Major League Baseball Players Ass'n v. Garvey,

532 U.S. 504 (2001)

The Major League Baseball Players Association and the Major League Baseball Clubs resolved a dispute regarding labor practices by establishing a fund to be distributed to injured players. The agreement provided that injured players could submit their individual claims to an arbitrator who would decide if the individual player was entitled to dam-ages and if so, the amount. Steve Garvey, a well-known player, submitted a claim that was denied by the arbitrator. He appealed to the courts for relief. The Court of Appeals for the Ninth Circuit rejected an arbitrator's factual findings and then resolved the merits of the parties' dispute instead of remanding the case for further arbitration proceedings. The Supreme Court granted a hearing and issued a per curiam opinion.

Per Curiam

In the late 1980s, petitioner Major League Baseball Play-ers Association (Association) filed grievances against the Major League Baseball Clubs (Clubs), claiming the Clubs had colluded in the market for free-agent services after the 1985, 1986 and 1987 baseball seasons, in violation of the industry's collective bargaining agreement. A free agent is a player who may contract with any Club, rather than one whose right to contract is restricted to a particular Club. In a series of decisions, arbitrators found collusion by the Clubs and damage to the players. The Association and Clubs subsequently entered into a Global Settlement Agreement (Agreement), pursuant to which the Clubs established a $280 million fund to be distributed to injured players. The Association also designed a "Framework" to evaluate the individual player's claims, and, applying that Framework, recommended distribution plans for claims relating to a particular season or seasons.

Respondent Steve Garvey, a retired, highly regarded first baseman, submitted a claim for damages of approximately $3 million. He alleged that his contract with the San Diego Padres was not extended to the 1988 and 1989 seasons due to collusion. The Association rejected Garvey's claim in February 1996, because he presented no evidence that the Padres actually offered to extend his contract. Garvey objected, and an arbitration hearing was held. He testified that the Padres offered to extend his contract for the 1988 and 1989 seasons and then withdrew the offer after they began colluding with other teams. He presented a June 1996 letter from Ballard Smith, Padres' President and CEO from 1979 to 1987, stating that, before the end of the 1985 season, Smith offered to extend Garvey's contract through the 1989 season, but that the Padres refused to negotiate with Garvey thereafter due to collusion.

The arbitrator denied Garvey's claim, after seeking additional documentation from the parties. In his award, he explained that "there exists . . . substantial doubt as to the credibility of the statements in the Smith letter." He noted the "stark contradictions" be-tween the 1996 letter and Smith's testimony in the ear-lier arbitration proceedings regarding collusion, where Smith, like other owners, denied collusion and stated that the Padres simply were not interested in extending Garvey's contract. The arbitrator determined that, due to these contradictions, he " 'must reject Smith's more recent assertion that Garvey did not receive[a contract] extension' " due to collusion, and found that Garvey had not shown a specific offer of extension.

Garvey moved to vacate the arbitrator's award. The District Court denied the motion. The Court of Appeals for the Ninth Circuit reversed by a divided vote. The court acknowledged that judicial review of an arbitrator's decision in a labor dispute is extremely limited. But it held that review of the merits of the arbitrator's award was warranted in this case, because the arbitrator "dispensed his own brand of industrial justice." The court recognized that Smith's prior testimony with respect to collusion conflicted with the statements in his 1996 letter. But in the court's view, the arbitrator's refusal to credit Smith's letter was "in-explicable" and "bordered on the irrational," because a panel of arbitrators, chaired by the arbitrator involved here, had previously concluded that the owners' prior testimony was false. The court also found that the re-cord provided "strong support" for the truthfulness of Smith's 1996 letter. The Court of Appeals reversed and remanded with directions to vacate the award.

The District Court then remanded the case to the arbitration panel for further hearings, and Garvey ap-pealed. The Court of Appeals, again by a divided vote, explained that "the conclusion that Smith made Gar-vey an offer and subsequently withdrew it because of the collusion scheme was the only conclusion that the arbitrator could draw from the record in the proceed-ings." Noting that its prior instructions might have been unclear, the Court clarified that "left only one possible resultthe result our holding contemplatedan award in Garvey's favor." The Court of Appeals re-versed the District Court and directed that it remand the case to the arbitration panel with instructions to enter an award for Garvey in the amount he claimed.

Judicial review of a labor-arbitration decision is very limited. Courts are not authorized to review the arbitrator's decision on the merits despite allegations that the decision rests on factual errors or misinterprets the parties' agreement. We recently reiterated that if an " 'arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,' the fact that 'a court is convinced he committed serious error does not suffice to overturn his decision.' " East-ern Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62 (2000). It is only when the arbitrator strays from interpretation and application of the agreement and effectively "dispenses his own brand of industrial jus-tice" that his decision may be unenforceable. Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960). When an arbitrator resolves disputes regarding the application of a contract, and no dishonesty is alleged, the arbitrator's "improvident, even silly, fact finding" does not provide a basis for a reviewing court to refuse to enforce the award. Misco, 484 U.S., at 39.

In discussing the courts' limited role in review-ing the merits of arbitration awards, we have stated that "courts . . . have no business weighing the merits of the grievance or considering whether there is equity in a particular claim." When the judiciary does so, "it usurps a function which . . . is entrusted to the arbitration tribunal." Consistent with this limited role, we said in Misco that "even in the very rare instances when an arbitrator's procedural aberrations rise to the level of affirmative misconduct, as a rule the court must not foreclose further proceedings by settling the merits according to its own judgment of the appropriate result." 484 U.S. at 40-41, n. 10. That step, we explained, "would improperly substitute a judicial determination for the arbitrator's decision that the parties bargained for" in their agreement. Id. Instead, the court should "simply vacate the award, thus leaving open the possibility of further proceedings if they are permitted under the terms of the agreement."

To be sure, the Court of Appeals here recited these principles, but its application of them is nothing short of baffling. The substance of the Court's discussion reveals that it overturned the arbitrator's decision because it disagreed with the arbitrator's factual findings, particularly those with respect to credibility. The Court of Appeals, it appears, would have credited Smith's 1996 letter, and found the arbitrator's refusal to do so at worst "irrational" and at best "bizarre." But even "seriouserror" on the arbitrator's part does not justify overturning his decision, where, as here, he is construing a contract and acting within the scope of his authority. Misco.

Established law ordinarily precludes a court from resolving the merits of the parties' dispute on the ba-sis of its own factual determinations, no matter how erroneous the arbitrator's decision. Misco. Even when the arbitrator's award may properly be vacated, the appropriate remedy is to remand the case for further arbitration proceedings. Misco. The Court of Appeals usurped the arbitrator's role by resolving the dispute and barring further proceedings, a result at odds with this governing law.

For the foregoing reasons, the Court of Appeals erred in reversing the order of the District Court denying the motion to vacate the arbitrator's award, and it erred further in directing that judgment be entered in Garvey's favor. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

Case Analysis

1. What is the judicial history of this case?

2. Did the Supreme Court agree with the arbitrator's factual findings? If not, why did it reverse the decision of the Court of Appeals?