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 »
The 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.
