2d Circuit Reviews Manifest Disregard of the Law Standard in Labor Arbitration

Chelsea v. N.Y. Hotel and Motel Trades Council, ____F.3d____(2d Cir. April 3, 2018), is brought to readers attention because it is a recent Second Circuit decision which, once again, demonstrates how difficult it is to vacate a labor arbitrator's decision. The court notes that there is a strong presumption that an arbitrator has not acted in manifest disregard of the law and it will uphold the decision under review so long as there is at least a slightly colorable basis. The court goes on the describe the manifest disregard standard as follows:

An arbitral decision rendered under the Labor
Management Relations Act (“LMRA”) may be vacated if the
arbitrator has exhibited a “manifest disregard of law.”
Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 208
(2d Cir. 2002) (internal quotation marks omitted).
Judicial inquiry under the “manifest disregard” standard is
“extremely limited.” Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Bobker, 808 F.2d 930, 934 (2d Cir. 1986);
see also Burns Int’l. Sec. Servs., Inc. v. Int’l Union,
United Plant Guard Workers of Am., 47 F.3d 14, 17 (2d Cir.
1995). To establish manifest disregard, Chelsea Grand must
show the arbitrator made “something beyond and different
from a mere error in the law or failure on the part of the
arbitrators to understand or apply the law.” Saxis S.S.
Co. v. Multifacs Int’l Traders, Inc., 375 F.2d 577, 582 (2d
Cir. 1967) (internal quotation marks omitted).
An arbitrator commits manifest disregard of the law
when the “governing law alleged to have been ignored by the
arbitrators [was] well defined, explicit, and clearly
applicable,” and the arbitrator “appreciate[d] the
existence of a clearly governing legal principle but
decide[d] to ignore or pay no attention to it.” Westerbeke
Corp., 304 F.3d at 209 (first alteration in original)
(quoting Merrill Lynch, 808 F.2d at 934); see also N.Y.
Tel. Co. v. Commc’ns Workers of Am. Local 1100, 256 F.3d
89, 91 (2d Cir. 2001) (per curiam). The rule ignored by
the arbitrator must be “obvious and capable of being
readily and instantly perceived by the average person
qualified to serve as an arbitrator.” Merrill Lynch, 808
F.2d at 933.

Procedural Arbitrability Questions Are For The Arbitrator To Decide

Matter of City of Yonkers v. Yonkers Firefighters, ___A.D. 3d___(2d Dep't. Aug. 9, 2017) illustrates how difficult it is to stay a labor arbitration and that questions concerning procedural arbitrability are for the Arbitrator. As the court explained:

The City's contention that arbitration was precluded because Local 628's grievance was not timely pursuant to step one of the grievance procedure is without merit. The "threshold determination of whether a condition precedent to arbitration exists and whether it has been complied with, is for the court to determine" (Matter of Village of Chester v Local 445, Intl. Bhd. of Teamsters, 118 AD3d 1012, 1013; see Matter of Incorporated Vil. of Floral Park v Floral Park Police Benevolent Assn., 131 AD3d at 1242; Matter of Town of N. Hempstead v Civil Serv. Empls. Assn., Inc., 78 AD3d 847, 848). By contrast, "[q]uestions concerning compliance with a contractual step-by-step grievance process have been recognized as matters of procedural arbitrability to be resolved by the arbitrators, particularly in the absence of a very narrow arbitration clause or a provision expressly making compliance with the time limitations a condition precedent to arbitration" (Matter of Enlarged City School Dist. of Troy [Troy Teachers Assn.], 69 NY2d 905, 907; see Matter of Triborough Bride & Tunnel Auth. [Dist. Council 37 of Am. Fedn. of State, County & Mun. Empls., AFL-CIO, 44 NY2d 967, 969; Matter of Incorporated Vil. of Floral Park v Floral Park Police Benevolent Assn., 131 AD3d at 1242; Matter of Hartsdale Fire Dist. v Greenburgh Uniform Firefighters Assn., Inc., Local 1586, IAFF, AFL-CIO, 55 AD3d 731, 732). As the CBA does not specify that timely commencement of the grievance is a condition precedent to arbitration, the issue of whether Local 628 timely initiated the grievance at step one must be resolved by the arbitrator, not the court

Pending Improper Practice Does Not Bar Related Arbitration

I bring Matter of City of Watertown and Watertown Professional Firefighters, ___A.D.3d___(4th Dept. July 7, 2017), to your attention for several reasons. First, in a relatively short opinion, the court does a nice job summarizing the standards to stay arbitration under New York law. Second, the court holds that a pending administrative case, presumably one at PERB, would not bar arbitration over a similar issue. As the court explained:

"It is well settled that, in deciding an application to stay or compel arbitration under CPLR 7503, we do not determine the merits of the grievance and instead determine only whether the subject matter of the grievance is arbitrable" (Matter of City of Syracuse [Syracuse Police Benevolent Assn., Inc.], 119 AD3d 1396, 1397; see CPLR 7501; Matter of Board of Educ. of Watertown City Sch. Dist. [Watertown Educ. Assn.], 93 NY2d 132, 142-143). "Proceeding with a two-part test, we first ask whether the parties may arbitrate the dispute by inquiring if there is any statutory, constitutional or public policy prohibition against arbitration of the grievance' . . . If no prohibition exists, we then ask whether the parties in fact agreed to arbitrate the particular dispute by examining their [CBA]. If there is a prohibition, our inquiry ends and an arbitrator cannot act" (Matter of County of Chautauqua v Civil Serv. Empls. Assn., Local 1000, AFSCME, AFL-CIO, County of Chautauqua Unit 6300, Chautauqua County Local 807, 8 NY3d 513, 519; see Syracuse Police Benevolent Assn., Inc., 119 AD3d at 1397; Matter of Mariano v Town of Orchard Park, 92 AD3d 1232, 1233).
We reject the City's contention on appeal that arbitration of respondent's grievance with respect to the City's failure to maintain minimum staffing levels is prohibited by law. Under the first prong of the arbitrability test, "the subject matter of the dispute controls the analysis" (Matter of City of New York v Uniformed Fire Officers Assn., Local 854, IAFF, AFL-CIO, 95 NY2d 273, 280). Contrary to the City's contention, a pending administrative proceeding concerning respondent's alleged improper practices does not preclude arbitration inasmuch as there is no indication that the "particular subject matter of the dispute" is not "authorized," i.e., not " lawfully fit for arbitration' " (id.).
We reject the City's further contention that the parties did not agree to arbitrate the grievance. " Our review of that question is limited to the language of the grievance and the demand for arbitration, as well as to the reasonable inferences that may be drawn therefrom' " (Matter of Wilson Cent. Sch. Dist. [Wilson Teachers' Assn.], 140 AD3d 1789, 1790; see Matter of Niagara Frontier Transp. Auth. v Niagara Frontier Transp. Auth. Superior Officers Assn., 71 AD3d 1389, 1390, lv denied 14 NY3d 712). "Where, as here, the [CBA] contains a broad arbitration clause, our determination of arbitrability is limited to whether there is a reasonable relationship between the subject matter of the dispute and the general subject matter of the CBA' "

Supremes Hold That Arbitration Agreements Must Be Treated Like Any Other Contracts

In Kindred Nursing Home v. Clark, ___U.S.___(May 15,2017), the Supreme Court, once again, treated agreements to arbitrate in a favorable fashion.
At issue was whether an individual with power of attorney, could enter into an arbitration agreement. The Kentucky Supreme Court said no, but the U.S. Supreme Court reversed, reasoning in part:

The Act’s key provision, once again, states that an arbitration agreement must ordinarily be treated as “valid, irrevocable, and enforceable.” 9 U. S. C. §2; see supra, at 4. By its terms, then, the Act cares not only about the “enforce[ment]” of arbitration agreements, but also about their initial “valid[ity]”—that is, about what it takes to enter into them. Or said otherwise: A rule selectively finding arbitration contracts invalid because improperly formed fares no better under the Act than a rule selectively refusing to enforce those agreements once properly made. 

Justice Thomas wrote an interesting dissent where he stated that he would hold that the Federal Arbitration Act does not apply in state courts.