Peabody Holding Company v. United Mine Workers of America ( 2016 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2032
PEABODY HOLDING COMPANY, LLC, Delaware Limited Liability
Company; BLACK BEAUTY COAL COMPANY, LLC, now known as
Peabody Midwest Mining, LLC, Indiana Limited Liability
Company,
Plaintiffs − Appellants,
v.
UNITED MINE WORKERS OF AMERICA, INTERNATIONAL UNION,
Unincorporated Association,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Leonie M. Brinkema,
District Judge. (1:13-cv-00458-LMB-IDD)
Argued: January 27, 2016 Decided: March 8, 2016
Before WILKINSON, SHEDD, and AGEE, Circuit Judges.
Vacated and remanded by published opinion. Judge Wilkinson
wrote the opinion, in which Judge Shedd and Judge Agee joined.
ARGUED: John R. Woodrum, OGLETREE, DEAKINS, NASH, SMOAK &
STEWART, P.C., Washington, D.C., for Appellants. Arthur
Traynor, III, UNITED MINE WORKERS OF AMERICA, Triangle,
Virginia, for Appellee. ON BRIEF: W. Gregory Mott, Zachary S.
Stinson, OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C.,
Washington, D.C., for Appellants. Diana Migliaccio Bardes, John
Robert Mooney, MOONEY, GREEN, SAINDON, MURPHY & WELCH, P.C.,
Washington, D.C., for Appellee.
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WILKINSON, Circuit Judge:
In this case we must decide when and under what
circumstances courts should review a labor arbitrator’s
decision. For the reasons given below, we hold that judicial
involvement in the labor dispute in this case was premature.
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. We therefore vacate the
district court’s order confirming the merits of the arbitrator’s
liability decision and direct that court to return the dispute
to the arbitrator to allow him to rule on the remedial issues
and otherwise complete the arbitration task.
I.
The dispute in this case arises out of a 2007 Memorandum of
Understanding Regarding Job Opportunities (the “Jobs MOU”)
signed by the United Mine Workers of America (the “Union”) and
Peabody Coal Company (“Peabody Coal”) as part of a wider
collective bargaining agreement. Peabody Coal signed the Jobs
MOU on behalf of itself and as a limited agent of its corporate
parent, Peabody Holding Company (“Peabody Holding”), and several
of Peabody Holding’s other subsidiaries, including Black Beauty
Coal Company (“Black Beauty”). The principal purpose of the Jobs
MOU was to require non-unionized companies within the Peabody
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corporate family to give preferential hiring treatment to coal
miners who were either working for or laid off by Peabody Coal.
An arbitration clause in the Jobs MOU provided that a “Jobs
Monitor” was to resolve any disputes involving the Jobs MOU, and
that his decisions would be “final and binding on all parties”
to the dispute. J.A. 79. The Jobs MOU was to expire on December
31, 2011.
Later in 2007, Peabody Energy Corporation (“Peabody
Energy”), the corporate parent of Peabody Holding and thus the
ultimate parent of Peabody Coal and Black Beauty, initiated a
spinoff of some of its mining operations to form a new entity
called Patriot Coal Corporation (“Patriot”). In conjunction with
the spinoff, Peabody Coal became part of Patriot. All but one of
the Peabody Holding subsidiaries on whose behalf Peabody Coal
had signed the Jobs MOU also became part of Patriot. The one
exception was Black Beauty, which, along with Peabody Holding
itself, was retained by Peabody Energy. Thus, following the
spinoff, Peabody Coal no longer shared any corporate
relationship with Peabody Holding or Black Beauty.
In 2008, Black Beauty hired private mine operator United
Minerals Company (“United Minerals”) to conduct surface mining
on Black Beauty’s property. Black Beauty and United Minerals
were non-unionized. United Minerals had no corporate
relationship with Peabody Coal and was thus not subject to the
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Jobs MOU. Shortly after Black Beauty began its work with United
Minerals, the Union sent a letter to Peabody Energy and Peabody
Holding stating that Peabody Holding and Black Beauty were still
bound by the Jobs MOU’s preferential hiring requirements.
Peabody Holding disagreed. It took the view that the spinoff of
Peabody Coal from the rest of the Peabody corporate family ended
any obligation that Peabody Holding or Black Beauty (the
“Companies”) had under the Jobs MOU. Because the Union and the
Companies could not resolve this dispute among themselves, the
Union submitted the dispute to the Jobs Monitor.
The Companies initially argued that the dispute was not
even arbitrable under the Jobs MOU’s arbitration clause. It
ultimately took a decision from this Court to confirm that the
dispute was in fact arbitrable. Peabody Holding Co. v. United
Mine Workers, 665 F.3d 96, 103 (4th Cir. 2012). The Union and
the Companies thus returned to arbitration to argue the merits
of the dispute before the Jobs Monitor.
When the Union and the Companies returned to the Jobs
Monitor they decided to bifurcate the dispute. As recounted by
the Jobs Monitor in his written decision, the parties asked him
to “treat[] in this proceeding solely the question of whether
[Peabody Holding] and Black Beauty continued to be bound by the
[Jobs] MOU after the . . . spinoff.” J.A. 57. The Jobs Monitor
noted further that “[i]f that question is resolved in the
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Union’s favor, and the parties cannot agree on an appropriate
remedy for the [Peabody Holding]/Black Beauty refusal to abide
by the [Jobs] MOU, resolution of the remedy issue will be
submitted to the Jobs Monitor.” J.A. 57.
After receiving arguments from both the Union and the
Companies, the Jobs Monitor ruled that the Jobs MOU remained in
force even though Peabody Coal no longer had any corporate
relationship with Peabody Holding or Black Beauty. The Jobs
Monitor then made a few related rulings, including that
continued enforcement of the Jobs MOU would not run afoul of the
National Labor Relations Act (“NLRA”). The Jobs Monitor,
however, deferred his decision on one notable issue. During the
proceedings, the Companies had argued that Black Beauty’s work
with United Minerals was actually exempt from the Jobs MOU by
virtue of the fact that Black Beauty had signed its contract
with United Minerals before it became bound by the Jobs MOU. The
Union responded by noting that even if Black Beauty’s work with
United Minerals was exempt, Black Beauty or Peabody Holding may
have contracted for other jobs that should have been covered by
the Jobs MOU. The Jobs Monitor determined that he would defer
answering this question “until the remedy stage of these
proceedings.” J.A. 70. At the conclusion of his decision, the
Jobs Monitor stated that he would “retain jurisdiction over this
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matter for the limited purpose of resolving any remedial issues
on which the parties cannot agree.” J.A. 70.
Unhappy that the Jobs Monitor had found them subject to
liability under the Jobs MOU, the Companies sought to vacate the
Jobs Monitor’s decision by filing a declaratory judgment action
in the Eastern District of Virginia. The Union filed a
counterclaim to enforce the decision. The Union also moved to
dismiss the Companies’ complaint, arguing that judicial review
of the Jobs Monitor’s decision was not proper until arbitration
before the Jobs Monitor was complete. Both parties then filed
cross motions for summary judgment on the merits of the Jobs
Monitor’s liability decision.
The district court denied the Union’s motion to dismiss. It
first noted that there was “some disagreement” in the case law
as to the nature of the judicial review provision on which the
Companies had premised their suit -- Section 301 of the Labor
Management Relations Act (“LMRA”), 29 U.S.C. § 185(a). Peabody
Holding Co. v. United Mine Workers, 41 F. Supp. 3d 494, 499 n.4
(E.D. Va. 2014). While some courts describe their jurisdiction
under Section 301 as limited to “review of final arbitration
awards,” other courts believe Congress conferred “sweeping
jurisdiction” under Section 301 and “merely contemplated
judicial application of a prudential rule” that would in
practice limit review to final awards. Id.7
The district court ultimately decided that it did not need
to determine if any limitation on judicial review under Section
301 to final awards was jurisdictional strictly speaking or
merely prudential. It simply determined that the Jobs Monitor’s
“award is final as to liability and therefore reviewable.” Id.The district court reached this conclusion largely because the
parties had agreed to bifurcate the liability and remedial
facets of their dispute, and the Jobs Monitor’s decision had
conclusively resolved the liability facet. Id. at 500-01.
Proceeding to the merits, the district court granted the
Union’s motion for summary judgment by enforcing the Jobs
Monitor’s decision as to the Companies’ liability under the Jobs
MOU. Id. at 507. The Companies timely appealed this order. The
Union did not cross appeal the district court’s denial of its
motion to dismiss, and instead sought only to defend the
district court’s summary judgment order confirming that the
Companies were liable under the Jobs MOU. After the parties
briefed this question, we asked for additional briefing on
whether we should even review the Jobs Monitor’s liability
decision in light of the fact that arbitration before the Jobs
Monitor was not complete. It is on this threshold question that
we now focus.
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II.
A.
This case came to federal court by way of Section 301 of
the LMRA. Section 301 gives federal district courts jurisdiction
over “[s]uits for violation of contracts between an employer and
a labor organization representing employees in an industry
affecting commerce . . . without respect to the amount in
controversy or without regard to the citizenship of the
parties.” 29 U.S.C. § 185(a). Long-standing Supreme Court
precedent provides that a party may utilize Section 301 to seek
judicial enforcement of an arbitration award made pursuant to an
arbitration clause in a collective bargaining agreement. Gen.
Drivers Local Union No. 89 v. Riss & Co., 372 U.S. 517, 519
(1963) (per curiam). Before a court may review the award,
however, it must determine that the award is “final and
binding.” Id. In line with this directive, many courts have held
that a federal district court should not review a labor
arbitrator’s decision under Section 301 until the arbitrator has
ruled on both liability and remedies -- a procedural requirement
commonly referred to as the complete arbitration rule. E.g.,
Local 36, Sheet Metal Workers Int'l Ass'n v. Pevely Sheet Metal
Co., 951 F.2d 947, 949-50 (8th Cir. 1992); Union Switch & Signal
Div. Am. Standard Inc. v. United Elec. Workers, Local 610, 900
F.2d 608, 612-14 (3d Cir. 1990); Millmen Local 550, United Bhd.
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of Carpenters v. Wells Exterior Trim, 828 F.2d 1373, 1375-76
(9th Cir. 1987).
As the district court noted, there appears to be some
uncertainty as to the nature of the complete arbitration rule.
Some decisions have described the complete arbitration rule as a
restriction of a federal court’s jurisdiction under Section 301.
Pub. Serv. Elec. & Gas Co. v. Sys. Council U-2, Int'l Bhd. of
Elec. Workers, 703 F.2d 68, 70 (3d Cir. 1983). But other
decisions have noted Section 301’s broad language, and have
accordingly taken the complete arbitration rule to be only a
prudential limitation on judicial involvement in a labor
arbitration. Union Switch, 900 F.2d at 612-14.
Both in briefing and during argument, the Companies claimed
and the Union agreed that the complete arbitration rule does not
concern federal subject matter jurisdiction in the strict sense.
We agree with the parties. Unlike, for instance, 28 U.S.C.
§ 1291, the statute conferring appellate jurisdiction on the
federal circuit courts of appeals, Section 301 itself does not
contain language limiting review to a “final decision” or some
other similarly definitive event. Its jurisdictional grant is
couched in much broader terms. 29 U.S.C. § 185(a).
Indeed, even courts that have referred to the complete
arbitration rule in jurisdictional terms appear to acknowledge
that it is not a hard and fast jurisdictional limitation,
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because those courts have noted exceptions to the rule in
“extreme cases.” Millmen Local 550, 828 F.2d at 1377. But of
course there can be no exception from the fact that federal
courts are courts of limited jurisdiction and thus do not have
authority to resolve a dispute unless that authority has
specifically been given to them. Home Buyers Warranty Corp. v.
Hanna, 750 F.3d 427, 432 (4th Cir. 2014). All of this is to say
that the complete arbitration rule necessarily constitutes only
a prudential limitation on a court’s authority to review a labor
arbitrator’s decision.
Although only prudential, the complete arbitration rule
nonetheless draws from the same well of policy rationales as its
strictly jurisdictional relatives. As noted, under 28 U.S.C.
§ 1291, a district court generally must have entered a final
judgment or order before a court of appeals can take the case.
Goode v. Cent. Va. Legal Aid Soc'y, Inc., 807 F.3d 619, 623 (4th
Cir. 2015). This requirement “preserves judicial economy by
ensuring that a district court maintains authority over a case
until it issues a final and appealable order, thus preventing
piecemeal litigation and repeated appeals.” Id. at 625.
The complete arbitration rule promotes similar ends. 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. And it mitigates the
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possibility of one party using an open courthouse door to delay
the arbitration. See Union Switch, 900 F.2d at 611. Finally, it
makes good sense, when working within a hierarchical system, to
give the decision maker at each level a full and fair say as to
the whole problem before passing the case on to the next stage
of review. Internal appeals in the state and federal courts
generally abide by this principle, and there is no reason that
it should not operate as a presumptive maxim in this context as
well. With this background in mind, we examine why the facts in
this case counsel us to adhere to the complete arbitration rule
and withhold judicial involvement until the arbitration before
the Jobs Monitor is complete.
B.
This case calls for a straightforward application of the
complete arbitration rule. As noted, the complete arbitration
rule provides that a federal court asked to review an
arbitrator’s decision should refrain from doing so until the
arbitrator has decided all facets of the dispute. Savers Prop. &
Cas. Ins. Co. v. Nat'l Union Fire Ins. Co., 748 F.3d 708, 719
(6th Cir. 2014). Accordingly, when a labor arbitrator first
decides liability questions and reserves jurisdiction to decide
remedial questions at a later time, as appears to be quite
common, see Union Switch, 900 F.2d at 611, a federal court
should generally withhold review of the arbitrator’s liability
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decision until the arbitrator has had the opportunity to rule on
the remedial questions as well. See McKinney Restoration Co. v.
Ill. Dist. Council No. 1 of Int’l Union of Bricklayers, 392 F.3d
867, 872 (7th Cir. 2004); Pub. Serv. Elec. & Gas Co., 703 F.2d
at 70.
Here the Jobs Monitor issued a decision as to the liability
phase of the parties’ dispute, but retained jurisdiction over
the remedies phase should the Union and the Companies fail to
agree on a remedy on their own. J.A. 69-70. Because the Jobs
Monitor was not finished with the dispute, the complete
arbitration rule counsels that we refrain from stepping in at
this juncture. If this dispute is destined to eventually make
its way to court, it is far better for it to come in one whole
piece than in dribs and drabs.
The Companies argue, however, that application of the
complete arbitration rule to this case is not so
straightforward, and offer reasons why we should review the
merits of the Jobs Monitor’s liability decision. First among
those reasons is that the Companies and the Union chose to
bifurcate their dispute into separate liability and remedial
proceedings. The Companies highlight decisions permitting
judicial review of a labor arbitrator’s liability decision when
the parties decide beforehand to deal separately with the
liability and remedial aspects of their dispute. Smart v. Int'l
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Bhd. of Elec. Workers, Local 702, 315 F.3d 721, 726 (7th Cir.
2002); Providence Journal Co. v. Providence Newspaper Guild, 271
F.3d 16, 19-20 (1st Cir. 2001).
It is true that the parties agreed to bifurcate their
dispute into two proceedings, one to address liability, and one
to address remedies, if necessary. Given the nature of the
dispute, this seems like a sensible approach. It is unsurprising
that the parties could not find common ground on the question of
whether the Jobs MOU survived the spinoff -- this is a zero sum
liability question on which neither party would want to give in.
No doubt, though, the parties at least contemplated the
possibility of some compromise as to the remedies question once
they received a definitive answer as to liability. One of the
many virtues of arbitration is that parties can segment the
dispute resolution process in a manner that enhances the
prospects for settlement.
That the parties agreed to bifurcate their arbitration
proceedings does not change the fact that they also agreed to
submit the entire dispute -- both the liability and remedies
questions -- to arbitration. The arbitration clause in the Jobs
MOU provides that “[a]ny dispute alleging a breach of th[e]
[Jobs] MOU” may be submitted to the Jobs Monitor for resolution.
J.A. 79. And it is clear from the Jobs Monitor’s written
decision that the “matter” given to him by the parties included
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both the liability and remedial facets of the dispute. J.A. 57.
For understandable reasons, the parties asked the Jobs Monitor
to deal with each question in a separate “proceeding.” J.A. 57.
That is, the parties gave the Jobs Monitor one large task, and
then asked him to deal with that task in a specific, segmented
manner. There is nothing unjust about a decision to withhold
review until the arbitrator has completed both segments of the
whole task that was given to him.
The Companies also argue that we should proceed to the
merits because it would be more efficient to have judicial
review now rather than later. The Companies essentially contend
that it would be a waste of resources to force the parties to
proceed through the remedial phase of the arbitration if the
Companies’ position on the liability question is eventually
determined by a court to be correct. This argument sweeps too
broadly. It could in principle be applied to all but the
simplest cases, because it could always be claimed that judicial
review of an arbitrator’s liability ruling might potentially
save the parties and the arbitrator remedial time. In fact, the
Companies’ argument could even be used to support one party’s
right to claim immediate recourse to court in disputes where
there is no semblance of bifurcation.
Moreover, the Companies’ efficiency argument overlooks the
widely held view that the sort of interlocutory appeal the
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Companies are requesting can, if not circumscribed, become
“inherently ‘disruptive, time-consuming, and expensive.’” Prado-
Steiman ex rel. Prado v. Bush, 221 F.3d 1266, 1276 (11th Cir.
2000) (quoting Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d
288, 294 (1st Cir. 2000)). One notable reason interlocutory
appeals tend to reduce rather than promote efficiency is that
they often “require[] the appellate courts to consider issues
that may be rendered moot if the appealing party ultimately
prevails in or settles the case.” Id.Were we to review the merits of the liability decision now,
we may end up considering an issue later rendered moot. As
noted, the Jobs Monitor has yet to decide if Black Beauty’s work
with United Minerals is exempt from the Jobs MOU. And as far as
we are aware, Black Beauty’s work with United Minerals is the
only potential breach of the Jobs MOU that the Union has thus
far identified. If, therefore, the Jobs Monitor finds that Black
Beauty’s work with United Minerals is exempt, and if the Union
does not identify other potential breaches of the Jobs MOU, then
our review of the liability decision will have had no practical
impact on the parties’ dispute. And no matter what the Jobs
Monitor might do during the remedial phase, settlement is always
a possibility. Dollars and cents are fertile subjects for
compromise. Having lost on the liability question, the Companies
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may decide to negotiate an alternative jobs agreement or reach
some other monetary agreement with the Union.
In addition, the Companies’ efficiency argument is undercut
by the particularized nature of this dispute. It is not as if a
court ruling on the liability question now would settle a common
issue for multiple cases proceeding simultaneously before
different arbitrators. The liability question is instead of
concern only to Peabody Holding and Black Beauty.
And even if a court ruling at this juncture would in some
way advance systemic efficiency, we would hesitate to make such
a ruling in light of the fact that the Jobs Monitor’s decision
on the liability question will not have any real-world effect
until either the parties or the Jobs Monitor decide on a
corresponding remedy. One rationale that has been given for
allowing a court to review an arbitrator’s liability decision in
a bifurcated arbitration is that the liability decision was
“expressly intended to have immediate collateral effects” in
another proceeding. Trade & Transp., Inc. v. Nat. Petroleum
Charterers Inc., 931 F.2d 191, 195 (2d Cir. 1991). But the
Companies have identified no similar adverse consequences here.
That the Jobs Monitor’s decision has no such immediate impact
bolsters our decision to withhold judicial review in this case.
Finally, the Companies’ whole line of argument for
immediate judicial review runs awkwardly into a first principle
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of arbitration: that “arbitration is a matter of contract.” Am.
Exp. Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013).
Because arbitration is contractual in nature, parties to an
arbitration agreement are generally free to fashion the arbitral
process to best suit their needs. See Vulcan Chem. Techs., Inc.
v. Barker, 297 F.3d 332, 340 (4th Cir. 2002). For instance, they
may agree among themselves which questions will go to
arbitration, which law the arbitrator will apply in the
arbitration, and which procedural rules the arbitrator will use
to manage the arbitration. The agreement fashioned by the
parties deserves judicial respect. Here, we have done nothing
more or less than honor the arbitral ground rules the Companies
and the Union have established for themselves.
III.
Arbitration plays a critical role in our nation’s system of
labor relations. By providing a forum in which labor and
management can meet to peaceably resolve their differences,
labor arbitration serves as a “substitute to industrial strife.”
Gateway Coal Co. v. United Mine Workers, 414 U.S. 368, 378
(1974) (quoting United Steelworkers v. Warrior & Gulf Nav. Co.,
363 U.S. 574, 578 (1960)). For this reason, Congress has adopted
a “federal policy favoring arbitration of labor disputes.”
Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 299
(2010) (quoting Gateway Coal Co. 414 U.S. at 377). The Companies
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have given us no reason to disrespect the important place that
labor arbitration occupies in our economy by intervening
prematurely and hearing this dispute before the arbitrator has
completed his job. We therefore vacate the district court’s
ruling and direct that court to remand this case to the Jobs
Monitor for further proceedings.
VACATED AND REMANDED
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