Confirmation / Vacation of Arbitration Awards

COURT OF APPEAL AFFIRMS VACATION OF ARBITRATION AWARD ON GROUNDS OF ARBITRATOR’S EVIDENT PARTIALITY

June 3, 2013 by Carlton Fields

Thomas Kinkade Company’s suit against Nancy and David White was submitted to an arbitration proceeding in which, as the Sixth Circuit noted, “the coincidences all break one way.” During the five-year arbitration, the arbitrator, Mark Kowalsky, defied his role as neutral intermediary in various ways. For example, Kowalsky provided the Whites multiple opportunities to bolster the proofs of their claims. Kowalsky allowed the Whites to submit as evidence 8,800 documents they had deliberately withheld from Kinkade for four years. On a straightforward breach-of-contract claim that went virtually uncontested throughout arbitration, he denied Kinkade any relief. When Kinkade raised objections to Kowalsky’s decisions as an arbitrator, Kowalsky gave no response. Kowalsky additionally awarded the Whites attorney’s fees of nearly $500,000 after the arbitration panel unequivocally denied those fees in the Interim Award. Finally, during arbitration, the Whites and their appointed arbitrator both retained Kowalsky’s law firm in unrelated matters, and Kowalsky made no effort to avoid receiving compensation for such matters. Kinkaid sought to disqualify Kowalsky to no avail. Both the AAA and Kowalsky denied disqualification requests. The arbitration panel entered a Final Award in favor of the Whites in an amount in excess of $1.4 million. The district court granted Kinkade’s motion to vacate due to the arbitrator’s partiality, and the Sixth Circuit affirmed. Thomas Kinkade Company v. White, No. 10-1634 (6th Cir. April 2, 2013).

This post written by Rollie Goss.

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ROUNDUP OF APPELLATE ARBITRATION DECISIONS

May 16, 2013 by Carlton Fields

Confirming Award

Mandell v. Reeve, No. 11-5238 (2d. Cir. Feb. 4, 2013) (affirming district court’s confirmation of arbitration award and denial of petition to vacate award; denying appellee’s motion for sanctions, finding that the appeal was not frivolous).

Timegate Studios, Inc. v. Southpeak Interactive, L.L.C., No. 12-20256 (5th Cir. Apr. 9, 2013) (reversing district court’s decision to vacate an arbitration award with instructions to reinstate the award, holding that the arbitrator’s award of a perpetual license as relief to the prevailing party was not inconsistent with the essence of the parties’ contract).

Data & Development, Inc. v. Infokall, Inc., No. 12-2456 (2d Cir. Mar. 13, 2013) (affirming district court’s decision to confirm arbitration award, holding that the arbitrator did not manifestly disregard New York law in awarding lost profits to the prevailing party on breach of contract claim).

Stonebridge Equity v. China Automotive Systems, Inc., No. 12-1548 (6th Cir. Mar. 26, 2013) (affirming district court’s confirmation of arbitration award, holding that arbitrators did not act in manifest disregard of the law by using extrinsic evidence to interpret the parties’ contract and that the district court’s minor modification of the award to assure compliance was in accordance with the FAA).

Johnson Controls, Inc. v. Edman Controls, Inc., Nos. 12-2308 & 12-2623 (7th Cir. Mar. 18, 2013) (affirming district court’s confirmation of arbitration award and denial of petition to vacate award; arbitrator had not disregarded the parties’ choice of law nor exceeded his powers in awarding damages and attorneys fees to prevailing party).

Vacating Award

Town & Country Salida, Inc. v. Dealer Computer Services, Inc., No. 12-1850 (6th Cir. Apr. 9, 2013) (affirming district court’s partial vacatur of arbitration award, holding that the district court did not commit clear error in making the factual determination that an entity was not bound by an arbitration clause).

City of Oswego v. Oswego City Firefighters Association, No. 49 (N.Y. Apr. 2, 2013) (reversing order of appellate division; ordering that an arbitration award be vacated because the award would require a municipality to provide a benefit no longer authorized by law and that the final result would conflict with other laws and well-defined policy considerations).

Class Action Waiver and FAA Preemption

McKenzie Check Advance of Florida, LLC v. Betts, No. SC 11-514 (Fla. Apr. 11, 2013) (FAA preemption prevents court from invalidating class action waiver as void against state public policy because waiver would prevent consumers from vindicating rights under state consumer protection laws).

Jurisdiction

Community State Bank v. Knox, No. 12-1304 (4th Cir. Apr. 11, 2013) (affirming district court’s dismissal of petition to compel arbitration holding that that the FAA by itself does not bestow federal jurisdiction and that there was no independent basis for federal jurisdiction).

This post written by Ben Seessel.

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ARBITRATION AWARD REVIEW ROUNDUP

April 10, 2013 by Carlton Fields

Manifest Disregard/Exceeding Powers

Tivo, Inc. v. Goldwasser, Case No. 12-cv-07142 (USDC S.D.N.Y. Feb. 14, 2013) (denying motion to vacate award; granting motion to confirm award; panel did not exceed authority for allegedly basing award on theory not advanced by parties; panel’s patent licensing determinations not a “manifest disregard” of the law)

Giller v. Oracle USA, Inc., No. 12-895 (2d Cir. Feb 22, 2013) (affirming order granting motion to dismiss petition to vacate award in employment dispute; no grounds for vacatur for arbitrator’s interpretation of underlying contract; noting that “manifest disregard” still regarded as a “judicial gloss” on the FAA in the Second Circuit)

Peterson v. Macy’s, Case No. 10-cv-05119 (USDC E.D.N.Y. Feb. 25, 2013) (denying motion to vacate in pro se employment discrimination action; “since, inter alia, there is more than a ‘colorable justification’ for the arbitrator’s decision, the arbitration award was not rendered in manifest disregard of the law”)

Department of Professional & Financial Regulation v. Maine State Employees Association, Case No. 2013 ME 23 (Me. Feb. 28, 2013) (reversing and remanding for lower court to enter order denying motion to vacate award that reinstated employee; because the award “did not violate a public policy ‘affirmatively expressed or defined in the laws of Maine,’ the arbitrator did not exceed his powers, and the award is not subject to further judicial scrutiny on that basis”)

Choice of Law

Orbitcom, Inc. v. Qwest Communications Co., Case No. 12-cv-01639 (USDC D. Co. March 12, 2013) (granting motion to confirm award; denying motion to vacate; arbitrator did not exceed powers for 16-month delay of entry of final award; arbitrator correctly applied FAA for arbitration procedure, rather than New York law, notwithstanding New York substantive choice of law provision)

Abu Dhabi Investment Authority v. Citigroup, Inc., Case No. 12-cv-00283 (USDC S.D.N.Y. March 4, 2013) (denying petition to vacate award; no manifest disregard for New York choice of law; proceedings were not fundamentally unfair, notwithstanding tribunal’s denial of certain discovery)

Subject Matter Jurisdiction

Duffy v. Legal Aid Society, Case No. 12-cv-02152 (USDC S.D.N.Y. Feb. 12, 2013) (dismissing petitioner’s pro se action to vacate arbitration decision in employment dispute; employee lacked standing to challenge arbitration between union and employer; petitioner failed to argue that union did not provide fair representation; argument that arbitration decision was “confusing and contradictory” not grounds for vacatur)

Smith v. Cheesecake Factory Restaurants, Inc., Case No. 06-cv-00829 (USDC M.D. Tenn. Feb. 8, 2013) (denying motion to vacate award; arbitrator’s award authorizing collective arbitration under Fair Labor Standards Act was an interim decision and vacatur was thus not ripe for judicial review)

Conclusory Challenge

Wanken v. Wanken, No. 12-10562 (5th Cir. Feb. 11, 2013) (affirming order denying motion for relief from judgment and confirming arbitration award; appellant failed to show that court ignored evidence allegedly showing that appellees gave perjured testimony and fraudulently procured the arbitration award)

Bailey Brake Farms, Inc. v. Trout, Case No. 2011-CA-00610 (Miss. Feb. 28, 2013) (reversing vacatur of arbitration award that set the value of shares under a stock buy-sell agreement; court’s order lacked any analysis or findings supporting grounds for vacatur, such as exceeding authority, “undue means,” or “unresolved issues”)

This post written by Michael Wolgin.

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SECOND CIRCUIT AFFIRMS JUDGMENT CONFIRMING ARBITRATION AWARD AND DENYING MOTION TO VACATE

March 7, 2013 by Carlton Fields

In a summary order, the Second Circuit Court of Appeals affirmed the district court’s confirmation of an arbitration award issued in favor of NCG Network Asia and the denial of PAC Pacific Group International’s motion to vacate. The court found that the arbitrator had properly disclosed a prior business relationship that indirectly linked him with NCG Network Asia, nothing about the relationship would compel a reasonable person to believe that the arbitrator was partial, and that PAC Pacific Group had thus not made the requisite showing to entitle it to post-arbitration discovery on the arbitrator’s alleged bias. The court also held that there was nothing inappropriate in denying PAC Pacific Group’s challenges to the arbitrator based on alleged impartiality, which denials complied with governing AAA rules and, further, that the arbitrator’s conclusion that there was no breach of the implied covenant of good faith and fair dealing was in accord with applicable law. NGC Network Asia, LLC v. PAC Pacific Group International, Inc., No. 12-0967 (2d Cir. Feb. 11, 2013).

This post written by Ben Seessel.

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ARBITRATION AWARD ROUNDUP

February 27, 2013 by Carlton Fields

Following is a summary of selected court opinions addressing requests for confirmation and vacation of arbitration awards.

Manifest disregard

NYKCool A.B. v. Pacific Fruit, Inc., No. 11-4246 (2d Cir. Jan 16, 2013) (affirming judgment by S.D.N.Y. confirming an arbitration award based on finding that defendant did not establish a “manifest disregard of the law,” or that the panel exceeded its authority or that the panel denied defendant a fundamentally fair hearing)

Murray v. Citigroup Global Markets, Inc., No. 11-4355 (6th Cir. Jan. 10, 2013) (affirming district court’s denial of plaintiff’s motion to vacate or modify an arbitration award; court could not determine whether the panel acted in “manifest disregard of the law” because plaintiff did not request a reasoned award from the panel)

Swarm, LLC v. Cohen, Case No. 10-03188 (C.D. Cal. Dec. 7, 2012) (granting defendants’ motion to confirm final arbitration award based on finding that arbitrator’s application of the alter ego doctrine, finding of a written agreement, and reliance on the same evidence presented by plaintiff for two different claims is not a “manifest disregard of the law” under the FAA)

Ometto v. ASA Bioenergy Holding A.G., Case No. 12-1328 (S.D.N.Y. Jan. 9, 2013) (denying petitioners’ motion to vacate two arbitration awards and granting respondents’ motion to confirm the awards based on finding that petitioners’ grounds for vacatur were without merit, including allegations that the tribunal’s chairman was partial, the tribunal acted in manifest disregard of the law, and the awards were procured through fraud)

Budget Blinds Inc. v. LeClair, Case No. 12-1101 (C.D. Cal. Jan. 16, 2013) (denying petition to vacate arbitration award and granting cross-petition to confirm award, on grounds that petition to vacate did not establish “manifest disregard of the law” or that arbitrator exceeded her authority and was merely an attempt to re-litigate the arbitrator’s factual findings)

Fuchs & Associates, Inc. v. Lesso, No. B239246 (Cal. Ct. App. Jan. 8, 2013) (affirming trial court’s judgment confirming an arbitration award based on finding that the arbitrator did not exceed his authority and there was no “manifest disregard of the law”)

Exceeding authority

Brotherhood of Locomotive Engineers and Trainmen v. United Transportation Union, No. 11-4177 (6th Cir. Dec. 5, 2012) (affirming district court’s reinstatement of arbitration award following magistrate judge’s vacatur; arbitration board did not exceed its jurisdiction when it interpreted contractual provisions)

Zhao v. Ming Due International Trade, Inc., No. B236813 (Cal. Ct. App. Jan. 7, 2013) (affirming trial court’s judgment confirming an arbitration award based on finding that arbitrator did not exceed the scope of his power by denying plaintiff’s motion for an uncontested arbitration, especially since the parties stipulated to binding arbitration in which the arbitrator would control the proceedings in “his sole discretion”)

Disclosure inadequacy

Gray v. Chiu, No. B238304 (Cal. Ct. App. Jan. 22, 2013) (reversing trial court’s denial of appellant’s petition to vacate a medical malpractice arbitration award on grounds that the arbitrator violated the disclosure provisions of the California Arbitration Act and the California Ethics Standards for Neutral Arbitrators in Contractual Arbitrations by failing to disclose that counsel for the defendant was affiliated with the abritrator’s firm)

Re-litigating arbitrators’ decisions

Citigroup Global Markets, Inc. v. Bock, Case No. 10-24157 (S.D. Fla. Jan. 17, 2013) (confirming FINRA arbitration award and denying respondent’s motion to vacate the award as an attempt to “re-litigate discovery decisions that were properly before the arbitration panel”)

Untimely vacation request

Domnarski v. UBS Financial Services, Inc., Case No. 12-30139 (D. Mass. Jan. 23, 2013) (denying plaintiff’s motion to vacate a FINRA arbitration award and allowing defendant’s motion to confirm the award because plaintiff filed her motion outside the 3 month limitations period established by the FAA)

Foreign Arbitration Awards – jurisdiction

Covington Marine Corp. v. Xiamen Shipbuilding Industry Co., No. 12-30383 (5th Cir. Dec. 21, 2012) (affirming district court’s decision to deny confirmation of a foreign arbitral award under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards against a Chinese shipbuilding company and the People’s Republic of China due to lack of personal and subject matter jurisdiction)

This post written by Abigail Kortz.

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