In Prime Healthcare Servs. – Landmark LLC v. United Nurses & Allied Prof’ls, Local 5067, 848 F.3d 41 (1st Cir. 2017), the First Circuit ruled that an arbitration agreement required the arbitrator to determine whether ERISA preempted the claims at issue.
Plaintiff purchased a financially troubled hospital that had a pension plan, and a collective bargaining agreement (CBA) with defendant. The CBA contained a broad arbitration provision. After the acquisition, the pension plan was terminated by the Pension Benefit Guaranty Corp. (PBGC), and the defendant union sought arbitration of its grievance that the termination violated the CBA. Ultimately, the district court ruled that the union’s claims were preempted by ERISA.
The Court noted that courts will determine questions of arbitrability only when there is a dispute of “substantive arbitrability” – whether the parties are bound by an arbitration clause, or whether the particular clause governs a particular type of controversy. “Procedural arbitrability” questions, in contrast, are presumptively determined by the arbitrator; these questions include things like defenses of waiver, delay, or any other procedural rule that grows out of the dispute and bears on its final disposition.
The Court held that the pending dispute did not raise a question of substantive arbitrability, because there clearly was an arbitration clause and it applied to the dispute.
Next, the Court addressed the district court’s conclusion that the particular claim at issue could only be brought by the PBGC, and thus ERISA barred defendant from arbitrating the dispute. The First Circuit noted that courts will decide “whether legal constraints external to the parties’ agreement foreclosed arbitration[,]” but held that the party resisting arbitration must demonstrate that Congress intended – by specific words or by the goals of the statute – disputes not to be arbitrable. The court held that it would be “highly implausible” to argue that ERISA in general shows congressional intent to preclude arbitration. In rejecting plaintiff’s argument, the Court essentially assumed the correctness of plaintiff’s assertion that only the PBGC could assert the particular claim at issue, but explained:
The fatal flaw in Prime’s reasoning is that it fails to draw a simple, but crucial distinction: the question before us is not whether the Union can bring its claim, but who decides — court or arbitrator — whether the Union can bring its claim. Even if we assume, for the sake of argument, that Prime’s reading of ERISA is correct, this does not mean that the subject matter of the Union’s claims is not suitable for arbitration. [emphasis by the Court].
The Court also rejected plaintiff’s argument that an arbitrator might damage the purposes of ERISA by reaching the wrong conclusion, calling it “exactly the kind of ‘outmoded’ view of arbitration” rejected by the Supreme Court.