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Confirmation / Vacation of Arbitration Awards

Court Refuses to Vacate Award Stemming From Workplace Personal Injury

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The U.S. District Court for the Southern District of New York recently refused to vacate an arbitration award stemming from a workplace personal injury after the arbitrator concluded that the employee was primarily responsible for his own injuries.

Daniel Pacelli was working for Vane Line Bunkering Inc. (known as “Vane Brothers”), as a tankerman on one of Vane Brothers’ barges in New York Harbor when he slipped, fell, and was injured on ice while attempting to salt the deck of the barge. He initiated an arbitration action against Vane Brothers. A JAMS arbitrator heard the case and concluded that Pacelli had sustained $986,750 in damages and that both Pacelli and Vane Brothers were negligent. More specifically, the arbitrator concluded that Pacelli was 70% at fault while Vane Brothers was 30% at fault. The arbitrator therefore reduced Pacelli’s damages accordingly. Pacelli moved to vacate the award.

The district court declined to vacate the award. It rejected Pacelli’s arguments that the arbitrator had (1) manifestly disregarded the law; (2) been partial to Vane Brothers; (3) engaged in “misbehavior” by repeatedly delaying his decision; and (4) improperly failed to award interest.

With respect to manifest disregard, the court concluded that the arbitrator had applied the law regarding contributory negligence to the facts of the case and had supported his decision regarding comparative fault with evidence from the record, including evidence that Pacelli had acted carelessly by attempting to salt a narrow part of the deck at night and in freezing temperatures without seeking assistance. The court noted that the Second Circuit does not recognize manifest disregard of the evidence as a ground for vacating an award and refused to reweigh the evidence.

The court also rejected Pacelli’s argument that the arbitrator had been partial to Vane Brothers. After the arbitration hearing but months before the arbitrator issued his decision, the arbitrator disclosed that he had a small ownership interest in JAMS and JAMS disclosed that it had a small number of other arbitrations with Vane Brothers, its counsel, and/or its counsel’s law firm. The court noted that Pacelli had waived this argument by not raising it before the arbitrator. The court nevertheless also explained that the facts did not show improper partiality and rejected Pacelli’s argument that the arbitrator’s small ownership interest was material in any event.

Turning to Pacelli’s next argument — that the arbitrator’s delays warranted vacatur — the court noted that Pacelli had not pointed to any “authority to support his position that the arbitrator’s extension requests amounted to ‘misbehavior’ by the arbitrator such that Pacelli’s rights were prejudiced.” That was especially true because Pacelli had consented to the extensions.

Finally, the court rejected Pacelli’s contention that it should vacate the award because the arbitrator had not awarded prejudgment interest. Although the court acknowledged that it would have been proper for the arbitrator to award prejudgment interest, the court noted that Pacelli had failed “to point the Court to any case in which a district court vacated an arbitration award for failure to award prejudgment interest” and noted that courts had declined to do any such thing.

The court then went on to confirm the arbitration award.

Pacelli v. Vane Line Bunkering, Inc., No. 1:20-cv-09431 (S.D.N.Y. July 16, 2021).

Court Confirms Arbitration Decision Concluding That Discrimination Claims Were Time-Barred

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A federal district court recently confirmed an arbitration decision concluding that a disgruntled former employee’s discrimination and retaliation claims under Title VII were time-barred because the former employee did not initiate arbitration in a timely fashion.

Clare Anagonye, a financial adviser, filed a charge with the EEOC claiming she was constructively discharged and discriminated and retaliated against on the basis of her race, color, and gender in violation of Title VII. The EEOC dismissed the charge on January 19, 2018, and advised Anagonye of the 90-day limitation period for filing a civil action at that time.

Anagonye filed a civil action within the 90-day time period, but her employment contract with her former employer contained an arbitration clause. The district court concluded that the clause was valid and enforceable and stayed Anagonye’s action pending arbitration. Anagonye subsequently filed a demand for arbitration on or about August 27, 2019.

Anagonye’s former employer argued that the arbitration clause in the employment contract required Anagonye to initiate arbitration, not a lawsuit, within 90 days of the EEOC’s dismissal.

An arbitrator panel of the American Arbitration Association (AAA) agreed and concluded that Anagonye’s demand for arbitration was time-barred and that it therefore lacked jurisdiction over her claim. Anagonye’s former employer moved to confirm the award and Anagonye, proceeding pro se, moved to vacate it.

The U.S. District Court for the Eastern District of Michigan confirmed the award. A magistrate judge concluded that Anagonye had “failed to establish any of the statutory grounds for setting aside the arbitration decision.” The judge noted that it had already rejected Anagonye’s primary claim that court, not arbitration, was the appropriate venue for her claims when it ordered a stay pending arbitration and that Anagonye had waived any challenge to that decision by failing to object to it. The judge also rejected Anagonye’s “conclusory statements and speculation” regarding alleged “corruption” by the AAA panel, noting that the record established that Anagonye had the opportunity to select arbiters despite her allegations to the contrary. Finally, the judge held that he was precluded from adjudicating the panel’s decision that Anagonye’s claim was time-barred because “the FAA does not provide for judicial review of an arbitrator’s legal conclusions.”

The district court adopted the magistrate judge’s recommendation.

Anagonye v. Mass Mutual Insurance Co., No. 2:18-cv-11170 (E.D. Mich. May 21, 2021).

Party Opposing Confirmation of Non-Domestic Arbitration Award Subject to Convention May Also Assert FAA Defenses If Award Rendered in the U.S. or Under U.S. Arbitral Law

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In 2006, Goldgroup and DynaResource entered into a contract relating to a gold mining operation in Mexico, which contained a dispute resolution provision requiring that the disputes be submitted to binding arbitration in Denver, Colorado, under the rules of the American Arbitration Association (AAA). Goldgroup initiated arbitration in Denver, but DynaResource refused to participate, relying on a Mexico City court’s ruling in 2015 that the arbitration agreement was unenforceable because Goldgroup had waived its right to arbitration by submitting to the jurisdiction of Mexico courts in prior disputes.

In 2016, the arbitrator ruled in Goldgroup’s favor and awarded it monetary and equitable relief. The arbitrator also found that the arbitration clause was valid and enforceable, that Goldgroup had not waived its right to arbitrate by participating in any other lawsuits, and that DynaResource engaged in forum shopping by asking the Mexico City court to rule on the arbitrability of Goldgroup’s claims.

Goldgroup then sought confirmation of the non-domestic arbitration award in the Colorado district court. DynaResource opposed recognition of the award under the Inter-American Convention on International Commercial Arbitration (the Convention) and moved to vacate the award under the Federal Arbitration Act (FAA), arguing that the award should not be confirmed because the arbitrator exceeded the scope of his authority by ruling on the issue of whether Goldgroup had waived its right to arbitrate and whether the Mexico City court’s ruling effectively annulled the subsequent award issued in the arbitration. The district court confirmed the award and entered final judgment against DynaResource. After unsuccessfully moving to alter or amend the judgment, DynaResource appealed.

On appeal, DynaResource argued that the district court erred in holding that waiver was a question for the court without making a factual determination as to whether Goldgroup in fact waived its right to arbitration. Goldgroup contended that DynaResource did not raise the issue with the district court and thus failed to preserve it. The Tenth Circuit Court of Appeals agreed, finding that the district court was not required to decide whether Goldgroup waived its right to arbitrate because the issue was not properly before it, and DynaResource had not preserved the issue for the appellate court’s review.

In addition, Goldgroup argued that even if DynaResource had preserved the issue, waiver is not available as a defense to confirmation of the award because FAA defenses, such as waiver, do not provide grounds for vacating an award subject to the Convention.

On an issue of first impression, the Tenth Circuit addressed whether the FAA’s vacatur standards apply when a U.S. court is considering the confirmation of a non-domestic arbitration award subject to the Convention and rendered in the United States or under U.S. arbitral law.

The Tenth Circuit rejected Goldgroup’s argument, holding that the Convention’s defenses for opposing the confirmation of a non-domestic arbitration award are not exclusive and that a party may also assert FAA defenses to oppose confirmation if the non-domestic arbitration award was rendered in the United States or under U.S. arbitral law.

Despite its holding that DynaResource could seek vacatur under the FAA, the Tenth Circuit rejected DynaResource’s argument under the FAA that the arbitrator exceeded his authority by ruling on the issue of arbitrability, finding that the contracting parties manifested a clear intent to arbitrate the issue of arbitrability by incorporating the AAA rules into their arbitration agreement. Moreover, the circuit court found DynaResource failed to show that any alleged error by the arbitrator in ruling on the waiver issue warranted vacatur.

The circuit court also rejected DynaResource’s argument under the Convention that the Mexico City court’s ruling effectively annulled the subsequent arbitration award, holding that the defense does not apply preemptively to awards not yet rendered. The circuit court also found the defense was inapplicable because the Mexico City court improperly applied Mexican law rather than U.S. law, where the arbitration was pending. Therefore, the Tenth Circuit affirmed confirmation of the award.

Goldgroup Resources, Inc. v. DynaResource de Mexico, S.A. de C.V., No. 20-1143 (10th Cir. Apr. 16, 2021).

Connecticut Supreme Court Finds State Law Statutory Limitation Period to Vacate Arbitration Award Confers Jurisdiction on State Courts and Not Preempted by FAA

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Plaintiff A Better Way Wholesale Autos Inc. filed an application in Connecticut state court seeking to vacate an arbitration award issued in favor of the defendants, James Saint Paul and Julie J. Saint Paul. The defendants filed motions to confirm the award and for attorneys’ fees, and to dismiss the plaintiff’s application. The defendants argued that the application was untimely under Connecticut Statutes section 52-420 (b) and that the trial court therefore lacked subject matter jurisdiction. The trial court order granting the defendant’s motions and dismissing the plaintiff’s application was affirmed on appeal. The Supreme Court of Connecticut framed the issues as: (1) whether Connecticut’s 30-day statutory limitation for seeking to vacate an arbitration award is “jurisdictional” in that it implicates the subject matter jurisdiction of state courts; and (2) whether the Connecticut statute is preempted by the FAA, which has a three-month limitation period for seeking to vacate.

With regard to the jurisdictional issue, the plaintiff claimed that section 52-420 (b) did not confer jurisdiction because the arbitration clause between the parties explicitly provided that any arbitration “shall be governed by the [FAA] … and not by any state law concerning arbitration.” But the Supreme Court agreed with the courts below that parties cannot privately agree to have the FAA’s three-month limitation period apply to a vacatur action filed in Connecticut state court, so as to override the limitation period in section 52-420 (b). The Supreme Court also found it is “hornbook law” that parties cannot confer subject matter jurisdiction on a court by consent or agreement. The Supreme Court was similarly unpersuaded by the plaintiff’s preemption argument, finding the time limitation in section 52-420 (b) does not impede the federal policy of enforcing arbitration agreements.

A Better Way Wholesale Autos, Inc. v. Saint Paul, No. SC 20386 (Conn. Apr. 15, 2021).

Second Circuit Affirms Confirmation of ICC Decision Based on UAE Law

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The Second Circuit Court of Appeals recently affirmed a decision confirming a decision by the International Chamber of Commerce (ICC) that applied the law of the United Arab Emirates (UAE).

Cessna Finance Corp. leased several private jets to startup Prestige Jet Rental. Ghaith Al Ghaith, Prestige’s chairman, who was also the deputy chairman of Al Ghaith Holding Co. PJSC (AGHC), guaranteed the lease agreements in his capacity as deputy chairman of AGHC. When Prestige defaulted, Cessna initiated arbitration in the ICC pursuant to the lease agreements against AGHC. AGHC argued that Al Ghaith’s guarantee was invalid because its articles of association required the signatures of “two out of three” of its chairman, deputy chairman, and managing director to bind the company, and only Al Ghaith had signed the guarantee. The ICC rejected that claim, finding that “AGHC was bound by ‘good faith’ under … the UAE Civil Code.” Cessna moved to confirm the ICC’s award and AGHC cross-moved to vacate the award.

The district court confirmed the award. The Second Circuit affirmed. The Second Circuit rejected AGHC’s argument that the ICC had “manifestly disregarded the law,” explaining that it had applied the law of the UAE in a way that “provided at least a barely colorable justification for its decision.” The court noted that a barely colorable justification was all that was needed for an award to be enforced against a challenge that an arbitrator manifestly disregarded the law.

Cesfin Ventures LLC v. Al Ghaith Holding Co. PJSC, No. 20-1106 (2d Cir. Apr. 22, 2021).