Supreme Court Rules on Prerequisite for Arbitration

A unanimous Supreme Court ruled on Tuesday, December 8, that written proof of an attempt by workers and their employer to resolve a dispute is not a requirement prior to arbitration under a law governing the railway and airline industries.

The Railway Labor Act stipulates that parties involved in a grievance must try to work out their differences, as outlined in their collective bargaining agreement, before taking the fight to the National Railroad Adjustment Board.

In the case before the Supreme Court, Union Pacific Railroad Co. disciplined five employees. The Brotherhood of Locomotive Engineers and Trainmen sought arbitration by the board after it could not come to an agreement with the company in 2002-03.

Before a hearing on the case in March 2004, one of the industry members of the arbitration panel asserted that the record of the dispute resolution proceedings showed no proof that the company and union discussed their differences. Neither the company nor the union had previously disputed such “conferencing.”

A year later, the board dismissed the union petitions, arguing that it did not have jurisdiction over the claims because it is an appellate body that decides cases only where the parties have failed to come to an agreement on their own.

The union petitioned the U.S. District Court for the Northern District of Illinois to set aside the board’s order, arguing that lack of proof that a conference occurred is not a sufficient reason for the board to refuse to hear the case.

The district court upheld the board. The 7th Circuit Court of Appeals overturned the ruling, holding that written evidence of conferencing is not required before arbitration. The appeals court based its reversal not on the railway law but rather argued that the board had denied the union due process, which is a constitutional matter.

The Supreme Court upheld the 7th Circuit’s decision but not its reasoning. Once the appeals court ruled that proof of conferencing is not required for arbitration, “there is no due process issue alive in this case,” wrote Justice Ruth Bader Ginsburg.

“The 7th Circuit, we agree, asked the right question, but inappropriately placed its answer under a constitutional, rather than a statutory, headline,” Ginsburg wrote.

The narrow ruling means that the Supreme Court avoided the larger and potentially more profound matter of whether courts can insert themselves into arbitration decisions if due process has been violated.

“An answer to that question must await a case in which the issue is genuinely in controversy,” Ginsburg wrote.

Although the circuit courts have been split on the extent to which courts can review arbitration cases, Edward Brill, a partner at Proskauer Rose in New York, is not surprised that the Supreme Court sidestepped the issue.

“The court typically will avoid a constitutional question when it can,” Brill said. “This is not an earth-shattering decision.”

—Mark Schoeff Jr.

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