Waiver of a challenge to the jurisdiction of an arbitrator and how to avoid it

The Ninth Circuit has affirmed a decision rejecting an effort by Asarco to vacate an award by Arbitrator Michael Rappaport. (The District Court's decision, and Arbitrator Rappaport's  award are discussed in "No-add" language in cba doesn't prevent arbitrator from modifying contract.) The Court  disagreed, however, with the District Court's decision that Asarco had not waived its challenge to the jurisdiction of the arbitrator to hear the dispute.

Arbitrator Rappaport upheld a grievance claiming that the parties had not discussed or understood the impact of an agreement to exclude new hires from the existing pension plan on the eligibility of the new hires to participate in a separate bonus plan. Concluding that the parties were mutually mistaken about how the pension modification would impact bonus eligibility, he ordered the contract amended to specifically provide for bonus eligibility for the new hires notwithstanding their exclusion for the pension plan. Asarco filed suit to vacate the award, arguing that the arbitrator had exceeded his authority by ignoring contract language providing:

The arbitrator shall not have jurisdiction or authority to add to, detract from or alter in any way the provisions of this Agreement.

The District Court rejected the Union's claim that Asarco had waived its challenge to the arbitrator's jurisdiction but, on the merits, "concluded that the arbitrator did not violate the no-add provision because the reformation corrected a defect in the [cba], which was the product of mutual mistake, to reflect the terms the parties had agreed upon"

On appeal, the Circuit Court found that Asarco had, in fact, waived its challenge to the arbitrator's jurisdiction. 

The Court reviewed several methods a challenge to an arbitrator's jurisdiction could be asserted:

Generally speaking, the issue of arbitrability is decided by the courts. ...  The parties may, however, agree to submit the question of arbitrability to the arbitrator. ... Additionally, as occurred here, the parties may stipulate that the controversy is arbitrable. If, however, a party "objects to arbitration on jurisdictional grounds, [it] may refuse to arbitrate the case."... The party seeking arbitration is "then put to the task of petitioning the court to compel arbitration." ... Alternatively, a party can "object[ ] to the arbitrator's authority, refuse[ ] to argue the [jurisdictional] issue before him, and proceed[ ] to the merits of the grievance." Id. at 1475. "[T]hen, clearly the [jurisdictional] question would have been preserved for independent judicial scrutiny." Id. "The same result could be achieved by making an objection as to jurisdiction and an express reservation of the question on the record." Id.

As another alternative, the objecting party can "take[ ] the initiative by seeking declaratory and injunctive relief prior to the commencement of the arbitration." .... The objecting party can take any of these steps to "obtain[ ] an independent judicial examination of the [jurisdictional] question."

The Court concluded that Asarco had not utilized any of these methods. It noted that at the beginning of the arbitration hearing Asarco had stipulated that the matters properly before the arbitrator and that the arbitrator had jurisdiction to decide the grievance. Finding a waiver, the Court observed:

When ASARCO argued to the arbitrator that the he lacked authority to reform the [cba], it submitted that issue to the arbitrator, and could not seek a different result from the district court. The argument was waived. Additionally, ASARCO's decision to argue the issue to the arbitrator suggests that it never really objected to the arbitrator's jurisdiction at all, but rather objected only to the arbitrator crafting the remedy that the Union sought.

Judge Ikuta, dissenting, would have vacated the award as an improper effort by the arbitrator to ignore the clear language of the contract and to dispense his own brand of industrial justice.

The Court's opinion can be found here.

Update: The Court has withdrawn the opinion discussed and substituted a new one. (here). The new opinion does not contain the discussion of waiver of  a challenge to the arbitrator's jurisdiction.