Baxter International , Incorporated v. Abbott Laboratories

* Chief Judge Flaum and Judges Manion and Rovner did not
participate in consideration of this matter.
In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-2039
B AXTER I NTERNATIONAL , I NCORPORATED ,
Plaintiff-Appellant,
v.
A BBOTT L ABORATORIES , Defendant-Appellee.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
Nos. 01 C 4809 & 01 C 4839—Ronald A. Guzmán, Judge.
____________
Petition for Rehearing and
Rehearing En Banc
____________
D ECIDED —A PRIL 10, 2003
____________
Before C UDAHY , P OSNER , C OFFEY , E ASTERBROOK , R IPPLE ,
K ANNE , D IANE P. W OOD , E VANS , and W ILLIAMS , Circuit
Judges.*
Plaintiff-appellant filed a petition for rehearing and re-
hearing en banc on January 30, 2003. A vote of the active
members of the court was requested, Circuit Judges Ripple,
Diane P. Wood, and Williams voted to grant rehearing en
banc, and a majority of the judges voted to deny rehearing
en banc. A majority of the judges on the panel voted to deny
rehearing. The petition for rehearing is therefore denied.

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2 No. 02-2039
R IPPLE , Circuit Judge, with whom Diane P. Wood and
Williams, Circuit Judges,. join, dissenting from the denial
of rehearing en banc. It is my judgment that the scope of
judicial review of arbitral decisions that, at least arguably,
order the parties to violate the law is an important issue
that deserves the attention of the full court. As the cases
cited by the dissent demonstrate, the panel opinion’s analy-
sis is difficult to square with existing Supreme Court prece-
dent and, indeed, with the precedent of this circuit and our
sister circuits.
In the panel majority’s view, “the initial question is
whether Baxter is entitled to reargue an issue that was
resolved by the arbitral tribunal.” Baxter Int’l, Inc. v.
Abbott Labs., 315 F.3d 829, 831 (7th Cir. 2003). The panel
majority takes the view that the resolution of the question
is a clear-cut application of existing law. In its analysis, the
panel majority first notes that Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), held
that antitrust issues can be arbitrated. It then invokes the
general principle that a mistake in law is not a ground on
which to set aside an award. Consequently, the majority
concludes, there is no reason to disturb the arbitral award
even if the arbitral panel erred in concluding that the
parties’ agreement did not violate the antitrust laws.
However, as the dissent notes, the majority opinion is
anything but a straightforward application of circuit and
Supreme Court precedent; indeed, the majority opinion
significantly expands the Supreme Court’s holding in
Mitsubishi:
Now, the majority has taken the process one giant step
further and has found that Mitsubishi not only allows
submission of statutory and antitrust claims to arbi-
tration, but denies our prerogative to refuse to enforce
awards that command unlawful conduct. . . .
Id. at 836.

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No. 02-2039 3
Although the majority’s opinion is subject to different in-
terpretations, there is certainly strength in Baxter’s sub-
mission that, as written, the panel’s opinion holds that
“[a]rbitrators have the unreviewable authority to decide for
themselves whether they are commanding the parties to
violate the law.” Rehearing Pet. at 8. There is also ground
for agreeing with Baxter that such a broad holding conflicts
with any number of Supreme Court and circuit cases that
establish that questions of public policy are ultimately
reserved for the courts. See, e.g., W.R. Grace & Co. v. Local
Union 759, Int’l Union of United Rubber, Cork, Linoleum
& Plastic Workers of America, 461 U.S. 757 (1983). The Su-
preme Court has held that a court may refuse to enforce
an arbitral award “where the contract as interpreted would
violate some explicit public policy that is well defined
and dominant”; this requirement is to be determined “by
reference to the laws and legal precedents and not from
general considerations of supposed public interests.” United
Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 43-44
(1987) (internal quotation marks and citations omitted).
This requirement—reference to an explicit public policy
grounded in law—certainly is met in the present case
because the policy is contained in § 1 of the Sherman Act.
Arbitration is an ever-expanding means of resolving
conflicts without incurring the increased expenditure of
time and funds often associated with litigation. With due
respect to parties’ choice of decisionmakers and also to
legislative policies favoring arbitration, the role of the
courts to interpret and uphold the law should not be
dismissed casually. The opinion of the panel majority clouds
the authority of the court to review arbitration agreements
of private parties that violate public policy—an authority
repeatedly acknowledged by the Supreme Court. I would
grant rehearing en banc.

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4 No. 02-2039
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—4-10-03

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