Court Upholds Large Arbitration Award for Union’s Breach of Most-Favored Nation Clause

June 11, 2010
The U.S. Court of Appeals for the Seventh Circuit (Ill., Ind., Wis.) has upheld an arbitration award against the Chicago Regional Council of Carpenters (CRCC) for violating a most-favored nation (MFN) clause resulting in substantial damages to a residential and commercial roofing contractor.  
The contractor, Prate Installations, has been a union contractor since 1983.  For the past several years, though, the company and the CRCC have had an acrimonious relationship with several disputes.  The present dispute arose when Prate filed a grievance under the multiemployer collective bargaining agreement (CBA) to which it was signatory claiming that the union violated the CBA's MFN clause by requiring Prate and others to pay wages on an hourly basis while allowing competitors to pay on a piecework basis.  An arbitrator agreed with Prate and awarded it over $9.4 million dollars in damages for violations occurring up to the date of the award.  The arbitrator also allowed Prate to pay on a piecework basis until the union began complying with the MFN clause, and he awarded Prate reasonable attorneys' fees up to $2 million. After CRCC advised Prate that it did not intend to comply with the arbitration award, Prate filed a lawsuit under §301 of the Labor Management Relations Act in federal district court.  The district court confirmed the award of damages for violations up to the expiration of the CBA governing the dispute, but it reduced the amount of the award to $5.1 million to exclude violations occurring after CBA expiration and vacated the part of the award allowing Prate to pay on a piecework basis after CBA expiration.   The court of appeals affirmed, holding that the arbitrator's finding that CRCC violated the MFN clause was a permissible interpretation of the CBA and that his award of attorney's fees was also permissible, but that the district court properly struck the portion of the arbitrator's award that extended beyond the CBA expiration. For the full text of the court opinion, click here.  For more background on the parties' dispute from the contractor's point of view, click here.
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