main image

Archive for the ‘Exceeding Powers’ Category

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

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 »

Appellate Division, Fourth Department Vacates Imperfectly Executed Arbitration Award

August 15th, 2018 Authority of Arbitrators, Awards, Exceeding Powers, Imperfectly Executed Award or Powers, Labor Arbitration, New York State Courts Comments Off on Appellate Division, Fourth Department Vacates Imperfectly Executed Arbitration Award
Imperfectly Executed 1

Imperfectly Executed 1

New York Civil Practice Law & Rules (“CPLR”) Section 7511(b)(1)(iii) provides that an arbitration award “shall be vacated” where the arbitrator “so imperfectly executed [the award] that a final and definite award upon the subject matter submitted was not made” CPLR 7511(b)(1)(iii). The Federal Arbitration Act similarly authorizes vacatur “where the arbitrators…so imperfectly executed [their powers] that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10(a)(4).

In Professional, Clerical, Tech. Emps. Ass’n v. Board of Ed. for Buffalo City School Dist., ___ A.D.3d ___, 2018 N.Y. Slip Op. 04128, at *1 (4th Dep’t June 8, 2018), the New York Supreme Court, Appellate Division, Fourth Department, held that the trial court erred by confirming a labor arbitration award that did not adequately explain the basis for the compensation to be awarded or how it should be calculated. 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 »

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