Part III.B.1
Panel Issue No. 1: the Armstrong Panel’s Authority to Decide the SCA Parties’ Sanctions Claims
Introduction
Part III.A of our Lance Armstrong Arbitration Award series identified (a) the categories of issues (the “Issue Categories”) that a court can address on a motion to vacate an arbitration award on the ground the arbitrators exceeded their powers (the “Issue Categories”); and (a) the four specific issues that the Panel addressed in its award (the “Panel Issues”).
Panel Issue No. 1 was, as phrased by the arbitrators: “Does this Arbitration Tribunal have the jurisdiction or authority to decide and resolve the existing disputes between the named parties?” That issue falls into Issue Category No. 1: Issues concerning whether the parties delegated to the arbitrators—or were required to delegate to the arbitrators—the power to decide particular disputes.
Whether or not the Panel had the authority to decide the SCA Parties’ claims against Armstrong and Tailwind (the “Armstrong Parties”) depends on whether at least one 0f the parties requested the arbitrators to adjudicate those claims; and the other party either: (a) expressly or impliedly consented to the arbitrators deciding the dispute; or (b) objected to the request, but the claims were within the scope of the parties’ written pre- or post-dispute arbitration agreement. Disputes what issues the parties submitted—or were required to be submit—to arbitration present questions of arbitrability. See, e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83-86 (2002); First Options of Chicago, Inc. v. Kaplan, 543 U.S. 938, 942-45 (1995).
Relationship Between Arbitrability and the Post-Award Standard of Judicial Review
Ordinarily, questions of arbitrability are— in the allocation-of-decision-making-power scheme of things—for the court to decide, unless the parties have clearly and unmistakably agreed to delegate them to arbitrators. See, e.g., First Options, 543 U.S. at 944-45. Under a typical broadly-worded pre-dispute arbitration agreement, the vast majority of disputes that may arise between the parties—including disputes about arbitration procedure—are presumptively arbitrable, that is, they are subject to arbitration unless the parties clearly a nd unmistakably exclude them from arbitration. But when a dispute presents a question of arbitrability, then it is presumptively for the court to decide, that is, they are not subject to arbitration unless the parties clearly and unmistakably include them within the universe of disputes that must be submitted to arbitration.
Where as here, an arbitrability issue arises at the award enforcement (or back-end) stage of the proceedings—rather than the pre-arbitration, arbitration-agreement-enforcement (or front-end) stage (i.e., on a motion to compel arbitration or stay litigation)—then whether or not an issue is a question of arbitrability affects the standard of review. The standard of review is, in essence, the degree of deference to which a court pays the arbitrators’ decisions on matters that are material to applications to confirm, vacate or modify arbitration awards.
The standard of review for judicial review of arbitrator arbitrability determinations depends on whether the parties clearly and unmistakably submitted arbitrability questions to the arbitrators. If they did not, then the Court determines arbitrability issues independently, that is, without paying any deference to the panel’s determination of the question. See First Options, 514 U.S. at 943-43. But if they did clearly and unmistakably submit arbitrability questions to the arbitrators, then courts review the arbitrator’s decisions on those matters just as they would any other decision made by an arbitrator, and overturn the arbitrator’s decision only if it the arbitrator’s decision did not “draw its essence” from the parties’ agreement or otherwise falls into one of a handful of narrow grounds for vacating an arbitration award. See First Options, 514 U.S. at 942-45; Oxford Health Plans LLC v. Sutter, 133 S.Ct. 2064, 2070-71 (2013); Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1767-70 (2010); see, generally, 9 U.S.C. § 10 (2014).
Did the Parties Clearly and Unmistakably Agree
to Arbitrate Arbitrability Questions?
The court always decides independently—i.e., without according any deference to the arbitrators’ decision—whether the parties clearly and unmistakably delegated arbitrability questions to the arbitrators. The arbitration agreement in the Settlement Agreement is very broad:
The Arbitration Panel consisting of Richard Faulkner, Richard Chernick and Ted Lyon shall have exclusive jurisdiction over the parties hereto with respect to any dispute or controversy among them arising under or in connection with this SETTLEMENT AGREEMENT or Contingent Prize Contract #31122 and, by execution and delivery of this SETTLEMENT AGREEMENT, each of the parties hereby submits to the jurisdiction of that Panel and waives any objection to such jurisdiction on the grounds of venue or forum non conveniens the absence of in personam or subject matter jurisdiction and any similar grounds, consents to service of process by mail or any other manner permitted by law, and agrees to be bound by any order or award issued or rendered thereby in connection with this SETTLEMENT AGREEMENT.
(Award at 6)
To determine whether it should defer to the arbitrators’ determinations of the merits of the arbitrability question, the court will have to decide whether this broad arbitration agreement clearly and unmistakably evidences party consent to arbitrate arbitrability. The Panel expressed its belief that the parties’ had agreed to arbitrate arbitrability. (See Award at 8.)
Our view on the clear and unmistakable issue is different than the Panel’s, but ultimately the difference is (or at least should be) immaterial because no matter how much or little deference a court might accord the Panel’s decision, the Panel’s conclusion that the parties agreed to arbitrate SCA’s claims was right on the mark.
The Panel’s decision that it had jurisdiction over SCA’s claims was, in our view, not simply “arguably” correct; it is probably the only outcome a decision maker could reach in light of the facts and applicable law, including our old friend the presumption of arbitrability. Had the panel decided that it did not have jurisdiction to hear the disputes, and dismissed SCA’s claims on that basis, then that decision would likely be subject to vacatur were the Court to review it independently.
We agree with the Panel that the arbitration agreement is broad enough to be construed as an agreement to arbitrate arbitrability. And given that both arbitrators are Fellows of the prestigious U.K.-based Chartered Institute of Arbitrators (“CIArb”), and experienced in both domestic and international arbitration, we’re not surprised that the Panel concluded that the parties agreed to arbitrate arbitrability. Jurisdiction-to-decide-jurisdiction in international arbitration—sometimes referred to as “competence-competence”—is a widely accepted principle in English and European Civil Law international arbitration.
We disagree with the Panel to the extent it was implying that the arbitration agreement was not susceptible to an interpretation under which the parties did not agree to arbitrate arbitrability. The “clear and unmistakable” rule reverses the ordinary presumption that ambiguities in arbitration agreements are construed in favor of arbitration. It is thus effectively creates a presumption of non-arbitrability of arbitrability questions, which can be rebutted only by clear and unmistakable evidence that the parties intended to arbitrate arbitrability. See First Options, 514 U.S. at 944-45.
As a general rule, the sheer breadth of an arbitration agreement is not in and of itself enough to satisfy the clear and unmistakable requirement. Predispute arbitration agreements typically are very broad. A common way of broadly defining the scope of disputes to be submitted to arbitration is to require the parties to submit to arbitration “any dispute arising out of or relating to” an agreement. From a purely linguistic standpoint one might argue persuasively that this common formulation is itself a clear and unmistakable way of expressing an intent to arbitrate arbitrability. A dispute about the scope of an arbitration agreement is unquestionably a “dispute.” And a dispute about the scope of an arbitration agreement almost certainly “arises out of or relates to” the parties’ agreement.
But the clear and unmistakable rule, as its name suggests, requires something more than an inference of consent to arbitrate arbitrability, even if that inference is the most probable one to flow from the parties’ use of the type of broad, patently unambiguous scope-provision language that is so frequently found in arbitration agreements. The whole point of the rule is to ensure that parties pay extra and careful attention to whether they wish to not only waive their rights to a judicial forum on their contract, tort and other merits claims “arising out of or relating to” the legal relationship created by a contract, but also to waive their right to a judicial determination of whether, and if so, to what extent, they waived those rights in the first place. See First Options, 514 U.S. at 945. That’s why the U.S. Supreme Court—in language the linguist might convincingly argue is redundant—requires not only clear consent to arbitrate arbitrability, but unmistakable consent.
The Supreme Court’s use of arguably redundant adjectives (“clear and unmistakable”) was presumably designed to underscore the importance of parties having meaningful notice that they are agreeing to arbitrate issues that most people probably would assume would be resolved by a court even where they had agreed to a broad arbitration agreement. See First Options, 514 U.S. at 945. Presumably because most pre-dispute arbitration agreements are broad, courts typically require an express statement in the arbitration agreement or incorporated-by-reference arbitration rules that unambiguously provides that arbitrators get to decide arbitrability questions. Even that probably falls short of providing meaningful notice to people who are not reasonably well versed in arbitration versus litigation basics, but it is probably the best the law can do without Congress amending the Federal Arbitration Act.
The Armstrong Arbitration Agreement is undoubtedly extremely broad in that the parties agreed that the Panel “shall have exclusive jurisdiction over the parties hereto with respect to any dispute or controversy among them arising under or in connection with this SETTLEMENT AGREEMENT or Contingent Prize Contract #31122. . . .” The “exclusive jurisdiction” provision certainly suggests strongly an intent to require the parties to arbitrate even arbitrability disputes, but the agreement does not expressly say that the parties agreed to arbitrate arbitrability disputes. We thus do not read it as a clear and unmistakable agreement to arbitrate arbitrability.
Because the parties did not clearly and unmistakably express their intent to submit arbitrability questions to the arbitrators, the court will likely decide arbitrability questions without deferring to the Panel’s decision. We think, however, that the court will find the arbitrators’ decision on arbitrability to be helpful, especially because it points out some important factual nuances that tend to buttress the conclusion that we think would follow in any event: the parties agreed to submit the disputes before the Panel to arbitration.
Our next segment (Part III.B.2) will focus on the Panel’s analysis of the merits of Panel Issue No. 1.
Tags: Chartered Institute of Arbitrators, CIArb, Clear and Unmistakable Rule, Competence-Competence, Enterprise Wheel-Stolt-Nielsen-Oxford Contract-based Outcome Standard of Review standard, First Options of Chicago Inc. v. Kaplan, Howsam v. Dean Witter Reynolds Inc., Judicial Review, Judicial Review of Arbitration Awards, jurisdiction of arbitrators, Lance Armstrong, Lance Armstrong Arbitration Award, Oxford Health Plans LLC v. Sutter, Richard Chernick, Richard Faulkner, Rick Faulkner, Scope of Arbitration Agreement, Scope of Authority, Scope of Submission, Stolt-Nielsen S.A. v. AnimalFeeds Inc, Ted Lyons, Texas General Arbitration Act, Texas Law, U.S. Supreme Court
