When must a dispute be submitted to arbitration? Who makes the call?, part II.

• Author: Spero, Donald J.
• Position: Labor and Employment Law

A recurring question in arbitration law is who is empowered to determine if parties are required to arbitrate a particular matter. The issue is likely to come up when a party sues to compel arbitration of a dispute. Part I of this article in the February issue of the Journal discussed potential defenses a party may assert when the opposing party seeks to compel arbitration. Part II discusses whether a court must decide if it should determine arbitrability, or if it should remand the matter for the arbitration panel to decide whether the disagreement should be arbitrated.

In John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546-47 (1964), the parties disagreed as to whether a collective bargaining agreement (CBA) with an arbitration clause bound a company that had merged with and taken over the operations of the employer which had entered into the CBA with the union. The Court determined that a court should decide whether the CBA survived the merger. The Court observed:

"Under our decisions, whether or not the company was bound to arbitrate, as well as what issues it must arbitrate is a matter to be determined by the Court on the basis of the contract entered into by the parties." ... The duty to arbitrate being of contractual origin, a compulsory submission to arbitration cannot precede judicial determination that the collective bargaining agreement does in fact create such a duty. Thus, just as an employer has no obligation to arbitrate issues which it has not agreed to arbitrate, so a fortiori, it cannot be compelled to arbitrate if an arbitration clause does not bind it at all. (Citations omitted.)

The Supreme Court held in Prima Paint v. Floyd & Conklin Mfg., Inc., 388 U.S. 395, 404 (1967), that "a court may consider only issues relating to the making and performance of the agreement to arbitrate." The Court took note of the fact that [section]4 of the Federal Arbitration Act requires a court to order the parties to arbitrate "upon being satisfied that the making of the agreement to arbitrate ... is not in issue." The Court held that "a federal court may consider only issues relating to the making and performance of the agreement to arbitrate." (1) Thus, the Court ruled that an arbitration panel, not a court, is to decide an issue of whether there was fraud in the inducement of a contract containing an arbitration clause.

In AT&T Technologies v. Communication Workers of America, 475 U.S. 643, 649 (1986), the Court stated: [T]he question of arbitrability-whether a collective bargaining...