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Updated! Supreme Court's First 09-10 Term Arb Opinion Overturns Labor Panel's Decision (Web)

This has evolved into a busy week for arbitration at the nation’s top Court:

Yesterday, the U.S. Supreme Court issued its first arbitration decision of the 2009-2010 term, ruling on the jurisdiction of a federal labor arbitration panel.

Today, the Court heard oral arguments in Stolt-Nielsen S.A. et al. v. AnimalFeeds International Corp., No. 08-1198, a tough case that is expected to decide whether class arbitrations can proceed when arbitration contracts don’t mention them, but arbitrators decide the process is needed.  You can find the transcript of the Court arguments here.

The U.S. Supreme Court unanimously held yesterday that a failure to demonstrate a pre-arbitration conference had been held before an arbitration proceeded isn’t enough to permit a National Railroad Adjustment Board to rule that it didn’t have jurisdiction in a labor dispute under the Railway Labor Act.

The decision backs the Seventh U.S. Circuit Court of Appeals’s setting aside the board’s decision to dismiss the case.

But the decision, written by Associate Justice Ruth Bader Ginsburg in Union Pacific Railroad Co. v. Brotherhood of Teamsters, 08-604 (Dec. 8, 2009)(available here)affirms on different grounds.

The opinion provides a history of railroad labor disputes, starting with Congress’s 1926 effort in passing the Railway Labor Act “to promote peaceful and efficient resolution” so that labor issues wouldn’t cripple the railroads, and in their wake, the nation’s economy. 

The decision rests on a finding that the lack of proof by the union of “conferencing”–a negotiation step before unions and management move to arbitration mandated by the Act–did not allow the board to reject the claim for a lack of jurisdiction.

The Supreme Court ruled that there is nothing in the act that elevates to jurisdictional status an obligation to conference or to prove conferencing.  That “leaves no doubt about the Union’s entitlement” to having the board’s order vacated.

The Seventh Circuit, the Court says, went too far.  The federal appeals court had ruled that there was no prerequisite in the statute or rules for documenting conferencing had taken place.  The appeals court also had reversed the board, but based on the ground that the board’s proceedings were incompatible with due process.

Congress gave the board the right to develop rules to process arbitration claims, Ginsburg notes, but it alone covers the board’s jurisdiction.  The Ginsburg opinion says that by declaring it didn’t have jurisdiction, the board had not conformed to Congress’s jurisdictional grant.

Satisfying the conferencing requirement “does not condition the Board’s adjudicatory authority,” the opinion holds.  The Seventh Circuit should have stopped at that point and overturned the board without the due process ruling.        

The opinion concludes: “By refusing to adjudicate cases on the false premise that it lacked power to hear them, the [National Railroad Adjustment Board ] panel failed ‘to conform, or confine itself,’ to the jurisdiction Congress gave it.”

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In Stolt-Nielsen, which was the second case to be argued today, the questions presented in the case  were:

In Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), this Court granted certiorari to decide a question that had divided the lower courts: whether the Federal Arbitration Act permits the imposition of class arbitration when the parties' agreement is silent regarding class arbitration. The Court was unable to reach that question, however, because a plurality concluded that the arbitrator first needed to address whether the agreement there was in fact “silent.” That threshold obstacle is not present in this case, and the question presented here--which continues to divide the lower courts--is the same one presented in Bazzle:
Whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq.

Our preview article after the Court took the case on June 15 can be found here.  Most of the Stolt-Nielsen briefs can be found hereHere again is the link to the Ce. 9 oral argument transcript.

–Russ Bleemer, Editor, Alternatives