The focus: A deep dive into
‘exceeded powers’ cases—one of the limited Federal Arbitration Act and
state law categories for challenging a tribunal award.
The assessment: The authors analyze many cases here—where courts upheld the awards, and also where tribunals overstepped.
The practice takeaway:
Arbitrators, stay strong. The writers provide distinct case themes that
provide a comprehensive advisory. Read this and you will know the types
of cases most susceptible to challenge … and how to insulate your
neutraling or advocacy work from attack.
Although most arbitration awards are followed by
voluntary compliance, or by pro forma judicial confirmation and prompt
enforcement, post-award litigation occurs hundreds of times each year as
the losing party in arbitration attempts to vacate the award.
As practicing arbitrators, we have taken a perhaps
perverse interest in the reported cases where losing parties have sought
to vacate adverse arbitration awards. In particular, we have canvassed
reported court opinions in cases where vacatur was sought during an
eight-month sample period in 2004 (see L. Mills and T. Brewer, et al.,
“Vacating Arbitration Awards: A Real World View of the Case Law,” Dispute Resolution Magazine (Summer 2005)), a nine-month period in 2008 (see T. Brewer and L. Mills, “When Arbitrators Exceed Their Powers,” Dispute Resolution Journal (February-April 2009), and, most recently, a 12-month period ending in mid-2012.
In brief, our prior work persuaded us that, although
“evident partiality,” “arbitrator misconduct,” and “manifest disregard”
all continue to get a good deal of ink, the vacatur ground that is
invoked most often—and succeeds most often—in the real world is that
“the arbitrators exceeded their powers.”
The earlier studies also persuaded us that, although
arbitrators often fret about whether particular case-management actions
they might consider taking pose possible risks of a later vacatur, in
the real world managerial arbitrators who take firm steps to promote the
efficiency and expedition of their cases rarely, if ever, have their
awards vacated later for such decision-making.
Rather, the earlier studies indicated that arbitrators
are on solid ground, from a possible vacatur perspective, when
exercising the case-management discretion granted to them by the parties
to manage procedural matters such as pre-hearing exchanges of
information, motions, case scheduling, hearing procedures, and the like.
Statistically speaking, the risks of a possible vacatur
grow, however, when arbitrators make decisions resolving substantive
issues or granting relief that arguably go beyond the matters submitted
to them by the parties.
This article departs from our earlier statistical
tabulations. It instead addresses some interesting themes that appear to
be emerging in recent exceeded powers cases.
In particular, we review three themes that seem to recur
in recent cases where the exceeded powers challenge successfully
resulted in vacatur of an award.
Conversely, we also take a look at three recurring
themes evident in recent cases where the exceeded powers challenge to an
award was rejected by the courts. Along the way, this article points
out practical considerations that may be useful to parties, advocates,
and arbitrators seeking to protect the finality of awards challenged on
the exceeded powers ground.
REAL WORLD DIFFICULTY
There are limited statutory grounds on which a court may
vacate an arbitration award. Litigators and arbitrators are well aware
that the Federal Arbitration Act authorizes vacatur only where (1) “the
award was procured by corruption, fraud or undue means;” (2) where
“there was evident partiality or corruption in the arbitrators;” (3)
where “the arbitrators were guilty of misconduct,” e.g., by refusing to
postpone the hearing for good cause shown or by refusing to consider
material and pertinent evidence; or (4) where “the arbitrators exceeded
their powers, or so imperfectly executed them that a … final and
definite award upon the subject matter submitted was not made.” 9 U.S.C.
§ 10(a)(available at http://bit.ly/120BmfV).
Most state arbitration statutes mirror these statutory vacatur grounds.
In addition, courts in some jurisdictions also permit vacatur if the
arbitrator’s award exhibits “manifest disregard of the law” or is
“contrary to public policy,” “irrational,” or “arbitrary and
In general, our earlier reviews of the cases confirmed
how difficult it is in the real world for a party to vacate an
arbitration award. For example, in our 2004 study of 184 reported court
decisions in which a party sought to vacate an arbitration award, we
found that motions to vacate based on manifest disregard succeeded only
about 4% of the time. Motions based on evident partiality succeeded in
only about 12% of the cases where the argument was made.
Our 2004 study also determined that the most frequently
asserted and most successful of all the statutory and other grounds
advanced by parties seeking vacatur was the contention that the
arbitrators had exceeded their powers. When asserted, this ground
succeeded about 20% of the time. Thus, even in the exceeded powers
cases, a party seeking to upset an arbitration award was likely to be
successful only one out of every five times.
Our most recent review focused on 47 exceeded powers
cases decided by federal and state courts between June 2011 and May
2012. As with the earlier studies, in this sample of “exceeded powers”
challenges, vacatur occurred about 20% of the time—in nine cases out of a
total of 47.
The courts’ decisions in these cases reveal some
interesting themes, both in the nine cases where the challenge resulted
in vacatur and in the 38 cases where the challenge was rejected and the
award was confirmed.
The cases in which the exceeded powers argument seemed
to work best involved situations where (1) the challenged award granted
relief concerning a nonsignatory to the arbitration agreement; (2) the
award involved a fairly blatant disregard for, or rewriting of, the
parties’ underlying contract; or (3) the award was impermissibly vague.
Conversely, the cases in which the courts rejected the
exceeded powers challenge often involved fact patterns where (1) the
arbitrators were accused of misconstruing the agreement between the
parties or the applicable law; (2) the losing party complained that the
arbitrator did not adequately explain the reasons for the award; or (3)
the arbitrators allegedly fashioned relief that was not specifically
requested or was particularly draconian, e.g. punitive damages or
complete dismissal of a claim.
The discussion that follows addresses these themes in
greater detail. It concludes with some practical thoughts we hope may be
useful to parties, advocates, and arbitrators interested in protecting
the finality of arbitration awards facing “exceeded powers” challenges.
The nine cases in our recent sample where an exceeded
powers challenge succeeded in the courts involved three main fact
1. AWARD FOR OR AGAINST NONSIGNATORIES TO ARBITRATION AGREEMENT.
Three of these nine cases involved determinations by the
reviewing courts that the arbitrator had impermissibly awarded relief
for or against a party that had never agreed to arbitrate.
In Brown v. Styles, 2011 WL 3655158 (Tenn. Ct. App. 2011)(available at http://bit.ly/198sPhf),
in a dispute between a homeowner and a contractor regarding the
installation of a gutter system for a home, the arbitrator entered an
award in favor of the homeowner for nearly $64,000. The award was made
against both the defunct gutter installation company and the individual
who was the principal owner of the gutter company.
On a motion to vacate the award, the court found the
homeowner had entered into a contract with the gutter company, and not
with the owner of the gutter company individually. Because the owner did
not sign the contract containing the arbitration agreement and was not
named as an arbitration party, the Court of Appeals held that the trial
court lacked jurisdiction to confirm the arbitration award against the
individual owner. Accordingly, the arbitration award was confirmed as to
the gutter company and vacated as to the owner.
Another case in which an arbitration award was vacated because the arbitrator awarded relief in favor of nonparties was Morgan Keegan & Co. v. Garrett, 816 F. Supp. 2d 439 (S.D. Tex. 2011)(available at http://1.usa.gov/120BGvc).
In the case, a group of investors claimed a financial advisory firm
misled them to invest in certain bonds. An arbitration panel awarded the
investors more than $9 million in compensatory damages, costs, and
The financial advisory firm moved to vacate the award.
The U.S. District Court for the Southern District of Texas vacated the
entire award on the ground that the panel exceeded its powers by hearing
derivative claims and claims of non-customers. Moreover, the court
observed that even if the panel had the power to hear those claims, the
award still would have been vacated because the claimants’ expert
admitted—in other testimony months after the hearing—he realized while
testifying in the arbitration that his calculations were wrong and his
conclusions were false.
Thus, the court reasoned, the arbitration award would
have been subject to vacatur because the award was procured by fraud as
well as on the exceeded powers ground.
Finally, in another case in which an arbitration award was partially vacated because it granted relief against a nonparty, Lumber Liquidators Inc. v Sullivan, 2011 WL 5884252 (D. Mass. 2011)(available at http://bit.ly/178FALD),
an arbitrator entered an award against a former employee who violated a
two-year noncompetition agreement by incorporating a competing Nevada
corporation and opening three competing stores in California.
The arbitration award ordered the former employee to
wind down, close, and liquidate the competing Nevada corporation and its
operations, and to pay the former employer nearly $360,000 in damages.
On a motion to vacate the arbitration award, the former
employee argued the arbitrator exceeded her powers by enjoining the
Nevada corporation, which was not a party to the original arbitration
agreement, and ordering the dissolution of the Nevada corporation. The
court agreed. The court confirmed the arbitration award of damages
against the former employee, and vacated the portion of the award
relating to the nonparty Nevada corporation.
2. AWARD DISREGARDING OR REWRITING THE PARTIES’ CONTRACT.
The second category of cases in our recent sample where
awards were vacated involved determinations by the reviewing courts that
the arbitrators had exceeded their powers by disregarding, or
rewriting, the parties’ underlying contract. Four of the nine cases in
our sample where vacatur was ordered involved such analyses by the
A good example of the courts’ ambivalence toward
arbitration awards granting relief beyond the parties’ underlying
contract is the case of Timegate Studios Inc. v. Southpeak Interactive LLC, 860 F. Supp. 2d 350 (S.D. Tex. 2012) (available at http://1.usa.gov/14wJ49o).
This case involved a dispute between a video game developer and a video
game publisher regarding an agreement to invest funds in a game in
exchange for revenue from the marketing and distribution of the game
through a series of payments over a limited duration license.
The game was a flop, and the parties submitted their
claims to arbitration. The arbitrator awarded the publisher more than
$7.3 million in damages, plus the expenses of arbitration and the
arbitrator’s fees. In the award, the arbitrator also amended the
publishing agreement by granting the publisher a perpetual license and
providing that no royalties need be paid to the game developer.
The district court found that the creation of a
perpetual license was directly contrary to the parties’ agreement and
the provision for nonpayment of royalties extended far beyond the
intended contractual duration of payments. Moreover, the parties had not
asked the arbitrator to void their contract but simply to interpret it.
Therefore, because the arbitrator failed “to anchor his
award in any recognized law,” the court held he exceeded his powers. The
court concluded it could not modify the award while still preserving
its intent and acting consistently with the essence of the parties’
agreement. The award was vacated.
Although we counted this case as involving the vacatur
of an arbitration award on the “exceeded powers” ground, on appeal, the
Fifth Circuit reversed the district court and reinstated the
arbitrator’s award holding that the perpetual license “was a permissible
exercise of the arbitrator’s creative remedial powers” and “rationally
rooted in the Agreement’s essence”—even if it was not wholly consistent
with the parties’ contract. 2013 WL 1437710 (5th Cir. 2013).
In Muskegon Central Dispatch 911 v. Tiburon Inc., 462 Fed. Appx. 517 (6th Cir. 2012)(unpublished)(available at http://bit.ly/12tR8Ga),
an arbitrator’s award also was vacated essentially because the
reviewing court concluded that the arbitrator’s award disregarded the
underlying contract. The case involved a dispute under an agreement to
implement an integrated public safety computer system.
The arbitrator determined the liability issues and
awarded the supplier of public safety software more than $450,000 in
damages for breach of the contract by a consortium of police, fire, and
emergency medical service agencies.
On review of the award, the court found the arbitrator
exceeded his powers by concluding the consortium had failed to complete
the contractual dispute resolution process when, in fact, the software
supplier had itself truncated the process by prematurely commencing
In effect, the arbitrator’s decision resulted in the
consortium losing entirely on all its claims, and the software supplier
winning entirely, without any finding as to whether the supplier’s
conduct satisfied, or materially breached, the operative substantive
terms of the parties’ contract. Accordingly, the arbitrator’s award was
vacated and the court decided that the supplier’s contract claim should
be remanded to a new arbitrator in the interest of fairness.
Another case involving an arbitrator’s failure to analyze the underlying contracts was Sonic Automotive Inc. v. Price, 2011 WL 3564884 (W.D.N.C. 2011)(available at http://bit.ly/15419pF).
The case featured an arbitration commenced by individual purchasers of
automobiles and associated service contracts packaged with a product
called ETCH, which consisted of a small number stenciled to one or more
vehicle windows and marketed as an automobile theft deterrent system.
The ETCH product was purchased from different auto dealers; each of the
buyers signed some form of arbitration agreement at the time of
The arbitrator entered a “Partial Final Award on Class
Certification,” a 59-page memorandum and order conditionally certifying
certain customers as a class. Pursuant to American Arbitration
Association rules, the arbitrator properly stayed the award to allow for
On review, the court granted the petition to vacate the
class certification award primarily because there were differing
arbitration clauses in the dealer-customer contracts, and some of the
clauses contained a ban on proceeding as a class. Since the arbitrator
did not perform any analysis to determine the applicability of
individual agreements to arbitrate or make any determinations about
whether the agreements permitted or precluded class actions, the court
found the arbitrator exceeded his powers.
Our sample also included a case decided by the Minnesota Court of Appeals, Garlyn Inc. v. Auto-Owners Ins. Co., 814 N.W.2d 709 (Minn. App. 2012)(available at http://bit.ly/18GPLHE).
The court held that, although the arbitrator did not exceed his
authority by finding a breach of contracts for repair and replacement of
auto glass, the arbitrator’s award would be partially vacated where the
arbitrator exceeded his authority by including pre-award interest on
claims of less than $7,500 in violation of a Minnesota statute.
3. AWARD THAT IS IMPERMISSIBLY VAGUE.
The third category of cases in which arbitrators were
held to have exceeded their powers involved determinations by the
reviewing courts that the challenged awards were impermissibly vague.
For example, in Asia Pacific Hotel Guam Inc. v. Dongbu Ins. Co. Ltd., 2011 WL 5037184 (Sup. Ct. Guam 2011)(available at http://bit.ly/12LseTX),
a dispute arose between a construction contractor’s bonding company and
the owner of a hotel property regarding multiple construction
deficiencies in the renovation of a resort hotel.
After emphasizing the strong public policy favoring
confirmation of arbitration awards, the reviewing court vacated the
entire “conditional award” because it left open whether the construction
work had been substantially completed and whether the hotel owner had
provided reasonable documentation of the work actually done. The court
remanded the case to the original arbitration panel to settle the
unresolved issues and to render a final and definite award, which could
then be reviewed by the court.
Another case involving the arbitration panel’s failure
to make a sufficiently definite award is the fascinating, one-of-a-kind
arbitration case that came to the attention of the Kings County, N.Y.,
Supreme Court in Matter of Wydra (Brach), 938 N.Y.S. 2d 231 (N.Y. Sup. 2011) (the Supreme Court is the trial-level court in New York state).
This case was a complex multiparty arbitration extending
over 14 months that was heard by a tribunal consisting of three rabbis,
who issued an arbitration award designated “Decision of the Bais Din.”
The arbitration petitioners were two individuals, at
least 10 limited liability companies, and one corporation; the
respondents were two individuals, together with 19 limited liability
companies, and two corporations.
Although the “Decision of the Bais Din” contained no
description of the disputes among the parties, it appears the disputes
related to a number of valuable parcels of real property located in and
around New York City. The arbitration award included a monetary award of
more than $15.8 million.
The reviewing court struggled with determining the scope
of the arbitration agreement, the parties who agreed to arbitrate, and
the meaning and effect of the award. Among the award’s ambiguities was
that it did not disclose the formula or method used by the panel to
arrive at the amount.
Although the grounds for the court’s decision are many,
the court vacated the arbitration award and remitted the entire matter
to the rabbinical panel for rehearing of the issues. It appears the
primary ground for the court’s vacatur of the award was that the
arbitrators exceeded their powers by failing to make a definite and
comprehensible award on the subject matter submitted.
Turning to the 38 cases in our sample where the courts
rejected the exceeded powers challenge and confirmed the award, here,
too, we observed several recurring themes that were addressed by the
reviewing courts, but ultimately resulted in the arbitration awards
[The sample of cases in which the exceeded powers challenge failed and the award was confirmed included Petrobras America Inc. v. Astra Oil Trading N.V.,
2012 WL 1068311 (Tex. App.–Houston (1 Dist.) 2012). One of the authors
served as the tribunal chair in this matter. We think it best to avoid
post-award comment on the case by one of its former arbitrators, so that
case will not be discussed further here.]
Examples of arbitrators’ actions that were challenged
are described below. The courts eventually—although not always
initially—rejected the losing party’s exceeded powers challenges to the
awards issued in all of the cases listed. Nevertheless, the list of
challenged conduct makes for interesting reading for those of us who
often serve as arbitrators.
1. Arbitrators allegedly misconstrued the agreement between the parties or the applicable law. Several of these cases involved unsuccessful allegations by the losing party that the arbitrators:
2. Arbitrators allegedly did not adequately explain the reasons for the award. In addition, a number of these cases involved claims, ultimately denied by reviewing courts, that the arbitrators:
3. Arbitrators allegedly fashioned relief that was not specifically requested or was particularly draconian.
The cases in our sample that resulted in confirmation of the awards
also included a number of challenges to the relief granted by the
arbitrators, including that the arbitrators allegedly improperly:
Almost all of these opinions begin their analyses of the
exceeded powers issue by reminding us how difficult it is to obtain
vacatur of arbitration awards generally: Arbitration awards are “subject
to very limited review in order to avoid undermining the twin goals of
arbitration, namely settling disputes efficiently and avoiding long and
expensive litigation.” L’Objet LLC v. Limited, 2011 WL 4528297 (S.D.N.Y. 2011).
Courts should vacate awards only in “exceedingly narrow”
circumstances and must apply an “extremely deferential” standard of
review. J.D. Shehadi LLC v. US Maintenance Inc., 2011 WL 4632187 (E.D. Pa. 2011)(available at http://bit.ly/11lgMZ1).
Once an award is issued, the finality of arbitration weighs heavily in
its favor and cannot be upset “except under exceptional circumstances”;
accordingly, the standard of review of arbitral awards “is among the
narrowest known to law.” Gilmore v. Brandt, 2011 WL 5240421 (D. Colo. 2011) (available at http://bit.ly/1abGSEf).
Maximum deference is owed to the arbitrators for this
reason: a strong presumption exists requiring “all doubts concerning
whether a matter is within the arbitrators’ powers to be resolved in
favor of arbitrability.” Id.
As a result, awards are shown “great deference”; the
courts will enforce the award unless the arbitrators lacked a “barely
colorable justification” for the outcome reached. Agility Public Warehousing Co. K.S.C. v. Supreme Foodservice GmbH, 840 F. Supp. 2d 703 (S.D.N.Y. 2011) (available at http://bit.ly/144xsWp). Judicial review is “extraordinarily narrow” and “exceedingly deferential.” See Rain CII Carbon LLC, 674 F.3d 469, supra.
Most would agree that the goal of an arbitral proceeding
should be a just award rendered in a fair, efficient, and final
But vacatur litigation inevitably compromises at least
some of these goals by adding an expensive and potentially protracted
judicial “second round” to the process, whether the motion to vacate
ultimately succeeds or not.
In cases where the award is vacated, the consequences to
the parties can be severe, especially in cases where they may be
ordered to arbitrate again, and thus will have wasted much or all of the
time and expense invested in the vacated arbitral proceedings.
We believe the cases in our most recent sample again
confirm the importance for arbitrators of ensuring that their awards
confine the relief awarded to parties bound by the arbitration
agreement. Applicable case law permits nonsignatories to be bound under
certain circumstances. See, e.g., Ragone v. Atlantic Video at Manhattan Center, 595 F.3d 115 (2nd Cir. 2010)(available at http://bit.ly/11B81c3); Enterprises Int’l Inc. v. Pasaban S.A., No. 11-05919 (USDC W.D. Wash. Feb. 11, 2013)(available at http://bit.ly/14B8zns).
We believe our sample confirms, however, that such decisions may be a
lightning rod for possible challenges and, accordingly, should be
approached by arbitrators with care.
We also believe the cases in our most recent sample
confirm the importance for arbitrators of ensuring that the issues
submitted for decision be addressed consistently with the terms of the
parties’ contractual commitments, and that the awards resolve such
issues in a clear and definite manner.
We also have had a concern—particularly since the U.S. Supreme Court’s decision in Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 559 U.S. 662 (2010)(available at http://1.usa.gov/cf9ol4)—that
determinations as to whether an award “follows the contract” may prove
to be a slippery slope on which to base “exceeded powers” analyses. See
T. Brewer, “Arbitrator Boundaries: What Are the Limits on Arbitrator
Authority?” 2012 AAA Yearbook on Arbitration and the Law, 24th ed. at 471, 480-85 (Juris 2012).
The recent cases in our sample, in general, included
some important reassurance on that point, as does the U.S. Supreme
Court’s recent decision in Oxford Health Plans LLC v. Sutter, No. 12-135 (June 12, 2013)(available at www.supremecourt.gov/
Several of the cases in our sample teach that the focus
of inquiry in exceeded powers challenges to an award under Federal
Arbitration Act Section 10(a)(4) should be on “whether the arbitrators
had the power, based on the parties’ submissions or the arbitration
agreement, to reach a certain issue, not whether the arbitrators
correctly decided that issue. …”
In other words, as long as the arbitrator is even
arguably construing or applying the contract and acting within the scope
of his authority, a court’s conviction that the arbitrator has
committed serious error in resolving the disputed issue does not suffice
to overturn his decision. Jock v. Sterling Jewelers Inc., 646 F.3d 113, 122 (2d Cir. 2012)(available at http://bit.ly/13GUuE6).
Limits on an arbitrator’s authority must be “plain and
unambiguous. … A reviewing court examining whether arbitrators exceeded
their powers must resolve all doubts in favor of arbitration.” See Rain CII Carbon LLC, 674 F.3d 469, supra.
If the arbitrator was even arguably construing or
applying the contract, judicial review should be limited to whether the
arbitrator’s decision was “rationally inferable from the contract”; even
an error in interpretation would not require setting aside the award
“unless it amounted to bad faith or affirmative misconduct by the
arbitrator.” Central West Virginia Energy Inc. v. Bayer Cropscience LP, 645 F.3d 267, 276 (4th Cir. 2011)(available at http://1.usa.gov/13GUZhf).
If the arbitrator was arguably applying the contract, his decision
should not be vacated unless it was “completely irrational.” Blanco v. Trump Ruffin Tower I LLC, 2011 WL 3841207 (D. Nev. 2011) (available at http://bit.ly/17Mt9V3).
“This standard is met only if there is no support in the record justifying the arbitrator’s decision.” See J.D. Shehadi LLC, supra.
The Supreme Court’s recent Oxford Health Plans decision is emphatically to the same effect:
Here, Oxford invokes §10(a)(4) of the Act, which
authorizes a federal court to set aside an arbitral award “where the
arbitrator exceeded [his] powers.” A party seeking relief under that
provision bears a heavy burden. “It is not enough … to show that the
[arbitrator] committed an error—or even a serious error.” Stolt-Nielsen,
559 U.S., at 671. Because the parties “bargained for the arbitrator’s
construction of their agreement,” an arbitral decision “even arguably
construing or applying the contract” must stand, regardless of a court’s
view of its (de)merits… Only if “the arbitrator act[s] outside the
scope of his contractually delegated authority”—issuing an award that
“simply reflect[s] [his] own notions of [economic] justice” rather than
“draw[ing] its essence from the contract”— may a court overturn his
determination. So the sole question for us is whether the arbitrator
(even arguably) interpreted the parties’ contract, not whether he got
its meaning right or wrong.
See Oxford Health Plans, supra.
The cases in our sample also seem to show signs of an
intriguing doctrinal development: continuing temptations, in some
forums, to blur the lines between “manifest disregard of the law” and
“exceeded powers” challenges to alleged errors by arbitrators.
Ever since Hall Street Associates L.L.C. v. Mattel Inc., 552 U.S. 576 (2008)(available at http://1.usa.gov/144AQAT),
the courts have been debating whether judicially created grounds for
vacatur, including especially the manifest disregard doctrine, survive
that decision or whether the grounds for vacatur are now exclusively the
statutory grounds enumerated in the Federal Arbitration Act, including
Section 10(a)(4)’s provision concerning exceeded powers.
Our sample of cases denying exceeded powers challenges
included several cases where courts or parties apparently turned to the
manifest disregard standard—that the arbitrators knew of a well-defined,
clearly applicable legal principle and yet refused to apply it or
ignored it altogether—to help decide whether an alleged error of law
made by the arbitrator was sufficiently extreme to warrant vacatur on
the exceeded powers ground.
In Collins v. Chicago Investment Group LLC, 2012 WL 938725 (D. Nev. 2012) (available at http://bit.ly/10iz1mA),
for example, the court seemed to apply both the “completely irrational”
and the “manifest disregard” standards as functional equivalents of one
another in rejecting an “exceeded powers” challenge.
In several other cases in our sample, the reviewing
courts expressly invoked the manifest disregard standard to help explain
their findings that an arbitrator’s alleged error of law did not merit
vacatur under the exceeded powers ground. Moreover, in Jock, 646
F.3d 113, supra, members of an appellate panel chided one another as to
whether reference to the manifest disregard standard is appropriate in
an exceeded powers analysis.
Taken together, these cases seem to suggest that, even after Hall Street,
the manifest disregard doctrine will not be going away quietly and,
indeed, may live again as a tool for interpreting FAA Section 10(a)(4)
in exceeded powers cases challenging alleged errors of law.
ENCOURAGEMENT FOR MANAGERIAL ARBITRATORS
Finally, and perhaps most importantly, the cases in our
most recent study, taken together, further establish the proposition
that, although arbitrators certainly should not be cavalier about
ascertaining the sources of their authority to act, arbitrators should
not hesitate to use their authority to promote a fair and efficient
process, or to reach substantive decisions that seem best based on the
evidence and arguments presented.
As with our earlier studies, the cases in this latest
sample again confirm that managerial arbitrators who use their
case-management discretion, and administer their arbitrations in an
efficient and expeditious manner, face little real-world risk of having
their awards vacated later.
Rather, the recurrent theme in the 38 cases in our
sample in which the courts rejected exceeding powers challenges to
awards is, once again, that the courts will do their part to help
protect the finality and efficiency of arbitral proceedings.
In the cases we canvassed there are excellent examples
of reviewing courts confirming decisions made by arbitral tribunals to
improve the efficiency or effectiveness of the arbitral process. In Hotels Nevada v. L.A. Pacific Center Inc., 203 Cal. App. 4th 336 (2012)(available at http://bit.ly/14BaOY2),
for example, the tribunal chose to implement somewhat unusual hearing
procedures in order to save the process when confronted by an unexpected
medical emergency involving one of the panel members.
Similarly, in Agility Public Warehousing Co. K.S.C,
840 F. Supp. 2d 703, supra, the tribunal had to make a difficult
procedural decision about how to respond to key witnesses asserting
their Fifth Amendment privileges.
In Spungin, 883 F. Supp. 2d 1193, supra, the
tribunal concluded that preliminary injunctive relief was necessary to
vindicate the arbitration process’s efficacy.
The reviewing courts confirmed all of these arbitral
decisions. The lesson here is that fear of an award’s possible future
vacatur is not a good or sufficient basis for arbitrators to avoid
managerial decisions that promote the efficiency, fairness, or efficacy
of the arbitration process.
In particular, we saw nothing in this most recent sample
of cases suggesting that arbitrators create vacatur risks by acting
with a firm hand to manage discovery, motion practice, or how the
hearing is conducted, or by insisting on a reasonable and efficient
overall case schedule.
This is, after all, the job we are hired to do
Mills is an experienced arbitrator serving on the
JAMS panel of neutrals in Seattle and northern California. Brewer is an
experienced arbitrator of international and domestic disputes based in
Seattle. The authors would like to acknowledge and thank Zainab Hussain,
a student at Seattle University School of Law, who provided research
and analytical support for this article. The authors write, “Any errors
are ours, not hers.”
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