The Seventh Circuit has addressed important issues relating to the commencement of efforts to vacate an arbitration award. The relevant facts are found in the district court's Order. An arbitration award was entered against Webster under the rules of the American Arbitration Association (“AAA”). Under the Federal Arbitration Act (“FAA”), 9 U.S.C. section 12, when a party moves to vacate, confirm or modify an arbitration award, notice “must be served upon the opposing party or his attorney within three moths after the award is filed or delivered.” The district court found Webster's attempt to vacate the award was one day late, and hence barred, and the Seventh Circuit affirmed. The courts held that the award was “filed or delivered” within the meaning of the FAA and the AAA's rules when it was both e-mailed and mailed by the arbitrator to counsel for the parties, regardless of when counsel received the mailed version or opened his e-mail. The court noted that a request to vacate an award is a motion, rather than a new action, under the Federal Rules of Civil Procedure, and the plain language of section 12 of the FAA speaks in terms of “service” rather than “filing.” Since Webster's counsel filed a Complaint seeking to vacate the award one day prior to the three month deadline, but did not serve the action on his opponent until one day after the three month deadline, the request to vacate the award was untimely under the FAA. The Court rejected Webster’s argument that the FAA’s limitation period was tolled with the filing of the action, stating instead that there was “nothing ambiguous about § 12’s provision that the statute of limitations is tolled when notice of a motion to vacate is ‘served upon the opposing party or his attorney.’” (emphasis added). This is a critical principle for parties seeking to vacate or confirm an award under the FAA. Webster v. A.T. Kearney, Inc. & Electronic Data Systems Corp., No. 06-3094 (7th Cir. Nov. 2, 2007).
Confirmation / Vacation of Arbitration Awards
INTERESTING DECISIONS ON ARBITRATION AWARDS
Four recent opinions address interesting issues in the confirmation of arbitration awards:
- In Extendicare Health Services, Inc. c. District 1199P Service Employees International Union, No. 06-4768 (3d Cir. Oct. 26, 2007), the court affirmed a district court decision finding that the reinstatement of an employee by an arbitrator in a labor arbitration was not contrary to public policy. This opinion contains a rather extended discussion of the public policy issue analysis.
- In Lagstein v. Certain Underwriters at Lloyds of London, Case No. 03-1075 (USDC D. Nev., Aug. 15, 2007), an insurance bad faith case, the arbitration panel awarded $900,000 in compensatory damages, $1.5 million in bad faith compensatory/emotional distress damages, $4 million in punitive damages and $350,000 in attorneys’ fees. The district court found that this award “shocks the Court’s conscience, is biased, and cannot stand.” The court further found that the damages were unsupported by the record and in manifest disregard of law, that the punitive damage award exceeded the jurisdiction of the arbitration since it awarded damages for a time period that the parties had expressly agreed was beyond the scope of the arbitration, and that the size of the punitive damage award was excessive.
- In Hendrik Delivery Service, Inc. v. St. Louis Post-Dispatch LLC, Case No. 07-1516 (USDC E.D. Mo. Oct. 19, 2007), the court confirmed an arbitration award of $892,000 in compensatory and $750,000 of punitive damages in a business dispute. The losing party sought to vacate the award, essentially arguing that the arbitrator made the wrong decision. The court found no manifest disregard of law, and refused to vacate the award.
- In Van Pelt v. UBS Financial Services, Inc., Case No. 05-477 (USDC W.D. N.C. Oct. 12, 2007), the court denied a motion to vacate an arbitration award of $2.4 million for wrongful termination of a financial advisor. The employer contended that the award should be vacated because: (1) the award was not drawn from the essence of a contract; (2) the panel manifestly disregarded the law; (3) the panel exceeded its power in making the award; and (4) the award violated public policy. The court denied the request to vacate the award. The critical point in this opinion is that since the award was not a reasoned award, and hence the panel did not explain the bases for its decision, there was an insufficient record upon which to vacate the award.
ARBITRATION AWARD CONFIRMATION DECISIONS
There are three recent decisions regarding arbitration awards, two of which have some unique interest:
- In Comedy Club, Inc. v. Improv West Associates, No. 05-55739 (USCA 9th Cir. Sept. 7, 2007), the court partially confirmed and partially vacated an arbitration award, finding that the arbitrator properly arbitrated equitable claims, properly issued injunctions except to the extent that they sought to bind non-parties to the arbitration agreement who were not in privy with parties, did not act irrationally, but acted in manifest disregard of law in the imposition of an overbroad covenant not to compete.
- In Ward v. Phantom Screens Manufacturing, Ltd., Case No. 04-3916 (USDC D. N.J. April 13, 2007), the court confirmed a Canadian arbitration award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards with minimal analysis, noting that the Convention clearly stated the bases upon which an award could be vacated, and that none of those grounds were present. The bases for the Order are set out in a Memorandum.
- In Louis J. Kennedy Trucking Co. v. Teamsters Local Union No. 701, Case No. 05-6005 (USDC D. N.J. Sept. 17, 2007), the court refused to vacate an arbitration award based upon claims that the arbitrator exceeded her authority, manifestly disregarded the law and acted in violation of public policy. The basis for the argument to vacate was basically that the arbitrator had erred, which is insufficient under the FAA.
ARBITRATION AWARD CONFIRMATION DECISIONS
Four recent opinions dealt with arbitration award confirmation on a variety of bases.
- In Cuie v. Nordstrom, Inc., No. 07-1114 (3d Cir. Aug. 14, 2007) the court affirmed the denial of a motion to vacate an arbitration award. The Court characterized the arguments of the movant as being nothing more than that the arbitrator had made the wrong decision.
- In Coastal Caisson Corp. v. E. E. Cruz/NAB/Frontier-Kemper, Case No. 05-7462 (USDC S.D. N.Y. Aug. 10, 2007), the court had vacated an initial arbitration decision as being in manifest disregard of law. The court confimed a second award entered after the matter was remanded to the panel. This decision also addresses the availability of pre-judgment interest.
- In Hutchinson v. Farm Family Casualty Ins. Co., Case No. 99-2584 (USDC D. Conn. Aug. 20, 2007), the court denied a motion to vacate an award based upon the contention that the panel's decision with respect to choice of law exceeded its authority.
- In New Regency Productions, Inc. v. Nippon Herald Films, Inc., No. 05-55224 (9th Cir. Sept. 4, 2007), the court affimed the vacation of an award on the basis of evident partiality on the part of the arbitrator. The arbitrator took a new employment position and failed to investigate a potential conflict. The court held that he was under a duty to investigate potential conflicts and make an appropriate disclosure, and that the fact that the arbitrator did not have actual knowledge of a conflict did not excuse this breach of duty.
ARBITRATION AWARD CONFIRMATION DECISIONS
Six recent opinions, four from US Courts of Appeal, have considered confirmation or vacation of arbitration awards. Five of the opinions rejected claims that the arbitration awards were in manifest disregard of law. Five Star Parking v. Union Local 723, Case No. 06-2012 (3d Cir. July 24, 2007) (reversing the vacation of an arbitration award relating to a collective bargaining agreement, finding that the award interpreted a contract); Aldred v. Avis Rent-a-Car, Cased No. 06-14883 (11th Cir. July 24, 2007) (affirming confirmation of award relating to collective bargaining agreement interpreting a contract); HSM Construction Services, Inc. v. MDC Systems, Inc., Case No. 06-2584 (3d Cir. July 16, 2007) (affirming confirmation of an arbitration award, finding no manifest disregard of law and no evident partiality); Caja Nacional de Ahorro y Seguros in Liquidation v. Deutsche Ruckversicherung AG, Case No. 06-5826 (USDC S.D.N.Y. Aug. 1, 2007) (confirming award pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the federal Arbitration Act, finding no manifest disregard of law, that the Panel did not exceed its authority and that questions regarding the admissibility of evidence did not provide a basis for vacating the award); Buechner v. Mid-America Energy, Inc., Case No. 07-109 (USDC W.D.Ky. July 27, 2007). The sixth opinion vacated an award dealing with attorneys' fees on the basis that it was partially in manifest disregard of law and partially in violation of an enabling statute. Porzig v. Dresdner, Kleinwort, Benson, North America LLC, Case No. 06-1212 (2d Cir. Aug. 7, 2007).