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You are here: Home / Archives for Arbitration / Court Decisions / Confirmation / Vacation of Arbitration Awards

Confirmation / Vacation of Arbitration Awards

NEVADA FEDERAL COURT AFFIRMS ARBITRATION AWARD

November 2, 2016 by John Pitblado

The background of this case is as follows. Lift Equipment Certification Co., a heavy equipment manufacturer, was contracted by Lawrence Leasing Corp., a shipping company to redesign one of Lawrence’s cranes. The deal fell through, and the parties proceeded to arbitration. The arbitrator awarded both parties significant sums of money. However, plaintiff Lift believed that defendant Lawrence received too much in the arbitration award, and that it received too little. Thus, it moved in federal court in Nevada for the arbitration award to be vacated, and Lawrence cross-moved for the award to be confirmed.

The Nevada federal court noted that its review of arbitration awards is limited, and that plaintiff Lift faced a “heavy burden to prove by clear and convincing evidence that the arbitrator intentionally disregarded obvious legal principles” or that the decision is “utterly without support in the record.” The court then held that plaintiff Lift failed to prove by clear and convincing evidence that the arbitrator “manifestly disregarded the law” or that the award was “arbitrary and capricious.” Thus, the court denied Lift’s motion to vacate the arbitration award, and granted Lawrence’s cross motion to confirm the arbitration award. However, the court declined defendant Lawrence’s request for legal fees since plaintiff’s claims were “far from frivolous.”

Lift Equipment Certification Co., Inc. v. Lawrence Leasing Corp., No. 2:15-CV-01987-JAD-GWF (USDC D. Nev. Sept. 23, 2016)

This post written by Jeanne Kohler.

See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards

THIRD CIRCUIT REJECTS CONTRACTOR’S CHALLENGE TO ARBITRAL JURISDICTION BASED ON FAILURE TO COMPLY WITH AGREEMENT’S PROCEDURAL REQUIREMENTS

October 24, 2016 by Rob DiUbaldo

The Third Circuit affirmed a lower court’s ruling against a contractor challenging an arbitrator’s authority in ordering payment of delinquent contributions to employee benefit funds. Plaintiff (“Nolt”) signed a Project Labor Agreement (“PLA”) for a construction project that required it to hire union employees, but permitted it to hire non-union employees in certain circumstances.  The PLA also required Nolt to contribute to employee benefit funds “on behalf of all employees covered by” it.  The PLA contained a provision with an exclusive grievance and arbitration procedure for disputes between the parties, which included certain pre-arbitration “meet and confer” requirements and time limits, the failure to comply with which rendered any grievances null and void.

In a dispute over whether Nolt was required to contribute to union employee benefit funds on behalf of its non-union employees, who would not benefit from the funds, an arbitrator interpreted the plain language of the PLA to require contributions for “all employees covered” by the PLA and ordered payment of $492,000 in delinquent contributions. Nolt moved to vacate the arbitration award on the grounds that the arbitrator lacked jurisdiction and that the award violated public policy and other relevant wage laws.

The Third Circuit, noting the limited role of courts in reviewing arbitration awards, affirmed the award based on a finding of arbitral jurisdiction and lack of sufficient conflict with a cognizable public policy. The court found that Nolt’s argument claiming the union failed to comply with the PLA’s procedural requirements was a question of “procedural arbitrability” that was appropriately left to the arbitrator, rather than one of “substantive arbitrability” that would be appropriate for judicial resolution.  The court also rejected Nolt’s claim that the award conflicted with public policy by forcing it to essentially pay twice, first to the union employee benefit fund and second via its obligations under applicable wage laws.  Nolt failed to identify any “explicit conflict with other ‘laws and legal precedents’,” and, instead, relied on a non-cognizable “general interest in fairness and equal treatment” between union and non-union employers.  The court deferred to the arbitrator’s interpretation of the PLA as contract interpretation within his authority and affirmed despite recognizing Nolt’s persuasive arguments that the award forced Nolt to pay an unfair price for its non-union employees.

D.A. Nolt, Inc. v. Local Union No. 30 United Union of Roofers, Waterproofers & Allied Workers, No. 15-3697 (3d Cir. Sept. 23, 2016).

This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .

See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards, Jurisdiction Issues, Week's Best Posts

ELEVENTH CIRCUIT DETERMINES PARTY’S COUNTERCLAIM TO PETITION FOR CONFIRMATION COULD NOT BE CONSTRUED AS MOTION TO VACATE THE ARBITRATION AWARD

October 12, 2016 by John Pitblado

When the appellant failed to file a motion to vacate or modify an arbitration award, it waived its right to raise Section 10 or 11 of the Federal Arbitration Action (“FAA”) as a defense to a motion to confirm the award. Appellant argued that its counterclaim to the petition for confirmation should have been construed as a motion to vacate. Although a district court has “discretion to liberally construe a poorly conceived filing”, there is no obligation for the court to “independently inquire into the most advantageous construction of a represented civil litigant’s filing.” The Court found the counterclaim was “so vague that the district court could not possibly have discerned a factual predicate for Section 10 relief.”

The Court also upheld the District Court’s decision denying appellant’s motion for reconsideration, as appellant neglected to timely move for vacatur or respond to petitioner’s supplement to its petition for confirmation. Since a motion for reconsideration exists for the correction of “obvious errors or injustices” and not to put forth a new argument, the district court did not abuse its discretion by declining to accept appellant’s belated request to construe the counterclaim as a motion to vacate. Careminders Home Care, Inc. v. Concura, Inc., et al., No. 16-10112 (11th Cir. Aug. 25, 2016)

This post written by Nora A. Valenza-Frost.

See our disclaimer.

Filed Under: Arbitration Process Issues, Confirmation / Vacation of Arbitration Awards

ILLINOIS FEDERAL COURT GRANTS MOTION TO CONFIRM ARBITRATION AWARD FOR PRE-HEARING SECURITY

October 11, 2016 by John Pitblado

We previously reported on this case in our blog dated December 21, 2015. The background of the dispute is as follows. A dispute arose between an insurer and its insured under four written program agreements, each containing an arbitration clause. The insurer filed a single demand for arbitration with the American Arbitration Association (the “AAA”), alleging that the insureds failed to pay amounts due under the four program agreements. The insureds raised various objections to the arbitration demand, including that they were entitled to four separate arbitrations. The AAA ruled that the arbitration would continue as one arbitration, and the insureds appointed the sole arbitrator. Shortly thereafter, the insureds filed an action in Texas state court, seeking a Temporary Restraining Order (“TRO”) to stay the arbitration because it had been improperly consolidated. The Texas court granted the TRO, stating that the AAA had failed to follow the arbitration agreements by administering one proceeding, not four, and enjoined the AAA from administering the arbitration. The AAA removed the Texas action to federal court, and filed a motion to dismiss, to which the insureds did not file a response. After the TRO expired, the AAA attempted to resume administration of the arbitration, but the insureds would not participate in the arbitration and informed the AAA that their counsel could not communicate with the AAA given the pending Texas action. Thus, the insurer filed an action in Illinois federal court, where the arbitration was pending, seeking to compel arbitration, which was granted in November 2015. The parties then returned to arbitration.

In the arbitration, predicting future legal resistance from the insured, the insurer petitioned the arbitrators for the insured to post pre-hearing security. The arbitrators granted the petition, and ordered the insured to post about $4.6 million in security. The insured did not post such security, and the insurer thus sought to confirm the panel’s pre-hearing award for security in the Illinois federal court. In response, the insured argued that the award should be vacated because the arbitrators exceeded their authority under Section 10(a)(4) of the Federal Arbitration Act (the “FAA”).

The Illinois federal court first found that an interim pre-hearing security award is an “award” under the FAA. Thus, the court noted that, under the FAA, it must confirm the award unless a statutory exception applies, one of which is Section 10(a)(4)of the FAA. The court also noted that a party seeking relief under Section 10(a)(4) bears a heavy burden and that strong deference is given to arbitrators’ decisions. Then, focusing on the parties’ program agreements, the court held that there is support for the pre-hearing security award in the agreements and arbitration clause. Although the agreements did not mention prehearing security as a remedy available to the parties, the court noted that it does not mean such remedy is not available. In this regard, citing other precedents, the court noted that “[i]f an enumeration of remedies were necessary, in many cases the arbitrator[s] would be powerless to impose any remedy, and that would not be correct. Since the arbitrator[s] derive[] all [their] powers from the agreement, the agreement must implicitly grant [the arbitrators] remedial powers when there is no explicit grant.” The court then stated that the arbitration clause at issue provided that the arbitration was to be conducted under the AAA Rules, which allow for interim awards of security. Thus, the court held that, by adopting the AAA Rules into their agreements, the parties implicitly included the arbitrators’ authority to grant an award like the interim security award at issue. Finding the insured’s arguments to vacate unpersuasive, the court then granted the insurer’s motion to confirm the pre-hearing security award.

Zurich American Insurance Company, et al. v. Trendsetter HR, LLC, et al., No. 1:15-cv-08696 (USDC N.D. Ill. Aug. 24, 2016).

This post written by Jeanne Kohler.

See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards, Interim or Preliminary Relief, Week's Best Posts

THIRD CIRCUIT AFFIRMS DISMISSAL OF SUIT TO VACATE FINRA ARBITRATION AWARD

September 21, 2016 by John Pitblado

This case involved an underlying arbitration before an arbitration panel operating under the Financial Industry Regulatory Authority (“FINRA”) rules, which was brought by Judith and Kenneth Goldman against their financial advisor, Barry Guariglia, and his employer Citigroup Global Markets. The Goldmans had followed their investment adviser when he left his prior employer, Merrill Lynch, and went to Citigroup. In the arbitration, they claimed that when they transferred their account to Citigroup, they were subjected to a “devastating margin call” that wiped out their retirement savings. After 10 days of evidence and argument, and after the Goldmans submitted their case in chief, Citigroup moved to dismiss for lack of evidence. The FINRA arbitration panel dismissed the case, noting that “[w]hile all the claims were quite stridently argued, not a single claim was proven to be true by evidence.”

The Goldmans then filed a motion to vacate the arbitration award in a Pennsylvania federal court, and Citigroup moved to dismiss for lack of subject matter jurisdiction, which was granted by the court. In its decision, the court noted that it did not have subject matter jurisdiction because the Federal Arbitration Act does not itself create federal subject matter jurisdiction, and that the parties were not diverse, and thus, federal question jurisdiction would be required for the court to consider a motion to vacate an arbitration award. The Pennsylvania federal court found that the Goldmans failed to raise a federal question and simply sought to “assert the same claims they unsuccessfully brought in their arbitration.” The Goldmans then appealed to the Third Circuit Court of Appeals.

In their appeal, the Goldmans asserted that a district court can “look through a motion to vacate” at the underlying subject matter, relying on footnote in a prior Third Circuit decision, Goldman Sachs v. Athena Venture Partners, which stated that the district court has subject matter jurisdiction over a motion to vacate because the arbitration included federal securities law claims. The Third Circuit, however, rejected that argument, and found that it was not bound to follow the footnote in that case, noting that the footnote was an “unexamined exercise of jurisdiction and so is without precedential effect” and that the “drive-by jurisdictional ruling” in Athena goes against Third Circuit precedent. Thus, the Third Circuit affirmed the Pennsylvania federal court’s order dismissing the suit for lack of subject matter jurisdiction.

Goldman et al. v. Citigroup Global Markets Inc., et al., No. 15-2345 (3d Cir. Aug. 22, 2016).

This post written by Jeanne Kohler.

See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards, Jurisdiction Issues

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