The U.S. Court of Appeals for the D.C. Circuit invoked a rare exception in a ruling Friday that “threatens to destabilize” arbitration awards in future cases, a federal appeals judge said in her dissent.
The D.C. Circuit, divided, ruled for the National Railroad Passenger Corp.—Amtrak—in a dispute over the firing of an officer named Sarah Bryant. An arbitrator said Bryant, fired for misconduct in 2012, should receive reinstatement, with back pay and lost seniority. A Washington federal trial judge later vacated that award.
Bryant, through the Fraternal Order of Police, appealed to the D.C. Circuit. The court was presented a conflict rooted in whether an Amtrak inspector general was bound to comply with certain procedures in the officer’s collective bargaining agreement.
The arbitrator had said the internal investigation violated a part of the collective bargaining agreement that governs interrogations. Two judges on the D.C. Circuit panel, A. Raymond Randolph and Brett Kavanaugh, said Amtrak’s inspector general’s office was not bound by that rule in the agreement.
Judges don’t have much flexibility when it comes to vacating arbitration awards. Randolph and Kavanaugh turned to one rarely used exception—for “public policy.” That exception gives judges the power to strike an award that is contrary to “law or public policy.”
The public policy exception has remained an open question in the courts. It has been called by some legal experts an amorphous and unruly caveat in arbitration disputes. The exception can overturn an arbitration award on grounds that it violates a law or compels an employer to violate a law.
Friday’s ruling was the first time the D.C. Circuit has invoked the exception since the Supreme Court first described it decades ago. The high court itself has never used the exception and has opted to narrowly interpret the exception.
D.C. Circuit Judge Cornelia Pillard said in her dissent that the Amtrak case “does not come close to meriting such an extraordinary step” for a court to use the public policy exception to side with the Amtrak employee and potentially re-litigate an issue.
Pillard wrote in her dissent:
The court’s decision to vacate the arbitral award in this case contradicts decades of precedent delineating a narrow public policy exception and threatens as a practical matter to destabilize many, if not most, arbitral awards. Indeed, its impact may well reach beyond labor arbitration to commercial arbitration under the Federal Arbitration Act.
Pillard argued the court should not relieve Amtrak of its obligation to comply with its collective bargaining agreement.
Randolph, writing for the majority, said the exception should be applied in Bryant’s case because the court would essentially be enforcing an illegal contractual obligation. The inspector general should not have been restricted by any rules created in collective bargaining agreements to conduct investigations.
“An arbitration award may not be enforced if it transgresses well defined and dominant laws and legal precedents,” Randolph said in the opinion.
In her dissent, Pillard noted cases in which the Supreme Court declined to invoke the public policy exception in previous cases, including a case in which an operator of dangerous machinery was found with marijuana in a company parking lot and another in which male employees were given seniority over women in a contract agreement. She said in these cases the high court was bound to not second-guess the ways arbitrators handled the public policy issue at hand.
“As the Supreme Court envisioned it, the public policy exception would only be triggered by a public policy whose ‘explicit, well defined and dominant’ character could be ascertained by reference to laws and legal precedents,” she said.
Pillard said defining the rule in this case as ground for this exception “exceeds the scope” of the court’s review.
“Today’s decision invites litigation in every case in which a disappointed party to an arbitration case can base its own objection on some claim of error that places the awards at odds with law or public policy,” Pillard wrote. “Once arbitration becomes the state rather than the end of the dispute resolution process, it no longer serves the role Congress envisioned.”
The attorney for the Amtrak officer said he plans to request a review from the entire D.C. Circuit and plans to appeal to the U.S. Supreme Court in this case, if necessary.
“Allowing the panel’s decision to stand would undermine nearly a century of jurisprudence under the Railway Labor Act,” Thomas Cushane of Cushane Law Firm, who argued for the Amtrak officer, said.
Thomas Reinert Jr. of Morgan, Lewis & Bockius, who represented Amtrak in the case, did not return messages seeking comment.