Opinion ID: 2497296
Heading Depth: 2
Heading Rank: 3

Heading: A Party Seeking Confirmation Must Produce The Arbitration Agreement

Text: Our analysis begins, as always, with the plain text of the statute. Section 9 of the FAA begins by stating that a court shall confirm an arbitration award: If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration. 9 U.S.C. § 9. (Emphasis added). The plain language of 9 U.S.C. § 9 presupposes an agreement to arbitrate as a necessary condition for confirmation of an arbitral award. Therefore, before a court may enter judgment on a petition to confirm, it must answer the fundamental question: Was there an arbitration agreement between these parties? FIA argues this question has already been answered by the arbitrator. The arbitral award states [o]n or before 02/22/2007 the Parties entered into a written agreement to arbitrate their dispute. The district court judge apparently believed the arbitrator's finding was binding on the court: [t]he arbitration agreement is valid, binding and enforceable because the debtor did not timely bring an attack on the arbitration agreement, and the arbitrator found the arbitration agreement to be binding and enforceable. However, both the U.S. Supreme Court and this court have held a challenge brought to the very existence of the contract containing the arbitration clause must be decided by the court, not by the arbitrator. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 23, n. 27, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983); International River Center v. Johns-Manville Sales Corp., 02-3060 (La.12/3/03), 861 So.2d 139, 143. It is also noteworthy that, under the FAA, any party moving for an order confirming. . . an award shall, at the time such order is filed with the clerk for the entry of judgment thereon, also file the following papers with the clerk: (a) the agreement. 9 U.S.C. § 13. The fact that the agreement must be filed with the court affirms it is the court's duty to rule on this issue, and it is not left solely to the arbitrator's discretion. If Congress meant for the arbitrator's decision on this issue to be binding, there would be no need for the moving party to provide the court with a copy of the contract. Although our analysis is based on the statutory language of the FAA, we have also reviewed the jurisprudence on this issue. This court is bound by the United States Supreme Court's interpretation of federal statutes. We are not bound by the decisions of lower federal courts (or, for that matter, other state supreme courts). Shell Oil Co. v. Secretary, Revenue and Taxation, 96-0929 (La.11/25/96), 683 So.2d 1204, 1210 n. 11. Nonetheless, we review those opinions carefully to see if they provide further guidance for our analysis. Chittenden v. State Farm Mutual Auto. Ins. Co., 00-414 (La.5/15/01), 788 So.2d 1140, 1149 n. 21. Weaver relies primarily on MCI Telecommunications Corp. v. Exalon Industries, Inc., 138 F.3d 426 (1st Cir.1998). MCI entered into a tariff regulation with the FCC which provided for arbitration of any dispute between MCI and anyone using its services as a provider of long-distance telecommunications. Id. at 427. Exalon and MCI signed a contract which apparently did not include an arbitration clause. When a dispute arose regarding MCI's fees, MCI proceeded to arbitration. Exalon, not believing itself bound by the FCC tariff regulation, did not participate in the arbitration, and a sizable award was entered in MCI's favor. Id. at 428. MCI moved to confirm the award, and Exalon filed an opposition claiming there was no written agreement to arbitrate between the parties. The district court held, because Exalon did not file a motion to vacate within three months of entry of the award, it waived any objections. The First Circuit reversed, emphasizing that in arbitration the need for an agreement, or more accurately, one that is in writing, as condition to gaining access to the umbrella provided by the FAA, manifests itself throughout the various provisions of this law. Id. at 429. Therefore, it is apparent that determining whether there is a written agreement to arbitrate the controversy in question is a first and crucial step in any enforcement proceeding before a district court . . . . if one of the parties alleges the inexistence of the contract, such a party is entitled to present evidence before the fact finder in support of this position. Id. at 429 (emphasis added). The court went on to compare Exalon's strategy to a collateral attack on a default judgment: this situation is analogous to where a lawsuit proceeds against a non-appearing party over whom personal jurisdiction has not been acquired. That party can challenge the judgment when it is executed, for it lacks legal validity. Id. at 430. Interestingly, the court suggested that, if Exalon had appeared before the arbitrator, it would have not been permitted to bring such a collateral attack. Id., citing Cullen v. Paine, Webber, Jackson & Curtis, Inc., 863 F.2d 851 (11th Cir.1989) and Professional Administrators Ltd. v. Kopper-Glo Fuel, Inc., 819 F.2d 639 (6th Cir.1987). The case was remanded for the district court to determine whether Exalon had ever entered into a written arbitration agreement. Id. at 431. [3] Not all state courts have accepted MCI 's reasoning. Advantage Assets, Inc. II v. Howell, 190 N.C.App. 443, 663 S.E.2d 8 (2008) also involves an assignee of MBNA credit card debt. Plaintiff obtained a default arbitration award from the NAF. After the three month period had run, and no motion to vacate had been filed, plaintiff filed a motion to confirm. As proof of arbitration agreement, plaintiff submitted an unsigned credit card agreement dated April 2001. [4] The court held the defendant's response to plaintiff's motion to confirmthat there was no arbitration agreementwas simply not an appropriate response given the procedural posture of the case. Id. at 447, 663 S.E.2d 8. The court believed defendant's only legitimate means for attacking an arbitration agreement was to file a pre-arbitration motion under 9 U.S.C. § 4. Id. Under this interpretation, if a party fails to challenge the arbitration agreement prior to the arbitration proceedings, he is estopped from ever doing so. We do not find the North Carolina court of appeal's reasoning convincing. To begin with, we note the court does not adequately address the requirements for confirming an award under 9 U.S.C. § 9. That statute begins by emphasizing a court shall only confirm an arbitration award If the parties in their agreement have agreed to do so. Id. Highly significantly, the North Carolina court chose not to quote that language, instead beginning its quote with the second part of the statute. In ignoring this crucial phrase, the court assumed away the central issue whether an arbitration award may be confirmed where the party seeking confirmation has failed to present evidence of an agreement between the parties. We also note that Advantage Assets has not been followed or cited by any other state or federal court, and appears to be against the greater weight of authority, most of which supports MCI. In Bank of America, N.A. (USA) v. Dahlquist, 336 Mont. 50, 152 P.3d 718 (2007), the bank sued Dahlquist on an unpaid credit card debt. Dahlquist responded by filing a motion to confirm an arbitration award he had obtained from the National Arbitration Council (NAC). [5] Bank of America failed to dispute the award within ninety days. Dahlquist moved to confirm the award and argued the bank had waived any defense, including any defense claiming that there was no arbitration agreement. Id. at 720. The Montana Supreme Court unanimously rejected this assertion. It noted that [u]nder the FAA, where parties have not agreed to arbitrate . . . the arbitration award is invalid ab initio . . . [the] FAA time limitation was thus not triggered, and [the bank] is not bound by the award, even though it failed to challenge it within three months. Id. at 721; accord Citibank v. Wood, 177 Ohio App.3d 103, 894 N.E.2d 57 (2008) (citing Dahlquist and holding an award entered without an agreement to arbitrate before that arbitrator is legal nullity which may be challenged at any time.) Similarly, in Yates v. CACV of Colorado, LLC, 303 Ga.App. 425, 693 S.E.2d 629 (2010), CACV, a successor in interest to MBNA, initiated arbitration proceedings with the NAF. An award was entered in favor of CACV and, after three months passed, it filed a motion to confirm. Yates filed a cross-claim under the Fair Debt Collection Practices Act and a motion to vacate the arbitral award. As proof of the agreement to arbitrate, CACV submitted an undated, unsigned, unauthenticated arbitration agreement. Id. at 634. The trial court confirmed the award, but the Court of Appeal reversed. The court noted, as an initial matter, whether an arbitration agreement exists is a question for the court, not the arbitrator, and CACV bore the burden of proving the existence of such a valid and enforceable agreement. Id. at 634 (citing Pickle v. Rayonier Forest Resources, 282 Ga.App. 295, 638 S.E.2d 344 (2006) and Life Care Centers of America v. Smith, 298 Ga.App. 739, 681 S.E.2d 182 (2009)). The court found, in no uncertain terms, CACV failed to meet that burden: The record before us shows unequivocally that CACV failed to meet this burden. The only evidence of an arbitration agreement was an undated, unauthenticated photocopy of certain additional terms and conditions of an MBNA credit agreement that CACV attached to its amended petition to confirm the arbitration award. There was no evidence, however, showing that Yates's contract with MBNA was governed by these provisions. Specifically, CACV did not submit a copy of any credit card application or agreement executed by Yates; nor did it submit an affidavit or other evidence showing the date Yates entered into a credit agreement with MBNA and that the photocopied terms and conditions represented the terms and conditions in effect for all MBNA credit agreements at that time. Alternatively, CACV failed to offer any evidence showing that the original credit agreement between Yates and MBNA had been properly amended, the date of such amendment, that the attached terms and conditions reflected the amended agreement, that the amendments were sent to Yates, and that she accepted the same by continuing to use her MBNA credit card. Id. at 635 (citations omitted). Because the question of the existence of an arbitration clause is for the court, CACV could not simply rely on the arbitrator's findings and bore the burden of presenting evidence from which a court could independently determine the existence of the agreement. Id. The court rejected CACV's argument that Yates' failure to move to vacate within three months waived the defense. The assertion of this defense does not constitute a motion to vacate, modify or correct an award. Thus, it is not subject to the 90-day time limitation found in section 12 of the FAA. 9 USCA § 12. Rather, a claim that a contract dispute is not subject to arbitration constitutes an attack on the subject matter jurisdiction of the arbitrator, and thus may be raised at any time. Id. Several other state courts have likewise found, even if a defendant fails to timely move to vacate an arbitral award, he may raise the lack of an arbitration agreement as a defense to confirmation. See Danner v. MBNA America Bank, NA, 369 Ark. 435, 255 S.W.3d 863, 867 (2007) (The time limits provided by section 12 . . . do not prevent a party who did not participate in an arbitration proceeding from challenging the validity of the award at the time of its enforcement on the basis that no written agreement to arbitrate existed between the parties); MBNA America Bank, NA v. Christianson, 377 S.C. 210, 659 S.E.2d 209, 212 (S.C.App.2008) (MBNA could not rely on the debtor's tardiness in challenging the award if the arbitrator never had jurisdiction to arbitrate and enter an award . . . Before a circuit court confirms an arbitration award subject to the Federal Arbitration Act, there must be evidence of an arbitration agreement); MBNA America Bank, NA v. Credit, 281 Kan. 655, 132 P.3d 898, 900 (2006) (MBNA cannot rely on Credit's tardiness in challenging the award if the arbitrator never had jurisdiction to arbitrate and enter an award); MBNA America Bank, NA v. Boata, 283 Conn. 381, 926 A.2d 1035, 1045 (2007) ([A]t the very minimum, a trial court must determine whether there is an agreement to arbitrate before it confirms an award on the basis of that agreement. Thus, a challenge to the existence of an arbitration agreement is appropriate at any stage.) FIA cites several cases finding challenges to arbitration proceedings are waived if not raised within three months. However, many of these cases are distinguishable as they do not involve challenges to the underlying arbitrability of the dispute. See, e.g., Weldon v. Asset Acceptance, LLC, 896 N.E.2d 1181 (Ind.App. 2008) (Undisputed that the credit card agreement contained an arbitration clause, and the defendant had accepted those terms by use of the card); Comprehensive Accounting Corp. v. Rudell, 760 F.2d 138 (7th Cir.1985) (record contained a copy of a signed contract including an arbitration clause); Ottley v. Schwartzberg, 819 F.2d 373 (2d Cir.1987) (Undisputed that collective bargaining agreement provided for arbitration). Indeed, many of these cases seem to stand for the proposition that, where the defendant has established no grounds for vacating an award, the award must be confirmed. [6] While this is certainly the law, it does not apply where, as here, there are grounds for not enforcing an awardspecifically, lack of proof that an arbitration agreement exists.