Confirmation / Vacation of Arbitration Awards

APPELLATE COURT UPHOLDS ARBITRATION AWARD IN FACE OF MANIFEST DISREGARD OF LAW AND PUBLIC POLICY ARGUMENTS

July 11, 2017 by Carlton Fields

An arbitration panel entered an award in a legal malpractice matter in favor of the claimant and the attorneys and law firm moved to vacate the award. The district court denied the motion to vacate, and the Ninth Circuit affirmed. The court of appeals rejected two proffered bases for vacation: (1) that the panel’s finding that the claim was not barred by a one year statute of limitation amounted to manifest disregard of law; and (2) that the alleged perjury of a witness in an underlying action justified vacature on the basis that the award violated public policy.

The Court held that even if the panel had made an error of law in its finding that the claim was not barred by the statute of limitation, the record did not reflect a factual basis for a finding that it had manifestly disregarded the law by “intentionally” disregarding the law, and that the movants had failed to carry their burden to prove manifest disregard. Without a reasoned award or a hearing transcript specifically providing a record on this issue proving manifest disregard may be a challenge.

With respect to the public policy ground for vacation, the Court found that the panel expressly considered the claim of perjury and questioned the witness concerning the allegedly perjured testimony. The Court declined to vacate the award on this basis because doing so “would require the Court to revisit the arbitrator’s findings of fact and conclusions of law with respect to Defendant’s perjury argument put forth to the arbitrator ….”

The court of appeal did partially vacate the district court’s ruling. The arbitrator had awarded pre-judgment interest from June 30, 2011. The defendants did not challenge that part of the award in the motion to vacate the award, but after the award was confirmed contended, in a FRCP 59(e) motion to amend the judgment, that pre-judgment interest should have run from a later date, July 30, 2014. The district court granted that motion. The court of appeals vacated that ruling, holding that the Rule 59(e) motion amounted to a late and improper attempt to circumvent the provisions of the Federal Arbitration Act. Demartini v. Johns, Nos. 15-15205, 16-15078, 16-15134 (9th Cir. June 7, 2017).

This post written by Rollie Goss.
See our disclaimer.

COURT VACATES ARBITRATION AWARD FOR ARBITRATOR’S EVIDENT PARTIALITY

June 6, 2017 by Michael Wolgin

A New York Court vacated an arbitration award, finding that a party appointed arbitrator’s undisclosed relationships with the appointing party amounted to a relatively infrequent instance in which such nondisclosure demonstrated evident partiality by clear and convincing evidence. In doing so, the court confirmed that “evident partiality” standard applies in tripartite arbitration involving party appointed arbitrators.

The arbitration at issue arose from a dispute where the reinsurers denied coverage for two workers’ compensation claims by the reinsured. Pursuant to the reinsurance treaties’ arbitration clause, each side appointed an arbitrator and the party appointed arbitrators then selected an umpire. The arbitration resulted in an award for the reinsured and the reinsurers brought this action against the reinsured to vacate the award. The plaintiffs argued that the arbitrator appointed by the defendant (“arbitrator”) failed to disclose his significant business relationships with numerous executives of the defendant, which demonstrated such “evident partiality” as to warrant vacatur of the arbitration award. The court granted plaintiff’s motion to vacate the arbitration award.

In finding “evident partiality,” the court considered the arbitrator’s nondisclosure of his relationships with the defendant’s numerous principals. Those principals were involved in the arbitrator’s own business in their capacity as the Chief Financial Officer, Managing General Agent, National Claims Manager, and counsel. The court found particularly relevant the arbitrator’s nondisclosure of his relationship with a director of the defendant whom the arbitrator hired as the Chief Financial Officer of the arbitrator’s own company just months before the arbitration hearing. The court held that a reasonable person would conclude that an arbitrator who failed to disclose such material relationships was partial to one side. Also, in response to defendant’s argument that evident partiality standard applies “with reduced force, or not at all” in tripartite industry arbitration involving party appointed arbitrators, the court cited a Second Circuit case where the court applied the evident partiality standard to an arbitration panel with the same arrangement. Certain Underwriting Members at Lloyd’s of London v. Ins. Co. of the Americas, Case No. 16-00374 (USDC S.D.N.Y. Mar. 31, 2017)

This post written by Rollie Goss.

See our disclaimer.

SIXTH CIRCUIT AFFIRMS FINDING ARBITRATOR HAD REASONABLE BASIS TO DENY WAGE DISCRIMINATION CLAIM

June 2, 2017 by John Pitblado

Plaintiff raised three arguments in support of her motion to vacate an arbitration award: “(1) that the arbitrator exceed his powers or so imperfectly executed them that a mutual, final, and definite award upon her claims was not made; (2) that the arbitrator acted in manifest disregard of the applicable law and in violation of clear public policy; and (3) that there was an evident material mistake in the description of the facts and evidence presented at the hearing with respect to [Plaintiff’s] claims.” Ultimately, the Court found her arguments “did not overcome the substantial deference that courts must give to an arbitrator’s decision on review.”

The Court specifically looked at the applicable law under both the ADEA and the age-discrimination provisions of the THRA, finding Plaintiff was unable to “demonstrate that the arbitrator misinterpreted the law – much less that the arbitrator exceeded his authority such that [Plaintiff] is entitled to vacatur of the arbitrator’s judgment.” Moreover, “[t]he fact that the arbitrator chose to weigh [a witness’s] detailed testimony more heavily than [another witness’s] vague answers in concluding that a valid non-discriminatory reason existed for [Plaintiff’s] lesser pay does not amount to an action in excess of the arbitrator’s power, a ‘manifest disregard of the law,’ or an ‘evident material mistake’ in the facts of the award. It does not even amount to a ‘serious error,’ a case in which we would still be bound to uphold the arbitrator’s decision.”

Marshall v. SSC Nashville Operating Co., LLC d/b/a SAVA Senior Care and Greenhills Health Rehabilitation Center, No. 16-5751 (6th Cir. April 18, 2017)

This post written by Nora A. Valenza-Frost.

See our disclaimer.

MASSACHUSETTS DISTRICT COURT, CITING HALL STREET, DECLINES TO FIND MANIFEST DISREGARD OF THE LAW OR PUBLIC POLICY AS BASES FOR VACATUR OF ARBITRATION AWARD

June 1, 2017 by John Pitblado

A federal court confirmed an arbitration award, denying a motion to vacate where the movant failed to cite any basis for vacatur under section 10 of the Federal Arbitration Act (FAA). Instead, the movant sought vacatur of the award on two grounds – manifest disregard of the law and public policy – both of which it acknowledged are not listed within section 10. The respondent argued that following the Supreme Court’s decision in Hall Street, neither ground, independent of any provision under section 10, is an adequate basis for vacatur under the FAA.

The Court agreed, but also noted that the First Circuit has not “squarely determined whether [its] manifest disregard case law can be reconciled with Hall Street.” However, the Court looked to the First Circuit’s dicta, which stated that Hall Street compels the conclusion that the manifest disregard standard survives only as a judicial gloss on § 10. With regard to the movant’s public policy argument, the Court noted that although there has been no discussion following Hall Street by the First Circuit about whether a violation of public policy survives as a basis for vacatur under the FAA, to the extent that it survives, it, too, would only do so as a judicial gloss on section 10.

The Court also rejected the movant’s arguments raised only in its reply brief that the arbitrator exceeded his powers, citing section 10(a)(1)–(4) as a plausible basis for vacatur. The Court reasoned that any perceived errors made by the arbitrator in his contractual interpretations did not amount to a decision “unfounded in reason and fact” or “based on reasoning so palpably faulty that no judge, or group of judges, ever could conceivably have made such a ruling.” As such, the Court denied the motion for vacatur and confirmed the award.

Sanwan v. Lindsay, No. 16-12469-RWZ (USDC D. Mass. May 5, 2017).

This post written by Gail Jankowski.

See our disclaimer.

COURT DECLINES TO VACATE ARBITRAL DECISION IN FACE OF SEVEN CHALLENGES MADE BY PRO SE PLAINTIFF

May 25, 2017 by Rob DiUbaldo

Last month the Southern District of New York granted DCH Auto Group’s motion to confirm a favorable arbitral decision dismissing a pro se plaintiff’s arbitration with prejudice, over a host of different challenges seeking vacatur of that decision. The plaintiff, Marciano, brought workplace discrimination claims against DCH. During the course of the litigation, plaintiff was represented intermittently by outside counsel, notified of various discovery delinquencies, made multiple requests for extensions of time to comply with said deficiencies or other deadlines, and was warned at least twice that no further extensions would be granted. The arbitrator ultimately dismissed the arbitration with prejudice based on these factors, as well as the detriment DCH faced with having to defend a case that had already been litigated for two-and-a-half years but not proceeded beyond discovery.

The court systematically rejected all seven of Marciano’s challenges to the arbitration decision. First, the court found no wrongdoing by DCH where the AAA made a mistake in providing a pre-corrected version of the arbitration decision. Second, the court rejected the claim that the arbitrator was guilty of misconduct for failure to hear evidence because the allegedly ignored evidence was unsolicited, submitted long after the operative deadline, and the arbitral decision was likely already made before the submission. Third, there was no non-speculative evidence of bias by the arbitrator. Fourth, the allegedly improper ex parte communications did not prejudice Marciano because they were mainly comprised of exchanges between DCH and the AAA (not the individual arbitrator), contained non-dispositive procedural questions, and were not “untoward.” Fifth, the court rejected Marciano’s challenge that DCH’s participation in the arbitration required vacatur. Sixth, the arbitrator was justified in refusing Marciano’s request to further postpone the arbitration proceedings because of the numerous extension requests that had been granted throughout the proceedings and because Marciano had adequate notice and ample time to respond by the deadlines. Finally, the court found no manifest disregard of the law on the arbitrator’s behalf and noted that Marciano failed to, despite notice, adequately respond to discovery inquiries regarding her disability status—a threshold issue in the case. Accordingly, the court granted DCH’s motion to confirm and denied Marciano’s motion to vacate.

Marciano v DCH Auto Grp., Case No. 11-9635 (USDC S.D.N.Y. Apr. 27, 2017)

This post written by Thaddeus Ewald .

See our disclaimer.