Stead Motors of Walnut Creek v. Automotive MacHinists Lodge No. 1173, International Association of MacHinists and Aerospace Workers

WALLACE, Circuit Judge,

joined by Circuit Judges ALARCON and O’SCANNLAIN, and joined by Chief Judge GOODWIN in part I only, concurring in part and dissenting in part:

I agree with the plurality’s conclusion that we must reverse the district court’s order, which partially vacated the arbitral award. As the plurality demonstrates, Stead Motors has failed to meet the first threshold requirement identified in United Paperworkers International Union, AFL-CIO v. Misco, Inc., 484 U.S. 29 , 108 S.Ct. 364 , 98 L.Ed.2d 286 (1987) (Misco). See plurality op. at 1216. Stead Motors has not demonstrated the existence of a well defined, dominant, and explicit public policy in California, sufficiently grounded in “laws and legal precedents” rather than in “general considerations of supposed public interests,” with which this arbitral award could conflict. Misco, 108 S.Ct. at 373-74 . To decide this case, we need go no further. I write separately because the plurality reaches out to cover ground that is neither necessary nor desirable.

I

The Supreme Court first explicitly recognized the “public policy” exception to enforcement of labor arbitration awards in W.R. Grace & Co. v. Local Union 759, 461 U.S. 757 , 103 S.Ct. 2177 , 76 L.Ed.2d 298 (1983) (W.R. Grace). After declaring that “the question of public policy is ultimately one for resolution by the courts,” the Court stated that if the collective bargaining agreement as interpreted by the arbitrator in his arbitral award “violates some explicit public policy, we are obliged to refrain from enforcing it.” Id. at 766 , 103 S.Ct. at *1225 2183 . (citations omitted). However, the Court cautioned that “[s]uch a public policy ... must be well defined and dominant, and is to be ascertained ‘by reference to the laws and legal precedents and not from general considerations of supposed public interests.’ ” Id,., quoting Muschany v. United States, 324 U.S. 49, 66 , 65 S.Ct. 442, 451 , 89 L.Ed. 744 (1945).

More recently, the Court in Misco articulated two “threshold” requirements which must be met before a court may refuse to enforce an arbitrator’s award on public policy grounds: “At the very least, an alleged public policy must be properly framed under the approach set out in W.R. Grace, and the violation of such a policy must be clearly shown if an award is not to be enforced.” Misco, 108 S.Ct. at 373-74 (emphasis added). The first threshold requirement — proper “framing” of the public policy under W.R. Grace — itself has two components: (1) the purported policy must be well defined, dominant and explicit, and (2) the policy must be grounded in “laws and legal precedents” rather than in “general considerations of supposed public interests.” W.R. Grace, 461 U.S. at 766 , 103 S.Ct. at 2183 .

I conclude, with the plurality, that because Stead Motors’s formulation of the public policy at stake fails to meet Misco’s first threshold requirement, we must reverse. The original panel accepted Stead Motors’s invocation of California’s alleged “strong public policy favoring the proper maintenance and repair of motor vehicles.” Applying the first threshold requirement under Misco, the plurality holds that “[w]e have found nothing in the record of this case, in the arguments of counsel, or in our inquiry into the ‘laws and legal precedents’ of California which supports the existence of the specific public policy necessary to justify vacating the arbitral award in this case.” Plurality op. at 1216. The plurality reasons that the two sections of the California Code identified by Stead Motors do not “constitute the sort of laws and legal precedents necessary for the valid expression of an ‘explicit, well defined and dominant’ public policy.” Id. In other words, such a policy cannot be “gleaned from [the] two sections of the California Code” cited by Stead Motors. Id. at 1204; see also id. at 1216. As the party seeking to have the award vacated, Stead Motors bears the burden of demonstrating, at the outset, the existence of a well defined, dominant and explicit public policy which is sufficiently rooted in laws and legal precedents rather than in general considerations of supposed public interests. I agree with the plurality that Stead Motors has not carried this burden. This should end the case.

II

Unfortunately, the plurality is not content to stop on the first step of Misco’s threshold. Instead, it goes off on two additional grounds: (1) Stead Motors has not “clearly shown” that Rocks’s reinstatement would violate Stead Motors’s improperly framed public policy, and (2) at any rate the arbitrator’s factual determination (judged according to a newly created rule of construction) of Rocks’s amenability to discipline cannot be second-guessed by the court. In my view, we need not and should not reach these issues to decide the case. Reaching the last ground is especially unfortunate because the plurality’s analysis of how courts should review an arbitrator’s “finding” regarding a discharged worker’s amenability to discipline is wrong.

The plurality constructs a formidable rule of deference to an arbitrator’s “determinations” regarding discharged workers’ amenability to discipline. It accomplishes this in three steps. First, it distills from the concluding paragraph of the majority opinion in Misco the principle that an arbitrator’s “factual findings” regarding amenability to discipline are immune from judicial review. See plurality op. at 1212-13. Second, it formulates a potent rule of construction: arbitrators need not make an express finding that a discharged worker is amenable to discipline. See id. at 1213. In fact, according to the plurality, if an arbi-tral award which orders reinstatement is silent regarding amenability to discipline, “[a] court cannot infer ... that the arbitrator did not consider the question; nor can it *1226 make an independent judgment in such a case.” Id. at 1213. Instead, the court cannot “infer the non-existence of a particular reason merely from the award’s silence on a given issue.” Id. In other words, unless the arbitrator expressly says that he is not making a determination of amenability to discipline (and what arbitrator would do so if the plurality opinion were the law?), the courts must presume that such a determination was made. Third and finally, the plurality concludes: “Ordinarily, a court would be hard-pressed to find a public policy barring reinstatement in a case in which an arbitrator has, expressly or by implication, determined that the employee is subject to rehabilitation and therefore not likely to commit an act which violates public policy in the future.” Id. at 1212. This analysis is wrong for several reasons.

The concluding paragraph of the majority opinion in Misco provides weak support for the plurality’s amenability to discipline analysis. To begin with, the paragraph is composed of several “even if” arguments which are not necessary to the Court’s decision. See 108 S.Ct. at 374 . Not only is the paragraph dicta, but its primary focus is on a factual inference different in nature from that seized on by the plurality: the inference that because Cooper, the discharged worker, possessed drugs on company property, he was likely to use drugs before operating dangerous machinery. Here is the full paragraph:

In any event, it was inappropriate for the Court of Appeals itself to draw the necessary inference. To conclude from the fact that marijuana had been found in Cooper’s car that Cooper had ever been or would be under the influence of marijuana while he was on the job and operating dangerous machinery is an exercise in factfinding about Cooper’s use of drugs and his amenability to discipline, a task that exceeds the authority of a court asked to overturn an arbitration award. The parties did not bargain for the facts to be found by a court, but by an arbitrator chosen by them who had more opportunity to observe Cooper and to be familiar with the plant and its problems. Nor does the fact that it is inquiring into a possible violation of public policy excuse a court for doing the arbitrator’s task. If additional facts were to be found, the arbitrator should find them in the course of any further effort the Company might have made to discharge Cooper for having had marijuana in his car on company premises. Had the arbitrator found that Cooper had possessed drugs on the property, yet imposed discipline short of discharge because he found as a factual matter that Cooper could be trusted not to use them on the job, the Court of Appeals could not upset the award because of its own view that public policy about plant safety was threatened. In this connection it should also be noted that the award ordered Cooper to be reinstated in his old job or in an equivalent one for which he was qualified. It is by no means clear from the record that Cooper would pose a serious threat to the asserted public policy in every job for which he was qualified.

108 S.Ct. at 374 (footnotes omitted) (emphasis added).

The type of factual inference involved in Misco was different from the one before us. In Misco, the Court was focusing on the court of appeals’s factual finding or inference that because Cooper possessed drugs, he would necessarily use them before operating dangerous machinery. Cooper had been found to possess drugs on company property. There was no finding that he had ever used drugs or operated machinery while under the influence of drugs. Nor was there a finding by the arbitrator that Cooper was likely or unlikely in the future to use drugs or to operate dangerous machinery while under their influence. At best, the amenability to discipline point was only a small part of the larger factual inference discussed by the Court in this paragraph. Misco’s final paragraph, composed of dicta and focused on a different kind of factual inference, provides extremely weak support for the plurality’s expansive approach.

Moreover, there is an inconsistency between Misco’s concluding paragraph and *1227 the plurality’s approach. The Court in Mis-co disapproved of the court of appeals having drawn factual inferences or made factual findings not made by the arbitrator. The Court observed that “[i]f additional facts were to be found, the arbitrator should find them_” Id. (emphasis added). By reading silence as reflecting a finding of amenability to discipline, the plurality accomplishes through a rule of construction what the dicta in Misco forbids.

Contrary to its assertion, the plurality opinion does not merely embody a straightforward and noncontroversial application of the general principles for construing arbi-tral awards announced in the Steelworkers Trilogy. See plurality op. at 1207-1209, 1213: To begin with, the rules announced in United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593 , 80 S.Ct. 1358 , 4 L.Ed.2d 1424 (1960), are not applicable to cases involving the public policy exception. If, as Misco establishes, “ ‘the question of public policy is ultimately one for resolution by the courts,’ ” 108 S.Ct. at 373 , quoting W.R. Grace, 461 U.S. at 766 , 103 S.Ct. at 2183 , then the public policy exception is just that: an exception to Enterprise Wheel’s, deferential rules for reviewing arbitral awards. Several of our past decisions have so held. Sheet Metal Workers International Association, Local No. 359 v. Arizona Mechanical & Stainless, Inc., 863 F.2d 647, 653 (9th Cir.1988) (after summarizing deferential Enterprise Wheel principles, stating that “[o]nly when the arbitrator’s award actually violates the law or any explicit, well-defined and dominant public policy, is deference inappropriate.”); George Day Construction Co. v. United Brotherhood of Carpenters & Joiners of America, Local 354, 722 F.2d 1471, 1477 (9th Cir.1984) (same). Enterprise Wheel did not involve the public policy exception; it involved whether a labor arbitrator had exceeded the scope of his power under the collective bargaining agreement. This is a question of contractual interpretation made, in the first instance, by the arbitrator. Thus, the Court in Enterprise Wheel was being asked to substitute its judgment for the arbitrator’s on an issue on which the parties had bargained for the arbitrator’s judgment: the meaning of the contract. By contrast, in deciding whether to vacate an arbitral award because it conflicts with public policy, a court “is actually concerned with the lawfulness of its enforcing the award and not with the correctness of the arbitrator’s decision.” International Union, United Automobile, Aerospace & Agricultural Implement Workers of America Local 985 v. W.M. Chace Co., 262 F.Supp. 114, 117 (E.D.Mich.1966) (emphasis in original); see also Misco, 108 S.Ct. at 373 (public policy exception “derives from the basic notion that no court will lend its aid to one who founds a cause of action upon an immoral or illegal act.”). Because a court, in considering whether to vacate an award for public policy reasons, is not reconsidering a decision already made by the arbitrator — that is, is not substituting its judgment for the arbitrator’s on an issue on which the parties bargained for the arbitrator’s judgment — the Enterprise Wheel principles do not apply.

In addition, I fail to see how we can square the plurality’s rule of construction with Misco ’s teaching that “ ‘the question of public policy is ultimately one for resolution by the courts.’ ” 108 S.Ct. at 373 , quoting W.R. Grace, 461 U.S. at 766 , 103 S.Ct. at 2183 . I believe that the plurality’s rule of construction relegates, under certain circumstances, the question of public policy to the arbitrator. If the asserted policy is one potentially threatened by the worker’s future conduct, the plurality’s rule would confer upon the arbitrator the unreviewable power to determine in effect whether the reinstatement violates public policy. I am concerned about the mischief this rule would create where a party demonstrated the existence of a well defined, dominant and explicit public policy which clearly conflicted with the arbitral award, yet the arbitrator found the worker amenable to discipline.

The plurality’s “amenability to discipline” discussion is unnecessary to our decision, unwise, unwarranted by the final paragraph in Misco, and wrong. Since there already exists another reason to reverse, we need not and should not address this problematic one as well.

*1228 III

Lastly, I am troubled by the plurality’s extended discussion of hypothetical grounds on which Delta Air Lines, Inc. v. Air Line Pilots Association, International, 861 F.2d 665 (11th Cir.1988), and Iowa Electric Light & Power Co. v. Local Union 204, 834 F.2d 1424 (8th Cir.1987), “could have” been decided, and its explanation of why these invented rationales would not change the outcome of this case. See plurality op. at 1214-16. This discussion is unnecessary since our primary, stated reason for not following these two cases is that they misread Misco. Both cases erroneously focus on whether public policy conflicts with the discharged worker’s past conduct instead of with the arbitral award. See id. at 1215-16. In addition, in both cases Misco’s first threshold requirement is met — here it is not. At any rate, since the plurality opinion itself acknowledges that its extraneous remarks on Delta and Iowa Electric are dicta, see id. at 1215 n. 15. I need not formally dissent from this discussion.