do we know but it might have been settled a long time ago?

Mr. McTernan: Well, he had hoped, sir... sir, he had no way of going back to arbitration.

The union withdrew the case from arbitration and that was the end of the road.

He had to--

Unidentified Justice: It was conceded, unless you disagree with it... that makes it quite different... that he could get outside counsel and go to arbitration.

Mr. McTernan: --Oh, I think what that was addressed to was this, if there were arbitration after this litigation, he might be able to get--

Unidentified Justice: Not after?

Before he started his lawsuit in the district court, are you saying he could not have had arbitration with his own private counsel?

Mr. McTernan: --Mr. Chief Justice, at that point he could have had no arbitration either with the union representing him or with private counsel representing him.

The grievance was over with, dead, and done, and that's stipulated to by all the parties at trial.

Unidentified Justice: Because of the provisions of the collective bargaining contract.

Mr. McTernan: Exactly.

Exactly.

Unidentified Justice: The procedure was exhausted.

Mr. McTernan: Exactly.

Thank you.

Chief Justice Burger: Very well.

Thank you, gentlemen.

The case is submitted.

Attribution:

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Featured:

United Parcel Service, Inc. v. Mitchell - Oral Argument

Wed, 18 Feb 2009 06:13:05 +0000

Case:

United Parcel Service, Inc. v. Mitchell

Media File:

80-169_19810224-argument.mp3

Related Transcript:

80-169_19810224-argument_transcript.xml

Transcript:

ORAL ARGUMENT OF BERNARD G. SEGAL, ESQ., ON BEHALF OF THE PETITIONER

Chief Justice Burger: We will hear arguments first this morning in United Parcel Service, Incorporated, against William Mitchell.

Mr. Segal, you may proceed whenever you are ready.

Mr. Segal: Mr. Chief Justice, and may it please the Court:

The facts of this case are very simple.

The Petitioner, United Parcel Service, was charged with having discharged unfairly an employee, who was charged with having falsified his timecard and claiming payment for time that he did not work.

His union took his case through the grievance procedure, all the way to arbitration before a joint panel, regularly constituted, which, under the collective bargaining agreement issues awards which are final and binding.

Seventeen months later, Mitchell, the Plaintiff, sued United Parcel Service and the union under Section 301 of the Labor Management Relations Act, seeking reinstatement and back pay, charging that the union had failed to represent him fairly in the arbitration proceedings.

Both parties moved to dismiss, the District Court did dismiss, the Court of Appeals reversed, and held unlike the District Court which says that a statute of limitations of 90 days which applied to actions to vacate arbitration awards, does not apply... but rather, the regular statute of limitations applying to contract claims did apply.

The petition for certiorari was then filed by the employer only.

It involved--

Unidentified Justice: The union, Mr. Segal, did not file?

Mr. Segal: --The union did not file.

Unidentified Justice: And does the judgment stand, then, as to it?

Mr. Segal: I would suppose that the judgment stands and that the case would be remanded unless this Court were to order otherwise, which on occasion it has done, but very rarely.

The--

Unidentified Justice: Well the union remains a party to the case though?

Mr. Segal: --It is a party to the case.

Unidentified Justice: It's a respondent, isn't it?

Mr. Segal: It is a respondent in the case, just as it has been.

Unidentified Justice: Well isn't it entitled to file a brief for or against the judgment below?

Mr. Segal: It has done so, we have been in consultation with the union and while I am not here to argue its cause, if the Court should have any questions I would endeavor to answer them.

Unidentified Justice: Well Mr. Segal, if you prevailed, what would be the status of the case against you?

Mr. Segal: If we prevailed, it would be up to this Court and there have been differences on this Court, as Mr. Justice Brennan, you know, quite recently on this kind of issue, on whether they are divisible, whether they should be divisible, whether the Court should, itself, ordain a rule, if it were finally to get around to what the dissenters most recently said I guess, in the Occidental case.

Then my guess is, it would apply it to both.

Otherwise, the Plaintiff would be out by virtue of the 90 day statute of limitations; as to us, it would go back on a remand as to the union.

While the petition was pending the Third Circuit decided the Liotta case, which was really on all fours with what the District Court did... held that a 90 day statute in these very facts would apply.

The case has very real significance, very important significance in labor management relations throughout the United States and the potential impact may best be seen, perhaps by the fact that the International Brotherhood of Teamsters with its almost two million members and its 80 to 100 thousand collective bargaining agreements, has filed a brief amicus curiae and that the AFL-CIO with its 15 and 1/2 million members has likewise filed a brief, taking very strong positions.

Unidentified Justice: But different?

Mr. Segal: But different.

Quite different.

But both of which would have the Plaintiff out of this Court.

Unidentified Justice: And the union?

Mr. Segal: And the union, correct.

I start with the proposition that this Court has long favored arbitration as a fair, fast and final--

Unidentified Justice: Well if we applied that same notion to joint board decisions--

Mr. Segal: --Yes, Mister--

Unidentified Justice: --This wasn't arbitration?

Mr. Segal: --This was an arbitration in terms of our agreement with the--

Unidentified Justice: Well, it was the end of the line, and--

Mr. Segal: --And it was the end of the line,--

Unidentified Justice: --But there was not an independent arbitrator?

Mr. Segal: --This Court has expressly stated that a joint panel decision is an arbitration award.

Unidentified Justice: Wasn't that in the Railway Labor Act context though, Mr. Segal?

Mr. Segal: No, it was... Justice Brennan, it was in a Railway Labor Act, it was in a seaman's case and I have a vague recollection that it was in a teamster case, but I'm not sure.

However, no one has ever questioned that, the conclusiveness and the collective bargaining agreement makes it very clear that that is as final and binding as if it went to arbitration.

In 1960, this Court decided the landmark trilogy of steelworkers cases.

And that contains of course, the leading statement that the role of the courts must be to encourage arbitration of disputes in labor management negotiations... and not to substitute their views on the merits of contract claims for the views of the arbitrators.

And that's been emphasized throughout and we think that is important in this case.

Hines v. Anchor Motor Freight established that Section 301 actions might be brought against an employer and a union, although the alleged breach was by arbitration; that was the first case and that's why I mentioned it.

But I might say that no statute of limitations was involved in the Hines case, and I think anyone who reads the case would feel that if there were a statute it would have been tolled by virtue of the really monstrous facts there: an employee having been found guilty, when two years later a clerk in a motel admitted that he had stolen the money and not the employee.

Now, then came Hoosier and I think that's about the last case I want to mention, because that's a case which although involving neither arbitration nor conduct that would have been an unfair labor practice, did opt to look to the state for the appropriate limitation period.

I mention it only because it was the first case and following the procedure mandated by Hoosier, that's what was done here, on the authority of that case.

Mitchell's claim was a suit, we maintain, to vacate an arbitration award, to say that if the arbitration award was still outstanding and as final and binding as indeed it is, Mitchell would simply have no cause of action.

Unidentified Justice: Well wasn't Hoosier some time before?

Mr. Segal: 1960.

Unidentified Justice: So it was before Hines, a good deal before Hines?

Mr. Segal: Yes.

But Hines' real significance, I think, Mr. Justice White, is it was the first case where an arbitration was gone into and overturned.

The sanctity of arbitration... there were a lot of articles at the time; whether that was going to be seriously affected but it wasn't and I think the reason it wasn't is that as I say, if the issue had been a statute of limitations, it would have definitely been tolled under those facts.

Unidentified Justice: Hoosier involved, as I remember, a claim for breach of a collective bargaining contract under Section 301.

Not... it didn't involve arbitration, did it?

Mr. Segal: Hoosier?

Unidentified Justice: Hoosier.

Mr. Segal: Hoosier did not.

Unidentified Justice: No.

It was a claim... under 301.

Mr. Segal: It involved neither arbitration nor conduct that would have been an unfair labor practice, that is--

Unidentified Justice: Right, merely a breach of a collective bargaining contract.

Mr. Segal: --Right, precisely.

Now, prior to this case, every district court in the country that had tried the issue, and I think it's significant because they know right at the scene of the action how important arbitration and the sanctity and the continuance of arbitration instead of strikes, is; every one of them, except the court that was reversed in the Liotta case, over the years, has decided on a 90-day statute of limitations and has decided that any such attacks, are attacks on the award unless you get rid of the award... you simply can't proceed any further.

It stands as an absolute bar.

Unidentified Justice: Well Mr. Segal, the 90-day... what's the source of the 90-day--

Mr. Segal: The 90-day is the New York statute--

Unidentified Justice: --Yes.

Mr. Segal: --applying to arbitration.

Unidentified Justice: But you're saying, every district court around the country, they were applying their own state statutes, I take it--

Mr. Segal: Well Your Honor, around the country, there are 42--

Unidentified Justice: --Yes.

Mr. Segal: --statutes, and 37 of them are--

Unidentified Justice: Are 90 days.

Mr. Segal: --for 90 days or less.

Now three of them are for the term of court--

Unidentified Justice: Anyway, anyway, they applied a statute that relates to overturning arbitration agreements?

Mr. Segal: --There's only one statute that's a year.

Everybody else is 90 days, except for one for 100 days.

Unidentified Justice: But they all borrow, don't they, each district court borrows the appropriate state statutes?

Mr. Segal: Yes, yes, Justice Rehnquist.

Unidentified Justice: How many statutes are less than 90 days, Mr. Segal?

Mr. Segal: Five... wait a minute, I think there are five; it's three or five.

Unidentified Justice: Well there's no point made anyway that the 90 days is too short?

Mr. Segal: Well, I'll come to that in a moment, if I may.

I just want to point out the Plaintiff's position here.

The Plaintiff's position has now shifted somewhat, from the 6-year statute that he tried in the courts below to a three-year statute which he takes the position, would apply to the union but not the employer, because it involves malpractice for instance and that can't apply to the employer and so on.

Then he takes the position that if the United Parcel were the Plaintiff in a Section 301 action, only a 90-day statute would apply.

But somehow if it becomes the Defendant a six-year contract statute applies.

And that is the situation in which we now find ourselves.

Now I think it's significant that even the Court below and the only other Court that refused to apply a 90-day statute of limitations, the Sixth Circuit, said and I quote them: that the effect of a judgment for the discharged employee... I substituted the words discharged employee... the effect of a judgment for the discharged employee would be to nullify the arbitral decision.

That's the precise language quoted by both those courts; the only two that have opted for a longer statute.

I think where the Court of Appeals went wrong was in focussing on the underlying claim rather than the relief sought, and said the underlying claim is the collective bargaining agreement.

And since that's a contract, why we move right over to that word contract in the six-year statute.

Unidentified Justice: Well are you saying that this is in substance, Mr. Segal, a claim of ineffective assistance by the union?

But described in some other terms in the complaint?

Mr. Segal: Yes.

It comes a little curiously, because the very day after the arbitration had been submitted, just in passing I might say, the Plaintiff wrote a letter to the president of the Teamsters, Joe... Joe Purcell and Donald Mason... business agents for the local, have done a tremendous job in my behalf, however, because of the company's unreasonable position, I have been compelled to hire an attorney to protect my civil rights.

And I might say, he hired that attorney the day of the arbitration award.

There was no hardship here, to a 90-day, if he'd gone ahead with it.

But he waited for some reason for 17 more months and then changed his position that the union had not given him a faithful representation.

We believe--

Unidentified Justice: Mr. Segal, what statute of limitations usually applies around the country to claims of unfair representation, just against the union?

Suppose this suit had been filed only against the union,--

Mr. Segal: --The 90-day statute now, it happens--

Unidentified Justice: --Well, it's... he wouldn't be... have they applied that 90-day--

Mr. Segal: --90-day arbitration award--

Unidentified Justice: --Yes.

Mr. Segal: --The 90-day statute.

The District Court's... Justice White.

Unidentified Justice: So they've applied, whether they are suing the union alone or with the employer?

Mr. Segal: Yes.

But I would say that--

Unidentified Justice: And what if there's only--

Mr. Segal: --it's very unusual for them not to include the employer as a favorite target.

Unidentified Justice: --Particularly after Hines v. Anchor Motor Freight.

Mr. Segal: Particularly... that's correct, Mr. Justice Rehnquist.

So we feel that having failed to file this action under the 90-day statute that he just isn't in this Court.

We believe that... I started to say, about the substantive claim... the reason I believe that that's a flaw in the reasoning of the Court is that every arbitration has an underlying claim and if you're not going to worry about procedure at all and you're going to look at the underlying claim, then there is no arbitration really, involving an employee that doesn't have an underlying claim of contract.

So all these decisions would have to be no-no.

They now go to the contract 5 or 6 years, in virtually all the states, and the fact that there was an arbitration is just washed out.

I submit to Your Honors that if that ever happened, we'd go back to strikes in place of arbitration in the solution of industrial disputes in this country.

Unidentified Justice: Or possibly we'd go back to Congress and say maybe Congress ought to enact the statute.

Mr. Segal: Yes, only that takes a little while, Mr. Justice Stevens, I have found in my experience.

And--

Unidentified Justice: Ultimately they did it in the anti-trust area, though, as you know?

Mr. Segal: --Yes, that's... I should say that usually takes a little while.

Unidentified Justice: Mr. Segal, have any of the... have any suggestions ever cropped up in any of these cases before, that Congress has already enacted a statute to--

Mr. Segal: There's a lot of... briefs--

Unidentified Justice: --The suggestion is, in this case, that Congress has already adopted the statute, 10(b).

Mr. Segal: --The 10(b) and that of course would involve an unfair labor practice, and there's a little difficulty in applying that to the employer.

And you run into a whole gamut of reasoning, I would say that frankly if the Court and the federal government generally were to want leave the multiplicity, as you, Mr. Justice White, urged way back in Hoosier, of 50 states, that probably that would be the best place to go.

Some people think the best place to go would be, to use the analogy... for this Court to use the analogy of the U.S. Arbitration Statute, often called the Federal Arbitration Statute which has a 90-day.

Everybody who has opted, as I say, it isn't only the district courts, it isn't only the legislatures, but the Congress has opted for 90 days.

Unidentified Justice: Well isn't the theory under 10(b) is that as applied to a case like this, that if you want to reopen the result of a collective bargaining procedure, you should do so within six months?

Mr. Segal: That's exactly it.

Unidentified Justice: And that this is collective bargaining?

Mr. Segal: That's precisely the reasoning and there's a great amount of support in logic, and in labor management practice for that view.

I certainly don't decry it.

We're here on a petition asking for the 90-day, but I would scarcely leave in mourning if the Court opted for the six months.

And I think, more importantly, labor and management, preferring the shortest possible period that's fair and 90 days, federal and state, has been regarded as a fair time.

Now--

Unidentified Justice: As a practical matter, Mr. Segal, in terms of corporate accounting purposes, perhaps requirements of the SEC, on every discharge case would the... either good practice or SEC demands require that the corporation set up a contingency reserve for a suit that might come 5 years and 11 months afterward?

Mr. Segal: --Mr. Chief Justice, half my professional life has been in the field of labor relations.

And as a former associate, sometime opponent, sitting on the bench knows, Mr. Justice Brennan, I would say that if we go to a six year, labor management relations become impractical in America.

We're talking here about a discharge.

We have contracts that are 1, 2 or 3 years of duration.

It would mean that when you sit down to negotiate a contract out there, forget discharges... you have serious arbitrations on seniority rights, what are the seniority rights... on meanings of clauses, this point is made very well in the Teamster's brief, and likewise in the AFL-CIO brief.

You would have chaos in labor relations if we had to sit around in labor management relations for the first time six years, so that when you come to a one-year contract you've got five years of arbitration outstanding where you're not sure of whether what the arbitrator said a contract means in broad, important means, whether that will hold or won't hold.

So that its impact is very large indeed.

Now, there's a small point I'll just mention in passing, the Court of Appeals was just in error in holding that Mitchell had no standing to sue under New York State law.

He lost sight of the case of Vaca v. Sipes, decided by this Court; there was an appellate division case too, it's taken up fully in our brief, and I mention it only in passing.

But the Court, curiously, and I must say with the greatest of deference to the bench, which I hold in high regard, that I cannot understand the Court's emphasis on the unfairness of a 90-day statute.

Unidentified Justice: Mr. Segal, turning to the last paragraph of the Court of Appeals' opinion in this case, the sentence on page 813, where it says applying the 6-year limitation period of 213(2) provides for relatively rapid disposition of labor disputes without undermining the employees ability to vindicate his rights through 301 actions.

Do you understand that?

Mr. Segal: I though it was a misprint, most frankly, Mr. Justice Rehnquist.

I reread the opinion so that it is... I do not understand that, and I do not understand how, as I say with the greatest of deference, three judges sitting in conference in the face of the fact that every legislature that has acted has decided 6-5-4-3-2, all are too long, but the Congress of the United States has so decided that every one of the district courts that decided the case, other than the Liotta, were reversed, would sit there and bemoan the unfairness to employees of a 90-day statute and yet, that is a major factor in its opinion.

It has this fact I just mentioned, the lack of standing which is certainly erroneous, it has that this would be basically unfair and what it's saying is that the policy of labor management relations in America is basically unfair, that what unions and management want is basically unfair.

That what the legislatures of the country have virtually unanimously opted for is unfair; that what the Congress of the United States said in at least three statutes, 90 days is unfair.

If it just upped the statutory interpretation, I'd say, well it's an error.

It's an erroneous statutory interpretation because of forgetting this underlying basis... theory and being misled by it.

This leaves me, as the sentence that you quoted, Mr. Justice Rehnquist, nonplussed.

Now, I point out to this Court that apart from the unfairness, just being--

Unidentified Justice: Mr. Segal, on this question of unfairness, it's a little bit of an unusual case because we have the union which, if we accept the allegations of the complaint and the theory of the complaint, has violated its duty of representing the employee fairly--

Mr. Segal: --Well we think it should have a section 301 suit to test that.

Unidentified Justice: --But it must file within 90 days?

Mr. Segal: Within 90 days, that's right.

Unidentified Justice: What if the facts that form the basis of the claim of unfair representation do not come to the attention of the employee within the 90-day period?

Mr. Segal: Well then you have the tolling of the statute.

Unidentified Justice: Does the New York statute provide for tolling of the 90-day period?

Mr. Segal: Yes, and incidentally so does the federal statute, so does the... Uniform Act.

Unidentified Justice: Well because we're relying on the New York statute here.

And there is a doctrine in New York that the 90-day suit to set aside an arbitration award is tolled--

Mr. Segal: Mr. Justice Stevens, as I understand it, it's a right which a plaintiff has absent statutory provisions for tolling; that if you can demonstrate fraud or misconduct... but it does have it there, because it says that you can set aside the award in three contingencies, one is misconduct.

Unidentified Justice: --Well I understand that the tolling for fraud is one thing, but it isn't always true that the mere lack of knowledge of the facts on which your cause of action is based is a sufficient ground for tolling.

Mr. Segal: No, I agree with that.

Unidentified Justice: And that's what might be involved in this kind of case.

Mr. Segal: In such a case, Mr. Justice Stevens, you weigh the public considerations and the public consideration for the 90-day as opposed to a six-year labor management relation, is so much greater than the situation of the employee who sits on his rights... if he doesn't sit on his rights in the first place, most arbitral boards have shown that they will reconsider the matter.

There is nothing that is... these are managements and labor representatives and they're not heartless, so we can assume that if it went to them they would... this is a situation where a man just left his job where 7 supervisors... and each filed statements that they saw him leave and he doctored up his record.

Well in this case, I would say the 90 days is a good rule.

Unidentified Justice: Well of course if the facts are that clear you don't really need a statute of limitations, do you?

Mr. Segal: That's precisely... well, I don't know, the facts aren't that clear five and a half years later.

Unidentified Justice: He has this burden of course, not you.

Mr. Segal: The supervisors are gone, things have changed.

Well, I want to leave myself some time--

Unidentified Justice: May I just ask one question, Mr. Segal?

Mr. Segal: --Yes.

Unidentified Justice: You recall that in Hoosier, there's a footnote on this, footnote 9... what do you suppose that means?

Other questions would be raised if the case presented a state law characterization of 301 suite reasonably described the nature of the cause of action, but required application of an unusually short or long limitation period, for example... under the New Mexico statute, where it must be commenced within 60 days following the date of discharge.

Mr. Segal: I read that, and I thought it was just trying to leave the door open in a kind of excessive question; that's how I read it.

Unidentified Justice: You don't think it reflects upon the fairness, at least, of the 60 day statute?

Mr. Segal: Oh, yes but the Court had no facts before it, it didn't know what the Mexican statute provided for and neither do I.

So that, Your Honors, as I leave you with the fact that what the Plaintiff seeks here is precisely what he sought in the arbitration award, before the Arbitration Panel, his objective is the same, his motive is the same and unless he gets rid of that, he cannot prevail and he's too late to get rid of that.

Chief Justice Burger: Mr. Jaroslawicz.

ORAL ARGUMENT OF DAVID JAROSLAWICZ, ESQ., ON BEHALF OF RESPONDENT

Mr. Jaroslawicz: Mr. Chief Justice and may it please the Court: Whatever the statute of limitations may be in a section 301 claim, it is not the statute of limitations to vacate an arbitration award.

At least, insofar as the employee goes and that's Mr. Mitchell, or any other American worker, and I think it strange to see here today, labor and management lined up on one side and nobody on the side of Mr. Mitchell, and saying, if he claims something is wrong, give him a forum to have his complaint heard.

If this were true--

Unidentified Justice: Isn't that the... doesn't that permeate the whole structure of federal law on industrial relations, to resolve matters as quickly as possible?

Mr. Jaroslawicz: --Absolutely, Mr. Chief Justice.

And that's precisely the point.

In those cases where the employee has a chance to be heard in the arbitration and the union doesn't sell him out, then he has no 301 claim in the first place.

The only time he ever gets to a section 301 claim is where he has a more than probable showing that the union sold him out, that he never had a hearing below and then his forum is the courthouse.

Until he can get by those two basic standards, he doesn't have a 301 claim; then the arbitration is binding.

Unidentified Justice: Is that an unfair labor practice on the part of the union?

Mr. Jaroslawicz: It might be construed an unfair labor practice yes, Your Honor.

Unidentified Justice: Well what is it if those two events occur; that the union sells him out and he then has a forum in the courthouse, what is the nature of his action, what is it for and what statute of limitations is it governed by?

Mr. Jaroslawicz: I believe, Justice Rehnquist, that it's a statutory claim, and I think it's most analogous to a 1983 action under the civil rights law.

If you take, for example, an employee who works for an agency of some sort, state agency.

And he has outspoken views on abortion or minority rights, which his supervisor doesn't agree with and he fires him for that.

He then goes ahead and files a 1983 claim, which, similarly to Section 301, has no built-in statute of limitations.

Unidentified Justice: But United Parcel Service isn't a state agency, is it?

Mr. Jaroslawicz: No, but United Parcel Service, Justice Rehnquist, is his employer.

And there's a collective bargaining agreement, and--

Unidentified Justice: There's no 1983 claim, because--

Mr. Jaroslawicz: --No, there was no 1983--

Unidentified Justice: --it has to be under color of state law.

Mr. Jaroslawicz: --claim, no, no.

This case does not have a 1983 claim, Your Honor.

Unidentified Justice: No, it couldn't.

Mr. Jaroslawicz: I'm simply saying that the most analogous situation is that of a 1983 claim where all the Courts have said that the statute of limitations to be applied is the state statutes for a claim upon a statutory claim, which in New York is three years, in other states it might be two years.

Unidentified Justice: Well my question as to whether or not it's an unfair labor practice was prompted by the amicus brief filed in this case by the AFL CIO, which suggests that the proper statute of limitations is that supplied by Section 10(b) of the Labor Act.

Mr. Jaroslawicz: Which would be, I believe, the six month statute.

Unidentified Justice: A six month statute.

Mr. Jaroslawicz: Which is what they are opting for.

And I don't believe it can be, Your Honor.

And the reason for that is the decision in Vaca v. Sipes, Justice Stewart.

Because as was pointed out there, an employee in this situation cannot obtain complete relief unless both the employer and the union are in the suit together.

Because you have an employee as Mr. Mitchell, who after 13 years was discharged.

You can't say to him we'll give you money, although money is nice, he wants his job back, he wants his seniority back, he wants his pension rights, and he wants his job where he lives and he has worked for 15 years.

This is... his discharge was improper.

Now the other reason I say that this--

Unidentified Justice: You think it contributes to the... what permeates the whole industrial relations statutory structure, to allow the employee to wait five years and 11 months and then bring a lawsuit of this kind?

Mr. Jaroslawicz: --Well there are two answers to that, Mr. Chief Justice.

One is, most meritorious claims the employee is not... who's out of work and has no money is not going to wait until the end of the statute and say, I'm going to take it down to the line and see what happens.

Certainly, if an employee does that, the Court can limit his damages by saying he should have mitigated.

And finally,--

Unidentified Justice: You mean, applying a laches doctrine against him?

Mr. Jaroslawicz: --There could be a laches doctrine precisely.

Unidentified Justice: In the face of a six year statute?

Mr. Jaroslawicz: If the union can show or the employer can show that an employee had deliberately waited knowing of his right and that the employer had been harmed because it hired other people in the interim, laches might very well be applicable.

Unidentified Justice: But that's not a contract action, which is traditionally governed by a statute of limitations it's an equitable action that's governed by laches.

Mr. Jaroslawicz: No, Your Honor, the actions by the employee against the employer, it is the Plaintiff's position or Mitchell's position, that it would be either a breach of contract action... because the collective bargaining agreement has now been breached.

In the alternative, it is a statutory claim brought pursuant to Section 301.

But one thing it is not is an action to vacate an arbitration award.

Unidentified Justice: No, but either one of the two that you mention is the sort of thing that's governed by a traditional statute of limitations and not by any doctrine of laches, isn't it?

Mr. Jaroslawicz: If Your Honor pleases, I didn't say it should be governed by laches, I was responding to the Chief Justice's question as to what happens if an employee waits for six years and I said if he waits properly because there's a valid reason, then the statute would be his cutoff point.

If he waits improperly, then the doctrine of laches might apply.

Unidentified Justice: Isn't there a brand new law, statute of limitations?

Isn't there a brand new one, because right after this I'm going to ask you to give me a case.

Mr. Jaroslawicz: Well perhaps laches is the wrong pigeonhole to put it in, Your Honor, but in labor cases--

Unidentified Justice: I thought that the statute of limitations meant if you filed it within the period of 20 years it's under the statute and you don't have to explain to anybody under any circumstances, am I right?

Mr. Jaroslawicz: --Yes, Justice--

Unidentified Justice: Am I right?

Mr. Jaroslawicz: --Yes.

But when the case got to--

Unidentified Justice: So where'd you get laches in there?

Mr. Jaroslawicz: --trial, the Court could mitigate his damage and say I'm not going to let you recover for waiting 19 years.

Unidentified Justice: Give me a case on that.

Mr. Jaroslawicz: Where there are frequent cases--

Unidentified Justice: No, cite me one, cite me one.

Mr. Jaroslawicz: --I'll be happy to--

Unidentified Justice: I'll even take a justice of the peace case.

Mr. Jaroslawicz: --Where an employee is out of work because he's been discharged and for a year he doesn't get another job when a job is available to him, and sits back.

The arbitrator or judge then says to the employee, I'm not going to give you damages for the time you could have worked--

Unidentified Justice: This is a arbitrator-judge... what is this you called this man?

Mr. Jaroslawicz: --If there was an--

Unidentified Justice: I'm talking about a judge-judge.

That's the one that deals with the statute of limitations, right?

Now give me a judge who said that although you were within the statute of limitations, I'm going to say you are too late.

Mr. Jaroslawicz: --I cannot refer, Your Honor, to a case of that nature.

Unidentified Justice: I don't think you can.

Laches is purely an equitable--

Mr. Jaroslawicz: Laches is an equitable defense.

Which is available to the employer in a case where it's properly available, not to the statute--

Unidentified Justice: --It's not available in a legal action when there's a statute of limitations, as my Brother Marshall suggests.

Mr. Jaroslawicz: --I agree with--

Unidentified Justice: You're not arguing laches, you're just arguing the duty to mitigate, which reduces the damage claim.

That's all you're arguing.

Mr. Jaroslawicz: --Yes, that's basically--

Unidentified Justice: And that assumes you're in Court, that you have passed the statute of limitations bar and now you're talking about damages.

Mr. Jaroslawicz: --And I believe that he has a right to get to Court.

And I don't believe the statute was meant to vacate an arbitration award.

Unidentified Justice: Would you agree with Judge Timbers' statement in the... for the Second Circuit that six years is not... is a relatively rapid disposition?

Mr. Jaroslawicz: I believe Justice Timbers took that from this Court's decision in Hoosier.

Where this Court in Hoosier, said that six years was relatively rapid and in that case, admittedly, the Court was choosing between a 20 year statute and a six year statute, and so the Court indicated that six years was relatively rapid and sufficient to meet labor policy and that's where I believe Judge Timbers adopted that from.

And the reason I say to the Court that it can't be a motion to vacate an arbitration award, is that nobody even in this Court, argues that the Plaintiff's remedy or the employee's remedy is to go back and have a new arbitration.

If this were truly an attempt to vacate an arbitration award, as it is where there's corruption of an arbitrator, the employee's remedy is to go back to a new arbitrator where there won't be corruption and he'll have a fair opportunity to be heard before the arbitrator.

But that is not a section 301 claim.

A section 301 claim is a separate claim, which the statute and Congress has given an employee, it says if you didn't have a fair hearing and the union sold you out, whether it's arbitration or anything else, you have a right to be here.

And that's what Vaca said and that's what Hines said.

I think it's also interesting to see that the union in this case, in filing of a brief, said we should have the same statute of limitations as the employer.

The employer, in its reply brief said, we don't want the same statute of limitations as the union, we get a different statute of limitations.

I believe the reason for that is that the union clearly knows that it cannot possibly argue that the statute of limitations as against the union is 90 days to vacate an arbitration award because there is no arbitration award to be vacated against the union.

While the employer has a superficially appealing argument, it says you're really trying to vacate an arbitration award.

But that's not so.

The arbitration was between the union and the employer, the employee's right may have been at stake, but he never had a chance to be heard and his rights weren't adjudicated, if not, he would never get to the section 301 claim.

And I say that if the union or the employer wanted to bypass the arbitration award or vacate it, if you will, here the statute of limitations is 90 days, because that's the agreement between them.

But when it comes to the employee, it's not 90 days, and under the standing issue, which I think the Second Circuit probably recognized, he would have no standing in the State of New York to even bring the proceeding, the New York Court of Appeals has said if you're unhappy with what your union did, you bring a separate action, a 301 action, against your union, but you can't interfere in the arbitration, which is a proceeding between the union and the employer.

That, Your Honor, is basically Mitchell's position.

Thank you.

Unless the Court has any questions?

Unidentified Justice: I do have a question.

There is nothing, or am I wrong on this, in the complaint, or no facts are alleged which account for the failure to file more promptly.

Is that correct?

Mr. Jaroslawicz: No facts in the complaint.

Chief Justice Burger: Very well.

Do you have anything further, Mr. Segal?

Mr. Segal: Nothing, if it please the Court.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Barrentine v. Arkansas-Best Freight System - Oral Argument

Wed, 18 Feb 2009 06:13:06 +0000

Case:

Barrentine v. Arkansas-Best Freight System

Media File:

79-2006_19810113-argument.mp3

Related Transcript:

79-2006_19810113-argument_transcript.xml

Transcript:

ORAL ARGUMENT OF DAVID C. VLADECK, ESQ., ON BEHALF OF THE PETITIONERS

Chief Justice Burger: We'll hear arguments next in Barrentine v. Arkansas-Best Freight System.

Mr. Vladeck, you may proceed when you are ready.

Mr. Vladeck: Thank you.

Mr. Chief Justice, and may it please the Court:

Petitioners in this case are truck drivers employed by Respondent, Arkansas-Best Freight System.

They operate out of ABF's Little Rock, Arkansas, terminal.

They are required prior to embarking on an over-the-road trip to conduct a rigorous pre-trip safety inspection of their vehicle.

Among other things they must check all of the safety devices, the brakes, coupling devices, and so forth, to make sure they are in good working order.

Generally it takes the drivers approximately 15 minutes to half an hour to conduct this inspection, and when defects are found to take the vehicle to ABF's repair facility, which is located at the terminal.

ABF refuses to compensate the drivers for this time.

Accordingly, the drivers have filed a series of grievances alleging that ABF's refusal violates the terms of their contract.

These grievances, in turn, were processed by the union, which processed them through the joint grievance committee procedures spelled out in the collective bargaining agreement.

Despite the fact that the lower courts have found that applying a literal reading of the collective bargaining agreement this time would be compensable, the joint grievance committees rejected the drivers' grievances.

Accordingly, with no further remedy left under the contract, petitioners filed suit in March, 1977, alleging--

Unidentified Justice: Did I understand you to say there was no other remedy available?

Mr. Vladeck: --Under their contract.

Petitioners... the grievances had been pursued through final stage of the grievance procedure set forth in the contract.

Accordingly, petitioners filed suit in district court, alleging among other things that ABF's refusal to compensate them for this time violated the minimum wage provisions of the Fair Labor Standards Act.

Unidentified Justice: But no allegation that it violated the contract?

Mr. Vladeck: Yes, Your Honor, there was an allegation that it did.

Unidentified Justice: But that isn't what this case is about?

Mr. Vladeck: Well, we have not pressed that issue here, Your Honor.

Despite the fact that defendants have pressed the Fair Labor Standards Act issue, however, neither court below reached the merit of that question.

Rather, both courts held instead that the prior submission of their contract-based grievance claim to arbitration barred the right to have court review of their statutory claim under the Fair Labor Standards Act.

Accordingly, the sole question presented here is whether submission of their contract claim to the joint grievance committee barred subsequent court review of their claim under the Fair Labor Standards Act.

Petitioners submit that the courthouse door must remain open to review the merits of their statutory claims, regardless of whether there has been a prior arbitrator award and that the resolution of the issue presented here is controlled by two principles.

The first principle that I will discuss is that the decision below was inconsistent with the provisions of the Fair Labor Standards Act itself.

This Court in a series of decisions has held that rights conferred under the Fair Labor Standards Act cannot be waived or bargained away as part of the collective bargaining process.

Unidentified Justice: Then you necessarily mean that an agreement to arbitrate is bargaining away those rights?

Mr. Vladeck: No, Your Honor, what my contention here is, is that this contract as construed by the joint grievance committees violates the Fair Labor Standards Act, and what petitioners want is the right to go into court to litigate that question under the statute.

Unidentified Justice: And your contention would be not that the arbitrator had applied an improper reading of the contract but that even if the contract had expressly said that this is the wages we will be paid and we will not be paid for the time you claim, the federal law simply prohibits that kind of contract?

Mr. Vladeck: That's correct, Your Honor.

The second point that I will turn to later on is that the decision below cannot be reconciled with this Court's decision in the Gardner-Denver decision.

Unidentified Justice: What kind of a case was Gardner-Denver?

Mr. Vladeck: Gardner-Denver was a Title VII case, Your Honor.

Unidentified Justice: That's right.

This is not a Title VII case, is it?

Mr. Vladeck: That's correct, Your Honor, but petitioners' position is that the standard of nonpreclusion of court review of federally granted rights should govern in this case, and as I will argue later, the statutes are parallel in all material respects and those parallels demonstrate that Gardner-Denver should govern in this case as well.

But let me first turn to my argument under the statute.

The Fair Labor Standards Act is a broadly remedial statute.

It embodies a number of distinct and diverse policy judgments made by Congress.

Among other things the Act sets forth a strict policy of guaranteed minimum wage compensation for all workers covered by the Act.

In addition, it grants certain workers the right to premium pay for overtime work.

To insure effective enforcement of the statute, Congress has authorized courts to impose a variety of remedies, including double damages, attorneys' fees, injunctive relief, back pay awards in cases where the employee prevails.

The role of these provisions is dual.

Congress used them to both determine employer violations and to insure that workers who had been injured by Fair Labor Standards Act violations were fully compensated for their injuries.

Because of the remedial nature of the statute, this Court has often recognized that rights conferred by the Fair Labor Standards Act can neither be waived nor bargained away during the course of the collective bargaining process.

Indeed, this Court has expressly held that any customer contract that falls short of these policies... for example, an agreement to pay less than minimum wages... cannot be used to deprive workers of their statutory rights.

Nonetheless, in the face of these decisions, the court below's decision effectively insulates from judicial scrutiny the contract which we contend does precisely that: cuts back on petitioners' right to certain minimum wage compensation.

Under the lower court's theory, arbitration, which is, at this Court has recognized, an extension of the collective bargaining process, can be used to foreclose employees' right to sue under the Fair Labor Standards Act.

And petitioners submit that this result simply cannot be reconciled with this Court's prior decisions.

Unidentified Justice: Well, we have held, haven't we, in a recent case that a collective bargaining contract could override the Norris-La Guardia Act?

Mr. Vladeck: I'm not familiar with that case.

Unidentified Justice: In Boyd's Market and Buffalo Forge and that line of cases?

Mr. Vladeck: Well, Your Honor, we're talking here about statutory rights that are conferred on an individual worker.

These are not the majoritarian rights that are derived from a collective bargaining agreement.

And our position is that where rights are expressly conferred by Congress and Congress has provided that the courts should enforce those rights, an arbitration decision or a collective bargaining agreement cannot cut back on those statutory rights.

Unidentified Justice: But under the Norris-La Guardia Act, there were stringent restrictions placed on injunction.

Injunctions run against individuals as well as unions, and yet in some of our later cases we said that those stringent restrictions could be altered by the provisions of a collective bargaining agreement.

Mr. Vladeck: I am aware of no decision of this Court which supports the proposition that an arbitration award or a contract can cut back on an employee's rights that have been both conferred directly by statute and are enforceable by that statute through the courts.

And that is this case.

The point that I'm trying to make is that unless the Fair Labor Standards Act claim can be brought into court after an arbitration award, then the Act affords employees nothing more than they would derive from the collective bargaining agreement.

In a sense the lower court decision renders the Fair Labor Standards Act a nullity insofar as it applies to workers who are covered by collective bargaining agreement.

The second point I want to make under the statute--

Unidentified Justice: Before you leave that, I have a little problem.

When this contract was entered into, it was understood one way or the other that this statute was here.

And if you had meant not to nullify the statute, you could have said so in the contract.

Mr. Vladeck: --Well, Your Honor--

Unidentified Justice: Or you could have said that you did, one way or the other.

That could have been put in the contract.

Mr. Vladeck: --Your Honor, a provision could certainly have been put in the contract, but as this Court has recognized... for example, in the Steelworkers trilogy, labor contracts are not as precise perhaps as we would all like.

They--

Unidentified Justice: But don't you think that at the time they ought to be getting to start to get ready to being precise?

Mr. Vladeck: --Well, Your Honor, let me point out--

Unidentified Justice: Wouldn't it help everything if we could be precise?

Mr. Vladeck: --Well, I agree with Your Honor that it would certainly help, but let me point out that in Gardner-Denver--

Unidentified Justice: At least we would have been saved one case, wouldn't we?

Mr. Vladeck: --That's correct, Your Honor.

Unidentified Justice: That is progress.

Mr. Vladeck: But in Gardner-Denver, the statutory right was exactly identical to the contractual provision.

The people who wrote the collective bargaining agreement cribbed precisely from Title VII.

Nonetheless, this Court unanimously held that a prior arbitration decision, even under the terms of a collective bargaining agreement that were precisely identical to the statute, did not relieve the federal courts from their duty to examine the statutory claim on the merits.

So, I guess in a longwinded sense, my answer to your question is that even if the contract had borrowed precisely from the language of the Fair Labor Standards Act, courts would nonetheless be required to review the merits of that decision, to review the merits of the statutory claim, to make sure that the rights had not been impaired.

Unidentified Justice: Mr. Vladeck, do you think this case from your point of view is a harder one than Gardner-Denver?

After all, it does affect laches; Gardner-Denver didn't.

Mr. Vladeck: Well, in some respects, Your Honor, I think it's an easier case.

Why don't I talk about that first?

It's an easier case because unlike Gardner-Denver, where Congress had set up an elaborate mechanism of dispute resolution prior to court review, elaborate exhaustion requirements, deferrals to state agencies, as this Court elaborated in the Mohasco decision last term.

There is nothing in the Fair Labor Standards Act which bars immediate employee access to the courts.

Now, getting back to the thrust of your question, I think that that was one of the reasons the lower court ruled against us.

That is, that they distinguished between the nature of employee wage claims and claims of discrimination.

I think there are several answers to that.

In the first place, the decision that wage claims are somehow simpler or less complex than claims of discrimination is inherently a difficult one.

I doubt strongly that this Court wants to weigh the relative complexity of various federal statutes in deciding how vigorous the Court should be in enforcing a Congress command.

Unidentified Justice: Yet, our treatment of the prohibitions against discrimination in age has been kind of a mixture, has it not, of the Fair Labor Standards Act mechanisms and the Title VII mechanisms, the Title VI mechanisms?

Mr. Vladeck: I think that's correct but I don't think that the Court has been any less vigilant in protecting those rights.

All that... my point is that... to begin with, apart from the inherent difficulty in measuring the relative complexities of various statutes, this Court... it is a doubtful proposition that this Court wants to waive the relative importance of various remedial statutory schemes passed by Congress.

But even assuming that that's relevant, that it's a relevant inquiry, here the long history of the Fair Labor Standards Act and several of this Court's opinions recognizing its vital policy underpinnings, strongly support petitioners' contention that it merits equally vigilant court enforcement as Title VII or any other remedial humanitarian protection of statute.

Unidentified Justice: Do you think, if you prevail here, that it will open the gates to a flood of wage claims in the federal courts?

Mr. Vladeck: Your Honor, I think that that option is more likely under the lower court's theory than if we prevail.

Under the lower court's theory, as I read it, and I'm not sure it is without ambiguity, employees would have the option of either first going into court or using the collective bargaining procedure spelled out in their contract.

If they opt for arbitration under the lower court's theory, they are barred from going into court thereafter, and an employee who is faced with waiving forever his right to liquidated damages, attorneys' fees, back pay, the host of remedies that could be imposed under the Fair Labor Standards Act, as well as the superior procedural rights afforded in court review, may well opt to go into court rather than to choose for arbitration.

It may well be that the most efficient answer that this Court can provide is the same one it did in Gardner-Denver, and that is to hold that regardless of whether the workers first employ the arbitration process, they retain the right to go into court but preserving the option of arbitration, which is relatively cheap and relatively quick.

It may well be, as this Court observed in Gardner-Denver, employees will opt first to arbitrate their grievances.

It may well be in a large number of cases that whatever remedies they're entitled to under the contract will be adequate.

If that is the case, then in a large class of cases there will be no ultimate resort to the courts.

Unidentified Justice: If there is an imperial arbitrator at the end of the line, very likely the Fair Labor Standards Act is going to be taken into account, I would suppose.

Mr. Vladeck: Well, Your Honor, I think that this Court--

Unidentified Justice: It wasn't taken into account here, was it?

Mr. Vladeck: --No, Your Honor, it was not.

Unidentified Justice: And there was no impartial arbitrator?

Mr. Vladeck: No, Your Honor, it was a panel of partisans.

Unidentified Justice: A joint board?

Mr. Vladeck: That's correct.

That's correct, Your Honor.

Unidentified Justice: Well, now, there was some litigation maybe a decade ago about tax exempt foundations and I think the Internal Revenue Service took the position that tax contributions were not deductible if the school discriminated on the basis of race.

Would you say that the same principle ought to be applied by the Internal Revenue Service if a school failed to pay minimum wages?

Mr. Vladeck: Your Honor, that's not one of the remedies that's accorded under the Fair Labor Standards Act, so I--

Unidentified Justice: Well, it's not one that's accorded anywhere, so far as I know.

Mr. Vladeck: --Well, I guess my first answer, Your Honor, is that it's far afield from the question here.

And I guess it's really a question that ought to be addressed to the Department of Labor.

I think Congress has in the Fair Labor Standards Act evidenced a very strong concern that the statutory requisites be enforced.

If that is an additional way to secure enforcement and the courts have upheld it, I see no difficulty with that.

But, again, I think that is not this case.

Unidentified Justice: Well, even if you lost, the United States wouldn't be barred from suit, would they?

Mr. Vladeck: Well, I'm not sure that's correct.

Under the Fair Labor Standards Act--

Unidentified Justice: You wouldn't mind taking the case, though, for the United States, would you?

Mr. Vladeck: --No, Your Honor, that's another case that I would like to argue.

Unidentified Justice: Well, if this Court held that that was correct, what would you think about it?

Mr. Vladeck: Well, my first question would be--

Unidentified Justice: Then you wouldn't have any hesitation in bringing the suit, would you?

Mr. Vladeck: --No.

Unidentified Justice: You said there was a suit; if you were representing the Government.

Mr. Vladeck: No, but again it's a question that I would not like this Court to reach.

Our principal submission is that the Fair Labor Standards Act grants to the employee a right to bring suit in a court, either federal court or state court, to enforce the rights conferred upon him by Congress.

That's really all we're asking for in this case, is a right to get into the courthouse door.

This case, at this stage--

Unidentified Justice: Well, if the... would the United States be entitled to bring a suit to have a collective bargaining agreement declared illegal if it's been consistently construed by the parties who made it not to take account of the Fair Labor Standards Act?

Mr. Vladeck: --That would not be the way the case would be characterized.

Unidentified Justice: I know.

That isn't what I asked you.

Mr. Vladeck: They could bring suit on behalf of the employees.

Unidentified Justice: And, to enjoin the enforcement of a collective bargaining contract to that effect?

Mr. Vladeck: Yes, Your Honor, but I think they would frame the remedy in a different manner.

Unidentified Justice: Well, they needn't confine their suit each time just to recovering the wages for an individual employee?

Mr. Vladeck: That's correct, Your Honor.

I'd like to turn for a moment to one of the arguments raised by the court below in rejecting application of Gardner-Denver.

The principal reason was, as I think Mr. Justice White suggested, that wage claims are somehow less complex, or somehow less deserving of protection by the courts than discrimination claims.

And I think the fundamental problem with that approach is that it rests on a misapprehension of the nature and scope of the arbitrable process.

To begin with, arbitrators have no general authority to apply the dictates of public law.

Rather, this Court has made it clear in a number of decisions that an arbitration award will be only enforced, only so long as it draws its essence from the contract between the parties.

Moreover, the arbitrator would not have the right to impose the broad range of remedies Congress thought necessary to root out violations of the Fair Labor Standards Act.

The third reason is that the arbitration process is not necessarily adequate procedurally to protect statutory claims.

Let me give you an example here, where we're dealing not with conventional arbitration but with a joint grievance committee.

There was no neutral arbitrator.

Although there are many grievances filed, there is no written decision.

Petitioners do not even have a right to have counsel present during the grievance hearing.

So there is no parallel between the remedies and procedural safeguards that are afforded under this procedure and in general under arbitration, as there are in court procedures.

And lastly, the finality that is normally given to arbitration award rests in part on the fact that arbitrators are simply proctors of the bargain.

They are simply trying to derive what it was that the parties privately bargaining for a contract decided to agree upon.

In sharp contrast, under the Fair Labor Standards Act, Congress has dictated what the standards are, and Congress did so to provide for uniform nationwide standards.

There is no way that a patchwork of arbitration decisions can implement Congress's policy embodied in the Fair Labor Standards Act.

Moreover, the lower court appeared to presume that Fair Labor Standards Act rights could somehow be merged into the rights that are accorded under the collective bargaining agreement.

That is not the case.

The Fair Labor Standards Act accords distinct rights; they do not form a part of the collective bargaining process at all.

They exist independently of the contract and they were conferred by Congress.

To relegate those rights to the arbitral forum would be in contravention of what Congress spelled out in the Act itself in its broad jurisdictional provisions.

Unidentified Justice: What if, Mr. Vladeck, you had a collective bargaining agreement that set out various rates of pay and hours and working conditions and then said, nothing herein contained shall be understood to require any violation of the Fair Labor Standards Act.

And there was a grievance under that contract, and the arbitrator found that there was no violation of the Fair Labor Standards Act, and rejected the grievance, although the grievance was brought under the collective bargaining agreement itself.

Then later, if that employee brought a lawsuit under the Fair Labor Standards Act, what if any preclusive effect should the prior arbitration have?

Mr. Vladeck: Well, I think that is precisely the Gardner-Denver question, because in Gardner--

Unidentified Justice: It was left open, wasn't it?

Mr. Vladeck: --Well, the Court dropped a footnote, last page of the decision, footnote 21, where the Court suggested that while it did not want to resolve the issue there, the appropriate course of action might be for the district court to assess to what degree the language of the statute and the language of the contract were identical, whether the procedures that are normally accorded in a court were also accorded in the arbitration, and then accord whatever deference the lower court felt the arbitration decision was entitled to.

But the court, at the end of that footnote--

Unidentified Justice: That's the answer the Court gave.

I'd say, it left the question open.

Mr. Vladeck: --Yes, Your Honor.

I do... but I think the Court in part answered the question by its final sentence in that footnote.

It said that

"courts must remain open to resolve statutory claims. "

And I think the fair import--

Unidentified Justice: But it suggested that a trial court might in such a lawsuit give preclusive controlling effect to the prior arbitration, didn't it?

Might, might.

Mr. Vladeck: --Well, I guess I have trouble with the word "preclusive".

It said it might accord it great weight, which I think is very different from according it preclusive effect, Your Honor.

I think that preclusive effect generally means that you always determine whether the--

Unidentified Justice: In any event it wouldn't be res judicata, it would be something less than that?

Mr. Vladeck: --That's correct, Your Honor.

I see that I only have five minutes remaining.

I'd like to reserve the rest of my time for rebuttal.

Chief Justice Burger: Mr. Maurras.

ORAL ARGUMENT OF S. WALTON MAURRAS, ESQ., ON BEHALF OF THE RESPONDENTS

Mr. Maurras: Mr. Chief Justice, and may it please the Court:

The purpose for the Fair Labor Standards Act was to protect the unorganized worker and it was not to protect organized labor.

This purpose is implicit in the legislative history of the Act and was exemplified in the exchange in the Senate between Mr. Walsh and Mr. Black in which the question was asked, if upon the adoption of the FLSA it would have any effect on existing or on future collective bargaining agreements?

And the negative response was given.

Unidentified Justice: Wasn't there a proposal somewhere along the line in the debate of this pending bill to make the Fair Labor Standards Act applicable only to unorganized workers, and wasn't that proposal rejected?

Mr. Maurras: It was, Your Honor.

However, nothing... To the contrary, the statute was left silent as to whether it was exclusive for unorganized labor or included both.

It did not thereafter go and specifically address the question.

This Court, subsequent to the adoption of the Act in the Brooklyn Savings Bank case, acknowledged the fact that the purpose for the Act was to protect the unorganized worker.

And although subsequent to the Brooklyn Savings Bank Case this Court decided in Jewel Ridge and in the Anderson v. Mt.

Clemens case that acts which had not previously been determined to be work or compensable under the collective bargaining agreements were compensable under the FLSA.

Congress responded to the decisions of the Court by adopting the Portal-to-Portal Pay Act, and in so doing stated in its findings and purposes that it was necessary to adopt that Act because of judicial interpretation that were in disregard of the customs, practices, and contracts between employers and employees.

Again, the Court, subsequent to the Portal-to-Portal Act, decided the case of Bay Ridge in which the Court stated that the FLSA required that certain activity be treated as overtime which had not been treated as overtime in the contract.

The result of the decision was to have the payment of FLSA overtime on top of contractual overtime.

Congress again responded to that decision of the Court with the Overtime-on-Overtime Act, and in its statement of findings for the necessity of the Act said that the claims which had resulted from the Court's decision were windfalls and were in derogation of the collective bargaining agreements as they were understood by the parties.

Congress also said that the arrangements for the overtime was the result of collective bargaining, and that there was no evidence that it was other than at arm's length.

So I would submit to the Court that because of the subsequent actions of Congress in trying to restrict the decisions so that the FLSA did not take precedence over legitimate bona fide collective bargaining agreements, evidences the intent of Congress to protect the unorganized worker as opposed to organized labor.

The FLSA itself does not require that the action for its enforcement be judicial in nature.

Section 216(b) says that an action for damages for back wages or for liquidated damages may be brought in a court of competent jurisdiction.

It does not use the mandatory "shall".

There is no language in the statute that prohibits alternate forms.

If Congress had wanted to prohibit alternate forms, it certainly could have done so, as it did in the Securities Act, and said that you cannot... specifically... cannot waive any of the rights accorded.

In Donahue v. Susquehanna Collieries, that court acknowledged this idea that if Congress had wanted to exclude arbitration as a method of resolving FLSA claims, that Congress could have specifically so stated in the Act.

Now, the petitioners have stated in their reply brief that Donahue is clouded.

Then I would submit to you that that cloud is more apparent than real.

The cases the petitioners cite as creating a cloud in fact state that the Arbitration Act cannot be used to enforce employment contracts.

They do not go beyond that holding.

There is nothing in the holdings which says that FLSA claims cannot be arbitrated if the parties voluntarily agree to it in the context of a bona fide collective bargaining agreement.

And as a matter of fact, in one of the petitioners' cases, the Colonial Hardwood Flooring case, that court says, that while they hold that the Arbitration Act is not applicable, that is not to say that the parties may not voluntarily agree to arbitrate their disputes.

Unidentified Justice: Counsel, would you say the same thing as to OSHA rights, if the parties agree to those?

Mr. Maurras: Your Honor, the policy considerations behind OSHA rights I think are somewhat different from the policy considerations the Congress may have of the persons intended to be protected in the scope of the legislation.

I'm not prepared to make a blanket statement but I am prepared to state that I believe that the Leone court is correct in its holding that the time spent in an OSHA inspection is not compensable time under the FLSA.

Unidentified Justice: What about the Equal Pay Act?

Mr. Maurras: I'm sorry, Your Honor, in what context?

Unidentified Justice: Suppose the parties agreed that the subject of equal pay should be subject to arbitration, and that the statute should not apply.

Would that override the provisions of the Equal Pay Act?

Mr. Maurras: Your Honor, again, I think it depends on the policy considerations expressed by Congress as interpreted by this Court as to the relative weight to be given the statute.

I'm not prepared to argue that the rights under the Equal Pay Act are subject to waiver or subject to an agreement to arbitrate.

Unidentified Justice: How about a collective bargaining agreement that provided for wages lower than the minimum wage?

Mr. Maurras: This collective bargaining agreement does not so provide, Your Honor--

Unidentified Justice: I know, but--

Mr. Maurras: --but if one did, I would think--

Unidentified Justice: --And the grievance was processed and it was turned down?

Mr. Maurras: --Yes, sir.

I do not agree that an arbitrator cannot take into consideration the general law of the land.

I think he can, I think he must.

I don't think any decision of this Court says that he cannot.

Unidentified Justice: Well, did this joint board take the Fair Labor Standards Act into consideration?

Mr. Maurras: Your Honor, I was not present during the consideration by the board.

All I can state to the Court is--

Unidentified Justice: Suppose he didn't?

Suppose this joint board didn't?

Suppose it was presented to the joint board, and the joint board said--

Mr. Maurras: --As a wage claim?

Unidentified Justice: --Awfully sorry, but we just don't take that into account.

We go by the collective bargaining agreement.

Mr. Maurras: If the joint board refused to acknowledge the law of the land, whatever that law may be, if it refused to acknowledge the law, I think it would be wrong.

Unidentified Justice: And the employee could go into court?

Mr. Maurras: Yes, sir, I do, and I think he could go into court under existing decisions of this Court that he had not been fairly represented, as I think that would clearly fall under the concept of no fair representation, to which he is entitled.

The arbitration provision in this case is broad enough to cover the FLSA claims.

Now, there have been prior decisions of the Court which have said that where the scope of the arbitration clause is limited, that claims that arise under FLSA would not be considered because of the limited scope of the arbitration clause.

Article 44 in this contract says that any controversy which may arise is subject to the arbitration.

It's not limited to controversies arising under the contract.

Article 43 also provides that any grievance of any employee will be processed.

So we have an arbitration clause that has a very broad scope.

There is no limitation of what can be presented.

Unidentified Justice: Well, if he presented a claim for the minimum wage under the statute and it was turned down, you say he could go into court?

Mr. Maurras: Your Honor, if he did, he could, but I submit to you this committee would not do that if the time involved... and that's the threshold question--

Unidentified Justice: Yes, yes.

Mr. Maurras: --I'll come to that in my argument.

But you have to reach that threshold question first, and in this case the committee did reach that threshold question and it was decided adversely to the employees.

Unidentified Justice: On the facts?

Mr. Maurras: Yes, sir.

So that you never get to the second question.

Article 50 in the collective bargaining agreement says that the employees are to be paid for all time spent in the service of the employer.

And I would submit to the Court that that is at least as broad, if not broader, than the FLSA requirement that the employee be paid for time worked.

So that the language of what is required to be paid, in the contract, is as broad as what the FLSA requires for payment.

But before you get to that question, you first have to determine, are the acts that the employees performed work?

Now, to do that you have to go to the Muscoda test and determine whether or not this inspection meets the Muscoda requirements.

Muscoda required that physical exertion be involved, that it be under the control of the employer, and that it be necessarily and primarily for the benefit of the employer.

I submit to you that, as to the DOT safety inspection, at least two of those elements are not met.

This inspection is not under the control of the employer.

The necessity for it is established by the DOT.

The elements which comprise the inspection are established by the DOT.

The frequency of the inspection is prescribed by the DOT, and the person who makes the inspection is prescribed by the DOT.

So that... and when the employee makes the inspection, as the evidence showed, he does so at his own pace, there is no supervision by the company, he departs from where he has picked up his bills of lading, goes out and at his own leisure he makes his inspection and departs.

Unidentified Justice: All of this goes to the merits of the FLS, Fair Labor Standards Act claim?

Mr. Maurras: Yes, sir.

Unidentified Justice: Which as I understand it are not before us, are they?

Or do I misapprehend what's before us?

Mr. Maurras: Your Honor, I don't know if they're before the Court or not.

In the--

Unidentified Justice: Well, I thought they were not.

Mr. Maurras: --In the petitioners' brief and in at least one of the amicus briefs, there are... if they're not issues, they're gratuitous statements:

"Of course, the time is compensable in any event. "

I don't think that is an accurate statement.

Unidentified Justice: But that's the merits of the Fair Labor Standards Act claim.

And is there some question that they may be before us?

You don't know whether they are or not.

Mr. Maurras: Your Honor, as I stated, they are mentioned in the briefs of the petitioners, they are mentioned in the amicus brief.

I choose to address the issues because I don't feel that the time is compensable in any event.

Unidentified Justice: Is that for us to decide?

Is that an issue in this case here?

Well, you're saying it's not.

Or don't you know?

You're saying it's an issue though that an arbitrator can decide.

Mr. Maurras: Sir?

Unidentified Justice: You're saying it's an issue an arbitrator can finally decide?

Mr. Maurras: Yes, sir.

I think that the determination of whether the activities that the employee has engaged in constitute time spent in the service of the employer are exactly the kind of questions that arbitrators have traditionally decided.

It's a matter of hours worked, what constitutes hours worked, it's a matter of the law of the shop, previous history.

Unidentified Justice: What if the employee filed a claim and said, filed a grievance and said, I worked 12 hours on June 1 and I was only paid for eight, and I am entitled to some over-time.

And the employer said, you didn't work at all beyond eight hours; you just didn't, you're a liar, you're lying.

And it went to arbitration and the arbitrator decided he only worked eight hours.

Your suggestion is that that's the end of the case?

Mr. Maurras: Yes, Your Honor.

Unidentified Justice: That he shouldn't be able to relitigate that fact in a court?

Mr. Maurras: Yes, Your Honor, that's correct.

That's a correct statement of my position.

Unidentified Justice: Whereas, if the arbitrator had said, well, I guess you did work ten hours, but the contract just calls for you to be paid for eight, then you'd say the arbitrator would be in trouble?

Mr. Maurras: Yes, Your Honor, and I think you have to come back and keep in context that the individual has a right to this fair representation by the union, and if he... in the context of this contract, with the joint committee, you just could not get the result that you have suggested.

Unidentified Justice: I take it that your argument goes only so far as to say that when there is a decision on the facts that that's what's binding?

Mr. Maurras: Yes, Your Honor.

Also, though, even under this Court's decision in the Arguelles case, I think the decision in the instant case should be affirmed.

Now, Arguelles said that the employee had an option to either proceed with his contract remedy of arbitration or to proceed under the statutory remedy and go directly to court.

Unidentified Justice: Mr. Maurras, I'm a little puzzled about what do you contend the arbitrator decided as to whether it was fact or law, as to whether the time where they were waiting around was... He decided it was not compensable time under the contract.

Did he decide it was not compensable time under the statute?

Mr. Maurras: Your Honor, the decision does not say this is not compensable time under the contract.

The grievance that was submitted, at least one of the grievances that was submitted, sets out a factual recitation of what it is that the... well, they all set out just a factual recitation of the events that occurred that the employee claims to be entitled to payment for.

At least one of the grievances, and it's reproduced in the Joint Appendix, also states that the time is compensable under federal wage laws or federal work statutes.

Unidentified Justice: Is there a dispute about what the facts were?

Mr. Maurras: No, Your Honor, there is none.

Unidentified Justice: There wasn't any dispute about the facts, was there?

Mr. Maurras: There is none.

Unidentified Justice: Well, then, I don't understand how you're saying that he decided a fact issue that's now binding and precludes his litigating the statutory issue.

Mr. Maurras: What he decided was that the facts did not constitute time spent in the service of the employer.

That is the equivalent of... that phrase is the equivalent of time worked.

A decision has been made that the acts that took place do not constitute time worked.

Unidentified Justice: The decision has been made as a matter of law, these acts don't entitle you to pay under the statute.

Mr. Maurras: That's correct.

Unidentified Justice: Well, you say that that determination is like the arbitrator saying, you didn't work 12 hours, you just worked eight.

It just isn't work.

Mr. Maurras: Your Honor, if the factual basis for the contractual claim and the factual basis for the statutory claim are the same, then the decision of the arbitrator as to what the effect of those facts are should have the same outcome as to whether the claim is based on the statute or under the contract.

Unidentified Justice: But not if they're different standards?

Not if the contractual standard for pay is different from the statutory standard?

Mr. Maurras: Your Honor, I do not see that there are different standards here.

There's a different rate of pay but the standard is that the employee be paid--

Unidentified Justice: Isn't that the very issue he wants to litigate?

I mean, maybe you're right.

You make a very persuasive argument that you are, but as Justice Stewart suggested, doesn't that all go to the merits of your claim?

Mr. Maurras: --It may go to the merits of my claim, Your Honor, but my point is that the employee has had the opportunity to litigate or arbitrate... and he has made his choice... the merits of his claim, and he should not now be given a second bite at the apple to relitigate it de novo.

The trial court here, while it did not go into the underlying facts, whether or not the time was or was not compensable, did give a two-day examination of whether or not the grievance process itself in this case was fair, and after an extensive trial said that it was.

I submit that that is the proper standard.

Unidentified Justice: Well, that was the 301 claim, primarily, wasn't it?

Mr. Maurras: Yes, sir.

Unidentified Justice: Well, don't you think there's a difference between the board finding, or an arbitrator, as the case may be, a finding: the activities he said he carried out he did not carry out, therefore he performed no work; and a finding: yes, he carried these things on, but those things do not constitute work?

Isn't there a difference?

Mr. Maurras: Yes, there is a difference, Your Honor--

Unidentified Justice: Well, now, as to the former, that he never did these things at all, I can understand why you could say, if you let that go to arbitration, you ought to be bound by it.

But as to the latter, yes, he did these things, but it didn't constitute work, why doesn't that still leave open a statutory claim?

The arbitrator says it didn't constitute work but maybe under the statute a court might say, yes, indeed, they did.

Mr. Maurras: --The parties have bargained for what they have, Your Honor.

They have agreed in their collective bargaining agreement that the arbitrators will decide these issues.

Now, having made that agreement--

Unidentified Justice: That's the difficulty, as I see it.

It is that if the arbitrator decides that, yes, he did these things but they don't constitute work, then necessarily he's in the area of whether the statute covers what in fact the arbitrator found he did.

Mr. Maurras: --That's correct, Your Honor, and as I have stated earlier, I believe, that the arbitrator or the grievance committee has the right, if not the obligation, to consider what the law is, in construing the contract, the contract cannot be construed in a vacuum or a void, it has to take into consideration what the law is, to arrive at the correct result.

Unidentified Justice: As I recall, the district judge expressly left open the idea that if there had been a lack of fair representation, then the grievance finding would not be binding.

Is that not correct?

Mr. Maurras: Yes, Your Honor.

I'm not sure--

Unidentified Justice: Did the Court of Appeals disturb that?

Mr. Maurras: --No, sir.

I'm not sure that I understand when you say, "left open".

The district--

Unidentified Justice: Well, would not harm.

Mr. Maurras: --judge was more explicit.

He said that if there had not been fair representation, that he would have gone into--

Unidentified Justice: You could attack, you could attack on that ground?

Mr. Maurras: --Yes, sir, absolutely.

I do not believe that the Court should apply the doctrine that it has set forth in Gardner-Denver to FLSA wage claims which involve collective bargaining agreements.

Now, basically, the reasons are set forth in the Satterwhite decision.

I think that the Satterwhite decision is thorough and I think it is an accurate decision.

The differences between the two types of legislation necessarily and legitimately permit different types of approaches to solve the problems that are involved.

Wages and hours and what does and does not constitute work is historically the bread and butter for arbitrators.

Wage discrimination and what does or does not constitute race discrimination is not.

It just historically has not been an area that arbitrators have delved into.

Race discrimination is often a very subtle form of discrimination.

It is not always obvious.

It takes specialized training and it's training that arbitrators just generally do not have.

Additionally--

Unidentified Justice: Well, do they have it less than judges?

Mr. Maurras: --Do arbitrators have less training or expertise than judges in the area of race discrimination?

Unidentified Justice: Yes.

Mr. Maurras: Yes, sir.

I believe they do.

I believe that judges are far more qualified to determine questions of race discrimination than are arbitrators.

Unidentified Justice: Yes, but we had a lot of race discrimination arbitrations before we ever had Title VII.

Mr. Maurras: Yes, sir, but since Title VII I don't believe there are very many.

Unidentified Justice: There may not be, but arbitrators simply had to decide race discrimination claims under collective bargaining agreements before Title VII, and did.

Mr. Maurras: Again, I would just repeat myself, Your Honor.

Not since Title VII, and not since the Court has said that the policy of the United States is such that arbitration is not an acceptable method of solution.

And that must have evidenced some dissatisfaction by the Court with the results that the arbitrators were coming up with.

Finally, I would turn to my position that failure to file the written consents under 29 U.S.C. 216(b) is fatal to this action.

216(b) requires that the written consents of the named plaintiffs, or named parties, be submitted, in order for the action to be commenced.

Subsection (a) provides that an action is not commenced until the complaint is filed and the written consents are filed.

Subsection (b) contemplates a situation in which the complaint is filed but the written consents are not, and it provides that the action is not deemed to be commenced until those written consents are filed.

No written consents have ever been filed in this case.

I would submit to you that the parties are not properly before the Court.

The purpose for the written consent under 216(b) is for the party to opt into and be bound by the decision of the Court.

That's not been done here.

Although this case started as a combination of a class action under Rule 23 and a collective action under 216(b), the dismissal by the plaintiffs, or rather by the court, of the claims under Rule 23 did not dispense with the necessity for the filing of the written consents.

216(b) has been amended three times since it was adopted: 1966, 1977, and 1974.

And in none of those amendments was the requirement for the execution and filing of a written consent ever alleviated.

So I would submit to you that this action has not been properly commenced, and that the plaintiffs are not properly before the Court.

Thank you.

Chief Justice Burger: Do you have anything further, Mr. Vladeck?

ORAL ARGUMENT OF DAVID C. VLADECK, ESQ., ON BEHALF OF THE PETITIONERS -- REBUTTAL

Unidentified Justice: Can you address that last point, Mr. Vladeck?

Yes.

Mr. Vladeck: Well, we address that at length in our reply brief, and the short answer is that we disagree that consents are required to be filed in noncollective actions.

The collective aspects of this case were dismissed by the trial court early on.

Even if that answer is not acceptable to the Court, each of the plaintiffs in this action has signed at least two sets of answers to interrogatories, I believe it's been deposed, it's been participated in very actively in conduct of this litigation.

The court... the circuit courts have held that the signing of interrogatory answers is adequate consent requirement.

And thus we don't think that provides any basis whatsoever for the Court to dispose of this action.

Moreover--

Unidentified Justice: In any event, that wasn't one of the questions even arguably comprised in the question presented on the petition for writ of certiorari, was it?

Mr. Vladeck: --That's correct, Your Honor.

Nor was it raised below.

Unidentified Justice: And, well, insofar as it may be raised below, it can be raised below.

Mr. Vladeck: That's correct, Your Honor.

Unidentified Justice: So it's not properly here, is it?

Mr. Vladeck: That's correct, Your Honor.

Unidentified Justice: Well, may the respondent use that as a defense?

Was it even suggested below?

Mr. Vladeck: I believe it was suggested insofar as the collective aspects of this action.

However, the district court dismissed it.

Unidentified Justice: Well, whatever it may have been, isn't he entitled in defense of his judgment to rely on the theory?

Mr. Vladeck: Yes, Your Honor.

I'd just like to respond briefly to Justice Stevens' question.

Whether this time is compensable under the Fair Labor Standards Act or not turns on the question under the statute of whether it is integral or indispensable to the primary activity of the employer.

That phrase has been the subject of nearly 40 years of judicial construction, a host of Department of Labor regulations, case law, and so forth.

It is a statutory question, one that is typically resolved by the courts.

I do not... it is not akin to the question that was put before the arbitrator in this case.

The second point that I'd like to address is the legislative history.

Congress has never suggested in its various deliberations on the Fair Labor Standards Act that a contract providing below the minimum standards set forth in the Act could be used to cut back on those minimum standards.

It has considered the applicability of collective bargaining agreements many times, and it's never yet, never reached that judgment.

The last point I would like to make is that counsel for respondent has somehow equated the duty of fair representation standard with one about the correct interpretation of a contract, and that standard be somehow engrafted upon a Fair Labor Standards Act litigation.

There are two separate standards.

Congress has provided distinct statutory rights, rights that are not merged into the collective bargaining agreement.

Neither Congress nor this Court has ever even suggested that a court must accept an arbitrator's resolution of a contract claim as dispositive of an independent claim under the statute.

To the contrary, the decisions of this Court including the decision in Gardner-Denver suggested the opposite, that while contract rights are properly relegated to the arbitral forum the courthouse door must stay open to resolve statutory claims.

And I think this case bears out the wisdom of that policy.

Because unless petitioners can get into court, there is no way that they can challenge this pay practice as being violative of their rights under the Fair Labor Standards Act.

Unidentified Justice: It's a necessary predicate of your position, is it not, under your question presented on page 3 of your petition, that the Fair Labor Standards Act claim was not in fact submitted to or passed upon by the grievance committee?

Mr. Vladeck: Well, Your Honor, we now argue that it is immaterial whether it was submitted or not.

All that we were trying to emphasize is that in this case it was not submitted.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Attribution:

The OYEZ Project

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