Alex Silverman

The Seneca Nation of Indians moved under Section 10 of the Federal Arbitration Act (FAA) to vacate certain arbitration awards issued in favor of the state of New York, finding that Seneca must pay the state millions in revenue-sharing pursuant to an exclusive gaming compact. The issue before the Western District of New York was whether the awards “manifestly disregarded” the Indian Gaming Regulatory Act (IGRA). The state cross-moved to confirm.

At the outset, Seneca’s petition to vacate was deemed timely. The court ruled that a partial award issued by the panel regarding liability only was not “final” and thus did not trigger the three-month filing period for a petition to vacate an arbitral award, as the partial award did not “definitively resolve” all the issues submitted to arbitration. The state relied on a Second Circuit decision finding a partial award to be “final” under the FAA, but the court found the case to be factually distinguishable here. Nonetheless, both the partial and final awards were confirmed. First, the court found no statutory basis for vacatur pursuant to Section 10 of the FAA. It also found no basis for vacating the awards based on a manifest disregard of the law, noting that the extreme deference afforded to arbitration awards “essentially bars review of whether an arbitrator misconstrued a contract.” Citing a recent decision by the Second Circuit and applying a two-step analysis, the court agreed with the state that this is not one of the “exceedingly rare instances where some egregious impropriety on the part of the arbitrator is apparent,” as is required for a finding of “manifest disregard.” As such, Seneca’s petition to vacate was denied, and the state’s cross-petition to confirm was granted.

Seneca Nation of Indians v. State of N.Y., No. 1:19-cv-00735 (W.D.N.Y. Nov. 8, 2019).

Two professional baseball teams — the Washington Nationals and the Baltimore Orioles — were parties to a partnership agreement granting exclusive broadcast rights to their baseball games to a third entity. The agreement had a multistep dispute resolution process. After an unsuccessful mediation, the parties were required to arbitrate before the commissioner of Major League Baseball, unless MLB had an ownership or financial interest in one of the parties to the dispute when it arose. In that event, any dispute was required to be arbitrated before the American Arbitration Association (AAA), pursuant to AAA rules.

The question on appeal was whether the MLB commissioner, the AAA, or a court should decide the gateway issue of whether MLB had a financial interest at the time the dispute arose between the parties. The Appellate Division, First Department, acknowledged that AAA rules were expressly incorporated in the relevant agreement by reference. Under AAA rules, threshold arbitrability questions are clearly and unmistakably delegated to the arbitrator. For this reason, the court held that it possessed “no power” to override the arbitration agreement between the parties. It also emphasized that the arbitration clause here broadly encompassed “any dispute” and expressly stated that if MLB has a potential interest in a dispute, AAA rules shall apply, notwithstanding any powers MLB may ordinarily grant the commissioner in the dispute resolution process. The court therefore vacated an interim stay of arbitration instituted pending appeal and denied the Nationals’ motion for a preliminary injunction enjoining a AAA proceeding commenced by the Orioles.

In re WN Partner, LLC v. Baltimore Orioles Ltd. P’ship, No. 652052/2019 (N.Y. App. Div. Nov. 19, 2019).

The petitioner moved to confirm an arbitration award, and the respondent cross-moved to vacate, claiming the arbitrator was guilty of misconduct in refusing to postpone the hearing upon the unexpected passing of a witness’ father, then refusing to consider testimony of a different witness, and for showing manifest disregard of the law. The court explained that litigants carry a heavy burden when seeking to vacate an award based on arbitrator misconduct, noting that not every failure to consider relevant evidence requires vacatur. Only when an arbitrator refuses to accept evidence from a “key witness,” such that the opposition’s critical arguments would go unopposed, would the misconduct rise to the level ordinarily required for vacatur. Here, the respondent essentially admitted that one of the excluded witnesses was not “key” and that the other was meant only to corroborate the respondent’s own evidence, rather than rebut the petitioner’s. For these and other reasons, the court held that the arbitrator’s refusal to consider these witnesses was not improper, much less misconduct requiring vacatur. The court also found no evidence to suggest that this was one of the “exceedingly rare” instances in which an award may be vacated for manifest disregard of the law. The court therefore granted the petitioner’s motion to confirm the award, and denied the respondent’s cross-motion.

Eaton Partners, LLC v. Azimuth Capital Mgmt. IV, Ltd., No. 1:18-cv-11112 (S.D.N.Y. Oct. 18, 2019),

The Southern District of New York granted a motion to compel arbitration of an employment dispute between the petitioners and the respondent. The petitioners also filed a motion to dismiss or stay a concurrent proceeding that the respondent had filed in federal court in Colorado. The respondent did not dispute that the claims he asserted in the Colorado action fell within the scope of an arbitration clause in his employment agreement with the petitioners. Rather, he argued that the arbitration clause was invalid because: (1) the employment agreement limited the petitioners’ liability in certain respects; and (2) a fee-shifting clause in the arbitration provision was unconscionable. The court rejected both arguments. First, the court held that “validity” challenges under Section 2 of the Federal Arbitration Act are limited to the validity of the arbitration clause itself, which is severable from the remainder of the contract. The respondent’s “limitation of liability” argument was not premised on the validity of the arbitration provision, but on two sections of the agreement that had no bearing on the arbitration clause, including its validity. Second, the court held that the fee-shifting provision was not unconscionable, and noted that the respondent failed to identify a single federal or New York court that had invalidated an arbitration agreement based on a fee-shifting clause. As such, the court granted the petitioners’ motion to compel arbitration, but denied the petitioners’ motion to stay the Colorado action, finding it lacked jurisdiction to do so.

Crispin Porter & Bogusky LLC v. Watson, No. 1:18-mc-00384 (S.D.N.Y. Oct. 10, 2019).