A run-of-the-mill employment dispute could become a major embarrassment for railroad giant BNSF over an allegation that a senior executive threatened to blackball an arbitrator from the industry if she ruled against the company.
In a federal court case set to go to trial next week in Tacoma, Wash., a fired BNSF Railway Co. employee accuses the company of legal corruption. The suit claims that the BNSF executive pressured the arbitrator to reverse a proposed ruling that initially was in the worker’s favor.
The arbitrator at the middle of the dispute, Jacalyn Zimmerman, was the neutral party on a three-member arbitration panel that also included Roger Boldra, then BNSF’s labor relations director, and Jay Schollmeyer, a railroad union leader.
Two months after a February 2009 phone conference among the three – when the alleged threat was made by Boldra – Zimmerman backed away from her proposed decision to reinstate the fired worker, Richard Kite, and dismissed the case without prejudice. A new arbitrator later upheld Kite’s firing.
The case shines a light on a downside of the growing use of arbitration in consumer and workplace disputes in recent years: the pressure on arbitrators to issue rulings that please the corporate entities that retain them, or risk falling out of favor and losing lucrative repeat business.
Unlike judges who are assigned cases randomly – and who, in the federal courts, have lifetime tenure – arbitrators are private business people dependent on their next case. They know there is always an implied threat that if they issue unfavorable or unpopular rulings they may not be used again. What makes the BNSF case unusual is that the threat of losing business allegedly was raised so explicitly.
Company denies wrongdoing
A spokeswoman for Forth Worth, Texas,-based BNSF, one of the nation’s two biggest railroads and a unit of investor Warren Buffett’s Berkshire Hathaway Inc., declined comment about the arbitration dispute. In court papers, however, the company strongly denied any wrongdoing. Boldra, 64, who retired from BNSF in January, declined to comment for this story. However, he acknowledged in a written statement entered into court records that he told Zimmerman about potential fallout “if you make decisions like that.”
Zimmerman declined comment, but said in court papers she did not perceive his remarks to constitute a threat. On the other hand, Schollmeyer, general chairman of the United Transportation Union, considered Boldra’s comment “improper” and a “threat,” according to court documents.
Carmen Parcelli, a Washington, D.C., labor lawyer who represents workers in railroad cases but who is not involved in the Kite case, said, “No one should ever say those words. It is just outrageous.” In part because of the controversy over Boldra’s remarks, she said, the case has dragged on for a decade. “That is not good for anybody who cares about making this system work,” Parcelli said.
Growing concern about the fairness of arbitration awards has courts more willing to scrutinize them in recent years, experts say. Alex Colvin, professor of conflict resolution at Cornell University, said there appears to have been a “breakdown” of confidence in the arbitration process. “There are a lot of really good arbitrators out there but I don’t think it is as universally accepted as it used to be,” he said.
Arbitration groups, which say arbitration can be quicker and far less costly than courts, have expressed alarm at aspects of the Kite case. The National Association of Railroad Referees, a group of railroad industry arbitrators, said in a letter to the district court that the case could have a “chilling effect” on the deliberative process by requiring arbitrators to answer questions about their decisions under oath.
Kite, a conductor and 27-year BNSF employee from southwestern Washington, was fired by BNSF in 2005 after failing a random blood alcohol test. Company policy mandated dismissal of employees with two positive tests within 10 years; the company claimed Kite had previously tested positive in 1997.
Union fought discharge
His case was assigned to mandatory arbitration under federal law after the United Transportation Union unsuccessfully fought his discharge within the BNSF internal dispute resolution system.
Zimmerman, an experienced public employee labor negotiator from Illinois who operated a private arbitration practice, was appointed by the federal National Mediation Board to hear the case. Schollmeyer and Boldra presented evidence to her in writing and in oral argument.
Her conclusion: Kite reported for work under the influence in 2005, but the purported 1997 violation was not fully documented. In a November 2008 draft decision, she proposed treating Kite as a first-time offender, reinstating him without back pay. She circulated the draft and invited Boldra and Schollmeyer to convene in a phone conference before she made it final.
At the February 2009 telephone conference, Boldra strongly objected to Kite’s proposed reinstatement. According to Boldra’s written statement, Zimmerman stuck to her guns and indicated she was inclined to finalize her draft.
Boldra, according to his statement for the district court, then said this:
“I then reminded her of what I said at the oral argument: allowing a second-violation employee back to work would create an emotional response from the carrier, and that I didn’t know how I could have made that point any clearer unless I’d said, ‘you won’t be able to work in the industry if you make decisions like that.’”
Arbitrator bows out
In April 2009, Zimmerman stepped aside, clearing the way for the case to be assigned to another arbitrator, who sided with BNSF. Later in 2009, Zimmerman resigned from serving as a neutral arbitrator through the mediation board, and accepted a job as head of the Illinois Labor Relations Board, where she had worked many years as general counsel earlier in her career. She has since returned to private practice.
Kite and the union filed suit in November 2010 in U.S. district court claiming that BNSF had corrupted the system. The court threw out the lawsuit saying it had no power to review Zimmerman’s arbitration award because it had not been finalized. A federal appeals court disagreed.
“If Boldra as a high ranking railway official … made such a statement and intended it as an economic threat against Zimmerman if she did not change the outcome … then Boldra committed an act of attempted extortion and impaired the integrity of the arbitral process,” a panel of the 9th U.S. Circuit Court of Appeals held in 2013. The case was sent back to the district court to allow the union the chance to prove corruption.
Kite’s attorneys have characterized the remark as “an extortionate threat from an angry partisan,” and accused Zimmerman of “a failure of nerve” for not upholding the draft award.
“The only conflict of interest Ms. Zimmerman had was her own secret one —her interest in receiving continued appointments on BNSF grievance matters versus deciding Kite’s case on merit,” attorney Stephen Thompson asserted in a court filing.
Zimmerman said in her deposition this April that she resigned because she had been put in an untenable position. She said she originally believed there was enough evidence to support Kite’s dismissal but that she drafted the award to reflect a compromise she believed the railroad and union had reached to resolve the case. She indicated that she felt BNSF was trying to disavow that agreement, while the union was pushing her to enforce it, leaving her with no choice but to resign from the case.
“The two parties were so entrenched in their positions that they were not going to accept any award I wrote on my own as fair and impartial,” she said in the deposition.
“I felt that the cleanest, best, most ethical thing in this case would be for the case to be heard by somebody with no prior knowledge of any of this, to just get the record and make a decision,” she said.
Zimmerman said she did not consider Boldra’s comment to be a threat but rather “a statement of common knowledge within the industry” that “an employee who blows his second chance is going to be subject to dismissal.”
“Obviously Mr. Boldra’s statement was not quite as tactful as it might have been,” she said. “I’m sure if he were sitting here today he would phrase it a little differently.”