When Can a Non-Signatory Be Bound by an Arbitration Agreement?
There’s usually no mistaking who’s bound by an arbitration agreement: the parties who signed it at the bottom. However, the Sixth Circuit’s recent decision in Greenhouse Holdings, LLC v. Int’l Union of Painters and Allied Trades District Council 91, Case No. 21-6164 (August 8, 2022) reminds us that's not always true.
Greenhouse Holdings featured a bunch of complicating factors. First, the same owners owned two different but similarly named companies that did the same or similar work in two different states: Clearview Glass and Glazing Contractors of Tennessee, LLC (Clearview), and Greenhouse Holdings, LLC (Greenhouse). The first company, Clearview, located in Tennessee, was party to a collective bargaining agreement (the CBA) with the defendant union (the Union). The second company, Greenhouse, located in Kentucky, was not.
Second, when the Union perceived a violation of the CBA, it filed a grievance against “Clearview Glass,” which was not the name of either company. Third, “Clearview Glass,” whatever the Union intended it to be, was represented by at the arbitration by one Mr. Daniel Kinney, part owner of Clearview and Greenhouse.
Ultimately, the arbitrator found a CBA violation and ruled in favor of the Union ordering “Clearview Glass and Glazing” (not the name of either company) to “pay the Union the amount of underpaid wages and benefits due its non-Tennessee shop employees.” This introduced the fourth complicating factor, as Clearview had no non-Tennessee shop employees. Greenhouse, located in Kentucky, had the non-Tennessee employees. In any event, the arbitrator entered a preliminary decision on January 27, 2021, establishing a liability. The arbitrator entered the final decision on February 19, 2021, fixing damages. This was the fifth complication.
Greenhouse filed in federal court to vacate the arbitrator’s decision. The district court granted Greenhouse the relief requested because it was not convinced Greenhouse was a party to the CBA. In other words, Greenhouse had never signed the CBA. The Union appealed.
The Sixth Circuit’s decision first addressed the issue of subject matter jurisdiction, as it must. Readers will recall that last term the Supreme Court held that, in the context of a motion to vacate an arbitrator’s award (as opposed to a lawsuit or motion to enforce an arbitration agreement), there must be an independent basis for jurisdiction clearly apparent from “the face of the [motion to vacate] itself.” Badgerow v. Walters, ___ US ___; 141 SCt 1310, 1316 (2022). The Sixth Circuit concluded an independent basis for its jurisdiction existed in the Labor Management Relations Act (LMRA), which authorizes courts to enforce or vacate arbitration awards.
The Court then turned to a procedural issue. Had Greenhouse filed a timely motion to vacate? That depended on whether the clock started ticking when the arbitrator issued his preliminary decision, establishing liability, or his final decision, establishing damages. The answer, the Court held, was the final decision. Therefore, the motion was timely.
Finally turning to the merits, the Court observed arbitration agreements don't have to be in writing, much less signed. A party that hasn’t signed an arbitration agreement may, nevertheless, consent to arbitration by, for instance, participating in the arbitration without objection. Thus, the question became whether Greenhouse consented to arbitration, even though it wasn’t a party to the CBA, when Mr. Kinney, it’s part-owner, participated in the arbitration? Not surprisingly, the parties saw things differently. The Union filed an affidavit claiming Mr. Kinney spoke on behalf of Greenhouse at the arbitration. Mr. Kinney, on the other hand, maintained he only spoke on behalf of Clearview, except to object that Greenhouse was a non-union shop. This dispute, the Sixth Circuit held, needed to be resolved by the district court. If the Union was right, it was possible Greenhouse consented to arbitration under the CBA even though it wasn’t a party and hadn't signed the CBA. If Mr. Kinney was right, then Greenhouse wasn’t bound by the CBA and, presumably, it’s motion to vacate should be granted.
So, when it comes to arbitration agreements, there are times when actions speak louder than words.