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Archive for the ‘American Arbitration Association’ Category

SCOTUS Denies Americo and Jupiter Medical Cert. Petitions: All Eyes now on DIRECTV. . . .

May 19th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Awards, Choice-of-Law Provisions, Class Action Arbitration, Class Action Waivers, Confirmation of Awards, Consent to Class Arbitration, Contract Interpretation, FAA Preemption of State Law, Federal Arbitration Act Enforcement Litigation Procedure, Judicial Review of Arbitration Awards, State Courts, United States Supreme Court Comments Off on SCOTUS Denies Americo and Jupiter Medical Cert. Petitions: All Eyes now on DIRECTV. . . .

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On March 28, 2015 we reported (here) that the U.S. Supreme Court (“SCOTUS”) had asked for a response to the petition for certiorari in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014). In Americo the Texas Supreme Court held that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration rule that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend to require parties to appoint only neutral arbitrators—that is, arbitrators that are both impartial and independent.

Five Justices of the nine-member Texas Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

yay-12776482As reported here and here, the losing party requested Supreme  Court review to determine whether the Texas Supreme Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. The petition argues that there is a split in the circuits on the issue.

On Monday, May 18, 2015, SCOTUS denied the petition for certiorari.  (You can access the Court’s May 18, 2015 Order List here.)

On Monday May 4, 2015, SCOTUS also denied the petition for certiorari in another Federal Arbitration Act case, Jupiter Medical Center, Inc. v. Visiting Nurse Assoc., No. 14-944, which was decided by the Florida Supreme Court. (You can access the Court’s May 4, 2015 Order List here.) Jupiter Medical Center, like Americo, concerned a post-award challenge under Section 10(a)(4) of the Federal Arbitration Act, and also like Americo, was decided by a state supreme court. In Jupiter Medical, however, the Florida Supreme Court rejected the post-award challenge.

yay-5257980-digitalSupreme Court watchers interested in arbitration cases will have to get their fix next term from DIRECTV v. Imburgia, which we discussed here. Will SCOTUS hold that the California intermediate Court did not give effect to the presumption of arbitrability? Will SCOTUS go even further and explain that, just as a statute cannot be interpreted “‘to destroy itself,'” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1748 (2011) (quoting  American Telephone & Telegraph Co. v. Central Office Telephone, Inc., 524 U.S. 214, 227-228 (1998) (quotation omitted)), so too cannot state law contract interpretation rules be applied in a way that would destroy an arbitration agreement to which the Federal Arbitration Act applies? Cf. Volt Info. Sciences, Inc. v. Trustees of Leland Stanford Junior Univ., 489 U.S. 468,  (1989) (“The question remains whether, assuming the choice-of-law clause meant what the Court of Appeal found it to mean, application of Cal. Civ. Proc. Code Ann. § 1281.2(c) is nonetheless pre-empted by the FAA to the extent it is used to stay arbitration under this contract involving interstate commerce.  .  .  . [because] “it would undermine the goals and policies of the FAA.”)

Stay tuned for DIRECTV.  .  .  .

 

Photo Acknowledgements:

All photos used in the text portion of this post are licensed from Yay Images and are subject to copyright protection under applicable law. Text has been added to image 2 (counting from top to bottom). Hover your mouse pointer over any image to view the Yay Images abbreviation of the photographer’s name.

All Eyes on Americo. . . .SCOTUS Expected to Rule on Petition for Certiorari at Upcoming May 14, 2015 Conference

May 12th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Awards, Confirmation of Awards, Contract Interpretation, Evident Partiality, Judicial Review of Arbitration Awards, State Courts Comments Off on All Eyes on Americo. . . .SCOTUS Expected to Rule on Petition for Certiorari at Upcoming May 14, 2015 Conference

yay-677327-digitalOn March 28, 2015 we reported (here) that the U.S. Supreme Court had asked for a response to the petition for certiorari in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014). In Americo the Texas Supreme Court held that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration principle that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend that appointed arbitrators must be neutral.

Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

yay-34842-e1424841353823The losing party is requesting Supreme  Court review to determine whether the Texas Supreme Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. The petition argues that there is a split in the circuits on the issue.

At this week’s May 14, 2015 conference, the Court will presumably decide whether or not to grant certiorari.

In our March 28, 2015 post (here) we argued  that Americo‘s unique facts make it poor candidate for certiorari. At the time the parties agreed to arbitrate, the AAA rules “provided that ‘[u]nless the parties agree otherwise, an arbitrator selected unilaterally by one party is a party-appointed arbitrator and not subject to disqualification pursuant to Section 19.'” 440 S.W.3d at 23 (quoting AAA Commercial Rule § 12 (1996)). Section 19 permitted the AAA to disqualify neutral arbitrators for partiality, but, under Section 12, absent an agreement to the contrary, party-appointed arbitrators were not subject to disqualification under Rule 19. When the AAA Rules were amended to reverse the traditional presumption about partiality of party-appointed arbitrators, the Rules were also amended to authorize the AAA to determine whether party-appointed arbitrators were neutral.

yay-8590418-digitalThis is one of those (relatively rare) cases where a question of arbitrability—that is, whether the parties agreed to delegate to the AAA the authority to make a final and binding determination on whether a party-appointed arbitrator may be disqualified—is intertwined so inextricably with the merits of the dispute alleged to be arbitrable that, for all intents and purposes, the arbitrability and merits questions are identical. In other words, the AAA’s authority to disqualify turns on whether the parties agreed to neutral or non-neutral party-appointed arbitrators–the precise issue the petition claims the AAA should itself decide. In situations like these, the court cannot abdicate its duty to determine arbitrability, even if that means deciding some or all of the disputes that are alleged to be arbitrable. See, generally, Litton Financial Printing Div. v. National Labor Relations Board, 501 U.S. 190, 208-09 (1991).

Of course, the Supreme Court may believe otherwise, or may have other reasons for wanting  to grant certiorari.  But in any event, we’ll probably know by Monday, May 18, 2015 whether the Court will take the case.

 

Photo Acknowledgements:

All photos used in the text portion of this post are licensed from Yay Images and are subject to copyright protection under applicable law. Text has been added to images 1 and 3 (counting from top to bottom). Hover your mouse pointer over any image to view the Yay Images abbreviation of the photographer’s name.

United States Supreme Court Requests Response to Petition for Certiorari in Texas Party-Appointed Arbitrator Qualification Case

March 28th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Authority of Arbitrators, Awards, Contract Interpretation, Evident Partiality, Grounds for Vacatur, Judicial Review of Arbitration Awards, State Arbitration Law, State Courts, Texas Supreme Court, United States Supreme Court 2 Comments »

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On June 20, 2014 the Texas Supreme Court held in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014), that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration principle that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend that appointed arbitrators must be neutral.

Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

The losing party has petitioned the United States Supreme Court for a writ of certiorari, arguing that the Court should determine whether the Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. Continue Reading »

Americo Part II: Sometimes Hard Cases Make Good Law

September 3rd, 2014 American Arbitration Association, Appellate Practice, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Authority of Arbitrators, Awards, Confirmation of Awards, State Courts, Texas Supreme Court Comments Off on Americo Part II: Sometimes Hard Cases Make Good Law

 

Introduction

On August 5, 2014 we critiqued (here) the Texas Supreme Court’s June 20, 2014 decision in Americo Life, Inc. v. Myer, ___ S.W.3d __, No. 12-0739, slip op. (Tex. June 20, 2014), which held that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the American Arbitration Association (the “AAA”) had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See slip op. at 10.   

The Americo award was not a legitimate by product of the parties’ arbitration agreement, and so, ruled the majority, it had to be vacated. The majority resisted a temptation that the four dissenting Justices apparently could not: “interpreting” the parties’ agreement in a hyper-technical fashion to justify confirming the award, even though that outcome, as desirable as it might otherwise seem, would have required the majority to reach a conclusion about party intent that was, at best, implausible.

Make no mistake about it, the Texas Supreme Court was faced with a tough case, and we think the majority made the right call.  Had a similar issue been presented in a garden-variety contract interpretation case, we doubt it would have been such a tough case and would not be particularly surprised if the outcome would have been unanimous, not split.

What made the case so tough was that this was not only an arbitration case, but one where the interpretive issue was justiciable only at the post-award stage. The law says that should make so difference and that, in any event, subject to a few special arbitration-law rules, the Federal Arbitration Act (the “FAA”) requires courts to put arbitration agreements on the same footing as all other contracts. But in post-award practice there a number of objective and subjective considerations that not infrequently result in courts reaching decisions in favor of confirming awards based on very doubtful, and sometimes, as here, implausible, conclusions about party intent.

That did not happen in Americo, and strange as it may seem, the majority’s decision that the award had to be vacated was a very pro-arbitration decision. A majority of the Justices enforced the parties’ arbitration agreement, which is the whole point of the FAA. And by doing so, they made arbitration all the more an attractive alternative to litigation.

Today’s post examines in greater detail what transpired in Americo, including the reasoning the majority and dissent articulated in support of their conclusions, and concludes with a few parting observations.  Continue Reading »

Gateway Keeping: The Third Circuit Joins the Sixth in Holding that Courts get to Decide whether Parties Consented to Class Arbitration

August 28th, 2014 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consent to Class Arbitration, Consolidation of Arbitration Proceedings, Drafting Arbitration Agreements, Existence of Arbitration Agreement, Judicial Review of Arbitration Awards, Practice and Procedure, Stay of Litigation, United States Court of Appeals for the Sixth Circuit, United States Court of Appeals for the Third Circuit, United States Supreme Court Comments Off on Gateway Keeping: The Third Circuit Joins the Sixth in Holding that Courts get to Decide whether Parties Consented to Class Arbitration

On June 10, 2013 the U.S. Supreme Court in Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) considered whether an arbitrator exceeded his powers under Federal Arbitration Act (“FAA”) Section 10(a)(4) by finding that a fairly run-of-the-mill arbitration agreement authorized class arbitration. Applying the deferential, manifest-disregard-of-the-agreement outcome-review standard authorized by FAA Section 10(a)(4), the Court upheld an arbitrator’s determination that an arbitration agreement authorized class arbitration because the arbitrator had, at least arguably, interpreted the arbitration agreement, albeit in a highly creative and doubtful way. (See Loree Reins. & Arb. L. Forum posts here, here, here & here.)

In a footnote, the Court explained that it “would face a different issue if Oxford had argued below that the availability of class arbitration is a so-called ‘question of arbitrability.’” 133 S. Ct. at 2068 n.2. The Court said that Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 680 (2010), “made clear that this Court has not yet decided” whether class-arbitration-consent presents a question of arbitrability. But “Oxford agreed that the arbitrator should determine whether its contract with Sutter authorized class procedures[,]” and “Oxford submitted that issue to arbitrator not once, but twice—and the second time after Stolt-Nielsen flagged that it might be a question of arbitrability.” 133 S. Ct. at 2068 n.2. (emphasis added)

Had Oxford opted to request the Supreme Court to determine whether class- arbitration consent presented a question of arbitrability, and had the Court determined that it was such a question, then the Court would have determined independently—that is, without deferring to the arbitrator’s decision—whether the parties consented to class arbitration. See BG Group plc v. Republic of Argentina, No. 12-138, slip op. at 6 (U.S. March 5, 2014); First Options of Chicago, Inc. v. Kaplan, 543 U.S. 938, 942 (1995). And we doubt that a majority of the Supreme Court would have upheld the Oxford award had it reviewed the class-arbitration-consent determination de novo. See, e.g., Oxford, 133 S. Ct. at 2071 (Alito, J., concurring) (“If we were reviewing the arbitrator’s interpretation of the contract de novo, we would have little trouble concluding that he improperly inferred “[a]n implicit agreement to authorize class-action arbitration … from the fact of the parties’ agreement to arbitrate.”) (quoting Stolt-Nielsen, 559 U.S. at 685).  

Those who have been tracking developments in class and consolidated arbitration since the turn of this century no doubt recall that, after a plurality of the Court determined in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-53 (2003), that a class-arbitration-consent-related dispute did not present a question of arbitrability, but merely a procedural question, parties began to submit routinely and unreservedly class-arbitration-consent questions to arbitration.

But after Stolt-Nielsen, and, no doubt with renewed vigor after Oxford, class arbitration opponents began to argue that class-arbitration-consent presented a question of arbitrability for the Court to decide. And U.S. Circuit Courts of Appeals are beginning to rule on those challenges.

The first one to do so was the U.S. Court of Appeals for the Sixth Circuit in Reed Elsevier, Inc. v. Crockett, 734 F.3d 594 (6th Cir. 2013), where the Court in November 2013 held “that the question whether an arbitration agreement permits classwide arbitration is a gateway matter, which is reserved for judicial determination unless the parties clearly and unmistakably provide otherwise.” 734 F.2d at 599 (quotation and citation omitted).

The second, and most recent Circuit Court of Appeals to rule on the issue, was the U.S. Court of Appeals for the Third Circuit in Opalinski v. Robert Half Int’l Inc., ___ F.3d ___, No. 12-4444, slip op. (3rd Cir. July 30, 2014), which on July 30, 2014 “join[ed] the Sixth Circuit Court of Appeals in holding that.  .  .  “the availability of” class arbitration “is a substantive gateway question rather than a procedural one[,]” and thus “is a question of arbitrability.” Slip op. at 15, 16-17.  The Court’s decision turned on “the critical differences between individual and class arbitration and the significant consequences of that determination for both [a] whose claims are subject to arbitration[;] and [b] the type of controversy to be arbitrated.” Slip op. at 15 (emphasis added). Where, as in Opalinski, the arbitration agreement did not “mention” class arbitration, the Court “believ[ed] the parties would have expected a court, not an arbitrator, to determine the availability of class arbitration[,]” and that was “especially so given the critical differences between individual and class arbitration and the significant consequences” of the class-arbitration-consent determination as respects “whose claims are subject to arbitration and the type of controversy to be arbitrated.” slip op. at 16-17.

The Third Circuit’s Opalinski decision, like the Sixth Circuit’s in Reed Elsevier, is well reasoned and reaches the conclusion we likewise think is required by the Supreme Court’s long-line of arbitrability jurisprudence, and by its post-Bazzle class-arbitration cases, beginning with Stolt-Nielsen. We suspect that other circuits will, for largely the same reasons, that class-arbitration-consent presents a question of arbitrability.

Let’s have a look at what transpired in Opalinski.  .  .  . Continue Reading »

Faithful to the “First Principle” of Arbitration Law, the Texas Supreme Court Shores up the “Cornerstone of the Arbitral Process”

August 5th, 2014 American Arbitration Association, Appellate Practice, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Authority of Arbitrators, Awards, Confirmation of Awards, Contract Interpretation, Drafting Arbitration Agreements, Grounds for Vacatur, Judicial Review of Arbitration Awards, Party-Appointed Arbitrators, Practice and Procedure, State Courts, Texas Supreme Court Comments Off on Faithful to the “First Principle” of Arbitration Law, the Texas Supreme Court Shores up the “Cornerstone of the Arbitral Process”

Introduction  

Anyone versed in arbitration-law basics knows that “arbitration is a matter of consent, not coercion.” Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 678-80 (2010) (citation and quotations omitted). That is the “first principle” of arbitration law (the “First Principle”) set forth in the Steelworkers’ Trilogy.[1] See, e.g., Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287, 295 & n.7, 294 n.6 (2010); AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 648 (1986).

The First Principle is integrally intertwined with “the central or primary purpose of the [Federal Arbitration Act (“FAA”)][,]” which is “to ensure that  private agreements to arbitrate are enforced according to their terms.” Stolt-Nielsen, 559 U.S. at 679 (citations and quotations omitted). To “enforce” an arbitration agreement “courts and arbitrators must give effect to the contractual rights and expectations of the parties.” Id. When courts do not give effect to the parties’ contractual rights and expectations, they violate the First Principle.

Courts and arbitrators are supposed to apply the First Principle faithfully and rigorously whenever  they interpret or apply material arbitration-agreement-terms, and in “doing so [they] must  not lose sight of the purpose of the exercise: to give effect to the intent of the parties.” See Stolt-Nielsen, 559 U.S. at 679-81. And if that admonition applies with special force in any particular context, it would be in the interpretation and enforcement of arbitrator selection and qualification provisions.

Arbitrator selection provisions are what Circuit Court Judge Richard A. Posner once dubbed the “cornerstone” of the parties’ agreement: “Selection of the decision maker by or with the consent of the parties is the cornerstone of the arbitral process.” Lefkovitz v. Wagner, 395 F.3d 773, 780 (2005) (Posner, J.); see, e.g., 9 U.S.C. § 5 (“If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed.  .  .  .”); Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Art. V(1)(d), June 10, 1958, 21 U.S.T. 2519, T.I.A.S. No. 6997 (a/k/a the “New York Convention”) (implemented by 9 U.S.C. §§ 201, et. seq.) (award subject to challenge where “[t]he composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties”); Stolt-Nielsen, 559 U.S. at 668, 670 (one of the FAA’s “rules of fundamental importance” is parties “may choose who will resolve specific disputes”) (emphasis added; citations omitted); Encyclopaedia Universalis S.A. v. Encyclopaedia Brittanica, Inc., 403 F.3d 85, 91-92 (2d Cir. 2005) (vacating award by panel not convened in accordance with parties’ agreement); Cargill Rice, Inc. v. Empresa Nicaraguense Dealimentos Basicos, 25 F.3d 223, 226 (4th Cir. 1994) (same); Avis Rent A Car Sys., Inc. v. Garage Employees Union, 791 F.2d 22, 25 (2d Cir. 1986) (same).

Americo Life, Inc. v. Myer

On June 20, 2014, a divided Texas Supreme Court in Americo Life, Inc. v. Myer, ___ S.W.3d __, No. 12-0739, slip op. (Tex. June 20, 2014), adhered to and correctly applied the First Principle by holding that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement.  Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the American Arbitration Association (the “AAA”) had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See Slip op. at 10. Continue Reading »

Re Colorado Energy Management, LLC v. Lea Power Partners, LLC: Another Appellate Division holds Construction Arbitration Award should be Vacated, but this time for Good Reason

May 10th, 2014 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Practice and Procedure, Arbitrator Vacancy, Authority of Arbitrators, Awards, Construction Industry Arbitration, Functus Officio, Grounds for Vacatur, Judicial Review of Arbitration Awards, New York State Courts, Practice and Procedure, State Arbitration Law, State Arbitration Statutes, State Courts Comments Off on Re Colorado Energy Management, LLC v. Lea Power Partners, LLC: Another Appellate Division holds Construction Arbitration Award should be Vacated, but this time for Good Reason

Introduction

In our recent post on the Merion Construction case (here), we were pretty critical of New Jersey’s Superior Court, Appellate Division, for reversing a trial court decision confirming a modified arbitration award, finding it should have been vacated and the original award confirmed. Today’s post takes a brief look at a decision by another state’s Appellate Division—New York’s Supreme Court, Appellate Division, First Department—which held that another construction-industry award should be vacated.

In Merion Construction the New Jersey Appellate Division thought the arbitrator had no authority to correct his award to reflect the rulings he intended to make on two issues the parties had submitted to him. Re Colorado Management, LLC v. Lea Power Partners, LLC , ___ A.D.3d ___, ___, 2014 N.Y. Slip Op. 01253 at 1-3 (1st Dep’t Feb. 20, 2014), held that a final arbitration award had to be vacated because the arbitrator had no authority to rule upon an issue that was not presented to him in light of the parties’ submissions and a ruling made in the same proceeding by a predecessor arbitrator.

While Merion Construction got an “F,” Colorado Management gets at least an “A-,” and perhaps even an “A.” Continue Reading »

No Good Deed Should Go Unpunished: Functus Officio and Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc.—Part I

May 3rd, 2014 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Arbitration Provider Rules, Authority of Arbitrators, Awards, Construction Industry Arbitration, Final Awards, Functus Officio, Grounds for Vacatur, Judicial Review of Arbitration Awards, New Jersey State Courts, Practice and Procedure, State Arbitration Statutes, State Courts, Uncategorized 1 Comment »

Courts usually err in favor of not vacating awards in close cases. As a result, Courts usually vacate awards only where there is a very clear, fundamental disconnect between the award and the parties’ arbitration agreement. Vacating an award in those circumstances enforces the parties’ agreement to arbitrate, which is exactly what the Federal Arbitration Act (“FAA”) and state arbitration codes are supposed to do. (See, e.g., L. Reins. & Arb. L. Forum post here.)

Today’s case, Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc., No. A-2428-12T4, slip op. (N.J. App. Div. March 13, 2014), involved two disputed awards: the original arbitration award (the “Original Award”) and a subsequent, modified award (the “Modified Award”). The arbitrator (the “Arbitrator”) issued the Modified Award to correct a mistake in the Original Award, which had inadvertently omitted items of claimed damage that one of the parties had requested the Arbitrator to award. The Arbitrator said he intended to include those damage items in the Original Award. The Modified Award thus accurately reflected the parties’ agreement and submission and the Original Award did not.

Which Award should have been confirmed? Relying on the functus officio doctrine, and an American Arbitration Association (“AAA”) Rule concerning arbitral modification and correction of awards, the intermediate state appellate court reversed a trial court judgment confirming the Modified Award, and held that the Original Award should have been confirmed.

A few years back the Chief Justice of the United States Supreme Court prefaced one his opinions with the following truism: “People make mistakes. Even administrators of ERISA plans.” Conkright v. Frommert, 559 U.S. 506, 509 (2010) (Roberts, C.J.). Had Merion Construction been decided correctly, then the New Jersey appellate court might have prefaced its opinion with a similar truism: “People make mistakes. Even arbitrators.” But based on how the case was decided a more fitting preface would have been: “No good deed should go unpunished. Even those perpetrated by arbitrators.” Continue Reading »