Ninth Circuit Vacates Labor Arbitration Award, Finding That “Following The Presentation Of Evidence, Matters Took A Bizarre Turn”

A Ninth Circuit panel, by a 2-1 vote, vacated a labor arbitration award entered in favor of the employee, holding that “the proceedings violate[d] the rule of fundamental fairness.” In Costco Wholesale Corporation v. International Brotherhood of Teamsters, Local No. 542, the court recounted the events that supported its decision of vacatur:

The arbitrator engaged in “extensive post-hearing ex parte communications with Diaz and the Union,” including an unauthorized $6,000 settlement offer to Diaz of which Costco was unaware. The arbitrator rendered his decision via a vague and bizarre email only sent to the Union and reading: “The above named grievant prevails in his grievance. The Union’s arguments as to double jeopardy were correct. Union remedy is adopted. So that I can look at myself in the mirror, my resignation is effective today.” The arbitrator resigned after rendering his email judgment, thereby preventing Costco from obtaining clarification of his decision. Costco requested that the arbitrator email a copy of the completed Board of Adjustment Decision form, but never received the form. A copy of the form was filed in the district court and stated with no elaboration: “Double Jeopardy was proved by preponderance of evidence presented. Employee to be made whole.” Because the arbitrator failed to provide a reasoned decision, Costco was left with uncertainty as to the parameters of the remedy ordered by the arbitrator. “Based on the facts of the case before us, we simply cannot conclude that [Costco] received a fundamentally fair hearing,” and Costco “is entitled to vacatur.”

Rejecting the dissenter’s opinion that “the arbitrator’s decision drew its essence from the collective bargaining agreement,” the majority found that “there was no essence of the decision because there was no decision rendered, and no reasoning proffered. For all we know, the arbitrator flipped a coin, consulted a ouija board, or threw darts at a dartboard to determine the outcome. He certainly gave no explanation to the parties of his decision despite a request from Costco that he do so.”

Concluding that the arbitrator’s “ex parte communications and an unauthorized settlement offer reflect consummate bias and lack of commitment to a transparent proceeding,” the majority of the appellate panel vacated the award.