First, SCOTUSblog referenced “arbitration nation” last fall, which was flattering.  Then last week the Ninth Circuit declared: “we have become an arbitration nation.”   That was basically the title of my first post on this blog seven years ago!  (“We are becoming an arbitration nation.”) I am going to turn up the  Janet Jackson  (“Rhythm Nation”) and feel smugly validated while I draft the rest of this post.  Because there is more to talk about than just the catchy phrase spreading far and wide.  Three federal circuits have vacated arbitration awards this month, giving new hope to parties who are trying to vacate awards and offering cautionary tales to arbitrators.

Aspic Eng’g & Constr. Co. v. ECC Centcom Constructors2019 WL 333339 (9th Cir. Jan. 28, 2019), dealt with a subcontractor constructing army facilities in Afghanistan.  The subcontractor claimed it was owed significant funds after the project was terminated for convenience by the U.S. government.  It proceeded to arbitration against the prime contractor, and an arbitrator awarded the subcontractor just over $1,000,000.  The prime contractor petitioned to vacate the award.

Both the district court and Ninth Circuit found that the award should be vacated.  The appellate court found the arbitrator exceeded his power within the meaning of Section 10 (a)(4) by issuing a “completely irrational” award.  And what made it completely irrational in the court’s view?  It was the fact that the arbitrator explicitly refused to enforce material provisions of the parties’ subcontract because the Arbitrator concluded  “it was not reasonable to expect that Afghanistan subcontractors would be able to conform to the strict and detailed requirements of general contractors on U.S. Federal projects.”    The court found that the resulting award directly conflicted with the parties’ subcontract.  “By concluding that [subcontractor] need not comply with the FAR requirements, the Arbitrator exceeded his authority and failed to draw the essence of the Award from the Subcontracts…Such an award is ‘irrational.'”

In the opinion’s conclusion, the court reminds us that it is more than just a rubber stamp for arbitral awards:

We have become an arbitration nation.  An increasing number of private disputes are resolved not by courts, but by arbitrators.  Although courts play a limited role in reviewing arbitral awards, our duty remains an important one.  When an arbitrator disergards the plain text of a contract without legal justification simply to reach a result that he believes is just, we must intervene.

The Ninth Circuit was not the only federal circuit court of appeals to vacate an arbitration award this month.  The Fifth Circuit vacated an award in Southwest Airlines Co. v. Local 555, Transport Workers Union of America, 2019 WL 139247 (5th Cir. Jan. 9, 2019) for a similar reason.  The court found “the arbitrator ignored the unambiguous terms of the CBA.”  In particular, the arbitrator treated the final execution date of the Collective Bargaining Agreement (CBA) as the effective date, even though the record established the parties had ratified it weeks earlier. The court found the arbitrator’s analysis “was not an arguable construction of the CBA and instead amounted to the arbitrator’s own brand of industrial justice.”  Indeed, it introduced the case by saying “this case is an example of when an arbitrator goes too far.”  (The allowable bases for vacatur in this case were governed by the Railway Labor Act, and are similar to those in the FAA.)

The third case comes from the Federal Circuit, in Koester v. U.S. Park Police, 2019 WL 81105 (Fed. Cir. Jan. 3, 2019).   In that labor case, an arbitrator had upheld the park police’s decision to remove an officer from service.  But the court found the arbitrator abused his discretion by refusing to consider evidence, then vacated the award and remanded back to the arbitrator.  (Vacatur in Koester is not governed by the narrow standards of the Federal Arbitration Act, but instead by by the less deferential standards in a federal statute specific to labor relations with government employees.)

In the Midwest, however, arbitration awards fared just fine under the FAA. In fact, the Eighth Circuit un-vacated an award in Great American Ins. Co. v. Russell, 2019 WL 387032 (8th Cir. Jan. 31, 2019).   That case involved a farmer’s claim that his crop insurer wrongfully denied his claim for damage to his corn crop.  A panel of three arbitrators awarded the farmer $1,433,008.  The insurer moved to vacate the award under the Federal Arbitration Act, claiming the arbitrators violated applicable federal regulations that require the arbitrators to make factual findings, including the basis for any award and breakdown any award by claim.  The insurer argued that because the panel did not break the award down by county or otherwise explain the damage calculation, the award must be vacated.  The district court agreed and vacated the award, but the Eighth Circuit reversed, finding “nothing in the regulations required the panel to segregate this claim into multiple separate claims.”

The Fourth Circuit issued an opinion yesterday in an under-developed area of arbitration law: when are awards “mutual, final, and definite”?  This is an important issue because under Section 10(a)(4) of the Federal Arbitration Act, arbitration awards can be vacated if they don’t meet the standard of “mutual, final and, definite.”

In Norfolk Southern Railway Co. v. Sprint Communications Co., 2018 WL 1004805 (4th Cir. Feb. 22, 2018), the parties’ lease agreement called for a three-person appraisal panel to establish the price for the renewal period.  Each party selected their own appraiser, and those two appraisers chose a third appraiser.  (Let’s just call him the Chair.)  In December of 2014, the Chair issued a “majority decision,” setting a payment amount and identifying two critical assumptions underlying that payment amount.  The majority decision clarified that  “[i]f either of these extraordinary assumptions are found to not be true, [the Chair] … reserves the right to withdraw his assent.”   A panel of AAA arbitrators then determined the Majority Decision was final and binding.

Norfolk Southern then moved to confirm the Majority Decision and the district court granted the motion.  The Fourth Circuit reversed, finding the Majority Decision was not “final”.  It cited cases for the proposition that “[a]n award is not ‘final’ under the FAA if it fails to resolve an issue presented by the parties to the arbitrators.”  The court focused on the Chair’s reservation of his right to withdraw his assent as the key aspect of the Majority Decision that made it lack finality.  It wrote: the Chair “did not merely base his assent on certain assumptions, but rather reserved the right to withdraw his assent if his assumptions proved to be incorrect. This outcome cannot be squared with any conception of ‘finality.'”

The Fourth Circuit remanded to the district court with instructions to vacate the award, and told the parties to go back to arbitration for “an arbitration award that is “final” and otherwise complies with the FAA and this opinion.”

This is an important case for arbitrators to read in order to be sure they issue awards that are final and can be confirmed.


Two cases recently fit in one of my favorite categories: those awards that get “un-vacated.”  These cases went through arbitration, had that arbitration award vacated by a district court, only to have the award later resurrected by an appellate court.  In today’s edition, the whiplash happens in both state and federal court.

In Caffey v. Lees, 2018 WL 327260 (R.I. Jan. 9, 2018), Lees was the winner after bringing a personal injury case in arbitration. He was awarded nearly $200,000.  Caffey moved to vacate the award, arguing every possible basis under the Rhode Island arbitration statute.  The trial court granted the motion to vacate, based on the initial failure of Lees’ counsel to disclose a document from its expert.  Not just any document, of course, but an early assessment that contradicted the expert’s eventual opinion about causation.  The trial court found that omission meant the award was procured by “undue means.”

On appeal, the Supreme Court of Rhode Island noted it had not addressed “undue means” since 1858.  It looked to more recent definitions from federal circuit courts of the phrase — noting that proving undue means involves proving “nefarious intent or bad faith” or “immoral” conduct.   It found that standard was not met in this case, since the losing party had the critical document well before it submitted its final brief to the arbitrator.  Indeed, the issue of the untimely disclosure was placed before the arbitrator, and the expert explained the discrepancy.  Because the expert had a plausible explanation, the court could not agree that Lees’ counsel obtained the award through underhanded or conniving means.  The Supreme Court reinstated the award.

A case in the Ninth Circuit followed the same path.  In Sanchez v. Elizondo, 2018 WL 297352 (9th Cir. Jan. 5, 2018), an investor won a $75,000 award in a FINRA arbitration.  The district court granted the broker’s motion to vacate based on an argument that the arbitrator exceeded his powers.  In particular, the arbitrator allowed the arbitration to proceed with a single arbitrator, even after the claimant had submitted a pre-hearing brief increasing its damage request to just over the FINRA line that requires a three-arbitrator panel.  (The FINRA rules provide that claims over $100,000 must be heard by three arbitrators.  The claimant had initially requested exactly $100,000, so was assigned the single arbitrator, but then sought $125,000 in the pre-hearing brief, without amending the claim.)

The Ninth Circuit reinstated the award.  After first establishing that it had appellate jurisdiction, it considered the arbitrator’s powers.  Importantly, the court affirmed that arbitrators have discretion on matters of substance as well as matters of procedure.  In this case, FINRA rules explicitly gave the arbitrator power to interpret the FINRA Code and rules. Furthermore, the arbitrator asked the parties to address the issue of the increased damage amount, considered their arguments, and interpreted the rule to reference the amount initially claimed in the demand, instead of any amount later sought in the arbitration.  Because the arbitrator had power to interpret the rule and did so, the court found he did not exceed his powers.

These don’t seem like hard cases to me.  Given the standard for vacating awards, these arbitration awards should have been straightforward to confirm.  The fact that they weren’t suggests either that the speed of development under the FAA is difficult for advocates and judges to keep up with, or that there may be some judicial hostility toward arbitration coloring the application of the standard for vacatur.

What could be a better subject for a Black Friday weekend post than the Cabbage Patch Kids??!  Especially if you are old enough to remember the 1980s…  Whether you loved or hated the smushed-face dolls, the point of this post is that the 11th Circuit confirmed an arbitration award in their favor, showing significant deference to the arbitrator.  Original Appalachian Artworks, Inc. v. Jakks Pacific, Inc., 2017 WL 5508498 (11th Cir. Nov. 17, 2017).

The dispute was between the company that owns the Cabbage Patch Kids (CPK) brand and a company to which it licensed the intellectual property during 2012-2014 (the licensee).  As the end of the license agreement was approaching, CPK selected a new company to receive the license in 2015, and let them get started creating the new line of toys, so that the new line could launch right away in 2015.  The licensee claimed that was a breach of the agreement and started an arbitration.

The arbitrator concluded that CPK had not breached the agreement and ordered that the licensee had to repay CPK over a million dollars in unpaid royalties.  The licensee moved to vacate the award.  Curiously, it made arguments under both the Georgia Arbitration Code and the FAA, and the 11th Circuit considered them all.  [Maybe showing that New Hampshire was onto something in declaring the FAA does not preempt state law on vacatur?]

Under the Georgia Code, the licensee argued the arbitrator had manifestly disregarded the law by ignoring the parol evidence rule (and accepting extrinsic evidence regarding the agreement).  [Manifest disregard is a statutory basis for vacatur under the Georgia act, unlike the federal act.]  The court found there was no concrete evidence that the arbitrator purposely disregarded the law, which is the standard.  Instead, the transcript and award showed the arbitrator had understood Georgia law as instructing that the purpose of contract interpretation is to effectuate the parties’ intent, and that’s what he tried to do in reviewing the extrinsic evidence.  So, even “assuming the arbitrator incorrectly applied the parol evidence rule,” the court found he “simply made a mistake.”  That does not rise to the level of manifest disregard.

Under the FAA, the licensee separately argued that the arbitrator had exceeded his powers.  After quoting the standard from Sutter, the court quickly concluded that because the arbitrator did interpret the parties’ contract, it does not matter “whether he got its meaning right or wrong,” the award must be confirmed.

Today I present a collection of recent state and federal appellate court decisions that vacate or un-vacate arbitration awards. The seven opinions below emphasize how difficult it is to prove that an arbitrator exceeded his or her power and suggest that the surest way to vacate an arbitration award is still by presenting evidence that an arbitrator had significant ties to the opposing party.


The Supreme Court of Alabama vacated an award for evident partiality. Municipal Workers Compensation Fund, Inc. v. Morgan Keegan & Co., Inc., __ So. 3d __, 2015 WL 1524911 (Ala. Apr. 3, 2015). Alabama has determined, under the FAA, that arbitration awards may be vacated if the evidence shows a “reasonable impression of partiality” by the arbitrators. In this case, the court found that one of the three FINRA arbitrators did not disclose the significant relationship between his financial firm and the respondent’s firm (including co-underwriting equity and debt issuances and being co-defendants in lawsuits). Even though there was no evidence that the arbitrator was aware of those business relationships, the court found the FINRA arbitration rules obligated the arbitrator to discover those relationships and he did not satisfy that duty. Therefore, the arbitration award was vacated for evident partiality.

The Federal Circuit vacated an arbitration award because the arbitrator had improperly dismissed an employee’s labor dispute. In Garcia v. Dept. of Homeland Security, __ F.3d __, 2015 WL 1087880 (Fed. Cir. Mar. 13, 2015), the arbitrator construed the limitation period within the collective bargaining agreement and found the employee’s claims were too late. Noting that courts may interpret CBA provisions de novo, the court found the employee’s request was timely. (That should be seen as a labor-specific result. It does not comply with the standard in Oxford Health Plans.)


At least three appellate courts have recently un-vacated arbitration awards that lower courts had vacated.

My favorite of these is Raymond James Fin. Servs., Inc. v. Fenyk, __ F.3d__, 2015 WL 1055385 (1st Cir. Mar. 11, 2015), in which the court found the arbitration award “perplex[ing]” and possibly erroneous, but not “unsustainable.” In that case, a discharged employee initially asserted claims that the employer violated Vermont state law. At the hearing, however, the employee asked to add a claim under the federal Americans with Disabilities Act. And, in his post-hearing brief, he asked to add claims under New York and Florida law. The arbitration panel applied Florida law and awarded the employee damages over $600,000. The employer moved to vacate the award, arguing that the panel exceeded its power by ruling on a claim that the employee only submitted after the hearing and ignored Florida’s statute of limitations for that claim. The district court agreed and vacated the award. The First Circuit reversed, noting that the arbitrators were empowered to resolve claims under Florida law, and that Florida’s law on the statute of limitation was ‘evolving” at the time of the arbitration, so “any error by the panel in refusing to dismiss” the claims cannot justify vacatur.

The Supreme Court of Connecticut also un-vacated an award under its state arbitration act in Burr Road Operating Co. II, LLC v. New England Health Care Employees Union, Dist. 1199, __ A.3d__, 2015 WL 1894398 (Conn. May 5, 2015). In a dispute over the proper punishment for an employee who delayed reporting her suspicion that a nursing home resident had been abused, the arbitrator reduced the punishment from termination to a one month unpaid suspension. The employer moved to vacate the award and the trial court denied it. The intermediate appellate court, however, found the arbitration award violated well-defined public policy against delayed reporting of abuse and vacated the award. The Supreme Court of Connecticut then un-vacated the award. After clarifying the factors a reviewing court should consider on claims that an arbitration award violated public policy, it concluded that the award in this case did not violate public policy.

The Fifth Circuit un-vacated an award (using the Texas state arbitration act) in Campbell Harrison & Dagley, LLP v. Hill, __ F.3d __, 2015 WL 1501059 (5th Cir. April 2, 2015). Two law firms were awarded $28 million in an arbitration with their former clients, but the district court vacated the portion of the award that was based on the contingency fee agreement, finding it unconscionable. The Fifth Circuit found the district court “misapplied” the highly deferential standard of review due to arbitration awards under Texas law and substituted its judgment for that of the arbitrators. The Fifth Circuit affirmed the entire award for the law firms.


Two other decisions address, and shoot down, interesting arguments for vacatur.

The Fourth Circuit found that the death of one member of a three-member arbitration panel is not sufficient to vacate the award for “exceeding its authority”, without absolute proof that the third arbitrator failed to participate in deliberation in the case. Although billing records for the arbitrator’s time ceased before issuance of the award, the district court found he participated in and signed the award prior to his death.  PNGI Charles Town Gaming, LLC v. Mawing, 2015 WL 898559 (4th Cir. Mar. 4, 2015).

In the area of reinsurance, the First Circuit agreed that vacatur was not appropriate in First State Ins. Co. v. National Casualty Co., __ F.3d __, 2015 WL 1263147 (1st Cir. Mar. 20, 2015). After the arbitration award declared the parties obligations under the reinsurance contracts, the insured party asked the federal court to vacate the award because the arbitrator’s exceeded their authority. The district court and appellate court both refused to vacate the award. The First Circuit noted that the text of the award shows the arbitrators based their award on the terms of the agreements so that there was “no doubt that the arbitrators were arguably construing those agreements.” Plus, the agreements had “an honorable engagement provision,” which relieved arbitrators of “strict rules of law” and directed them to consider the agreements as “an honorable engagement rather than merely a legal obligation.” The court found that provision empowered the arbitrators to grant equitable remedies that depart from strict readings of the agreements.

If you made it all the way to the bottom of this post you deserve a prize. Today, that prize is this collection of awesome words from the First Circuit opinion in First State Insurance Co.: defenestrate, ultracrepidarian, and adumbrated. Plus, the court quoted Shakespeare!

Let’s say your arbitration agreement calls for arbitration administered by JAMS under JAMS rules, but the arbitrator is independent and applies AAA rules, over one party’s objection.  A new decision from the Fifth Circuit says that is enough to vacate the resulting award.

In Poolre Insurance Corp. v. Organizational Strategies, Inc., __ F.3d__, 2015 WL 1566633 (5th Cir. April 7, 2015), there was a dispute between a self-insured company, the consultants that set up its insurance program (Capstone), and its reinsurer.  The arbitration agreement between the company and Capstone called for arbitration under the Commercial Arbitration Rules of the AAA, with venue in Delaware.  The arbitration agreement between the company and the reinsurer, on the other hand, called for arbitration by the International Chamber of Commerce (ICC), in Anguilla, with the arbitrator chosen by “the Anguilla [] Director of Insurance.” (Anguilla is in the British West Indies.  Why don’t I ever get to arbitrate somewhere exotic?  Maybe that’s the reward for being a reinsurance lawyer…)

Capstone started arbitration with the company at “Conflict Resolution Systems, PLLC” (CRS) in Houston, and Dion Ramos was named the arbitrator.  When the reinsurer inquired whether the Anguilla Director of Insurance could select the arbitrator, as required in the reinsurance contract, an Anguillan official explained that “no such official existed.”  (Sounds reminiscent of these cases...)  However, the Anguillan official designated CRS to select an independent arbitrator and administer the proceedings.  The company objected to the arbitrator’s authority, and the reinsurer intervened to request an arbitrator based in Anguilla.  Ramos found he had jurisdiction over all parties, and found the reinsurer waived its right to arbitrate in Anguilla by intervening.  The company continued to object, arguing that the arbitrator did not have the power to apply AAA rules to the reinsurance dispute.

Ramos found the reinsurer was properly joined in the arbitration.  On the merits, Ramos found the company breached its contracts with Capstone and the reinsurer and granted attorneys’ fees and expenses to Capstone and the reinsurer of about a half a million dollars.  Ramos denied all the company’s claims.

The reinsurer and Capstone moved to confirm the award and the company moved to vacate.  The Texas district court found Ramos exceeded his authority by exercising jurisdiction over the reinsurer and applying AAA rules to the reinsurance dispute. Because the inclusion of the reinsurer “tainted the entire process,” the district court vacated the award.

On appeal, the Fifth Circuit affirmed the district court’s decision to vacate the award.  The court noted that arbitration awards may be vacated when arbitrators “exceed[] the express limitations” of the contractual mandate, or act contrary to express contractual provisions.  Here, the Fifth Circuit found two separate bases for vacating the award.  First, the arbitrator-selection mechanism in the reinsurance contracts was not followed.  (In a footnote, the court acknowledged that the selection mechanism provided in the contract was not actually available, since there was no official with that title, but that the parties could have come to the court under Section 5 of the FAA and asked the court to appoint an arbitrator.)  Second, Ramos “acted contrary” to the requirement that the reinsurance disputes be arbitrated by the ICC under ICC rules.  The court found that was a “forum selection clause integral to the agreement” and therefore the arbitrator exceeded his power by applying AAA rules.  (Interestingly, the Fifth Circuit did not analyze the third basis that the district court used to support vacatur: the arbitrator’s decision to join all the parties to a single arbitration, although the company had not consented to consolidation.)

What are the lessons here for parties?  Here are at least two.  First, do not try to consolidate arbitrations that call for different administrators or different rules unless all parties agree.  And second, if you are going to specify an unusual arbitrator-selection process, make sure to put a “Plan B” in the contract.

Two other bits of arbitration news:

First, SCOTUS denied cert in one of the cases that refused to enforce an arbitration clause calling for arbitration before a Native American tribe.

Second, Delaware’s Rapid Arbitration Act officially became a law on April 3 and will go into effect in May.  Will Delaware businesses see the promise of speedy dispute resolution (max resolution time is 180 days by law) as enough of a benefit to give it a try? We may never know, as the process will be confidential…

“When an arbitration goes an opponent’s way on the basis of questionable contract interpretation, parties often seek refuge in [Section] 10(a)(4).  But the Supreme Court has made clear that district courts’ review of arbitrators’ awards under [that Section] is limited to the ‘sole question… of whether the arbitrator (even arguably) interpreted the parties contract.'”

Those two sentences of the Fifth Circuit’s recent opinion in BNSF Railway Co. v. Alstom Transportation, Inc., __F.3d__, 2015 WL 507874 (5th Cir. Feb. 5, 2015), are indicative not only of the result of the opinion, but also of the Court’s attempt to educate the district courts within its reach.  You almost get the sense the Court is saying “if I have to say this one more time…”

The Northern District of Texas had vacated an arbitration award.  The arbitrators found, in part, that BNSF breached its covenant of good faith and fair dealing when it exercised its termination rights under the parties’ agreement.  The agreement gave BNSF the right to terminate without cause, at any time.  The district court could not see how the arbitrator avoided that contractual language to find against BNSF, and therefore ruled that the arbitrators had exceeded their power within the meaning of Section 10(a)(4) of the FAA.

The Fifth Circuit disagreed.  For the benefit of any other district courts that had mis-understood the meaning of Sutter, the Fifth Circuit took this opportunity to give a “how to” tutorial on evaluating motions to vacate arbitration awards.  As a start, the Court notes that “district courts should consult the arbitrator’s award itself” and look for textual evidence that the arbitrator interpreted the contract.  To be even more helpful, the Court suggests that evidence may be found in the arbitrator’s definition of her task, or citations to the contract, or analysis of the contract, or conclusions that “are framed in terms of the contract’s meaning.”  Because in this case, the arbitrators framed their analysis as an interpretation of the “without cause” provision of the contract, the Fifth Circuit found reversal required and reinstated the arbitration award.

[The Fifth Circuit also easily tossed aside the railroad’s argument that the award should be vacated under the Texas or Illinois state arbitration acts.  It cited case law that the FAA rules apply unless there is clear and unambiguous contractual language selecting state arbitration acts.]

The Minnesota Supreme Court today unanimously confirmed an arbitration award of over $600 million in punitive sanctions. Seagate Technology, LLC v. Western Digital Corp., (Minn. Oct. 8, 2014).  Although the appellant argued the arbitrator exceeded his authority by severely sanctioning appellant for fabricating evidence, the court concluded that the parties’ agreement gave the arbitrator power to impose the sanctions. In contrast to the two recent state court decisions vacating arbitration awards, this decision deserves a gold star. (Of course it does. In Minnesota, the women are strong, the men are good looking, and the judges are all above average.)

The parties’ arbitration agreement provided that arbitration would proceed “in accordance with the rules then in effect of the American Arbitration Association. The arbitrator may grant injunctions or other relief in such dispute or controversy.” The relevant AAA rules in turn empowered the arbitrator to “grant any remedy or relief that would have been available to the parties had the matter been heard in court.”  The court found that both the language of the agreement and the incorporated rule were broad enough to allow the arbitrator to issue sanctions, even big sanctions, against a party who fabricated evidence.

The court found the sanctions were “injunctions or other relief” within the meaning of the agreement, and a “remedy or relief” contemplated in the AAA rules. The court therefore held the arbitrator did not exceed his power and the award could not be vacated. (The court also disagreed with the opinion below by finding that arbitrators do not automatically have power to sanction parties, it must come from the language of the parties’ agreement or any incorporated arbitral rules.  The court refused to get into the merits of whether punitive sanctions was an appropriate remedy given the specific facts of this case, noting that the parties chose arbitration and with that choice comes “very limited review of the final award.” )

The court also found the arbitrator did not “refuse to hear evidence” within the meaning of the statute allowing vacatur. Because the arbitrator conducted a full evidentiary hearing before issuing his sanctions award, the court construed the appellant’s challenge as centering on how the arbitrator used or weighed evidence, which is not a basis for vacatur.

The most surprising thing about this case is that the parties do not appear to have argued for application of the FAA.  In fact, the court analyzed the case under Minnesota’s Uniform Arbitration Act (which has since been replaced by the Revised Uniform Arbitration Act).  Given that both of these parties engage in interstate commerce every day, never mind the sheer dollars at issue in this dispute, the FAA definitely applies.  Although the award would be confirmed under both state and federal arbitration statutes, I would have loved to see the Minnesota Supreme Court use this case as an opportunity to help educate the Minnesota bar about the broad application of the federal act.


Other ArbitrationNation News

The University of the District of Columbia Law Review is looking for practitioners to present at its March 2015 conference: “Not All Controversies End in Court: Checking the Balance In Alternative Dispute Resolution.” If you are interested, send an abstract of 200 words or less to by November 1.

Two good new articles are available from Prof. Thomas Stipanowich, both including empirical data from recent surveys of arbitrators and mediators. The first is “Commercial Arbitration and Settlement: Empirical Insights into the Roles Arbitrators Play,” available at The second is “Managing Construction Conflict: Unfinished Revolution, Continuing Evolution” available at


In an example of “What Not to Vacate,” the South Dakota Supreme Court just vacated an arbitration award because the arbitrator dared to apply a South Dakota statute allowing attorneys’ fees to the claimant. A week earlier, the Ohio Supreme Court also vacated an arbitration award for granting a remedy that the court found exceeded the panel’s contractual power.

In the South Dakota case, the arbitrator awarded the claimant attorneys’ fees and costs under South Dakota’s Uniform Limited Liability Company Act. Black Hills Surgical Physicians, LLC v. Setliff, __ N.W.2d __, 2014 WL 4815715 (S.D. Sept. 24, 2014). The state supreme court vacated those fees and costs, finding they exceeded the arbitrator’s power because the contract stated that the parties “agree . . . that each shall pay their own attorneys’ fees.” Citing mostly to labor law cases from the 1960s-1980s, the court concluded that because the arbitrator based her award on law outside the contract (i.e. the applicable statute), she exceeded her power.

Similarly, the Supreme Court of Ohio vacated a portion of an arbitration award reinstating a high level employee to his previous position because it found the arbitration panel exceeded its power. Cedar Fair, L.P. v. Falfas, __ N.E.3d__, 2014 WL 4649951 (Ohio Sept. 18, 2014). Again citing liberally from decades-old labor law cases, the court found that the contract limited the panel’s authority on remedies by stating the panel had authority “to award any remedy or relief that [a state] or federal court in Ohio could grant.” Because the “general rule” in Ohio is that specific performance is not an available remedy for breach of an employment contract, the court found the arbitrators exceeded their power and vacated the reinstatement award. (Instead, the court awarded the employee his base salary for the remainder of his employment term.)

These cases gave me an idea. Instead of reviewing limited cases on an individual basis, SCOTUS should issue a list of guidelines for state courts deciding arbitration disputes. (Can’t you just see it? MEMO TO: All state courts. RE: Your Opinions Are Screwing Up Our Arbitration Jurisprudence. FROM: SCOTUS.)

For example, the subset of guidelines for state courts considering whether to vacate an award could include these five pearls of wisdom:

  • Consider whether the Federal Arbitration Act applies to the dispute (ask the parties to brief that issue if they did not already).
  • Do not rely on any cases before 2000. The law in this area has been evolving rapidly. [This could have changed the outcome of both Black Hills and Cedar Fair.]
  • Do not use standards or language from labor law cases when considering whether to vacate cases that do not involve a collective bargaining agreement. The standards are different. See Associated Elec. Coop., Inc. v. Int’l Bhd. of Elec. Workers, Local No. 53, __ F.3d __, No. 12-3712, 2014 WL 1910604, at *6 (8th Cir. May 14, 2014). [This also could have changed the outcome of both Black Hills and Cedar Fair.]
  • Consider the impact of the arbitral rules on the dispute (ask the parties to brief that issue if they did not already). For example, if AAA rules are mentioned in the arbitration agreement, the arbitrator has the powers outlined in those rules. [This could have changed the outcome of both Black Hills and Cedar Fair, but the opinion does not show whether any set of rules was incorporated.]
  • Read Sutter. And Hall Street.

Any others I should add to the list??!

By the way, the Supreme Court of Florida deserves a gold star on this topic. In Visiting Nurse Assoc. of Fl. v. Jupiter Medical Ctr., Inc., __ So.3d__, 2014 WL 3360314 (Fl. July 10, 2014), it provides a good example of how to analyze a claim for vacatur. The losing party in arbitration claimed the award “impermissibly construed the parties’ contract in a manner that violated multiple federal laws” and the arbitration panel “exceeded its powers by contravening the express contractual limitations.” The court first conducted a sua sponte analysis to determine that the FAA controlled, then agreed with federal circuits finding the four bases for vacatur in Section 10 are exclusive, so that “illegality of the award” is not recognized. It then applied the analysis in Sutter to conclude that the argument about exceeding power was essentially an argument that the losing party “simply disagrees with the panel’s construction of the contract.”

Two posts ago, I reviewed four recent cases in which appellate courts enforced arbitration awards that district courts had refused to enforce.  Today I review two more appellate courts coming to the rescue of arbitration, this time by confirming arbitration awards that had been vacated by lower courts.

In SPX Corp. v. Garda USA, Inc., __A.3d__, 2014 WL 2708631 (Del. June 16, 2014), the Delaware Court of Chancery vacated an arbitration award (under its state arbitration act) after concluding the arbitrator manifestly disregarded the terms of the parties’ agreement. That court found that a section of the parties’ agreement unambiguously required the company’s working capital to reflect liabilities associated with workers compensation claims and the arbitrator manifestly disregarded that contractual requirement in issuing its award. The Supreme Court of Delaware reversed that decision. It found that there were two “colorable” interpretations of the contract, and that even if the arbitrator’s interpretation was wrong, it did not constitute manifest disregard because the arbitrator did not consciously choose to ignore a contract term that is not subject to reasonable debate.

In American Postal Workers Union, AFL-CIO v. U.S. Postal Service, __F.3d__, 2014 WL 2535249 (2d Cir. June 6, 2014), the district court had vacated an award in favor of the Postal Service after finding the arbitrator exceeded his powers. The district court found the arbitrator exceeded his power when he found the worker’s claims were barred based on the doctrine of collateral estoppel, because the collective bargaining agreement (CBA) did not explicitly provide for collateral estoppel. The Second Circuit reversed, finding that even if the CBA did not specifically allow collateral estoppel, it did not explicitly preclude it either, and case law allows arbitrators to apply collateral estoppel under broad arbitration agreements. Because of that, the arbitrator was arguably construing the contract (within the meaning of Sutter) and the award must be confirmed.

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