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Confirming Awards | Federal Arbitration Act | Section 9 Loree Reinsurance and Arbitration Law Forum
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June 19th, 2020 Arbitration and Mediation FAQs, Arbitration as a Matter of Consent, Arbitration Law, Arbitration Practice and Procedure, Awards, Businessperson's FAQ Guide to the Federal Arbitration Act, Confirmation of Awards, Consent to Confirmation, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 9, Nuts & Bolts, Nuts & Bolts: Arbitration, Personal Jurisdiction, Petition or Application to Confirm Award, Section 9, Small Business B-2-B Arbitration, Statute of Limitations No Comments » By Philip J. Loree Jr.
In the last segment of this Businessperson’s Federal Arbitration Act FAQ Guide, we discussed the substantive requirements for confirming a Chapter One Domestic Award. Now we turn to the procedural requirements.
What are the Procedural Requirements for Confirming a Chapter One Domestic Award?
The party seeking confirmation may apply for it “within one year after the award is made. . .”;
Notice of application must be properly served;
Venue must be proper; and
The “court must grant” confirmation “unless the award is vacated, modified or corrected” under Section 10 or 11 of the FAA.
Confirming Awards: One-Year Statute of Limitations
Section 9 provides a limitations period for confirming awards: a party “may” make an application to confirm “within one year after the award is made. . . .” The Fourth Circuit has ruled that this one-year deadline is permissive and that an application to confirm may be made after the expiration of that deadline. Sverdrup Corp. v. WHC Constructors, Inc., 989 F.2d 148, 151-56 (4th Cir. 1993); accord Val-U Const. Co. v. Rosebud Sioux Tribe, 146 F.3d 573, 581 (8th Cir. 1998). Under the Fourth Circuit’s rationale, the parties may invoke the Federal Arbitration Act’s summary proceedings for confirming awards even after the one-year period has expired.
The Second Circuit, however, has ruled that the one-year period is a mandatory statute of limitations for confirming an award under Section 9. Photopaint Technologies, LLC v. Smartlens Corp., 335 F.3d 152, 155-60 (2d Cir. 2003). Under this view, expiration of the one-year period would bar an action to confirm an award, at least under the Federal Arbitration Act.
Confirming an arbitration award, however, may be possible not only under Section 9, but also under an applicable state arbitration statute. Or state law might permit a plenary action to enforce an award as a contract right.
The Supreme Court has, without deciding the issue, acknowledged that such state-law-based avenues for award enforcement might be invoked as an alternative to Section 9’s expedited review procedures. See Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 1035, 1046 (2007). The Second Circuit in Photopaint Technologies also suggested, without deciding, that an action on an award might be available as an alternative route for confirming an award.
Thus, even if, under applicable law the one-year statute of limitations for confirming an award has expired, a party might be able to seek relief under the applicable state arbitration statute, or in an action to confirm an award, provided that such remedies are not also time-barred. In cases where New York law provides the statute of limitations, bringing a statutory or plenary action to confirm or enforce an award once the Section 9 statute oflimitations has expired does not provide a meaningful alternative. For New York requires an “action upon an arbitration award” to be “commenced within one year[.]” N.Y. Civ. Prac. L. & R. 215(5).
Section 9 sets forth standards for service of a notice of a motion to confirm, but the federal courts have not interpreted them uniformly. Section 9 initially states, in an uncontroversial fashion, that “[n]otice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding.” 9 U.S.C. § 9.
The statute prescribed two different kinds of service for confirming awards, one that applies when the person to be served is “a resident of the district within which the award is made,” and one that applies when that person is a “nonresident of the district. . . .” 9 U.S.C. § 9.
Adverse Party Resident of District in which Award Made
“If the adverse party is a resident of the district within which the award was made,” Section 9 says, then “such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court.”
“[S]ervice of notice of motion in an action” is ordinarily governed by Fed. R. Civ. P. 5(b), which governs service of papers in actions in which formal service of process has already been made, including “written motions.” See Fed. R. Civ. P. 5(a)(1); Fed. R. Civ. P. 5(a)(1)(D).
Fed. R. Civ. P. 5(b)(1) states that, “[i]f a party is represented by an attorney, service under this rule must be made on the attorney unless the court orders service on the party.” Fed. R. Civ. P. 5(b)(1).
Fed. R. Civ. P. 5(b)(2) describes how papers may be served:
(i) at the person’s office with a clerk or other person in charge or, if no one is in charge, in a conspicuous place in the office; or
(ii) if the person has no office or the office is closed, at the person’s dwelling or usual place of abode with someone of suitable age and discretion who resides there;
(C) mailing it to the person’s last known address—in which event service is complete upon mailing;
(E) sending it to a registered user by filing it with the court’s electronic-filing system or sending it by other electronic means that the person consented to in writing—in either of which events service is complete upon filing or sending, but is not effective if the filer or sender learns that it did not reach the person to be served; or
Fed. R. Civ. P. 5(b).
Despite Section 9’s plain terms, at least one court has held that service on a resident of the district has to be made under Fed. R. Civ. P. 4, which governs service of summonses and complaints, not simply Fed. R. Civ. P. 5(b). See Bruno v. Abeyta, No. CV-18-01124-PHX-DGC, slip op at *3 (D. Ariz. Oct. 31, 2018) (noting split in authority and citing cases). Other courts, including Courts within the Second Circuit, have found that service can be made under Fed. R. Civ. P. 5(b). See id. (citing cases, including Martin v. Deutsche Bank Sec. Inc., 676 Fed. Appx. 27, 28-29 (2d Cir. 2017) (summary order)).
Adverse Party Nonresident of District
“If the adverse party shall be a nonresident,” Section 9 provides, “then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.” 9 U.S.C. § 9.
Section 9, like most of the rest of Chapter One of the Federal Arbitration Act, was enacted in 1925, prior to 1938, when the first version of the Federal Rules of Civil Procedure became effective. In 1925, and for more than forty years after the Federal Rules of Civil Procedure became effective in 1938, summonses and complaints in federal actions were served by U.S. Marshals or persons “specially appointed by the court. . . .” InterCarbon Bermuda, Ltd. and Caltex Trading and Transport Corp., 146 F.R.D. 64, 67 n.3 (S.D.N.Y. 1993) (quotations omitted) (citing Changes in Federal Summons Service Under Amended Rule 4 of the Federal Rules of Civil Procedure, 96 F.R.D. 81, 94 (1983)).
But amendments to Fed. R. Civ. P. 4 in the “early 1980s substantially changed the identity of those who may serve process[,]” the “ostensibly principal purpose of [which]. . . was to tak[e] the marshals out of summons service almost entirely.” 146 F.R.D. at 67 n.3 (quotations omitted; some bracketed material in original). Thus, in the typical civil action service of the summons and initiatory pleading is made by private process servers in the manner prescribed by Fed. R. Civ. P. 4.
Section 9’s nonresident service requirement that an “application” to confirm an award “shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court[]” raises at least two important interpretive questions.
First, to initiate a proceeding to confirm an award against a nonresident of the district, must service of a motion to confirm be made outside the district by a U.S. marshal, even though in an ordinary litigation, service could be made by a process server? This question has significant practical importance to private parties and their attorneys because arranging service by U.S. marshal is ordinarily more difficult and time consuming than doing so through a private process server. Why should confirming an arbitration award against a nonresident require service-of-process formalities that would not apply to a suit for, say, breach of contract?
Second, who is supposed to serve process to initiate a proceeding to confirm an award against an international party, which is not a resident of any district, and which cannot be served by U.S. marshal?
The first question has, perhaps not surprisingly, generated a split in decisions among federal district courts. Some courts, including courts within the Second Circuit, have determined that service on a nonresident of the district is adequate if not made by U.S. Marshal, provided that the service is made “in like manner as other process of the court[,]” that is, in manner authorized by Fed. R. Civ. P. 4. See, e.g., Technologists, Inc. v. MIR’s Ltd., 725 F. Supp. 2d 120, 126-127 (D.D.C. 2010) (construing 9 U.S.C. § 12); VentureForth Holdings LLC v. Joseph, 80 F. Supp. 3d 147, 148 (D.D.C. 2015) (construing 9 U.S.C. § 9); Hancor, Inc. v. R & R Eng’g Products, Inc., 381 F.Supp.2d 12, 15–16 (D.P.R.2005) (9 U.S.C. § 9); In re Lauritzen Kosan Tankers (Chem.Trading, Inc.), 903 F.Supp. 635, 637 (S.D.N.Y.1995) (9 U.S.C. § 9); See InterCarbon Bermuda, 146 F.R.D. at 67 & n.3 (9 U.S.C. § 12).
Other courts, however, have held that a U.S. marshal must serve an application to confirm if the opposing party is a nonresident of the district. See, e.g., Logan & Kanawha Coal Co. Llc v. Detherage Coal Sales LLC, 789 F. Supp. 2d 716, 718-22 (S.D.W. Va. 2011) (citing cases). While that interpretation has support in the text of Section 9, it imposes a strange service regime for confirming awards.
If the adverse party is a resident of the district, then Section 9 authorizes it to utilize the informal means of serving motions in pending actions. In ordinary federal court litigation, service of process against residents of a district must be made under Fed. R. Civ. P. 4, which requires service to be made in a more formal manner, and only on the adversary itself, not its attorney.
That means Section 9, by its terms, and as enacted in 1925, facilitates speedy and efficient enforcement of arbitration agreements by allowing confirmation proceedings against residents of a district to be served by the relatively informal means provided by Fed. R. Civ. P. 5(b), including service on the party’s attorney in the arbitration. That makes sense: confirming an award as quick and easy as reasonably possible.
But if the adverse party is not a resident, then service under Section 9 must be made by a marshal only, even though the requirement of service by U.S. marshal was abolished in ordinary federal court litigation approximately 40 years ago.
That means Section 9, by its terms, and as enacted in 1925, facilitated speedy and efficient enforcement of arbitration agreements by allowing confirmation proceedings against nonresidents of a district to be served in the same manner that an ordinary lawsuit would be served at the time, that is, by a U.S. marshall “in like manner as other process of the court.” 9 U.S.C. § 9.
But now that service can be made legally and much more quickly and efficiently by a private process server under Fed. R. Civ. P. 4, if Section 9 is construed to require service by a U.S. marshal, rather than simply compliance with Fed. R. Civ. P. 4, which governs the “manner” of service of “other process of the court[,]” 9 U.S.C. § 9, then Section 9 will no longer serve the purpose evidenced by its text.
There are several arguments that may be made in favor of or against requiring nonresident service to be performed by a U.S. marshal, including arguments based on what is known as the “reference canon.” See Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 769-70 (2019).
Adverse Party not Found in any District
Section 9’s reference to service to U.S. marshals serving “nonresidents” of the district reveals another oddity in the statute. U.S. marshals ordinarily cannot serve process abroad, and in any event, Section 9 authorizes service on nonresidents only “by the marshal of any district within which the adverse party may be found. . . .”
Section 9 therefore makes no provision for service on international parties who are not residents of, or otherwise “found” in, in any U.S. federal judicial circuit. Courts that have addressed the question of how such nonresidents should be served have determined that service may be made under Fed. R. Civ. P. 4’s provisions governing service abroad. See, e.g., InterCarbon Bermuda,146 F.R.D. at 67 (construing 9 U.S.C. § 12); Arbitration Bet. Trans Chem. Ltd. and China, 978 F. Supp. 266, 299-300 (S.D. Tex. 1997), aff’d, 161 F.3d 314 (5th Cir. 1998) (per curiam).
Consent to Arbitrate in the District
Cases in the Second Circuit have held that consenting to arbitrate in a particular city and state constitutes consent to personal jurisdiction in the district in which the parties agreed to arbitrate for purposes of compelling arbitration or confirming an arbitration award. Doctor’s Associates, Inc. v. Stuart, 85 F.3d 975, 979 (2d Cir. 1996); Merrill Lynch, Pierce, Fenner Smith v. Lecopulos, 553 F.2d 842, 844-45 (2d Cir. 1977); Victory Transport Inc. v. Comisaria General, 336 F.2d 354, 363 (2d Cir. 1964); Hamilton Life Ins. v. Republic Nat. Life, 408 F.2d 606, 613 (2d Cir. 1969); see Reed Martin, Inc. v. Westinghouse Electric, 439 F.2d 1268, 1276-77 (2d Cir. 1971).
In cases where the parties have consented to arbitration in the district, “the sole function of process. . . is. . . to notify the [adverse party] that proceedings ha[ve] been commenced.” Victory Transport, 336 F.2d at 364. That consent “includes consent to service by any method consistent with due process.” Hamilton Life, 408 F.2d at 613; accord Waterspring, S.A. v. Trans Mktg. Houston, 717 F. Supp. 181, 186-87 (S.D.N.Y. 1989); Petrol Shipping Corporation v. Kingdom of Greece, 360 F.2d 103, 107 (2d Cir. 1966); Flexi-Van Leasing Car v. Gulf Fleeting Marine Corp., 108 F.R.D.116, 118 (S.D.N.Y. 1985); AAACON Auto Transport, Inc. v. Klee, 356 F. Supp. 319 (S.D.N.Y. 1973); Lawn v. Franklin, 328 F. Supp. 791, 794 (S.D.N.Y. 1971).
In addition, if the parties have incorporated-by-reference arbitration rules that specify how papers may be served, or if they have otherwise expressly agreed that service may be made in a specified manner, than service may be made under those rules or in that specified manner. See Stuart, 85 F.3d at 982 (2d Cir. 1996).
Motion to Confirm Made in an Already-Pending Action
Section 9’s service rules prescribe the manner of service to be used to commence a proceeding to confirm an award. See 9 U.S.C. § 9. If an action is already pending, however, then, irrespective of whether the adversary party is a resident of the district, service of a motion to confirm is made in the same manner as any other motion in a pending action would be made, that is, under Fed. R. Civ. P. 5(b). See 9 U.S.C. § 6 (“Any application to the court hereunder shall be made and heard in the manner provided by law for the making and hearing of motions, except as otherwise herein expressly provided.”); Fed. R. Civ. P. 5(a)(1)(D).
Confirming Awards: Venue Must be Proper
Section 9’s venue provision states: “If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.” 9 U.S.C. § 9.
The U.S. Supreme Court has held that Section 9’s venue provision is permissive, not mandatory. Cortez Byrd Chips, Inc. v. Bill Harbert Constr. Co., 529 U.S. 193, 195 (2000). Accordingly, the venue for an application to confirm an award is proper if Section 9 authorizes it, but if Section 9 does not authorize venue, then it is still proper if the general venue statute, 28 U.S.C. § 1391, authorizes it. See 529 U.S. at 195; 28 U.S.C. § 1391.
“Court Must Grant” Confirmation “unless the Award is Vacated, Modified or Corrected” under Section 10 or 11 of the FAA
Section 9 provides that, if a party makes a properly supported application to confirm, the “[C]ourt must” confirm the award “unless” it is “vacated, modified or corrected as prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9. Courts have construed this provision to establish a “strong presumption in favor of enforcing arbitration awards.” Wall Street Associates, L.P. v. Becker Paribas, 27 F.3d 845, 849 (2d Cir. 1994) (citations and quotations omitted). Under that “presumption[,]” “the award is valid unless it is proven otherwise[,]” its “validity” is subject to attack only on those grounds listed in [Section] 10, and the policy of the [Federal Arbitration Act] requires that the award be enforced unless one of those grounds is affirmatively shown to exist.” Becker Paribas, 27 F.3d at 849. See also Landau v. Eisenberg, 922 F.3d 495, 498 (2d Cir. 2019) (Given the “presumption,” “an arbitration award should be enforced, despite a court’s disagreement with it on the merits, if there is a barely colorable justification for the outcome reached.”) (citation and quotations omitted); Rich v. Spartis, 516 F.3d 75, 81 (2d Cir. 2008).
The limited grounds for vacatur, modification, or correction under Sections 10 and 11 are therefore the only defenses that can be advanced in response to a properly supported application to confirm. If a Section 11 defense is successfully asserted, then the award will be confirmed as modified.
And, as we’ll discuss in a future segment of this post, those defenses are subject to a strict, three-month statute of limitation, even if they are asserted in opposition to a motion to confirm.
The next segment of this series will focus on some additional FAQs about confirming Chapter One Domestic Awards.
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