Confirmation / Vacation of Arbitration Awards

THIRD CIRCUIT FINDS THAT ALLEGED LEGAL ERRORS DO NOT JUSTIFY VACATUR OF ARBITRATION AWARD

February 15, 2016 by Carlton Fields

The United States Court of Appeals for the Third Circuit recently confirmed an arbitration award in a dispute concerning the ownership of certain music rights, rejecting the argument that alleged legal errors constituted sufficient grounds to vacate the award. The underlying arbitration involved a dispute between The Pullman Group, LLC and its owner, David Pullman (collectively, “Pullman”), and the estates of John Whitehead and Gene McFadden, who were “an integral part of the Philadelphia music scene in the 1970s.” Pullman entered into a contract with Whitehead and McFadden to purchase their song catalogue, but the sale was never finalized. After the musicians passed away, Pullman and the estates agreed to arbitrate their dispute over ownership of the catalogue. An arbitration panel ruled in favor of the estates, and Pullman brought an action in federal court to vacate the award on the grounds that the panel had committed various legal errors.

The district court denied Pullman’s motion to vacate the award, which the Third Circuit affirmed. The court held that mere errors of law are insufficient to warrant vacatur of arbitration award, and that such outcome is only justified where an arbitrator’s legal error is so substantial that a party was deprived of a fair hearing. In this case, that the arbitration panel’s application of New York law and decision to exclude certain testimony was well-founded, and did not arise to the level of misconduct required to vacate the award. The Third Circuit rejected Pullman’s alternative argument that the panel’s ruling amounted to “manifest disregard of the law,” finding that even if this doctrine is still a viable ground to vacate an arbitration award (which the court declined to address), it would not apply because the panel’s decision did not ignore binding legal precedent. Whitehead v. The Pullman Group, LLC, Nos. 15-1627 & 15-1628 (3d Cir. Dec. 10, 2015).

This post written by Rob DiUbaldo.

See our disclaimer.

PENNSYLVANIA FEDERAL COURT CONFIRMS ARBITRATION AWARD IN FAVOR OF PHILADELPHIA UNION SOCCER TEAM IN WRONGFUL TERMINATION SUIT WITH FORMER COACH

February 4, 2016 by John Pitblado

A Pennsylvania federal court recently confirmed an arbitrator’s decision in a wrongful termination suit which held in favor of the Philadelphia Union soccer team, finding it did not violate former head coach Piotr Nowak’s contractual rights when the team fired him in 2012.

In the order confirming the award, and denying Nowak’s motion to vacate it, the court noted that a federal court’s review of an arbitration award “gives extreme deference” to the arbitrator’s decision and does not “second guess but instead presume[s] the reasoned award is enforceable”.

In the motion to vacate the award, Nowak claimed that the arbitrator was biased and made factual judgments from what Nowak claimed was hearsay evidence in testimony by witnesses. However, the court found that the record revealed that the arbitrator did not misapply the law, noting that the award itself highlighted sufficient independent evidence supporting the arbitrator’s conclusions, including witness testimony from former players, a trainer and Nowak himself. It also found that the award, supported by ample record evidence, was not completely irrational. Finally, the court found that there was no evidence of bias or impartiality on the part of the arbitrator. Thus, because Nowak did not establish any ground for vacatur, the court denied the motion to vacate and granted the motion to confirm the arbitration award.

Piotr Nowak v. Pennsylvania Professional Soccer, LLC, et al., No. 12-4165 (E.D. Pa. Jan. 11, 2016).

This post written by Jeanne Kohler.

See our disclaimer.

DELAWARE FEDERAL COURT CONFIRMS ARBITRATION AWARD IN COMMERCIAL DISPUTE, FINDING THAT THE FAA STANDARD, AND NOT THE DELAWARE UNIFORM ARBITRATION ACT, GOVERNED THE PARTY’S CHALLENGE

January 28, 2016 by Carlton Fields

Roquette Freres, S.A. and Solazyme, Inc. entered into a Joint Venture Operating Agreement (the “JVOA”), which was established for the purpose of “the research and development, manufacture, distribution, sales, marketing and support” of certain products. The JVOA contained an arbitration provision that required disputes arising out of or connected with the agreement to be resolved under the “Arbitration Rules of the Center for Public Resources in New York”. The JVOA further provided that the arbitration be conducted “according to the laws of the State of Delaware” and that the agreement was “governed and construed in accordance with” Delaware law.

After the arbitration panel ruled in Solazyme’s favor, Roquette moved to vacate the award under Delaware law. Solazyme counterclaimed for confirmation of the award, arguing that the standard set forth in the Federal Arbitration Act (“FAA”) governed Roquette’s challenge. As a threshold matter, the court found that because the JVOA did not specifically reference the Delaware Arbitration Act, and Roquette did not file its action in the Delaware Court of Chancery (as contemplated by the statute), the FAA controlled. Applying the standard set forth by the FAA, the court confirmed the panel’s award and denied Roquette’s motion to vacate because: (1) the panel’s interpretation of the time period in which to render an award, which Roquette argued had not been strictly adhered to, was a procedural issue that required broad deference under the statute and was rationally derived from the JVOA and CPR rules; (2) the panel’s consideration of extrinsic evidence was necessary to resolve the issues in dispute, and thus permissible; (3) alleged “public policy” considerations did not provide the court with a basis to vacate the panel’s ruling as a matter of law; and (4) the relief crafted by the panel, though broad in scope, was based upon the language of the JVOA, and thus within the panel’s authority. Roquette Freres, S.A. v. Solazyme, Inc., No. 1:14-cv-01442 (USDC D.Del. Dec. 21, 2015).

This post written by Rob DiUbaldo.
See our disclaimer.

SECOND CIRCUIT REFUSES TO VACATE FINRA AWARD AS A MANIFEST DISREGARD OF THE LAW

January 21, 2016 by Carlton Fields

Raymond James had initiated a FINRA arbitration because Singh, a financial advisor who was a registered representative of Raymond James, had refused to indemnify Raymond James pursuant to the terms of their agreement. Following an arbitration award in favor Raymond James, Singh unsuccessfully attempted to vacate the arbitration award against him by arguing the award was a manifest disregard of the law. On appeal, the higher court also rejected Singh’s arguments, noting that unless it had “serious reservations about the soundness of the arbitrator’s reading of the contract” it could not vacate the award. The court further pointed out that it was prohibited from second guessing the arbitrators construing of the contract. Singh’s argument that the amount of the award was not justified by the evidence did not fare any better; arbitrators are not required to disclose their rationale for an award, the record showed that there was evidence presented to the panel, and the amount awarded was less than the amount sought by Raymond James. Singh v. Raymond James Financial Services, Inc., Case No. 14-3970 (2d Cir. Dec. 9, 2015).

This post written by Barry Weissman.

See our disclaimer.

FILING OF FOUR LAWSUITS OVER TEN YEARS DID NOT WAIVE RIGHT TO ARBITRATE WHERE “LITIGATION MACHINERY” HAD NOT BEEN INVOKED

January 19, 2016 by Carlton Fields

Grigsby & Associates appealed an order confirming an arbitration award of compensatory damages and attorney fees to M Securities, in a dispute relating to underwriting fees owed in a municipal bond transaction. Grigsby claimed that the award should be vacated because the defendants waived their right to arbitration after filing four lawsuits concerning the bond transaction over ten years. The Eleventh Circuit held, however, that despite the prior lawsuits, M Securities still had not “substantial[ly] invoke[d] the litigation machinery prior to demanding arbitration.” M Securities did not effectuate service against Grigsby in three of the lawsuits, and the fourth litigation did not progress beyond the filing stage. And while delay in seeking arbitration generally weighs in favor of finding waiver, it must be coupled with other substantial conduct “inconsistent with an intent to arbitrate,” which M Securities did not display here. Nor did Grigsby demonstrate prejudice given “the extremely limited nature” of the prior lawsuits. Grigsby & Associates, Inc. v. M Securities Investment, Case No. 13-15208 (11th Cir. Dec. 28, 2015).

This post written by Joshua S. Wirth, a law clerk at Carlton Fields Jorden Burt in Washington, DC.

See our disclaimer.