Opinion ID: 166601
Heading Depth: 2
Heading Rank: 1

Heading: Gorelick's motion to dismiss the arbitration appeal for lack of appellate jurisdiction.

Text: 30 Ordinarily, this court's jurisdiction to consider an appeal from a district court's confirmation of an arbitration award arises under 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(1)(D). The jurisdictional problem in this case arises from the fact that in the stock purchase agreement, the provision dealing with arbitration contained a non-appealability clause. It states, in relevant part: 31 Judgment upon the award rendered by the arbitrator shall be final and nonappealable and may be entered in any court having jurisdiction thereof. 32 Therefore, the question before us is whether such a provision is enforceable and, as a result, deprives this court of appellate jurisdiction. 33 As a general rule, judicial review over an arbitration award is very limited. The FAA, 9 U.S.C. § 10(a), lists only four situations in which it is appropriate at the district court level to vacate an arbitration award: (1) where the award was the product of corruption or fraud; (2) where there was evident partiality or corruption on the part of the arbitrator; (3) where the arbitrators were guilty of misconduct in refusing, upon sufficient cause shown, to postpone the hearing or hear pertinent and material evidence; and (4) where the arbitrator exceeded his powers. In addition, the Supreme Court has held that vacatur is also appropriate when the arbitrator demonstrates a manifest disregard for the law. Wilko v. Swan, 346 U.S. 427, 436-437, 74 S.Ct. 182, 98 L.Ed. 168 (1953), overruled on other grounds, Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 485, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989); see also Hoeft v. MVL Group, Inc., 343 F.3d 57, 64 (2d Cir.2003). As for appellate review, the FAA merely provides that decisions made under § 10(a) may be appealed. 9 U.S.C. § 16. The statute is silent on whether such an appeal is barred if the parties agree that the district court's judgment confirming or vacating the award is to be non-appealable. 34 This court considered a similar issue in Bowen v. Amoco Pipeline Co., 254 F.3d 925 (10th Cir.2001). In that case, the parties, pursuant to a prior agreement, arbitrated a dispute over damages caused by an oil pipeline leak. Id. at 927-28, 930. The arbitration panel found for the plaintiff and awarded damages. Id. at 930. Thereafter, the plaintiff sought, and received, a confirmation of the award from the district court. Id. The defendant appealed, claiming that the arbitrators exceeded their powers and acted in manifest disregard of the law. Id. at 930, 932. 35 The plaintiff moved to dismiss the appeal for lack of jurisdiction, citing a provision in the arbitration agreement that stated that the district court's ruling on the award was to be final. Id. at 930. We noted in dicta that although parties to an arbitration agreement may eliminate judicial review by contract, their intention to do so must be clear and unequivocal. Id. at 931 (citing Dep't of Air Force v. Fed. Labor Relations Auth., 775 F.2d 727, 733 (6th Cir.1985); Aerojet-Gen. Corp. v. Am. Arbitration Ass'n, 478 F.2d 248, 251 (9th Cir.1973)). We held that the parties' agreement to make the district court's judgment final did not clearly evince an intent to waive all appellate review, stating: 36 In fact, the very statute from which we derive our jurisdiction, 28 U.S.C. § 1291, grants appellate courts jurisdiction from all final decisions of the district courts. Hence, by agreeing that the district court's ruling shall be final, the parties have merely reinforced the appellate jurisdiction conferred by § 1291. 37 Bowen, 254 F.3d at 931. As a result we denied the plaintiff's motion to dismiss the appeal. Id. at 930. 38 In the instant case, the stock purchase agreement states not only that the district court's judgment shall be final, but also that it shall be nonappealable. As a result, Gorelick relies heavily on our dicta in Bowen to argue that the instant clause should be held to have waived all judicial review over the district court's confirmation of the arbitration award. 39 In a separate portion of Bowen, however, we held that the parties may not contractually expand the standard of judicial review to allow the district court to vacate the award for insufficient evidence. 254 F.3d at 935, 937. In so doing, we noted that [w]hen Congress passed the Act in 1925, it did so with the primary goal of changing the judiciary's refusal to enforce arbitration clauses in private contracts. Id. at 933. This policy notwithstanding, we refused to enforce the parties' agreement to permit judicial review of an arbitrator's decision based on sufficiency of the evidence. Id. at 935, 937. Our decision was rooted in another policy goal of the FAA: [B]y agreeing to arbitrate, a party trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration. Id. at 935 (alteration in original) (quotation omitted). 40 We would reach an illogical result if we concluded that the FAA's policy of ensuring judicial enforcement of arbitration agreements is well served by allowing for expansive judicial review after the matter is arbitrated.... Contractually expanded standards, particularly those that allow for factual review, clearly threaten to undermine the independence of the arbitration process and dilute the finality of arbitration awards.... 41 Id. We ultimately framed our Bowen holding in broad terms: We agree and hold that parties may not contract for expanded judicial review of arbitration awards. Id. at 937. 42 From this holding, one might argue that if Bowen expressly forbade private expansion of judicial review, it might also, by implication, prohibit private restriction (or elimination) of judicial review. After all, to justify our refusal to enforce the parties' contractual provisions expanding judicial review, we described the Supreme Court's jurisprudence in this area as suggesting that the FAA is more than a collection of default rules, which parties may alter with complete discretion. Id. at 935. But to make such an argument ignores our dicta in the jurisdictional section of the decision, that parties to an arbitration agreement may eliminate judicial review by contract so long as they clearly and unequivocally indicate their intention to do so. Id. at 931. 43 How, then, do we reconcile our stated willingness to accept private restrictions on judicial review with our express holding that private expansions on judicial review are unenforceable? Fortunately, the panel in Bowen solves this dilemma: The key question is whether the alternate rule conflicts with the federal policies furthered by the FAA. Id. at 935. If the fundamental policy behind the FAA is to reduce litigation costs by providing a more efficient forum, it makes sense to uphold contractual provisions that support that aim while striking down provisions that subvert it. 44 This is not to say that we would uphold any and all private restrictions on judicial review over an arbitrator's award. In Hoeft, the parties' agreement provided that the arbitrator's decision was not subject to any type of review or appeal whatsoever. 343 F.3d at 63. After the arbitrator found for the plaintiff, the defendant successfully persuaded the district court to vacate the award on the grounds that the arbitrator manifestly disregarded the law. Id. at 61, 63. On appeal, the plaintiff argued that the non-appealability clause should have barred the district court from examining the substance of the arbitrator's decision because the parties had expressly agreed that the arbitrator's award would not be subject to any sort of judicial review. Id. at 63. The Second Circuit held that a non-appealability provision cannot deprive the federal courts of the ability to apply the standards set forth in 9 U.S.C. § 10(a) or Wilko. Hoeft, 343 F.3d at 66. The court noted that the plaintiff's position was internally inconsistent: the plaintiff essentially argued that he should be entitled to the benefits of judicial confirmation of the award without incurring the risk of vacatur under § 10(a)(3). Id. at 64. This would, the court argued, turn the district court's involvement with the case into nothing more than a rubber stamp of the arbitration award. Id. The court's overarching concern was that if the federal courts were to give the stamp of legitimacy to the arbitrator's decisions (by confirming his award), they must also retain the right to abrogate that award (if his conduct falls within the narrow parameters for vacatur). See id. 45 There is a fundamental difference between the instant case and Hoeft. In Hoeft, the non-appealability clause applied to a district court's review of the arbitrator's award. 343 F.3d at 63. Here, on the other hand, the clause applies only to an appellate court's review of the district court's judgment (presumably confirming or vacating the arbitrator's award). As a result, none of the policy concerns implicated by Hoeft are present in this case. The agreement here preserves district court review under 9 U.S.C. § 10(a)(3), and while an unsatisfied defendant would not be able to appeal a district court order denying his application to vacate the award, so too would an unsatisfied plaintiff be unable to contest a district court's vacatur of an arbitration award in plaintiff's favor. From the parties' perspective, then, the risks of a negative outcome resulting from the non-appealability clause are borne equally by both sides. What we have here is something less than full judicial review of the arbitrator's decision; but we do not have a situation in which there is no judicial review at all, nor a situation where a court is asked to enforce an arbitration award without being given the authority to review compliance of that award with the FAA. It is, in a sense, a compromise whereby the litigants trade the risk of protracted appellate review for a one-shot opportunity before the district court. 3 Indeed, courts routinely enforce agreements that waive the right to appellate review over district court decisions. See 15A Charles Alan Wright et al., Federal Practice and Procedure § 3901, at 18-19 (2d ed.1992) [hereinafter Wright & Miller]. We see no reason to treat district court decisions concerning arbitration awards differently than any other kind of district court judgment. 46 Thus, consistent with our dicta in Bowen, we hold that contractual provisions limiting the right to appeal from a district court's judgment confirming or vacating an arbitration award are permissible, so long as the intent to do so is clear and unequivocal. Here, the parties' contract expressly provided that the district court's judgment would be both final and nonappealable. While use of the term final would not, by itself, be enough to convey an intent to eliminate appellate rights, see Bowen, 254 F.3d at 931, inclusion of the term nonappealable serves this purpose. 47 Accordingly, Gorelick's motion to dismiss the arbitration appeal for lack of jurisdiction is GRANTED. This leaves only our consideration of the declaratory judgment appeal. 48