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Posts Tagged ‘Delegation of Authority to Arbitrators’

No Good Deed Should Go Unpunished: Functus Officio and Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc.—Part I

May 3rd, 2014 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Arbitration Provider Rules, Authority of Arbitrators, Awards, Construction Industry Arbitration, Final Awards, Functus Officio, Grounds for Vacatur, Judicial Review of Arbitration Awards, New Jersey State Courts, Practice and Procedure, State Arbitration Statutes, State Courts, Uncategorized Comments Off on No Good Deed Should Go Unpunished: Functus Officio and Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc.—Part I

Courts usually err in favor of not vacating awards in close cases. As a result, Courts usually vacate awards only where there is a very clear, fundamental disconnect between the award and the parties’ arbitration agreement. Vacating an award in those circumstances enforces the parties’ agreement to arbitrate, which is exactly what the Federal Arbitration Act (“FAA”) and state arbitration codes are supposed to do. (See, e.g., L. Reins. & Arb. L. Forum post here.)

Today’s case, Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc., No. A-2428-12T4, slip op. (N.J. App. Div. March 13, 2014), involved two disputed awards: the original arbitration award (the “Original Award”) and a subsequent, modified award (the “Modified Award”). The arbitrator (the “Arbitrator”) issued the Modified Award to correct a mistake in the Original Award, which had inadvertently omitted items of claimed damage that one of the parties had requested the Arbitrator to award. The Arbitrator said he intended to include those damage items in the Original Award. The Modified Award thus accurately reflected the parties’ agreement and submission and the Original Award did not.

Which Award should have been confirmed? Relying on the functus officio doctrine, and an American Arbitration Association (“AAA”) Rule concerning arbitral modification and correction of awards, the intermediate state appellate court reversed a trial court judgment confirming the Modified Award, and held that the Original Award should have been confirmed.

A few years back the Chief Justice of the United States Supreme Court prefaced one his opinions with the following truism: “People make mistakes. Even administrators of ERISA plans.” Conkright v. Frommert, 559 U.S. 506, 509 (2010) (Roberts, C.J.). Had Merion Construction been decided correctly, then the New Jersey appellate court might have prefaced its opinion with a similar truism: “People make mistakes. Even arbitrators.” But based on how the case was decided a more fitting preface would have been: “No good deed should go unpunished. Even those perpetrated by arbitrators.” Continue Reading »

Small Business B-2-B Arbitration Part II.B: How Arbitration Agreements Work

October 17th, 2013 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Drafting Arbitration Agreements, Making Decisions about Arbitration, Practice and Procedure, Small Business B-2-B Arbitration Comments Off on Small Business B-2-B Arbitration Part II.B: How Arbitration Agreements Work

Part II.B.1: Delegating Authority

The Arbitration Agreement and the Submission

If you’ve followed this series from inception you already know that the decision to agree to arbitrate disputes arising out of a transaction, and if so, under what terms, can be as important as any other decision a business must make about price and performance terms. Armed with sufficient knowledge about how arbitration and arbitration-law works, business people and their lawyers can make better-informed choices about arbitration, including whether seeking advice from an attorney with arbitration and arbitration-law experience is warranted in the circumstances. All else equal, a business that makes informed choices about transaction terms—including dispute resolution terms—increases the odds that the transaction will work as the parties intended.

Knowledge of how arbitration agreements are structured and how they work is essential to appreciate the risks and benefits associated with arbitration. Part II.B of the series is designed to introduce the basics of pre-dispute-arbitration-agreement structure and function. This Part II.B.1 focuses on the nature of the pre-dispute promise to arbitrate, how that promise is implemented by the post-dispute submission and the nature and extent of the power parties delegate to an arbitrator by way of their submission. Continue Reading »