Confirmation / Vacation of Arbitration Awards

The Eleventh Circuit recently limited the authority by which an aggrieved party can obtain judicial review of arbitration awards outside of the four grounds enumerated in the Federal Arbitration Act, ruling that an insurance policy alone could not serve as “an independent basis for the enforcement of an arbitration award.” The plaintiff argued that its right to expanded judicial review was based on the policy’s express language that “[a]ny decision rendered in arbitration is binding on you and us unless judicial review is sought…you and we have the right to judicial review of any decision rendered in arbitration.” The Eleventh Circuit disagreed, holding that if parties wish to allow for more avenues to judicial review, they must explicitly designate the “state statutory or common law alternatives to the FAA in their arbitration agreements.” Otherwise, the contract alone will not suffice as the sole basis for judicial review when the FAA itself does not apply. Campbell’s Foliage, Inc. v. Federal Crop Insurance Corp., No. 13-11896 (11th Cir. Apr. 3, 2014).

This post written by Rollie Goss.

See our disclaimer.

The Ninth Circuit Court of Appeals affirmed a district court’s denial of a motion to vacate an arbitration award issued in a dispute between the Johnsons and Wetzel’s Pretzels, concerning the termination of a franchise agreement. The appellants, the Johnsons, challenge the award on grounds that the arbitrator exceeded his powers by enforcing provisions in the franchise agreement that required the Johnsons to assign their lease and property interests to the defendant. The Ninth Circuit denied the appellants’ claims, stating that the Johnsons were unable to show that the award was “irrational or exhibit[ed] a manifest disregard of law,” two of the limited grounds on which a federal court may vacate an arbitral award. Emphasizing the terms of the franchise agreement, the Court stated that the arbitrator acted within the scope of the agreement, which expressly provided for the assignment of the plaintiff’s lease and property interests upon termination of the agreement. Additionally, the Court indicated that the Johnsons were unable to offer convincing evidence that award exhibited a manifest disregard of law. Wetzel’s Pretzels, LLC v. Johnson, No. 12-56716 (10th Cir. Apr. 3, 2014).

This post written by Rollie Goss.

See our disclaimer.

A federal judge in Houston recently vacated an arbitration award where the reinsurance agreement specified that the arbitration of any disputes would proceed “under the auspices of the ICC,” but the arbitration actually proceeded under the American Arbitration Association’s Commercial Arbitration Rules. The Court found that the parties to the reinsurance agreements selected the International Chamber of Commerce, and application of its rules, as a mandatory and essential condition of their agreement to arbitrate. Because this did not occur, the selected arbitrator lacked jurisdiction to hear the claims presented. The court noted that generally, after the conclusion of an arbitration, a court cannot second guess the arbitrator’s jurisdiction and decision so long as the arbitrator (1) is arguably construing or applying the contract, and (2) is acting within the scope of his authority. The court found, however, that the case presented a rare example of the second exception, in which an arbitrator assumed authority over a dispute that the parties’ agreements mandated be referred to a different forum, namely the ICC. This error fundamentally prejudiced the proceedings. PoolRe Insurance Corp. v. Organizational Strategies, Inc., Case No. H-13-1857 (USDC S.D. Tex. Mar. 31, 2014).

This post written by Catherine Acree.

See our disclaimer.