Archive for the ‘Awards’ Category

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

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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 »

SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.A: What are the Issues?

March 26th, 2015 Arbitrability, Arbitration Practice and Procedure, Attorney Fees and Sanctions, Authority of Arbitrators, Awards, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Grounds for Vacatur Comments Off on SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.A: What are the Issues?

SCA v. Armstrong: Anatomy of the Armstrong Arbitration Award

Part III.A: What are the Issues?

In Part II we discussed applicable arbitration law, so now let’s take a look at what issues the Court may need to address in the event the Armstrong Parties contend that the arbitration panel (the “Panel”)’s award exceeded its powers under the Federal Arbitration Act (a/k/a the “FAA”) and the Texas General Arbitration Act (the “TAA “).

summer-15198434-digitalpowerThe Federal Arbitration Act (a/k/a the “FAA”) and the Texas General Arbitration Act (the “TAA “) both authorize courts to vacate awards where arbitrators exceed their powers. See 9 U.S.C. § 10(a)(4) (2014); Tex. Civ. Prac. & Rem. Code § 171.088 (a)(3)(A) (Vernon 1997). If the New York Convention applies by way of Chapter 2 of the Federal Arbitration Act, then Chapter 1 of the Federal Arbitration Act would continue to apply because the Award was made in the U.S. And in any event, Article V of  the Convention permits parties to defend against the enforcement of an arbitration award falling under the Convention on the ground that the arbitrators exceeded their powers. See Convention on the Recognition and Enforcement of Foreign Arbitral Awards at Art. V.(c) & V.(d). Continue Reading »

SCA v. Armstrong: Anatomy of an Arbitration Award—Part I

February 23rd, 2015 Arbitration Practice and Procedure, Attorney Fees and Sanctions, Authority of Arbitrators, Awards, Confirmation of Awards, State Courts Comments Off on SCA v. Armstrong: Anatomy of an Arbitration Award—Part I

Armstrong Arbitration Award: Introduction

yay-15106666-digitalArmstrong-e1424717219396On Monday morning, February 16, 2015 attorneys for SCA Promotions, Inc. (“SCA”) and SCA Insurance Specialists, Inc. (“SCA Insurance”) (collectively, the “SCA Entities”) filed a petition in a Dallas County, Texas state court to confirm a $10,000,000.00 arbitration award recently made in the Matter of the Arbitration between Lance Armstrong and SCA Promotions, Inc. Ordinarily something like that is an event accompanied with all the fanfare of a tree falling in a deserted forest.

But this petition is different. It seeks to confirm an arbitration panel’s award of $10,000,000.00 in sanctions levied against cyclist Lance Armstrong for having lied under oath to the arbitration panel and the SCA Entities in an earlier arbitration proceeding. So its filing was widely reported and discussed by major national and international media providers.

Here’s a condensed and simplified version of the background: Continue Reading »

Federal Arbitration Act Litigation Procedure Blog Posts on Final Arbitration Awards

December 30th, 2014 Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Awards, Confirmation of Awards, Functus Officio, Grounds for Vacatur, Judicial Review of Arbitration Awards, Loree & Loree Arbitration-Law Blogs, Nuts & Bolts, Nuts & Bolts: Arbitration, United States Supreme Court Comments Off on Federal Arbitration Act Litigation Procedure Blog Posts on Final Arbitration Awards

Back when we began posting in 2009 we published a “Nuts & Bolts”  series post about final arbitration awards, which you can read here. Interestingly, enough, that post, according to Google Analytics statistics, is one of the (if not the) most popular post we’ve ever published.

That may seem a bit strange, but it’s really not. Whether or not an arbitration award is a final arbitration award bears on a number of important issues, including whether the award can be confirmed, vacated, modified or corrected, and whether it is a decision that the arbitrators have the authority to revisit. And whether or not an arbitration award can be confirmed, vacated, modified or corrected before the conclusion of an ongoing arbitration proceeding has obvious time-bar consequences in light of the short limitation periods for confirming, vacating, modifying and correcting awards: to avoid forfeiture, it may be necessary to commence post-award Federal Arbitration Act enforcement proceedings before the arbitration proceeding has concluded. (See Loree Reins. & Arb. L. Forum posts here & here.)

Given the recent launch of  the Federal Arbitration Act Litigation Procedure Blog, and the need to start posting what we hope will be interesting and useful material, we decided to kick-off with the finality topic. Earlier today we published the first  segment of the series Federal Arbitration Act Finality: Is this Arbitration Decision a Final Award, An Interim Final Award, a Partial Award, a Partial Final Award or. . . What??, which you can read here.

That post outlines the topic and describes a hypothetical arbitration that gives rise to five types of awards and rulings, four of which are issued prior to the award that concludes the arbitration. Future posts  will discuss whether or not each type of award is, or may in some circumstances be, a final arbitration award for  purposes of Chapter 1 of the Federal Arbitration Act.

Another thing we’ll discuss will be the affect, if any, of Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) on the final award issue. Of all the many issues discussed in the Stolt-Nielsen case the one we hear relatively little commentary about is the Supreme Court’s rejection of the dissent’s argument that the class-arbitration consent award was not ripe for judicial review.  See 559 U.S. at 667 n.2. As part of the Federal Arbitration Act Litigation Procedure Blog final-award series, we’ll consider that aspect of the Supreme Court’s ruling and its relevance to the question whether a partial award can be a partial final award if the parties consent.

And unless we  somehow feel compelled  to publish yet another post this year, we’d like to take this opportunity to wish everyone a happy and prosperous New Year!

Philip J. Loree Jr.

 

The Loree Law Firm Launches Arbitration Award Enforcement Practice Website and Arbitration Award Practice Blog, which will focus on Federal Arbitration Act Arbitration Award Enforcement

December 17th, 2014 Awards, Loree & Loree Arbitration-Law Blogs Comments Off on The Loree Law Firm Launches Arbitration Award Enforcement Practice Website and Arbitration Award Practice Blog, which will focus on Federal Arbitration Act Arbitration Award Enforcement

Last week Loree & Loree launched its Arbitration Award Enforcement Practice Website, which is designed to highlight the award enforcement and challenge services we offer as part of our arbitration and arbitration law practice (referred to in our website as our Arbitration Law, Practice & Procedure practice, but what’s in a name?). As part and parcel of that, the website also provides what we hope will be some useful general information about the Federal Arbitration Act and proceedings to confirm, vacate, modify or correct arbitration awards.

We used a WordPress platform to create, and continue to use it to maintain, the site, and WordPress makes it pretty easy to make a blog part of the site, so we of course could not resist the opportunity to create a blog that is limited to the limited subject matter of the site itself: Federal Arbitration Act and state arbitration law award enforcement practice, a topic we’ve blogged a lot out about here at the Forum since 2009. The new blog is the Arbitration Award Practice Blog. Continue Reading »

Small Business B-2-B Arbitration Part III.A: Arbitration RIsks—Outcome Risk  

November 26th, 2014 Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Arbitration Risks, Authority of Arbitrators, Awards, Bad Faith, Confirmation of Awards, Contract Interpretation, Dispute Risk - Frequency and Severity, Drafting Arbitration Agreements, Grounds for Vacatur, Judicial Review of Arbitration Awards, Making Decisions about Arbitration, Managing Dispute Risks, Nuts & Bolts, Nuts & Bolts: Arbitration, Outcome Risk, Practice and Procedure, Small and Medium-Sized Business Arbitration Risk Comments Off on Small Business B-2-B Arbitration Part III.A: Arbitration RIsks—Outcome Risk  

Arbitration Risks—Outcome Risk

Introduction

Our last segment of our B-2-B arbitration series (here) wrapped up discussion of the structural characteristics of arbitration agreements. Now that we’ve covered  the nature and purpose of arbitration, and the structure of arbitration agreements, let’s consider some of the risks an agreement to arbitration can pose to a small or medium-sized business.

For simplicity’s sake we’ll focus on five types of risk associated with agreeing to arbitrate disputes:

  1. “Outcome risk;”
  2. “Fail-Safe risk;”
  3. “Bleak House risk;”
  4. “Counterparty risk;” and
  5. “Integrity risk.”

These are not necessarily the only types of risk one assumes in arbitration, but they are among the more significant ones. There are ways to help hedge against these risks and perhaps even lessen the frequency and severity of their manifestation, but for present purposes, let’s briefly discuss each, starting with outcome risk. Continue Reading »

Arbitration and Mediation FAQs: Do Arbitrators Necessarily Exceed their Powers by Making an Award that Conflicts with the Unambiguous Terms of the Parties’ Agreement?

November 11th, 2014 Appellate Practice, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Confirmation of Awards, Contract Interpretation, Grounds for Vacatur, Judicial Review of Arbitration Awards, New York Court of Appeals, New York State Courts, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Small Business B-2-B Arbitration, United States Supreme Court Comments Off on Arbitration and Mediation FAQs: Do Arbitrators Necessarily Exceed their Powers by Making an Award that Conflicts with the Unambiguous Terms of the Parties’ Agreement?

We’ve addressed on many occasions the Enterprise WheelStolt-Nielsen/Oxford contract-based outcome review standard, which permits courts to vacate awards when they do not “draw their essence” from the parties’ agreement. Under that standard the “sole question is whether the arbitrators (even arguably) interpreted the parties’ contract, not whether [they] got its meaning right or wrong.” See Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013) (parenthetical in original). (See, e.g.,  Loree Reins. & Arb. L. F. posts here, here, here, here, here & here.)

While exceedingly deferential, the standard is not toothless. Arbitration awards that disregard or contravene the clear and unmistakable terms of a contract are subject to vacatur under it. See Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 676 (panel had “no occasion to ascertain the parties’ intention in the present case because the parties were in complete agreement regarding their intent.”) (quotation omitted); United Paperworkers v. Misco, Inc., 484 U.S. 29, 38 (1987) (“The arbitrator may not ignore the plain language of the contract. . . .”). That’s because an arbitrator who makes an award that lacks “any contractual basis” has not even arguably interpreted the contract, and therefore has strayed from his or her task. See Oxford, 133 S. Ct. at 2069 (distinguishing Stolt-Nielsen); Stolt-Nielsen, 559 U.S. at 668-69, 672; Misco, 484 U.S. at 38.

An arbitrator whose award contradicts the unambiguous provisions of the parties’ contract may—but will not necessarily—exceed her powers. The answer depends on what the agreement says, what the award says and whether the award is at least arguably grounded in the agreement.

Whether or not a contract or contract term is “ambiguous” depends on whether it is reasonably susceptible to more than one meaning. See, e.g., White v. Continental Cas. Co., 9 N.Y.3d 264, 267 (2007); Greenfield v. Philles Records, 98 N.Y.2d 562, 570-71 (2002). When a contract is unambiguous, a court can interpret it as a matter of law; if it is ambiguous, its meaning is a question of fact for trial.

Can the Interpretation of the Arbitrators be “Unreasonable,” yet still Colorable or Plausible?

The legal standard for lack of ambiguity is that there be only one “reasonable” interpretation of the contract terms, not that there are no other at least barely plausible or barely colorable interpretations of what the contract might mean. In probably the majority of contract interpretation cases concerning alleged contract ambiguity, each litigant supports its position with good-faith, reasonable arguments for why the disputed contract terms are allegedly susceptible to one or more than one meaning. Whenever courts determine that a contract is unambiguous, that conclusion necessarily means that the losing party’s interpretation of the contract is unreasonable as a matter of law. Continue Reading »

What Happens when Arbitrators Exceed Clear Limitations on their Authority?

October 24th, 2014 Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Attorney Fees and Sanctions, Authority of Arbitrators, Awards, Confirmation of Awards, Contract Interpretation, Drafting Arbitration Agreements, Grounds for Vacatur, Judicial Review of Arbitration Awards, New York State Courts, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Small Business B-2-B Arbitration, State Arbitration Law, State Arbitration Statutes, State Courts, United States Court of Appeals for the Second Circuit Comments Off on What Happens when Arbitrators Exceed Clear Limitations on their Authority?

One advantage of arbitration is that parties can define and delineate the scope of disputes they agree to submit to arbitration, the basis on which disputes  can or must be resolved and the scope of the arbitrator’s remedial powers. If parties impose clear limits on an arbitrator’s authority (usually by expressly excluding certain matters from arbitration or expressly providing that an arbitrator cannot or must grant certain remedies), then courts and arbitrators are supposed to enforce those limitations. See, e.g., Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 559 U.S. 662, 680-81 (2010).

Far too frequently, parties simply agree to a broad arbitration agreement that places no limitations on arbitral power, and when they end up on the wrong-end of an award they didn’t expect, they discover to their dismay that they have no judicial remedy. Whether or not they understood that at the time they agreed to arbitrate is, of course, irrelevant. The only relevant consideration is whether their agreement could be reasonably construed to grant the arbitrator that authority, even if it could also be reasonably construed to withhold it. See, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) (“when a court interprets such provisions in an agreement covered by the FAA, due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration”) (quotation and citation omitted).

But suppose the parties take the time to consider whether they desire to limit arbitral authority, and their arbitration agreement unambiguously expresses an intention to limit arbitral authority to resolve certain disputes or impose certain remedies, or to expressly require that the arbitrators grant certain types of relief, such as fee shifting to a prevailing party. Should a court vacate the award if the arbitrator does not abide by the parties’ unambiguously expressed intentions?  Continue Reading »

National Children’s Center, Inc. v. Service Employees Int’l Union: What Happens when an Arbitrator Interprets a Contract, but does not even Arguably Apply the Interpretation to the Parties’ Dispute?

October 20th, 2014 Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Contract Interpretation, Grounds for Vacatur, Judicial Review of Arbitration Awards, Practice and Procedure, United States District Court for the District of Columbia, United States Supreme Court Comments Off on National Children’s Center, Inc. v. Service Employees Int’l Union: What Happens when an Arbitrator Interprets a Contract, but does not even Arguably Apply the Interpretation to the Parties’ Dispute?

Introduction

The deferential Enterprise Wheel/Stolt-Nielsen/Oxford contract-based outcome review standard the U.S. Supreme Court has applied to both labor arbitration awards under Section 301 of the Labor Management Relations Act, and commercial arbitration awards falling under the Federal Arbitration Act, is fairly simple to articulate yet often difficult to apply, especially in close cases.

In National Children’s Center, Inc. v. Service Employees Int’l Union, No. 13-1036, slip op. (D.D.C. Sep’t 19, 2014), United States District Court for the District of Columbia was faced with such a case, and the district court judge had to make a tough call. Applying the sometimes elusive standard, the Court concluded that the award had to be vacated. It was a close call— so close, in fact, that others may disagree and support their conclusions with what may appear to be compelling arguments.

On balance, we think the Court did the right thing given the somewhat unusual circumstances the case presented. But at least on some level it doesn’t matter. The district court judge did exactly what a good judge should do: she followed the law and, faced with the task of applying the law to a rather odd set of circumstances, she did so in the way she thought (and we agree) the law should be applied, even though the result was overturning an award.

It is quite likely that on remand the arbitrator will issue an award reaching the same conclusion and that the second award will be judicially enforced. While some might argue that vacatur should have been denied for expediency’s sake, that would not only have been the wrong decision, but a shortsighted one. Continue Reading »

Res Judicata and Consolidated Arbitration: the Sixth Circuit puts the Kibosh on the “Contagion Theory of Arbitration”

September 17th, 2014 Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Confirmation of Awards, Consolidation of Arbitration Proceedings, Construction Industry Arbitration, Contract Interpretation, Drafting Arbitration Agreements, Existence of Arbitration Agreement, Final Awards, Judicial Review of Arbitration Awards, Michigan State Courts, Practice and Procedure, Preclusive Effect of Awards, Res Judicata or Claim Preclusion, State Courts, United States Court of Appeals for the Sixth Circuit, United States Supreme Court Comments Off on Res Judicata and Consolidated Arbitration: the Sixth Circuit puts the Kibosh on the “Contagion Theory of Arbitration”

Res judicata—Latin for a “matter” or “thing” “decided”—is the legal principle under which a final judgment in one action bars the same parties from relitigating in another, successive action matters that were or could have been asserted in that  first action. Also known as “claim preclusion”, it is designed to promote finality and judicial economy, and to protect persons from vexatious litigation. See, generally, Taylor v. Sturgell, 553 U.S. 880, 891 (2008).

But can an unconfirmed arbitration  award preclude a party from maintaining a court action to resolve a matter that it did not submit or agree to submit to arbitration? Suppose:

  1. A has an arbitration agreement with B (the “AB Agreement”);
  2. B has an arbitration agreement with C (the “BC Agreement”);
  3. A and C did not agree to arbitrate any disputes between them;
  4. The AB Agreement contemplates the parties arbitrating their claims against each other in a consolidated arbitration that may involve factually-related disputes that B has agreed to arbitrate with C or other third parties, provided those third parties consent to consolidated arbitration;
  5. The AB Agreement does not purport to require A or B to arbitrate any disputes between (a) A or B or both; and (b) C or any other non-party;
  6. The BC Agreement does not purport to require B or C to arbitrate any disputes between (a) B or C or both; and (b) A or any other third party;
  7. A dispute arises between A and B, and A demands arbitration against B;
  8. B, in turn, demands arbitration against C, seeking indemnity from C for any liability B may have to A;
  9. The AB and BC arbitrations are consolidated over A’s objection;
  10. A knows it has a legal and factual basis for asserting a tort claim against C arising out of the same transactions and occurrences at issue in the consolidated arbitration, but does not submit (or attempt to submit) that claim to arbitration;
  11. The arbitration proceeds, and the arbitrator issues a final award finding that B is liable to A for $X in damages and that C is not obligated to indemnify B;
  12. Nobody seeks to confirm, vacate, modify or correct the award; and
  13. A subsequently brings an action in court against C, which seeks damages from C allegedly caused by C’s negligent conduct with respect to the same transactions and occurrences that were the subject of the consolidated arbitration.

Is A’s lawsuit barred by res judicata?

On August 28, 2014, in O’Neil v. Shepley, No. 13-2320, slip op. (6th Cir. Aug. 28, 2014),  the U.S. Court of Appeals for the Sixth Circuit, in a 2-1 decision, said the answer was “no,” and that the answer would have been the same had the AB/BC award been confirmed. See slip op. at 10-11.

The two-judge majority opinion—authored by Chief Circuit Court Judge R. Guy Cole, and joined by Circuit (and former Chief) Judge Danny Julian Boggs—minced no words when it said that to bar A’s lawsuit based on res judicata would be to endorse a “contagion theory of arbitration” that “has no basis in law or the relevant contracts[:]”

Simply put: the premise of arbitration is consent and [A] did not consent to arbitrate the present claims [against C]. Our judicial doctrines do not force it to do so now.

Slip op. at 10-11.

Circuit Court Judge David William McKeague dissented, arguing that the “court does not need to infect [A] with a ‘contagion theory of arbitration’ to bar his claims with res judicata. It merely needs to hold him to the basic terms of his contract. Any infection that [A] O’Neil has acquired is its own doing.” That was so, claimed the dissent, because:

[The AB arbitration was] eventually expanded to include [C]. Moreover, in [subcontractor A’s] contract with [construction manager B], [A] agreed to arbitrate his grievances with [B] and further agreed in a standard ‘flowthrough’ provision to be ‘bound by the procedures, decision and determinations resulting from any dispute resolution process’ in the contract between [B] and [the owner].  The contract between [B] and the [owner] required all disputes, among all contractors, to be submitted to binding arbitration.

Slip op. at 13 (emphasis in original) (McKeague, J., dissenting).

All three judges appeared to agree that res judicata does not turn on whether the first proceeding would have barred the second had the first been a plenary court proceeding. The difference of opinion between the majority and dissent was that the dissent was prepared to find A’s agreement to consolidated arbitration was the functional equivalent of an agreement arbitrate its claims against any person who might consent to join such a consolidated arbitration, even if A had no contractual relationship with that person, let alone a written agreement to arbitrate.

We think the majority’s read of the relevant contractual provisions gave effect to the parties expressed intent, whereas the dissent’s view of what the parties agreed did not. But to appreciate why, you’ll need to take a closer look at the Sheply facts, which in substance are much like (but not identical to) those in our hypothetical. Continue Reading »

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