Opinion ID: 1643072
Heading Depth: 2
Heading Rank: 4

Heading: Arbitrary, Irrational, and Failure to Derive Essence

Text: The News, in addition to asserting that the arbitrators exceeded their powers and acted in manifest disregard of the law, claims that each award fails to derive its essence from the underlying contract, was arbitrary and capricious, and was completely irrational. See William H. Hardie, Arbitration: Post-Award Procedures, 60 Ala. Law. 314, 322-23, for a general discussion of these grounds. We decline the News's invitation to adopt any of these other grounds of review. We deem these grounds too vague for application in the context of arbitration awards where the arbitrators have neither exceeded their powers nor manifestly disregarded the law. Professor Stephen L. Hayford, a recognized authority on judicial review of arbitration awards, after noting that only a few federal circuits have adopted these grounds, offered the following thoughtful analysis of their problematical nature: The case law from the several federal courts of appeals embracing the `other' nonstatutory grounds for vacatur reveals no unifying theory explaining or justifying that judicial tack. Nevertheless, it seems clear that the three nonstatutory grounds for vacatur of commercial arbitration awards beyond the `manifest disregard of the law' and `public policy' grounds are largely the product of judicial efforts to draw a line between `routine' arbitral missteps that do not warrant vacatur of the award and arbitral errors of law, contract interpretation, or fact so calamitous as to compel a reviewing court to intervene, presumably in the name of justice, and overturn the arbitral result. . . . . . . . The undisciplined approach to judicial decisionmaking reflected in the case law recognizing the `other' nonstatutory grounds for vacatur gives rise to the second primary problem they present. The mode of analysis described above has produced a number of imprecise legal standards that furnish the lower courts and the practicing bar with little useful guidance in their tasks of distinguishing between commercial arbitration awards that are seriously flawed and therefore likely subject to vacatur and those that are not. . . . Judicial attempts to clarify the precise parameters of a court's inquiry under the `other' nonstatutory grounds reflected in the case law reviewed above invariably fail to provide the lower courts and the commercial arbitration bar with objective, easily identifiable standards for determining when a petition for vacatur should succeed. Instead, these opinions have done little more than furnish rhetorical `hooks' for efforts at securing reversal of the offending arbitration awards. The preceding review of the relevant case law demonstrates that attempts at achieving vacatur under the `other' nonstatutory grounds are almost always futile. Why courts, when presented with petitions for vacatur intoning one or more of the `other' nonstatutory grounds, do not simply note that the standard(s) relied upon by the petitioner is (are) nowhere contemplated in the FAA or the law of commercial arbitration and then proceed to summarily dismiss the underlying petitions is puzzling indeed. Instead, the courts recognizing these grounds typically engage in an analysis of the cited ground for vacatur, endeavor to fashion standards for distinguishing between awards that warrant vacatur and those that do not, and then note that the articulated test for vacatur is not satisfied. After a circuit first addresses one of the `other' nonstatutory grounds, advocates who wish to take issue with the merits of an unfavorable commercial arbitration award are provided with ready-made commercial arbitration case authority upon which to base such a challenge. Given the imprecise, highly subjective character of the `arbitrary and capricious award,' the `clearly irrational award,' and the `essence of the agreement' standards, it is not surprising that a party dissatisfied with a commercial arbitration award often finds irresistible the temptation to attempt to convince a reviewing court that the arbitrator's resolution of the dispute before him was so seriously marred by an error of law, contract, or fact as to warrant vacatur in the interest of justice. Until the federal courts of appeals that have adopted the `other' nonstatutory grounds squarely confront and address this reality and the highly dubious presumption of an identity between commercial and labor arbitration, the destabilizing effect of these constructs on commercial arbitration is certain to limit the move toward institutionalizing the commercial arbitration process as a viable and effective substitute for traditional litigation. (Emphasis added.) Stephen L. Hayford, A New Paradigm for Commercial Arbitration: Rethinking the Relationship Between Reasoned Awards and the Judicial Standards for Vacatur, 66 Geo. Wash. L.Rev. 443, 489-93 (1998).