Kavanaugh on Arbitration

By Russ Bleemer, Sara Higgins & George Somi

President Trump’s nominee to the U.S. Supreme Court, Brett Kavanaugh, has worked on a healthy dose of arbitration cases during his tenure on the federal appeals court following his confirmation, after a three-year Senate battle, in 2006. In this unusually lengthy post, presented in installments this week, CPR has taken a look at 21 of these cases. 

Overview

Kavanaugh’s arbitration decisions mostly adhere to the portrait of the nominee recently presented by both his supporters and detractors—that of a deeply conservative justice who leans hard toward business arguments and away from employees’ interests, and harbors a suspicion of government bureaucracy indicated most prominently by his disdain for federal agency law interpretations. See, e.g., Elliott Ash and Daniel L. Chen, “Kavanaugh is radically conservative. Here’s the data to prove it.” Washington Post (July 10)(available at https://wapo.st/2mdYxrf); Jess Bravin and Brent Kendall, “Who Is Brett Kavanaugh?” Wall Street Journal (July 9)(available at https://on.wsj.com/2NGECOf).

But, characteristic of judiciary views of ADR, Kavanaugh’s work in arbitration cases is less predictable on which party gets his backing, because he tends to stick to a narrow statutory interpretation.  For the Federal Arbitration Act cases, he attributes the stance to reflecting Congress’s preference for the practice. In a case involving another 1940’s labor statute, Kavanaugh joined a panel backing union claims in arbitration, reinstating an award against a big employer.

The arbitration-related decisions below are dominated by labor cases, a function of Kavanaugh’s place on the District of Columbia Circuit Court of Appeals, the federal appellate court which is a frequent site for appeals of National Labor Relations Board cases.

Kavanaugh’s views in those cases have received widespread praise from his conservative backers, and have inspired concerns about the future vitality of unions from the oppositions. Jeff Stein, “3 Ways Trump’s Supreme Court pick could transform U.S. labor law,” Washington Post (July 10)(available at https://wapo.st/2LaIBRN).

Kavanaugh’s views of the law on the relationship between management and labor surely will be a flashpoint during his confirmation hearings. See, e.g., Erin Mulvaney, “Brett Kavanaugh ‘Looks for Ways to Rule for Employers’” Nat’l Law Journal (July 12)(available at https://bit.ly/2Ld4qA8).

One of those cases in particular has fired up labor organizations, who looked beyond the ADR implications and cited an erosion of National Labor Relations Act protections in Kavanaugh’s decision. The case, Verizon New England Inc. v. Nat’l Labor Relations Bd., has been cited as emblematic of the nominee’s anti-worker stance. One major union pointed to the arbitration case as soon as Kavanaugh was nominated, calling on the Senate to vote against the nomination. More below.

Kavanaugh’s arbitration views, if confirmed, will emerge early in his tenure. The U.S. Supreme Court already has scheduled three arbitration cases for the 2018-2019 term scheduled to begin Oct. 1. Lewis Tan, “Ready To Reverse? Supreme Court Will Revisit Class Arbitration,” 36 Alternatives 98 (July/August 2018)(available at https://bit.ly/2JnrFWf).

The following are highlights of cases in which Circuit Judge Kavanaugh participated that involve arbitration based on searches of the D.C. Circuit Court of Appeals website and commercial databases. The first three are authored by the nominee, and the remainder are cases in which he was a panel member. The final entry reviews a brief on a regulatory pricing issue that emanated from arbitrations on which Kavanaugh participated as part of a big legal team in a Fourth U.S. Circuit Court of Appeals case.

  1. Verizon New England Inc. v. Nat’l Labor Relations Bd., 826 F.3d 480 (D.C. Cir. 2016) (available at https://bit.ly/2NKd8Yn).

Kavanaugh began the opinion by setting out the parameters of labor arbitration agreements in a simple-to-understand fashion, stating that unions may collectively bargain to waive certain National Labor Relations Act rights, and agree to arbitration.  He noted that the National Labor Relations Board may intervene by reviewing a decision where the loser says it has been deprived of an NLRA right.

“But consistent with the national labor policy favoring arbitration,” Kavanaugh’s first paragraph concluded, “the Board reviews the arbitration decisions under a highly deferential standard.  . . .”

And, consistent with the conservative justice’s suspicion of the reach of administrative agencies’ powers, the opinion restored an arbitrator’s award in favor of the telecommunications company.  The award had been confirmed by an administrative law judge, but overturned by the National Labor Relations Board.

The opinion is controversial because the union had agreed to bar its members from picketing, and was taken to arbitration by the company.  The union lost because its members put signs in their car windows during a dispute.

Rather than focusing on fundamental NLRA rights, Kavanaugh stuck to arbitration procedure in reversing the NLRB—noting the appellate panel’s review is for reasonableness, not de novo—and adopted a stance in which the union had agreed to the picketing restriction.

He wrote that the NLRB violated its own “highly deferential standard” for reviewing an arbitration decision, known as the Spielberg-Olin standard, when it issued its decision.  Olin Corp., 268 N.L.R.B. 573, 574 (1984); Spielberg Manufacturing Co., 112 N.L.R.B. 1080, 1082 (1955).

The NLRB “misapplied its highly deferential standard for reviewing arbitration decisions,” wrote Kavanaugh. “Under that standard, the Board should have upheld the arbitration decision in this case. The Board acted unreasonably by overturning the arbitration decision.”

He added later in the opinion, “All agree that the National Labor Relations Act allows a union to waive its members’ Section 7 right to display pro-union signs in vehicles parked on company property.” Kavanaugh supported a limited inquiry by the panel into the arbitrator’s decision, but says the award should be restored because it “was not a ‘palpably wrong’ interpretation of the collective bargaining agreement.”

Fellow D.C. Circuit panelists concurred in the result but questioned the appropriate NLRB review standards of the arbitration, and the Kavanaugh’s deferral standard toward the NLRB decision.

The case was cited by the Communications Workers of America on Monday in its announcement asking senators to oppose Kavanaugh’s nomination. See https://bit.ly/2uieX6L.

2. Nat’l Postal Mail Handlers Union v. Am. Postal Workers Union, 589 F.3d 437 (D.C. Cir. 2009) (available at https://bit.ly/2zqyEOB).

In an arbitration case between two unions at odds over their respective division of mail-handling duties, Kavanaugh, writing for a unanimous appellate panel, noted that the arbitrator “probably erred as a matter of contract interpretation,” but backed a federal district court ruling upholding the arbitration award.

He wrote, “[I]n light of the deference courts must afford to a labor arbitrator’s contract interpretation—including an arbitrator’s decision on arbitrability where, as here, the parties agree to present that issue to the arbitrator—we agree with the District Court that we must uphold the arbitrator’s decision in this case.”

3. U.S. Dep’t of the Navy v. Fed. Labor Relations Auth., 665 F.3d 1339 (D.C. Cir. 2012) (available at https://bit.ly/2NaiBpX).

Writing for the panel, Kavanaugh overturned an arbitral decision finding that the Navy had a duty to bargain with unions representing civilian employees before removing free bottled water provided to workers at a Newport, R.I., facility, after the Navy determined that water available from water fountains was no longer unsafe.

In 2005, the Navy had issued an email informing base personnel that previously contaminated drinking water was now safe, and that federal appropriations law precluded the Navy from providing bottled water given that safe and drinkable tap water was available.

Civilian employees at the base are represented by two unions: (i) the National Association of Government Employees, Local R1–134, known as NAGE, and (ii) the Federal Union of Scientists and Engineers, Local R1–144, known as FUSE. NAGE negotiated a collective bargaining agreement with the Navy; FUSE had a grievance procedure agreement with the Navy, but no collective bargaining agreement.

These unions filed grievances under their negotiated dispute resolution procedures, arguing that the Navy had a duty to bargain with them before removing the bottled water. When the grievances were not resolved through negotiation, the unions sought binding arbitration.

The arbitrator found that any change regarding the bottled water “required conferring and negotiating between the parties bound by the Collective Bargaining Agreement(s).”

“The arbitrator declined to consider the Navy’s argument that federal appropriations law barred it from providing bottled water,” according to the Kavanaugh opinion, adding, “The arbitrator said that looking to federal appropriations law ‘would be looking outside of the Collective Bargaining Agreement between the parties.’”

The Navy filed exceptions to the arbitration award with the Federal Labor Relations Authority, arguing that (1) the arbitrator refused to consider its argument that federal appropriations law precluded it from providing bottled water, and (2) the arbitrator’s findings drew no distinction between NAGE and FUSE, even though only NAGE had a collective bargaining agreement with the Navy.

The Federal Labor Relations Authority declined the Navy’s exceptions and affirmed the arbitrator’s conclusion that the Navy was obligated to bargain before removing the bottled water. The Navy petitioned for review in the D.C. Circuit.

Writing for the majority, Kavanaugh vacated the arbitrator’s decision on the grounds that federal appropriations law barred Navy from providing free bottled water to employees when safe drinkable tap water was available. After finding that the statute governing federal labor relations explicitly relieves agencies of the duty to bargain over any matter that would be “inconsistent with any Federal law or any Government-wide rule or regulation” 5 U.S.C. § 7117(a)(1), the Court turned to the issue of whether providing bottled water under these circumstances would violate federal appropriations law.  The panel concluded that it did.

Applying the “necessary expense” doctrine in the construction of appropriations laws, Kavanaugh wrote “[p]roviding bottled water when safe and drinkable tap water is available would serve no purpose other than accommodating employees’ personal tastes—a purpose that generally cannot justify the expenditure of appropriated funds.”

Kavanaugh vacated the arbitral award and remanded to the Federal Labor Relations Authority to determine the more fundamental question of whether the tap water is in fact safe to drink. “If the water at the Newport facilities is safe to drink,” wrote Kavanaugh, “then the Authority must rule for the Navy.” 

4. Kelleher v. Dream Catcher L.L.C., 2018 U.S. App. LEXIS 9831, *1.

This per curiam D.C. Circuit panel decision affirmed a lower court ruling that the petitioner contractor had forfeited its contract right to compel arbitration by delaying its request for eight months after a complaint had been filed. The petitioner had, instead, filed an answer, rather than a pre-answer motion to compel. The district court had found that the delay causes substantial prejudice to the respondent and the court.

The appeals panel, in the unpublished opinion, backed the district court and refused to stay the matter or compel arbitration.

5. Leidos Inc. v. Hellenic Republic, 881 F.3d 213 (Feb. 2, 2018)

Kavanaugh joined a unanimous circuit panel in denying a request to modify a large arbitration award related to services provided by the petitioner to Greece during the 2004 Olympics by allowing a currency conversion, to dollars from Euros, where the Euro had been devalued.  The long history in the case contemplated payment in Euros.

6. Nat’l R.R. Passenger Corp. v. Fraternal Order of Police, Lodge 189 Labor Comm., 855 F.3d 335 (D.C. Cir. 2017)(Available at https://bit.ly/2N4SctW).

Kavanaugh was in the majority on a panel that affirmed, 2-1, a district court’s decision to vacate an arbitration award in favor of a police officer on the grounds that it was contrary to law.  He did not write the decision.

In the case, a union–the Fraternal Order of Police, Lodge 189–brought arbitration on an employee’s behalf against Amtrak. The employee was an Amtrak Police Department in the Canine Unit officer who was fired after Amtrak’s Inspector General found that the officer had lied about co-owning a home in Maryland with her supervisor.

After the officer unsuccessfully appealed the decision within Amtrak, she sought arbitration pursuant to the collective bargaining agreement’s grievance procedure. On her behalf, the Fraternal Order of Police claimed that she had been fired without just cause. Without reaching that claim, the arbitrator determined that the officer should be reinstated because the Inspector General’s investigator, when interviewing her, had not fully complied with the contract’s Rule 50 procedures.

The rule provides procedures for investigating officers—the “Police Officers Bill of Rights”– incorporated into the collective bargaining agreement.

The arbitrator ruled that the National Railroad Passenger Corp., better known as Amtrak, must reinstate, with backpay and lost seniority, the fired employee.

Pursuant to the Railway Labor Act, Amtrak brought an action in district court, seeking an order setting aside the arbitrator’s award. The district court, relying on the Inspector General Act of 1978, 5 U.S.C. app. 3, §§ 1-13, and U.S. Department of Homeland Security v. FLRA (DHS), 751 F.3d 665, 672 (D.C. Cir. 2014), agreed with the railroad, vacating the arbitrator’s award to the officer because the Amtrak Inspector General could not legally be governed by Rule 50 of the contract. Nat’l R.R. Passenger Corp., 142 F. Supp. 3d at 90.

The appellate panel decision cited limited grounds on which a court may set aside an arbitration award, specifically where a contractual provision is contrary to “law or public policy.” United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 42 (1987).

The D.C. Circuit panel agreed with the district court’s finding that the arbitrator had improperly applied Rule 50 of the Collective Bargaining Agreement to the Amtrak Inspector General.

The opinion relied on U.S. Department of Homeland Security v. FLRA, 751 F.3d 665, 672 (D.C. Cir. 2014(“DHS”)), which held that under the Inspector General Act of 1978, “public sector unions and agencies can neither add to nor subtract from the OIG’s investigatory authority through collective bargaining.” 751 F.3d at 671.

7. Newco Ltd. v. Gov’t of Belize, 650 F. App’x 14 (D.C. Cir. 2016)(unpublished), cert. denied, 137 S. Ct. 619 (2017) (available at https://bit.ly/2mkxTxj).

Kavanaugh once again joined a panel decision affirming a district court’s order to enforce an international arbitral award.

The dispute between Newco Limited and the Government of Belize over an agreement to develop the country’s international airport was submitted to arbitration. A Miami arbitral tribunal issued an award in favor of Newco for $4.3 million. Belize agreed to pay the award on the condition that payment be made in Belize dollars rather than in U.S. dollars as required by the agreement, and that the parties first subtract unpaid taxes owed by Newco to Belize before paying the award.

Newco brought suit to enforce the award in the D.C. District Court. Belize brought its own suit in the Belize Supreme Court. Belize obtained an anti-suit injunction against Newco from the Belize court, while Newco’s federal court suit was stayed as Newco litigated in Belize.

The Belize Supreme Court ultimately agreed with Belize that the nation could subtract unpaid taxes and pay the remainder of the award in Belize dollars. But Newco refused to agree to the conditions and renewed its effort to enforce the arbitral award in the D.C. federal district court. Belize moved to dismiss the suit on a variety of grounds, including international comity, public policy, and forum non conveniens. The District Court rejected Belize’s arguments and enforced the award. Newco Ltd. v. Belize, No. 08-2010, 2015 WL 9810457 (D.D.C. Aug. 7, 2015).

The D.C. Circuit Court opinion, joined by Kavanaugh, affirmed this decision. The panel first rejected Belize’s request that the award not be enforced on the basis of international comity, finding that it failed to provide support for its assertion that the doctrine of international comity is a “’rule[] of procedure of the territory’ where the enforcement action is brought”—that is, the United States.

The panel noted that the allegations must be one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the New York Convention.

Belize also alleged that the U.S. federal court should have refused to enforce the arbitral award “based on an alleged public policy interest in international comity.” The opinion noted that under the New York Convention, courts may decline to enforce an arbitral award if “enforcement of the award would be contrary to the public policy of that country.” New York Convention art. V(2)(b).

The opinion added that courts should rely on the public policy exception only “in clear-cut cases” where “enforcement would violate the forum state’s most basic notions of morality and justice.” Termorio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 938 (D.C. Cir. 2007) (citations omitted). In this case, the panel determined that Belize did not show that enforcement “would violate the most basic U.S. notions of morality and justice.”

Finally, the appellate court found Belize’s contention that the district court should have dismissed the enforcement action on forum non conveniens grounds squarely foreclosed by precedent. See TMR Energy Ltd. v. State Property Fund of Ukraine, 411 F.3d 296 (D.C. Cir. 2005)(forum non conveniens does not apply to U.S. actions to enforce arbitral awards against foreign nations).

8BCB Holdings Ltd. v. Gov’t of Belize, 650 Fed. Appx. 17 (D.C. Cir. 2016)(available at https://bit.ly/2umHHuV).

In another 2016 unpublished opinion concerning a disputed Belize arbitration, D.C. Circuit Judge Kavanaugh was on a panel affirming the D.C. District Court’s enforcement of an international arbitral award, this time made in the U.K.

In 2005, BCB Holdings Limited and Belize Bank Limited—two Belize banking companies—signed an agreement with the nation’s prime minister addressing matters like their tax treatment.

In 2008, the firms invoked the agreement’s arbitration clause when the government repudiated the agreement. In 2009, an arbitral tribunal in London ruled against Belize, ordering that the country pay the banking companies about $20.5 million, plus interest and costs. Belize’s high court prevented the award’s enforcement, holding that it contravened the country’s separation-of-powers system.

BCB Holdings and Belize Bank sought to confirm the foreign arbitral award under the Federal Arbitration Act and New York Convention in the U.S. District Court for the District of Columbia. They also sought recognition and enforcement of the foreign money judgment pursuant to the District of Columbia Foreign Money Judgments Recognition Act and to covert the award and its associated costs and interest to U.S. dollars. The District Court enforced the award.

On an appeal by the Belize government, the D.C. Circuit affirmed the federal district court’s ruling. The court held that under the FAA, the doctrine of international comity was not a “rule of procedure” and, therefore, it did not constitute a basis for denying the arbitral award’s enforcement.

Second, in response to Belize’s contention that there was a corrupt bargain between the former Belize prime minister and the two companies, the panel held that Belize had not demonstrated that enforcement “would violate the most basic U.S. notions of morality and justice.” The court reasoned that the arbitral tribunal didn’t find any corruption and that Belize’s high court never contemplated corruption when it refused to enforce the award.

Finally, the court held that while parties are time-barred to enforce arbitral awards within three years, 9 U.S.C. § 207, “the District Court equitably tolled the statute of limitations so that their claims were not time-barred.” The two companies diligently pursued their rights to the arbitral award in the face of a 2010 Belize criminal statute that imposed imprisonment and fines on those who violated an injunction by the country’s highest court—violations which included pursuing enforcement of an arbitration against Belize. Once that statute was deemed unconstitutional in 2014, BCB Holdings and Belize Bank filed the enforcement action in the U.S. district court within six months.

9. GSS Grp. Ltd. v. Nat’l Port Auth. of Liberia, 822 F.3d 598 (D.C. Cir. 2016)(available at https://bit.ly/2L3c7fe).

D.C. Circuit Judge Kavanaugh was on a panel affirming the district court’s denial of motion to enforce an international arbitral award, but did not write the opinion.

The D.C. Circuit agreed with a Washington, D.C., federal district court finding that issue preclusion barred relitigating personal jurisdiction over the Port Authority, and that GSS failed to demonstrate that the government Liberia was liable for the Port Authority’s alleged contract breach.

Following the end of a second civil war in Liberia in 2003, the Liberian Port Authority, a wholly Liberian-owned corporation that manages, operates and maintains all Liberian ports, awarded GSS a multi-million dollar contract to build a container park at the port in the nation’s capital, Monrovia. GSS is a British Virgin Islands corporation based in Israel.

Although Liberia’s Interim Public Procurement Policy and Procedures mandated that the Port Authority award such contracts through “open competitive bidding,” the Port Authority did not do so. As a result, in 2005, the Liberian Contract and Monopolies Commission informed the Port Authority that the GSS contract was invalid and reminded it that all contracts must result from competitive bidding.

The Port Authority subsequently petitioned the commission for a single-source exemption, which allows a Liberian entity to dispense with competitive bidding if, “there is an urgent need” for the contract and “engaging in bid proceedings . . . is impractical due to unforeseeable circumstances.” The commission granted the exemption on Aug. 12, 2005, and the parties re-negotiated the contract 10 days later.

The contract alarmed the International Contact Group on Liberia, a multinational advisory board including representatives of the United States, the United Nations, the European Union, the Economic Community of West African States and the World Bank. In response to concerns over the contract’s validity and monetary value, the Port Authority and GSS amended the contract again.

Nevertheless, on Dec. 30, 2005, the National Transitional Government’s chairman directed the Port Authority to cancel the GSS contract. A Feb. 16, 2006, letter from the Port Authority notified GSS that the single-source exemption to competitive bidding was mistakenly granted, and therefore the Port Authority considered the contract “null and void ab initio.”

On March 15, 2006, GSS invoked the contract’s arbitration clause, which provided that disputes arising under the agreement were to be arbitrated in London and in accordance with the laws of England and Wales, against the Port Authority, but not against Liberia. “Meanwhile,” the D.C. Circuit opinion notes, “a separate Liberian governmental organization—the Liberian Public Procurement and Concession Commission —sought a Liberian-court declaration that the contract, including the arbitration provision, was invalid.”

Because of the Liberian judicial proceedings, the Port Authority refused to participate in the London arbitration; GSS appointed the sole arbitrator. On Feb. 8, 2008, the Liberian court held that the contract was unenforceable.

But one month later, the arbitrator determined that he had jurisdiction. In June 2008, he concluded that the Port Authority was liable for the cancellation. In May 2009, the arbitrator awarded GSS more than $44.3 million.

GSS filed a June 2009 petition in the D.C. federal district court to confirm the London arbitral award. The petition was dismissed for lack of personal jurisdiction. GSS appealed and the D.C. Court of Appeals affirmed.

In March 2012, GSS filed a second district court to confirm the arbitral award, naming Liberia as the sole respondent, and amending three weeks later to add the Port Authority.

GSS’s second petition claimed that the Port Authority was Liberia’s agent and, therefore, Liberia was liable for the big London award. “Because Liberia, as a sovereign, may not assert a personal-jurisdiction defense,” the D.C. Circuit noted, “GSS believed that its second petition cleared the hurdle that blocked its first.”

The district court disagreed and denied GSS’s motion to enforce the award because, it stated, that GSS failed to prove that the Port Authority acted as Liberian government agent. GSS appealed and the D.C. Circuit panel, joined by Circuit Judge Kavanaugh, affirmed, refusing to enforce the arbitral award on the basis of issue preclusion, lack of subject-matter jurisdiction, and a failure to demonstrate an agency relationship between Liberia and the Port Authority.

10. Cont’l Transfert Technique, Ltd. v. Fed. Gov’t of Nigeria, 603 Fed. Appx. 1, (D.C. Cir. 2015)(unpublished).

D.C. Circuit Judge Kavanaugh was on a panel affirming the District Court’s enforcement of an international arbitral award, but he did not write the unpublished opinion.

In 1999, Continental Transfert Technique Ltd., a Nigerian corporation, initiated arbitration against Nigeria’s Ministry of the Interior in a dispute relating to the creation of a computerized residence permit and alien card system.

In 2008, a London arbitration awarded Continental ₦29.6 billion in Nigerian naira in damages—in today’s dollars, more than $82 million—along with $247,500 in legal fees and expenses, and more than £253,000 in arbitral costs.

Continental sought enforcement under the District of Columbia Uniform Foreign Money Judgments Recognition Act at the U.S. District Court for the District of Columbia.

The U.S. federal court confirmed the arbitral award under the New York Convention pursuant to Federal Arbitration Act, recognized the arbitral judgment under the D.C. Recognition Act, converted the award into U.S. dollars, and awarded Continental pre- and post-judgment interest. Nigeria appealed to the D.C. Circuit, arguing that the U.K. court’s order was not a “judgment” under the D.C. Recognition Act and that the U.K. award was obtained fraudulently because Continental had not informed the London court ordering enforcement about a Nigerian court’s restraining order.

The D.C. Circuit, relying on Church of Scientology of California v. United States, 506 U.S. 9, 12 (1992), held that it had no authority to decide legal questions if its judgments cannot provide redress. Since Nigeria had not presented any challenge to the arbitral award’s confirmation under the New York Convention, the court had no appellate jurisdiction to hear Nigeria’s challenges regarding the District Court’s recognition of the U.K. judgment under the D.C. Recognition Act.

Nigeria’s remaining challenges, the D.C. Circuit held, were without merit. For instance, the court, relying on Rule 54(c) of the Federal Rules of Civil Procedure, held that conversion of arbitral awards from a foreign currency into U.S. dollars was warranted even though such relief was not explicitly requested by Continental in its complaint.

11. Nat’l Treasury Employees Union v. Fed. Labor Relations Auth., 754 F.3d 1031 (D.C. Cir. 2014)(available at https://bit.ly/2KOB6Up).

The union petitioned the court for review of the respondent’s determination that overruled an arbitrator’s finding of unfair labor practices against the employer, the Internal Revenue Service, in a dispute over workloads.

In a unanimous panel decision that Kavanaugh joined, the D.C. Circuit held that the Federal Labor Relations Authority correctly determined “that the IRS did not make any unilateral change” in the work rules, a holding “consistent with the Arbitrator’s factual finding that the IRS ‘divide[d] up an ever-growing pool of cases among virtually the same number of existing Case Advocates without making other reasonable adjustments.’” [Citation to the arbitration decision omitted.]

That, the opinion said, “was the critical finding,” under authority precedent, and required no notice to the union or opportunity to bargain.  “The IRS responded to outside factors,” according to the D.C. Circuit, “but initiated no change of its own to its policies, practices, or procedures.”  It denied review of the petition and didn’t reinstate the arbitrator’s unfair practices determination.

12. Oakey v. U.S. Airways Pilots Disability Income Plan, 723 F.3d 227 (D.C. Cir. 2013) (available at https://bit.ly/2L3cs1u).

This is another opinion in which Kavanaugh joined a panel decision but did not write it.  The decision affirms a federal district court’s dismissal of a claim arising under the Employee Retirement Income Security Act for lack of jurisdiction because the claim is grounded in the application and interpretation of a collective bargaining agreement, and would need to be arbitrated if it is unable to be resolved informally.

The appeals panel held that the former pilot Oakey’s dispute fell under the Railway Labor Act, which has been applied to disputes between air carriers and their employees since 1936 and includes a mandatory arbitration provision, depriving the district court of jurisdiction.

Petitioner Oakley submitted a claim for disability benefits under a company plan to the retirement board, which approved the claim effective Jan. 30, 2002. In January 2003, US Airways notified Oakey he was to be “furloughed” on Feb. 4, 2003, as part of a fleet reduction. In March 2003, the plan administrator advised Oakey that, based on his furlough date, his disability benefits had terminated on Feb. 4, 2003.

In November 2003, Oakey filed an action under ERISA against US Airways and the plan for benefits allegedly owed to him. Oakey’s complaint asserts that that the 1997 Amendment was ineffective because it was not signed by an Air Line Pilots Association representative, and that as a result, Oakey’s disability coverage was governed by a 1975 Disability Plan, which didn‘t terminate benefits upon an employee’s furlough.

The district court granted the plan’s motion–on the ground that the RLA’s mandatory arbitration provision deprived the district court of jurisdiction–and dismissed the action in March 2012. Oakey v. U.S. Airways Pilots Disability Income Plan, 839 F. Supp. 2d 225 (D.D.C. 2012).

Upon de novo review of the district court’s grant of a motion to dismiss for lack of subject matter jurisdiction, the D.C. Circuit appellate panel, joined by Judge Kavanaugh, affirmed.

The appeals panel cited earlier opinions in which it addressed the interplay between the RLA and ERISA and “concluded that the latter (and later-enacted) statute, notwithstanding its broad preemption of state law remedies, has no preemptive effect on other federal enactments—including the RLA.” Air Line Pilots Ass’n Int’l v. Northwest Airlines Inc., 627 F.2d 272 (D.C. Cir. 1980)(emphasis is in the opinion).

Given the “strong, comprehensive, express statement that ERISA is not to be read as displacing by implication any pre-existing federal legislation,” the Northwest court concluded that ERISA has no effect on RLA Section 204’s “mandate[ that] the carrier or the union [] refer disputes over the application or interpretation of bargaining agreements covering [rates of pay, rules, or working conditions’ terms including employee pensions], if they cannot be resolved informally, to arbitration.” Id. at 275-76 (quoting 45 U.S.C. § 184)(emphasis in the opinion).

Oakey argued that even if Northwest’s preclusion rule survives, it does not apply to his case because, he contended, that for the rule to apply (1) the claim must involve interpretation or construction of the collective bargaining agreement’s terms, and (2) the interpretative issue must be dispositive or conclusive of the claim.

The Court rejected this argument, holding that Oakey’s dispute, over which version of the plan agreement controls, is plainly such a dispute: regardless of the version of the plan agreement is controlling, its interpretation or application governs the outcome.

13. Belize Soc. Dev. Ltd. v. Gov’t of Belize, 668 F.3d 724 (D.C. Cir. 2012)(available at https://bit.ly/2ufkwTa).

Kavanaugh was in the minority in a 2-1 panel decision backing a writ of mandamus to end a stay of enforcement for an arbitration award.

In his dissent, Kavanaugh wrote that he would dismiss the appeal for lack of appellate jurisdiction and deny the petition for a writ of mandamus.

The case involved a petition to confirm and enforce a London arbitration award against the Government of Belize. The D.C. Circuit panel reversed a federal district court order to stay the proceeding pending the outcome of related litigation in Belize.

Following the respondent’s request, the appellate court opted to treat the appeal as an application for a writ of mandamus. The circuit court concluded that the stay order exceeded the district court’s proper exercise of authority and remanded the case for further proceedings.

In his dissent, Kavanaugh wrote that a mandamus order by the court was an unnecessary step that should be reserved for extraordinary situations. “Even if we think the District Court erred under the Federal Arbitration Act by entering a temporary stay,” he wrote, “its error was hardly ‘extraordinary.’ Mandamus for this case is akin to using a chainsaw to carve your holiday turkey. Indeed, if you ask me which is the more extraordinary–the District Court’s temporary stay or this Court’s invocation of mandamus jurisdiction under these circumstances–I would say the latter.”

14. New York & Presbyterian Hosp. v. N.L.R.B., 649 F.3d 723 (D.C. Cir. 2011) (available at https://bit.ly/2uBhNDd).

 A unanimous D.C. Circuit panel in which Kavanaugh joined rejected arguments by a New York hospital that an NLRB review of an arbitration agreement, backing a finding of a National Labor Relations Act violation, was erroneous. Kavanaugh was not the author of the opinion which supported a determination in favor of a union.

The case provided an interesting look at pre-ADR discovery.

The panel unanimously rejected the New York & Presbyterian Hospital’s petition for review of a decision and order by the NLRB, which found the Hospital in violation of National Labor Relations Act Section 8(a)(5) (at 29 U.S.C. § 158(a)(5)), for failing to produce information requested by the labor union with which the hospital has a collective bargaining agreement, the New York State Nurses Association.

The petition arose from an alleged violation of the collective bargaining agreement. In 2004, the union filed a grievance alleging that the hospital hired nurse practitioners in a nonunion capacity to do bargaining unit work. The employer denied the grievance on May 18, 2005, explaining that the nurse practitioners were “not Hospital employees” and thus did “not fall within the Hospital’s span of control nor [were] they governed by the Hospital’s Policies and Procedures.

NYSNA subsequently filed an unfair labor practice charge with the NLRB against both the Hospital and Columbia University. (The Hospital is affiliated with Columbia University School of Medicine, the opinion notes, adding that nearly all of its physicians are members of Columbia’s faculty and employed directly by Columbia.)  The charged alleged that they were “a single employer or alter egos of one another” responsible for “restrain[ing] and coerc[ing] nurse practitioners at [the Hospital] in exercising their Section 7 rights by employing nurse practitioners to work at [the Hospital] under terms and conditions of employment different from those specified in the collective bargaining agreement . . . covering nurse practitioners who work at the hospital.”

Acting pursuant to board policy, the NLRB’s regional director deferred consideration of the union’s unfair labor practice charge to the arbitration over NYSNA’s grievance. Columbia then informed the union and the hospital that, as a nonsignatory to the collective bargaining agreement, it did not intend to participate in the arbitration.

In preparing for the arbitration, the union made a number of information requests concerning the employment of nurse practitioners who were not designated as union-represented employees working on the hospital premises, but the hospital refused to provide the documentation.  And the arbitrator apparently failed to decide whether the hospital was obligated to produce the requested information.

An administrative law judge subsequently determined that the hospital was obligated to turn over the requested information. The hospital sought review in court, and the NLRB cross-applied for enforcement of its decision and order.

The hospital argued that union failed to demonstrate the relevance of its request; attacked the evidentiary foundation of the Board’s decision and order, and raised a number of additional arguments. But the majority, joined by Kavanaugh, rejected the Hospital’s arguments and denied its petition for review.

15. Winston & Strawn, LLP v. Doley, 384 F. App’x 1 (D.C. Cir. 2010) (unpublished decision available on Westlaw https://bit.ly/2LbfPn9).

Kavanaugh joined a panel decision that affirmed a district court order denying a motion for reconsideration of its summary judgment ruling. In the unpublished opinion, the Court rejected the contention of clients of the Winston & Strawn law firm that the district court erred in not staying the litigation proceedings to allow arbitration to go forward.

The Court held that this argument failed under the rule established in Khan v. Parsons Global Services, Ltd., 521 F.3d 421 (D.C.Cir.2008)–that a party is deemed to have waived the right to compel arbitration if it actively participated in the lawsuit.

Because at the time the client-appellants filed their motion to stay proceedings they already had filed a Federal Rule of Civil Procedure 12(b)(6) motion, the appellants already were actively participating in the suit, and the district court did not err in holding that they had waived their right to compel arbitration.

16. Verizon Washington, D.C. Inc. v. Communications Workers of Am., AFL-CIO, 571 F.3d 1296 (D.C. Cir. 2009) (available at https://bit.ly/2L3un8b).

A panel opinion in which Kavanaugh joined but didn’t write reinstated an arbitrator’s award in favor of union employees which had been overturned by a federal district court. The opinion said that the arbitrator’s award for the union and against Verizon had properly drawn its essence from the collective bargaining agreement in a case under a section of the Labor Management Relations Act of 1947 at 29 U.S.C. § 185(a).

17. Cephas v. MVM Inc., 520 F.3d 480 (D.C. Cir. 2008).

This unanimous panel decision Kavanaugh joined was about a statute of limitations issue that would allow a worker to proceed with a grievance against his employer under a collective bargaining agreement.

A federal district court rejected the filing as out-of-time under, respectively, the Labor Management Relations Act, because it “preempts a claim for breach of a CBA cast in terms of state contract law,”  and the National Labor Relations Act.

But the panel said that the lower court got the applicable limitation period wrong, and ruled it was in the District of Columbia Code. The ruling allowed the grievance by the employee—a federal court worker employed by a government contractor–to proceed, possibly to arbitration. 

18. Am. Postal Workers Union v. U.S. Postal Serv., 550 F.3d 27 (D.C. Cir. 2008)(available at https://bit.ly/2mdhomh).

In a case involving the arcane collective bargaining issue of classifying work roles in bargaining units, a unanimous panel in an opinion in which Kavanaugh joined but did not write conducted a de novo review supporting the arbitrator’s classification. The question was about the interpretation of the award, not its validity. The opinion noted the award was on the classification, not the work undertaken by the jobholder. It stated that the award had that focus, but, ultimately, the panel reversed the district court determination for a further inquiry on whether the award excluded disputed work, rather than the position, from the bargaining unit. 

19. Lessin v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 481 F.3d 813 (D.C. Cir. 2007)(available at https://bit.ly/2uclfVp).

Kavanaugh joined a panel decision affirming the District Court’s denial of petitioner’s motion to vacate an arbitral award in his favor because it didn’t approach the damages he sought, in a straightforward application of the Federal Arbitration Act.

In January 2000, the plaintiff transferred almost $5.3 million in Yahoo! Securities and a $2.1 million margin balance to his Merrill Lynch brokerage account. At Merrill Lynch he executed a Retail Account Profile stating that his investment objective was “growth” and that his risk tolerance was “aggressive.” Less than a year later, by October 2000, Lessin’s account had lost almost 100% of its value.

In February 2003, pursuant to a standard brokerage contract to arbitrate disputes before a panel of the National Association of Securities Dealers, plaintiff Lessin filed a statement of claim against Merrill Lynch and his broker for between $5 million and $10 million in compensatory damages as well as for punitive damages. The three-arbitrator NASD panel heard evidence over a six-day period. The panel found Merrill Lynch, but not the broker, liable to Lessin for nearly $33,000 in compensatory damages, and Lessin filed a motion to vacate the award in the D.C. Superior Court, which Merrill Lynch removed to the federal district court.

Reviewing the district court’s confirmation of the arbitration award for clear error as to findings of fact and de novo questions of law, the D.C. Circuit affirmed the district court’s denial of Lessin’s motion to vacate. The Court noted its limited jurisdiction to review arbitral awards under the Federal Arbitration Act, and rejected Lessin’s contention that the arbitration panel engaged in misconduct by refusing to hear pertinent and material evidence from one of his designated expert witnesses.

The panel also found no evidence on the record that the panel’s refusal to hear testimony from Lessin’s second expert deprived Lessin of a fair hearing, concluding that, given the evidence before the panel, Lessin failed to demonstrate that the award violated an explicit public policy.

20. Democratic Republic of Congo v. FG Hemisphere Assocs. LLC, 508 F.3d 1062 (D.C. Cir. 2007)(https://bit.ly/2Ji1L6p).

D.C. Circuit Judge Kavanaugh joined a panel affirming a federal district court’s denial of motions to vacate default judgments surrounding the enforcement of international arbitration awards, but he did not write the opinion.

FG Hemisphere’s predecessor-in-interest brought action in the district court against the Democratic Republic of Congo under the Foreign Sovereign Immunities Act, seeking to confirm arbitration awards it had secured against the DRC. The DRC failed to appear in court, and default judgment was entered against it in the cases September 2004 and January 2005. The district court denied the DRC’s subsequent motions to vacate the judgments. The D.C. Circuit reversed and remanded for further proceedings.

At that point, the DRC raised its objections about service of process. The lower court denied motions to vacate for faulty service.

The D.C. Circuit Court of Appeals affirmed the district court’s ruling, reasoning that the DRC had waived its right to challenge service of process pursuant to Rules 12(g) and 12(h)(1) of the Federal Rules of Civil Procedure. The DRC had participated in 13 months of post-default judgment litigation to hold off the judgment creditor’s execution against its properties before finally claiming inadequate service of process and making any mention of personal jurisdiction issues.

21. GTE South Inc. v. Morrison, 199 F.3d 733 (4th Cir. 1999)(available at https://bit.ly/2KRa8LT).

In addition to service in the White House under President George W. Bush, Kavanaugh was an attorney at Kirkland & Ellis before ascending to the D.C. Circuit. He participated as one of five Kirkland attorneys named on the brief for the appellant, GTE South Inc., in a Fourth Circuit case, GTE South, Inc. v. Morrison.  A total of 13 attorneys appeared on the brief from Kirkland, co-counsel Hunton & Williams, and the company. Kavanaugh was a team member and not the counsel of record.

At issue was the Virginia State Corporation Commission’s determination of prices in arbitration proceedings brought by new entrants into Virginia’s telephone markets. In an effort to end monopolies by local exchange carriers, Congress enacted the Telecommunications Act of 1996, which required local telephone companies that were monopolies to make available their facilities and services to would-be competitors at “just, reasonable, and nondiscriminatory” negotiated prices. If such negotiations failed, prices would be determined in arbitration before a state utility commission, such as the Virginia state corporation.

GTE, an incumbent company in this scenario, challenged the results of arbitration and filed suit against would-be competitors, Cox Fibernet Commercial Services Inc., AT&T Communications of Virginia Inc., and two MCI units, as well as the Virginia corporation’s commissioners, alleging that the state’s pricing decisions failed to meet the Telecommunications Act requirements. The district court granted summary judgment against GTE.

In its amended brief to the Fourth Circuit, the Kirkland team addressed the Supreme Court’s decision in AT&T Corp. v. Iowa Utils. Bd., 522 U.S. 366 (1999) (confirming FCC rulemaking power with respect to the Telecommunications Act) by arguing that the Federal Communication Commission’s pricing rules could not be applied retroactively.

Second, the team argued that Virginia pricing decisions violated the Telecommunications Act because the act’s plain terms required prices based on all of GTE’s costs, including the recovery of historical costs.

Third, if the rules applied retroactively to GTE, a remand to the Virginia corporation would be necessary.

Fourth, GTE argued that the court had to determine whether the FCC’s pricing methodology was at odds with the Telecommunications Act; if the court were to decide it lacked such jurisdiction, it should stay the appeal until deliberations on the substantive challenges to the rules were completed in the Eighth Circuit.

Finally, the amended brief contended that the Virginia corporation’s “Hatfield Model” pricing—a forward-looking methodology for estimating costs, differing from projections based on GTE’s actual past costs—violates the FCC’s requirements.

The brief was unsuccessful.  The Fourth Circuit affirmed the federal district court’s ruling for summary judgment against GTE, upholding arbitration agreements issued by the Virginia state corporation.  It held that the FCC’s pricing methodology and determinations were not precluded by any retroactivity principles and that the Virginia corporation appropriately relied on the best available information to set prices.

Bleemer edits Alternatives for the CPR Institute; Higgins is a student at the Northeastern University School of Law in Boston and a CPR Institute Summer 2018 intern. Somi, a student at Brooklyn Law School, also is a CPR Institute Summer 2018 intern.

One thought on “Kavanaugh on Arbitration

  1. Pingback: Kavanaugh on Mediation | CPR Speaks

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