Exelon Generation Co. v. Local 15, International Brotherhood of Electrical Workers

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604

May 31, 2012

Before

MICHAEL S. KANNE, Circuit Judge
DIANE S. SYKES, Circuit Judge
DAVID F. HAMILTON, Circuit Judge

No. 11-2423

E XELON G ENERATION C OMPANY, LLC,

Plaintiff/Counter-Defendant-Appellee,

v.

L OCAL 15, INTERNATIONAL B ROTHERHOOD
OF E LECTRICAL W ORKERS, AFL-CIO,

Defendant/Counter-Plaintiff-Appellant.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:10-cv-4846—Robert W. Gettleman, Judge.

ORDER

On consideration of the petition for rehearing en banc,
filed on April 13, 2012, all judges on the original panel
2 No. 11-2423

have voted to deny the petition for panel rehearing, and
no judge in active service has requested a vote for re-
hearing en banc.Œ
Accordingly, the petition for rehearing en banc is DENIED.

P OSNER, Circuit Judge. Although I asked for a response
to the petition for rehearing, I am persuaded that the
panel decision is sound and that the criteria for granting
rehearing en banc have not been satisfied. But the result
is disturbing, and while there is nothing judges can
do without exceeding the proper bounds of our office,
Congress and the Nuclear Regulatory Commission can
do something and one or both of them should.
Federal law prescribes stringent requirements that
operators of nuclear facilities must follow before
granting persons, including plant employees, “unescorted
access” to the facility. 10 C.F.R. §§ 73.56, -.57. Exelon,
however, which is one of these operators, has signed a
collective bargaining agreement with a union repre-
senting its employees that provides for binding arbitration
of disputes over “working conditions,” a term that has
been interpreted (Exelon does not challenge the inter-

Œ
Judges Rovner and Williams did not participate in the
consideration of the Petition for Rehearing En Banc.
No. 11-2423 3

pretation) to include disputes over whether a worker
deprived of his right of unescorted access (that is, his
security clearance) was properly deprived of it.
Exelon discharged two employees, the first for failing
a drug and alcohol test and lying about his substance
abuse, and the second for lying about his alcohol
abuse. Exelon’s Nuclear Security Department further de-
termined that the employees’ lies revealed them to
be untrustworthy, and on that ground it revoked the
right of unescorted access that they had needed to
perform their jobs. The two employees filed grievances
with the union, seeking reinstatement and return of
their clearances, and the grievances were moving toward
arbitration when Exelon brought this declaratory judg-
ment action against the union, claiming that although
arbitrators can order reinstatement of terminated employ-
ees they are forbidden by regulations of the Nuclear
Regulatory Commissions to restore unescorted access
privileges that Exelon has revoked—which would preclude
reinstatement of employees, like the two just mentioned,
whose jobs require that they have unescorted access.
The Commission does not review grants or denials of
these security clearances. The nuclear energy companies
grant them, and claim the right to revoke them subject
to no judicial or administrative review. The union dis-
agrees only to the extent that it thinks an arbitrator—a
private citizen, not a government employee—can restore
a security clearance yanked by the employer. Under
either view the government plays no role. The result is
a void that is both strange and dangerous. The safety of
4 No. 11-2423

nuclear energy facilities cannot be taken for granted. See,
e.g., Carl Behrens & Mark Holt, “Nuclear Power Plants:
Vulnerability to Terrorist Attack” (CRS [Congressional
Research Service] Report for Congress, Feb. 4, 2005),
www.fas.org/irp/crs/RS21131.pdf (visited May 18,
2012). The employer should have a right to invoke ad-
ministrative review of a labor arbitrator’s restoration
of a revoked security clearance. Equally an employee
claiming to have been wrongfully deprived of his
security clearance should have a right to administrative
review because the deprivation may bar him from
future employment in his chosen line of work. But it is
the failure to provide public remedies for grants of
security clearances that is especially disturbing. An
errant employee of a nuclear power plant, including a
substance abuser who is also a liar, could do catastrophic
damage.
Arbitrators are selected by or with the consent of the
parties. An arbitrator who gets a reputation for favoring
one side in a class of cases, such as cases of employ-
ment termination, or disputes between investors and
brokers or between management and unions, will be
unacceptable to one of the parties in any future dispute,
and so the demand for his services will wither. A resulting
tendency of arbitrators to split the difference in their
awards—that is, to give each side a partial victory (and
therefore partial defeat)—has been observed. Armendariz v.
Foundation Health Psychcare Services, Inc., 6 P.3d 669, 693
(Cal. 2000); Donald Wittman, “Lay Juries, Professional
Arbitrators, and the Arbitrator; Selection Hypothesis,” 5
American Law & Econ. Rev. 61, 81 (2003); Estelle D. Franklin,
No. 11-2423 5

“Maneuvering Through the Labyrinth: The Employers’
Paradox in Responding to Hostile Environment Sexual
Harassment—A Proposed Way Out,” 67 Fordham L. Rev.
1517, 1565 (1999); Robert Haig, “Corporate Counsel’s
Guide: Legal Development Report on Cost-Effective
Management of Corporate Litigation,” 610 PLI/Lit 177, 186-
87 (1999). Splitting the difference makes it difficult for
parties on either side in a class of disputes to infer a pattern
of favoritism. Risk-averse disputants like the split-the-
difference approach because it truncates both the upside
risk and the downside risk of the dispute-resolution
process. This in turn helps differentiate arbitration from
adjudication, typically an all-or-nothing affair. Differentia-
tion is essential to the success of arbitration as an alter-
native to adjudication because adjudication is subsidized
by the government and arbitration is not. The public
subsidy of the courts places arbitrators at a cost disad-
vantage. One way to overcome it is to offer a service
unavailable from the courts, and split-the-difference
decisionmaking is such a service.
Tugging the other way is the incentive of arbitrators
to cultivate a reputation for competence, which may
hold the split-the-difference tendency at bay. A recent
study finds that the tendency does not characterize
“investment treaty” arbitration, Daphna Kapeliuk, “The
Repeat Appointment Factor: Exploring Decision Patterns
of Elite Investment Arbitrators,” 96 Cornell L. Rev. 47, 83
(2010), though that is an esoteric area of dispute
resolution, remote from labor arbitration, and so
Kapeliuk’s findings may not be applicable to the latter.
6 No. 11-2423

There are enough indications of split-the-difference
behavior in labor arbitration to make one worry about
the possible tendency of an arbitrator reviewing a
nuclear facility’s revocation of an employee’s security
clearance to impose a sanction that would enable him
to retain a right of unescorted access to the facility even
if he were a drug addict, a drunkard, and a congenital
liar all rolled up into one.
The Commission could amend its regulations to
forbid collective bargaining agreements to empower
arbitrators to resolve disputes over security clearances.
See 42 U.S.C. §§ 2201(b), (i), (p). It could establish the
type of administrative process that I have suggested. See
id. As could Congress. So far the Commission has been
content with requiring its licensees to establish security
clearance systems with one layer of internal review and
allowing arbitration pursuant to collective bargaining
agreements to (in effect) overrule a licensee’s revocation of
a clearance. It is time that the Commission, or failing that
Congress, instituted administrative review of decisions by
private arbitrators granting or denying security clearances
to employees of nuclear facilities.
An alternative would be to forbid split-the-difference
awards. The common split award in labor arbitration is
reinstatement without back pay but with a last-chance
clause. The Commission might provide by regulation that
unless the arbitrator decides that the employee is right in
all respects—for example, never had a drinking problem
and always told the truth and so is entitled to reinstate-
ment with full back pay—the security clearance cannot be
reinstated.
No. 11-2423 7

Not all nuclear facilities are unionized. In those that
are not, employers have carte blanche to revoke security
clearances. Those decisions too should be subject to
administrative review.
But whatever the correct solution to the problems created
by the mysterious absence of government review of
decisions involving security clearances for employees
of nuclear facilities, it is beyond judicial authority to
command.

5-31-12