Finality

The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., provides very few grounds to challenge an arbitration decision. While there may be some thrashing about in court, in most instances the case is over when the award is issued, and both sides are spared the considerable time and expense of appeals and the possibility of an even more expensive remand for a new trial.

Sec. 10(a) of the Federal Arbitration Act sets out the grounds for a court to vacate an arbitration award:

  • (a) In any of the following cases, the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration—
    • (1) where the award was procured by corruption, fraud, or undue means;
    • (2) where there was evident partiality or corruption in the arbitrators or either of them;
    • (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
    • (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

Most arbitration awards are upheld when they are challenged in court. For example, Johnson v. Directory Assistants Inc., 797 F.3d 1294, 1299 (11th Cir. 2015), stated:

Next, DAI challenges the district court’s decision to vacate the arbitration award. “There is a presumption under the FAA that arbitration awards will be confirmed, and federal courts should defer to an arbitrator’s decision whenever possible.” Frazier v. CitiFinancial Corp., LLC, 604 F.3d 1313, 1321 (11th Cir.2010) (internal quotation marks omitted). …

While several judicially-created bases for vacatur had developed in this circuit over the past few decades, we held in Frazier that such grounds are no longer valid in light of the Supreme Court’s decision in Hall Street. Frazier, 604 F.3d at 1324. Thus, the grounds for vacatur listed in § 10(a) are exclusive.

(Footnote omitted.) The Fifth Circuit stated the same principle in BNSF R. Co. v. Alstom Transp., Inc., 777 F.3d 785, 787 (5th Cir. 2015):

We review a district court’s order vacating an arbitration award de novo. See Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 350 (5th Cir.2009). Our “review of the underlying award is exceedingly deferential.” Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 472 (5th Cir.2012) (internal quotation marks omitted). “[T]he sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.” Oxford Health Plans LLC v. Sutter, ––– U.S. ––––, 133 S.Ct. 2064, 2068, 186 L.Ed.2d 113 (2013).

The Second Circuit stated the same rule of thumb in Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99, 103–04 (2d Cir. 2013):

The role of a district court in reviewing an arbitration award is “narrowly limited” and “arbitration panel determinations are generally accorded great deference under the [Federal Arbitration Act].” Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 19 (2d Cir.1997). This deference promotes the “twin goals of arbitration, namely settling disputes efficiently and avoiding long and expensive litigation.” Telenor Mobile Commc’ns AS v. Storm LLC, 584 F.3d 396, 405 (2d Cir.2009). Consequently, the burden of proof necessary to avoid confirmation of an arbitration award is very high, and a district court will enforce the award as long as “there is a barely colorable justification for the outcome reached.” Rich v. Spartis, 516 F.3d 75, 81 (2d Cir.2008) (internal quotation marks omitted).

Motions to vacate an arbitration award are filed much more often they are granted.

An arbitrator who does not know his or her business can write an arbitration award in a manner that is vulnerable to attack, such as by making inconsistent rulings in different parts of the case or by using ambiguous language or by failing to decide issues that have to be decided, or by deciding issues the parties have not agreed to arbitrate. That, too, is expensive.

Parties should choose arbitrators with a good reputation, who have experience in writing clearly, and who can prepare awards that are crafted to avoid an attack, or to withstand any attack that may be made. If the award is carefully enough written to persuade the losing party that any challenge would be futile, that helps the goal of efficiently achieving a just result.