## Facts

- Teamsters, Chauffeurs, Warehousemen and Helpers, Local Union No. 506 (the Union) and E.D. Clapp Corporation (the Company) were parties to a collective-bargaining agreement (CBA) with a multi-step grievance process ending in binding arbitration.
- During the CBA term, a strike occurred and disputes arose between the parties.
- The New York Supreme Court ordered the parties to submit all current disputes to binding arbitration.
- The New York State Mediation Board appointed John Beich as arbitrator.
- On July 1, 1981, the arbitrator convened a session in Auburn, New York. The parties sharply disagreed about what happened, including whether the session was a true evidentiary hearing and whether evidence on the merits was allowed.
- The parties agreed to a second session, held on September 1, 1981, also in Auburn. The parties again disputed what occurred; the Union claimed the arbitrator quit during the session, while the Company contended he did not resign, though it was undisputed that the session ended early.
- Because the September session ended prematurely, neither side completed its evidentiary presentation.
- After the September session, both sides communicated with the arbitrator outside the presence of the other. A written stipulation between the parties addressed the arbitrator’s ability to conduct investigations and communicate outside formal sessions, though the Union contested aspects of that stipulation.
- No transcript or stenographic record was made, and the court was presented with conflicting affidavits about the July and September proceedings.
- On November 12, 1981, the arbitrator issued written rulings concluding the submitted disputes were not arbitrable under the CBA.
- The Union filed an action in federal district court seeking vacatur under the Federal Arbitration Act (FAA), 9 U.S.C. § 10, asserting (among other grounds) refusal to hear evidence, ex parte contacts, partiality/fraud, and lack of authority due to resignation.

## Issues

1. Whether the arbitration rulings should be vacated under 9 U.S.C. § 10(c) because the arbitrator ended the hearing before the Union could present evidence and then decided nonarbitrability without a fair opportunity to be heard.
2. Whether the Union established vacatur under 9 U.S.C. § 10(a) or (b) based on corruption/fraud/undue means or evident partiality arising from ex parte communications.
3. Whether the arbitrator exceeded his powers under 9 U.S.C. § 10(d) by issuing a decision after allegedly resigning.

## Decision

- The court granted the Union’s petition and vacated the November 12, 1981 arbitration rulings.
- Vacatur rested on 9 U.S.C. § 10(c): the arbitrator’s conduct deprived the Union of a fair chance to present evidence before a dispositive ruling on arbitrability.
- The court declined to vacate under § 10(a) or § 10(b), finding the record did not establish corruption, fraud, undue means, or evident partiality to the level required.
- The court rejected the claim that the arbitrator lacked authority to issue the decision based on resignation, concluding the proof did not show a resignation that stripped him of authority (though the premature end of the session supported vacatur under § 10(c)).

## Legal Principles

- Federal courts give strong deference to labor-arbitration outcomes and do not reweigh the merits of arbitral decisions, but the FAA authorizes vacatur on specific statutory grounds.
- Under 9 U.S.C. § 10(c), an award may be vacated when the arbitrator refuses to hear evidence that is relevant and material, or otherwise engages in conduct that prejudices a party’s rights and denies a fair hearing.
- Even in a system designed to be efficient and less formal than court litigation, basic procedural fairness requires a meaningful chance to present proof before the arbitrator resolves a dispute on a dispositive basis.
- Allegations of corruption, fraud, or evident partiality require a strong evidentiary showing; where both sides engaged in outside communications and the parties’ agreement contemplated some outside contact, ex parte communications alone may be insufficient to prove bias or fraud.
- A disputed claim that an arbitrator “quit” does not automatically void a later award; the question is whether the arbitrator in fact withdrew in a way that ended his authority. Separate from authority, an early termination of the hearing can still warrant vacatur under § 10(c).

## Conclusion

The district court set aside the arbitrator’s nonarbitrability rulings because the arbitration process ended before the Union could finish presenting its evidence, and the arbitrator nevertheless issued a dispositive decision—misconduct under FAA § 10(c) that denied a fair hearing—while the Union’s claims of fraud, bias, and lack of authority were not proven on the record.


Teamsters Local 506 v. E.D. Clapp Corp., 551 F. Supp. 570 (1982)