Asarco, LLC v. United Steel, Paper and Forest , 893 F.3d 621 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ASARCO LLC, a limited liability No. 16-16363
corporation,
Petitioner-Appellant, D.C. No.
2:15-cv-00117-
v. SMM
UNITED STEEL, PAPER AND
FORESTRY, RUBBER, OPINION
MANUFACTURING, ENERGY, ALLIED
INDUSTRIAL AND SERVICE WORKERS
INTERNATIONAL UNION, AFL-CIO,
CLC, on behalf of itself and the other
unions representing ASARCO LLC's
bargaining unit employees,
Respondent-Appellee.
Appeal from the United States District Court
for the District of Arizona
Stephen M. McNamee, Senior District Judge, Presiding
Argued and Submitted November 16, 2017
Pasadena, California
Filed June 19, 2018
2 ASARCO V. UNITED STEEL
Before: Richard A. Paez and Sandra S. Ikuta, Circuit
Judges, and Robert W. Gettleman, * District Judge.
Opinion by Judge Gettleman;
Dissent by Judge Ikuta
SUMMARY **
Labor Law
The panel affirmed the district court’s order affirming an
arbitration award in favor of a union, which sought relief
concerning a pension provision in the parties’ collective
bargaining agreement.
The employer asserted that the arbitrator reformed the
collective bargaining agreement in contravention of a no-add
provision in the agreement. The district court held that the
arbitrator was authorized to reform the agreement, despite
the no-add provision, based on a finding of mutual mistake.
The panel held that the employer did not properly
preserve its objection to the arbitrator’s jurisdiction because
the employer conceded that the union’s grievance was
arbitrable and failed to expressly preserve the right to contest
jurisdiction in a judicial proceeding. The panel further held
that the arbitration award drew its essence from the
*
The Honorable Robert W. Gettleman, United States District Judge
for the Northern District of Illinois, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
ASARCO V. UNITED STEEL 3
collective bargaining agreement, and the arbitrator did not
exceed his authority in reforming the agreement. In
addition, the arbitrator’s award did not violate public policy.
Dissenting, Judge Ikuta wrote that, in light of the no-add
provision, the arbitrator exceeded his authority under the
collective bargaining agreement.
COUNSEL
Rex S. Heinke (argued), Akin Gump Strauss Hauer & Feld
LLP, Los Angeles, California; Lacy Lawrence and Marty L.
Brimmage, Akin Gump Strauss Hauer & Feld LLP, Dallas,
Texas; for Petitioner-Appellant.
Michael D. Weiner (argued) and Jay Smith, Gilbert &
Sackman, Los Angeles, California; Daniel M. Kovalik,
United Steelworkers, Pittsburgh, Pennsylvania; Gerald
Barrett, Ward Keenan & Barrett P.C., Phoenix, Arizona; for
Respondent-Appellee.
OPINION
GETTLEMAN, District Judge:
This appeal involves the validity of an arbitration award.
ASARCO asserts that the award is invalid because the
arbitrator reformed the Basic Labor Agreement (“BLA”)
between the Union and ASARCO in contravention of a no-
add provision in that agreement. The Union argues that the
arbitrator did not contravene the no-add provision because
he was required to reform the BLA upon finding that the
parties were mutually mistaken as to its terms when they
4 ASARCO V. UNITED STEEL
agreed to it. The district court affirmed the award, holding
that ASARCO properly preserved its objection to the
arbitrator’s jurisdiction, but the arbitrator was authorized to
reform the BLA, despite the no-add provision, based on a
finding of mutual mistake. We affirm, but conclude that
ASARCO did not properly preserve its objection to the
arbitrator’s jurisdiction.
I. BACKGROUND AND PROCEDURAL HISTORY
ASARCO is a miner, smelter, and refiner of copper and
other precious metals with facilities in Arizona and Texas.
ASARCO’s employees are represented by the Union.
ASARCO and the Union are parties to the BLA, which was
originally effective January 1, 2007, through June 30, 2010.
The BLA was modified and extended through two
Memoranda of Agreement (“MOA”) negotiated in 2010 and
2011. Article 9, Section B of the BLA provides that a
Copper Price Bonus (“Bonus”) will be paid quarterly to
employees who participate in ASARCO’s pension plan. The
Bonus is calculated based on the price of copper and is
significant, at times as much as $8,000 annually per
employee. The 2011 MOA modified Article 12, Section Q
of the BLA to make employees hired on or after July 1, 2011
ineligible for ASARCO’s pension plan, and thus ineligible
for the Bonus. The Union, unaware of the link between the
pension plan and the Bonus, 1 filed a grievance disputing
1
It is undisputed that the parties did not discuss the Bonus when
negotiating the 2011 MOA, and neither party indicated that the Bonus
would be impacted in any way by the modification.
ASARCO V. UNITED STEEL 5
ASARCO’s refusal to pay the Bonus to employees hired
after July 1, 2011. The case proceeded to arbitration. 2
At the beginning of the arbitration hearing the parties
stipulated that the matter was properly before the arbitrator
and that the arbitrator had jurisdiction to decide the
grievance. The Union claimed there was a mutual mistake
in the 2011 MOA: the parties failed to recognize that Article
9, Section C of the BLA tied eligibility for the Bonus to
participation in the pension plan, and both parties intended
for all employees to remain eligible for the Bonus when they
negotiated the 2011 MOA. Accordingly, the Union argued
that reformation of the BLA was the appropriate remedy.
ASARCO offered no evidence to the contrary, but argued
that the arbitrator lacked authority to reform the BLA
because Article 5, Section I(6)(c) contained the following
no-add provision: “The arbitrator shall not have jurisdiction
or authority to add to, detract from or alter in any way the
provisions of this Agreement.” After hearing six days of
evidence the arbitrator concluded that neither party
anticipated that the 2011 MOA modification would impact
new hires’ eligibility for the Bonus. Because he found that
the parties were mutually mistaken as to the terms of the
2011 MOA, the arbitrator ordered that the BLA be amended
to provide that new hires, though ineligible for ASARCO’s
pension plan, remain eligible for the Bonus.
ASARCO filed a Petition to Vacate Arbitration Award
in the United States District Court for the District of Arizona.
ASARCO did not challenge the arbitrator’s findings of fact
or conclusions of law, but argued that the no-add provision
2
Article 5, Section 1 of the BLA provides that all disputes between
the parties are to be resolved through a grievance procedure that
culminates in arbitration.
6 ASARCO V. UNITED STEEL
deprived the arbitrator of authority to amend the BLA. The
district court confirmed the arbitration award, but rejected
the Union’s argument that ASARCO had waived any
argument regarding the limits of the arbitrator’s jurisdiction.
In confirming the award, the district court noted the degree
of deference due to the arbitrator’s decision and concluded
that the arbitrator did not violate the no-add provision
because the reformation corrected a defect in the BLA,
which was the product of mutual mistake, to reflect the terms
the parties had agreed upon. ASARCO timely appeals.
II. STANDARD OF REVIEW
Our review of a district court’s decision confirming an
arbitration award is de novo. Hawaii Teamsters & Allied
Workers Union, Local 996 v. United Parcel Serv., 241 F.3d
1177, 1180 (9th Cir. 2001). “Our review of labor arbitration
awards is, however, extremely deferential because ‘courts do
not sit to hear claims of factual or legal error by an arbitrator
as an appellate court does in reviewing decisions of lower
courts.’” Id. (quoting United Paperworkers Int’l Union,
AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 108 S. Ct. 364, 98
L. Ed. 2d 286 (1987)) (internal alterations omitted). Unless
the arbitrator has “‘dispensed his own brand of industrial
justice’ by making an award that does not ‘draw its essence
from the collective bargaining agreement,’” we must
confirm the award. Id. at 1181 (quoting United Steelworkers
v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 80
S. Ct. 1358, 4 L. Ed. 2d 1424 (1960)) (internal alterations
omitted).
The context of collective bargaining warrants this
extremely limited scope of review because the parties have
agreed to have their disputes decided by an arbitrator chosen
by them: “[I]t is the arbitrator’s view of the facts and of the
meaning of the contract that they have agreed to accept.” Id.ASARCO V. UNITED STEEL 7
“Indeed, the mandatory and prearranged arbitration of
grievances is a critical aspect of the parties’ bargain, the
means through which they agree ‘to handle the anticipated
unanticipated omissions of the collective bargaining
agreement.’” Stead Motors of Walnut Creek v. Auto.
Machinists Lodge No. 1173, Int’l Ass’n of Machinists &
Aerospace Workers, 886 F.2d 1200, 1205 (9th Cir. 1989) (en
banc) (quoting St. Antoine, Judicial Review of Labor
Arbitration Awards: A Second Look at Enterprise Wheel and
Its Progeny, 75 Mich.L.Rev. 1137, 1140 (1977)) (“Judicial
Review”) (internal alterations omitted). Such omissions
occur because “[u]nlike the commercial contract, which is
designed to be a comprehensive distillation of the parties’
bargain, the collective bargaining agreement is a skeletal,
interstitial document.” Id.Consequently, “[t]he labor arbitrator is the person the
parties designate to fill in the gaps; for the vast array of
circumstances they have not considered or reduced to
writing, the arbitrator will state the parties’ bargain.” Id. He
is “‘their joint alter ego for the purpose of striking whatever
supplementary bargain is necessary’ to handle matters
omitted from the agreement.” Id. (quoting Judicial Review,
75 Mich.L.Rev. at 1140). Because of this role, the arbitrator
“cannot ‘misinterpret’ a collective bargaining agreement,”
id., and “even if we were convinced that the arbitrator
misread the contract or erred in interpreting it, such a
conviction would not be a permissible ground for vacating
the award.” Va. Mason Hosp. v. Wash. State Nurses Ass’n,
511 F.3d 908, 913‒14 (9th Cir. 2007) (footnote omitted).
This deference applies “‘even if the basis for the arbitrator’s
decision is ambiguous and notwithstanding the
erroneousness of any factual findings or legal conclusions.’”
Federated Dep’t Stores v. United Foods & Commercial
8 ASARCO V. UNITED STEEL
Workers Union, Local 1442, 901 F.2d 1494, 1496 (9th Cir.
1990) (quoting Stead Motors, 886 F.2d at 1209).
III. ANALYSIS
Although judicial review of arbitration awards is
extremely limited, the Supreme Court and this Circuit have
articulated three exceptions to the general rule of deference
to an arbitrator’s decision: “(1) when the arbitrator’s award
does not draw its essence from the collective bargaining
agreement and the arbitrator is dispensing his own brand of
industrial justice; (2) when the arbitrator exceeds the
boundaries of the issues submitted to him; and (3) when the
award is contrary to public policy.” Id. (internal quotation
marks omitted). According to ASARCO, the arbitrator’s
award should be vacated on all three grounds. We will
address each, but turn first to the Union’s argument that
ASARCO waived the right to contest the arbitrator’s
jurisdiction. According to the Union, it did so by conceding
that the grievance was arbitrable and failing to expressly
preserve the right to contest jurisdiction in a judicial
proceeding. Although the district court rejected this
argument, we agree with the Union.
A. Waiver
Generally speaking, the issue of arbitrability is decided
by the courts. John Wiley & Sons, Inc., v. Livingston,
376 U.S. 543, 546–47, 84 S. Ct. 909, 912–13, 11 L. Ed. 2d
898 (1964). The parties may, however, agree to submit the
question of arbitrability to the arbitrator. United
Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S.
574, 578, 80 S. Ct. 1347, 1350, 4 L. Ed. 2d 1409 (1960).
Additionally, as occurred here, the parties may stipulate that
the controversy is arbitrable. If, however, a party “objects to
arbitration on jurisdictional grounds, [it] may refuse to
ASARCO V. UNITED STEEL 9
arbitrate the case.” George Day Const. Co. v. United Bhd.
of Carpenters & Joiners of Am., Local 354, 722 F.2d 1471,
1476 (9th Cir. 1984). The party seeking arbitration is “then
put to the task of petitioning the court to compel arbitration.”
Id. Alternatively, a party can “object[ ] to the arbitrator’s
authority, refuse[ ] to argue the [jurisdictional] issue before
him, and proceed[ ] to the merits of the grievance.” Id. at
1475. “[T]hen, clearly the [jurisdictional] question would
have been preserved for independent judicial scrutiny.” Id.“The same result could be achieved by making an objection
as to jurisdiction and an express reservation of the question
on the record.” Id.As another alternative, the objecting party can “take[ ]
the initiative by seeking declaratory and injunctive relief
prior to the commencement of the arbitration.” Id. at 1476.
The objecting party can take any of these steps to “obtain[ ]
an independent judicial examination of the [jurisdictional]
question.” Id. The objection is not expressly preserved for
judicial examination, however, when “the objection is
raised, the [jurisdictional] issue is argued along with the
merits, and the case is submitted to the arbitrator for
decision.” Id. at 1475. In such circumstances, “it becomes
readily apparent that the parties have consented to allow the
arbitrator to decide the entire controversy, including the
question of arbitrability.” Id. Indeed, “an agreement to
arbitrate a particular issue need not be express—it may be
implied from the conduct of the parties.” Ficek v. S. Pac.
Co., 338 F.2d 655, 656 (9th Cir. 1964). By voluntarily
submitting an issue to the arbitrator, the parties “‘evinc[e] a
subsequent agreement for private settlement’” of that issue.
Id. (quoting Amicizia Societa Navegazione v. Chilean
Nitrate & Iodine Sales Corp., 274 F.2d 805, 809 (2d Cir.
1960)). “The rule is sometimes stated in terms of waiver: A
claimant may not voluntarily submit his claim to arbitration,
10 ASARCO V. UNITED STEEL
await the outcome, and, if the decision is unfavorable, then
challenge the authority of the arbitrators to act.” Id. at 657
(citation omitted).
ASARCO did not exercise any of the options discussed
above to expressly preserve the jurisdictional question for
judicial review. Instead, ASARCO conceded that the
grievance was arbitrable, then argued to the arbitrator that he
lacked jurisdiction to reform the BLA in crafting a remedy.
“Although [ASARCO] did suggest at the arbitration hearing
that the arbitrator had no authority to [reform the BLA], it
chose to argue that the arbitrator lacked authority rather than
simply refusing to come to the table.” Tristar Pictures, Inc.
v. Dir.’s Guild of Am., Inc., 160 F.3d 537, 540 (9th Cir.
1998). “‘In this manner, [ASARCO] by its conduct evinced
clearly its intent to allow the arbitrator to decide not only the
merits of the dispute but also the question of [jurisdiction].’”
Id. (quoting George Day, 722 F.2d at 1475) (internal
alterations omitted).
ASARCO attempts to distinguish Tristar by pointing out
that in that case the employer disputed the arbitrator’s
jurisdiction over the entire dispute, whereas ASARCO
objected only to the arbitrator’s authority to reform the BLA.
This point is well taken, but it does nothing to salvage
ASARCO’s claim that it expressly preserved the question of
the arbitrator’s authority to reform the BLA for judicial
review. As our precedent makes clear, ASARCO submitted
that issue to the arbitrator when it chose to argue it before
the arbitrator rather than making an express reservation of
the issue and arguing only the merits of the grievance. When
ASARCO argued to the arbitrator that the he lacked
authority to reform the BLA, it submitted that issue to the
arbitrator, and could not seek a different result from the
district court. The argument was waived. Additionally,
ASARCO V. UNITED STEEL 11
ASARCO’s decision to argue the issue to the arbitrator
suggests that it never really objected to the arbitrator’s
jurisdiction at all, but rather objected only to the arbitrator
crafting the remedy that the Union sought.
In deciding that ASARCO did not waive its right to
contest the arbitrator’s jurisdiction, the district court relied
heavily on Van Waters & Rogers, Inc. v. Int’l Bhd. of
Teamsters, Local Union 70, 913 F.2d 736 (9th Cir. 1990). In
Van Waters the company purchased the assets of a rival
company and, as part of that purchase, agreed to offer
employment to seven of the rival company’s employees, all
of whom were represented by Local Union 70, and to assume
the terms and conditions of their Collective Bargaining
Agreement (“CBA”). Id. at 738. The parties’ CBA
contained a provision that prohibited arbitration of
jurisdictional disputes between Local Union 70 and any
other Union, and instead mandated that such disputes would
be resolved only by the Unions. Id. at 740. Local Union 70
filed grievances on behalf of the seven employees hired by
Van Waters related to pay, benefits, and seniority status.
The parties agreed to arbitrate the grievances. At the outset
of the arbitration Van Waters stipulated that under Local
Union 70’s CBA the arbitrator did not have jurisdiction over
its other employees, who were represented by a different
Union, Local 287, and that the arbitrator did not have the
authority to issue a ruling that would affect the employees
represented by Local 287, which was not a party to the
proceeding. Id. at 741. Van Waters used similar language
to that used by ASARCO, and we held that Van Waters
adequately preserved the jurisdictional question on the
record and had therefore not waived the issue of arbitrability.
Id. Although ASARCO used similar language, it did so in
relation to a vastly different objection under vastly different
circumstances.
12 ASARCO V. UNITED STEEL
Van Waters is thus inapposite for at least two reasons.
First, Van Waters objected to the arbitrator exercising
jurisdiction over an entire group of employees, Local 287,
who were not parties to the proceeding and were in no way
represented in the arbitration. Second, after objecting to the
arbitrator’s jurisdiction, Van Waters did not proceed to argue
throughout the arbitration hearing how and why the
arbitrator lacked jurisdiction, as ASARCO did in the instant
case. Instead, Van Waters stipulated to the scope of the
arbitration and proceeded to argue only the merits of its case.
ASARCO, on the other hand, objected not to the scope of
the arbitration and not to the arbitrator’s exercise of
jurisdiction over any parties, but rather to his authority to
reform the BLA in crafting a remedy. After objecting,
ASARCO argued at length, to the arbitrator, that he lacked
such authority. By doing so, ASARCO submitted the issue
to the arbitrator and “evinced a subsequent agreement for
private settlement” of that issue. Ficek, 338 F.2d at 656(internal quotation marks omitted). ASARCO cannot
“voluntarily submit [its] claim to arbitration, await the
outcome, and, [when] the decision is unfavorable, then
challenge the authority of the arbitrator[ ] to act.” Id. at 657(citation omitted). Accordingly, we find that ASARCO
waived its right to contest the arbitrator’s jurisdiction.
B. Merits
Given the great deference due to arbitrator’s decisions,
ASARCO wisely does not challenge the arbitrator’s findings
of fact or conclusions of law, but instead argues that the
arbitrator’s award does not warrant deference because of the
following exceptions: (1) the award does not draw its
essence from the BLA; (2) the arbitrator exceeded his
authority in reforming the BLA; and (3) the award is
contrary to public policy. See supra at 7–8. The first two
ASARCO V. UNITED STEEL 13
exceptions are interrelated, and we will address them
simultaneously before turning to the third exception.
ASARCO argues that the no-add provision in the BLA
deprived the arbitrator of authority to reform the BLA, and
the arbitrator’s award does not draw its essence from the
BLA because it ignores this provision.
In deciding whether the arbitrator’s award draws its
essence from the BLA, “the quality – that is the degree of
substantive validity – of [his] interpretation is, and always
has been, beside the point.” Sw. Reg’l Council of Carpenters
v. Drywall Dynamics, Inc., 823 F.3d 524, 532 (9th Cir.
2016), cert. denied, 137 S. Ct. 829, 197 L. Ed. 2d 68 (2017).
“Instead, the appropriate question for a court to ask when
determining whether to enforce a labor arbitration award
interpreting a collective bargaining agreement is a simple
binary one: Did the arbitrator look to and construe the
contract, or did he not?” Id. This is because “‘[i]t is only
when the arbitrator strays from interpretation and application
of the agreement and effectively dispenses his own brand of
industrial justice that his decision may be unenforceable.’”
Id. at 531 (quoting Major League Baseball Players Ass’n v.
Garvey, 532 U.S. 504, 509, 121 S. Ct. 1724, 149 L. Ed. 2d
740 (2001)) (internal alterations omitted). Accordingly, “the
court’s inquiry ends” if the arbitrator “made any
interpretation or application of the agreement at all.” Id. at
531‒32. We therefore “must limit [our] review to whether
the arbitrator’s solution can be rationally derived from some
plausible 3 theory of the general framework or intent of the
3
As the parties note, this Court has retired the use of the term
“plausibility” when describing judicial review of labor arbitration
awards. See Drywall Dynamics, 823 F.3d at 532. This step was taken
not to “propose any substantive change to the settled law in this area,”
14 ASARCO V. UNITED STEEL
agreement.” United Food & Commercial Workers Int’l
Union, Local 588 v. Foster Poultry Farms, 74 F.3d 169, 173
(9th Cir. 1995), opinion amended on denial of reh’g, (9th
Cir. Jan. 30, 1996).
We have no doubt that the arbitrator’s decision was
grounded in his reading of the BLA. The arbitrator
acknowledged that new hires were not entitled to the Bonus
under the plain language of the BLA and that he could not
find for the Union based solely on the language contained in
the BLA. He also recognized that arbitrators do not generally
have the authority to rewrite CBAs or ignore their
provisions. He noted, however, that arbitrators can reform a
contract to correct an obvious mutual mistake. Citing a
substantial amount of evidence that he heard over six days,
the arbitrator concluded that the parties presented precisely
this scenario: in negotiating the 2011 MOA, they never
discussed or even acknowledged that if the BLA were
amended to make new hires ineligible for the pension plan,
they would also be ineligible for the Bonus. Although he did
not specifically cite the no-add provision when explaining
the basis of his award, the arbitrator did quote it directly as
relevant language of the BLA and noted that, absent a
finding of mutual mistake, he would not have the authority
to reform the BLA. 4
but rather to underscore the limited nature of the inquiry, which is
whether “the arbitrator look[ed] at and construe[d] the contract.” Id.4
Respectfully, the dissenting opinion is incorrect when it states that
the arbitrator failed to discuss, or even mention, the no-add provision. In
fact, the arbitrator discussed the no-add provision at length on pages 14
and 16 of the arbitration award, quoted it directly, and discussed the
parties’ positions regarding its impact. The arbitrator then
ASARCO V. UNITED STEEL 15
Given the arbitrator’s extensive treatment of the BLA
and acknowledgment of the no-add provision, we agree with
the district court that the arbitrator’s decision was grounded
in his reading of the BLA, and are “bound to enforce the
award” even if “the basis for the arbitrator’s decision may be
ambiguous.” W.R. Grace & Co. v. Local Union 759, Int’l
Union of United Rubber, Cork, Linoleum & Plastic Workers
of Am., 461 U.S. 757, 764, 103 S. Ct. 2177, 2182, 76 L. Ed.
2d 298 (1983); see also Drywall Dynamics, 823 F.3d at
533(“‘[A]rbitrators have no obligation to give their reasons
for an award at all,’” and a court may not “‘infer the non-
existence of a particular reason merely from the award’s
silence on a given issue.’”) (quoting Stead Motors, 886 F.2d
at 1208, 1213); Stead Motors, 886 F.2d at 1208 (“‘[M]ere
ambiguity in the opinion accompanying an award, which
permits the inference that the arbitrator may have exceeded
his authority, is not a reason for refusing to enforce the
award.’”) (quoting Enterprise Wheel, 363 U.S. at 598, 80
S. Ct. at 1361).
Upon concluding that the parties were mutually mistaken
as to the impact of the 2011 MOA on new hires’ eligibility
for the Bonus, the arbitrator was authorized to reform the
CBA despite ASARCO’s protest. W.R. Grace, 461 U.S. at
765, 103 S. Ct. at 2183 (“Because the authority of arbitrators
is a subject of collective bargaining, just as is any other
contractual provision, the scope of the arbitrator’s authority
is itself a question of contract interpretation that the parties
have delegated to the arbitrator.”). Additionally, the
arbitrator was not strictly bound only to the provisions of the
BLA in crafting a remedy, because “the arbitrator is entitled,
and is even expected, to range afield of the actual text of the
acknowledged that he lacked authority to rewrite the BLA or ignore its
provisions absent a finding of mutual mistake.
16 ASARCO V. UNITED STEEL
collective bargaining agreement he interprets.” Stead
Motors, 886 F.2d at 1206. The arbitrator was entitled to rely
on a number of resources, including “‘statutes, case
decisions, principles of contract law, practices, assumptions,
understandings, [and] the common law of the shop’” in his
effort to give meaning to the BLA. Hawaii Teamsters,
241 F.3d at 1183 (quoting McKinney v. Emery Air Freight
Corp., 954 F.2d 590, 595 (9th Cir. 1992)).
Applying ordinary principles of contract law, the
arbitrator concluded that the proper remedy for the parties’
mutual mistake was to reform the BLA to make it reflect the
terms the parties actually agreed upon. See Caliber One
Indem. Co. v. Wade Cook Fin. Corp., 491 F.3d 1079, 1083
(9th Cir. 2007) (reformation of contract is warranted to
correct mutually mistaken terms). Even if we were to
conclude otherwise, “where it is contemplated that the
arbitrator will determine remedies for contract violations
that he finds, courts have no authority to disagree with his
honest judgment in that respect.” Misco, 484 U.S. at 38, 108
S. Ct. at 371. Because the arbitrator was construing the BLA
in light of the evidence presented to him and basic principles
of contract law, his decision and award are due great
deference. See W.R. Grace, 461 U.S. at 765, 103 S. Ct. at
2183 (“Regardless of what our view might be of the
correctness of [the arbitrator’s] contractual interpretation,
[ASARCO] and the Union bargained for that interpretation.
A federal court may not second-guess it.”) (citation omitted).
Although we could conceivably have reached a different
result if we were to interpret the BLA ourselves, we
conclude that the arbitrator’s award drew its essence from
the BLA.
The cases ASARCO cites to support its argument that the
no-add provision left the arbitrator powerless to remedy
ASARCO V. UNITED STEEL 17
what he found to be an obvious mutual mistake fail to do so.
First, ASARCO tells us that we need look only to one case
to vacate the arbitrator’s award: West Coast Telephone. W.
Coast Tel. Co. v. Local Union No. 77, Int’l Bhd. of Elec.
Workers, AFL-CIO, 431 F.2d 1219 (9th Cir. 1970). In West
Coast Telephone the employer sought to reform its CBA
because it contained wage schedules for certain employees
that reflected wages higher than what the employer and
Union had agreed upon when bargaining. Id. at 1220. The
employer was made aware of this discrepancy when the
Union filed a grievance because the employees were being
paid the agreed upon wage rather than the higher wage
contained in the CBA. Id. The Union requested the dispute
be submitted to arbitration under the terms of the CBA, but
the company refused to arbitrate and instead filed suit in the
district court seeking reformation. Id. The Union moved to
compel arbitration. The district court denied the motion, and
the Union appealed. Id. This court affirmed:
[T]he company seeks a change in the terms of
the written agreement. It can be said with
positive assurance that such an issue is not
arbitrable under the agreement in question.
The arbitration clause of the contract
expressly provides that the arbitrator ‘shall
have no power to destroy, change, add to or
delete from its terms.’
Id. at 1221.
ASARCO’s reliance on West Coast Telephone is
misplaced. West Coast Telephone did not grapple with
courts’ deference to arbitrator’s decisions, nor did it hold that
arbitrators may never, under any circumstances, reform
18 ASARCO V. UNITED STEEL
contracts that contain no-add provisions. 5 It simply held that
the issue of contract reformation was not arbitrable under the
facts of that case because the contract contained a no-add
provision. That question is not before this court. ASARCO
attempts to discard this difference as one of inconsequential
procedural posture, but here procedural posture makes all the
difference.
Even assuming a court would have been obligated under
West Coast Telephone to hold that the dispute at issue was
not arbitrable, ASARCO loses because it agreed to submit
the dispute to arbitration. When ASARCO did so, it took the
question of arbitrability out of the courts’ hands.
Consequently, ASARCO is now faced with a nearly
insurmountable hurdle given the level of deference that this
court must grant to the arbitrator’s decision. Had ASARCO
refused to arbitrate and instead sought relief in the district
court, it is quite possible, if not probable, that the court
would have followed West Coast Telephone. ASARCO did
not. Instead, it stipulated that the dispute was arbitrable and
argued to the arbitrator that he lacked authority to reform the
BLA. Again, ASARCO “may not voluntarily submit [its]
claim to arbitration, await the outcome, and, [when] the
decision is unfavorable, then challenge the authority of the
arbitrator[ ] to act.” Ficek, 338 F.2d at 657.
The other cases cited by ASARCO are equally inapt, if
not more so. Not one of them concerns a mutual mistake
made by two parties who have agreed to submit their dispute
to an arbitrator, or what the proper remedy would be in such
5
West Coast Telephone did suggest that reformation is the
appropriate remedy when the provisions of a contract do not reflect the
parties’ agreed upon terms. See West Coast Telephone, 431 F.2d at1221‒22.
ASARCO V. UNITED STEEL 19
a situation. For the reasons discussed above, these facts
matter. Additionally, ASARCO faults the Union for not
seeking reformation of the BLA in the district court, but
ASARCO knew all along that the Union sought reformation
and was equally capable of seeking relief in the district court
by simply refusing to arbitrate the issue. It did not and now
cannot present the issue to this court and hope for a better
outcome.
Finally, ASARCO argues that the arbitrator’s award
should be vacated because it violates public policy. The
Union argues that ASARCO waived this argument by failing
to present it in the district court. ASARCO concedes this
fact, but urges that an argument first raised on appeal is not
waived when the issue is purely one of law and the opposing
party will not be prejudiced. See United States v. Carlson,
900 F.2d 1346, 1349 (9th Cir. 1990). Regardless of whether
ASARCO’s argument is waived, it fails. There is “a very
limited ‘public policy exception’ to the stringent rule
ordinarily requiring courts’ enforcement of arbitrators’
decisions interpreting and applying collective bargaining
agreements.” Drywall Dynamics, 823 F.3d at 533 (citations
omitted). Under this exception “a court may vacate an
arbitration award that ‘runs contrary to an explicit, well-
defined, and dominant public policy, as ascertained by
reference to positive law and not from general considerations
of supposed public interests.’” Id. at 534 (quoting E.
Associated Coal Corp. v. United Mine Workers of Am., Dist.
17, 531 U.S. 57, 63, 121 S. Ct. 462, 148 L. Ed. 2d 354(2000)) (internal alterations omitted).
According to ASARCO, the public policy interest served
by the collective bargaining process demands that the award
be vacated because courts should not confirm arbitration
awards that distort the product of collective bargaining – the
20 ASARCO V. UNITED STEEL
Collective Bargaining Agreement. Assuming ASARCO has
stated an “explicit, well-defined, and dominant public
policy,” its argument still fails for a very simple reason. The
arbitrator did not distort the BLA; he reformed it so that it no
longer distorted the agreement that the parties made during
collective bargaining. For the reasons discussed above, the
arbitrator was authorized to do so upon finding the parties
were mutually mistaken about the terms they agreed to. The
award does not violate public policy.
We conclude that the arbitrator was acting within his
authority when he crafted a remedy to cure the parties’
mutual mistake. Consequently, even if ASARCO did not
waive its right to contest the arbitrator’s jurisdiction, which
it did, we would defer to the arbitrator’s judgment, as we
must.
AFFIRMED.
IKUTA, Circuit Judge, dissenting:
The operative facts here are quite simple. The no-add
provision of the collective bargaining agreement in this case
says: “The arbitrator shall not have jurisdiction or authority
to add to, detract from or alter in any way the provisions of
this Agreement.” The pension provision of the collective
bargaining agreement says: “Employees hired on and after
the Effective Date are not eligible to participate in the
pension plan.”
Without discussing the no-add provision, the arbitrator
here ordered that the pension provision be amended to
include five additional lines of text:
ASARCO V. UNITED STEEL 21
Employees hired on and after the Effective
Date are not eligible to participate in the
pension plan. However, the Company shall
treat such Employees as if they were accruing
Continuous Service under the Retirement
Income Plan for Hourly Rated Employees of
ASARCO Inc. on the same terms as other
Employees, only for purposes of determining
eligibility for the Copper Price Bonus
pursuant to Article 9, Section C.5 of the BLA.
By adding to the pension provision, the arbitrator plainly
exceeded the authority granted to him by the collective
bargaining agreement. Can he do that? We have said no:
“an arbitrator has no authority to ignore the plain language
of a collective bargaining agreement that limits the scope of
his authority.” Haw. Teamsters & Allied Workers Union,
Local 996 v. United Parcel Serv., 241 F.3d 1177, 1181 (9th
Cir. 2001). When issuing awards, “an 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).
In reviewing an arbitral award, we are likewise bound by
express limitations on an arbitrator’s authority. A court may
not enforce an arbitration award if it does not “draw its
essence from the collective bargaining agreement.”
Federated Emp’rs of Nev., Inc. v. Teamsters Local No. 631,
600 F.2d 1263, 1264 (9th Cir. 1979). An arbitration award
that violates “an express and explicit restriction on the
arbitrator’s power” does not draw its essence from the
agreement, but rather “demonstrates that the arbitrator
ignored the essence of the agreement in making the award.”
Id. at 1264–65. Because the arbitrator here ignored the
22 ASARCO V. UNITED STEEL
essence of the agreement by violating an express and explicit
restriction on his power, the award must be vacated. See id.The majority abandons these principles today based on
two unreasoned conclusions. First, the majority upholds the
arbitrator’s award because it “was grounded in his reading”
of the collective bargaining agreement. Maj. Op. at 15. On
its face, this statement is dead wrong: the arbitrator did not
even mention, let alone construe, the no-add provision in
formulating his award. 1 Unlike in Oxford Health Plans LLC
v. Sutter, 569 U.S. 564, 570 (2013), where the arbitrator
based a potentially unreasonable construction of his
authority on a “textual exegesis,” the arbitrator here made no
effort to reconcile his decision to add five lines of text to the
agreement with the contract’s no-add provision. The
majority does not really dispute this point: it concedes that
the arbitrator “did not specifically cite the no-add provision
when explaining the basis of his award,” but concludes it
was sufficient for the arbitrator to “quote it directly” in the
section of the arbitration decision entitled “Relevant
Language of the BLA,” which it deems to be an
“acknowledgment of the no-add provision.” Maj. Op. at 14–
1
The Arbitration Award is divided into six sections entitled:
“Background”; “Relevant Language of the BLA”; “Relevant Language
of the 2011 Memorandum of Agreement”: “Statement of the Issues”;
“Summary of the Position of the Parties”; and “Discussion and Award.”
The no-add provision is mentioned in two sections of the Arbitration
Award. The section entitled “Relevant Language of the BLA,” sets forth
the text of four subsections of the collective bargaining agreement,
including one entitled “Board of Arbitration” which explains the role of
the arbitrator and contains the no-add provision. The “Summary of the
Position of the Parties” sets forth the opposing positions of the Union
and ASARCO regarding the effect of the no-add provision. The section
entitled “Discussion and Award,” where the arbitrator provides his
analysis and conclusion, does not discuss or mention the no-add
provision.
ASARCO V. UNITED STEEL 23
15. But the arbitrator’s knowledge that the collective
bargaining agreement contained a no-add provision is
immaterial if the arbitrator failed to construe it. Obviously,
a “few references” to a key issue in dispute does not show
that the arbitrator “did anything other than impose its own
policy preference.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l
Corp., 559 U.S. 662, 676 (2010). Here the arbitrator
expressly stated he was reforming the agreement “in the
interest of justice and fairness.” In other words, the
arbitrator issued an award that “simply reflect[s] the
arbitrator’s own notions of industrial justice.” E. Associated
Coal Corp. v. United Mine Workers of Am., Dist. 17,
531 U.S. 57, 62 (2000) (quoting United Paperworkers Int’l
Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987)).
Second, the majority states that the arbitrator’s award is
binding because arbitrators can reform a contract to correct
a mutual mistake and “to make it reflect the terms the parties
actually agreed upon.” Maj. Op. at 16. This sweeping
assertion is inapposite here. While arbitrators may have
power to reform an agreement where permitted to do so by
the collective bargaining agreement, the arbitrator in this
case clearly lacked that power. Rather, “the terms the parties
actually agreed upon” in this collective bargaining
agreement expressly state that the arbitrator may not add
provisions to the agreement. Because “an arbitrator’s
authority derives solely from the contract,” McDonald v.
City of W. Branch, Mich., 466 U.S. 284, 290 (1984), the
arbitrator here could not add provisions to the agreement,
even if there had been a mutual mistake. The majority fails
to explain why the arbitrator here could exercise a power
directly contrary to the express restrictions on the arbitrator’s
authority.
24 ASARCO V. UNITED STEEL
Indeed, the majority cites no case supporting its
proposition that an arbitrator can reform a contract based on
mutual mistake when the parties expressly prohibit the
arbitrator from adding to or modifying the agreement. To
the contrary, we have held that a no-add provision prohibits
an arbitrator from modifying an agreement even when there
is a mutual mistake. See W. Coast Tel. Co. v. Local Union
No. 77, Int’l Bhd. of Elec. Workers, AFL-CIO, 431 F.2d
1219, 1221 (9th Cir. 1970). In West Coast Telephone, we
considered a union’s demand to compel arbitration of the
question whether its collective bargaining agreement should
be reformed to reflect the parties’ intent. Id. at 1220. We
concluded “with positive assurance” that the issue of
reformation due to mutual mistake was not arbitrable
because “[t]he arbitration clause of the contract expressly
provides that the arbitrator ‘shall have no power to destroy,
change, add to or delete from its terms.’” Id. at 1221. In
other words, a no-add provision in a collective bargaining
agreement precludes the arbitrator from rewriting the
agreement.
The majority attempts to distinguish West Coast
Telephone because it addressed whether a dispute over
reformation was arbitrable, rather than whether the arbitrator
lacked authority to reform the contract, and therefore does
not definitively resolve the issue whether the arbitrator’s
award here drew its essence from the agreement. Maj. Op.
at 17–18. But West Coast Telephone’s holding was based
on its conclusion that a no-add provision deprives the
arbitrator of the authority to modify the agreement, and this
ruling is binding on us. 431 F.2d at 1221. We need not
consider whether we would defer to an arbitrator who
erroneously construed a no-add provision as allowing
reformation of a contract in a particular case. This issue is
not before us because—as mentioned above—the arbitrator
ASARCO V. UNITED STEEL 25
here did not construe the no-add provision. Because under
our precedent the arbitrator’s modification was contrary to
the no-add provision and is therefore not a “plausible
interpretation” of the contract, and because there is no basis
for deferring to the arbitrator’s construction of the no-add
provision in this case, his award must be vacated. 2
Federated Empr’s, 600 F.2d at 1265.
The arbitrator here dispensed his own brand of industrial
justice by exceeding the scope of his delegated powers and
modifying the agreement “in the interest of justice and
fairness.” Because “an arbitrator has no authority to ignore
the plain language of a collective bargaining agreement that
limits the scope of his authority,” the award fails to draw its
essence from the collective bargaining agreement. Haw.
Teamsters, 241 F.3d at 1181. The majority today turns its
back on these basic principles and our precedent. I dissent.
2
The majority states that we have “retired the use of the term
‘plausibility’ when describing judicial review of labor arbitration
awards.” Maj. Op. at 13–14 n.3 (citing Sw. Reg’l Council of Carpenters
v. Drywall Dynamics, Inc., 823 F.3d 524, 532 (9th Cir. 2016)). But of
course “a three-judge panel may not overrule a prior decision of the
court,” Miller v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003) (en banc),
except under circumstances not met by Drywall. Accordingly, as the
majority concedes, Drywall did not make any substantive change to the
settled law in this area. Maj. Op. at 13–14 n.3.