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Posts Tagged ‘Zipper Clause’

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 »

National Children’s Center, Inc. v. Service Employees Int’l Union: What Happens when an Arbitrator Interprets a Contract, but does not even Arguably Apply the Interpretation to the Parties’ Dispute?

October 20th, 2014 Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Contract Interpretation, Grounds for Vacatur, Judicial Review of Arbitration Awards, Practice and Procedure, United States District Court for the District of Columbia, United States Supreme Court Comments Off on National Children’s Center, Inc. v. Service Employees Int’l Union: What Happens when an Arbitrator Interprets a Contract, but does not even Arguably Apply the Interpretation to the Parties’ Dispute?

Introduction

The deferential Enterprise Wheel/Stolt-Nielsen/Oxford contract-based outcome review standard the U.S. Supreme Court has applied to both labor arbitration awards under Section 301 of the Labor Management Relations Act, and commercial arbitration awards falling under the Federal Arbitration Act, is fairly simple to articulate yet often difficult to apply, especially in close cases.

In National Children’s Center, Inc. v. Service Employees Int’l Union, No. 13-1036, slip op. (D.D.C. Sep’t 19, 2014), United States District Court for the District of Columbia was faced with such a case, and the district court judge had to make a tough call. Applying the sometimes elusive standard, the Court concluded that the award had to be vacated. It was a close call— so close, in fact, that others may disagree and support their conclusions with what may appear to be compelling arguments.

On balance, we think the Court did the right thing given the somewhat unusual circumstances the case presented. But at least on some level it doesn’t matter. The district court judge did exactly what a good judge should do: she followed the law and, faced with the task of applying the law to a rather odd set of circumstances, she did so in the way she thought (and we agree) the law should be applied, even though the result was overturning an award.

It is quite likely that on remand the arbitrator will issue an award reaching the same conclusion and that the second award will be judicially enforced. While some might argue that vacatur should have been denied for expediency’s sake, that would not only have been the wrong decision, but a shortsighted one. 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 »