Confirmation / Vacation of Arbitration Awards

THIRD CIRCUIT AFFIRMS VACATING ARBITRATION AWARD, WHICH WAS THE “ESSENCE OF MANIFEST DISREGARD”

April 11, 2011 by Carlton Fields

The Third Circuit Court of Appeals affirmed a ruling vacating an arbitration award in an employment dispute involving a collective bargaining agreement (“CBA”). Armstrong County Hospital unilaterally instituted a smoking ban on its property. Its employees’ union disputed that policy, and sought arbitration of the dispute. The arbitrator ruled in favor of the union, finding that the policy unfairly altered the past practice of allowing smoking in designated areas, which was a working condition expected by employees, and which could not be altered unilaterally. The Hospital moved to vacate the award in federal court, on grounds that the arbitrator failed to address key language in the CBA stating that the Hospital’s management rights to institute policy unilaterally was “specifically not limited by existing or ‘prior practices.’” The district court agreed with the Hospital and vacated the award, finding it the “essence of manifest disregard.” The Third Circuit, citing the constraint on courts to “exceedingly narrow” review of such arbitration awards, nevertheless affirmed, finding the arbitrator’s award effectively rewrote the parties’ agreement. Armstrong County Memorial Hospital v. United Steel, Paper and Forestry, Rubber, Mfg. Energy, Allied Industrial and Service Workers Int’l Union, No. 10-2495 (3d Cir. March 14, 2011).

This post written by John Pitblado.

ARBITRATION AWARD CONFIRMATION DECISIONS

March 2, 2011 by Carlton Fields

Preclusive Effect of Prior Litigation

Regale, Inc. v. Thee Dollhouse Prods. N.C., Inc., Case No. 10-280 (USDC E.D.N.C. Jan. 20, 2011) (denying motion to vacate and/or modify award and granting motion to confirm award; no manifest disregard of the law; award did not fail to draw its essence from the agreement; court’s decisions in prior tort case did not preclude decision of contract issues subject to arbitration)

Foreign Awards

Int’l. Trading & Indus. Inv. Co. v. Dynacorp Aerospace Tech., Case No. 09-791 (USDC D.C. Jan. 21, 2001) (confirming arbitration award under the FAA and Convention on Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”); manifest disregard standard does not provide a basis for denying confirmation under the New York Convention; arbitrator did not manifestly disregard Qatari law, notwithstanding Qatari high court’s conclusion that the arbitrator failed to follow Qatari law)

Mistake of Law

Brown v. Pulte Home Corp., Case No. 10-mc-201 (USDC Feb. 14, 2011) (granting plaintiffs’ petition to confirm arbitration award in part and denying petition to vacate award in part; arbitrator’s finding of “liability” in liability phase did not bind the arbitrator to hold for plaintiffs on all counts in damages phase; arbitrator’s alleged mistake of law in refusing to order damages under unfair trade practices and consumer protection law beyond the scope of judicial review)

Contech Constr. Prods., Inc. v. Heierli, Case No. 09-01483 (USDC D.C. Feb. 4, 2011) (granting petition to confirm final award and cross-petition to confirm partial award; fact that the arbitrator may have misapplied the law or rules not a basis for vacating the award under the FAA)

Exceeding Authority; Manifest Disregard of the Law

Westminster Securities Corp. v. Petrocom Energy Ltd., Case No. 10-07893 (USDC S.D.N.Y. Jan. 19, 2011) (granting petition to confirm award and denying motion to vacate award; arbitration panel did not manifestly disregard the law in holding that agreement’s tail provision applied to transaction at issue; panel did not lack the authority to adjudicate unjust enrichment claim)

N.J. Bldg. Laborers Statewide Benefit Funds v. GMAC Constr., Case No. 10-6518 (USDC D.N.J. Jan. 31, 2011) (confirming arbitration award requiring that contributions be made to employee trust funds and benefit plans; no evidence to suggest arbitrator acted in manifest disregard of the law or exceeded his authority)

Popkave v. John Hancock Distribs., LLC, Case No. 10-3680 (E.D. Pa. Feb. 7, 2011) (denying petition to vacate award; arbitrators did not exceed their powers, nor manifestly disregard the law by issuing an award against an entity that may not have been the proper party; the party had not sufficiently educated the arbitrators about the law, and did not independently recognize the law, so they could not have manifestly disregarded it)

Bailey v. Northrop Grumman Ship Sys., Inc., Case No. 08-04685 (USDC E.D. La. Feb. 2, 2011) (denying motion to vacate arbitration award; no statutory grounds under the FAA for vacatur—manifest disregard not a basis for vacatur; arbitrator did not exceed his authority)

Weiner v. Commerce Ins. Co., Case No. 10-P-234 (Mass. Ct. App. Jan. 7, 2011) (affirming vacatur of initial arbitration award because the arbitrator exceeded his authority in declaring UIM claimant’s claim as premature and failing to determine damages; affirming confirmation of subsequent award by a second arbitrator appointed by the court)

Contravention of Public Policy

Kiely Constr. Co. v. Util. Workers Union of Am., Case No. 10-4871 (USDC D.N.J. Jan. 3, 2011) (denying motion to vacate award; award drew its essence from the collective bargaining agreement; award did not contravene public policy)

Nat’l Football League Players Ass’n. v. Nat’l Football League Mgmt. Council, Case No. 10-1671 (USDC S.D. Cal. Jan. 5, 2011) (granting motion to confirm arbitration award requiring application of Tennessee law to workers’ compensation claims brought in California and denying motion to vacate award; no manifest disregard of the law; not contrary to public policy)

Evidence of Partiality or Corruption

Tysinger Motor Co., Inc. v. Chrysler Group, LLC, Case No. 10-554 (USDC E.D. Va. Jan. 7, 2011) (denying motion to vacate award; FAA did not apply, special procedure created by Congress governed, which did not provide for judicial review; even so, there was no evident partiality or corruption by arbitrators)

This post written by Ben Seessel.

STAY OF PREMATURE ARBITRATION DID NOT RENDER SUBSEQUENT PROCEEDINGS OR AWARD VOID

February 24, 2011 by Carlton Fields

Where a court of appeals reversed a lower court’s order compelling arbitration, and mandated a stay of ongoing arbitration proceedings, the proceedings conducted in arbitration both before and after the institution of the stay were not void. The case surrounded a coverage dispute under an automobile insurance policy. The lower court had improperly compelled arbitration prior to determining whether coverage existed under the policy. After the court of appeals reversed, remanded, and stayed arbitration, the lower court found coverage existed and the arbitration resumed. The arbitrator then issued an award for the insureds, and the insurer appealed, contending the stay of the premature arbitration effectively voided all subsequent arbitral proceedings. Quoting a legal dictionary, the court held: “A stay does not vacate anything, but it is instead only the postponement or halting of a proceeding, judgment, or the like.” United Automobile Insurance Co. v. Wilson, Case No. 1-09-3061 (Ill. Ct. App. Jan. 18, 2011).

This post written by Michael Wolgin.

SECOND CIRCUIT AFFIRMS DISTRICT COURT’S DECISION IN CARDELL DISPUTE

February 23, 2011 by Carlton Fields

In the latest development in the dispute between Cardell Financial and Suchodolski Associates, the Second Circuit issued a summary order affirming the district court’s judgment confirming an arbitration award and injunctive relief in Cardell’s favor. (We earlier posted on this case at the district court-level on January 20, 2010.) The underlying dispute chiefly concerned two separate agreements: the first – a $12.8 million promissory note, the second – a nonrecourse stock pledge agreement. The district court determined that the arbitrator had not manifestly disregarded the law by, among other things, refusing to apply New York law. Suchodolski Associates appealed, asserting the same theory for overturning the award. The Second Circuit affirmed for substantially the same reasons stated by the district court. Cardell Fin. Corp. v. Suchodolski Associates, Inc., No. 10-226 (2d Cir. Feb. 9, 2011).

This post written by John Black.

MANIFEST DISREGARD OF THE LAW UNDER THE LABOR-MANAGEMENT RELATIONS ACT QUESTIONED IN THE EIGHTH CIRCUIT

February 22, 2011 by Carlton Fields

In a case involving an arbitration award in a labor dispute, a federal district court in the Eighth Circuit recently questioned whether the “manifest disregard of the law” ground for vacating an arbitration award continues to exist under the Labor-Management Relations Act. The case concerned an arbitration regarding the company’s procedures for evaluating whether an injured employee was physically able to return to work. The arbitrator found in favor of the employee, determining that the procedure employed by the company concerning this employee was inconsistent with its past practices with other employees. The company claimed that its actions were consistent with its collective bargaining agreement and with federal law, and moved to vacate the award as a “manifest disregard” under the LMRA and the Federal Arbitration Act. In upholding the arbitration award, the court recognized that in the Eighth Circuit, “manifest disregard” is no longer a valid basis for vacating an arbitration award under the FAA, and “even if this ground for vacatur survives in LMRA cases,” the arbitrator at worst incorrectly applied the applicable law, rather than refused to apply it. Breckenridge O’Fallon, Inc. v. Teamsters Union Local No. 682, Case No. 4:09CV2005 (USDC E.D. Mo. Jan. 24, 2011).

This post written by Michael Wolgin.