United Trans Union v. Gateway Western ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 01-2150
United Transportation Union,
Plaintiff-Appellee,
v.
Gateway Western Railway Company,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 00 C 212--Michael J. Reagan, Judge.
Argued December 3, 2001--Decided March 21, 2002
Before Posner, Evans, and Williams, Circuit
Judges.
Posner, Circuit Judge. A union seeks to
enforce an arbitration award made by a
Public Law Board pursuant to the Railway
Labor Act. The Act establishes a system
of compulsory arbitration of grievances
("minor disputes"), Andrews v. Louisville
& Nashville R.R., 406 U.S. 320, 322
(1972), but gives the parties a choice of
arbitral methods. Employees Protective
Ass’n v. Norfolk & Western Ry., 511 F.2d
1040, 1044 (4th Cir. 1975). One option is
arbitration by three-member panels one
member of which is appointed by the
union, one by the employer, and the
third, the "neutral" member, by the
National Mediation Board, a permanent
agency (unlike the Public Law Boards)
that administers the arbitration and
mediation processes ordained by the Act.
45 U.S.C. sec. 153 Second; Brotherhood of
Locomotive Engineers v. Atchison, Topeka
& Santa Fe Ry., 768 F.2d 914, 918 (7th
Cir. 1985); Woodrum v. Southern Ry., 750
F.2d 876, 880 (11th Cir. 1985); Jones v.
St. Louis-San Francisco Ry., 728 F.2d
257, 259-60 (6th Cir. 1984). The neutral
is appointed only if the two party-
designated arbitrators can’t agree on the
resolution of the grievance, and is
appointed by the Board only if the other
two arbitrators can’t agree on a neutral.
The Board appoints the neutral from a
roster of arbitrators that it maintains,
and since the party members of the panel
are expected to vote in accordance with
their principals’ wishes (though they
don’t always do so), it is the neutral
who is the real "judge" and usually
decides the case, though the award must
be signed by one of the party members as
well, normally of course the one in whose
principal’s favor the neutral has
decided.
The neutral in this case was a lawyer
named Fredenberger, whose distinguished
record included a stint as general
counsel of the National Mediation Board.
The hearing on the union’s grievances was
held on March 9, 1999. A month later
Fredenberger was charged in an
information with and pleaded guilty to
feloniously assisting in the preparation
of a fraudulent federal income tax
return. The Board learned of this and
issued an order to show cause by August
27 why Fredenberger should not be removed
from the roster of arbitrators. He asked
for and was granted an extension to
August 30 to respond. On that day he both
responded to the order to show cause and
signed (and within a day or two he mailed
to the parties to the arbitration) his
award, which generally favored the union.
The next day the Board struck him from
the roster, effective immediately. There
is no suggestion that the Board was at
fault in failing to remove him earlier.
The union member of the Public Law Board
signed the award sometime after August
30, though we don’t known when. The
employer member refused to sign it, and
the employer makes two arguments against
enforcing it. The first is that it was
procured by fraud, namely Fredenberger’s
concealment of his conviction. The
Railway Labor Act empowers a district
court to set aside an arbitral award if
there was "fraud or corruption by a
member of the [panel] making the order."
45 U.S.C. sec. 153 First (p). That is of
course a ground under other arbitration
statutes as well. 9 U.S.C. sec. 10(a)(1);
Uniform Arbitration Act sec. 12(a)(1)
(model act adopted by about 34 states);
United Paperworkers Int’l Union v. Misco,
Inc., 484 U.S. 29, 38 (1987); DDI
Seamless Cylinder Int’l, Inc. v. General
Fire Extinguisher Corp., 14 F.3d 1163,
1166 (7th Cir. 1994); MSP Collaborative
Developers v. Fidelity & Deposit Co., 596
F.2d 247, 250 (7th Cir. 1979);
Mountaineer Gas Co. v. Oil, Chemical &
Atomic Workers Int’l Union, 76 F.3d 606,
608 (4th Cir. 1996). Despite differences
in wording, these statutes are generally
interpreted to mean the same thing. E.g.,
Brotherhood of Locomotive Engineers v.
Atchison, Topeka & Santa Fe Ry., supra,
768 F.2d at 921.
In the usual case the fraud is against
the party seeking to set aside the award,
as where the arbitrator is bribed by the
opposing party or fails to disclose a
relationship with that party. American
Postal Workers Union v. United States
Postal Service, 52 F.3d 359, 362 (D.C.
Cir. 1995); Pacific & Arctic Ry. &
Navigation Co. v. United Transportation
Union, 952 F.2d 1144, 1147-48 (9th Cir.
1991); cf. Commonwealth Coatings Corp. v.
Continental Casualty Co., 393 U.S. 145,
147-48, 149 (1968) (plurality opinion).
There is no suggestion of that here.
Fredenberger’s criminal violation of
federal tax law was unrelated to the
grievances that he was asked to
arbitrate, and there is no suggestion
that his violation would have inclined
him in favor of (or, for that matter,
against) the union.
His failure to disclose his criminal
conviction was, we may assume, material
in the sense that one or both parties
might well have decided that they did not
want to have a criminal resolve their
dispute. But it does not follow that it
should be a basis for setting aside his
award. So far as appears, the fraud was
completely harmless; for there is no
evidence or reason to think that
Fredenberger’s conviction (or events
leading up to it) had the slightest
effect on the award that he rendered. A
judge’s decisions are not voidable on the
basis of an undisclosed criminal
conviction, even in a capital case, Bracy
v. Gramley, 520 U.S. 899, 901, 909
(1997), if the conviction had no impact
on the decision, and we do not see why a
stricter rule should apply in
arbitration, cf. Remmey v. PaineWebber,
Inc., 32 F.3d 143, 147-48 (4th Cir.
1994), especially since the standard due
process entitlement to an impartial
tribunal is relaxed when the tribunal is
an arbitral tribunal rather than a court.
Van Boxel v. Journal Co. Employees’
Pension Trust, 836 F.2d 1048, 1050 (7th
Cir. 1987); Merit Ins. Co. v. Leatherby
Ins. Co., 714 F.2d 673, 679 (7th Cir.
1983); Schmitz v. Zilveti, 20 F.3d 1043,
1046-47 (9th Cir. 1994); Morelite Const.
Corp. v. New York City District Council
Carpenters Beneficial Funds, 748 F.2d 79,
83 (2d Cir. 1984). A contrary rule would
encourage losing parties to an
arbitration to conduct a background check
on the arbitrators, looking for dirt--a
particularly questionable undertaking
because arbitrators, unlike judges, are
not subjected to background checks when
appointed. It is another example of the
lesser formality, and concomitant
relaxation of due process norms, of
arbitration in comparison to
adjudication.
We do not wish to generalize
prematurely, however, by holding that
there can be no case in which a fraud
that does not induce bias on the part of
the arbitrator warrants the setting aside
of the award. Suppose that a baboon
cunningly dressed in human clothes fooled
the National Mediation Board into
appointing him the neutral arbitrator of
the union’s grievances. Whichever party
had the stronger case would be
disadvantaged by the fact that the
grievance had been subjected to an
essentially random decision procedure,
even though the procedure was not biased
(random is the opposite of biased). That
party could complain that he had been
defrauded. So far as appears,
Fredenberger was not only an experienced
arbitrator but did as careful a job of
arbitrating the union’s grievances as he
would have done had he never violated the
income tax laws.
Second, the employer argues that because
Fredenberger was removed from the roster
of Railway Labor Act arbitrators before
the second member of the panel signed the
award, there was no award. The Federal
Arbitration Act is explicit that an award
is unenforceable unless final, 9 U.S.C.
sec. 10(a)(4); IDS Life Ins. Co. v. Royal
Alliance Associates, Inc., 266 F.3d 645,
650 (7th Cir. 2001); Flender Corp. v.
Techna-Quip Co., 953 F.2d 273, 279 (7th
Cir. 1992); Remmey v. PaineWebber, Inc.,
supra, 32 F.3d at 150, and an award that
was never made (executed, perhaps, but
not issued) is the best example of a
nonfinal award that occurs to us. See
United Steelworkers of America v. Ideal
Cement Co, 762 F.2d 837, 842 (10th Cir.
1985). We cannot think of any reason why
a different rule should apply to
arbitration under the Railway Labor Act,
though we can find no cases on the point.
In the case of a judicial panel,
moreover, the departure whether by death,
resignation, retirement, or recusal of a
judge before the panel’s decision is
formally issued operates to disqualify
the judge. E.g., Kulumani v. Blue Cross
Blue Shield Ass’n, 224 F.3d 681, 683 n.
** (7th Cir. 2000); Whitehall Tenants
Corp. v. Whitehall Realty Co., 136 F.3d
230, 232-33 (2d Cir. 1998); Dubose v.
Pierce, 857 F.2d 889, 891 n. * (2d Cir.
1988) (per curiam). The quorum for a
decision by a three-judge federal court
of appeals panel is two, 26 U.S.C. sec.
46(d), so that if two of the three judges
die or resign before the panel’s decision
is issued, a judge must be added to the
panel before the decision can be issued.
See, e.g., 11th Cir. R. 34-2. This might
seem fatal to the award in this case,
where the quorum was two and Fredenberger
departed the scene before the second
arbitrator signed the award and the third
arbitrator never signed it.
But this argument fails, though not
because the employer has failed to show
that Fredenberger actually left the panel
before the union member signed. For while
the order by the National Mediation Board
of August 30 removing him from the roster
of arbitrators did not say it was
removing him from any existing panels he
was on, it is likely that he did quit the
Public Law Board then. His request for an
extension of time to respond to the order
to show cause implies that he wanted time
to complete his work on the award before
he was removed from the roster.
Nor does the employer’s argument fail
because, as one might expect, the norms
applicable to arbitration differ from
those governing judicial panels and thus
preclude enforcement of an award if an
arbitrator leaves the panel after he has
signed the award but before it has been
signed by a second member of the panel.
The norms are the same, though the case
law establishing this proposition is
sparse, Marine Products Export Corp. v.
M.T. Globe Galaxy, 977 F.2d 66, 68 (2d
Cir. 1992); Czarnikow-Rionda Co. v.
Buenamar Compania Naviera S.A., No. 86
Civ. 24, 1986 WL 10485, at *7 (S.D.N.Y.
Sept. 17, 1986); Cia De Navegacion Omsil,
S.A. v. Hugo Neu Corp., 359 F. Supp. 898,
899 (S.D.N.Y. 1973); cf. Amalgamated
Ass’n of Street Electric Ry. & Motor
Coach Employees of America v. Connecticut
Co., 112 A.2d 501, 505-06 (Conn. 1955),
and we are hesitant to declare the issue
definitively resolved. As applied to
judicial panels the rule reflects the
fact that before the panel’s decision is
issued something may happen that causes a
change in mind of one or more of the
judges. Ayrshire Collieries Corp. v.
United States, 331 U.S. 132, 139 (1947);
cf. Pastene Wine & Spirits Co. v.
Alcoholic Beverages Control Comm’n, 449
N.E.2d 1235, 1236 (Mass. App. 1983). The
parties are entitled to have a quorum of
the judges consider the new development.
Arbitration by panels composed of party
representatives and a neutral is
different. Not only because of the lesser
formality, of which a pertinent
illustration is that arbitrators usually
resign as soon as they issue their award
rather than waiting till any judicial
proceedings to vacate or confirm the
award are completed, with the result that
sometimes the arbitral panel has to be
reconstituted if there is a remand by the
court. Ethyl Corp. v. United Steelworkers
of America, 768 F.2d 180, 187 (7th Cir.
1985); Pinkerton’s NY Racing Security
Service, Inc. v. Local 32E Service
Employees Int’l Union, 805 F.2d 470, 474
(2d Cir. 1986); see also Washington-
Baltimore Newspaper Guild Local 35 v.
Washington Post Co., 442 F.2d 1234, 1238-
39 (D.C. Cir. 1971). But also and more
important because the party
representatives are not neutrals. If the
neutral is the only real decision maker--
if signature by the party representative
of the neutral arbitrator’s award in
favor of that party is pro forma, a
purely technical requirement--then
failure to comply with the requirement is
harmless and does not justify the setting
aside of the award. And in that case had
Fredenberger died before the union
arbitrator got around to signing the
award, there would be no reason to void
the award, even though if a judge on a
panel containing only one other judge
(say because the third judge had recused
himself) died before the decision of the
panel was issued, the decision would be
voidable.
But we are overstating the difference
between arbitration and adjudication.
Though the party-designated arbitrators
are not neutral, each being biased in
favor of the party that designated him,
they are not rubber stamps. Hence Jones
v. St. Louis-San Francisco Ry., supra,
728 F.2d at 262, holds "that in order to
have a valid award, a majority of the
[Public Law] Board must hear the parties
and participate in the decisionmaking
process before rendering an award." And
even when they are rubber stamps, they
may influence the neutral’s decision in
post-hearing deliberations here
foreshortened by Fredenberger’s
resignation. "After the attorneys present
their cases and the official proceedings
are terminated, the partial [i.e., party-
designated] arbitrators have another
opportunity to attempt to persuade the
neutral to rule in their client’s favor."
Eugene K. Connors & Brooke Bashore-Smith,
"Employment Dispute Resolution in the
United States: An Overview," 17 Can.-U.S.
L.J. 319, 323 (1991). See also Associated
General Contractors of America,
Evansville Chapter, Inc. v. NLRB, 465
F.2d 327, 333 (7th Cir. 1972) ("it would
take an extreme naivete about tripartite
arbitration to believe that the partisan
members will never attempt to reach a
compromise solution after the dispute has
been submitted to the panel"); Delta Mine
Holding Co. v. AFC Coal Properties, Inc.,
280 F.3d 815, 819 (8th Cir. 2001)
(describing post-hearing deliberations of
tripartite arbitration panel in which
partisan arbitrators presented competing
draft orders for consideration by the
neutral); Note, "The Use of Tripartite
Boards in Labor, Commercial, and
International Arbitration," 68 Harv. L.
Rev. 293, 304 (1954).
But this discussion leaves the issue of
remedy unresolved. In the case of a
judicial panel, a decision made without a
quorum is void. Ayrshire Collieries Corp.
v. United States, supra, 331 U.S. at 139.
That is the general rule for public
bodies. Appeal of Net Realty Holding
Trust, 497 A.2d 865, 867 (N.H. 1985);
Rock v. Thompson, 426 N.E.2d 891, 897
(Ill. 1981); Williams v. Nieman Marcus,
652 S.W.2d 893, 894 (Mo. App. 1983);
Pastene Wine & Spirits Co. v. Alcoholic
Beverages Control Comm’n, supra, 449
N.E.2d at 1236. But we do not think the
same result should follow when an
arbitration panel lacking a quorum
renders a decision. See Teamsters Local
Union No. 61 v. United Parcel Service,
Inc., 272 F.3d 600, 605 (D.C. Cir. 2001).
Not only is arbitration less formal than
adjudication, but the absence of a-party-
designated arbitrator does not have the
same significance as the absence of a
third judge. Realistically, in most cases
the absence of a party-designated
arbitrator makes no difference at all in
the outcome. Given these differences
between arbitration and adjudication, it
behooved the employer in this case to
present some evidence, or at least
argument, that the inability of its
designated arbitrator to influence the
outcome by appeal to the neutral
arbitrator (he having decamped after
signing his award) had an actual or at
least a probable effect on the outcome of
the arbitration. The employer presented
neither evidence nor argument. On the
contrary, such evidence as there is that
bears on the issue favors the union. The
neutral arbitrator apparently drafted his
award without prior consultation with the
party-designated arbitrators, and no
further deliberations were contemplated,
the signature of the union-designated
arbitrator and the nonsignature of
theemployer-designated arbitrator being
pro forma. So far as appears, then, the
error in failing to appoint a neutral
arbitrator after Fredenberger resigned
was completely harmless, and that being
so the decision enforcing the award must
we think be, and it is,
Affirmed.