WASHINGTON (CN) – The Supreme Court heard arguments Tuesday on whether a judge or an arbitrator should resolve a disagreement over a contract mandating that an arbitrator decide all questions. The problem is rooted in whether the contract was already in effect.
The Granite Rock Company, a California cement company, struck a tentative successor labor agreement with its workers – members of the Teamsters Local 287 – to replace the expiring agreement. The new contract included a no-strike clause and mandated that all disputes be arbitrated.
When the union decided to add a measure to clear it of liability in the case of strike misconduct, the cement company rejected it, claiming the union had already ratified the contract. The union maintained that it hadn’t and proceeded to strike, with financial help from the International Brotherhood of Teamsters.
The cement company sued, claiming the strike violated the alleged agreement and that the International Brotherhood of Teamsters intervened to represent the union.
The question now is whether the cement company can bring an action against the international brotherhood- which did not sign the agreement. The second question is whether the court has jurisdiction over if the agreement took effect, or whether that should be left to an arbitrator.
Garry Mathiason from Littler Mendelson represented Granite Rock, the cement company. He argued that the federal court, not an arbitrator, has the authority to decide if the contract – which contained an arbitration provision – had been adopted.
Peter Nussbaum, from Altshuler Berzon, represented the International Brotherhood of Teamsters. He said that Granite Rock, as a non-party to the agreement, should not be sued for its involvement in the strike – which may have violated the contract, depending on when the contract took effect.
Robert Bonsall, from Bonsall Robert Beeson Tayer & Bodine, represented the Teamsters Local 287. He argued that the agreement was not adopted, but ironically pointed to that agreement in calling for an arbitrator to determine if that contract was adopted.
The arguments were plagued by apparent confusion among the justices over the positions parties took.
Justice Ruth Bader Ginsburg asked the Teamsters Local 287 lawyer, “I thought that the union’s initial position was that there was no agreement, and it refused to arbitrate,” she said. “Wasn’t the union’s refusal to arbitrate what precipitated this case?”
Bonsall replied, “That is not correct, Your Honor.”
After Bonsall tried to explain his position, Justice Samuel Alito had a go. “So in substance, you think that the arbitrator would decide the issue of contract formation.”
Bonsall replied, “No.”
Justice Stephen Breyer noted that because the agreement to resolve disputes through arbitration is part of the overall disputed agreement, the question should be left to the courts. “That would go to the judge whether we formed that contract with its arbitration clause, he said, “because everything’s up in the air.”
Chief Justice John Roberts also suggested that the court be allowed to determine when the contract went into effect. “Your friend says ‘no, we had a contract on July 2nd,’ and that’s for the Court to determine, not the arbitrator, because it’s a question of formation.”
Breyer suggested that the dispute about when the contract takes effect be a question for an arbitrator. “Is there any authority at all anywhere that says it isn’t?” he asked
Ginsburg seemed inclined towards giving an arbitrator jurisdiction over the case. “If the contract had read, not simply ‘claims arising under this contract,’ but in addition said ‘including the formation or breach thereof,’ if the arbitration clause had included formation, then you would have no argument,” she said to Granite Rock’s lawyer.
Justice Sonia Sotomayor likewise suggested that the court did not have jurisdiction over the case. “Now the only question that appears to be extant in my mind is whether or not there was a breach of the no-strike clause. So why isn’t that subject to arbitration by the very terms of the arbitration clause?”
On the question of whether the cement company can sue the international unions, Roberts said, “I don’t see how somebody who is not a party to the contract can violate the contract.”
The district court ruled that it did not have jurisdiction over the international brotherhood, but it asserted its jurisdiction to decide whether the contract had been ratified. A jury later found that the employees had ratified the agreement.
The 9th Circuit reversed the district court’s decision, ruling that the court did not have jurisdiction over the agreement, and held instead that an arbitrator must decide whether the agreement was signed, as stated in the contract. It upheld the decision that it does not have jurisdiction over the charges against the international brotherhood.