Participation Without Reservation Waives Non‑Signatory Arbitrability Objections in Labor Arbitration

Precedents Cited

• Cont'l Cas. Co. v. Certain Underwriters at Lloyd's of London, 10 F.4th 814 (7th Cir. 2021): supplied the appellate standard of review for confirmation orders (legal issues de novo; factual matters for clear error). The court used this framing to emphasize that the real question was the legal permissibility of confirmation under the highly deferential arbitral-review regime.
• AGCO Corp. v. Anglin, 216 F.3d 589 (7th Cir. 2000): provided the central waiver rule: a party that “willingly and without reservation” submits an issue to arbitration cannot later argue the arbitrator lacked authority. The court treated this as dispositive of the non-signatories’ arbitrability objection because all “Employers” participated without clearly reserving the right to contest arbitrability.
• Slaney v. Int'l Amateur Athletic Fed'n, 244 F.3d 580 (7th Cir. 2001): reinforced that a party cannot “sit back and allow the arbitration to go forward” and then deny agreement to arbitrate after an adverse outcome. This buttressed the court’s conclusion that participation plus silence equals forfeiture of the arbitrability challenge.
• Int'l Ass'n of Machinists & Aerospace Workers, Lodge No. 1777 v. Fansteel, Inc., 900 F.2d 1005 (7th Cir. 1990): supplied the “carefully and explicitly” requirement—objections to arbitrability must be made in unambiguous language to the arbitrator and union even if the objector proceeds with the hearing. The court used Fansteel to highlight what was missing here: any record indication that counsel limited his appearance or preserved an objection on behalf of some respondents.
• Jones Dairy Farm v. Local No. P-1236, United Food & Com. Workers Int'l Union, 760 F.2d 173 (7th Cir. 1985): supported the proposition that absent evidence the parties “questioned the arbitrator's authority,” they cannot later claim he had “no authority” to bind them. The panel relied on this to close the door on the post-award arbitrability attack.
• United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593 (1960): supplied the foundational labor-arbitration limitation: arbitrators interpret and apply the CBA and do not “dispense [their] own brand of industrial justice.” The court invoked Enterprise Wheel to explain the “essence” inquiry and why disagreement with the arbitrator’s interpretation is not a basis for vacatur.
• N. Ind. Pub. Serv. Co. v. United Steelworkers of Am., 243 F.3d 345 (7th Cir. 2001); Amax Coal Co. v. United Mine Workers of Am., 92 F.3d 571 (7th Cir. 1996); Am. Postal Workers Union v. Runyon, 185 F.3d 832 (7th Cir. 1999): collectively articulated the Seventh Circuit’s extreme deference to arbitral reasoning—vacatur is appropriate only where there is “no possible interpretive route” from the CBA to the award, i.e., the arbitrator must have relied on something outside the contract. The panel used these cases to reject the Employers’ arguments that the “hotel” and “Employer” determinations failed the essence test.
• U.S. Soccer Fed'n, Inc. v. U.S. Nat'l Soccer Team Players Ass'n, 838 F.3d 826 (7th Cir. 2016): reinforced that even clear or gross interpretive error is not enough; the question is whether the arbitrator “interpreted the contract.” The court relied on this to deem the Employers’ “wrong interpretation” arguments legally irrelevant on review.
• Hill v. Staten Island Zoological Soc'y, Inc., 147 F.3d 209 (2d Cir. 1998) (quoted in Am. Postal Workers Union v. Runyon): supported the separate principle that parties may expand the arbitrator’s authority by “express submission” of issues beyond the contract’s default scope. The panel used this to provide an alternative holding: even if “single employer” or “hotel” status were not purely contractual questions, the parties’ extensive litigation of those issues in arbitration without objection brought them within the arbitrator’s authority.

Legal Reasoning

1) Non-signatories (and an individual) can be bound when they participate without reserving arbitrability

The Employers argued that only Elmar agreed to arbitrate because only Elmar (through Karcho) assumed the CBA. The court treated this as an arbitrability objection that was waived. Critical facts were (i) the presence of Polselli, Karcho, and Crouse at hearings, (ii) joint representation, and (iii) counsel’s self-identification as “Attorney for each Respondent” with no limitation or reservation.

Under AGCO Corp. v. Anglin and Int'l Ass'n of Machinists & Aerospace Workers, Lodge No. 1777 v. Fansteel, Inc., participation is compatible with later challenge only if the party “clearly and explicitly” reserves the objection. Silence while litigating the merits forecloses a post-loss arbitrability challenge.

2) The “essence” standard: the award stands if the arbitrator interpreted the CBA

The Employers next contended the arbitrator lacked authority to decide whether the Inn was a “hotel” and whether Allegiant, Elmar, and Social Club were the contractual “Employer.” The court rejected this under the “draws its essence from” test associated with United Steelworkers of Am. v. Enter. Wheel & Car Corp..

The panel emphasized the Seventh Circuit’s most deferential formulation (from N. Ind. Pub. Serv. Co. v. United Steelworkers of Am. and related cases): vacatur is appropriate only where there is “no possible interpretive route” from the CBA to the award. Here, the arbitrator expressly:

• Tied applicability to whether the facility was still a “hotel,” consulted the Group Sales Agreement, and reasoned the building became “a different type of hotel” rather than ceasing to be one.
• Parsed the CBA’s “broad definition” of “Employer” (including entities “substantially under the control of the [Inn]”) and found common control—especially Polselli’s central role and coordination among entities—supporting a “single employer.”

Whether those readings were correct did not matter under U.S. Soccer Fed'n, Inc. v. U.S. Nat'l Soccer Team Players Ass'n; what mattered was that they were grounded in contract interpretation.

3) Express submission as a backstop basis of authority

The court added that, even if these issues could be seen as “outside” the CBA, the parties’ conduct brought them within the arbitrator’s authority. Relying on Am. Postal Workers Union v. Runyon (quoting Hill v. Staten Island Zoological Soc'y, Inc.), the panel held that parties can expand arbitral authority by submitting issues for decision. The Employers argued “single employer” and “hotel” at length and never objected to the arbitrator resolving those questions; they therefore could not complain on judicial review that he decided them.

4) NLRA finding and notice/due process challenges

The Employers argued the arbitrator could not find NLRA violations by Polselli and Social Club because the NLRB charge named only Elmar and Allegiant. The court characterized this primarily as a repackaged attack on the “Employer” finding. To the extent it was a notice/due process claim, it failed on the record: grievances were addressed to Polselli, Karcho, and others; the NLRB charge listed Polselli and Crouse as representatives; and the relevant actors appeared with counsel and actively litigated the identity/scope of the “Employer.”

The due process claim also targeted the arbitrator’s adverse inference from Karcho’s failure to testify after suggesting she would. The court rejected the contention that this shifted the burden of proof, noting the inference was only one factor among many.

5) Public policy challenge

The Employers argued the award violated public policy because the arbitrator effectively “pierced the corporate veil” to bind non-signatories. The court treated this as another reframing of the already-rejected arbitrability and contractual-authority arguments, and it declined to disturb the award on that basis.

Impact

• Sharper waiver stakes for multi-entity employers: Entities (and individuals) that appear, litigate, and share counsel in labor arbitration without an explicit reservation risk being bound even if they later characterize themselves as non-signatories. The decision underscores that arbitrability objections must be preserved contemporaneously and unambiguously.
• Reinforcement of “no possible interpretive route” deference: Challenges framed as “the arbitrator got the contract wrong” remain dead on arrival in the Seventh Circuit so long as the award is plausibly tethered to CBA text and context (here, “hotel” operations and the CBA’s “Employer” definition).
• Express-submission doctrine as a practical trapdoor: Even when parties later argue an issue was beyond arbitral jurisdiction, litigating it on the merits without objection can itself confer authority. This affects disputes over “single employer,” successorship, scope of bargaining unit work, and operational characterization of a facility.
• Operational repurposing does not necessarily escape a hospitality CBA: The “different type of hotel” framing suggests that repurposing a hotel to provide migrant or other social-service housing will not automatically remove it from contractual definitions tied to hotel operations, especially where agreements and conduct resemble continuing hotel services.