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Legal Update

US Supreme Court Issues Opinion in Granite Rock Co. v. International Brotherhood of Teamsters

25 June 2010
Mayer Brown Legal Update

On June 24, 2010, in Granite Rock Co. v. International Brotherhood of Teamsters, No. 08-1214, the Supreme Court decided one issue of arbitration law and one issue of labor relations. The Court held that, when a party to a purported collective-bargaining agreement (CBA) with an arbitration clause asserts that the CBA was not ratified, the issue must be resolved by the district court rather than an arbitrator. The Court also declined to recognize a new federal common-law cause of action for tortious interference under § 301(a) of the Labor Management Relations Act (LMRA), which authorizes federal courts to fashion a body of law for the enforcement of CBAs. 

Petitioner Granite Rock, a concrete and building materials company, had a CBA with a local chapter of respondent International Brotherhood of Teamsters (IBT) that expired in April 2004. Initial attempts to negotiate a new CBA failed, and local members initiated a strike on June 9, 2004. The parties reached a tentative CBA on July 2, 2004, which included no-strike and arbitration clauses but did not address union members’ liability for any strike-related damages incurred by Granite Rock before the new CBA was negotiated. IBT opposed the local members’ decision to return to work before the damages issue was resolved, and directed the local members to continue the strike.

Granite Rock sued the local union as a signatory to the CBA and IBT as the local union’s agent or alter ego. The suit alleged that the continued strike violated the July 2 CBA and that IBT had tortiously interfered with the CBA by discouraging the local members from returning to work. In response, the unions asserted that the July 2 CBA had not been ratified and that the no-strike clause therefore could not be the basis for Granite Rock’s claims. On August 22, 2004, the local union members ratified the new CBA. In the district court, the local members then argued that the dispute over whether the CBA was ratified on July 2 or August 22 should be sent to arbitration.

The court rejected the local members’ argument, ruling that the question of when the agreement was formed was a question for the court rather than an arbitrator. The district court also refused to recognize a new tortious-interference cause of action under § 301(a) of the LMRA. The Ninth Circuit affirmed the dismissal of the tortious-interference claim, but held that the date on which the CBA was ratified should have been sent to an arbitrator. In an opinion by Justice Thomas, the Supreme Court affirmed the Ninth Circuit’s LMRA ruling but reversed its arbitration ruling. 

In its arbitration decision, the Court relied on the established principle that “a court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute.” Slip op. 7. “To satisfy itself that such agreement exists,” the Court said, “the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce.” Id. The Court concluded that, as with the question whether an arbitration agreement exists, the question of when it was formed must be resolved by the district court rather than an arbitrator. 

In refusing to recognize a new federal common-law cause of action for tortious interference, the Court explained that Granite Rock had not shown that other avenues of relief were unavailable and therefore had failed to demonstrate the need for a new cause of action. The Court left open the possibility that a cause of action for tortious interference could be recognized in a case in which the claimant was able to demonstrate the inadequacy of other available remedies.

Justice Sotomayor, joined by Justice Stevens, filed an opinion concurring in the Court’s LMRA holding but dissenting from its arbitration holding. On the latter point, the dissenting Justices would have held that a December 2004 agreement rendered the CBA effective, and thus its arbitration clause applicable, as of May 1, 2004—a theory the Court found the unions had waived. 

Mayer Brown filed an amicus brief with respect to the arbitration issue on behalf of the Chamber of Commerce in support of the petitioner.

Learn more about Mayer Brown’s Employment and Supreme Court & Appellate practices.

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