Category Archives: arbitration

Postal Service v. Letter Carriers

485 U. S. 680

April 27, 1988

A postman named Edward Hyde was fired for unlawfully delaying mail delivery. According to a collective bargaining agreement, postmen could only be fired for “just cause,” and an arbitrator unaccountably ruled that failing to deliver mail on time was not “just cause.” A District Court tried to set aside the arbitrator’s ruling as contrary to public policy, but the Court of Appeals said that no clearly defined public policy had been violated.

By a per curiam order, the Court dismissed the case as improvidently granted. While the Court of Appeals was probably technically correct, the facts of the case are utterly appalling. If failing to deliver mail isn’t “just cause” for a mailman being fired, then what the h3ll is?

Paperworkers v. Misco, Inc.

484 U. S. 29

December 1, 1987

Isiah Cooper worked a potentially dangerous job in a paper mill. He had twice been disciplined before he was found to be a marijuana abuser. Under the collective-bargaining agreement, firing disputes were subject to binding arbitration. On rather specious grounds, the arbiter held that Cooper must not be fired for his drug use. Because the arbiter had done such a sucky job, the company petitioned the courts to overrule the arbiter, on the grounds that the he had messed up, and that allowing Cooper to operate dangerous machinery was against public policy.

Unanimously, the Court ruled the arbitration to be binding. White explained that courts are supposed to have a policy of extreme deference to arbitration decisions, especially when they are required by contract. Looking through the evidence, White found that the arbiter had broken no rules, and had acted with the bare minimum of competence. Turning to the public policy issues, he said that the lower court had not been thorough enough in showing that the safety public policy existed, and had not taken care to ensure that the case’s facts matched that policy. Blackmun, joined by Brennan, noted that the outer limits of a court’s power to set aside arbitration as contrary to public policy remained undefined. Then, bizarrely, he proceeded to literally provide a summary of White’s opinion.

The Court’s ruling was correct. The paper company agreed to have firing disputes settled by arbitration, end of story. Regardless, as I’ve already said too many times to count, labor unions are evil and unbiblical organizations. Companies should not sign collective bargaining agreements with them, especially when their firing decisions are subject to kangaroo court arbitration. The shameless, lawless hubris of the union in supporting Cooper truly appalls. One last thing: does anyone really believe that Brennan and Marshall would have backed the arbiter if he had ruled against Cooper? Yeah, didn’t think so.

Perry v. Thomas

482 U. S. 483

June 15, 1987

Kenneth Morgan Thomas wanted to sue his boss Barclay Perry, but he had already signed an agreement to arbitrate. Undeterred, Thomas claimed that this agreement was invalid under a California law that held such agreements in employment contracts void. Perry responded that this California law conflicted with the Federal Arbitration Act (FAA), which generally mandated that arbitration agreements be honored. Thus, the California law had to give way under the Supremacy Clause.

The Court ruled 7-2 that the FAA did trump the California law. Putting to the side some questions about Perry’s standing, Marshall wrote that the two laws were in plain and fatal conflict. The only strong counterargument was a 1973 case known as Merrill Lynch v. Ware, which had enforced the very same California anti-arbitration statute. Ware, Marshall said, did not consider the effect of the FAA, and only looked at whether the Securities Exchange Act had provided for preemption of state laws on the subject.

Stevens dissented on the basis of his belief that the FAA had not been intended to preempt state laws, and that the Court’s many recent decisions to that effect were erroneous. In a separate dissent, O’Connor agreed with Stevens on this point. She further noted that Congress admittedly had the power to pass laws which created exceptions to the FAA’s general rule. If Congress could do this, then O’Connor felt that states could too.

Much as I dislike anti-arbitration provisions, I am forced to admit that O’Connor and Stevens may be right. Looking at the sparse language of the FAA, it’s anything but clear and unequivocal that states were meant to be barred from all legislation in the arena. Regardless, I can’t help but note the irony of Thomas breaking the arbitration promise he made in a contract in order to hold Perry accountable for allegedly breaking promises made in a contract. “When a man… swears an oath to put himself under an obligation, he must not break his word; he must do whatever he has promised” – Numbers 30:2

Shearson/American Express Inc. v. McMahon

482 U. S. 220

June 8, 1987

The McMahons were customers of Shearson/American Express, and signed an agreement that all disputes would be subject to arbitration rather than litigation. All too typically, the McMahons changed their mind, and whined that they deserved the right to sue. As a general rule, contracts which submit disputes to arbitration are always enforceable, but they filed suit anyway under the Exchange Act, and under RICO, arguing that these particular claims were not arbitrable.

Unanimously, the Court rejected the RICO argument, and it also rejected the Exchange Act argument 5-4. O’Connor wrote the majority opinion, which found nothing in RICO’s text to suggest that its provisions were not arbitrable, and was unmoved by the contention that its purposes worked best with litigation. The Exchange Act was harder because it said that compliance with its provisions could not be waived, and it also said that District Courts would have jurisdiction over its subject matter. O’Connor said that this jurisdiction was not a duty requiring “compliance.”

In one of the very first Warren Court decisions ever, Wilko v. Swan, the Court had ruled that arbitration was forbidden for a very similar act, the Securities Act. O’Connor rather politely argued that the Wilko ruling was stupid, undermined by subsequent cases, and unduly hostile to arbitration. She also said that arbitration had come a long way since 1953, and that it was now subjected to some government oversight. While declining to overrule Wilko, she limited its reach to the case’s fact.

Blackmun, joined by Brennan and Marshall, dissented. He thought the majority exaggerated the extent to which Wilko had been undermined in subsequent cases, and the force of its logic in interpreting the Securities Act. He also disagreed that the government oversight of the arbitration was any good, and that arbitration was fair. Blackmun said that the companies still exercised a lot of control over the arbiters, and that there was insufficient review of arbitration decisions. In a brief dissent of his own, Stevens said that lower courts had thought Wilko applied to the Exchange Act, and that the Court ought to leave this consensus unchanged.

Arbitration is a wonderful thing, and I’m sorry judicial liberals loath it so much. The Bible discourages lawsuits, and wants believers to settle disputes amicably. The liberal distaste for arbitration is yet another example of valuing ‘rights’ and ‘entitlements’ over humility, forgiveness, and peacemaking.

Atchison, T. & S. F. R. Co. v. Buell

480 U. S. 557

March 24, 1987

One federal statute, FELA, required railroads to compensate employees who were injured on the job. Another federal statute, RLA, provides for settlement of railroad labor disputes before an arbitration board. Buell, who had been working on the railroad all the livelong day, suffered a nervous breakdown due to emotional bullying from his boss. He then filed a FELA action to recover damages. In response, the railroad argued that the matter should more properly go before an RLA arbitration board, and that the FELA action was preempted for that reason.

Stevens, writing for a unanimous Court, found no evidence at all in the statutory text or legislative history that RLA arbitration was intended to preempt FELA actions. He also rejected the argument that emotional injury ought to be the exclusive domain of arbitration, saying that such a decision would amount to judicial legislation. Finally, Stevens remanded the case for a determination of whether the FELA’s reach extended to emotional injury. Legally, this looks like the right decision, but that being the case the laws ought to be amended, because I don’t think a railroad should be liable twice for the same basic complaint.