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Hot Topics in Appellate Arbitration: Supreme Court Review, Jurisdictional Fault Lines, and a Look Ahead to 2026

December 19th, 2025 Appellate Practice, Applicability of Federal Arbitration Act, Applicability of the FAA, Application to Confirm, Application to Stay Litigation, Application to Vacate, Arbitration Agreement Invalid, Arbitration Agreements, Arbitration Fees, Arbitration Law, Arbitration Practice and Procedure, Awards, California Supreme Court, Challenging Arbitration Awards, Choice-of-Law Provisions, Confirmation of Awards, Exemption from FAA, FAA Chapter 1, FAA Preemption of State Law, FAA Section 1, FAA Section 10, FAA Section 11, FAA Section 2, FAA Section 3, FAA Section 4, FAA Section 9, FAA Transportation Worker Exemption, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 1, Federal Arbitration Act Section 10, Federal Arbitration Act Section 11, Federal Arbitration Act Section 12, Federal Arbitration Act Section 2, Federal Arbitration Act Section 3, Federal Arbitration Act Section 4, Federal Arbitration Act Section 9, Federal Courts, Federal Question, Federal Subject Matter Jurisdiction, Independence, International Arbitration, International Institute for Conflict Prevention and Resolution (CPR), Loree and Faulkner Interviews, Personal Jurisdiction, Petition or Application to Confirm Award, Petition to Compel Arbitration, Petition to Modify Award, Petition to Vacate Award, Professor Angela Downes, Professor Downes, Richard D. Faulkner, Russ Bleemer, Section 1, Section 10, Section 11, Section 2, Section 3 Stay of Litigation, Section 4, Section 6, Service of Process, State Arbitration Law, State Arbitration Statutes, State Courts, Stay of Litigation, Stay of Litigation Pending Arbitration, Subject Matter Jurisdiction, Supreme Court, Textualism, The Loree Law Firm, United States Court of Appeals for the Fifth Circuit, United States Court of Appeals for the Fourth Circuit, United States Court of Appeals for the Ninth Circuit, United States Court of Appeals for the Second Circuit No Comments »

appellate arbitration-law developmentsIn late 2025, the International Institute for Conflict Prevention and Resolution (“CPR”) presented a CPR Speaks YouTube program entitled “Hot Topics: Year-End Wrap-Up, and 2026 Look-Ahead, on Appellate Arbitration Cases.” Moderated by our friend and colleague, Russ Bleemer, Editor of Alternatives to the High Cost of Litigation, Newsletter of CPR (“CPR Alternatives”), the program brought together a panel of highly experienced arbitration practitioners to discuss recent appellate arbitration developments and to assess issues likely to command attention in the current 2025 Supreme Court Term and beyond.

The panel included Professor Angela Downes, University of North Texas-Dallas College of Law(“UNTD”) Professor of Practice, UNTD Assistant Director of Experiential Education, and JAMS Neutral (arbitrator and mediator);  Richard D. Faulkner, veteran arbitration and appellate practitioner, arbitrator, mediator, former trial judge, prosecutor, and law professor; and the author, Philip J. Loree Jr., principal of The Loree Law Firm; founder, author,  and editor of the Arbitration Law Forum; and former BigLaw partner, who focuses his practice on arbitration and appellate and trial-court arbitration litigation.

You can review the video of the presentation here. This was the 17th arbitration-related, CPR-sponsored video presentation in which Mr. Loree and other members of the panel have participated. Russ is to be thanked profusely not only for hosting and moderating the program, but also  posting links and citation references to blog posts, articles and cases relevant to the matters discussed.

While the discussion canvassed a wide range of cases, the panel placed particular emphasis on two matters in which the United States Supreme Court (“SCOTUS”) has granted certiorari: Jules v. Andre Balazs Properties, No. 25-83 (U.S.) and Flowers Foods, Inc. v. Brock, No. 24-935 (U.S.).  Together, those cases underscore the Court’s renewed engagement with arbitration-related procedural and jurisdictional questions under the Federal Arbitration Act (the “FAA”).

This post summarizes the panel’s discussion of these important appellate arbitration developments, focusing primarily on Jules and Flowers and the issues they present. It then turns to other appellate decisions that have recently shaped the arbitration-law landscape.

Appellate Arbitration Developments: Supreme Court Certiorari as the Organizing Principle

A central premise of the CPR program was that Supreme Court certiorari activity is itself a critically important signal indicating the direction in which arbitration law is trending at the appellate level. . Even where arbitration doctrine appears settled, the Court’s willingness to take certain cases—and its refusal to take others—often reveals where doctrinal fault lines have emerged or are emerging.

In this respect, Jules and Flowers Foods are especially significant. Both cases present issues that go to the scope and operation of the FAA, but neither involves a frontal assault on arbitration enforceability. To be sure, their outcomes will in Flowers determine whether, under the facts, Section 1 of the FAA exempts from the FAA certain end-point workers who transport goods without crossing borders, and in Jules, whether an FAA-governed arbitration award must be confirmed in a state, rather than federal, forum. Instead, they raise jurisdictional questions that can determine whether arbitration-related disputes are heard in federal court at all (Jules) or in any court under the FAA (Flowers).

Key Appellate Arbitration-Law  Development I: Jules v. Andre Balazs Properties—Continuing or Anchor Subject Matter Jurisdiction Following a Section 3 Stay and a Section 4 Motion to Compel

In Jules, the Supreme Court granted certiorari to address whether a federal court that stays an action pending arbitration under FAA § 3, and compels arbitration under Section 4, retains subject-matter jurisdiction to adjudicate  post-arbitration applications to confirm or vacate the award under FAA §§ 9 or 10.

Although narrow in formulation, the question is complex and has sweeping practical consequences, particularly in light of the Court’s 2022 decision in Badgerow v. Walters, 596 U.S. 1 (2022), which sharply limited federal courts’ ability to exercise so-called “look-through” jurisdiction over post-arbitration proceedings.

As the panel emphasized, Jules sits at the intersection of two doctrinal developments in appellate arbitration law:

  1. Mandatory stays under FAA § 3, increasingly reinforced by Supreme Court precedent, which apply only when a party requests the stay and a court finds referable to arbitration a claim that is the subject or part of a pending federal-court lawsuit on the merits; and
  2. Following Badgerow, restricted federal jurisdiction over pre- or post-award arbitration enforcement proceedings, at least where those proceedings are standalone, independent proceedings that do not arise out of a preexisting but stayed federal-court lawsuit.

If a federal court in a lawsuit on the merits of a dispute compels arbitration, and if a party requests a stay of the federal lawsuit pending arbitration, then under Smith v. Spizzirri, 144 S. Ct. 1173 (2024), the federal court must grant the stay. But if the same court lacks jurisdiction to confirm or vacate the resulting award, the practical utility of the initially selected and stayed  federal forum is substantially diminished, and serious questions arise about whether Congress intended the FAA to permit such a result.

This is especially so since finding jurisdiction based on the preexisting jurisdiction of the federal lawsuit does not implicate any concerns about “looking through” to the underlying arbitration proceeding. As long as jurisdiction is based on the jurisdiction of the Court in the underlying lawsuit, then there is no “look through”—it’s really just “look at”—if there was subject matter jurisdiction over the stayed lawsuit, then there should presumably be subject matter jurisdiction over a motion made in that stayed lawsuit for relief under the FAA relating to the subject matter of that stayed lawsuit. See Badgerow, 596 U.S. at 15 (“Jurisdiction to decide the case includes jurisdiction to decide the motion; there is no need to “look through” the motion in search of a jurisdictional basis outside the court.”) The tension associated with all of this is what Jules brings to the fore.

CPR’s discussion of the case highlights how lower courts have divided on this issue and why the Supreme Court guidance is required. (See CPR’s analysis of Jules here.)

SmartSky Networks v. DAG Wireless: Context for the Jules Question

Against that backdrop, the panel discussed SmartSky Networks LLC v. DAG Wireless Ltd., 70 F.4th 615 (4th Cir. 2023),  a Fourth Circuit decision addressing whether a federal court that compelled arbitration, and stayed proceedings pending arbitration, retained jurisdiction to confirm or vacate the resulting award. The U.S. Court of Appeals for the Second Circuit ruled in Jules that the district court, which had federal question jurisdiction over a lawsuit on the merits, had continuing subject matter or anchor jurisdiction over post-award enforcement proceedings because it had granted a Section 3 stay and a Section 4 motion to compel arbitration. In SmartSky, however, the U.S. Court of Appeals for the Fourth Circuit reached the diametrically opposite conclusion in a case involving essentially the same material facts as Jules.

Importantly, as the panel made clear, SmartSky was not discussed as an end in itself. Rather, it served as a concrete illustration of the jurisdictional problem now before the U.S. Supreme Court in Jules. The resolution of Jules will most likely determine whether SmartSky is a good law, a very important question to appellate and trial-court arbitration law practitioners.

SmartSky, unlike Jules, concluded that the district court lacked jurisdiction over post-arbitration proceedings, notwithstanding the Section 3 stay. That approach reflects a strict reading of Badgerow and highlights the risk that federal courts may become jurisdictionally stranded after compelling arbitration. That would leave a significant amount of additional FAA litigation to the state courts, who would be expected to apply the FAA to substantive matters but be free to apply state arbitration law to procedural matters.

The panel discussed how courts have taken different approaches, creating uncertainty for practitioners and litigants alike. These divergent outcomes underscore why Supreme Court review is warranted.

As CPR’s year-end materials explain, SmartSky and Jules, taken together, demonstrate the kind of materially different approaches to the same important issue that often prompt a grant of certiorari. (See CPR’s overview here.)

Key Appellate Arbitration-Law  Development II: Flowers Foods, Inc. v. Brock— FAA § 1 and the Scope of the Transportation Worker Exemption

The panel also discussed Flowers Foods, Inc. v. Brock, No. 25-121 (U.S.), the other case in which the Supreme Court has granted certiorari. Flowers Foods concerns the scope of the FAA § 1 exemption for certain “transportation workers” and the criteria courts should apply in determining whether that exemption applies.

The question before the Court is: “[a]re workers who deliver locally goods that travel in interstate commerce—but who do
not transport the goods across borders nor interact with vehicles that cross borders—’transportation workers’ ‘engaged in foreign or interstate commerce’ for purposes of the Federal Arbitration Act’s § 1 exemption?”

Continuing Uncertainty Under FAA § 1

Although the Supreme Court has addressed FAA § 1 in recent years, the panel noted that lower courts continue to struggle with its application, particularly in cases involving workers who perform mixed or indirect transportation-related functions, or where (as here) a bona fide question arises concerning whether the workers are engaged in interstate commerce within the meaning of FAA § 1.

Flowers Foods presents an opportunity for the Court to clarify how broadly—or narrowly—the exemption should be construed, with significant implications for employment arbitration and independent contractor agreements.

The panel emphasized that FAA § 1 litigation has become one of the most active areas of appellate arbitration law, making the Court’s intervention both timely and consequential.

Other Appellate Developments Discussed

With the cert-granted-recently Supreme Court cases as the anchor, the panel surveyed several additional appellate decisions that illustrate broader trends:

  1. International arbitration and sovereign immunity, including the U.S. Supreme Court’s decision in CC/Devas (Mauritius) Ltd. v. Antrix Corp. Ltd., 145 S.Ct. 1572 (2025), addressing a Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28 U.S.C. §§ 1330, 1602 et seq., personal jurisdiction issue arising out of an award enforcement matter.
  2. FAA preemption of State Law, as reflected in Hohenshelt v. Superior Court, 18 Cal.5th 310 (2025) (finding no preemption of state law concerning prompt payment of arbitrator fees).
  3. Consumer arbitration and unconscionability, including Live Nation v. Heckman, 69 F.4th 1257 (9th Cir. 2023).
  4. Severability of illegal arbitration agreement provisions and contract enforcement, discussed through Mungo Homes LLC v. Huskins, 379 S.C. 199, 665 S.E.2d 590 (S.C. 2023). (For a discussion of Mungo Homes, see here.)
  5. FAA §3 stays and procedural consequences, as discussed in Smith v. Spizzirri, 144 S. Ct. 1173 (2024). (For a discussion of Spizzirri, see here.)
  6. Flores v. New York Football Giants, Inc.,104 F.4th 205 (2d Cir. 2024), in which the U.S. Court of Appeals for the Second Circuit refused to enforce an arbitration agreement that required disputes to be arbitrated by an arbitrator who lacked independence from the parties. (For a discussion of Flores, see here.)

Practical Implications for Arbitration Practitioners

The panel’s discussion yielded several practical takeaways, including:

  1. Arbitration law disputes increasingly turn on procedural and jurisdictional mechanics rather than on arbitration’s legitimacy as a dispute resolution mechanism.
  2. At least until the Supreme Court decides Jules, federal subject matter jurisdiction based on an “anchor” or “continuing jurisdiction” theory cannot be assumed simply because the court has compelled arbitration and stayed litigation pending arbitration.
  3. Strategic decisions at the motion-to-compel stage may determine whether other FAA litigation will proceed in state, rather than federal court.
  4. Arbitration clause drafting should account for jurisdictional endgames—including vertical (state vs. federal) choice of law—not just enforceability generally.

Looking Ahead to 2026

As the panel concluded, the Supreme Court’s decisions in Jules and Flowers Foods are likely to shape arbitration practice well beyond the this 2025 Term, and the Court’s 2026 Term, which starts later next year. Together, they reflect a Court that is less concerned with whether arbitration is favored, and more concerned with how arbitration fits within the text of the FAA concerning subject matter jurisdiction and exemptions to FAA applicability.

For arbitration practitioners, staying attuned to these developments is critical. Programs like CPR’s year-end “Hot Topics” discussion provide an invaluable forum for understanding not just where arbitration law has been—but where it is heading.

Contacting the Author

If you have any questions about this article, arbitration, arbitration-law, or arbitration-related litigation, then please contact Philip J. Loree Jr., at (516) 941-6094 or PJL1@LoreeLawFirm.com.

Philip J. Loree Jr. is principal of the Loree Law Firm, a New York attorney who focuses his practice on arbitration and trial court and appellate arbitration-related litigation. A former BigLaw partner, he has 35 years of experience representing a wide variety of corporate, other entity, and individual clients in matters arising under the Federal Arbitration Act, as well as in insurance- or reinsurance-related, and other, matters.

This blog features links to several arbitration-related videos and webinars in which Mr. Loree appears.

ATTORNEY ADVERTISING NOTICE: Prior results do not guarantee a similar outcome.

Photo Acknowledgment

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

 

 

 

 

 

 

 

 

S.K.A.V. v. Independent Specialty Ins. Co.: Fifth Circuit Decides Louisiana Statute Invalidating Arbitration Agreements in Insurance Contracts Applies to Surplus Lines Policies

June 27th, 2024 Anti-Arbitration Statutes, Applicability of Federal Arbitration Act, Application to Compel Arbitration, Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitrability | Existence of Arbitration Agreement, Arbitration Agreement Invalid, Arbitration Law, Arbitration Practice and Procedure, Clear and Unmistakable Rule, Delegation Agreements, Existence of Arbitration Agreement, FAA Chapter 1, FAA Preemption of State Law, FAA Section 2, FAA Section 4, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, Federal Arbitration Act Section 4, Formation of Arbitration Agreement, Gateway Disputes, Gateway Questions, Insurance Contracts, Louisiana Supreme Court, McCarran-Ferguson Act, Motion to Compel Arbitration, Petition to Compel Arbitration, Practice and Procedure, Pre-Award Federal Arbitration Act Litigation, Questions of Arbitrability, Section 2, Section 4, State Arbitration Law, State Arbitration Statutes, State Courts, Statutory Interpretation and Construction, United States Court of Appeals for the Fifth Circuit Comments Off on S.K.A.V. v. Independent Specialty Ins. Co.: Fifth Circuit Decides Louisiana Statute Invalidating Arbitration Agreements in Insurance Contracts Applies to Surplus Lines Policies

Introduction: LA Stat. Ann. § 22.868 and its Application to Surplus Lines Policies

surplus lines policy regulation

Louisiana has a statute, LA Stat. Ann. § 22.868, that courts have construed to make unenforceable arbitration provisions in insurance contracts, including surplus lines policies. The statute has an exception or savings provision that removes from the statute’s scope “a forum or venue selection clause in a policy form that is not subject to approval by the Department of Insurance[,]” LA Stat. Ann. § 22.868(D), for example, a venue- or forum-selection provision in a surplus lines policy.

The question before the U.S. Court of Appeals for the Fifth Circuit in S.K.A.V. v. Independent Specialty Ins. Co., ___ F.4th ___, No. 23-30293, slip op. (5th Cir. June 5, 2024), was whether the statute invalidates arbitration provisions contained in surplus lines insurance policies, that is, whether arbitration provisions in such contracts fall within the subsection (D) exception. Predicting how it thinks the Louisiana Supreme Court would rule if faced with the question, the Court held that the subsection (D) exemption did not apply, and accordingly, the statute rendered unenforceable arbitration agreements in surplus lines contracts. The Court accordingly affirmed the judgment of the district court, which denied the arbitration proponent’s motion to compel arbitration.

Pushing the Elephant Out of the Room. . .

Before taking a closer look at how the Court arrived at its conclusion, let’s deal with the “elephant in the room.” Why is the Court in a case governed by the Federal Arbitration Act (“FAA”) even considering enforcing a state statute that would (or could) render unenforceable an FAA-governed arbitration agreement? Doesn’t the FAA preempt state law that puts arbitration agreements on a different footing than other contracts?

The answer is “undoubtedly”, but, as insurance and reinsurance practitioners know, under the McCarran-Ferguson Act, 15 U.S.C. §§ 1011, et seq., “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance. . . .” 15 U.S.C. § 1012(b).

LA Stat. Ann. § 22.868 has been construed to be one that “regulat[es] the business insurance[,]” and the FAA is not an “Act [that] specifically relates to the business of insurance. . . .” Section 22.868 thus “reverse preempts” the FAA under McCarran-Ferguson. See slip op. at 2. (See, e.g., here.)

The Court’s Interpretation of Section 22.868, Including its Surplus Lines Policy Exemption

  LA Stat. Ann. § 22.868, provides, in pertinent part: Continue Reading »

New York Arbitration Law Focus: Appellate Division, Second Department Vacates Attorney’s Fee Award Because it was Irrational and Violated New York Public Policy

December 7th, 2023 Application to Confirm, Application to Vacate, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Arbitration Provider Rules, Attorney Fee Shifting, Attorney Fees and Sanctions, Authority of Arbitrators, Award Fails to Draw Essence from the Agreement, Award Irrational, Award Vacated, Awards, Challenging Arbitration Awards, CPLR Article 75, Enforcing Arbitration Agreements, Exceeding Powers, Grounds for Vacatur, Judicial Review of Arbitration Awards, Making Decisions about Arbitration, New York Arbitration Law (CPLR Article 75), New York State Courts, Outcome Risk, Petition or Application to Confirm Award, Petition to Vacate Award, Policy, Practice and Procedure, Public Policy, Second Department, State Arbitration Law, State Arbitration Statutes, State Courts, Vacate, Vacate Award | Attorney Fees, Vacate Award | Attorney's Fees, Vacate Award | Public Policy, Vacatur Comments Off on New York Arbitration Law Focus: Appellate Division, Second Department Vacates Attorney’s Fee Award Because it was Irrational and Violated New York Public Policy

Attorney's FeesThe question before the Appellate Division, Second Department in In re D & W Cent. Station Fire Alarm Co. v. Flatiron Hotel, ___ A.D. 3d ___, 2023 N.Y. Slip Op. 6136 (2d Dep’t Nov. 29, 2023), was whether an arbitration award had to be vacated because the amount of fees the arbitrator awarded was irrational and excessive and therefore exceeded the arbitrator’s powers under N.Y. Civ. Prac. L. & R. (“CPLR”) 7511(b)(1)(iii). The arbitrator awarded fees that were 13.5 times the amount the prevailing party’s attorney said it charged its client on an hourly basis. The fee award was 44% of the amount the arbitrators awarded for the prevailing party’s claim. See 2023 N.Y. Slip Op. 6136 at *1.

The Court concluded that the fee award was irrational and violative of New York’s strong public policy against the enforcement of contracts or claims for excessive legal fees. It therefore reversed the trial court’s judgment granting the motion to confirm and denying the motion to vacate, and remanded the matter back to the trial court. See 2023 N.Y. Slip Op. 6136 at *2.

Flatiron Hotel is of particular interest because it shows that there is authority under New York arbitration law for challenging successfully awards of legal fees that are authorized by the parties’ contract but are off the rails in their amount. While not a high-stakes arbitration involving hundreds of thousands of dollars in legal fees, it was one where the losing party was socked with a fee that was so far out of proportion of what it consented to pay that there was nothing whatosever in the record to support it.

Fortunately for the appellant in Flatiron Hotel, the Appellate Division set aside the fee award even though the standard of review for granting such relief is highly deferential. While decisions vacating awards are understandably quite rare, this was one where vacatur was quite appropriate, as we shall see. Continue Reading »

Application to Compel Arbitration | The Businessperson’s Federal Arbitration Act FAQ Guide III | The Nuts and Bolts of Pre-Award Federal Arbitration Act Practice under Sections 2, 3, and 4 (Part II)

April 22nd, 2020 Application to Compel Arbitration, Arbitrability, Arbitrability | Clear and Unmistakable Rule, Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Authority of Arbitrators, FAA Chapter 1, FAA Chapter 2, FAA Chapter 3, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 2, Federal Arbitration Act Section 4, Federal Courts, Federal Question, Gateway Disputes, Gateway Questions, Look Through, New York Arbitration Law (CPLR Article 75), Nuts & Bolts, Nuts & Bolts: Arbitration, Small Business B-2-B Arbitration, State Arbitration Statutes, Subject Matter Jurisdiction 2 Comments »
compel arbitration

Today’s segment of the Businessperson’s Federal Arbitration ACT FAQ Guide focuses on the nuts and bolts of applying to compel arbitration under Section 4 of the Federal Arbitration Act.

The last installment addressed the following questions:

  1. What Gateway Disputes do Sections 2, 3, and 4, Address, and How do they Address them?  
  2. How does Section 3 Work in Practice?

After discussing Section 4 generally and dividing the statute into five parts, this segment addresses an FAQ relating to the first of those five parts: “Under Section 4, who May Petition what Court when and for what?” Future segments will address FAQs relating to the other four parts of Section 4.  

Application to Compel Arbitration: Section 4 and its Component Parts

Section 4, which sometimes used in tandem with Section 3, but which is available as an independent remedy when a party simply refuses to arbitrate without attempting to litigate the allegedly arbitrable dispute, authorizes courts to compel parties to arbitrate the disputes they’ve promised to submit to arbitration.

Section 4 consists of 386 words jammed into a single paragraph and is thus a little daunting at first blush. It is easier to digest and follow if we divide it into subparagraphs or subsections, which we do below. The subsection letters and captions in bold are not part of the statute, but are added for ease of reference and clarity:  

Continue Reading »

Businessperson’s Federal Arbitration Act FAQ Guide II: Three Threshold Questions about the Federal Arbitration Act

January 21st, 2020 Arbitration Practice and Procedure, Businessperson's FAQ Guide to the Federal Arbitration Act, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, FAA Chapter 1, FAA Chapter 2, FAA Chapter 3, FAA Preemption of State Law, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 1, Federal Arbitration Act Section 2, Federal Arbitration Act Section 4, Federal Courts, Federal Question, Inter-American Convention on International Commercial Arbitration, New York Arbitration Law (CPLR Article 75), New York Convention, Nuts & Bolts: Arbitration, Panama Convention, Practice and Procedure, Rights and Obligations of Nonsignatories, Small Business B-2-B Arbitration, State Arbitration Law, State Arbitration Statutes, State Courts, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »
Federal Arbitration Act | Arbitrator

This second instalment of the Businessperson’s Federal Arbitration Act FAQ Guide addresses three threshold questions pertinent to the Federal Arbitration Act (the “FAA” or “Federal Arbitration Act”):

1. Does Chapter 1 of the FAA apply to my arbitration agreement?

2. Assuming it does, will a federal district court have subject matter jurisdiction over FAA litigation concerning the agreement or any awards made under it?

3. Does the Federal Arbitration Act apply in state court?

Does Chapter 1 of the FAA Apply to My Arbitration Agreement?

If your written arbitration agreement is contained in a maritime contract or a contract affecting commerce, or concerns a dispute arising out of such a contract, then it falls under Chapter 1 of the Federal Arbitration Act, unless it falls within Section 1’s exemption for contracts of employment of transportation workers engaged in interstate commerce. (See here.) It may also fall under Chapters 2 or 3 of the FAA, which implement the New York and Panama Conventions.

In our first instalment of this FAQ guide (here) we explained that Federal Arbitration Act Section 2, as interpreted by the U.S. Supreme Court, applies to written, pre-dispute arbitration agreements in: (a) “maritime contract[s]” (“Maritime Contracts”); or (b) “contract[s] evidencing a transaction involving commerce. . . .” (“Contracts Affecting Commerce”). It also applies to written post-dispute arbitration agreements “to settle by arbitration a controversy thereafter arising out of such [Maritime Contracts or Contracts Affecting Commerce], or the refusal to perform the whole or any part thereof. . . .” 9 U.S.C. § 2; see Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 273-282 (1995); Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 55-58 (2003).

Section 2’s requirement that an arbitration agreement be “written” seems simple enough, and, for the most part, it is, at least in wholly domestic arbitrations to which Chapters 2 or 3 of the FAA do not concurrently apply. But there are some caveats.

First, just because a contract is required to be “written” doesn’t necessarily mean the arbitration agreement must be signed. The arbitration agreement between the parties need only be in writing, although the arbitration-agreement proponent would need to show that the parties assented to the writing.

For example, suppose A agrees to provide services for B and further agrees that any disputes arising out of or relating to their agreement will be submitted to arbitration. A and B proceed to memorialize their agreement in a writing, including the agreement to arbitrate, spelling out the essential terms of their agreement. While the writing is not signed or initialed, both parties agree that it reflects the essential terms of the parties’ bargain. The written memorialization of the agreement is sufficient to establish a “written” agreement, even though it is not signed by the party opposing its enforcement. 

Second, provided there is a written agreement between at least two parties,  persons who are not parties to that agreement (“nonparties”) may, in appropriate circumstances, enforce the agreement or be bound by it if general principles of state law permit that result. Such general principles include “‘assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel[.] . . .’” . Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009) (citations omitted). This Term the United States Supreme Court is to determine whether such principles apply in cases governed by Chapter 2.

As respects whether a “contract” “evidenc[es] a transaction involving commerce,” the U.S. Supreme Court has interpreted Section 2 broadly to mean the Federal Arbitration Act applies to arbitration agreements in contracts or transactions that “affect” commerce, that is, to any contract or transaction that Congress could regulate in the full exercise of its Commerce Clause powers. See Allied-Bruce, 513 U.S. at 281-82; U.S. Const. Art. I, § 8, Cl. 3 (giving Congress power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes”).

Whether a contract “affects” commerce depends on the facts concerning, among other things, the parties, the contract’s subject matter, and the actual or contemplated transactions constituting the contract’s performance or contemplated performance. See Alafabco, 539 U.S. at 56-57. A party does not have to demonstrate that the contract has a “specific” or “substantial” “effect upon interstate commerce if in the aggregate the economic activity in question would represent a general practice subject to federal control.” Id. (citations and quotations omitted).  The question is whether the “aggregate economic activity in question” “bear[s] on interstate commerce in a substantial way.” Id. at 57.

Assuming that Chapter 1 of the FAA Applies to my Arbitration Agreement, Will a Federal District Court have Subject Matter jurisdiction over FAA Litigation Concerning the Agreement or any Awards Made under it?

Not necessarily. Unless an arbitration agreement also falls under Chapters 2 or 3 of the FAA, then there must be an independent basis for federal subject matter jurisdiction.

Continue Reading »

SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.B.2: Panel’s Authority to Decide the SCA Parties’ Sanctions Claims

April 2nd, 2015 Arbitrability, Arbitration Practice and Procedure, Attorney Fees and Sanctions, Authority of Arbitrators, Awards, Contract Interpretation, Functus Officio, Judicial Review of Arbitration Awards, Practice and Procedure, State Arbitration Law, State Arbitration Statutes, State Courts, United States Supreme Court Comments Off on SCA v. Armstrong: Anatomy of the Lance Armstrong Arbitration Award—Part III.B.2: Panel’s Authority to Decide the SCA Parties’ Sanctions Claims

Part III.B.2

Panel’s Analysis of the Merits of the Arbitrability Issue (Panel Issue No. 1)

Now that we’ve discussed why we think the Court will review the arbitrator’s threshold arbitrability decision de novo, let’s take a closer look at the Panel’s analysis of the arbitrability issue and whether the Texas state courts will conclude that the Panel had the jurisdiction to decide the SCA Parties’ sanctions claims.

yay-15706730-digitalThe procedural posture of  the jurisdictional issue before the Panel is unusual because the Panel, with the parties’ consent, had previously made a partial final award expressing its views on jurisdiction. The intent was to permit expedited judicial review of the issue. The Panel’s 2-1 ruling finding jurisdiction was confirmed by the trial court, which means that the trial court will almost certainly reject Armstrong’s putative challenge to the Panel’s jurisdiction.

The Armstrong Parties’ appeal to the intermediate court of appeals was dismissed for lack of appellate jurisdiction, presumably because the intermediate court of appeals concluded that the trial court’s order confirming the partial final award was not a final order or judgment from which an appeal could be taken. The Armstrong Parties sought temporary relief and mandamus review in the Texas Supreme Court, but the Supreme Court denied those requests.

yay-15481222-digital

Issue No. 1 is simply whether the parties agreed  to submit to arbitration the SCA Parties’ claims against Armstrong relating to Armstrong’s alleged procurement of the consent award through perjury, fraud and other deceptive means. The key question is whether the SCA Parties’ disputes fell within the broad scope of the parties’ arbitration agreement. And the answer is driven in large part by the presumption in favor of arbitration, under which ambiguities about the scope of an arbitration agreement are resolved in favor of arbitration.

By comparison, recall that the answer to the question who decides arbitrability questions was driven by a presumption against arbitration: courts presume that arbitrability questions are for the court to decide unless the parties “clearly and unmistakably” agree to delegate those questions to the arbitrators. The whole point of agreeing to arbitrate is to have arbitrators decide disputes about the merits, and so when the question is whether the parties empowered the arbitrators to decide the merits of a party’s claim for relief, courts presume those questions are for the arbitrators to decide.

The presumption of arbitrability applies to case governed by the Federal Arbitration Act as well as cases falling under the Texas General Arbitration Act. It provides that ambiguities in the scope of an arbitration agreement are to be resolved in favor of arbitration. See, e.g., Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); Mitsubishi Motors v. Soler Chrysler Plymouth, 473 U.S. 614, 626 (1985); G.T. Leach Builders, LLC v. Sapphire V.P. LP, No. 130497, at *21-22 & nn. 14 & 16 (Tex. Mar. 20, 2015); Branch Law Firm, L.L.P. v. Osborn, 447 S.W.3d 390, 394-98 & n.10 (Tex. App. 14 Dist. 2014). That means that if the scope provision of an arbitration agreement is susceptible to more than one interpretation, and at least one of those interpretations would require the dispute to be submitted to arbitration, then the court, as a matter of law, must find that the parties agreed to submit the dispute to arbitration. 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 »

Arbitration and Mediation FAQs: I Received an Arbitration Award in my Favor but my Adversary Refuses to Pay it. What can I do?

June 14th, 2014 Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Confirmation of Awards, Final Awards, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Small Business B-2-B Arbitration, State Arbitration Statutes, State Courts, Statute of Limitations Comments Off on Arbitration and Mediation FAQs: I Received an Arbitration Award in my Favor but my Adversary Refuses to Pay it. What can I do?

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 thus 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, an arbitration award stands on the same footing as any other privately prepared legal document, such as a contract. It may be intended by the arbitrators 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 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 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.

But that doesn’t mean you’re out of luck; it means you need 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.”).

The Federal Arbitration Act (the “FAA”), and most or all state arbitration statutes, authorize courts to confirm 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).

But let’s keep things simple, and take a brief look at the FAA’s requirements for confirmation applicable in federal court when 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 suit should have been brought in another federal judicial district) or the applicability of the FAA.  We’ll also discuss how applications to confirm are supposed to be summary proceedings, why timing of an application is important, and how courts go about deciding them. 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 »

The Tenth Tells us Time (Usually) Waits for No One: United Food & Commercial Workers Int’l Union v. King Soopers, Inc.

May 7th, 2014 Appellate Practice, Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Grounds for Vacatur, Judicial Review of Arbitration Awards, Labor Arbitration, Practice and Procedure, State Arbitration Law, State Arbitration Statutes, State Courts, Statute of Limitations, United States Court of Appeals for the Tenth Circuit, United States Supreme Court Comments Off on The Tenth Tells us Time (Usually) Waits for No One: United Food & Commercial Workers Int’l Union v. King Soopers, Inc.

Introduction

Arbitration is supposed to be a speedy alternative to litigation, and that is supposed to be true as respects commercial or employment arbitration governed by the Federal Arbitration Act (the “FAA”) and labor arbitration arising under the Railway Labor Act, 45 U.S.C. §§ 151, et. seq., or Section 301 of the Taft-Hartley Act (a/k/a the Labor Management Relations Act (“LMRA”)), 29 U.S.C. § 185. Arbitration awards are generally presumed to be valid, which puts the burden on challengers to establish their invalidity, at least provided the challenging party entered into a valid and enforceable arbitration agreement with the defending party.

Adjudicating a non-frivolous award challenge usually takes time, and if the challenge turns out to be valid, an order vacating the award does not usually resolve the underlying dispute, which, absent a settlement, must be resolved through further ADR or judicial proceedings. Delay is inevitable and delay undermines arbitration’s ability to compete with litigation.

The FAA and most or all state arbitration statutes try to minimize delay by not only by restricting t he scope of judicial review of awards, but also by imposing short limitation periods for vacating awards—for example, three months under the FAA and 90 days under many state arbitration statutes. See 9 U.S.C. § 12; see, e.g., N.Y. Civ. Prac. L.& R. § 7511(a); Fla. Stat. § 682.13(2); Wash. Rev. Code § 7.04A.230(2). Some state statutes impose shorter periods. See, e.g., Conn. Gen. Stat. § 52-420(b) (30 days); Mass. Gen. Laws ch. 251, § 12(b) (30 days); but see Cal. Code Civ. P. § 1288 (100 days).

By contrast, a motion or petition to confirm an award is usually subject to a longer statute of limitations. Cases governed by Chapter 1 of the FAA (e.g., domestic arbitrations between domestic parties), for example, are subject to a one-year limitation period. See 9 U.S.C. § 9.

Under the FAA, and presumably under many or most state arbitration statutes, if a party does not bring a timely petition to vacate, and the other moves to confirm after the time period for vacating an award has elapsed, then the challenging party cannot raise grounds for vacatur as defenses to confirmation, even if it does not seek an order vacating the award. See, e.g., Florasynth, Inc. v. Pickholz, 750 F.2d 171, 175-76 (2d Cir. 1984) (FAA); Kutch v. State Farm Mutual Auto. Ins. Co., 960 P.2d 93, 97-98 (Colo. 1998) (Colorado law); but see Lyden v. Bell, 232 A.D.2d 562, 563 (2d Dep’t 1996) (Where a confirmation proceeding “is commenced after the 90-day period, but within the one-year period. . . .[,] a party may, by cross motion to vacate, oppose the petition for confirmation on any of the grounds in CPLR 7511 even though his time to commence a separate proceeding to vacate or modify under CPLR 7511(a) has expired.”) (citations omitted) (New York law); 1000 Second Avenue Corp. v. Pauline Rose Trust, 171 A.D.2d 429, 430 (1st Dep’t 1991) (“an aggrieved party may wait to challenge an award until the opposing party has moved for its confirmation”) (New York law).

In United Food & Commercial Workers Int’l Union v. King Soopers, Inc., No. 12-1409, slip op. (10th Cir. Feb. 28, 2014), the United States Court of Appeals for the Tenth Circuit reminds us that the same rules apply to LMRA Section 301 labor-arbitration-award enforcement actions. Section 301 does not specify limitation periods for vacating arbitration awards, and as a general rule, courts “borrow” the most analogous state statute of limitations. See, e.g., Local 802, Assoc. Mus. of N.Y. v. Parker Meridien Hotel, 145 F.3d at 88-89 (2d Cir. 1998). In King Soopers the Tenth Circuit borrowed Colorado’s 90-day statute of limitations for vacating an award.[1]

King Soopers might be looked at as a refresher course in how important it is to act quickly and decisively when one finds oneself at the wrong end of an arbitration award that might not meet the modest criteria for summary confirmation or enforcement. While roughly nine years elapsed between the date the employee filed the grievance and the date the arbitrator issued the award, the Court, reversing the district court’s decision to the contrary, held (quite correctly) that King Sooper’s just-over-90-day delay in asserting grounds to vacate the award foreclosed it from opposing the union’s suit to enforce the award. Continue Reading »

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