Local Jt. Exec. Bd. Las Vegas v. Mirage Casino-Hotel, Inc. ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LOCAL JOINT EXECUTIVE BOARD OF No. 16-16754
LAS VEGAS; CULINARY WORKERS
UNION LOCAL 226, D.C. No.
Plaintiffs-Counter-Defendants- 2:15-cv-01225-
Appellants, GMN-PAL
v.
OPINION
MIRAGE CASINO-HOTEL, INC.,
Defendant-Counter-Claimant-
Plaintiff-Appellee.
Appeal from the United States District Court
for the District of Nevada
Gloria M. Navarro, Chief District Judge, Presiding
Argued and Submitted December 5, 2017
San Francisco, California
Filed December 13, 2018
Before: John B. Owens and Michelle T. Friedland, Circuit
Judges, and Elaine E. Bucklo, * District Judge.
*
The Honorable Elaine E. Bucklo, United States District Judge for
the Northern District of Illinois, sitting by designation.
2 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
Opinion by Judge Bucklo;
Concurrence by Judge Owens;
Dissent by Judge Friedland
SUMMARY **
Labor Law / Arbitration
The panel reversed the district court’s summary
judgment confirming, pursuant to the Labor Management
Relations Act, an arbitration award entered in favor of
Mirage Casino-Hotel, Inc., on a union’s grievance under the
parties’ collective bargaining agreement.
Mirage subcontracted with another company to operate
a venue, and the memorandum of agreement provided that
the other company would “directly employ” the union’s food
and beverage workers and would be responsible for paying
their wages and employee benefits. Mirage, however, would
control the terms and conditions of employment. The other
company soon declared bankruptcy and failed to pay certain
benefits before closing. Mirage declined to step in, and the
union filed a grievance. The arbitrator ruled that the union’s
grievance, filed pursuant to the CBA, was not arbitrable.
The panel explained that the parties’ substantive dispute
concerned whether Mirage was obliged under Article 29 of
the CBA and the MOA to ensure that the workers received
payment for accrued benefits. The dispute was arbitrable if
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 3
it fell within the arbitration agreement expressed in Article
21 of the CBA. Its arbitrability was to be determined by the
arbitrator if the parties “clearly and unmistakably” agreed to
submit that question to him. The union’s position would be
meritorious if its theory was supported by the CBA and the
other evidence.
The panel concluded that the arbitrator conflated these
inquiries in concluding that the dispute was not arbitrable
because Mirage was not the workers’ employer. The panel
held that, under the terms of the CBA, which required
Mirage to arbitrate grievances, the dispute was substantively
arbitrable. Further, the union’s assent to the arbitrator
deciding arbitrability could not be inferred from its post-
hearing briefing or its failure to call a halt to the arbitration
proceedings and seek judicial review of arbitrability. The
panel reversed the district court’s judgment and remanded
with instructions to vacate the arbitration award.
Concurring, Judge Owens wrote that, although the
dissent reached a more equitable result, the majority’s
opinion was more consistent with controlling law.
Dissenting, Judge Friedland wrote that the “clear and
unmistakable” test for determining whether a party resisting
arbitration has nevertheless consented to having the
arbitrator decide substantive arbitrability does not also apply
when determining whether a party that initiates arbitration
has so consented. Because the union submitted the dispute
to arbitration in the first place, Judge Friedland would
instead apply traditional standards of waiver to the union’s
actions. She would hold that, under those standards, the
union waived its objection to the arbitrator’s deciding the
substantive arbitrability question.
4 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
COUNSEL
Paul L. More (argued), Yuval Miller, Sarah Grossman-
Swensen, and Richard G. McCracken, McCracken
Stemerman & Holsberry LLP, Las Vegas, Nevada, for
Plaintiffs-Counter-Defendants-Appellants.
Kaitlyn M. Burke (argued) and Roger L. Grandgenett II,
Littler Mendelson P.C., Las Vegas, Nevada, for Defendant-
Counter-Claimant-Plaintiff-Appellee.
OPINION
BUCKLO, District Judge:
The parties to this surprisingly nuanced appeal of a labor
arbitration award are the Local Joint Executive Board of Las
Vegas and Culinary Workers Union, Local 226 (together, the
“Union”), and the Mirage Casino-Hotel, Inc. (“Mirage,” or
the “Company”). Mirage operates a hotel and casino on the
Las Vegas Strip. The Union represents Mirage’s food and
beverage employees. A collective bargaining agreement
(“CBA”) governed the parties’ relationship from 2007 to
2013.
In December of 2012, the Union filed a grievance against
Mirage pursuant to Article 21 of the CBA, captioned
“Grievance and Arbitration.” The grievance culminated in
an arbitration award in Mirage’s favor after the arbitrator
concluded that the grievance was “not arbitrable.” The
Union petitioned the district court to vacate the arbitrator’s
award pursuant to § 301(a) of the Labor Management
Relations Act, 29 U.S.C. § 185(a), and Mirage filed a cross-
petition seeking confirmation of the award. On cross-
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 5
motions for summary judgment, the district court confirmed
the award, and the Union timely appealed. We have
jurisdiction under 28 U.S.C. § 1291 and reverse.
I.
The events leading up to the Union’s grievance are
straightforward. In late 2009, Mirage subcontracted with
Beale Street Blues Company Las Vegas, LLC (“BB King’s”)
to operate a food and beverage venue called BB King’s
Blues Club and Grill at the Mirage. Their Memorandum of
Agreement (“MOA”) provided that BB King’s would
“directly employ” the Union’s food and beverage employees
and would be responsible for paying their wages and
employee benefits. Mirage, however, would “at all times
hold and exercise full control over the terms and conditions
of employment of all of the employees.”
BB King’s opened at the Mirage in November of 2009,
but its run was short-lived: BB King’s declared bankruptcy
in 2011 and shuttered permanently in November of 2012. At
the time of BB King’s closing, many of its employees had
accrued vacation time for which the Union believed they had
a right to payment under the terms of the CBA. When BB
King’s failed to pay these benefits, the Union turned to
Mirage to enforce the employees’ rights under the CBA.
After it became clear that Mirage would not step in to ensure
that the employees received the benefit of their collective
bargain, the Union filed a grievance against Mirage on
December 5, 2012. Mirage denied the grievance, which
wended its way to arbitration. After an evidentiary hearing
and partial briefing on the issues presented, the arbitrator
concluded: “The dispute over vacation pay not paid to B. B.
King employees upon the Club’s closing is not arbitrable.”
The federal action now before us ensued.
6 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
As we explain below, the arbitrator’s essential error was
his failure to discern a critical distinction between the
arbitrability of a grievance and its merits. The arbitrator
compounded this error by neglecting a second important
distinction between procedural arbitrability and substantive
arbitrability. The arbitrator’s confusion led him to decide an
arbitrability question that he was not empowered to
adjudicate on the mistaken belief that it was procedural, and
to base his conclusion of non-arbitrability on an analysis
anchored entirely in his view of the merits. Rather than
correct the legal errors in the arbitrator’s analysis, the district
court echoed them, concluding that the Union’s merits
argument “encompasse[d]” the issue of substantive
arbitrability and that by submitting the grievance for
arbitration, the Union had implicitly authorized the arbitrator
to render a decision on the scope of his own jurisdiction.
Unlocking the analytical puzzle before us requires a
review of arbitration’s first principles with a sharp focus on
the limited but essential role of the courts in effectuating its
basic canons. The application of those canons in this case
leads us to the inescapable conclusion that the arbitrator’s
award cannot stand and that the district court’s judgment
must be reversed and the case remanded with instructions to
vacate the arbitrator’s award.
A. The Arbitration Agreement
Article 21 of the CBA, entitled “Grievances and
Arbitration,” establishes the scope of the parties’ arbitration
agreement and related procedures. Section 21.01 defines a
“grievance” as “a dispute or difference of opinion between
the Union and Mirage involving the meaning, interpretation,
[and] application [of the CBA] to employees covered by this
Agreement,” except that violations of the CBA’s no-strike
and no-lock-out provisions “shall not be subject to the
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 7
grievance and arbitration procedure.” 1 Section 21.03 defines
the exclusive procedures for adjusting “all grievances” and
sets forth applicable time limits. Specifically, 21.03(a)
provides that an aggrieved party must submit a written
grievance identifying the claimed violation of the CBA
within twenty calendar days of either the event giving rise to
the grievance or the aggrieved party’s knowledge of that
event’s occurrence. If the parties are unable to settle a
grievance, Section 21.03(b) commands that the matter be set
for hearing before a joint labor-management Board of
Adjustment. And Section 21.03(c) provides for final and
binding arbitration of grievances not settled by the board of
adjustment. Finally, Section 21.04 provides that the time
limits in Article 21 may be extended or waived by
agreement.
B. The Subcontracting Arrangement
The parties negotiated contractual obligations in the
event Mirage subcontracted or subleased third-party
operations on its property. The CBA, a side letter
accompanying the CBA, and the MOA all contain provisions
concerning the subleasing or subcontracting of Mirage
facilities. Article 29 of the CBA provides that any work
performed under subcontracting or subleasing arrangements
must be performed by Union members and that Mirage shall
maintain “full control of the terms and conditions of
employment” of employees performing subcontracted work.
Specifically, article 29.01 provides:
1
Section 21.01 reads: “Any violation or alleged violation of Section
22.01 or 22.03 shall not be subject to the Grievance and Arbitration
Procedure.” There is no Section 22.03 in the CBA, but Section 22.02
contains the relevant text. We assume that the reference to 22.03 is a
typographical error.
8 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
It is recognized that the Employer [i.e.,
Mirage] and the Union have a common
interest in protecting work opportunities for
all employees covered by this Agreement and
employed on a regular basis. Therefore, no
work customarily performed by employees
covered by this Agreement shall be
performed under any sub-lease, sub-contract,
or other agreement unless the terms of any
lease, contract or other agreement
specifically states that (a) all such work shall
be performed only by members of the
bargaining unit covered by this Agreement,
and (b) the Employer shall at all times hold
and exercise full control of the terms and
conditions of employment of all such
employees pursuant to the terms of this
Agreement. The provisions of this Article
apply to all operations on the Employer’s
premises covered by this agreement,
regardless of location or displacement of
employees or prior use of the area occupied
by such operations.
Side Letter #5, executed by the parties in July of 2009,
modifies Mirage’s obligations to allow additional “hiring
flexibility” when opening new venues. It sets forth staffing
and seniority procedures that apply to “the opening of . . .
new branded, fine dining or ultra/gaming lounge venue[s]
. . . located on [Mirage]’s premises”; requires Mirage to give
notice to the Union before opening such venues; and
establishes procedures for hiring Union employees.
In addition to the CBA and its side letters, the parties
regularly negotiated venue-specific memoranda of
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 9
agreement, including as relevant here, the MOA executed by
the Union, Mirage, and BB King’s in November of 2009.
The MOA stipulated that BB King’s would operate as “an
independent business enterprise” that would “directly
employ” the venue’s food and beverage employees and
would be responsible for paying all wages and employee
benefits to them. Echoing Article 29 of the CBA, the MOA
went on to clarify that “[n]otwithstanding the foregoing, The
Mirage will at all times hold and exercise full control over
the terms and conditions of employment of all of the
employees, as required by Section 29.01(b) of the
Agreement.” The MOA likewise reiterated that BB King’s
would operate the restaurant “strictly in accordance” with
the CBA.
C. The Union’s Grievance
The Union invoked the CBA’s grievance procedures on
December 5, 2012, when it filed a formal grievance against
Mirage based on BB King’s failure to pay outstanding
employee benefits in the wake of its bankruptcy and
subsequent closure. The Union’s central theory was that by
failing to ensure that BB King’s employees were paid for
unused vacation time, Mirage violated the provisions in
Section 29.01 of the CBA, Side Letter #5, and the MOA
requiring Mirage to maintain “full control” over the terms
and conditions of employment of BB King’s employees.
Mirage participated in the grievance proceedings described
in Article 21 but disputed its liability for the payments.
When the Board of Adjustment was unable to resolve the
matter, the Union informed Mirage of its intent to submit the
grievance to arbitration.
The parties held an arbitration hearing before Arbitrator
Jonathan S. Monat on April 8, 2015. The hearing opened
with the following colloquy:
10 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
ARBITRATOR MONAT: Is this matter
properly before the arbitrator for a final and
binding decision under the terms of the
Collective Bargaining Agreement?
MR. GRANDGENETT [Mirage’s attorney]:
We are going to make the argument that it is
not subject to arbitration.
ARBITRATOR MONAT: So that answer
would be maybe?
MR. GRANDGENETT: Right. But we
would agree for you to hear the merits of the
underlying grievance.
ARBITRATOR MONAT: All right.
MR. JELLISON [Union’s attorney]: And we
will vigorously oppose—
MR. GRANDGENETT: I’m sure you will.
MR. JELLISON: —any last-minute
argument for the first time raised at the
hearing that it’s not arbitrable.
ARBITRATOR MONAT: Okay. I’ll just
write this down. Company raises
nonarbitrability.
The parties then stated the issues on which they sought
resolution. In the Union’s view, the dispute encompassed a
single issue: “Has the Mirage violated the [CBA] and
[MOA] by failing to pay BB King’s employees their accrued
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 11
vacation pay and pay for unused floating holidays when the
BB King’s employees were terminated on or about
November 11, 2012?” Mirage, however, presented four
issues: (1) whether the grievance was timely; (2) whether the
grievance was “subject to arbitration” against Mirage; (3) if
subject to arbitration, whether Mirage violated the CBA by
failing to pay the aggrieved employees’ accrued vacation
and holiday benefits; and (4) if Mirage was liable, what was
the appropriate remedy?
Mirage explained the basis for its assertion that the
grievance was not subject to arbitration as follows:
The CBA obviously is between the Mirage
and the culinary union, and this grievance
deals with the nonpayment by BB King’s, the
lessee of the Mirage, of vacation pay accrued,
unused vacation pay, and unused floating
holidays. And the Mirage is not the employer
of these particular employees, and so this is
not even subject to arbitration.
The Union disputed that the grievance was untimely and
further argued that Mirage had waived its timeliness
objection in all events by raising it for the first time at the
hearing. Responding to Mirage’s second issue—whether the
dispute was “subject to arbitration”—the Union’s attorney
stated:
It’s a little hard for me to understand exactly
what their argument is, but it sounds like their
argument on arbitrability is more on the
merits than it is on procedural arbitrability.
To the extent they say that they’re not
violating the contract, you know, that’s an
issue on the merits.
12 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
As the party submitting the grievance for arbitration, the
Union obviously believed that the matter was substantively
arbitrable, i.e., that it fell within the substantive scope of the
parties’ arbitration agreement as memorialized in Article 21
of the CBA. But the Union did not offer argument or
evidence supporting that view, nor did it insist that any
dispute over the issue be resolved by a court.
After these opening remarks, the parties presented
opening statements followed by evidence on the merits of
the Union’s grievance. Both the Union and Mirage called
witnesses and offered exhibits directed to whether the MOA
and Article 29 of the CBA required Mirage to cover the
unpaid vacation its subcontractor/lessee failed to pay. In lieu
of closing arguments, the parties agreed to submit post-
hearing briefs to the Arbitrator. In a letter memorializing
their agreement, the Union’s attorney informed the arbitrator
that:
The parties have agreed to submit briefs to
you on the timeliness-arbitrability question
10 days after receipt of the transcript. The
parties request you to then issue an expedited
decision on the timeliness-arbitrability issue.
If you rule that it is arbitrable, then the parties
will submit a brief on the merits 10 days after
receipt of your award on the timeliness-
arbitrability issue.
The arbitrator agreed to “follow the instructions from the
parties.”
Despite the appearance of agreement, the first round of
briefing revealed the parties’ very different understandings
of the issue—or issues—to be decided at the first stage of the
bifurcated proceedings. Mirage’s brief argued two points:
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 13
that the grievance was “not subject to arbitration” because
BB King’s—not Mirage—was the employees’ employer,
and that the grievance was not timely. 2 The Union, however,
confined the substantive arguments in its brief to the issue of
timeliness. It acknowledged Mirage’s argument that it was
not the aggrieved employees’ employer but declined to
counter it substantively at that time since in its view, the
“issue clearly [went] to the merits of the case and w[ould] be
dealt with when the parties submit[ted] their briefs to the
Arbitrator on the merits of the case.”
D. The Arbitration Award
On June 2, 2015, the arbitrator issued a decision and
award, which he viewed as resolving “two procedural
issues”: whether the grievance was “timely filed and
therefore arbitrable,” and whether the grievance “is not
arbitrable because [Mirage] is not the employer under the
CBA.” The arbitrator noted that “the parties engaged in
mutual discussion and decided to bifurcate procedural
arbitrability from the merits,” and requested that he “decide
the procedure issue first.” In this way, the arbitrator
continued, the parties “authorized [him] to provide an
answer to the procedural question”—before turning to the
merits.
The arbitrator began his analysis by observing that, “as a
general rule, there is a presumption of arbitrability when a
CBA contains a grievance procedure within which the last
step is final and binding arbitration,” and that “legal
precedent provides that the Arbitrator is the one to determine
2
Mirage also disputed the Union’s assertion that Mirage had waived
any objection to arbitrability by failing to assert it any time prior to the
hearing.
14 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
procedural questions of timeliness and arbitrability.” The
arbitrator went on to chronicle the events leading up to the
grievance and the steps the parties took to resolve it. He
noted that the grievance was timely filed and found that
although it lay dormant for almost two years thereafter,
Mirage was at least partially responsible for the delay.
Moreover, Mirage’s conduct indicated a willingness to
proceed to arbitration, which “created an expectation of
resolution of the issue on the merits.” For these reasons, the
arbitrator concluded that Mirage had waived its timeliness
objection.
The arbitrator then proceeded to consider whether the
grievance was “not subject to being arbitrated because
Mirage was not the employer but a lessor.” In this
connection, he quoted provisions in the MOA defining the
relationship between Mirage and BB King’s and establishing
BB King’s responsibility for the operation of its restaurant
and employment of its employees. The arbitrator observed
that although BB King’s “is not a signatory to the CBA
between Mirage and the Union,” the MOA stipulates that it
“will operate the Restaurant strictly in accordance with the
[CBA].” The arbitrator then considered the text of Side
Letter #5, Article 29.1 of the CBA, and the testimony of a
Union witness involved in negotiating agreements among
the Union, hotels, and subcontractors. Based on this
evidence, the arbitrator determined that Mirage was not “the
guarantor for payment of wages or benefits of [BB King’s]
employees,” and that the parties’ agreement that Mirage
would “at all times hold and exercise full control over the
terms and conditions of employment of all the employees”
meant only that Mirage was required to “assure compliance
with the CBA by [BB King’s] and nothing else.” For these
reasons, the arbitrator concluded, “[t]he dispute over
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 15
vacation pay not paid to B.B. King employees upon the
Club’s closing is not arbitrable.”
E. The District Court’s Decision
The district court considered whether to vacate the
arbitrator’s award on the grounds that it “d[id] not draw its
essence from the CBA and usurp[ed] the role of the Court in
determining whether the dispute is one the parties to the
CBA agreed to submit to arbitration.” Applying the “nearly
unparalleled degree of deference” that generally attends a
federal court’s review of a labor arbitration award, the court
confirmed the award. The court held that the Union’s
submission to the arbitrator of the merits of its grievance
“necessarily encompasse[d]” the question of arbitrability,
thus empowering the arbitrator to determine the latter. The
court reasoned that by “clearly and unmistakably agree[ing]
to arbitrate substantive issues,” the Union consented to have
the arbitrator decide substantive arbitrability.
The court went on to hold that the arbitrator did not
exceed the scope of issues presented by considering merits-
based arguments in proceedings limited to the “timeliness-
arbitrability question.” The court expressed sympathy for the
Union’s “apparent misunderstanding regarding the scope of
the ‘timeliness-arbitrability question,’” resulting in its
failure to confront the substance of Mirage’s argument that
it was not the aggrieved employees’ employer. But by
agreeing to arbitration, the court held, the Union was bound
to accept “the loose procedural requirements along with the
benefits which arbitration provides.” Further, the court
reasoned, the Union was aware that Mirage viewed its
asserted lack of an employment relationship with BB King’s
employees as a threshold arbitrability issue within the scope
of the “timeliness-arbitrability” question and had the
16 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
opportunity to present any counter-arguments it may have
had during the first stage of briefing.
On appeal, the Union argues that the arbitrator
fundamentally misunderstood the concept of arbitrability.
This is evident, the Union insists, by the arbitrator’s failure
to examine or even mention the only provisions of the CBA
that are legally relevant to the issue of arbitrability, and by
his grounding of his decision instead on his view of the
grievance’s substantive merits. The district court reproduced
the arbitrator’s confusion, the Union argues, when it held
that the Union’s merits argument “necessarily
encompasse[d]” the legally and analytically distinct
antecedent question of substantive arbitrability and that the
Union’s clear and unmistakable agreement “to arbitrate
substantive issues” implicitly authorized the arbitrator to
adjudicate the scope of his own jurisdiction.
II. Analysis
We review de novo conclusions of law underlying the
district court’s decision confirming the arbitration award, but
we accept any factual findings unless they are clearly
erroneous. First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 947–48 (1995).
The cardinal precept of arbitration is that it is “simply a
matter of contract between the parties; it is a way to resolve
those disputes—but only those disputes—that the parties
have agreed to submit to arbitration.” First Options,
514 U.S. at 943 (citing cases). This principle leads
“inexorably” to a second: that substantive arbitrability, i.e.,
“whether a collective bargaining agreement creates a duty
for the parties to arbitrate the particular grievance,” is a
question for judicial determination unless the parties “clearly
and unmistakably provide otherwise.” AT & T Techs., Inc. v.
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 17
Commc’ns Workers of Am., 475 U.S. 643, 649 (1986),
475 U.S. 643, 649 (1986). Questions of procedural
arbitrability, by contrast, are presumptively for the arbitrator.
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84–85
(2002) (timeliness, waiver, and other “gateway” procedural
matters growing out of the dispute are for arbitrator).
In disputes involving a collective bargaining agreement
with arbitration provisions, the arbitrability inquiry begins
with a presumption of arbitrability. AT & T Techs., 475 U.S.
at 650. This means that disputes involving the agreement’s
substantive provisions must be arbitrated “unless it may be
said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted
dispute.” Id. (quoting United Steelworkers of Am. v. Warrior
& Gulf Navigation Co., 363 U.S. 574, 582–83 (1960)).
Importantly, however, where the matter in dispute is not
whether a particular grievance falls within the scope of an
arbitration agreement, but rather who—court or arbitrator—
is empowered to decide arbitrability, the presumption is
“reverse[d]” in favor of judicial, rather than arbitral,
resolution. First Options, 514 U.S. at 945.
In this case, the parties’ substantive dispute concerns
Mirage’s putative obligation under Article 29 of the CBA,
Side Letter #5, and the MOA to ensure that BB King’s
employees received payment for unused vacation time and
other accrued benefits due to them under the CBA. That
dispute is arbitrable if it falls within the arbitration
agreement expressed in Article 21 of the CBA; its
arbitrability is determined by the arbitrator if the parties
“clearly and unmistakably agreed” to submit that question to
him; and it is meritorious if the Union’s “control” theory is
supported by the text of Article 29 of the CBA, Side Letter
#5, the MOA, and other evidence presented at the hearing.
18 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
But the arbitrator conflated these distinct inquiries, holding
that the grievance was “not arbitrable” without considering
his authority to decide that issue, and, compounding the
error, resting his holding on Article 29’s “control”
provisions and other provisions relevant to Mirage’s putative
responsibility for the claimed employee benefits but
irrelevant to the parties’ arbitration agreement.
Conspicuously, no one defends the arbitrator’s analysis.
Mirage does not contend that the contractual provisions on
which the arbitrator relied (or any other portion of the CBA)
authorized him to decide the issue of arbitrability, nor does
it argue that the Union’s grievance is non-arbitrable as
outside the scope of the parties’ arbitration agreement. In
fact, part of what makes this appeal so inscrutable is that
Mirage agrees that “the proper forum for the grievance was
in arbitration as opposed to litigation in court.” Because that
is the essence of the substantive arbitrability inquiry—
which, properly understood, examines the parties’
arbitration agreement and determines whether a particular
dispute is within its scope, and thus “arbitrable,” or outside
its scope, and thus “non-arbitrable”—Mirage has effectively
conceded that the dispute is substantively arbitrable.
The arbitrator’s conclusion that the grievance was not
arbitrable simply misunderstood the arbitrability inquiry. As
Mirage acknowledges, by “not arbitrable,” the arbitrator
meant that the grievance “was filed against the wrong
party—Mirage rather than BB King’s.” But the Union’s
grievance asserts obligations that the Union believes the
CBA and other agreements impose on Mirage. No one
disputes that the CBA requires Mirage to arbitrate
“grievances,” and Mirage has never contended that disputes
involving its subcontractors fall outside the CBA’s
definition of a “grievance.” The arbitrator apparently
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 19
concluded that the Union’s exclusive remedy to recover the
claimed benefits was against BB King’s; but whatever the
soundness of that conclusion, it plainly had nothing to do
with substantive arbitrability, which, again, concerns only
whether the dispute falls within the scope of the parties’
arbitration agreement. See First Options, 514 U.S. at 942.
The district court did not disembroil the arbitrator’s
analysis. Without endorsing the arbitrator’s reasoning, the
district court upheld the award on the ground that it was
entitled to “nearly unparalleled” deference and that it was
sufficiently grounded in the “essence” of the CBA to satisfy
minimal scrutiny. But the court’s extreme deference was
premised on two, equally erroneous beliefs: first, that the
substance of the Union’s grievance “encompasse[d]” the
question of arbitrability, and second, that by agreeing to
arbitrate “substantive issues,” the Union implicitly
authorized the arbitrator to determine whether the grievance
itself was arbitrable. Neither view can be squared with First
Options, which explained that a disagreement over who
should decide the merits of a dispute is distinct from a
disagreement over who should decide who decides the
merits. 514 U.S. at 942.
The district court relied on Schoenduve Corp. v. Lucent
Techs., 442 F.3d 727 (9th Cir. 2006), to hold that the Union’s
submission of the merits “encompasse[d]” the issue of
arbitrability. But in Schoenduve, the employer seeking to
vacate the arbitration award had conceded the arbitrator’s
jurisdiction to resolve the dispute submitted to him, which
was defined broadly as “an action to recover those
commissions, interest and other damages arising from the
wrongful conduct of [the employer]” and asserted “breach of
contract and other claims.” Id. at 732. The employer objected
to the arbitrator’s award because it relied on the doctrines of
20 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
quasi-contract and estoppel, which the arbitration demand
did not specifically assert. Id. at 729. This court upheld the
award, observing that the parties’ arbitration agreement was
“intend[ed] to reach all aspects of their relationship,” and
that courts generally defer to arbitrators’ interpretation of the
scope of issues submitted. Id. at 733–34. But however
broadly arbitrators may interpret the substantive scope of
merits issues presumptively before them, neither
Schoenduve nor the remaining authorities cited by the
district court suggest that an agreement to arbitrate the merits
“encompasses” the question of arbitrability, which carries a
“reverse” presumption favoring judicial determination, see
First Options, 514 U.S. at 944–45.
The district court further concluded that “the Union’s
post-hearing brief demonstrates that it submitted the
substantive arbitrability question to the Arbitrator.” The
court pointed to the Union’s statement that the issue of
whether Mirage was the employer of BB King’s employees
“will be dealt with when the parties submit their briefs to the
Arbitrator on the merits of the case.” (District court’s
emphasis.) But this statement only underscores that the
Union viewed Mirage’s claimed absence of an employment
relationship with the aggrieved employees as a merits issue,
not an arbitrability issue—a view the Union had previously
expressed at the arbitration hearing. Even if the Union were
wrong on that score, it cannot be deemed to have implicitly
empowered the arbitrator to decide arbitrability based on its
submission of an issue it explicitly claimed had nothing to
do with arbitrability. See First Options, 514 U.S. at 943;
LAWI/CSA Consolidators, Inc. v. Wholesale & Retail
Distribs., Teamsters Local 63, 849 F.2d 1236, 1239 (9th Cir.
1988) (alteration in original) (“Courts refer the question of
arbitrability to the arbitrator ‘only if [the parties] leave no
doubt that such was their intent.’” (quoting Bhd. of
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 21
Teamsters Local 70 v. Interstate Distrib. Co., 832 F.2d 507,
510 (9th Cir. 1987))); see also ConocoPhillips, Inc. v. Local
13-0555 United Steelworkers Int’l Union, 741 F.3d 627,
631–32 (5th Cir. 2014) (party’s consent to an arbitrator’s
jurisdiction over a limited merits issue did not evidence a
“clear and unmistakable intent to be bound by the
arbitrator’s decision on arbitrability” of a related issue).
Nor can the Union’s assent be inferred from its failure to
call a halt to the arbitration proceedings and seek judicial
resolution of arbitrability. In Mirage’s view, it was
incumbent upon the Union to stop the arbitration and seek a
judicial order compelling arbitration when it became clear
that there was a dispute over substantive arbitrability, and
that, having failed either to do so or to preserve its objection,
the Union cannot now be heard to complain that the
arbitrator exceeded his jurisdiction. We disagree for several
reasons.
First, it was far from clear during the arbitration
proceedings that there really was a dispute over substantive
arbitrability. Mirage raised no objection to arbitrability at
any time during the preliminary grievance procedures
established in Article 21. At the arbitration hearing, Mirage
asserted for the first time that the grievance was “not subject
to arbitration,” but it went on to explain that its view rested
exclusively on contractual provisions relating to the merits
of the Union’s grievance. At no point in the proceedings did
Mirage mention the parties’ arbitration agreement or cite
Article 21 of the CBA. The cornerstone of Mirage’s
“arbitrability” challenge was that Mirage had no
employment relationship with the aggrieved employees—
the very crux of its merits challenge.
Second, George Day Construction Co. v. United
Brotherhood of Carpenters & Joiners of America, 722 F.2d
22 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
1471 (9th Cir. 1984), does not persuade us that by failing to
reserve the right to have a court decide arbitrability, the
Union implicitly consented to the arbitrator’s authority to
decide that issue. In George Day, this court held that an
employer who arbitrated the issue of substantive arbitrability
alongside the merits and submitted both issues to the
arbitrator without reservation had impliedly consented to the
arbitrator’s jurisdiction. 722 F.2d at 1475. But George Day
predated the Supreme Court’s decision in AT&T
Technologies and did not apply the clear and unmistakable
requirement the Court articulated in that case. Moreover,
First Options later held that silence and ambiguity cannot
commit the question of arbitrability to an arbitrator. 514 U.S.
at 944–45. It is true that in Pacesetter Construction Co. v.
Carpenters 46 Northern California Counties Conference
Board, 116 F.3d 436, 439 (9th Cir. 1997), this court declined
to adopt “wholesale” the Court’s reasoning in First
Options—a commercial arbitration case—and held that
George Day remained good law in the labor context. But
since Pacesetter, the Supreme Court has made clear that the
“same framework” applies in both labor and commercial
arbitration disputes. Granite Rock Co. v. Int’l Bhd. of
Teamsters, 561 U.S. 287, 301 (2010). Indeed, several other
circuits have applied First Options in the labor context. See,
e.g., ConocoPhillips, Inc., 741 F.3d at 630–32; Rock-Tenn
Co. v. United Paperworkers Int’l Union, 184 F.3d 330, 335–
36 (4th Cir. 1999); Local 744, Int’l Bhd. of Teamsters v.
Hinckley & Schmitt, Inc., 76 F.3d 162, 165 (7th Cir. 1996).
At all events, the unusual posture of this case
distinguishes it from George Day. George Day embodies the
classic scenario in which a party disputing arbitrability seeks
to vacate an award it claims was decided without
jurisdiction. The George Day employer sought to vacate an
adverse arbitration award after fully litigating and
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 23
submitting the entire matter to the arbitrator. See George
Day, 722 F.2d at 1474–75. Here, by contrast, the Union did
not present any argument on substantive arbitrability to the
arbitrator because it recognized that Mirage’s second
“arbitrability” argument was actually directed to the merits,
and it believed that the issue would be argued and submitted
at a later time. So unlike the employer in George Day, the
Union is not seeking a second bite at the apple on an issue it
previously briefed and submitted to the arbitrator.
The upshot of the foregoing is that although the arbitrator
did not have authority to decide the question of substantive
arbitrability, he concluded that the Union’s grievance was
“not arbitrable.” As a result, the aggrieved employees were
denied benefits to which the Union might have proven their
entitlement had it presented its merits arguments to the
arbitrator. That harm is undoubtedly significant in the eyes
of the employees concerned. Equally important, however, is
that left undisturbed, the arbitrator’s award and the district
court’s confirmation of it establish a hazardous precedent
whose consequences are likely to reverberate far beyond the
benefits claims at issue in this case. On its terms, the
arbitrator’s award effectively carves out of the parties’
arbitration agreement a wide swath of presumptively
arbitrable grievances involving Mirage’s (and potentially
other employers’) subcontractors. 3 And it does so without
any textual basis in the CBA or rational basis in the law.
By blurring the line between arbitrability and merits
determinations, the arbitrator’s analysis contravenes
foundational principles of the arbitral process by
overlooking the limits the Supreme Court has placed on the
3
The record indicates that the Union had substantially similar
collective bargaining agreements with other hotels in the area.
24 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
arbitrator’s presumptive powers. We conclude that the award
cannot be squared with the holdings of AT & T Technologies,
First Options, and Granite Rock.
III.
For the foregoing reasons, we REVERSE the district
court’s judgment and REMAND with instructions to vacate
the arbitration award.
OWENS, Circuit Judge, concurring:
I join the majority opinion because I believe it is more
consistent with current controlling law. That being said, I
think the dissent reaches the more equitable result and, if the
slate were blank, I would join it. Perhaps most importantly,
the extremely convoluted procedural posture of this case is
so odd that our holding today likely will be limited to these
very idiosyncratic facts.
FRIEDLAND, Circuit Judge, dissenting:
The majority assumes that the “clear and unmistakable”
test for determining whether a party resisting arbitration has
nevertheless consented to having the arbitrator decide
substantive arbitrability also applies when determining
whether a party that initiates arbitration has so consented. I
believe that test was never intended to extend to the latter
context, and that applying it in such circumstances would
lead to counterintuitive results and would be in tension with
our caselaw.
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 25
I.
The Supreme Court provided a helpful explanation of the
“clear and unmistakable” test in First Options of Chicago,
Inc. v. Kaplan, 514 U.S. 938 (1995). In that case, a stock-
trading firm initiated arbitration against a “wholly owned
investment company” and that company’s individual owner
and his wife. Id. at 940. The investment company—but not
the individuals—had signed a contract with an arbitration
provision, and the individuals accordingly argued before the
arbitration panel that their dispute with the trading firm was
not arbitrable. Id. at 941. The arbitration panel rejected that
argument, concluding that it had the power to decide the
whole case, and then ruled on the merits in favor of the
trading firm. Id. The Supreme Court disagreed and held that
the claims against the individuals were not arbitrable. Id. at
943.
The Court explained that when “parties d[o] not agree to
submit the arbitrability question itself to arbitration, then the
court should decide that question . . . independently,”
without any deference to the arbitrator’s views on the
question. Id. The Court further specified that “[c]ourts
should not assume that the parties agreed to arbitrate
arbitrability unless there is ‘clea[r] and unmistakabl[e]’
evidence that they did so.” Id. at 944 (alterations in original)
(quoting AT & T Techs., Inc. v. Commc’ns Workers of Am.,
475 U.S. 643, 649 (1986)). Based on these principles, the
Court concluded that the trading firm could not show that the
individuals “clearly agreed to have the arbitrators decide . . .
the question of arbitrability.” Id. at 946. Although the
individuals had participated in the arbitration, they had
objected to being in arbitration at all, so their participation in
debate before the arbitrators about whether the dispute was
26 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
arbitrable did not clearly reflect consent to having the
arbitrators decide arbitrability. Id.
In First Options, applying the stringent “clear and
unmistakable” standard for demonstrating consent to allow
the arbitrators to decide arbitrability made sense because, as
the Supreme Court explained, the question of “who—court
or arbitrator—has the primary authority to decide whether a
party has agreed to arbitrate can make a critical difference to
a party resisting arbitration,” id. at 942 (emphasis added).
“[A] party who has not agreed to arbitrate will normally have
a right to a court’s decision about the merits of its dispute,”
but a party who “has agreed to arbitrate . . . has relinquished
much of that right’s practical value,” because a reviewing
court can “set that decision aside only in very unusual
circumstances.” Id. And “one can understand why courts
might hesitate to interpret silence or ambiguity” by a party
resisting arbitration “as giving the arbitrators that power, for
doing so might too often force unwilling parties to arbitrate
a matter they reasonably would have thought a judge, not an
arbitrator, would decide.” Id. at 945.
We have never applied the “clear and unmistakable” test
to the very different procedural posture at issue in the present
case, nor should we. Here, the party contending that the
arbitrator did not have the authority to decide the scope of
his own jurisdiction—i.e., the question of substantive
arbitrability—submitted its dispute with Mirage to the
arbitrator. Yet, despite having submitted the dispute to the
arbitrator, the Union would have us: (1) decide that the
arbitrator did not have the authority to decide the question of
his own jurisdiction over the dispute; but (2) conclude that
the arbitrator did have jurisdiction over the merits of the
dispute and thus send the case back to arbitration. This
request is quite counterintuitive—indeed, it seems
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 27
fundamentally inconsistent for a party to say without
reservation that it trusts the arbitrator’s ability to decide the
merits of the parties’ dispute but that it does not trust the
arbitrator to decide the arbitrator’s own jurisdiction,
especially when both issues turn on interpretation of the
parties’ contractual relationship and behavior.
We have previously refrained from applying the clear
and unmistakable rule when doing so would have allowed a
party to take inconsistent positions. In PowerAgent Inc. v.
Electronic Data Systems Corp., 358 F.3d 1187 (9th Cir.
2004), a plaintiff sued in federal court, but the district court
held that the case needed to be resolved in arbitration. Id. at
1189. The plaintiff then submitted an amended complaint
that omitted the parts of the complaint that the court had held
triggered arbitration. Id. The court rejected that effort and
sent the case to arbitration. Id. In arbitration, the plaintiff
argued that the arbitration panel—and not the district
court—should decide the question of substantive
arbitrability with respect to all the claims. Id. at 1189–90.
The arbitration panel concluded “that all the claims in the
dispute, including the claims added in the Amended
Complaint, were subject to the arbitration clause,” and, after
“extensive proceedings,” ruled on the merits in favor of the
defendants. Id. at 1190.
The plaintiff then sought “to vacate the arbitration
award,” arguing that the arbitration panel did not have the
authority to decide whether the dispute was substantively
arbitrable. Id. at 1190–91. We refused to vacate the award.
Id. at 1191. We recognized that normally “arbitrability is . . .
for courts” to decide “unless there is clea[r] and
unmistakabl[e] evidence that” “the parties agreed to arbitrate
arbitrability.” Id. (alterations in original) (internal citations
omitted). But we concluded that “neither paradigm quite
28 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
fit[]” the situation at issue because “[w]hether or not the
parties agreed with one another to arbitrate the arbitrability
issue, [the plaintiff] affirmatively submitted the issue to the
arbitrators and urged that they had the power to decide it.”
Id. In other words, “First Options d[id] not resolve the
question” in PowerAgent because in First Options “the
defendants in arbitration filed with the arbitrators a
memorandum opposing the arbitrators’ jurisdiction,” and in
PowerAgent the plaintiff was opposing the arbitration
panel’s ability to decide substantive arbitrability after
submitting that question to it. Id. at 1191–92.
Similarly, in Nghiem v. NEC Electronic, Inc., 25 F.3d
1437 (9th Cir. 1994), cert denied 513 U.S 1044 (1994), 1 we
considered a situation in which a party had “initiated the
arbitration, attended the hearings with representation,” and
participated fully in those hearings, but then asked a court to
decide that the dispute was not arbitrable partway through
the arbitration proceedings. Id. at 1439–40. There, we held
that “[o]nce a claimant submits to the authority of the
arbitrator and pursues arbitration, he cannot suddenly change
his mind and assert lack of authority.” Id. at 1440.
Of course, unlike in PowerAgent, the Union here did not
“affirmatively submit” the question of substantive
arbitrability to the arbitrator, and unlike in Nghiem, the
Union is not arguing that the merits of the dispute are not
arbitrable. Rather, here, the Union is arguing that the dispute
1
Although this case was decided before First Options, we have
since cited it approvingly. See Nagrampa v. MailCoups, Inc., 469 F.3d
1257, 1279 (9th Cir. 2006) (en banc) (explaining that in cases like
Nghiem “where we have found waiver [of the ability to challenge the
arbitrator’s ability to decide substantive arbitrability], the objecting party
ha[d] participated far more extensively than [the present objecting party]
did before resorting to the courts”).
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 29
is arbitrable but that the court—and not the arbitrator—
should decide that jurisdictional question and then should
send the parties back to arbitration. Still, like the plaintiffs
in both PowerAgent and Nghiem, the Union here submitted
the dispute to the arbitrator without reservation. It would
therefore be at least in tension, if not direct conflict, with
PowerAgent and Nghiem to allow the Union here to have its
cake and eat it too.
II.
Because the Union submitted the dispute to arbitration in
the first place, I would apply traditional standards of waiver
to the Union’s actions instead of applying the clear and
unmistakable rule. Cf. In re Duncan, 713 F.2d 538, 542–43
(9th Cir. 1983) (“Venue is a privilege that is waived if not
timely asserted.”); Nghiem, 25 F.3d at 1440 (observing that
a party’s “voluntary initiation of arbitration can be
interpreted as waiver of any objection he may have had over
the authority of the arbitrator”). 2
Under those standards, the Union waived its objection to
the arbitrator’s deciding the substantive arbitrability
question. When Mirage argued during the arbitration that
the dispute was not substantively arbitrable, the Union did
not contend that Mirage needed to make any such argument
to a court rather than to the arbitrator. Nor did the Union
2
Initiating arbitration should not, in and of itself, always mean that
a party has waived or forfeited any objection to the arbitrator’s deciding
the question of substantive arbitrability, but it may be evidence of such.
For example, the situation here might be different if the Union had
objected immediately that a court should decide the question of
substantive arbitrability when Mirage first argued that the dispute was
not arbitrable.
30 LOCAL JOINT EXEC. BD. V. MIRAGE CASINO-HOTEL
seek a stay of the arbitration to bring the issue to a court
itself. Instead, the Union indicated a willingness to argue the
substantive arbitrability question before the arbitrator when
it stated that it would “vigorously oppose . . . any last-minute
argument for the first time raised at the hearing that [the
dispute is] not arbitrable.” 3
Because the Union waived the objection it now makes to
the arbitrator’s deciding arbitrability, we should review his
answer to that question using the same “standard courts
apply when they review any other matter that parties have
3
Even if it could be said that the Union forfeited (rather than
waived) its objection and that we therefore should review that objection
now for plain error, the Union could not show that the arbitrator
committed plain error in concluding that he had the authority to decide
his own jurisdiction. To demonstrate plain error in the civil context, a
party must show (1) an error, (2) that was obvious, and (3) that was
prejudicial or affected substantial rights, and (4) that “review is
necessary to prevent a miscarriage of justice.” Hemmings v. Tidyman’s
Inc., 285 F.3d 1174, 1193 (9th Cir. 2002).
There was no obvious error here. The same conduct that I believe
effected a waiver would, even if not deemed a waiver, have signaled to
the arbitrator that he had the authority to decide the substantive
arbitrability question.
There was also no “miscarriage of justice.” Id. The Union cries foul
because it had no chance to brief the merits questions to the arbitrator
before the arbitrator effectively decided the merits in the course of
throwing out the case as non-arbitrable. But the Union ignores the fact
that it did have an opportunity to argue the merits during the arbitration
proceeding. Indeed, after Mirage raised its substantive arbitrability
objection, and after the Union argued that Mirage’s objection went to
merits of the dispute, the parties argued the merits before the arbitrator.
Intervening now would give the Union two bites at the apple as to the
merits question, which “[p]arties normally do not get.” John v. United
States, 247 F.3d 1032, 1051 (9th Cir. 2001) (en banc) (Rymer, J.,
concurring in part, dissenting in part, and dissenting from the judgment).
LOCAL JT. EXEC. BD. V. MIRAGE CASINO-HOTEL 31
agreed to arbitrate,” First Options, 514 U.S. at 943. “That is
to say, the court should give considerable leeway to the
arbitrator, setting aside his or her decision only in certain
narrow circumstances.” Id. “If an ‘arbitrator is even
arguably construing or applying the contract and acting
within the scope of his authority,’ the fact that ‘a court is
convinced he committed serious error does not suffice to
overturn his decision.’” S. Cal. Gas Co. v. Util. Workers
Union, Local 132, 265 F.3d 787, 792 (9th Cir. 2001)
(quoting E. Associated Coal Corp. v. United Mine Workers,
Dist. 17, 531 U.S. 57, 62 (2000)); see also Sw. Reg’l Council
of Carpenters v. Drywall Dynamics, Inc., 823 F.3d 524, 530
(9th Cir. 2016) (noting that we may set aside that decision
only if it “fails to ‘draw[] its essence from the collective
bargaining agreement,’ such that the arbitrator is merely
‘dispens[ing] his own brand of industrial justice’”
(alterations in original) (quoting United Steelworkers v.
Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960))).
Here, even if the arbitrator erred by deciding the merits
of the dispute when purporting to decide whether the dispute
was substantively arbitrable, he grounded his decision in the
CBA. His decision therefore was not merely “his own brand
of industrial justice.” Sw. Reg’l Council of Carpenters,
823 F.3d at 530 (quoting United Steelworkers, 363 U.S. at
597). I would therefore affirm the district court’s decision
not to vacate the arbitrator’s ruling.
For the foregoing reasons, I respectfully dissent.