Source: https://www.wolfflaw.com/procedures-and-grounds-for-requesting-a-u-s-district-court-to-co.html
Timestamp: 2019-04-24 00:18:22+00:00

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Arbitration of disputes by private arbitrators, instead of resolution of a dispute by a trial in Court, is required today by the terms of many business contracts, and also in many consumer transactions, either by a provision in a signed contract or by agreeing electronically to contract terms by a click on a website.
While arbitration can be sometimes quicker and cheaper than Court proceedings, one of its chief disadvantages is that there usually is no right to a typical “appeal” of an arbitration decision, no matter how wrong an Arbitration Award may seem.
Both the California Assembly and the United States Congress have adopted laws providing for limited review of arbitration awards in Court. Both these statues provide a much more limited basis for correcting or overturning an Arbitration Award than there is in an appeal after a trial in Court.
If your attempt to get the arbitrator to correct or amend his or her own decision immediately after (within 30 days or less) sending of the Award is unsuccessful (See related article), then you must be ready to immediately proceed in Court.
Under the California Act, a “petition” to correct or vacate the arbitration award must be “filed” with the Court and “served” on the other party to the Award within 100 days after the Award is served on the parties. Codes Civil Proc. § 1288 et seq.
If a Federal Court has jurisdiction and State arbitration law does not apply, a Petition to correct or vacate the Award must be file with the Court and a Motion and Notice of Motion to Vacate or Correct the Award must also be served on the other party by a U.S. Marshall within 90 days after the Award was served on or sent to the parties to the Award.
The grounds for a Court to vacate or correct an Arbitration Award are similar- but not identical- under the California and Federal Arbitration Acts.
In some circumstances the Federal Act may provide a greater or broader grounds for relief.
For purposes of brevity, this article will only discuss grounds for correction or vacation (or “vacatur”) of an Award under the United States or Federal Arbitration Act in situations where there are no express contractual limits on the powers of the arbitrators beyond their power to generally resolve a specific dispute or class of disputes.
A United States Federal District Court has the power under the Act, 9 U.S.C. §§ 10 & 11, to vacate, modify, correct or clarify contractual Arbitration Awards, or in certain instances to order a rehearing or clarification of the award in a further arbitration proceeding.
Stark v. Sandberg, Phoenix & von Gontard, P.C. (8th Cir. 2004) 381 F.3d 793, 799.
Teamsters Local 853 v. Paper (N.D. Cal. Feb. 17, 2010) 2010 U.S. Dist. LEXIS 14282, 7-8. See also, Oehmke. Commercial Arbitration (3rd Ed.), Exceeding Contractual Powers, Ch. 146.
Lagstein v. Certain Underwriters at Lloyd's (9th Cir. 2010) 607 F.3d 634, 643; Porzig v. Dresdner, Kleinwort, Benson, N. Am. LLC (2d Cir. N.Y. 2007) 497 F.3d 133, 140.
Comedy Club, Inc. v. Improv West Assocs. (9th Cir. 2009) 553 F.3d 1277, 1288.
Geneva Sec. v. Johnson (7th Cir. 1998) 138 F.3d 688, 692.
Schoenduve Corp. v. Lucent Techs., Inc. (9th Cir. 2006) 442 F.3d 727, 732.
Greenspan v. LADT, LLC (2010) 185 Cal. App. 4th 1413, 1437-1438.
Bosack v. Soward (9th Cir. 2009) 573 F.3d 891, 898-899, cert. den 130 S.Ct. 1522 (2010).
Thus, for example, if an arbitrator has decided an issue or dispute which the parties did not give him the authority - in the arbitration clause or in a Submission Agreement - to resolve or decide, then the Award may be vacated on that grounds.
An arbitrator’s decision must be based on the facts in evidence and on the terms of the contract or agreement from which the dispute arises.
If it does not, the Court may vacate the Award.
Bosack v. Soward, supra, 573 F.3d at 901.
Williams v. NFL (8th Cir. 2009) 582 F.3d 863, 883.
“It is only when [an] arbitrator strays from interpretation and application of the agreement and effectively ‘dispense[s] his own brand of industrial justice’ that his decision may be unenforceable.” . . . In that situation, an arbitration decision may be vacated under § 10(a)(4) of the FAA on the ground that the arbitrator “exceeded [his] powers,” for the task of an arbitrator is to interpret and enforce a contract, not to make public policy. In this case, we must conclude that what the arbitration panel did was simply to impose its own view of sound policy regarding class arbitration.n3"
Stolt-Nielsen S. A. v. Animal Feeds Int'l Corp. (2010) 559 U.S. 662, 130 S.Ct. 1758, 1766-1768.
Lagstein v. Certain Underwriters at Lloyd's (9th Cir. 2010) 607 F.3d 634, 641-642.
Hoffman v. Cargill, Inc. (8th Cir. 2001) 236 F.3d 458, 462.
Solvay Pharms., Inc. v. Duramed Pharms., Inc. (6th Cir. 2006) 442 F.3d 471, 476.
PMA Capital Ins. v. Platinum Underwriters Berm., LTD., supra, 659 F. Supp. 2d at 639.
Kim-C1, LLC v. Valent Biosciences Corp. (E.D. Cal. 2010) 756 F. Supp. 2d 1258, 1272.
In short, where the arbitrator bases his or her decision on something other than the contract and terms of the agreement between the parties from which the dispute has arisen (such as when the arbitrator’s decision is based on his or her idea of what would be fair or just), or if the arbitrator in the Award effectively ignores or revises important terms of the contract or creates a new kind of agreement between the parties than the contract that they entered into, the award may be vacated.
However, if the arbitrator has based the Award on his or her interpretation or reading of the contract, but that interpretation is clearly wrong or not what the parties actually intended, the Award probably may NOT be vacated, as the Courts do not typically have the power to vacate an Award due to a mere legal error.
As noted above, an Arbitration Award may also be vacated where the Award or the Arbitrators decision expresses a "manifest disregard of the law”.
Kim-C1, LLC v. Valent Biosciences Corp. (E.D. Cal. 2010) 756 F. Supp. 2d 1258, 1272-1273; Ardalan v. Macy's Inc. (N.D. Cal. June 28, 2012) 2012 U.S. Dist. LEXIS 90859, 19-20.
Biller v. Toyota Motor Corp., supra, 668 F.3d at 667.
“It is true that we have stated that "a court may infer that the arbitrators manifestly disregarded the law if it finds that the error made by the arbitrators is so obvious that it would be instantly perceived by the average person qualified to serve as an arbitrator." Willemijn, 103 F.3d at 13. However, the meaning of that phrase in the context of Willemijn was that an arbitrator's error in interpreting the legal doctrine relied upon by the parties can constitute manifest disregard if the average person qualified to serve as an arbitrator would not have made such an interpretation. Id. at 14 ("We only need decide whether there is any colorable justification for their decision"; if so, there is no manifest disregard.). n3"
D.H. Blair & Co. v. Gottdiener (2nd Cir. 2006) 462 F.3d 95, 111.
“Manifest Disregard of the Law” is therefore more than just a legal error or mistake by the arbitrator in the Award or a misunderstanding of the law.
Those are NOT grounds for vacating an Award.
For this grounds to apply, then, the arbitrator must: (a) have recognized in the Award that a particular law or legal doctrine applied to or governed resolution of the dispute, but (b) then the arbitrator proceeded to ignore or disregard or violate that same law or legal doctrine in issuing his or her decision.
Certain private associations which administer arbitrations and provide arbitrators - such as the American Arbitration Association, as one example - allow the parties to require the arbitrators to issue a “reasoned award”, explaining how the arbitrators arrived at their decision based on the contracts, evidence, etc.
The parties themselves could also include such a requirement - or a similar one - in the arbitration provisions of their business contracts, or in their Arbitration Submission Agreements in which they agree to submit certain specific disputes to arbitration.
According to explanatory materials published by the American Arbitration Association and still available on its website www.adr.org, a “reasoned award” at the AAA includes “Findings of Fact and Conclusions of Law”. Raymond G. Bender, Jr., “Critical First Steps in Complex Commercial Arbitration”, 64 Dispute Res. Jour. (Feb.-April 2009) 28, 35-36.
Cat Charter, LLC v. Schurtenberger (11th Cir. 2011) 646 F.3d 836, 844.
Where Findings of Fact and Conclusions of Law are required by the Arbitration or Submission Agreement, but not made, an Award should be vacated, as the arbitrators exceeded their authority.
W. Emplrs Ins. Co. v. Jefferies & Co. (9th Cir. 1992) 958 F.2d 258, 262.
LEIGHTON ex rel. One William St. Fund, Inc. v. ONE WILLIAM ST. FUND, INC. (2d Cir. N.Y. 1965) 343 F.2d 565, 567.
While these Court holdings regarding Findings of Fact and Conclusions of Law might not apply directly to Arbitration Awards where and similar findings and conclusions are requested and required, similar purposes would be served by such Findings in arbitration.
Thus, arbitral Findings and Conclusions logically also should be detailed enough to be sufficient for the some reasons and purposes as they are in Court.
An Award should at least be “reasoned” in its most important aspect, as to the “relief” Awarded, and why that relief was ordered based on the evidence before the arbitration.
Coutee v. Barington Capital Group, L.P. (9th Cir. 2003) 336 F.3d 1128, 1133; Elem Indian Colony of Pomo Indians v. Pac. Dev. Partners X, LLC (N.D. Cal. May 19, 2010) 2010 U.S. Dist. LEXIS 57820. See also, Oemke, Commercial Arbitration, supra, Award Contents, § 117.5.
Westerbeke Corp. v. Daihatsu Motor Co. (2d Cir. 2002) 304 F.3d 200, 218.
However, the law on these points is not well-settled and still in evolution, so its application is still uncertain.
But, where the parties have requested - in their arbitration clause or Submission Agreement - a “reasoned award” or “Findings of Fact and Conclusions of Law”, or some other type of explained decision - and the arbitrators issue an Award in which there is no discussion of the facts and the evidence and/or no reasoned or logical explanation for the relation or connection between the evidence and the decision or relief reached or ordered by the arbitrators, it should be possible to seek vacation of the Award on this basis, as the arbitrators have effectively “exceeded their powers” by failing to do what the parties contractually required them to do: logically explain how they reached their decision.
Under 9 U.S.C. § 10(a)(1), an arbitration award may be vacated where it was “procured by fraud, corruption, or undue means”.
Perjured testimony by a witness during an arbitration constitutes one type of “fraud” under 9 U.S.C. § 10(a)(1). Dogherra v. Safeway Stores, Inc. (9th Cir. 1982) 679 F.2d 1293, 1297, cert. denied, 459 U.S. 990, 103 S. Ct. 346 (1982) Bonar v. Dean Witter Reynolds, Inc. (11th Cir. Fla. 1988) 835 F.2d 1378, 1383 (collecting cases); MidAmerican Energy Co. v. IBEW Local 499 (8th Cir. 2003) 345 F.3d 616, 622-623. ( Perjury by ex-employee).
Nordahl Dev. Corp. v. Salomon Smith Barney (D. Or. 2004) 309 F. Supp. 2d 1257, 1268; Hernandez v. Smart & Final, Inc. (S.D. Cal. June 16, 2010) 2010 U.S. Dist. LEXIS 60755.
Dogherra v. Safeway Stores, Inc., supra, 679 F.2d at 1297, states and cites authority that “The fraud must be established by clear and convincing evidence”, but that authority was based upon cases decided under Federal Rule of Civil Procedure, Rule 60(b), and not the requirements of the Federal Arbitration Act.
Other Federal Circuit Courts of Appeal have also so held, on a similar basis or following the Rule 60(b) cases. See e.g., MCI Constructors, LLC v. City of Greensboro, supra, 610 F.3d at 858.
There are other kinds of fraud other then perjury by a witness. And “undue means” could include bribing witnesses, improper contracts with the arbitrator, and other illegal or immoral conduct.
The United States Arbitration Act also provides (9 U.S.C. § 11) that the Court may correct or modify certain aspects of an Arbitration Award in certain limited situations.
“§ 11. Same; modification or correction; grounds; order “In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration-- (a) Where there was an evident material miscalculation of figures . . . .
Schoenduve Corp. v. Lucent Techs., Inc. , supra, 442 F.3d at 731.
Correction or modification of an Award by the District Court is also appropriate under 9 U.S.C. § 11(a), where “there was an evident material miscalculation of figures” in the Award, resulting in a double or triple recovery of damages, or an Award of a duplicative or excessive relief.
As an example of such a modification in Eljer Mfg. the Court of Appeals affirmed a District Court order which modified the award to eliminate a duplicate Award of damages, and then went on to also further modify or correct the Award and eliminate an item of damages which the arbitrator Awarded on an issue which was not previously submitted to arbitration by contract.
N.B. The contents of this Article are only a very incomplete, simple and general discussion of just a small portion of the law pertaining to the vacatur or modification of Arbitration Awards, and the actual law governing such proceedings is extremely complex and in some cases is still unclear or unsettled. Vacation or modification of awards is very difficult.
This article thus do not constitute legal advice or create an attorney-client relationship with our firm, and you may NOT rely on it without seeking legal advice regarding your particular situation from a competent Arbitration lawyer or Litigation attorney.
Please also note that contracts and factual situations vary, and statutes and case law are frequently changing and evolving, and therefore this article also may be or may become outdated or incorrect.
For further information on this topic and how the current law may apply to your particular contract, arbitration and legal issues, Contact Us via email, phone (415)788-1881 or visit our website at www.wolfflaw.com for other contract information.
© 2013, George W. Wolff, all rights reserved.

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