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Posts Tagged ‘State Arbitration Law’

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


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.


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Belz v. Morgan Stanley Smith Barney: Does a Petition to Vacate an FAA-Governed Award Timely Commenced in State Court Become Time-Barred Simply Because it is Removed to Federal Court?

April 6th, 2014 Arbitration Practice and Procedure, FAA Preemption of State Law, Grounds for Vacatur, Nuts & Bolts: Arbitration, Practice and Procedure, State Arbitration Law, Statute of Limitations, United States Supreme Court Comments Off on Belz v. Morgan Stanley Smith Barney: Does a Petition to Vacate an FAA-Governed Award Timely Commenced in State Court Become Time-Barred Simply Because it is Removed to Federal Court?

Part I

Belz v. Morgan Stanley Smith Barney, LLC, No. 3:13-cv-636-J-34 (MCR), slip op. (M.D. Fla. March 5, 2014), is one of those deceptively complex cases. The petitioner, successor trustee of a family trust (the “Trustee”), timely commenced under the Florida Arbitration Code (the “FAC”) in Florida state court  a petition to vacate an arbitration award by filing it within the 90-day period allowed by state law, but did not serve it until a few days after the three-month period required to vacate an award under Section 10 of the Federal Arbitration Act (the “FAA”) had elapsed. Compare Fla. Stat. §§ 682.13(2) & 682.17 with 9 U.S.C. §§ 6, 10 & 12.[1]. The petition requested an order vacating the award under both the FAA and the FAC, which allows service to be effected after expiration of the 90-day filing deadline. See Fla. Stat. §§ 682.13 & 682.17.

The respondent, a well-known securities broker-dealer (the “Broker-Dealer”), removed the case to the United States District Court for the Middle District of Florida based on the court’s diversity jurisdiction. In federal court the Broker-Dealer argued that the petition was time-barred because service was not effected within the FAA Section 12’s three-month deadline. The district court agreed and dismissed the petition as time-barred.

The district court apparently thought that, once a court determines that an arbitration agreement falls within the scope of the FAA, all of its provisions—whether substantive, procedural or a combination of the two—supersede their state law counterparts if they conflict in any way with them, irrespective of whether the conflict frustrates the purposes and objectives of the FAA. The court also seems to have thought that the state of Florida could not, independently from the FAA, declare an arbitration agreement falling under the FAA to be valid, irrevocable and enforceable under Florida substantive arbitration law, and enforce that arbitration agreement through Florida’s own statutory, summary procedures that are, for the most part, identical to those provided by the FAA, and, in any event, do not frustrate the purposes and objectives of the FAA.

Belz is deceptively complex because at first glance the case seems relatively straightforward: (a) the FAA applied to the arbitration agreement and award; (b) the FAA’s three-month statute of limitations for vacating an award is not tolled until service is effected; (c) the court determined service was not timely under the FAA; (d) the FAC’s statute of limitations, which requires only that an application for vacatur be filed within the 90-day period, did not apply because the FAA applied; and (d) therefore, the application to vacate was untimely.

But in Belz there was an “elephant in the room,” albeit one well-camouflaged by its inherent complexity: federalism—a principle reflected in the text of the FAA, in the Continue Reading »