Legal Challenges to Arbitration Awards: Part 1

Before the Federal Arbitration Act (FAA) was enacted in 1925, it was difficult to enforce contracts for arbitration. The FAA and other laws like the Taft Hartley Act promote arbitration as a way to resolve disputes. Courts don’t usually overturn decisions made by arbitration panels, except for specific reasons. The FAA outlines four circumstances in which a court can overturn an arbitration award: if the award was obtained through corruption, fraud, or undue means; if the arbitrators were biased or corrupt; if the arbitrators behaved improperly or refused to hear important evidence; or if the arbitrators went beyond their authority or didn’t make a clear decision. If you want to overturn a decision made in an arbitration, you have to file a notice within three months. If both parties agree on the decision, one party can ask a court to confirm the decision within a year. Challenges to arbitration awards are usually decided using one of these two rules. Courts don’t like to overturn arbitration decisions, but they will if there’s proof that someone cheated to get the decision. It’s important for lawyers to be careful and check for any conflicts of interest from the beginning of the arbitration. In Bonar v. Dean Witter Reynolds, the court overturned a decision not to cancel a punishment in a case because one of the experts lied about his qualifications. In International Brotherhood of Teamsters, a case was sent back to the lower court because a worker may have been wrongly fired for a confrontation with a co-worker, and there may have been fraud in getting the decision. In Commonwealth Coatings Corp. v. Continental Casualty Co., the Supreme Court said that arbitrators need to be impartial and disclose any potential biases. Some courts have agreed with this, while others think arbitrators have more freedom. In some court cases, arbitrators were found to have conflicts of interest that they didn’t disclose before making their decision. In one case, an arbitrator didn’t tell anyone that his law firm had represented the losing party’s parent company in the past. In another case, an arbitrator had connections with one of the parties but the other party didn’t investigate or ask for disclosure. In both cases, the courts looked at whether the parties had waived their right to complain about the arbitrators’ impartiality. In another case, an arbitrator didn’t say that his family’s company had fought with two of the parties before. The court said it was the arbitrator’s duty to tell everyone about that, not the parties’ duty to investigate. In one more case, an arbitrator had previously worked with one of the parties but didn’t say anything about it. The court decided that there wasn’t enough evidence to show that the arbitrator was biased. The court said that a previous opinion by Justice White didn’t have enough support to be binding on lower courts. They also said that arbitrators can only be considered biased if there is clear evidence of it, not just a small connection to the parties involved. In a different case, the court ruled that an arbitrator was biased because of his family relationship with the president of a union involved in the arbitration. The court also said that arbitrators have the power to decide if a hearing should be postponed or not. In one case, the court upheld a decision where a party’s request for a postponement was denied because they didn’t provide enough information about the absent witness. In one case, the court said it was okay for a money award to be given when the person involved didn’t show up for a hearing. But in another case, the court said it was not fair to deny a request to delay the hearing when an important witness couldn’t be there because of a family emergency. And in another case, the court said it was okay to deny a request to delay the hearing when the person didn’t have a good reason for not being there. An arbitrator refused to delay a hearing for Continental Casualty Company’s lawyer because the lawyer’s son needed surgery. The lawyer and company didn’t show up to the hearing and were ordered to pay money. The court said the arbitrator didn’t have to explain why the delay was refused. In another case, an employer complained that the arbitrator wouldn’t consider some evidence, but the court said that other evidence was already presented. This is a summary of court cases involving arbitration awards. In one case, the court affirmed that an arbitrator has the discretion to limit repetitive testimony. In another case, the Supreme Court ruled that an arbitrator did not exceed his authority by allowing class arbitration. The court also said that once an arbitrator issues an award, they can’t change it. In another case, a court reversed a decision to modify an award because there was no clear mistake in the original award. The summary also mentions a law that allows courts to correct or modify arbitration awards in cases of obvious errors. The arbitrators can only make decisions on the issues that were brought to them. If they make a mistake in their decision or in the way they wrote it, the court can change it to make it right. In the case of McElroy v. Painewebber, the Fifth Circuit court refused to change an arbitration award when Mr. McElroy claimed it was much lower than he wanted. The court said there was no proof that the arbitrator made a mistake in the award. Before the Supreme Court’s decision in Hall Street Associates, some courts allowed an arbitration award to be overturned if it ignored the law. But after Hall Street, it’s unclear if that’s still allowed. Some courts say it is, while others say it isn’t. In the next part of the article, we’ll look at challenges to arbitration awards that might go against public policy, as well as the rules for challenging awards in labor disputes and in Florida.

Source: https://www.floridabar.org/the-florida-bar-journal/legal-challenges-to-arbitration-awards-part-1/