The Vacating of Arbitration Awards – Fact or Fiction?

When parties agree to arbitrate rather than litigate a dispute, one of the shared goals is obtaining a decision that is final. However, once a decision has been reached, the dissatisfied party may abandon this goal and seek to vacate the award in court. “The Vacating of Arbitration Awards – Fact or Fiction?”, presented by Hon. Wayne R. Andersen and Hon. Julia M. Nowicki at the American Bar Association (ABA) Annual Meeting in Chicago, August 3, 2012, sought to explore issues that arise when judges are faced with these motions to vacate. I was fortunate enough to attend as a representative of the Journal of Conflict Resolution. The discussion began with a general description of the judiciary’s attitude toward confirming court-challenged arbitration awards. The panelists highlighted the deferential nature of the federal statute governing vacating arbitration awards, but also noted an institutional bias towards confirming such awards due to judicial workload. (If you vacate, you will most likely be assigned the case!*). The judiciary also recognizes the specialized knowledge of industry subject matter possessed by arbitration panels, compared with judges. Most in attendance were practicing arbitrators or attorneys, so the panelists tried to focus on what could be done to ensure an award would be confirmed if challenged. (8/14/12: The panelists would like to clarify that these comments were made tongue-in-cheek and judicial workload is not actually a factor when making such decisions).

If the arbitration panel denied either party the right to a fair hearing, it could be a basis for vacatur. “The essence of arbitration is the parties’ right to a hearing,” commented Judge Andersen. The judge further commented that “it would be a very good hook” in a motion to vacate to point to evidence that an arbitrator had not allowed in during the proceeding. Judge Nowicki added that in her experience as a prosecutor, she may have held objections to defense counsel entering certain evidence in order to “seal up the decision.” The strategy, of course, was that the defense could not then argue that they had not been able to put their best case forward. Some arbitrators, such as those qualified by the American Arbitration Association (AAA), are required to conclude proceedings by asking both parties to verify that they have had an opportunity to present their respective cases. Others will conclude by verifying that each party has had the opportunity to introduce all evidence each felt was relevant.

Following this reasoning, both panelists agreed that arbitrators should be reluctant to grant partial dispositive motions during proceeding. Stuart Widman, a litigator/arbitrator at Miller Shakman & Beem LLP of Chicago who was in attendance, commented that the standard for these motions— whether there is a genuine issue of material fact—is not a bright line rule. Therefore if an arbitrator were to grant such a motion, the attorney would expect an extremely detailed opinion. Judge Nowicki agreed; any stipulation of fact must be crystal clear to ensure that the arbitrator “will not hear a peep” of objection from either party thereafter. This raised interesting issues regarding what written opinions the parties should request from the arbitrator at the outset of the proceeding. If finality is the goal of the arbitration, does one really want a thoroughly reasoned award? The answer could easily be no. The longer and more detailed the opinion, the more exposure to a smart lawyer that will be able find questions to raise in a motion to vacate.

Some parties will agree to merely have the arbitrator “check a box” at the conclusion of the proceeding, and not provide a reasoned judicial-style opinion regarding the decision made. Judge Nowicki pointed out that the problem with these short decisions is always that the losing party’s attorney will be unable to explain to their client why they lost. All agreed that one of the most important parts of the arbitration is having the parties agree as to exactly what the questions the arbitrator is expected to answer, and how. This protects the award from challenges based on the arbitrator exceeding his powers.

— Lucy Martucci, Notes Editor