ConocoPhillips, Inc. v. Local 13-0555 United Steelworkers International Union

Case: 12-31225 Document: 00512517454 Page: 1 Date Filed: 01/30/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 30, 2014
No. 12-31225 Lyle W. Cayce
Clerk
CONOCOPHILLIPS, INCORPORATED,
Plaintiff – Appellee
v.
LOCAL 13-0555 UNITED
STEELWORKERS INTERNATIONAL
UNION,
Defendant – Appellant
Appeal from the United States District Court
for the Western District of Louisiana
Before HIGGINBOTHAM, CLEMENT, and PRADO, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
United Steelworkers International Union, Local 13-0555 (“USW”) appeals
the district court’s vacatur of an arbitral award against ConocoPhillips, Inc.
(“Conoco”) involving dismissal of a refinery employee who failed a workplace
drug test. We AFFIRM.
FACTS AND PROCEEDINGS
USW member Dave Buller was a refinery operator at a Conoco refinery in
Lake Charles, Louisiana. On June 14, 2010, he was subject to a random drug
test at work, and tested above the allowed threshold for hydrocodone. Conoco
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terminated him, pursuant to a company policy providing for termination of those
who fail drug tests. Buller claimed that the test result had been caused by
several doses of a prescription cough medication, which had been prescribed for
him several years earlier and had long since expired.
The collective bargaining agreement (“CBA”) between Conoco and USW
provides for arbitration of grievances and of matters relating to the
interpretation and implementation of the CBA. Section 2-2 of that agreement
states:
The right to promote, discipline and discharge are likewise the sole
responsibility of the Company, provided that claims of
discriminatory and of wrongful or unjust discipline or discharges
shall be subject to the grievance procedure herein provided.
Discharge for a confirmed positive test under the substance abuse
policy shall not be subject to grievance or arbitration. However,
relative to such discharge the union continues to maintain the right
to grieve and arbitrate issues around the integrity of the chain of
custody.
USW brought an arbitration action against Conoco on Buller’s behalf for
wrongful termination, despite section 2-2’s language providing that “[d]ischarge
for a confirmed positive test under the substance abuse policy shall not be
subject to grievance or arbitration” except with respect to “the integrity of the
chain of custody.” USW argues that the grievance is for unjust discharge, and
was properly before the arbitrator.
At the start of the arbitration hearing, Conoco contested the arbitrability
of the dispute, stating that, because Buller had been discharged for substance
abuse, the dispute was not arbitrable, except with respect to the chain of
custody. The arbitrator stated that he would nevertheless hear the merits of the
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case before deciding the arbitrability question. Conoco proceeded to present its
case, which focused primarily on the chain of custody of the drug test evidence.
As the union began presenting its case, which was not limited to the chain
of custody, Conoco repeatedly objected on the ground that the arbitrator was
exceeding his jurisdiction under the CBA. Conoco eventually logged a
continuing objection to USW’s case, stating: “Can my objection be continuing
about this because I have objected to . . . the various provisions of the Contract
and can you arbitrate anything more than just what the Contract says.” At the
end of the proceedings, the following exchange occurred regarding the scope of
the arbitration:
USW: Okay. I think the Company will stipulate, though, that
it’s properly before the Arbitrator as far as Grievance is
concerned.
Conoco: What is that?
USW: The Grievance itself.
Conoco: Well, I say you can grieve, grieving is properly before
the Arbitrator. On the chain of custody, we don’t think
anything else is properly before the Arbitrator.
Following briefing on the issues discussed at the arbitration proceeding,
the arbitrator: (1) found that he did have the authority to consider this dispute,
(2) determined that the dispute was arbitrable, and (3) entered an award for
Buller, holding that Buller’s termination had been wrongful.
Conoco filed the instant action in the district court, seeking vacatur of the
arbitral award. The parties filed cross-motions for summary judgment. Conoco
contested the arbitrator’s determination that the merits of the discharge were
arbitrable, arguing that it (1) never consented to arbitrate a discharge for a
positive drug test, and (2) never agreed to allow the arbitrator to decide whether
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the dispute was arbitrable. USW argued that Conoco implicitly agreed to submit
the question of arbitrability to the arbitrator, and was therefore bound by its (1)
determination that the dispute was arbitrable and (2) subsequent award in favor
of USW.
The district court granted Conoco’s motion, holding that “there was no
clear and unmistakable agreement” to submit the question of arbitrability to the
arbitrator himself. It vacated the arbitration and the result of the arbitration,
and USW appealed.
STANDARD OF REVIEW
We review a district court’s judgment on arbitrability awards “like review
of any other district court decision finding an agreement between parties, e.g.,
accepting findings of fact that are not ‘clearly erroneous’ but deciding questions
of law de novo.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48
(1995).
DISCUSSION
There are three types of disputes concerning arbitration: (1) the merits of
the dispute; (2) whether the parties agreed to arbitrate the merits; and (3) who
has “the primary power to decide” whether the parties agreed to arbitrate the
merits. Id. at 942. Only the second and third questions are at issue in this case.
Arbitration 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.” Id. at 943. If an issue has been submitted to an
arbitrator, a court “will set that decision aside only in very unusual
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circumstances,” such as fraud, manifest disregard of the law, corruption, undue
means, and the arbitrator overstepping its powers. Id. at 942. But if an issue
has not been submitted to the arbitrator, the “party who has not agreed to
arbitrate will normally have a right to a court’s decision about the merits of its
dispute.” Id.
The primary issue on appeal is whether the parties agreed to submit the
question of “who has the power to decide whether an issue is arbitrable” to the
arbitrator. USW, as the party contending that Conoco agreed to submit that
question to the arbitrator, “bear[s] the burden of demonstrating clearly and
unmistakably that the parties agreed to have the arbitrator decide that
threshold question of arbitrability.” Gen. Motors Corp. v. Pamela Equities Corp.,
146 F.3d 242, 249 (5th Cir. 1998). If USW cannot show that the parties “clearly
and unmistakably” submitted the arbitrability question itself to the arbitrator,
then the “court should decide that question just as it would decide any other
question that the parties did not submit to arbitration, namely, independently.”
First Options, 514 U.S. at 943.
I. Did the parties “clearly and unmistakably” agree to submit the
question of “who has the power to decide whether an issue is
arbitrable” to the arbitrator himself?
The threshold and potentially dispositive issue is whether the parties
granted the arbitrator the power to determine whether Buller’s discharge was
arbitrable. Although the question of whether a particular issue is arbitrable errs
in favor of arbitration, “courts 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. This standard applies “regardless of whether the
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parties have entered into a pre-dispute arbitration contract.” Pamela, 146 F.3d
at 248 (“[W]e conclude that the ‘clear and unmistakable evidence’ standard
applies whenever one party to a dispute contends that the other party agreed to
submit to an arbitrator the question of whether that arbitrator has been
authorized to resolve the merits of their dispute, regardless of whether the
parties have entered a pre-dispute arbitration contract.”).
The Supreme Court has defined a “clear willingness to arbitrate”
arbitrability as “a willingness to be effectively bound by the arbitrator’s decision
on that point.” Id. at 946. Such a “willingness to be effectively bound” is not
demonstrated by “merely arguing the arbitrability issue to an arbitrator.” Id.
Nor do silence and ambiguity support a “willingness to be effectively bound”;
those circumstances favor submitting the question to the courts, lest the
arbitrator “force unwilling parties to arbitrate a matter they reasonably would
have thought a judge, not an arbitrator, would decide.” Id. at 945.
USW has not borne its burden in demonstrating Conoco’s clear and
unmistakable intent to be bound by the arbitrator’s decision on arbitrability. It
is undisputed that the CBA does not expressly submit the question of
arbitrability to the arbitrator. USW instead argues that Conoco’s conduct during
the arbitration hearing and statements in its briefs demonstrate that it “readily
submitted the question” of arbitrability to the arbitrator. But the record on this
point does not clearly and unmistakably support that conclusion. At best,
Conoco’s actions and statements are ambiguous; at worst, they demonstrate a
clear rejection of the arbitrator’s authority to determine arbitrability.
In First Options, the Kaplans—in their personal capacity—filed a written
memorandum with the arbitrator objecting to its jurisdiction over their dispute.
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Rather than finding that filing an objection with the arbitrator constituted
consent to be bound by its decision on arbitrability, the Supreme Court found
that, “insofar as the Kaplans were forcefully objecting to the arbitrators deciding
their dispute . . . one naturally would think that they did not want the
arbitrators to have binding authority over them.” Id. at 946. The Court found
support for this conclusion from the “obvious explanation for the Kaplans’
presence before the arbitrators,” namely that their wholly owned subsidiary was
before the arbitrator in the same matter. Id.
Similarly, Conoco repeatedly objected to the arbitrator’s determination of
any issue beyond “chain of custody.” It objected in its opening statement to the
arbitrator’s jurisdiction over Buller’s discharge, but acknowledged jurisdiction
over the chain of custody. Conoco objected throughout USW’s presentation that
the issue of discharge was beyond the arbitrator’s jurisdiction, and eventually
made a continuing objection to the presentation of USW’s case, stating: “Can my
objection be continuing about this because I have objected to . . . the various
provisions of the Contract and can you arbitrate anything more than just what
the Contract says.” Finally, at the end of the hearing, counsel for Conoco
explicitly stated that while the chain of custody was properly before the
arbitrator, “we don’t think anything else is properly before the Arbitrator.” And
just as the Kaplans had an obvious explanation for appearing before the
arbitrator, Conoco was there to litigate the chain of custody, a potential source
of relief for Buller under the CBA.
USW’s arguments focus on Conoco (1) arguing arbitrability to the
arbitrator, (2) failing to object to the arbitrator’s indications that it would
address arbitrability, and (3) presenting argument beyond mere chain of custody
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at the hearing. None of this evidences a clear and unmistakable intent to be
bound by the arbitrator’s decision on arbitrability. As the Supreme Court stated
in First Options, “merely arguing the arbitrability issue to an arbitrator” is not
enough to show clear and unmistakable intent. Id. The fact that Conoco raised
an issue of jurisdiction at the hearing and submitted briefing to dissuade the
arbitrator from addressing the merits of the discharge does not indicate that it
intended to be bound by that determination. “Merely arguing” the issue is not
enough, even if the issue is competently and consistently presented.
USW also notes Conoco’s failure to object to certain indications that the
arbitrator would consider the issue of arbitrability, particularly its statement
that: “To the matter of arbitrability, I’ll go ahead and hear the merits and then
I’ll decide the Arbitrability later. And if I get to the merits, I get to the merits.”
It also argues that all of Conoco’s objections referred to whether the question was
arbitrable, not whether the arbitrator had the power to decide that issue,
“confirming that the Company acquiesced in toto to the arbitrator’s
resolving . . . the question of arbitrability.” But in determining whether parties
have agreed to arbitrate arbitrability, ambiguity and silence favor having that
question decided by the courts, not the arbitrator. See id. at 944-45. USW’s
argument that Conoco’s consent can be inferred from its silence contradicts the
holding of First Options and flips the burden of proof on its head. Rather than
asking whether USW met its burden of “clearly and unmistakably”
demonstrating the parties’ agreement to arbitrate arbitrability, USW
contends—in both its brief and at oral argument—that the question is whether
Conoco “clearly objected and reserved its right to contest arbitrability.” That is
not the standard announced in First Options, and Conoco’s alleged failure to
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object is insufficient to demonstrate its intent to be bound by the arbitrator’s
decision on arbitrability.
Similarly, to the extent that Conoco presented arguments—either in its
case-in-chief or on rebuttal—that extended to the merits of the dispute, it cannot
be the case that merely countering your opponent’s case demonstrates an intent
to be bound by the arbitrator’s decision. Even believing that the arbitrator
lacked jurisdiction and with full intent to appeal, it would be prudent for Conoco
to address USW’s merits arguments, just in case it lost its jurisdictional
argument and lost again on appeal. Indeed, the district court could uphold
Conoco’s jurisdictional challenge—vesting the “arbitrability” decision in the
courts—but still find the dispute arbitrable and uphold the arbitration award in
favor of USW. When weighed against its consistent objections to arbitrating
anything beyond the chain of custody, Conoco’s decision to address issues beyond
the arbitrability of arbitrability does not clearly and unmistakably demonstrate
an intent to be bound by the arbitrator’s decision.
USW relies on two non-binding cases in support of its position that Conoco
clearly and unmistakably consented to have the arbitrator decide arbitrability.
In Rock-Tenn Company v. United Paperworkers International Union AFL-CIO,
the Fourth Circuit found clear and unmistakable consent where a party (1)
voluntarily submitted to arbitration of the dispute, (2) vigorously participated
in “on the merits debate during the arbitration proceedings,” and (3) utterly
failed “during those proceedings to challenge the arbitrator’s authority to
determine the dispute, or even to preserve the issue for resolution by the court.”
184 F.3d 330, 334 (4th Cir. 1999). Similarly, in Cleveland Electric Illuminating
Company v. Utility Workers Union of America, the Sixth Circuit found the
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objecting party’s failure to argue at arbitration “that the arbitrator had no
authority to decide the issue of arbitrability” sufficient to demonstrate clear and
unmistakable consent to be bound by the arbitrator’s decision on arbitrability.
440 F.3d 809, 811 (6th Cir. 2006).
These cases are easily distinguishable. Both Rock-Tenn and Cleveland
Electric rely heavily on the parties’ failure to object to the arbitrator’s power to
decide arbitrability during the hearing. Conoco’s attorney arguably objected to
arbitrating arbitrability at two different points during hearing, stating: (1) “Can
my objection be continuing about this because I have objected to . . . the various
provisions of the Contract and can you arbitrate anything more than just what
the Contract says”; and (2) besides chain of custody, “we don’t think anything else
is properly before the Arbitrator.” On their terms, Conoco appears to be
objecting to the arbitrator’s authority to decide anything not explicitly spelled
out in the CBA—such as who has the power to decide arbitrability—or
“anything” besides chain of custody. At the very least, these statements are too
ambiguous to say that Conoco “utterly failed” to raise the issue of the arbitrator’s
power to decide arbitrability.
Further, Rock-Tenn and Cleveland Electric are difficult to reconcile with
the Supreme Court’s holding in First Options. Both cases found a party’s failure
to object to the arbitrator’s authority to decide arbitrability conclusive in finding
a clear and unmistakable intent to arbitrate. As with USW’s argument, this
analysis flips the burden of proof on its head, requiring the objecting party to
have made some affirmative showing that it does not wish to be bound—which
is the natural state absent an arbitration agreement—rather than requiring
clear and unmistakable proof of an affirmative agreement to arbitrate. As the
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Court stated in First Options, “given the principle that a party can be forced to
arbitrate only those issues it specifically has agreed to submit to arbitration, one
can understand why courts might hesitate to interpret silence or ambiguity on
the ‘who should decide arbitrability’ point as giving the arbitrators that power.”
514 U.S. at 945. Further, allowing the absence of an objection to constitute
“clear and unmistakable” agreement risks undermining the arbitration system,
as “[t]he willingness of parties to enter into agreements that provide for
arbitration of specified disputes would be ‘drastically reduced[]’ . . . if a labor
arbitrator had the ‘power to determine his own jurisdiction.’” AT&T Techs., Inc.
v. Comm. Workers of Am., 475 U.S. 643, 651 (1986).
Conoco consistently objected to the jurisdiction of the arbitrator to
arbitrate Buller’s discharge, going so far as to object to its power over “anything
more than just what the Contract says” and “anything else” besides the chain of
custody. USW must bear the burden of demonstrating Conoco’s “clear and
unmistakable” intent to be bound by the arbitrator’s decision on arbitrability.
Because silence, ambiguity, and merely arguing the arbitrability issue to the
arbitrator are insufficient to meet this burden, we affirm the district court’s
judgment that Conoco did not clearly and unmistakably agree to arbitrate
arbitrability.
II. Did the district court err in determining that Buller’s discharge
was not arbitrable under the arbitration agreement?
Having found that the parties vested power to decide arbitrability in the
courts, the district court then had to determine whether the dispute was
arbitrable under the CBA. It “vacate[d] the arbitration and the result of the
arbitration” and granted summary judgment in favor of Conoco.
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USW has failed to challenge the district court’s determination that the
dispute was not arbitrable on appeal. Rather than argue that the district court’s
interpretation of the arbitrability agreement was in error, USW argues that the
district court failed to defer to the arbitrator’s decision on arbitrability.1 But
Conoco did not agree to arbitrate arbitrability, which places the question of
“whether the dispute is arbitrable” solely in the hands of the district court. The
district court owed no deference to the arbitrator in answering that question,
and USW does not challenge the merits of the district court’s de novo review of
that question. And although Conoco dedicated the entire opening section of its
response brief to a defense of the district court’s de novo interpretation of the
arbitration agreement, USW again failed to address that argument in its reply,
relying again on the deference allegedly owed to the arbitrator.
Because USW does not cite the district court’s interpretation of the
arbitration agreement as being in error on appeal, and has not briefed how the
district court’s interpretation itself—rather than its lack of deference—was in
error, these issues are deemed abandoned. Hobbs v. Blackburn, 752 F.2d 1079,
1083 (5th Cir. 1985) (“[T]hese matters have not been cited as error on appeal and
have not been briefed. In accordance with a long-standing rule in this circuit,
1
See, e.g., USW Br. 20 (“the District Court entirely refused to consider the arbitrator’s
soundly-supported conclusion that the grievance was both arbitrable and meritorious.”)
(emphases added); id. at 45 (“As such, the arbitrator’s decision in this case must be enforced.”);
id. at 45-48 (discussing Arbitrator Bankston’s reasoning and stating “Even if the Court is
convinced that Arbitrator Bankston committed ‘serious error’ when he determined that the
arbitration clause governed the management rights clause, it cannot vacate his decision”); id.
at 48-51 (collecting cases where courts deferred to arbitrator’s determination of arbitrability,
as “[the employer] and the [u]nion bargained for the arbitrator’s interpretation of the
Agreement, not ours”); id. at 52 (“Because it cannot be said that this decision did not involve
construction of the contract, this Court must reverse the District Court’s decision and enforce
the arbitrator’s award.”).
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these issues are deemed abandoned.”). We affirm the district court’s
determination that Buller’s discharge was not arbitrable under the CBA and its
decision to vacate the arbitration award.
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
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