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Consumer Arbitration Agreements: 11.2.6 Appeals of Trial Court Review of Arbitration Award

Motions to confirm, vacate, or modify an award are brought before a trial court, whether in federal or state court. Appellate courts generally have jurisdiction to review these decisions but, under both the FAA and most state arbitration acts, appellate courts do not have jurisdiction to consider appeals of the denial of a motion to vacate an arbitration award unless the lower court also confirmed the award.

Consumer Arbitration Agreements: 11.4.2 The Grounds for Vacating an Award Are Not Waivable

Some arbitration agreements may appear to restrict the grounds on which an award is reviewable in court, for example, by stating that an arbitration award is “unappealable” or “non-reviewable.” At least one appellate court has concluded that the grounds for vacatur spelled out in section 10 of the FAA are not waivable, and therefore contractual provisions like these are not enforceable.139 Other courts have avoided answering the question of whether the grounds for vacatur may be narrowed by agreement by finding that agreem

Consumer Arbitration Agreements: 11.4.3.1 General

The court may vacate an award when the arbitrators exceeded their powers or when they failed to render a decision in the matter.140 Arbitration is a matter of contract, and the arbitrator’s powers emanate from that contract. There is no federal or state policy favoring arbitration of claims that the parties have not agreed to arbitrate; an arbitrator’s powers are solely the product of the parties’ agreement.141

Consumer Arbitration Agreements: 11.4.4.1 General

Upon a party’s application, a court can vacate an arbitration decision when there was evident arbitrator partiality or corruption.179 Evident partiality has been defined as when a reasonable person would have to conclude that an arbitrator was partial to one party in the arbitration.180 This standard requires more than just that partiality might be questioned,181 and the party seeking vacatur bears the burden of proving this partiali

Consumer Arbitration Agreements: 11.4.4.3 California Statutes Requiring Disclosures by Arbitrators

California law requires arbitrators to make certain disclosures to the parties participating in the arbitration, including any relationships the arbitrator has with the parties or with the attorneys for the parties.211 California law also specifies that the court “shall” vacate an award if the arbitrator fails to make a disclosure of a ground for disqualification of which the arbitrator was then aware.212

Consumer Arbitration Agreements: 11.4.4.5 Equal Protection in Selection of Arbitrator

A creative attempt to challenge the constitutionality of an arbitration clause was made in Smith v. American Arbitration Association, Inc.223 In that case, the plaintiff argued (among other things) that the defendant’s action in striking the only woman on a list of fifteen possible arbitrators, thus guaranteeing an all-male arbitration panel, violated the Equal Protection Clause. The Seventh Circuit rejected this claim, holding that the AAA is a private body that does not operate as a state actor:

Consumer Arbitration Agreements: 11.4.5 Arbitrator’s Misconduct Including Refusal to Postpone the Hearing or to Hear Evidence

Upon proper application, a court may vacate an arbitration decision when the arbitrator is guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or when the arbitrator refuses to hear evidence pertinent and material to the controversy, or when the arbitrator otherwise engages in misbehavior by which the rights of any party are prejudiced.225

Consumer Arbitration Agreements: 11.4.6 Award Procured by Corruption, Fraud, or Undue Means

A court may vacate an award upon application of any party to the arbitration when the award was procured by corruption, fraud, or undue means.235 Parties moving for vacatur on these grounds generally must establish by clear and convincing evidence that the requisite misconduct occurred, that the misconduct was not discoverable with due diligence before or during the arbitration, and that the misconduct was material to an issue in the arbitration.236 Even when an award is attributabl

Consumer Arbitration Agreements: 11.5.2.3 A Different Standard for Statutory Claims?

While review for manifest disregard of the law is quite limited, a number of courts, prior to Hall Street Associates, were willing to look more closely at an award responding to a party’s statutory claim. This willingness is based on Supreme Court rulings that there is a fundamental requirement that arbitration allow parties to effectively vindicate their statutory rights.282 This principle has been narrowed, but not rejected, by the Supreme Court’s decision in American Express Co. v.

Consumer Arbitration Agreements: 11.5.3 Must Courts Ensure Arbitration Decision Is Consistent with Public Policy?

In the context of collective bargaining agreement disputes, the Supreme Court has stated that a court’s role in reviewing the merits of an arbitral award is to make sure that the arbitrator’s interpretation of the private contract does not conflict with public policy.296 This public policy review of arbitral decisions is derived from the common law doctrine that a court may not enforce a contract that itself violates law or public policy.297

Consumer Arbitration Agreements: 11.5.5 Can the Court Re-Examine Evidence?

Although the presumption is that a reviewing court will not second guess an arbitrator’s determination of the facts, there may be some room for the courts to re-examine the evidence that was presented to the arbitrator.311 Whereas federal courts reviewing jury verdicts are restrained by the Seventh Amendment from engaging in independent fact finding,312 there is no such explicit prohibition on judicial review of arbitral fact finding.

Consumer Arbitration Agreements: 11.5.6 Review of Award Affecting Individual Not Party to Arbitration Agreement

When a third party has not agreed to be bound by an arbitration agreement, courts are likely to use a different standard when reviewing awards affecting those third parties. For example, when an arbitrator directs a discovery order to an individual not a party to the arbitration agreement, the California Supreme Court has ruled that the third party must first raise objections to the order to the arbitrator.

Consumer Arbitration Agreements: 11.7.2 Is a Challenge to a Punitive Damages Award Timely and Brought in the Correct Court?

Under the Federal Arbitration Act (FAA) and most state laws, a party must seek to vacate or modify an award within ninety days after receiving notice of the award (or even less in certain states).330 On the other hand, the consumer typically has at least a year to confirm the award.331 Consequently there are advantages to waiting ninety days to confirm the award to see if the opposing party forgoes its right to vacate or modify the award.332

Consumer Arbitration Agreements: 11.7.3.1 Introduction

An award can be vacated if the arbitrator, in providing for punitive damages, exceeded the arbitrator’s powers.334 Thus a corporation may seek a court order vacating an award by arguing that the arbitrator exceeded their powers because the arbitration agreement, the rules of the arbitration service provider, or state law limits an arbitrator’s power to award punitive damages.

Consumer Arbitration Agreements: 11.7.3.2 Does the Arbitration Agreement Limit the Arbitrator’s Authority to Award Punitive Damages?

The United States Supreme Court holds that punitive damages are available in an arbitration proceeding unless the arbitration agreement unambiguously limits them.335 The Court finds a dual policy in allowing punitive damages whenever the language is unclear: ambiguities in the scope of an arbitration clause are to be resolved in favor of arbitration, and ambiguities in a contract are to be resolved against the party drafting the agreement.336

Consumer Arbitration Agreements: 11.7.3.4.1 Few state laws limit punitive damages in arbitration

The Supreme Court in Mastrobuono ruled that the FAA authorizes punitive damages in arbitration awards.349 Fifteen states have enacted the revised Uniform Arbitration Act (UAA),350 and the revised UAA specifically states: “An arbitrator may award punitive damages or other exemplary relief if such an award is authorized by law in a civil action involving the same claim and the evidence produced at the hearing justifies the award under the legal standards otherwise applicable to the cl