Confirmation / Vacation of Arbitration Awards

Connecticut Supreme Court to Consider Whether Parties Can Use FAA to Extend Time to Vacate Arbitration Award

December 12, 2019 by Brendan Gooley

The Connecticut Supreme Court will consider whether the parties to an arbitration agreement can circumvent Connecticut’s 30-day statutory deadline for filing an application to vacate an arbitration award by including in the arbitration agreement a choice-of-law provision stating that the agreement is governed by the Federal Arbitration Act, which contains a three-month time limitation for filing applications to vacate arbitration decisions.

In A Better Way Wholesale Autos, Inc. v. Saint Paul, 192 Conn. App. 245 (2019), the Connecticut Appellate Court affirmed the trial court’s dismissal of a plaintiff’s application to vacate an arbitration award on the ground that the application was untimely because it was filed more than 30 days after the award. Under a Connecticut statute, “[n]o motion to vacate, modify or correct an award may be made after thirty days from the notice of the award to the party to the arbitration who makes the motion.” The appellate court concluded as a matter of law that parties may not circumvent that statute by agreeing to have the FAA’s three-month limitation period apply. Thus, even though the arbitration agreement at issue provided that “[a]ny arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act … and not by any state law concerning arbitration,” Connecticut’s 30-day limitation applied.

A Better Way Wholesale Autos, Inc. v. Saint Paul, 192 Conn. App. 245 (2019).

Texas Magistrate Denies Motion for Attorneys’ Fees Incurred in Seeking Confirmation of Arbitration Award

November 18, 2019 by Nora Valenza-Frost

The plaintiff successfully confirmed an arbitration award concerning certain franchise agreements and then sought attorneys’ fees and costs incurred in connection with its confirmation action based on the attorneys’ fees provision in the franchise agreements. The defendants opposed because the arbitrator had already issued a final award awarding attorneys’ fees and costs in the arbitration.

The franchise agreement provided that if either party instituted arbitration and prevailed against the other party based entirely or in part on the terms of the franchise agreement, the prevailing party shall be entitled to recover from the losing party, in addition to any judgment, reasonable attorneys’ fees and arbitration costs. The magistrate judge found that, by its plain terms, the fee provision did not expressly authorize the court to award attorneys’ fees for enforcing an arbitration award.

Furthermore, where an arbitration award includes an award of attorneys’ fees – which it did here – a trial court may not award additional attorneys’ fees for enforcing or appealing the confirmation of the award unless the arbitration agreement provides otherwise.

Stockade Franchising, LP v. Kelly Rest. Grp., LLC, No. 1:18-cv-00918 (W.D. Tex. Oct. 24, 2019).

Fifth Circuit Affirms Confirmation of Arbitration Ruling in Favor of Ameriprise Financial

November 7, 2019 by Benjamin Stearns

The Fifth Circuit affirmed the confirmation of an arbitration ruling in favor of Ameriprise Financial Services Inc. In 2015, Ameriprise sought a temporary restraining order against Jeremy Walker, a former employee of an Ameriprise franchisee, to prevent him from using confidential customer information. The matter was referred to a FINRA arbitration panel, which resulted in an award against Walker and in favor of Ameriprise for injunctive relief, compensatory damages, and attorneys’ fees.

In 2017, Walker filed a FINRA arbitration against Ameriprise, primarily alleging that he was improperly enjoined by the 2015 arbitration. Ameriprise moved to dismiss under FINRA Code of Arbitration Procedure for Industry Disputes Rule 13504(a)(6)(C), which provides that dismissal may be granted when the “non-moving party previously brought a claim regarding the same dispute against the same party that was fully and finally adjudicated on the merits and memorialized in an order, judgment, award, or decision.” The 2017 arbitration panel found the 2015 arbitration and award met the requirements of Rule 13504(a)(6)(C) and unanimously dismissed the arbitration. Walker filed a motion to vacate arguing that the 2017 panel was “guilty of misconduct” under 9 U.S.C. § 10(a)(3) and “exceeded its powers” under 9 U.S.C. § 10(a)(4). The district court disagreed, denied Walker’s motion to vacate, and granted Ameriprise’s motion to confirm.

On appeal, the Fifth Circuit affirmed. Walker grounded his argument for vacatur under § 10(a)(3) upon the panel’s supposed failure to allow him to present evidence and testimony. However, the Fifth Circuit found that Walker was not prevented from presenting either. With regard to Walker’s argument that the panel exceeded its powers under § 10(a)(4), Walker argued that the panel erred in determining that the elements of Rule 13504(a)(6) had been met. However, this argument was insufficient under the § 10(a)(4) standard for vacatur, which requires a finding that the arbitration panel “acts contrary to express contractual provisions.” Even if Walker were correct that the panel had made a legal error, such errors “lie far outside the category of conduct embraced by § 10(a)(4).”

Walker v. Ameriprise Fin. Servs., Inc., No. 18-11641 (5th Cir. Oct. 9, 2019).

Court Confirms Arbitration Award Under FAA’s Strong Presumption in Favor of Such Awards

October 21, 2019 by Rachel Schwartz

This case arises from a dispute over the parties’ obligations under several oil and gas leases. The parties engaged in an arbitration pursuant to an arbitration agreement. The arbitration panel entered awards in favor of defendants Alan Larson and others. Northeast Natural Energy LLC filed a complaint in the U.S. District Court for the Western District of Pennsylvania. Under the Federal Arbitration Act, there is a strong presumption in favor of an arbitration award and a court must grant an order confirming an arbitration award, except in few enumerated instances. One ground for vacating an award includes “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” The court may also vacate an arbitration award when the arbitrators displayed a “manifest disregard” of the law. This means there must be “absolutely no support at all in the record justifying the arbitrator’s determinations.”

The court denied Northeast Energy’s motion to vacate the arbitration award and held that the panel did not exceed its powers and did not manifestly disregard the law. The court explained that there was nothing in the record to support that the panel exceeded its powers by rewriting the leases and failing to interpret the leases as written. The court further explained that the panel did not remove a provision from the leases, and the record supported the panel’s interpretation. The court found that the panel’s application of the parol evidence rule was not “completely irrational” as it cited appropriate legal authority and did not misapply Pennsylvania law. Lastly, the court held that the panel did not manifestly disregard the law in making awards to non-testifying defendants because the record revealed that the panel had sufficient information to make such findings.

Ne. Natural Energy LLC v. Larson, No. 3:18-cv-00240 (W.D. Penn. Sept. 20, 2019).

Second Circuit Confirms Arbitration Awards That Are (Literally) Out of This World

October 8, 2019 by Brendan Gooley

Arbitration over whether a South Korean company or a Bermuda company headquartered in Hong Kong owns a geostationary satellite in light of an order from a South Korean regulatory agency can be complicated. The Second Circuit recently affirmed a decision confirming an arbitration award adjudicating ownership of the satellite in question and awarding damages related to a party’s failure to obtain regulatory approvals necessary to complete the sale over claims that the arbitration panel exceeded its power, disregarded the law, and violated public policy.

KT Corp., a Korean company, agreed to sell a satellite to ABS Holdings Ltd., a Bermuda company headquartered in Hong Kong. The companies signed a purchase agreement to convey the title to the satellite and an operations agreement under which KT agreed to operate the satellite on behalf of ABS. Both agreements contained New York choice-of-law provisions and mandatory arbitration clauses. The purchase agreement required KT to obtain and maintain all necessary licenses and authorizations for the sale and the continued operation of the satellite.

The sale was completed and title to the satellite was transferred.

Nearly two years later, a South Korean regulatory agency issued an order declaring the purchase agreement null and void because KT had failed to obtain a required export permit. The agency canceled KT’s permission to use certain frequencies to operate the satellite.

KT and ABS arbitrated who held title to the satellite and whether KT had violated the purchase agreement before a panel of the International Chamber of Commerce. In two awards, the panel concluded that ABS held title to the satellite because title had lawfully passed when the conditions precedent to the purchase agreement were completed when there was no requirement that KT obtain an export permit. And even if that was not the case, the panel concluded, the regulatory order had no effect because it was issued retroactively without notice to the parties in violation of New York law, and KT breached its obligations by failing to obtain all the approvals necessary for the continued operation of the satellite (even though an export permit may not have been required for the sale of the satellite, one was necessary to maintain the satellite’s operations).

KT petitioned the Southern District of New York to vacate the award, and ABS petitioned the court to confirm it. The district court granted ABS’ petition and confirmed the panel’s award.

The Second Circuit affirmed. KT argued that the panel had exceeded its authority and that the award disregarded the law and violated public policy. KT claimed that the panel’s conclusion that the regulatory order was without effect violated due process principles. The court disagreed, noting that KT had not challenged the order, its counsel had questioned its validity, and the panel did not rest on the validity of the order; the panel referenced the propriety of the order as an alternate basis for its primary conclusion that title to the satellite properly changed hands. The court also rejected KT’s argument that the panel had disregarded New York contract law. Regarding public policy, although the court recognized that it is the public policy of the United States to enforce foreign judgments that are not repugnant to U.S. policy, it was unclear whether that public policy extended to foreign regulatory orders, and it was not even clear that the regulatory order in this case was enforceable under South Korean law according to KT’s expert.

KT Corp. v. ABS Holdings, Ltd., No. 18-2300 (2d Cir. Sept. 12, 2019).