Fifth Circuit Affirms W.D. of Texas Order Confirming Arbitrator’s Modified Decision

The United States Court of Appeals for the Fifth Circuit has affirmed a federal district court’s order confirming an arbitrator’s modified decision in a dispute between Southwestern Bell Telephone Company and the union representing the company’s workers.  In Communications Workers of America, AFL-CIO v. Southwestern Bell Telephone Co., et al., No. 19-50686 (5th Cir., March 27, 2020), Communications Workers of America, AFL-CIO (“CWA”) entered into a collective bargaining agreement (“CBA”) with Southwestern Bell Telephone Company (“the Company”).  According to the parties’ CBA, all disputes were subject to arbitration “conducted under the then obtaining rules of the Voluntary Labor Arbitration Tribunal of the American Arbitration Association.”  In addition, the CBA stated any decisions issued by an arbitrator were final and binding upon the parties.

In 2015, CWA filed a grievance against the Company after it assigned cable splicing work duties to certain technicians who were employed by the Company.  The Company countered the CWA’s claims by arguing it complied with both the CBA and the parties’ mutual understandings.  Following arbitration proceedings, an arbitrator sustained CWA’s grievance and found the Company violated the parties’ agreement.

The following month, the Company filed a motion for reconsideration.  According to the Company, a document the arbitrator heavily relied on in making his decision was related to a different CBA with another union.  CWA countered by arguing reconsideration was beyond the scope of the arbitrator’s powers.  Ultimately, the arbitrator agreed with the Company, vacated his initial decision, and issued a modified decision.

Next, CWA filed a motion to enforce the arbitrator’s initial decision and vacate his modified order in the Western District of Texas.  After that, both CWA and the Company filed motions for summary judgment.  The Western District of Texas referred the case to a magistrate judge who recommended the dispute be decided in favor of the Company.  The district court adopted the magistrate judge’s recommendation, held the arbitrator’s interpretation of his powers was consistent with the CBA, and confirmed the arbitrator’s modified award.  CWA then filed an appeal with the nation’s Fifth Circuit Court of Appeals.

On appeal, the Fifth Circuit said the standard of review was “very deferential.”  In addition, the Court of Appeals stated:

Courts are not permitted “to reconsider the merits of an [arbitration] award.” Misco, 484 U.S. at 36.  Instead, we must affirm an arbitral award “as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority.” Id. at 38. Even if an arbitrator committed serious error, we may not reverse the arbitrator’s judgment if the decision “draw[s] its essence from the contract.” Id.; see also Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 572 (2013)(noting that “convincing a court of an arbitrator’s error—even his grave error—is not enough” to justify vacatur).

Next, the appellate court said:

This uniquely deferential standard of review compels us to affirm the district court and uphold the arbitrator’s February award.

CWA argues that the arbitrator exceeded his authority when he rescinded the January award and issued the February award. An arbitrator exceeds his authority when he “ignore[s] the plain language of a contract.” Delek Refining, Ltd. v. Local 202, United Steel, 891 F.3d 566, 570 (5th Cir. 2018)(citations omitted); see id. (distinguishing between an arbitrator’s role in “applying or interpreting the agreement” and “rewriting it”). “[A]n arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice.” United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960). To determine whether an arbitrator exceeded his authority, courts apply the “essence test,” evaluating whether the arbitration award “ha[s] a basis that is at least rationally inferable, if not obviously drawn, from the letter or purpose of the collective bargaining agreement.” Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314, 1325 (5th Cir. 1994)(citation omitted).

The arbitrator’s decision is consistent with “our expansive reading of the `essence’ test.” Id. When he issued the February award, the arbitrator relied upon the language in the parties’ agreement, situating his decision and his interpretation of his authority within the rules that governed their dispute resolution process. Specifically, he held that Rule 40 of the AAA rules permitted him to reconsider his previous decision and issue a substitute opinion. In their CBA, the parties agreed that they would be bound by the AAA rules. When a CBA explicitly refers to the AAA rules, those rules become “incorporated” into the agreement between the parties. See Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012).

The Fifth Circuit reviewed the facts of the case before holding:

In this case, the arbitrator grounded his modification within the rules that governed the parties’ agreement. Though his interpretation of his powers is debatable, “the question for a judge is not whether the arbitrator construed the parties’ contract correctly, but whether he construed it at all.” Oxford Health, 569 U.S. at 573. Because the February award stemmed from a colorable interpretation of the parties’ CBA, the arbitrator drew the “essence” of his decision from the parties’ agreement, and he did not exceed his authority. See Misco, 484 U.S. at 38; Executone, 26 F.3d at 1325.

Because the United States Court of Appeals for the Fifth Circuit found the arbitrator did not exceed his authority, the appellate court affirmed the district court’s order confirming the arbitrator’s decision.

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