MAYER, BROWN & PLATT

SUPREME COURT DOCKET REPORT

Today the Supreme Court granted certiorari in four cases, two of which are of potential interest to the business community. Amicus briefs in support of the petitioner are due on Thursday, May 4, 2000, and amicus briefs in support of the respondents are due on Monday, June 6, 2000. Any questions about these cases should be directed to Donald Falk (202-263-3245) or Eileen Penner (202-263-3242) in our Washington office.

1. Arbitration Awards — Vacatur On Public Policy Grounds. In United Paperworkers International Union v. Misco, 484 U.S. 29 (1987), the Supreme Court held that a federal court may not vacate an arbitration award on public policy grounds unless the award clearly violates an explicit public policy that is well-defined, dominant, and ascertainable by reference to law and legal precedent. The Supreme Court granted certiorari today in Eastern Associated Coal Corp. v. United Mine Workers of America, No. 99-1038, to determine (1) whether public policy bars reinstatement to safety-sensitive jobs of employees who test positive for illegal drugs; and (2) whether an arbitral award must violate positive law in order to violate public policy.

Eastern Associated Coal Corporation suspended and ultimately discharged a mobile equipment operator, James Smith, for testing positive for marijuana use during a random drug test. Although Eastern’s collective bargaining agreement with the United Mine Workers Union permitted Eastern to discharge workers for cause, an arbitrator issued an award requiring Smith to take part in a substance abuse and random drug testing program and returning Smith to work after a 30-day suspension. After Smith again tested positive for marijuana use, Eastern again suspended and discharged him, and Smith again pursued arbitration. Once again, the arbitrator reinstated Smith, deeming Smith’s second lapse to be an isolated occurrence.

Eastern sought to vacate the award in the United States District Court for the Southern District of West Virginia on the ground that the arbitrator had violated public policy by reinstating Smith to a safety-sensitive position despite his record of drug use. The district court refused to vacate the award. 66 F.  Supp. 2d 795 (1998). The court found that, although "a well defined and dominant public policy exists against the use of controlled substances by those who perform safety sensitive jobs," the award of reinstatement did not contravene that policy. Id. at 804. The court reasoned that, because the relevant regulations of the United States Department of Transportation neither specifically required the permanent discharge of an employee who tested positive for drug use nor forbade reinstatement, the public policy against drug and alcohol abuse by employees in safety-sensitive jobs did not bar the arbitrator’s reinstatement of Smith. Id. at 805. The Fourth Circuit affirmed in an unpublished opinion that adopted the district court’s reasoning.

The Fourth Circuit’s decision deepened one conflict among the circuits in holding that a well defined and dominant public policy bars the reinstatement to safety-sensitive positions of employees who test positive for drug use. Compare, e.g., Exxon Corp. v. Esso Workers’ Union, Inc., 118 F.3d 841 (1st Cir. 1997) (holding that it does) with Tennessee Valley Auth. v. Tennessee Valley Trades & Labor Council, 184 F.3d 510 (6th Cir. 1999) (holding that it does not). The decision deepened another conflict in holding that an arbitration award may be set aside on public policy grounds only when enforcement of the award would violate positive law. See Exxon Shipping Co. v. Exxon Seamen’s Union, 11 F.3d 1189, 1192 (3d Cir. 1993) (explaining that the D.C. Circuit has adopted that narrow view of public policy, but joining "the First, Sixth, Seventh, and Eighth Circuits" in rejecting it).

Central Green Co. owns a pistachio orchard that is traversed by the Madera Canal. The Canal is part of the Central Valley Project (CVP), a massive federal water development. Flood control is one of the congressionally authorized purposes of the CVP. Central sued the United States in the Eastern District of California under the Federal Tort Claims Act, 28 U.S.C. §§ 2671 et seq., alleging that its pistachio orchard had been damaged by subsurface and surface flooding as a result of the government’s negligent design and maintenance of the Madera Canal. Central also contended that the water in the Canal was not in fact held for the purpose of flood control, but rather served only irrigation purposes. The district court nonetheless granted judgment on the pleadings to the government on the ground that Section 702c precluded liability.

The Ninth Circuit affirmed. 177 F.3d 834 (1999). The court of appeals recognized that the Supreme Court had interpreted Section 702c to "apply to all waters contained in or carried through a federal flood control project for purposes of or related to flood control, as well as to waters that such projects cannot control." Id. at 836 (quoting United States v. James, 478 U.S. 597, 605 (1986)). The Ninth Circuit also concluded that "the water in the Madera Canal was not held for the purpose of flood control." Id. at 839. Adhering to circuit precedent, however, the court of appeals held that Section 702c immunizes the United States so long as the asserted damage is not "wholly unrelated" to a project with flood control as one of its purposes. Id. at 837. Under that precedent, it did not matter whether the Madera Canal itself was actually used for flood control purposes, because the Canal was part of the CVP. Id. at 839.

The Ninth Circuit acknowledged that, "had this case been instituted in the Fourth, Seventh, or Tenth Circuit the government probably would not enjoy flood control immunity." 177 F.3d at 839 (citing Hayes v. United States, 585 F.2d 701, 702-703 (4th Cir. 1978); Fryman v. United States, 901 F.2d 79, 82 (7th Cir. 1990); and Boyd v. United States, 881 F.2d 895, 900 (10th Cir. 1989)). Those courts deny immunity based on Section 702c unless the government demonstrates a "more substantial nexus" between the particular purported "flood water" and a flood control activity or purpose. Id. at 837. By contrast, other circuits have adopted the Ninth Circuit rule. See 177 F.3d at 838 (citing, among others, Reese v. South Florida Water Management Dist., 59 F.3d 1128, 1130-31 (11th Cir. 1995), and Dawson v. United States, 894 F.2d 70, 73-74 (3d Cir. 1990)). The court of appeals expressed doubt about the "harsh result" dictated by its own circuit precedent and suggested that the "case might be an appropriate subject for Supreme Court review." Id. at 839.

This case is of great significance to agricultural and other businesses with significant facilities or land holdings near federal flood control facilities.