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Archive for the ‘Arbitration Practice and Procedure’ Category

Arbitration Law FAQs: Confirming Arbitration Awards under the Federal Arbitration Act

September 18th, 2018 Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Awards, Federal Arbitration Act Enforcement Litigation Procedure, Final Awards, Judicial Review of Arbitration Awards, Nuts & Bolts, Nuts & Bolts: Arbitration, Small Business B-2-B Arbitration No Comments »

Introduction

Confirming Arbitration Awards 1

Confirming Arbitration Awards 1

Favorable arbitration awards are wonderful things, but they are not self-enforcing. Sometimes the other side voluntarily complies, but if not, there is really not much of anything the arbitrator can do to help.

Arbitrators are not judges and do not have the authority to garnish wages, seize property,  foreclose on encumbered property, freeze bank accounts, impose contempt sanctions, and so forth. Parties can delegate to arbitrators broad adjudicatory and remedial authority, but that is relevant only to the nature and scope of their awards, and does not confer power on the arbitrators to enforce their awards coercively.

Apart from its potential preclusive effect in subsequent litigation or arbitration, an arbitration award stands on the same footing as any other privately prepared legal document, and for all intents and purposes it is a contract made for the parties by their joint agent of sorts—the arbitrator or arbitration panel. It may be intended by the arbitrator or panel, and at least one of the parties, to have legal effect, but it is up to a court to say what legal effect it has, and, if necessary, to implement that legal effect through coercive enforcement.

A judgment, by contrast, is an official decree by a governmental body (the court) that not only can be coercively enforced through subsequent summary proceedings in the same or other courts (including courts in other states and federal judicial districts), but is, to some extent, self-enforcing. A judgment, for example, can ordinarily be filed as a statutory lien on real property, and applicable state or federal law may, for example, authorize attorneys to avail their clients of certain judgment-enforcement-related remedies without prior judicial authorization.

Confirming Arbitration Awards 2

Confirming Arbitration Awards 2

The Federal Arbitration Act, and most or all state arbitration statutes, provide for enforcement of arbitration awards through a procedure by which a party may request a court to enter judgment on the award, that is to “confirm” it. Once an award has been reduced to judgment, it can be enforced to the same extent as any other judgment. See, e.g., 9 U.S.C. § 13 (Under Federal Arbitration Act, judgment on award “shall have the same force and effect, in all respects, as, and be subject to all the provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered”); Fla. Stat. § 682.15(1)( “The judgment may be recorded, docketed, and enforced as any other judgment in a civil action.”); N.Y. Civ. Prac. L. & R. § 7514(a) (“A judgment shall be entered upon the confirmation of an award.”).

Chapter One of The Federal Arbitration Act (the “FAA”), and most or all state arbitration statutes, authorize courts to confirm domestic awards in summary proceedings. State arbitration-law rules, procedures, limitation periods, and the like vary from state to state and frequently from the FAA, and state courts may apply them to FAA-governed awards (provided doing so does not frustrate the purposes and objectives of the FAA). And Chapter 2 of the FAA provides some different rules that apply to the confirmation of domestic arbitration awards that fall under the Convention on the Recognition of Foreign Arbitral Awards (the “Convention”), and the enforcement of non-domestic arbitration awards falling under the Convention (i.e., awards made in territory of a country that is a signatory to the Convention.

But let’s keep things simple, and take a brief look at the FAA’s requirements for confirming arbitration awards, as applicable in federal court for domestic awards not falling under Chapter Two of the Federal Arbitration Act in situations where there is no prior pending action related to the arbitration, and  there are no issues concerning federal subject-matter jurisdiction, personal jurisdiction, sufficiency or service of process, venue (i.e., whether the suit should have been brought in a different federal judicial district), or the applicability of Chapter One of the FAA (9 U.S.C. §§ 1-16).  We’ll also discuss how applications to confirm are supposed to be summary proceedings, why timing of an application is important, and how courts decide them.

What are the Requirements for Confirming Arbitration Awards under the Federal Arbitration Act?

Confirming Arbitration Awards 3

Confirming Arbitration Awards 3

Like most other issues arising under the FAA, whether a court should confirm an award depends on what the parties agreed. Section 9 of the FAA, which governs confirmation of awards, says—with bracketed lettering added, and in pertinent part: “[A] If the parties in their agreement have [B] agreed that a judgment of the court shall be entered upon [C] the award made pursuant to the arbitration, and [D] shall specify the court, then [E] at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and [F] thereupon the court must grant such an order unless [G] the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9. Items [A] through [D] above each concern party consent as evidenced by the parties’ arbitration agreement.

The key substantive requirements for confirming arbitration awards are thus: Continue Reading »

Arbitration Law FAQ Guide: Challenging Arbitration Awards under the Federal Arbitration Act — Part II

September 12th, 2018 Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Awards, Challenging Arbitration Awards, Federal Arbitration Act Enforcement Litigation Procedure, Grounds for Vacatur, Nuts & Bolts, Nuts & Bolts: Arbitration, Outcome Risk, Small and Medium-Sized Business Arbitration Risk, Small Business B-2-B Arbitration 2 Comments »
Awards Under the Federal Arbitration Act 1

Awards Under the Federal Arbitration Act 1

This is Part II of this two-part Arbitration Law FAQ Guide, which is designed to provide individuals and businesses with a brief and broad overview of challenging awards under the Federal Arbitration Act. Part I (here) addressed eight FAQs concerning this topic. This Part II addresses six more.

These FAQs, like the first eight, assume that a party is seeking to challenge a Federal-Arbitration-Act-governed arbitration award in a federal court having subject matter jurisdiction, personal jurisdiction, and proper venue.

This guide is not legal advice or a substitute for legal advice. An individual or business contemplating a challenge of an award under the Federal Arbitration Act  should consult with an attorney or firm that has experience and expertise in arbitration law matters.

  1. What does a person have to prove to convince a Court to grant it vacatur, modification, or correction of an award?

Awards Under the Federal Arbitration Act 2

Awards Under the Federal Arbitration Act 2

An arbitration award is presumed valid and an award challenger has a heavy burden of proof to show otherwise. Some courts require clear and convincing evidence of certain grounds, such as evident partiality or corruption in the arbitrators. And even if a challenger can meet its burden, challenging an award under the Federal Arbitration Act must ordinarily be done in a summary proceeding, which is heard and determined in the same manner as a motion.

Generally, the challenger must establish that the only legitimate inference that can be drawn from the law and undisputed facts is that vacatur, modification, or correction of the award is warranted. Even where there are factual disputes, courts ordinarily will not order discovery or evidentiary hearings absent “clear evidence of impropriety.”  See, generally, Andros Compania Maritima, S.A. v. Marc Rich & Co., 579 F.2d 691, 701, 702 (2d Cir. 1978).

  1. What proceedings does a Court usually hold to determine applications to vacate, modify, or correct awards under the Federal Arbitration Act?

These applications are summary proceedings that are made and decided like motions. See 9 U.S.C. § 6. If there is not already pending an action between the parties in which a motion may be made, then a challenger can start a proceeding by filing and serving, among other things, a petition or application, a notice of petition or application, supporting affidavits, and a memorandum of law in support. The responding party serves and files a memorandum in opposition, along with any affidavits in support.

Since the matter is a summary proceeding, and since the ordinary pleading rules do not apply, courts generally require the challenger to make all of its arguments at the time its response is due, including arguments that might be made by pre-answer motion in an ordinary law suit, such as lack of subject-matter or personal jurisdiction. The responding party will also typically file a cross-motion to confirm the award, that is, a request that the Court enter judgment upon the award. See 9 U.S.C. § 9. Continue Reading »

Arbitration Law FAQ Guide: Challenging Arbitration Awards under the Federal Arbitration Act

September 9th, 2018 Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Awards, Challenging Arbitration Awards, Grounds for Vacatur, Judicial Review of Arbitration Awards, Nuts & Bolts, Nuts & Bolts: Arbitration 3 Comments »

Introduction

This two-part Arbitration Law FAQ guide is designed to provide individuals and businesses with a basic overview of what the Federal Arbitration Act has to say about challenging arbitration awards in court. This is Part I and Part II is here.

It assumes that the award is governed by the Federal Arbitration Act; the challenge is made in a federal district court having subject matter and personal jurisdiction; and venue is proper.

This guide is not legal advice or a substitute for legal advice. If you are an individual or business which wants or has to challenge or defend an arbitration award, or make an application to confirm the award, then you should consult with an attorney or firm that has experience and expertise in arbitration law matters.

  1. I just received an arbitration award against me, which I believe is governed by the Federal Arbitration Act (the “FAA”). Does the FAA allow me to appeal the award to a court?

Challenging Arbitration Awards 1

Challenging Arbitration Awards 1

You cannot—at least in any meaningful sense of the word—“appeal” an FAA-governed arbitration award to a court. An appeal involves judicial review by an appellate court under which a panel of judges reviews trial-court rulings on questions of law independently—that is, as if the appellate court were deciding the question for itself in the first instance. The appellate court generally reviews the trial court’s findings of fact on a “clearly erroneous” or “clear error” standard of review, that is, paying a certain degree of deference to the finder of fact (the jury or, in a bench trial, the judge). Appellate review of a court decision is thus fairly broad and searching, particularly where outcomes turn solely on questions of law.

When a person agrees to arbitrate it gives up the right to appellate review, which focuses on issues relating to the merits of the case the court decided or on important litigation-procedure rulings.

  1. Does the FAA permit a party to challenge an arbitration award?

Challenging Arbitration Awards 2

Challenging Arbitration Awards 2

The Federal Arbitration Act provides some limited remedies for challenging arbitration awards where a party can show certain kinds of unusual and material violations of an arbitration agreement by an arbitrator or an opposing party, or an obvious mathematical, typographical, or technical error that appears on the face of the award. The remedies are orders: (a) modifying or correcting the award; or (b) vacating the award in whole or in part.

To vacate an award means to annul it, that is, to declare it null and void. When an award is vacated, then the parties generally must (absent a settlement) go back and re-arbitrate the matters that were the subject of the award.  When an award is modified or corrected, the correction or modification may be made by the court, or the court may remand the matter back to the arbitrators for that purpose. Continue Reading »

California Appeals Court Says Clause Construction Award is not Final Award Subject to Confirmation or Vacatur

August 29th, 2018 Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Awards, California State Courts, Class Action Arbitration, Clause Construction Award, Confirmation of Awards No Comments »

Introduction

Clause Construction Award 1

Clause Construction Award 1

We have discussed (here) what constitutes a final award under the Federal Arbitration Act, an issue that is important for a host of reasons, but is particularly so to any business faced with an adverse clause construction award. A clause construction award is an interim or partial final arbitration ruling that determines the threshold issue of whether the parties consented to class arbitration.

 

But not all arbitrations – even class arbitrations – are governed by the Federal Arbitration Act (“FAA”), and even when they are, parties may agree to procedural rules that are different from those of the FAA. See Preston v. Ferrer, 128 S.Ct. 978, 987-89 (2008); Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Jr. Univ.,  489 U.S. 468, 478-79 (1989). In Maplebear, Inc. v. Busick, ___ Cal. App.5th ___, slip op. (Cal. App., 1st Dist. August 21, 2018) (certified for publication), the parties agreed that  “the arbitration would be conducted by JAMS under its rules and procedures; the arbitrator would apply California substantive law; the arbitrator had no ‘power or authority to commit errors of law or legal reasoning’; and ‘[a]ny action to review the arbitration award for legal error or to have it confirmed, corrected or vacated’ would be decided under California law by ‘a California state court of competent jurisdiction.’” Slip op. at 2.

At issue in Maplebear was whether the California courts had jurisdiction to vacate a partial final Clause Construction Award, which concluded that the parties had consented to class arbitration. The California Appeals Court said “no,” which means that—unless the California Supreme Court (or the U.S. Supreme Court) hears an appeal and says otherwise—the parties have to endure through an entire class arbitration procedure before there is any judicial review of the Clause Construction Award. (Whether or not review by the California Supreme Court or the U.S. Supreme Court is even possible given the procedural posture of this case is outside the scope of this post.)

 

An Unfair Burden on the Clause Construction Award Challenger?

Clause Construction Award 2

Clause Construction Award 2

Consider the burden the decision imposes on the class-arbitration opponent. According to the majority opinion in Concepcion, then fairly current American Arbitration Association statistics showed that: (a) “[a]s of September 2009, the AAA had opened 283 class arbitrations[;]” (b) “[o]f those, 121 remained active, and 162 had been settled, withdrawn, or dismissed[;]” (c) “[n]ot a single one, however, had resulted in a final award on the merits[;]” and (d) “[f]or those cases that were no longer active, the median time from filing to settlement, withdrawal, or dismissal—not judgment on the merits—was 583 days, and the mean was 630 days.” AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1751 (2011).

Clause Construction Award 4

Clause Construction Award 4

While we have not researched whether more recent statistics tell a different story, it seems quite likely that the Court’s decision on finality means that the class arbitration opponent will have to spend an awful lot of time and money before the issue of class arbitration consent is reviewed by a court, assuming it is ever reviewed.

 

Continue Reading »

Class-Arbitration-Consent: The Eleventh Circuit Creates Circuit Split by Ruling that Incorporation of AAA Rules is Clear and Unmistakable Consent to Arbitrate Class-Arbitration-Consent Questions

August 24th, 2018 Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consent to Class Arbitration, FAA Preemption of State Law, United States Court of Appeals for the Eleventh Circuit, United States Supreme Court No Comments »

Introduction

Class-Arbitration-Consent 1

Class-Arbitration-Consent 1

In prior posts we’ve discussed how footnote 2 of the U.S. Supreme Court’s decision in Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2072 n.2 (2013) said it was an open issue whether class-arbitration-consent presented a question of arbitrability, and how certain U.S. Circuit Courts of Appeals have, subsequent to Oxford, held that consent-to-class-arbitration presents a question of arbitrability, which is ordinarily for the court to decide. (See, e.g., here.)

We have also discussed how, under First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942-46 (1995), even though questions of arbitrability are ordinarily for the court to decide, parties may clearly and unmistakably agree to submit questions of arbitrability to the arbitrators. In Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772, 2777 (2010), the Supreme Court of the United States referred to such agreements as “delegation provisions.” Id.

Class-Arbitration-Consent 2

Class-Arbitration-Consent 2

In Spirit Airlines, Inc. v. Maizes, ___ F.3d ___, slip op. (11th Cir. August 15, 2018), the United States Court of Appeals for the Eleventh Circuit addressed a question that called in to play these two related concepts: “whether the [parties’] agreement’s choice of American Arbitration Association rules, standing alone, is clear and unmistakable evidence that [the parties] intended that the arbitrator decide” the consent-to-class-arbitration question. Slip op. at 2. The Court said the answer to that question was “yes.”

Continue Reading »

Eighth Circuit: Arbitrator did not Disregard Parties’ Missouri Choice-of-Law Provision

August 19th, 2018 Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Choice-of-Law Provisions, Exceeding Powers, Judicial Review of Arbitration Awards, Manifest Disregard of the Agreement, Manifest Disregard of the Law, United States Court of Appeals for the Eighth Circuit No Comments »

Introduction

Choice-of-Law Provision 1

Choice-of-Law Provision 1

A choice-of-law provision is as much a part of a parties’ contract as any other, and an arbitrator might manifiestly disregard the parties’ contractual choice-of-law, which might provide grounds for vacating the award under Section 10(a)(4) of the Federal Arbitration Act (“FAA”). But, as well-illustrated by the U.S. Court of Appeals for the Eigth Circuit’s decision in Beumer Corp. v. ProEnergy Servs., LLC, ___ F.3d ____, slip op. (8th Cir. August 8, 2018), the circumstances that might justify such a decision would be very unusual, to say the least.

Beumer Corp. v. ProEnergy Servs., LLC

Choice-of-Law Provision 2

Choice-of-Law Provision 2

Owner and Contractor had a construction contract that contained an arbitration agreement, limitation-of-liability, provision, and a Missouri choice-of-law clause. The Owner complained that the Contractor’s work was deficient and, accordingly, no payment was due. The Contractor commenced arbitration for the amount due under the contract and the Owner counterclaimed for damages.

The parties disputed the scope and enforceability of their contract’s limitation of liability provision, which stated:

Notwithstanding any of the foregoing or any other term in this Contract, the total liability of Contractor for any loss, indemnity, damage or delay of any kind will not under any circumstances exceed 100% of the Contract Sum.

The contract contained a broad Missouri choice-of-law clause, and provided that a prevailing party could collect its attorney’s fees.

The Award

Choice-of-Law Provision 3

Choice-of-Law Provision 3

The Arbitrator ruled that the clause was enforceable, that the Contract Sum (i.e., the liability cap) was $699,702.39., and that the terms “loss, indemnity, damage or delay of any kind” did not include the prevailing party’s contractual right to attorney fees. The Arbitrator thus awarded Beumer: (a) $699,702.39 in damages; (b) $191,680.14 in pre-judgment interest; (c) post-judgment interest at 9%; and (d) $916,027.90 in attorney’s fees and expenses.

On its motion to vacate the Award the Contractor did not dispute that the Arbitrator “arguably construed” the limitation of liability clause, but contended that the Arbitrator exceeded its powers by “disregarding” the Missouri choice-of-law clause, because: (a) the Arbitrator relied on caselaw from four jurisdictions outside of Missouri to support his construction of the limitation of liability provision as exclusive of costs and attorney fees, and did not cite any Missouri decisions on this construction question; and (b) the Contractor claimed that the Missouri cases required a cost-inclusive interpretation of the clause, not a cost-plus one.

The Arbitrator did not Disregard the Choice-of-Law Provision

Choice-of-Law Provision 4

Choice-of-Law Provision 4

Did the Arbitrator exceed his powers by ruling that the limitation of liability clause did not limit liability for contractual attorney fees? The Eighth Circuit, in a well-reasoned decision, said the answer was “no.” Continue Reading »

The Fourth Circuit: What Constitutes a Final Award and Who Makes the Call?

August 3rd, 2018 Appellate Practice, Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Confirmation of Awards, Exceeding Powers, Federal Arbitration Act Enforcement Litigation Procedure, Grounds for Vacatur, Judicial Review of Arbitration Awards, Manifest Disregard of the Agreement, Manifest Disregard of the Law, United States Court of Appeals for the Fourth Circuit 1 Comment »
Final Award 2 - yay-15399450

Final Award 2

What constitutes a “final arbitration award” for purposes of the Federal Arbitration Act is important because it bears on whether an award can be confirmed, vacated, or modified under Sections 9, 10, or 11 of the Federal Arbitration Act (the “FAA”). We addressed the basics concerning final awards in a 2009 post, here.

In Northfolk Southern Railway Co. v. Sprint Communications Co., L.P., 883 F.3d 417 (4th Cir. 2018), the U.S. Court of Appeals for the Fourth Circuit was faced with the question whether an award (the “Appraisal Award”), convened under an agreement’s appraisal clause, and issued by three appraisers, was a final arbitration award under the FAA. The unusual procedural posture of the case raised an additional, related question: whether under the FAA an arbitration panel, convened under the arbitration provision of the parties’ agreement, had the authority to declare the Appraisal Award to be a final award. That question matters, for if an arbitration panel has that power, then its decision concerning finality is subject only to the very highly deferential review permitted by Section 10 of the FAA. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942-43 (1995); Oxford Health Plans LLC v. Sutter, 133 S. Ct.  2064, 2068-69 (2013).

Concededly with the benefit of 20/20 hindsight, we wonder whether a different litigation and appellate strategy might have yielded a different outcome. The Court held that the Appraisal Award was not final, and remanded the matter back to the appraisers. But the Court did not, for the reasons set forth below, definitively answer the “who” question. The Court’s decision that the Appraisal Award was not final was unquestionably correct if one considers from a purely objective standpoint, without deference to the Arbitration Award, which declared that the Award was final.  But the correct outcome would be considerably less certain had the Railroad sought confirmation of the Arbitration Award and urged the Court to accord deference to the arbitrators who made it.

Background: Northfolk Southern Railway Co. v. Sprint Communications Co., L.P., 883 F.3d 417 (4th Cir. 2018)

Final Award 1 - yay-1618918-digital

Final Award 1

The dispute between Northfolk Southern Railway Co. (the “Railroad” or the “Appraisal Award Defending Party”) and Sprint Communications Co., L.P. (the “Carrier” or the “Appraisal Award Challenging Party”) arose out of a 25-year-term 1987 licensing agreement (the “Agreement”) under which the Carrier’s predecessor licensed from the Railroad’s predecessor the right to use for fiber-optics-cable purposes certain parts of the Railroad’s rights of way. The Carrier renewed that Agreement for an additional 25-year term (the “renewed Agreement term”), and a dispute arose about the renewal price. Continue Reading »

Second Circuit Sets Evident Partiality Standard for Party-Appointed Arbitrators on Industry Tripartite Arbitration Panels

July 26th, 2018 Appellate Practice, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Awards, Evident Partiality, Federal Arbitration Act Enforcement Litigation Procedure, United States Court of Appeals for the Second Circuit, United States District Court for the Southern District of New York Comments Off on Second Circuit Sets Evident Partiality Standard for Party-Appointed Arbitrators on Industry Tripartite Arbitration Panels

Section 10(a)(2) of the Federal Arbitration Act (the “FAA”) authorizes courts to vacate awards “where there was evident partiality.  .  .  in the arbitrators.  .  .  .” 9 U.S.C. § 10(a)(2). As respects neutral arbitrators, the U.S. Court of Appeals for the Second Circuit has long held that “[e]vident partiality may be found only where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration.”  Scandinavian Reinsurance Co. Ltd. v. Saint Paul Fire and Marine Ins. Co., 668 F.3d 60, 64 (2d Cir. 2012) (quotations and citations omitted).

But, particularly in industry and labor arbitration, the parties do not necessarily intend that party-appointed arbitrators on tripartite panels are neutral, that is, disinterested in the outcome, impartial and independent. Can a party vacate an award based on the “evident partiality” of a non-neutral, party-appointed arbitrator, and if so, what standard applies to such a challenge? Continue Reading »

Appellate Division, First Department Vacates Arbitration Award Because it Rewrote the Parties’ Collective Bargaining Agreement

July 13th, 2018 Appellate Practice, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Labor Arbitration, Manifest Disregard of the Agreement, New York Arbitration Law (CPLR Article 75), New York State Courts Comments Off on Appellate Division, First Department Vacates Arbitration Award Because it Rewrote the Parties’ Collective Bargaining Agreement

yay-1663484-digitalNew York’s arbitration law (Article 75 of the CPLR), like the Federal Arbitration Act (the “FAA”), strictly limits award challenges premised on an arbitrator’s disregard of the parties’ contract. Arbitrator interpretations of the parties’ agreement cannot be second-guessed, even if the arbitrator has “disregarded” “the apparent, or even the plain, meaning of the words of the contract….” Maross Constr. v Central N. Y. Regional Transp. Auth., 66 N.Y 2d 341, 346 (1985) (quotations and citations omitted). To succeed, an award challenger must show that the  award “is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator’s power.” Kowaleski  v. New York State Dep’t Correctional Serv., 16 N.Y. 3d 85, 91 (2010).

In City of New York v. District Council 37, ___ A.D. 3d ___, 2018 NY Slip Op 3220 (1st Dep’t May 3, 2018), the New York’s Supreme Court, Appellate Division, First Department set aside an award because it exceeded “a specifically enumerated limitation” on arbitral power: The parties’ agreement prohibited the arbitrator from adding to or modifying the agreement.

“The arbitrator’s decision,” said the Court, “rewrote the contract for the parties by expanding the number of workers entitled to the [collective bargaining agreement’s] assignment differential, when the contract expressly limited the differential to workers at a specific facility.” 2018 N.Y. Slip Op. 3220 at *1.

Acknowledging that “[a] provision in a contract that the arbitrator may not alter or modify a contract does not limit the arbitrator’s power to resolve the dispute by interpreting the contract based on his or her findings as to the parties’ intent[,]” the Court explained that “an award should be vacated where it is not derived from the contract, but from the deliberate and intentional consideration of matters outside the contract.” 2018 N.Y. Slip Op. 3220 at *1.

To learn more about vacating awards based on an arbitrator’s manifest disregard of the contract click here, here, here, here, here, and here.

Photo Acknowledgement:

The photo featured in this post was licensed from Yay Images and is subject to copyright protection under applicable law.

Class Arbitration: Second Circuit in Jock II Rejects Jock I Bootstrapping Bid and Nixes Class Certification Award that Purported to Bind Non-Parties

July 26th, 2017 Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Consent to Class Arbitration, Exceeding Powers, Judicial Review of Arbitration Awards, United States Court of Appeals for the Second Circuit Comments Off on Class Arbitration: Second Circuit in Jock II Rejects Jock I Bootstrapping Bid and Nixes Class Certification Award that Purported to Bind Non-Parties

Arbitration law’s “first principle” is “arbitration is a matter of consent, not coercion[,]” and class arbitration is no exception. (See, e.g., here.) In Jock v. Sterling Jewelers, Inc., 703 Fed.Appx. 15 (2d Cir. 2017) (summary order), the U.S. Court of Appeals for the Second Circuit enforced that principle by vacating and remanding the district court’s judgment, which confirmed in part a class arbitration class certification award that purported to bind non-parties, that is, persons (other than named class representatives), who had not opted into the putative class.

Because the Second Circuit held in an earlier appeal, Jock v. Sterling Jewelers, Inc., 646 F.3d 113, 124 (2d Cir. 2011) (“Jock I”), that the “issue of whether the agreement permitted class arbitration was squarely presented to the Arbitrator,” see id., the district court concluded that holding was law of the case, and confirmed in part an award certifying a class that “included absent class members, i.e., employees other than the named plaintiffs and those who have opted into the class.” 703 Fed. Appx. at 17-18.

Photographer: stuartmilesThe Second Circuit vacated and remanded the judgment partially confirming the certification award because it purported to bind absent class members, who (because of their absence)  could not have “squarely presented’ to the arbitrator the question whether the agreement authorized class procedures, let alone the issue of whether they should be deemed part of a class in a class arbitration to which they had not consented. See 703 Fed. Appx. at 16, 17-18.

While in Jock I the parties had “squarely presented to the arbitrator” the issue of whether the agreement “permitted class arbitration,” Jock I did not address the more “narrow question” “whether an arbitrator, who may decide … whether an arbitration agreement provides for class procedures because the parties `squarely presented’ it for decision, may thereafter purport to bind non-parties to class procedures on this basis.” Id. at 18. The answer to that question is “no”— as Associate Justice Samuel A. Alito, Jr. suggested in his concurring opinion in Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2071-72 (2013) (Alito, J., concurring), and as the Second Circuit confirmed in Jock II. See 703 Fed. Appx. at 16, 17-18.

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. The Yay Images abbreviations of the photographer’s name for each of the two images are:

Image 1: CartoonResource

Image 2: stuartmiles