Opinion ID: 1643072
Heading Depth: 2
Heading Rank: 2

Heading: Exceeded Powers

Text: The plaintiffs assert that the grounds for review set out in the FAA are procedural rules, and, therefore, under the reasoning of Chief Justice Moore's dissent in Selma Medical Center, Inc. v. Fontenot, 824 So.2d 668 (Ala.2001), should not govern our substantive review in these cases; rather, argue the plaintiffs, only the § 6-6-14 grounds should apply. The general structure of § 6-6-15 dates back more than 130 years. Before that, there were other statutory procedures for appealing an arbitration award; there was even a period between 1852 and 1868 when there were no provisions for taking an appeal from an arbitration award. Wright v. Bolton & Stracener, 8 Ala. 548 (1845); Wilbourn v. Hurt, 139 Ala. 557, 36 So. 768 (1904). Section 6-6-15 provides that either party may appeal from an arbitration award made under this division [Arbitration and Award], specifying the sequence and effect of the procedures to be followed. When, as in the present cases, an action is already pending in the circuit court, upon the filing of the notice of appeal with the circuit clerk, together with a copy of the award, signed by the arbitrators or a majority of them ... the clerk or register shall enter the award as the judgement of the court. (Emphasis supplied.) (For many decades, the predecessors to § 6-6-15, up through Tit. 7 § 843 of the Code of Alabama of 1940 (Recomp.1958), assigned the duty of entering the judgment to the clerk, register or judge of the court. (Emphasis supplied.)) Section 6-6-15 states that if, within 10 days following the clerk's entry of the judgment, the circuit court does not set aside the award for one or more of the causes specified in Section 6-6-14, the judgment shall become final and an appeal shall lie as in other cases. The News filed with the circuit clerk its Motion to Vacate and Set Aside Arbitration Award in each case, stating various grounds, but acknowledging its intention to pursue an appeal, and it contemporaneously filed its notice of appeal. The trial judge did not act within the 10-day period following the filing of the notices of appeal, but nothing in the record suggests that any of the motions to vacate were actually called to his attention. The AAA has had throughout its history, until the last decade, a field of operation only with respect to post-dispute agreements to arbitrate. See Stone v. Dennis, 3 Port. 231 (Ala.1836); Bozeman v. Gilbert, 1 Ala. 90 (1840); and Headley v. Aetna Ins. Co., 202 Ala. 384, 80 So. 466, 467 (1918). Predispute agreements to arbitrate were invalid at common law, as the United States Supreme Court explained in Home Insurance Co. of New York v. Morse, 87 U.S. (20 Wall.) 445, 451, 22 L.Ed. 365 (1874): [A]greements in advance to oust the courts of the jurisdiction conferred by law are illegal and void.... [A citizen] cannot... bind himself in advance by an agreement, which may be specifically enforced, thus to forfeit his rights at all times and on all occasions, whenever the case may be presented. Under the common law, even when the parties entered into a post-dispute agreement to arbitrate, either could back out of that agreement at any time before the dispute was actually submitted to arbitration and an award determined. See Aspinwall v. Tousey, 2 Tyl. 328 (Vt.1803); Allen v. Watson, 16 Johns. 205 (N.Y.Sup.Ct.1819); and Smith v. Compton, 20 Barb. 262 (N.Y. Gen. Term 1855). Beginning with the Code of Alabama of 1923, the Alabama Code has included a statutory prohibition (now codified as § 8-1-41(3)) against the specific enforcement of a predispute agreement to submit a controversy to arbitration. However, through the combined holdings of several decisions of the United States Supreme Court, the application of that prohibition has been relegated to the rare case of a purely intrastate transaction that could not be said to involve commerce in any way. See Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984); Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995); and Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003). This Court held in Stewart, and Horn, supra, that the FAA preempted state law in the transactions between the News and the plaintiffs. Having held that the FAA is applicable to this case, we point out that its application is controlled by principles of `substantive federal law.' Ex parte Costa & Head [(Atrium), Ltd., 486 So.2d 1272], at 1275 [(Ala.1986)]. In cases governed by the FAA, the federal substantive law of arbitration governs, despite contrary state law or policy. Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984); H.L. Fuller Construction Co. v. Industrial Development Board of the Town of Vincent, 590 So.2d 218 (Ala.1991). Further, the provisions of the FAA govern all questions of the validity, interpretation, construction and enforceability of the arbitration agreement. See Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ; Willoughby Roofing & Supply Co. v. Kajima International, Inc., 598 F.Supp. 353 (N.D.Ala.1984), affirmed, 776 F.2d 269 (11th Cir.1985) . Maxus, Inc. v. Sciacca, 598 So.2d 1376, 1379 (Ala.1992). In Fuller Construction, supra, decided the year before Maxus, the Court understood one of the appellant's contentions to be that the arbitration award is due to be vacated because it allegedly did not comply with the FAA, which permits the vacation of an arbitration award in the following instance: `(d) 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.' 9 U.S.C. § 10(d) [redesignated by amendment as 9 U.S.C. § 10(a)(4)]. 590 So.2d at 223. The Court determined, however, that on the limited record presented in that appeal, it was unable to say that the arbitrators had either exceeded their powers or imperfectly executed them. In Maxus, after concluding that the FAA controlled its review, the Court went on to say: The FAA, specifically 9 U.S.C. § 10, permits the vacation of an arbitration award in the following instances: `(a) Where the award was procured by corruption, fraud, or undue means. `(b) Where there was evident partiality or corruption in the arbitrators, or either of them. `(c) 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. `(d) 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.' Where parties, as in this case, have agreed that disputes should go to arbitration, the role of the courts in reviewing the arbitration award is limited. Transit Casualty Co. v. Trenwick Reinsurance Co., 659 F.Supp. 1346 (S.D.N.Y.1987), affirmed, 841 F.2d 1117 (2d Cir.1988); Saxis Steamship Co. v. Multifacs International Traders, Inc., 375 F.2d 577 (2d Cir.1967). On motions to confirm or to vacate an award, it is not the function of courts to agree or disagree with the reasoning of the arbitrators. Application of States Marine Corp. of Delaware, 127 F.Supp. 943 (S.D.N.Y.1954). Courts are only to ascertain whether there exists one of the specific grounds for vacation of an award. Saxis Steamship Co. A court cannot set aside the arbitration award just because it disagrees with it; a policy allowing it to do so would undermine the federal policy of encouraging the settlement of disputes by arbitration. United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960); Virgin Islands Nursing Association's Bargaining Unit v. Schneider, 668 F.2d 221 (3d Cir.1981). An award should be vacated only where the party attacking the award clearly establishes one of the grounds specified above. Catz American Co. v. Pearl Grange Fruit Exchange, Inc., 292 F.Supp. 549 (S.D.N.Y.1968). 598 So.2d at 1380-81. More recently, in Mason v. Acceptance Loan Co., 850 So.2d 289 (Ala.2002), after determining that the FAA was applicable to the arbitration provisions in the agreements between the parties, we commented in a footnote that the FAA, 9 U.S.C. § 10, would be applicable to a review of the arbitrators' award. 850 So.2d at 302 n. 10. In accord with Maxus and Fuller, supra, the Court of Civil Appeals has also concluded that the standards for reviewing an arbitration award set out in the FAA apply to an appeal of an arbitration award in which the underlying transaction involved interstate commerce. McKee v. Hendrix, 816 So.2d 30 (Ala.Civ.App.2001). See also Sanderson Group, supra (four judges concurring in the result). Therefore, it is well established that the standards set out in the FAA for reviewing an arbitrator's award are applicable to our review in this case. To the extent that the limited grounds listed in § 6-6-14 (fraud, partiality, or corruption) might arguably govern judicial review of an arbitrator's award resulting from a post-dispute agreement to arbitrate when the parties have voluntarily opted for arbitration with full knowledge of the contours and significance of their dispute, those grounds do not provide adequate review of arbitrators' decisions in the numerous and varied commercial- and consumer-transaction disputes now being channeled to arbitration in this State through predispute agreements for arbitration. Most states have adopted a version of the Uniform Arbitration Act (UAA) drafted by the National Conference of Commissioners on Uniform State Laws in 1955. The UAA has undergone several revisions over the years, the most recent adopted by the Commissioners at their annual conference in 2000. However, since its promulgation in 1955 the UAA has always included a provision allowing for vacatur of an arbitration award where [t]he arbitrators exceeded their powers. (Section 12(a)(3) of the 1955 version; Section 23(a)(4) of the 2000 version.) The prefatory note to the 2000 version states that [f]orty-nine jurisdictions have arbitration statutes; 35 of these have adopted the UAA and 14 have adopted substantially similar legislation. Presumably Alabama is the excluded 50th jurisdiction, it being self-evident that the AAA is in no wise substantially similar to the UAA. Although § 10 of the FAA facially is applicable only to the federal district courts, a number of other state appellate courts have adopted the same approach as this Court by recognizing the applicability of the § 10 standards in appeals in state courts from arbitration awards. E.g., Hecla Mining Co. v. Bunker Hill Co., 101 Idaho 557, 561, 617 P.2d 861, 866 (1980) (federal law concerning the review of arbitrator's awards applies since the underlying factual situation here clearly concerns interstate commerce. Therefore we utilize the [FAA] and the cases thereunder instead of Idaho's enactment of the [UAA] . . . .); Edward D. Jones & Co. v. Schwartz, 969 S.W.2d 788 (Mo.Ct.App.1998); Dowd v. First Omaha Sec. Corp., 242 Neb. 347, 495 N.W.2d 36 (1993); and Allen & Co. v. Shearson Loeb Rhoades, Inc., 111 A.D.2d 122, 489 N.Y.S.2d 500 (1985), aff'd, 67 N.Y.2d 709, 490 N.E.2d 850, 499 N.Y.S.2d 931 (1986). In Edward D. Jones v. Schwartz, supra, the Missouri Court of Appeals concluded that the provisions of § 10 represent substantive law, such that the FAA governs the instant appeal. 969 S.W.2d at 795. Arguably, a similar approach is implicit in Fuller Construction, Maxus, and Mason, supra, but we need not stumble over the distinction between substantive law and procedural law in this particular context. This Court has adopted 9 U.S.C. § 10 as applicable to an appeal of an arbitration award in this state, and we see no need to retreat from that position. (It is to be noted that the three grounds listed in § 6-6-14 for vacating an arbitration award  fraud, partiality, or corruption in making the award  are replicated in 9 U.S.C. § 10(a)(1) and (2).) In general, the nature of the exceeded powers ground is described as follows: We have consistently accorded the narrowest reading to section 10(d) [currently section 10(a)(4)], especially when it has been invoked in the context of the arbitrators' alleged failure to correctly decide a question which all concede to have been properly submitted in the first instance. Our inquiry under § 10(a)(4) thus focuses on whether the arbitrators had the power, based on the parties' submissions or the arbitration agreement, to reach a certain issue, not whether the arbitrators correctly decided that issue. DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 824 (2d Cir.1997) (internal quotation marks and citations omitted).