Arbitration Rules/Procedures

The Consumer Financial Protection Bureau released an “Arbitration Study” exceeding 700 pages to Congress this week.  You have likely heard the headlines – most commentators assume that the CFPB will use the study to support an effort to restrict or regulate the use of “pre-dispute” arbitration in financial transactions.  But, let’s not get ahead of ourselves.  The study itself is worth digging into; the CFPB was able to access lots of information that us regular folks cannot.  Indeed, one complaint about arbitration is that it happens inside a black box, out of reach of statistical analysis or scholarly study, and precluding development of legal precedent. Here’s part one of my peek inside that black box, courtesy of the CFPB.

What the Cool Kids Are Putting in Their Arbitration Clauses

About a year ago, CFPB published its findings on the frequency of arbitration agreements in financial agreements.  This report does not add much in that area.  But, it has new information on the features of arbitration clauses that are prevalent in contracts in the industries studied (credit cards, checking accounts, general purpose reloadable prepaid accounts, private student loans, payday loans, and mobile wireless third-party billing).

  • Would you guess that 50% of payday loan agreements and 83% of private student loan agreements allowed their customers to opt out of arbitration? I was surprised. More than a quarter of credit cards and checking account agreements did also.
  • A majority of all types of financial agreements carved out small claims from their arbitration agreements.
  • The AAA is king. It is listed as either the sole provider or an arbitral option in about 9 out of 10 financial agreements (other than student loans). By comparison, JAMS is an option for about half of the agreements (but only 14% of mobile).
  • Roughly 9 of 10 arbitration clauses in these industries preclude class actions in arbitration. Most also stated that if the class waiver is unenforceable, the entire arbitration clause is unenforceable as well. (CFPB calls it the “anti-severability provision.”)
  • What are financial institutions not putting in the agreement? They are not shortening statutes of limitations often, they are not limiting damages very often, they are not authorizing the arbitrator to award attorneys’ fees to the prevailing party often, and they are generally not addressing confidentiality.

What the Public Understands About those Arbitration Clauses

The CFPB surveyed 1007 people about their dispute rights with respect to their credit cards, and found they know *nothing.*  And this should surprise no one.  (I am not pointing fingers.  If you asked me whether I could sue one of my credit card issuers in court, I would not know either.)  The study explains partly why that is: dispute resolution clauses do not factor into a consumer’s choice of credit card.  When all 1007 people were asked what features they considered in acquiring their credit cards, literally no one mentioned the ADR clause.

The 1007 people were asked what credit cards they had, and whether they could sue the company if there was a dispute.  The people who thought they could sue their credit card issuer in court were wrong 80% of the time.

The most surprising thing about the survey results to me were just how passive people are about disputes.  When confronted with a hypothetical example of a credit card refusing to correct a billing mistake, most people would cancel their cards and take no further action. Only 2% of people would consider going to court or talking to an attorney.

In the next post (part two), I will highlight statistics and findings from the CFPB’s comparison of how consumer disputes are resolved in arbitration and how they are resolved in court.

On February 4, an arbitration panel ordered Lance Armstrong to pay $10 million to his former promotions company, SCA, as a result of his “unparalleled pageant of international perjury, fraud and conspiracy” that covered up his use of performance-enhancing drugs.  (Read the NYT story about it here.)  What is curious about the award, from an arbitration law standpoint, is that SCA essentially re-opened an arbitration that it had lost with Armstrong in 2005 to obtain this new award.

The general rule of thumb is that arbitrators lose jurisdiction once they issue the final award.  Other than the short period within which parties may request that arbitrators correct a clerical or computational error under the arbitral rules (AAA gives 20 days; JAMS gives only 7), the arbitrators turn into pumpkins for all practical purposes after the final award is issued.  The arbitral rules do not have any equivalent to Rule 60, which in state and federal courts allows a judge to re-do a judgment or order based on newly discovered evidence, fraud, or mistake.  (But even Rule 60 sets a deadline of one year after the judgment is entered to request that the judgment be vacated…)

There is even a fancy Latin name for the reason that arbitrators turn into pumpkins after they issue final awards: functus officio.  The policy is that arbitration awards are suppoed to bring finality, and we wouldn’t want arbitrators revisiting awards based on improper or ex parte information.  However, one of my favorite arbitration resources, Domke on Arbitration, suggests that there are now so many exceptions to the functus officio doctrine that they just about swallow the rule.  Courts have allowed arbitrators to revisit their awards to correct mistakes, to rule on an issue that was submitted but not decided, to clarify an ambiguity, and always, if the parties contractually authorize the same panel to hear a new issue.

That last exception explains how the SCA got a second bite at its arbitration with Armstrong.  SCA’s petition to confirm the new arbitration award gives some important additional facts about what happened at the 2005 arbitration.  Before the arbitration concluded, SCA and Armstrong entered into a settlement agreement requiring SCA to pay Armstrong $7.5 Million.  That settlement agreement specified that the same panel of three arbitrators who heard the 2005 evidence would have “exclusive jurisdiction over” “any dispute or controversy [between the parties] arising under or in connection with” the settlement agreement.

After Armstrong admitted to Oprah Winfrey that he lied in his arbitration with SCA, SCA pursued two new claims with the three original arbitrators: sanctions for perjury and forfeiture of prize money that SCA had paid to Armstrong.  Armstrong objected that the initial panel lacked authority to reconvene, but a majority of the panel disagreed.  After hearing the evidence, a majority of the panel awarded SCA $10 million in sanctions against Armstrong.

Is there any lesson in this highly unusual tale for the run-of-the-mill arbitration?  Of course.  In general, parties and their advocates have one shot at getting the right result in arbitration, so every effort should be made to uncover important evidence and submit it to the panel.  But, in the circumstance where one party is convinced that material evidence remains hidden, why not find a way to make sure the same arbitrator(s) could hear that evidence in the future?  The settlement agreement between Armstrong and SCA is a good vehicle for that.

[Thanks to Karl Bayer and his Disputing Blog for alerting me to this award.]

Post Script: I received great advice from readers that I want to pass along to other advocates.  A few readers noted that the case law authorizing arbitrators to sanction parties is still developing, so attorneys who are involved in drafting arbitration agreements should consider granting the arbitrator specific authority to punish bad behavior.  Additionally, another reader noted that if the parties agree to have the same panel hear any future disputes, they would be wise to consider what happens if one of the panelists is no longer available.  Otherwise, a party who later refused to arbitrate could say that the precise makeup of the panel was integral to the parties’ agreement, such that the inability of any of the arbitrators to serve destroys the agreement to arbitrate.

The Supreme Court of Hawai’i concluded last week that it is fundamentally unfair to allow one party to an arbitration agreement to unilaterally select the arbitral forum. Nishimura v. Gentry Homes, Ltd., __ P.3d__, 2014 WL 5503393 (Haw. Oct. 31, 2014).  The parties can either jointly agree to a forum, or the court will select it for them.

A putative class of homeowners sued their builder, alleging the homes lacked “adequate high wind protection.” The builder moved to compel arbitration. The arbitration agreement called for binding arbitration of all disputes relating to the design or construction of the home. It also stated the “arbitration shall be conducted by Construction Arbitration Services, Inc., or such other reputable arbitration service that [the warranty service corporation] shall select, at its sole discretion…” Because Construction Arbitration Services, Inc., was no longer administering construction arbitrations, the agreement allowed the builder and its warranty service to unilaterally chose the entity that would administer the arbitration.

The Hawaii high court refused to allow the builder such one-sided power. It adopted the Sixth Circuit’s “fundamental fairness” test to determine “whether an arbitrator-selection provision is enforceable.” Applying that test, the court affirmed the lower court’s finding that the sole discretion in the arbitration agreement is fundamentally unfair. (The court also clarified that a party challenging the arbitration agreement’s arbitrator selection process does not need to wait until the arbitration is over and does not need to prove actual bias.) The court therefore severed the arbitrator-selection sentence from the agreement, and affirmed the lower court’s order requiring the parties to try and agree on an arbitration service or else the court would fill in the gap.

I am not sure why the Sixth Circuit, and then Hawaii, would establish a separate test for invalidating an arbitrator selection provision, instead of just applying a routine unconscionability analysis. Creating a special test for arbitrator selection seems to invite a preemption argument.

Finally, a post script from last week’s post (noting that a wife was not bound to her husband’s arbitration agreement on a golf cart purchase). This week, a case went the other way, finding a wife was bound to her husband’s arbitration agreement. In Everett v. Paul Davis Restoration, Inc., __ F.3d __, 2014 WL 5573300 (7th Cir. Nov. 3, 2014), the court found that the wife had received many direct benefits from the franchise agreement signed only by her husband and therefore was bound by its arbitration agreement. (For example, she was a half owner of the company that ran the franchise and benefitted from “trading upon the name, goodwill, reputation and other direct contractual benefits of the franchise agreement.”) It also did not help that the husband-wife team colluded to avoid the restrictive covenant in the franchise agreement.

This week marks the third anniversary of this blog devoted to interpretations of the Federal Arbitration Act.  (Here’s the first post.)  After 155 posts, can there possibly be more to say?  Yes, indeed.  Three new opinions from federal courts of appeals demonstrate how new issues keep “cropping” up in arbitration law each week.

The first case has to do with crop insurance and whether an arbitrator exceeded his power.  In Davis v. Producers Agricultural Ins. Co., __ F.3d__ 2014 WL3844815 (11th Cir. Aug. 6, 2014), the district court vacated the arbitrator’s award and the Eleventh Circuit reversed.  The decision revolved around two legal issues.  One is not likely to come up for many of us (whether the arbitrator exceeded his authority by interpreting an aspect of a crop reinsurance policy that is reserved to the Federal Crop Insurance Corporation; he didn’t because the FCIC had already approved the arbitrator’s interpretation).  But the second is a harsh result that could impact many parties in arbitration.  The applicable AAA rules provided that the arbitrator must issue his opinion within 30 days of closing the proceeding, but the arbitrator did not issue the award until the 33rd day.  The losing party argued that by issuing the award late, the arbitrator had exceeded his power under Section 10, and the award should be vacated.  The Eleventh Circuit relied on a 1969 case from the 5th Circuit to find that the losing party had waived his right to argue timeliness by failing to “object at the expiration of the thirty-day period.”  This strikes me as an unrealistic standard.  What party in their right mind would aggravate an arbitrator who is about to issue an award by complaining that the decision is tardy?  None, unless that party already knew it was going to lose.

The second case is about whether an arbitration clause in a non-compete agreement is broad enough to require arbitration of claims under the Fair Labor Standards Act.  In Sanchez v. Nitro-Lift Technologies, LLC, __ F.3d__, 2014 WL 3882543 (10th Cir. Aug. 8, 2014), employees sued Nitro-Lift for violating the FLSA by not paying overtime wages.  Those employees had each signed a “Confidentiality/Non-Compete Agreement” with an arbitration clause calling for arbitration of “any dispute, difference or unresolved question” between the parties.  The district court denied Nitro-Lift’s motion to compel arbitration, finding that an arbitration clause in a non-compete can only cover issues of competition, not overtime wages.  The Tenth Circuit disagreed, finding that the arbitration clause was as broad as possible and its placement within a non-compete agreement only made it ambiguous whether the arbitration clause was intended to cover broader disputes.  Because federal law requires all ambiguities about scope to be resolved in favor of arbitration, the dispute had to be arbitrated.  The court did, however, remand the issue to the district court to determine whether the fees of arbitration precluded the plaintiffs from effectively vindicating their federal statutory rights.  (Does Nitro-Lift ring a bell?  It could be because of another time the company had its arbitration clause saved by an appellate court.)

Finally, the third case for today is about non-signatories.  In Griswold v. Coventry First LLC, __ F.3d__, 2014 WL3892995 (3d Cir. Aug. 11, 2014), Mr. Griswold bought a large life insurance policy on himself. He set up a trust to own the policy and set up Griswold LLP as the beneficiary of the trust.  About two years after purchasing the policy, Mr. Griswold used a broker to sell the policy to Coventry.  That purchase agreement between the trust and Coventry had an arbitration clause.  After disbursing the funds, Griswold LLP dissolved.  Later, Mr. Griswold sued Coventry alleging that it colluded with the broker to be the sole bidder on his policy (getting it cheap).  Coventry moved to compel arbitration, but the district court denied its motion because Mr. Griswold was not a signatory to the purchase agreement.  The Third Circuit agreed. It found that equitable estoppel did not apply to bind Mr. Griswold to the arbitration agreement in the purchase agreement because his complaint did not mention or rely on the purchase agreement.  In fact, the fraud and collusion he alleged took place before the purchase agreement was executed.  That result was particularly important in this case, because Mr. Griswold wanted to proceed as a class action, which was unavailable in arbitration.

I look forward to another year of analyzing the evolving jurisprudence under the FAA!  Thanks for joining me on the journey.

 

Although we usually expect arbitrators to be impartial, the Supreme Court of Texas vacated an arbitration award because the chosen arbitrators were too impartial. Americo Life, Inc. v. Myer, __S.W.3d__, 2014 WL 2789429 (Tex. June 20, 2014). Because the court found the parties’ agreement allowed each side to choose an arbitrator who was partial to it, but the AAA had disqualified the selected advocate-arbitrators, the award was vacated.

The case stemmed from Myer’s sale of a collection of businesses to Americo in 1998. The arbitration agreement in the sale document stated that any disputes should be decided by three arbitrators, with each party appointing one arbitrator and those two selecting the third. The arbitration would be governed by AAA’s commercial rules. Critically, “[e]ach arbitrator shall be a knowledgeable, independent business person or professional.” A dispute about the meaning of that sentence caused the arbitration and its appeals to last nine years.

In 2005, Americo demanded arbitration. At that time, the AAA rules explicitly required arbitrators to be “impartial and independent.” Therefore, when Americo (twice) chose an arbitrator that was partial towards it, the AAA disqualified those arbitrators. After a panel of three impartial arbitrators heard the evidence, they awarded Myer over $26 million in damages.

Americo moved to vacate the award, arguing that the arbitrators were not selected in accordance with the parties’ agreement. The trial court vacated the award, the court of appeals un-vacated it, and a majority of the Texas Supreme Court re-vacated it.

The high court’s analysis emphasized the fact that “arbitrators must be selected pursuant to the method specified in the parties’ agreement.” Because the touchstone is the agreement, the court had to interpret whether the contractual requirement that the arbitrator be “independent” meant that he or she be impartial. The court concluded it did not. The 1998 AAA rules allowed parties to appoint arbitrators that would serve as their advocates. Therefore, the court interpreted “independent” to mean only that the arbitrators would not actually be employed by a party or under its control. (It also found that the modified AAA rules could not trump terms in the agreement itself.)

Once the court concluded that the agreement allowed arbitrators to be biased toward the party that selected them, but the AAA had disqualified arbitrators for being biased, its decision to vacate became unavoidable. “[T]he arbitration panel was formed contrary to the express terms of the arbitration agreement. The panel therefore, exceeded its authority when it resolved the parties’ dispute.” Four justices dissented from the opinion, arguing that the AAA rules in effect in 2005 demanded impartial arbitrators unless the parties specifically agreed otherwise and the language of the parties’ agreement did not specifically allow non-neutral arbitrators.

This case shows why arbitration law is so hard for people to grasp. Essentially, this case says that an award reached by three impartial arbitrators has to be reversed, because two of those arbitrators should have been biased. That is a head-scratcher.  Only when you understand that the FAA emphasizes the parties’ agreement over almost everything else does that result make any sense at all. This case may become Exhibit B for me when I explain that case law under the FAA is not intuitive, even for lawyers (Exhibit A is Buckeye Check Cashing, which never fails to elicit a strong reaction from the uninitiated).

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In a short and sweet opinion issued just six weeks after argument, the Eighth Circuit yesterday held that an arbitrator was authorized to decide whether a non-signatory was able to arbitrate a dispute.  Eckert/Wordell Architects, Inc. v. FJM Props. of Willmar, LLC, __ F.3d __, 2014 WL 2922343 (8th Cir. June 30, 2014).

The dispute was over the design and construction of a laser eye clinic in Minnesota.  The contract containing the arbitration agreement was between the architects and Fischer Laser Eye Center, the owner of the property where the clinic would be.  The shareholders of Fischer later formed a separate company to own and develop the land for the clinic, and that second company then changed its name to FJM Properties.  When it discovered problems with ventilation, FJM Properties demanded arbitration with the architects.  That arbitration proceeding went on for more than a year.  Just a month before the evidentiary hearing, the architects objected to participating further, based on their assertion that they had no arbitration agreement with FJM Properties.  The arbitrator found he had power to determine whether the parties had an arbitration agreement and invited briefing.

The architects went to federal district court and asked the judge to stop the arbitration.  But the court agreed that the arbitrator had the power to decide whether FJM could enforce the arbitration agreement between Fischer and the architects.  In a single paragraph of analysis, the Eighth Circuit affirmed.  It reminds us that “threshold questions of arbitrability are for a court to decide, unless there is clear and unmistakable evidence the parties intended to commit questions of arbitrability to an arbitrator.”  In this case, the parties’ incorporation of the AAA’s Construction Industry Arbitration Rules (which allow arbitrators to rule on their own jurisdiction) served as “a clear and unmistakable indication the parties intended for the arbitrator to decide threshold questions of arbitrability.”  Reading between the lines, the fact that the architects drafted the contract and then tried to design an escape hatch from arbitration after the proceeding was nearly concluded did not help their cause.

 

I field a lot of good procedural questions about how arbitration pleadings should be styled. Some of them are answered within the text of the FAA, but many of them leave clerks of court and practitioners scratching their heads and getting creative. I will address one of those common questions today: is a motion to compel arbitration a sufficient “answer” under Rule 12? Short answer: yes.

The Tenth Circuit addressed this issue and gave a clear answer, with authority that others can use:

“[a] defendant in a pending lawsuit may file a petition or motion to compel arbitration in lieu of an answer to the complaint,” Jay A. Grenig, Alternative Dispute Resolution § 23:3 at 574 (3d ed.2005)—as procedural summaries in arbitration cases uncontroversially reflect, see, e.g., Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 83, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000); Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1270 (11th Cir.2002). And, as [defendant] points out, requiring a party to file an answer denying material allegations in the complaint and asserting potential affirmative defenses—in short, formally and substantively engaging in the merits of the litigation—in order to enforce its right not to litigate is a non-sequitur.

 Lamkin v. Morinda Properties Weight Parcel, LLC, 440 Fed.Appx. 604, 607-08 (10th Cir. 2011).

Other courts have implicitly noted that a motion to compel arbitration, pursuant to Sections 3 or 4 of the FAA, may be filed instead of an answer that responds to the substance of a plaintiff’s complaint. E.g., Tuttle v. Sallie Mae, Inc., 2014 WL 545379, at *2 (N.D. Ind. Feb. 11, 2014); MQDC, Inc. v. Steadfast Ins. Co., 2013 WL 6388624, at *6 (E.D.N.Y. Dec. 6, 2013); Whaley v. T-Mobile, Inc., 2013 WL 5155342, at *2 (E.D. Ky. Sept. 12, 2013).

Therefore, if you are (or represent) a defendant who is served with a federal lawsuit, and the dispute is covered by an arbitration clause, you have two choices:

1) file a substantive answer within 21 days, which raises arbitration as an affirmative defense, with a motion to compel arbitration following soon after; or

2) file a motion to compel arbitration in lieu of any substantive answer (obviously, still within the 21 days).

Three decisions came out recently that offer guidance on appealing from arbitration awards.  Here are three pearls of arbitration appeal wisdom, one from each case:

1.  If you want to appeal from an arbitration, you must have a record.  Sounds basic, right?  But many parties, either due to confidence they will win in arbitration or due to penny-pinching, choose not to hire a court reporter to provide a transcript of the arbitration.  Similarly (though less frequently in my experience), parties sometimes opt for an arbitration award that does not include the arbitrator’s reasoning.  (I always advise clients to choose the highest level of award possible. If there were a Super Monster Supreme Award With Chocolate Sprinkles, I would recommend that.)  Those decisions can be the death knell of an arbitration appeal.  As the Sixth Circuit found recently, a party who fails to preserve a “complete record of the arbitration proceedings [] cannot meet its high burden of showing that the arbitration award must be vacated.”  Physicians Ins. Capital v. Praesidium Alliance Group, 2014 WL 1388835 (6th Cir. April 10, 2014).

2.  You cannot appeal in the middle of arbitration.  There are only two times to come to court about your arbitration: before it happens, when you want to figure out whether arbitration is required under your contract; and after it is complete, when you want to either vacate or confirm the final award.  The corollary is: you cannot appeal in between.  That rule was reiterated in Savers Property & Cas. Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburg, 2014 WL 1378134 (6th Cir. April 9, 2014).  (Other circuits take note — Savers was argued on March 21 and the decision came out less than three weeks later.  Such efficiency!)  In Savers, the panel of arbitrators had issued an interim award on liability and were accepting submissions on damages when the liable party convinced the federal court to enjoin any further orders from the panel (based largely on allegations of evident partiality).  The Sixth Circuit reversed the district court’s injunction saying that the liable party “is entitled to its day in court to challenge the fairness of the proceedings and the partiality of the arbitrators — just not until the panel has concluded its work and issued a final award.”

3.  If your arbitration itself includes an appellate review, the court may review both levels of arbitral awards.  As you likely are aware, the AAA started offering optional appellate rules a few months ago. (CPR and JAMS already had optional appellate rules.)  If parties incorporate those appellate rules into their arbitration agreement, then they are entitled to have a first arbitrator/panel decide the issues in the case, and then a second panel of arbitrators decide if the first arbitrator(s) made any material errors of law or “clearly erroneous” factual determinations.  (I didn’t blog about it because *everyone* was blogging about it.  The same reason I am not blogging about the new General Mills policy today…)  One of the practical questions I had about that process was how the courts would review those two levels of arbitral awards on motions to confirm or vacate.  Would a court review only the “final” award of the appellate panel?  Or would it conduct an independent review of the initial arbitrators’ decision?  The Alaska Supreme Court had occasion to address that situation and decided to give both levels of arbitration award the same level of scrutiny.  In Dunham v. Lithia Motors Supports Servs., Inc., 2014 WL 1421780 (Alaska April 9, 2014), the employment agreement allowed a second arbitrator to review the award made by the first arbitrator.  Both arbitrators concluded the employees’ claims lacked merit.  In considering the employees’ allegations that the award should be vacated, the court applied the Section 10 standards to both levels of arbitration: “neither arbitrator manifestly disregarded the law nor issued a completely irrational award;”  “the arbitrators’ awards do not violate public policy.”  While that is a good belt-and-suspenders approach, it strikes me as inefficient and unworkable in cases where the appellate arbitrators actually reversed an aspect of the trial arbitrator’s award.

 

Arbitration is in the news.  Not just a buried paragraph in the business section, but the front page.   (A three-arbitrator panel issued a 34-page arbitration award finding Major League Baseball was justified in suspending baseball player Alex Rodriguez for 162 games, which A-Rod is now trying to vacate.)  My own hope is that this high-profile arbitration becomes a tool for teaching the public about arbitration.  Indeed, A-Rod’s experience to date offers pointers for everyone from the arbitration novices to nerds. For example:

  • Labor disputes — i.e. those between employees who are members of unions and the employer or other employees — are frequently arbitrated.
  • In a case where the arbitration will be decided by three arbitrators, the agreement often provides that each party to the arbitration will choose one of the three, and only the third arbitrator will be neutral.  (In this case, one of A-Rod’s complaints is that his union, the MLB Players Association, chose his arbitrator and did not allow his personal legal team to make the selection.)  A-Rod’s panel was made up of the General Counsel of the Players Association, the COO of Major League Baseball, and then the impartial chair, Fredric Horowitz.  (The Players Association appointee did not agree to the award.)
  • Arbitration hearings do not generally proceed under either the Federal Rules of Civil Procedure or any state’s rules of civil procedure, nor do they necessarily abide by the federal or state rules of evidence.  Instead, the parties’ contract dictates what rules will govern the arbitration proceeding (contracts often choose rules of the arbitration provider, like the AAA).  In this case, the parties’ collective bargaining agreement set out its own rules of procedure that would govern.
  • Arbitration proceedings are not necessarily confidential.  A-Rod was unsuccessful in asking a federal judge to “seal” his arbitration award, i.e. keep it out of the public record.  And in general, once any party goes to court to confirm or vacate an arbitration award, the award is likely to become public, even if the parties’ agreement or the arbitral rules provide for confidentiality.
  • Arbitrators only have power over the parties who signed the arbitration agreement at issue, but not over third parties like media outlets.  In this case, both parties complained about violations of the confidentiality clause in the parties’ agreement during the arbitration, but the arbitration award noted that “the Panel does not have authority to enjoin third parties or the media from breaching the confidentiality provisions” of the agreement.
  • Arbitration awards are extremely difficult to overturn.  There are only four valid bases to overturn an arbitration award under the Federal Arbitration Act.  Rodriguez is arguing two of those bases (that the arbitrators refused to hear pertinent evidence and were partial to MLB).  He is also arguing a basis that is not found in the FAA, but was created by judges: the arbitrator manifestly disregarded the law.  Many federal courts have declared that “manifest disregard of the law” cannot be used to overturn arbitration awards (because it is not in the statute), but the federal courts in New York have continued to allow arguments that arbitrators effectively disregarded legal precedent.