Does the Supreme Court Decision in 14 Penn Plaza Augur the Unification of the FAA and Labor Arbitration Law?

By Galanter, Seth; McLaughlin, Jeremy M. | Dispute Resolution Journal, May-July 2009 | Go to article overview

Does the Supreme Court Decision in 14 Penn Plaza Augur the Unification of the FAA and Labor Arbitration Law?


Galanter, Seth, McLaughlin, Jeremy M., Dispute Resolution Journal


The implications of the many recent Supreme Court decisions in 2008 and 2009 have yet to be fully understood. This article discusses the possible implications of the Court's ruling in 14 Penn Plaza v. Pyett on the application of the FAA to arbitration provisions in collective bargaining agreements.

It has been the longstanding view of most federal courts that the Federal Arbitration Act (FAA) does not apply to arbitration provisions in collective bargaining agreements (CBAs). But the U.S. Supreme Court's recent decision in 14 Penn Plaza v. Pyett suggests otherwise.1 Does this decision by the High Court signal that the wall between the FAA and CBAs should be torn down? If so, the destruction of this wall will have important implications for arbitration provisions in CBAs, among them making judicial review of the arbitration award available under the FAA regime.

This article contends that, in light of the 14 Penn Plaza decision, the view that arbitration provisions in CBAs are outside the ambit of the FAA may be ripe for revisiting.

The FAA v. Federal Common Law

For the past 50 years, there have been two distinct but overlapping arbitration regimes under federal law. The first is the FAA, a statutory scheme enacted in 1925 by Congress at the behest of the business community in order to ensure that commercial arbitration agreements, and the awards resulting therefrom, would be enforceable in federal court.2

The second is the federal common law of labor arbitration under the Labor Management Relations Act of 1947 (LMRA), which finds its genesis in the Supreme Court's holding in Textile Workers Union of America v. Lincoln Mills of Alabama. 3 This case held that the LMRA did more than grant jurisdiction over CBAs to federal courts; it empowered these courts to create and apply federal common law to interpret and enforce arbitration provisions in CBAs and confirm or vacate arbitration awards resulting from these provisions.

The Supreme Court decision in Lincoln Mills did not mention the FAA even though the parties' briefs heavily relied on this statute. The dissent understood the majority's silence as implicitly holding that the FAA did not apply to arbitration provisions in CBAs,4 as the majority of federal courts of appeals have ruled.5

The decision in 14 Penn Plaza could be read to stand for the opposite principle-that arbitration provisions in CBAs do fall within the ambit of the FAA. While this principle may not change the outcome of many cases, it should bring coherence to the law, reduce the need for federal courts to invent common law doctrines that are not anchored in any statutory language, and encourage federal courts to give greater deference to labor arbitrators' awards.

An Unlikely Harbinger of Change

14 Penn Plaza may seem like an unlikely case to generate such a vast change in the legal underpinnings of labor-management arbitration. The primary legal issue was very specific: Could unions and employers negotiate an arbitration clause that required employees who belonged to the union to arbitrate, and thereby give up their right to litigate in court, the claim that the employer discriminated against them in violation of federal and/or state discrimination laws.

In 14 Penn Plaza, several employees filed an employment discrimination lawsuit in federal court. The employer moved to stay the judicial proceeding and compel arbitration in reliance on an arbitration provision in the CBA that expressly required arbitration of statutory discrimination claims. The district court held that the arbitration clause was invalid and denied the employer's motion. The 6th Circuit affirmed, rejecting the employer's arguments on appeal. It held that unions lack authority to bargain away the rights of individual employees to litigate statutory discrimination claims in court. It based this conclusion on the Supreme Court's 1974 decision in Alexander v. Gardner-Denver Co.

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