Source: http://kluwerconstructionblog.com/2009/11/17/a-quirk-in-enforcing-arbitral-awards-in-us-courts/
Timestamp: 2019-04-26 11:58:42
Document Index: 42984157

Matched Legal Cases: ['§ 1', '§ 201', '§ 9', '§ 10', '§ 9', '§1404']

A Quirk in Enforcing Arbitral Awards in U.S. Courts - Kluwer Construction Blog
Enforcement of arbitration awards in the United States in substantial matters is governed by the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (FAA). A closely related statute found at 9 U.S.C. §§ 201-208 contains specific provisions for international awards rendered under the New York Convention, but the FAA also governs those proceedings unless there is a conflict. Enacted in 1925 during an era when strong judicial hostility to arbitration was the norm, the FAA has long been in need of updating and revision. But various efforts to do so (other than an effort to eliminate its applicability to most consumer cases) have not really gotten off the ground. While it is generally short and to the point, there are nevertheless quirks and oddities in the FAA that are rather hard to justify. One of these, the disconnect between courts that can confirm an arbitral award and courts that can vacate an arbitral award, recently reared its head in a pending case.
Having prevailed in the arbitration, the winning party, expecting potential difficulties in collection, promptly filed a petition to confirm the award under § 9 of the FAA in a Federal District Court where there was subject matter jurisdiction (diversity of citizenship), personal jurisdiction, and proper venue. Not coincidentally, that District was also where many of the losing party’s assets are located, plus it has a well-deserved reputation for deciding matters quickly. However, it is not where the arbitration took place. The losing party accordingly waited until just before a response was due to this petition, then simultaneously filed a petition to vacate the award in the Federal District where the arbitration took place, and asked the court where the petition to confirm was filed to stay its proceedings pending resolution of the petition to vacate filed elsewhere.
Per §§ 10 and 11 of the FAA, the power to vacate or correct an award lies only in a court where the arbitration took place. By contrast, § 9 of the FAA allows the parties to specify which courts can confirm an award, and all standard form arbitration clauses give this power to any court having proper jurisdiction. Thus the quirk. There is no particular rationale behind this difference in treatment, and it has no particular defenders. It just is. Most courts in the situation of the court where the petition to confirm was filed have indeed stayed their proceedings until the petition to vacate is determined. In this instance, the court went one better, transferring the petition to confirm outright, per 28 U.S.C. §1404, to the same District where the petition to vacate is pending. U.S. courts generally are strongly disinclined to permit a later-filed action take precedence over an earlier-filed one, giving significant deference to the forum selection of the party first to the courthouse. But the odd language of the FAA drives exactly the opposite result in this situation. The result here, as is often the case, was a lot of procedural maneuvering at significant cost to both parties that was entirely attributable to the statute’s inconsistent wording. And ultimate resolution of the status of the award and its collection if confirmed has been significantly delayed, not least because the proceedings are now in a District that moves considerably more slowly than where the petition to confirm was initially filed.
Tales of the Unexpected: Where Liability Lurks Unseen #2
Melanie Grimmitt (Pinsent Masons)/ November 16, 2009