Local Jt. Exec. Bd. Las Vegas v. Mirage Casino-Hotel, Inc.
911 F.3d 588
9th Cir.2018Background
- Mirage subcontracted operation of BB King’s restaurant to BB King’s (2009 MOA); MOA said BB King’s would directly employ staff but Mirage would "hold and exercise full control" over terms and conditions per CBA Article 29.
- BB King’s closed and declared bankruptcy in 2012; many employees were unpaid for accrued vacation; Union filed a grievance against Mirage under the CBA (Article 21) seeking those benefits.
- Arbitration was bifurcated by agreement: an initial round on "timeliness-arbitrability" followed by merits if arbitrable. Parties disagreed about whether Mirage’s contention that it was not the employer was a merits issue or a threshold arbitrability question.
- Arbitrator concluded the grievance was "not arbitrable," reasoning that Mirage was not the employer and thus not liable—he based this conclusion on contract provisions relevant to the merits rather than on any clear grant of authority to decide substantive arbitrability.
- District court confirmed the award, holding the Union’s submission of the merits implicitly authorized the arbitrator to decide arbitrability; Union appealed. The Ninth Circuit reversed and remanded to vacate the award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides substantive arbitrability (court or arbitrator)? | Union: arbitrability is judicial unless parties clearly & unmistakably delegated it; arbitrator decided merits, not arbitrability. | Mirage: by submitting grievance to arbitration and participating, Union implicitly allowed arbitrator to decide arbitrability. | Court: substantive arbitrability is for courts absent clear and unmistakable evidence to delegate to arbitrator; arbitrator lacked authority here. |
| Whether the grievance was substantively arbitrable (i.e., within scope of CBA) | Union: CBA/Side Letter/MOA create obligations on Mirage (control theory) making the dispute arbitrable. | Mirage: BB King’s—not Mirage—was the employer; dispute should be against BB King’s. | Court: Mirage effectively conceded substantive arbitrability in this appeal; arbitrator’s merits-based rejection did not show the dispute was non-arbitrable. |
| Whether the arbitrator’s award must be vacated despite judicial deference to arbitral decisions | Union: award fails because arbitrator conflated arbitrability and merits and based non-arbitrability on merits analysis. | Mirage/District Ct: apply strong deference; Union’s submission of merits encompassed arbitrability question, so award stands. | Court: extreme deference does not justify upholding an award when arbitrator exceeded authority by deciding substantive arbitrability without clear delegation; award vacated. |
| Did the Union waive its right to seek a court decision on arbitrability by participating in arbitration? | Union: did not consent to arbitrator deciding arbitrability and reasonably considered Mirage’s argument a merits issue; did not forfeit right to judicial determination. | Mirage: Union should have halted arbitration and sought court intervention; failure to do so waived objection. | Court: no waiver; facts did not show Union clearly and unmistakably consented to arbitrator deciding arbitrability. |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (Supreme Court 1995) (courts decide arbitrability unless parties clearly and unmistakably delegate that question to arbitrator)
- AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643 (Supreme Court 1986) (substantive arbitrability presumptively for arbitrator only when parties have clearly agreed otherwise)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (Supreme Court 2002) (gateway procedural questions like timeliness are for the arbitrator)
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (Supreme Court 2010) (First Options framework applies in both labor and commercial arbitration)
- United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574 (Supreme Court 1960) (presumption of arbitrability; scope of arbitration clause)
- Schoenduve Corp. v. Lucent Technologies, 442 F.3d 727 (9th Cir. 2006) (parties’ broad submission can support arbitrator resolving related substantive issues)
- ConocoPhillips, Inc. v. Local 13-0555 United Steelworkers Int’l Union, 741 F.3d 627 (5th Cir. 2014) (party consent to arbitrate merits issue does not necessarily show clear delegation of arbitrability)