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Supreme Court: The Details on Granite Rock Co. v. Int'l Brotherhood of Teamsters (Web)

Arbitration has reached the U.S. Supreme Court once again, and it seems that even the justices were confused as to how much of a role the process should play in deciding the case.

There are several ways the Court could go in Granite Rock Co. v. Int’l Brotherhood of Teamsters, 08-1214.  The decision has the potential to address the scope of an arbitrator's jurisdiction and the tribunal’s role in determining issues concerning contract formation, as well as the limits of an arbitration clause, and even whether a third party nonsignatory can be compelled to arbitrate a dispute with a signatory party.

It’s more likely, however, that the Court will decide on narrower grounds in the labor arbitration case.

The matter arose out of negotiations for a collective bargaining agreement containing a no-strike provision between Graniterock Co.,  a California mining and construction company, and Teamsters Local 287, a construction workers’ union that represents workers at the company’s San Jose, Calif., facility.

After negotiations failed and an existing CBA expired, Local 287 went on strike with the help of the International Brotherhood of Teamsters.  Negotiations during the strike eventually led to a tentative agreement for a new CBA, which included an arbitration clause covering disputes arising under the new agreement, as well as a no-strike clause.

The parties disagreed on when the new agreement was ratified.  Graniterock believes it was ratified July 2, 2004.  But the union went on strike on July 6, 2004, in an effort to secure a back-to-work agreement with a “hold-harmless” provision.  

It was undisputed that a ratification took place later, on Aug. 22, 2004.  The new, ratified, CBA applied retroactively to May 1, 2004--the first day after the original CBA expired.  The new CBA was executed in December 2004.

Graniterock sought damages resulting from the strike between the date it contends the contract was ratified, July 6, 2004, and August 22, 2004.  

The union countered that the no-strike provision did not apply during that period.

Graniterock also sought damages for tortious interference with the contract by the International Brotherhood of Teamsters.

The district court ordered the case into arbitration but retained the issue of whether the contract was validly formed.  The court eventually held that the CBA was ratified and in force on July 2, 2004.  The court dismissed the tortious interference claim, holding that the Labor-Management Relations Act did not provide a remedy against nonsignatories to a contract, like the International Brotherhood.

The Ninth U.S. Circuit Court of Appeals (opinion here) affirmed in part, dismissing the claim against the International Brotherhood, but reversing and remanding part of the case.  It held that “both parties consented to arbitration; Granite Rock implicitly by suing under the contract containing the arbitration clause, and Local 287 explicitly by asserting the arbitration clause.”
It issued a remand compelling arbitration.

The circuit court did not rely on the CBA’s subsequent, undisputed ratification on Aug. 22, 2004, or its December 2004, execution, or and its retroactivity provision.

The U.S. Supreme Court heard the case on Jan. 19.  Graniterock, the petitioner, was represented by Garry G. Mathiason, a partner in the San Francisco office of Littler Mendelson.  Teamsters Local 287, one of the respondents, was represented by Robert Bonsall, a partner at Sacramento's Beeson Tayer & Bodine.  The other respondent, International Brotherhood of Teamsters, was represented by Peter D. Nussbaum, a partner at San Francisco's Altshuler Berzon.

The questions presented were:

1) Does a federal court have jurisdiction to determine whether a collective bargaining agreement was formed when it is disputed whether any binding contract exists, but no party makes an independent challenge to the arbitration clause apart from claiming it is inoperative before the contract is established?
2) Does Section 30l(a) of the Labor-Management Relations Act, which generally preempts otherwise available state law causes of action, provide a cause of action against an international union that is not a direct signatory to the collective bargaining agreement, but effectively displaces its signatory local union and causes a strike breaching a collective bargaining agreement for its own benefit?

Scotusblog reported that, at the oral argument, Graniterock counsel Mathiason “found little support on the Court for its claim that Section 301 . . . creates a federal cause of action against an international union for tortious interference with a contract between an employer and a local union when the international union was not a party to the contract.”  

The blog also notes that the other issue, “whether a defendant labor union can compel arbitration in a suit for violation of the contract even while arguing that no contract was formed, . . largely became a debate about the retroactive effectiveness of provisions in the contract upon which the parties later agreed.”

The argument transcript can be found here

There was some confusion at the oral argument about the contract formation issue, and as to what, exactly, the Ninth Circuit court had held.  This was because, in addition to the court matter,  the parties also were involved in administrative proceedings before the National Labor Relations Board.  

In that parallel track, on May 31, 2006, the NLRB concluded that:  (a) the union did not ratify the agreement on July 2; 2004; (b) by not ratifying the agreement on July 2, 2004, the union committed an unfair labor practice; and (c) the CBA, as finally executed, should be given retroactive effect to July 2, 2004.  

The Ninth Circuit, in a proceeding unrelated to the one currently on appeal in the Supreme Court, enforced the board's ruling.

The Supreme Court could go broad, and decide whether an arbitrator has jurisdiction over formation where a contract contains an arbitration provision.  Or it could hold that this particular contract was ratified in May 2004, and executed in December, and leave the interpretation of the retroactivity and no-strike provisions to an arbitrator.  

It is also possible, yet unlikely, that the court could visit the big issue, resonating beyond the labor context, as to whether nonsignatories to a contact with an arbitration clause could be compelled to arbitrate.

A decision is expected before the term ends in June.

The case is not the Court’s only look at arbitration this year.  Stolt-Nielsen S.A. et al. v. AnimalFeeds International Corp., 08-1198, has been argued and a decision is pending; the day before Stolt-Nielsen was argued in December, the Court decided Union Pacific Railroad Co. v. Brotherhood of Teamsters, 08-604, which addressed a labor arbitration forum issue.  Details and links for both are here.

Still to be argued this term is Rent-A-Center, West Inc. v. Jackson, No. 09-497, an arbitration unconscionability case.  Details here

--Abby Geller, CPR Intern