Confirmation / Vacation of Arbitration Awards

Wilson, a former salesperson for Oracle, had unsuccessfully appealed the amount of her commission through Oracle’s internal compensation review process. Wilson then submitted a claim for arbitration alleging breach of contract and breach of the covenant of good faith and fair dealing in processing her appeal.  Oracle filed a motion to dismiss, arguing that Wilson’s commission was subject to the Single Customer Provision in her contract and that her compensation was properly calculated in accordance with that provision. Wilson opposed oracle’s motion and made a cross-motion for a summary award, requesting that the arbitrator rule in her favor based on the undisputed facts.

At oral argument, the arbitrator asked Wilson questions, and Wilson answered, providing what Oracle characterized as unsworn testimony. Oracle also claimed that it did not receive any notice that the arbitrator was going to hear such testimony, but did not object to the questioning or cross-examine Wilson. Ultimately, the arbitrator issued the final award denying Oracle’s motion to dismiss and granting Wilson’s cross-motion for a summary award, awarding her the remaining balance of her commission prior to the application of the Single Customer Provision.  The arbitrator determined that the full pre-modified commission on the sale would not have given Wilson an “unplanned windfall” as contemplated in her contract.

The trial court denied Oracle’s motion to vacate the award, reaffirming the Second Circuit’s precedent that an arbitrator’s rationale for an award “need not be explained,” and that an award should be confirmed “if a ground for the arbitrator’s decision can be inferred from the facts of the case.” The court found no evidence in the record demonstrating that the arbitrator prevented Oracle from presenting pertinent and material evidence before a final award was issued. Specifically, the Court noted that Oracle expressly turned down an opportunity to object to the procedure the arbitrator proposed to follow and  determined that Oracle made a strategic decision not to rely on language aside from the Single Customer Provision.  The court determined that Oracle failed to identify any evidence that it would have presented, or why that evidence would have caused the arbitrator to resolve the dispute in its favor. Oracle Corp., v. Wilson, Case No. 17 Civ. 554 (USDC S.D.N.Y. Aug. 22, 2017).

This post written by Gail Jankowski.
See our disclaimer.

A former bond trader for Odeon Capital Group obtained an arbitration award against Odeon for $1,102,193.00 on a claim for unpaid wages.  Odeon then brought a petition to vacate the award on the ground of fraud, contending that the bond trader committed perjury at arbitration by falsely stating that no FINRA investigations into his business were then ongoing.  The trial court denied vacatur ruling that Odeon failed to demonstrate that the alleged perjury was material to the award of unpaid wages.  The court explained that in order for fraud to be material within the meaning of Section 10(a)(1) of the FAA, a petitioner must demonstrate a nexus between the alleged fraud and the decision made by the arbitrators (although a petitioner need not demonstrate that the arbitrators would have reached a different result).  On appeal, the Second Circuit agreed that the trader failed to demonstrate materiality.  The Second Circuit also reversed the lower court’s denial of the bond trader’s motion for attorneys’ fees incurred litigating the petition to vacate the award.  The lower court had erred by denying the fees as a matter of discretion under its equitable powers; the fees were mandatory under New York Labor Law.  Odeon Capital Group LLC v. Ackerman, Case No. 16‐1545‐cv (2d Cir. July 21, 2017).

This post written by Gail Jankowski.
See our disclaimer.

The Tenth Circuit recently upheld a district court’s confirmation of an arbitral award ordering a nursing home (“THI”) to pay fees and costs associated with the arbitration of a wrongful death claim. A personal representative (“Lovato”) of Guadalupe Duran’s estate prevailed in an arbitration of her wrongful death claim against THI that resulted in nearly a half million dollars in compensatory damages, as well as almost $250,000 in arbitration fees, costs, pre-, and post-judgment interest granted in a post-arbitration motion pursuant to the New Mexico Uniform Arbitration Act (“NMUAA”).

THI argued that the arbitrator exceeded his authority by awarding fees and costs under the NMUAA where the arbitration agreement designated the Federal Arbitration Act (“FAA”)—which does not authorize recovery of costs and interest—as the governing law. Citing the high burden a challenging party faces in attempting to overturn an arbitral award, the Tenth Circuit rejected this argument. First, THI did not establish that the FAA prohibits costs and interests, only that the FAA does not expressly authorize such an award. Second, the FAA displaces conflicting state law (such as the NMUAA) only to the extent the state law actually conflicts with or undermines the goals of the FAA—which the NMUAA costs and interest provision did not. Finally, the court found the arbitration agreement’s terms supported the award of costs and interest by delegating broad authority to the arbitrator and by invoking the National Arbitration Forum Code of Procedure, which allows any legal, equitable, or other remedy or relief to be granted.

The Tenth Circuit swiftly dismissed THI’s second argument that the arbitrator manifestly disregarded the law. In rejecting it, the court assumed without deciding the manifest disregard exception’s continuing validity. Harkening back to its analysis in rejecting THI’s first argument, the court noted the arbitrator did not exceed his authority. Furthermore, there was no evidence he was willfully inattentive to governing law.

THI of N. M. at Vida Encantada, LLC v. Lovato, No. 16-2041 (10th Cir. July 25, 2017).

This post written by Thaddeus Ewald .

See our disclaimer.

In a dispute between the Washington Nationals, the Baltimore Orioles, and affiliated parties regarding the value of broadcasting rights for Nationals games, an appellate court has affirmed a trial court order vacating an arbitration award on the basis of evident partiality by the arbitration panel, while also denying a motion to compel the parties to re-arbitrate the matter in a different arbitral forum.

In 2005, the Montreal Expos moved to Washington, DC, and became the Nationals. This led to an agreement under which the Orioles Television Network, which the Orioles had established with TCR Sports Broadcasting Holding, LLP, became MASN, a regional sports network with rights to broadcast both Orioles and Nationals games. The agreement set the broadcast fees from 2005-2011, after which the parties were to negotiate those fees. The parties further agreed to arbitrate disputes before the Revenue Sharing Definitions Committee (“RSDC”), a MLB-created body comprised of representatives of other MLB clubs.

A fee dispute arose between the parties regarding the broadcasting of Nationals games, and the matter proceeded to arbitration. The Nationals were represented by Proskauer Rose, which the Orioles and MASN objected to based on Proskauer’s past representations of the Nationals, MLB, and each of the three teams with members participating on the RSDC. Despite this objection, the arbitration proceeded and resulted in an order setting the amount MASN would pay the Nationals from 2012-2016.

MASN moved to vacate the award on numerous grounds, but the district court rejected all but one; the court found that that Proskauer’s representation of the Nationals led to “evident partiality,” making the proceedings fundamentally unfair. However, the district court rejected MASN’s motion to order the parties to re-arbitrate the matter in an arbitral forum unaffiliated with MLB.

The appellate court upheld the finding of evident partiality, noting that, under the FAA, a party seeking to vacate an arbitration award on this basis “bears the burden of showing that a reasonable person, considering all the circumstances, would have to conclude that an arbitrator was partial to one party to the arbitration”. The court found that MASN and the Orioles had met this burden based on the sheer volume of Proskauer’s representation of the RSDC panel members and MLB and the failure of the panel members to investigate the issue sufficiently or to fully disclose their own relationships to Proskauer. The appellate court also upheld the trial court’s refusal to order the parties to re-arbitrate the matter in a different forum. Emphasizing the FAA’s strong bias in favor of enforcing agreements to arbitrate as written, the court held that parties are free agree to “insider” arbitral forums that, like the RSDC, may be inherently prone to certain conflicts. The court also noted that the problem that led the original award to be vacated – Proskauer’s conflicts – had been remedied by the National’s hiring of new counsel. Thus, the court found that the parties could not be ordered to arbitrate the matter in a forum other than the RSDC.

TCR Sports Broad. Holding, LLP v. WN Partner, LLC, 3595, Index 652044/14 (N.Y. App. Div. July 13, 2017)