As the Enterprise Wheel turns: new evidence on the finality of labor arbitration awards.

AuthorLeRoy, Michael H.
  1. INTRODUCTION

    A. CONTEXT FOR THIS EMPIRICAL RESEARCH

    Two parties in a long-term relationship become embroiled in a dispute. A third person is drawn into their private circle and unwittingly complicates the relationship. Before long, their escalating quarrel is taken before a judge for resolution. TV fans of As the World Turns are familiar with this triangular intrigue.

    This summary also describes the subject of our empirical research in As the Enterprise Wheel Turns. Two parties in a long-term relationship--here, a union and employer--are entangled in a contract dispute. A third person--an arbitrator--enters into the controversy. Next, the arbitrator's decision disturbs the underlying relationship. One of the parties cannot accept the ruling and appeals to a federal judge.

    The Supreme Court has indulgently regulated this triangular affair since its 1957 landmark decision in Textile Workers Union v. Lincoln Mills (1)--about the time that the popular TV soap opera first aired. (2) Lincoln Mills authorized federal courts to fashion a common law for the enforcement of collective bargaining agreements (CBAs), including court petitions to confirm or vacate arbitrator awards that rule on grievances of alleged contract violations. In 1960, the Court set forth principles in three closely integrated decisions--now called the Steelworkers Trilogy (3)--to guide federal judges who are drawn into arbitration disputes.

    Trilogy standards for reviewing an arbitrator's award were set forth in United Steelworkers of America v. Enterprise Wheel & Car Corp. (4) Federal judges at that time understood the institutional history that led to the Trilogy. Unions were an economic force. (5) Because grievance arbitration was agreed upon in most CBAs, Section 301 of the Labor-Management Relations Act (LMRA) provided a legal process to enforce this bargain. (6) In a vital quid pro quo, unions promised not to strike if employers agreed to submit disputes to binding arbitration. (7)

    But from the inception of the Trilogy, the judiciary's role has been questioned. Skeptics claim that judges intrude on this private process by usurping the role of the arbitrator and adjudicating grievances. (8) We take these concerns seriously because of the potential for court review to reduce arbitration to a pre-trial discovery proceeding--adding delay and cost to a process that is supposed to be quick and inexpensive. (9)

    This background highlights the importance of our empirical research on federal court review of labor arbitration awards. Debate among judges, academics, and attorneys as to the proper level of judicial deference is driven by textual analysis of appellate decisions. (10) We do not believe that lead cases are accurate gauges of court behavior. So, in two earlier studies, we collected and analyzed data contained in over 1783 federal court rulings on labor arbitration awards that were rendered from June 1960 to March 2001. (11) In the present study, we add 281 new cases from federal court decisions that were issued between April 1, 2001, and May 31, 2006. Our extensive database puts us in a unique position to evaluate critical claims that arise in this on-going debate.

    But why does this matter? Our research is relevant to the Supreme Court's continuing stewardship of this vital process. As we explain in more detail later, the Trilogy was sufficiently comprehensive to be the final word on this subject. But the Court has repeatedly felt obliged to warn lower courts from interfering with an arbitrator's award. This litany suggests that the Justices believe that too many federal courts fail to heed its strong message of deference--in effect, endorsing the recent view of critics that too many judges re-arbitrate contract disputes that were meant to be resolved by a final and binding award. (12) Adding cogency to our empirical research, the Court issued two recent opinions that admonished federal judges. (13)

    As the Enterprise Wheel nears its fiftieth anniversary, more is at stake than the institution of labor arbitration. Private sector unions are waning. (14) Strikes--the ultimate concern of Congress when it passed the law that led to Enterprise Wheel--are almost non-existent. (15) But the Supreme Court's docket shows that arbitration is expanding to lending, (16) individual employment, (17) commercial, (18) international, (19) and technology disputes. (20) Even in water-use lawsuits between states, one can see the labor arbitration model as an ADR paradigm. (21) While regulating these newer dispute resolution applications, the Supreme Court has relied on Trilogy lessons, (22) and therefore has a large investment in the independent functioning of labor arbitration.

    B. ORGANIZATION OF THIS ARTICLE

    Our quantitative findings cannot be understood without some background. In Part II, we examine the standards of judicial review in Enterprise Wheel and related Trilogy cases. Part II.A demonstrates that Enterprise Wheel instructed judges in a patient, instructional voice. Part II.B shows that as the employment relationship was more regulated, tensions arose between the requirements of a CBA and new laws. This prompted employers to challenge arbitration awards on public policy grounds. In Misco, the Supreme Court deterred courts from overturning awards that are inconsistent with public policies. (23) More recently, in Eastern (24) and Garvey, (25) the Court has abandoned its collegial tone as Justices have grown weary of repeating the same award-deference message to federal judges.

    Part III.A explains our research methodology, and Part III.B reports our statistical findings. Finding Number 1 puts our present findings in a historical light by showing that award enforcement is now at its peak in our 46 year database of cases. (26) Finding Number 2 shows that courts now enforce awards in about seventy-six percent of their decisions, a marked increase from past years. (27) Finding Number 3 reports that more appellate decisions have reversed a lower court's non-enforcement order, compared to appellate decisions that have vacated an award which a lower court has enforced. (28)

    Courts have enforced between seventy and eighty percent of challenged awards, regardless of the legal argument, in Finding Number 4A. (29) The four-part essence test is examined in Finding Number 4B. (30) This test yields the same enforcement rate as other legal arguments that challenge awards. Unfortunately, it also stimulates excessive award lawsuits. Two court opinions provide context for these statistics. One demonstrates that the test can be applied with deference, (31) and the other illustrates intrusive court review. (32) Finding Number 4C shows that the public policy test does not diminish court enforcement of arbitrator rulings--an important change from our last study. (33) Two cases explain this outcome. (34) The first case shows that other employers blend a public policy argument with the idea that an unlawful award cannot draw its essence from the contract. (35) So far, this approach has not persuaded judges. Second, there is the case of a nurse who was reinstated after violating a drug-dispensing policy. (36) It shows the great deference that courts now pay to awards in the face of continuing public policy challenges.

    Finding Number 5 shows that the Second and Seventh Circuits are significantly more deferential to arbitration, and the Fifth Circuit is significantly less deferential, compared to other courts. (37) A case on Rule 11 sanctions demonstrates why courts in the Seventh Circuit are so deferential. (38) A second case cleverly communicated this court's policy on great deference. (39) In contrast, a Fifth Circuit case shows that judges rearbitrated a grievance while vacating an award. (40) It contradicts the deference precepts in Eastern and Garvey.

    Part IV reports the general conclusions and implications from these findings.

  2. THE SUPREME COURT'S MANAGEMENT OF FEDERAL COURTS: FROM PATIENT GUIDANCE TO REPROACHFUL REMINDERS

    In our earlier studies, we explained the reviewing standards in Enterprise Wheel and related Trilogy decisions. (41) Repeating this entire background is unnecessary, but omitting this context is also unwise. In developing this part of our Article, we have two aims. First, we describe how the Supreme Court's award reviewing principles are related to the research variables and results that appear later in the Article. Second, we focus on the Supreme Court's tone in talking to other federal courts since 1960. Its collegiality has worn thin, descending from patient guidance in the Trilogy to verbal jabs. This subtlety is easy to overlook because Supreme Court rulings provide more substantive information. But, while recently overseeing judicial review of labor arbitration awards, the Court has made no new ruling. Instead, its opinions have served as public notices to judges and attorneys to treat awards as final resolutions to grievances.

    A. ENTERPRISE WHEEL'S PATIENT GUIDANCE FOR JUDGES WHO REVIEW AWARDS

    In Enterprise Wheel, an arbitrator's award reduced the termination of several employees to ten-day suspensions. (42) After the employer refused to comply with the ruling, (43) the matter was taken up by the federal courts. The Fourth Circuit denied enforcement of the award, (44) but the Supreme Court reversed this ruling. (45) In a short opinion, the Enterprise Wheel Court said much. Setting a tone of great deference, the majority said that the "refusal of courts to review the merits of an arbitration award is the proper approach to arbitration under collective bargaining agreements." (46) This is because the "federal policy of settling labor disputes by arbitration would be undermined if courts had the final say on the merits of the awards." (47)

    Adding substance to this respectful approach, Enterprise Wheel said that an arbitrator is "to bring his informed judgment to bear in order to reach a fair solution of a problem." (48) We emphasize...

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