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March 8 — Judicial involvement in a labor dispute between United Mine Workers of America and Peabody Energy Corp. subsidiaries was premature under the complete arbitration rule, the U.S. Court of Appeals for the Fourth Circuit ruled March 8.
The U.S. District Court for the Eastern District of Virginia had upheld an arbitrator’s ruling that, after a change in corporate relationships, certain Peabody subsidiaries were still liable under a bargaining agreement with the union. But the arbitration proceedings were bifurcated, and the arbitrator had yet to decide the remedial phase of the dispute, the Fourth Circuit said in vacating the district court’s order.
“Under the complete arbitration rule, the arbitrator should have been given the opportunity to resolve both the liability and remedial phases of the dispute between the Companies and the Union before it moved to federal court,” Judge J. Harvie Wilkinson wrote for the court.
This ruling is in accord with decisions by the U.S. courts of Appeal for the Third, Eighth and Ninth circuits that federal district courts generally shouldn't review a labor arbitration decision under Section 301 of the Labor-Management Relations Act until the arbitrator has ruled on both liability and remedies.
This case involves several entities in the Peabody “corporate family,” according to the court.
Peabody Coal Company and UMWA entered into a memorandum of understanding in 2007 as part of a collective bargaining agreement. The MOU provided preferential treatment to Peabody Coal's current and laid-off miners in the hiring decisions at non-unionized subsidiaries of Peabody Holding Company. This included Black Beauty Coal Company.
Later in 2007, Peabody became part of a spinoff entity, and it was no longer related to Peabody Holding or Black Beauty.
The union and the companies disputed whether Peabody Holding and Black Beauty were still subject to the MOU.
Pursuant to a binding arbitration clause in the MOU, the parties argued the merits before an arbitrator. They agreed to split the arbitration into separate proceedings: one for liability and—if the companies were deemed liable—one for determining a remedy.
The arbitrator only resolved the liability question, finding that the Peabody Holding and Black Beauty were still bound by the MOU.
The companies challenged the liability ruling in federal district court, but the district court upheld the arbitrator's decision.
The companies appealed the district court's merits ruling to the Fourth Circuit. But the appeals court said it must first address the threshold question of whether the arbitrator's ruling was complete.
Parties to a labor agreement with a binding arbitration clause may seek judicial review of an arbitration award. But under the complete arbitration rule, courts have held that judicial review should generally happen after the arbitrator has ruled on both liability and remedies, the Fourth Circuit said.
Although the rule isn't a strict limitation, it “ensures that courts will not become incessantly dragooned into deciding narrow questions that form only a small part of a wider dispute otherwise entrusted to arbitration,” the appeals court said.
It also reduces the risk that a party will use the judicial process to delay arbitration, it said.
In the present case, the arbitrator reserved jurisdiction over the remedial phase in case the parties couldn't agree on their own remedy.
The appeals court decided it should “refrain from stepping in at this juncture,” because it would be better to review the dispute as a whole if it later becomes necessary.
The court rejected the companies' argument that it would be more efficient to review the merits now.
“Were we to review the merits of the liability decision now, we may end up considering an issue later rendered moot,” the appeals court said.
Judges Dennis W. Shedd and G. Steven Agee joined the opinion.
Ogletree, Deakins, Nash, Smoak & Stewart PC represented the companies. UMWA attorneys and Mooney, Green, Saindon, Murphy & Welch PC represented the union.
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Text of the opinion is available at http://www.bloomberglaw.com/public/document/PEABODY_HOLDING_COMPANY_LLC_Delaware_Limited_Liability_Company_BL.
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