Arbitrators in commercial civil disputes may change their minds and reverse their own final decisions without the worry of any review by federal judges, according to a recent decision by the U.S. Court of Appeals of the Fifth Circuit.
A three-judge panel ruled March 27 that the courts must give tremendous deference to arbitrators interpreting contract terms and applying the rules provided by arbitration agreements, even in cases in which judges believe the arbitrator committed “grave error.”
In a 13-page opinion written by Judge Stephen Higginson, the appellate court upheld a lower court’s decision in favor of AT&T and Southwestern Bell, which has been in a five-year-long labor dispute with one of its labor unions, the Communications Workers of America, which is part of the AFL-CIO.
“Even if the arbitrator made a mistake in reaching his conclusion, the potential for mistakes is the price of agreeing to arbitration. The arbitrator’s construction holds, however good, bad or ugly,” Judge Higginson wrote, citing prior precedent.
The CWA filed a grievance against AT&T in 2015 complaining that the Dallas-based telecom giant violated the collective bargaining agreement by requiring “premises technicians” to perform “cable-splicing activities.” The union claimed that AT&T had separate “cable-splicing technicians” employed for those functions.
The collective bargaining agreement included a mandatory arbitration clause.
Both sides presented their cases to arbitrator Samuel Nicholas Jr. in 2017.
Lawyers for the union introduced an exhibit during the arbitration proceedings showing that “fusion slicing had been specifically excluded from the list of tasks assigned to Prem Techs” in another geographic district. Union lawyers argued that the exhibit demonstrated the intent of the company and the union in their collective bargaining agreement.
The arbitrator issued his decision Jan. 18, 2018, sustaining the union’s grievance against AT&T. Nicholas wrote that the “broad ‘all work’ language” in the settlement agreement supported AT&T’s arguments, but that the “past practice” of the parties, as shown in the exhibit, showed that the company had not negotiated to formally have cable-splicing duties added to the duties of the “Prem Techs.”
The arbitrator noted, however, that he would not have ruled against AT&T except for the specific exhibit.
A few days later, lawyers for AT&T filed a motion asking the arbitrator to reconsider his decision, arguing that his reliance on the exhibit was in error because it referred to a different part of the business employing a completely different collective bargaining agreement.
On Feb. 23, 2018, Nicholas issued a new decision stating that he had “incorrectly relied” on the exhibit for his earlier decision and that he now ruled in favor of AT&T that no violation of the collective bargaining agreement occurred.
The arbitrator said that his initial decision was the result of a “technical error” and that his powers under American Arbitration Association Rule 40 gave him the authority to modify his decision.
Lawyers for the union filed a lawsuit in federal court asking the judge to enforce the initial Jan. 18 decision and to vacate the Feb. 23 ruling because the arbitrator acted beyond his legal authority to reverse himself.
AT&T petitioned the federal court to enforce the second arbitration decision.
The U.S. District Court in Austin ruled in favor of AT&T, then the union appealed to the Fifth Circuit.
“Courts are not permitted to reconsider the merits of an arbitration award,” Judge Higginson wrote. “Even if an arbitrator committed serious error, we may not reverse the arbitrator’s judgment if the decision draws its essence from the contract.
Judge Higginson, joined by judges Rhesa Hawkins Barksdale and Kyle Duncan, stated that even though the arbitrator “did not explain why his error was ‘technical’ and why it did not violate Rule 40’s prohibition against redetermining the merits of a dispute, his interpretation is entitled to deference.”
Matthew G. Holder, a San Antonio lawyer at David Van Os & Associates, is representing the Communications Workers of America. AT&T is represented by Christian Bourgeacq of Austin.