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Arbitration and labor contracts

Below, Stanford Law School student Timothy Tatarka previews Granite Rock Co. v. International Brotherhood of Teamsters (08-1214), which will be argued tomorrow, January 19. For later updates in the case, see the Granite Rock page on SCOTUSwiki.

In Granite Rock Co. v. International Brotherhood of Teamsters, the Court will consider two jurisdictional issues regarding labor-management relations.  The first question presented by the case is whether a defendant can compel arbitration in a suit for violation of a labor contract even while arguing that no contract was ever formed.  The second question is whether Section 301(a) of the Labor Management Relations Act (LMRA), which provides a federal forum “for violations of contracts between an employer and a labor organization,” creates a federal cause of action against an international union for interference in a contract between an employer and a local union when the international union was not a party to the contract.

Both issues arise out of a labor dispute between petitioner Granite Rock, a California supplier of construction materials, and Teamsters Local 287, one of the two respondents in the case.  In June 2004, Local 287 went on strike after its collective bargaining agreement expired.  On July 2, after an all-night bargaining session, Granite Rock and union negotiators reached a tentative agreement on the terms of a new contract, which included both no-strike and arbitration provisions.  The parties may also have discussed a “back-to-work” agreement that would hold harmless any unions that had engaged in strike misconduct.

The Local membership then held a meeting at which, according to Granite Rock, they ratified the contract.  The Local, however, argues that it only held an informal vote.  After Granite Rock rejected the “back-to-work” agreement, the Local continued its strike – purportedly at the behest of Rome Aloise, an alleged agent of the International, the other respondent in the case.  The strike finally ended on September 13, 2004.

Granite Rock subsequently filed suit in federal district court against Local 287, alleging that the Local had violated the no-strike provision in the July 2 contract.  The Local disputed that any contract had actually been formed and sought to submit the question to mandatory arbitration.  Granite Rock also named the International Brotherhood of Teamsters as a defendant, alleging that the International was liable for interfering with the contract between Granite Rock and Teamsters Local 287.

The district court denied the Local’s motion to submit the contract question to arbitration, and the jury later found that the contract was indeed ratified on July 2.  But the court dismissed the International as a party, interpreting Section 301(a) of the LMRA as providing a federal forum only for claims against parties who had actually signed a labor agreement.

On appeal, the Ninth Circuit affirmed in part and reversed in part.  First, it agreed with the Local that the parties were required to arbitrate their dispute in its entirety, reversing the district court.  It then affirmed the district court’s dismissal of the International from the case.  After rehearing en banc was denied, Granite Rock filed a petition for certiorari, which the Court granted on June 29.

In its brief on the merits, Granite Rock argues that federal courts, rather than arbitrators, should determine whether parties entered into a contract in which they agreed to be bound by arbitration.  According to Granite Rock, its case follows a long line of cases, including John Wiley & Sons, Inc. v. Livingston (1964), holding that federal courts must decide whether parties are bound by an arbitration clause before compelling arbitration.  It distinguishes these cases from Supreme Court precedent, such as Buckeye Check Cashing, Inc. v. Cardenga (2006), holding that an arbitrator should generally decide defenses – such as fraud – that would render an established contract void or voidable.  Because the agreement provides only that issues “aris[ing] under” it will be arbitrated, Granite Rock contends that it never agreed to arbitrate the question whether a contract had been formed in the first place.

Turning to the second question presented, Granite Rock argues that its suit against the International falls within the plain language of Section 301(a) because it is a “suit” for “violation” of a contract “between a labor organization and an employer.”  Section 301(a) provides subject matter jurisdiction, it continues, as long as the suit was (1) filed because a contract had been violated and (2) the contract in question is between an employer and a labor organization.  Moreover, its interpretation is consistent both with the Court’s determination that Section 301(a) authorizes courts to fashion a body of federal common law to enforce collective bargaining agreements and with Congress’s intent in the LMRA to promote labor stability and prevent the use of economic force to resolve issues under an existing collective bargaining agreement.

Local 258 defends the Ninth Circuit’s decision.  In the Local’s view, the Ninth Circuit properly found that Granite Rock became obligated to comply with the contract – including the arbitration agreement – when it filed a lawsuit asserting that the agreement was ratified on July 2 and was in effect from that time forward.  Unlike situations in which a party contends that it never agreed to arbitration because it never entered into a binding contract, here Granite Rock seeks to enforce the agreement’s no-strike provision precisely because it regards the contract as binding.  Moreover, Granite Rock’s attempt to have the court decide the Local’s defense to liability—that there was no valid contract on July 2—was rejected by the Supreme Court in cases like Buckeye.  The Local also separately argues that the district court erred in declining to compel arbitration because, by the time the Local made its motion to compel arbitration, the Local had ratified the tentative agreement and conceded that it was in effect.  Thus, the underlying dispute was only whether the no-strike provision was in effect during a particular period in the past.

The International argues that Section 301(a), which provides jurisdiction only for
[s]uits for violation of contracts,” does not provide a cause of action for the tort of contractual interference.  The International claims that Congress considered, but ultimately rejected, the possibility of creating a remedy for precisely the type of conduct for which Granite Rock now seeks to hold it liable.  Moreover, although parent unions can be held liable under Section 301(a) when they have both assumed obligations under the contract and violated those obligations, here Granite Rock has abandoned any claim that the International assumed any obligations.