Opinion ID: 1057586
Heading Depth: 3
Heading Rank: 1

Heading: Scope of Review of an Arbitration Award in Tennessee

Text: An agreement to arbitrate is governed by the TUAA. [2] Tenn.Code Ann. §§ 29-5-301 to -320 (2000). The TUAA provides that (a) A written agreement to submit any existing controversy to arbitration ... is valid, enforceable and irrevocable save upon such grounds as exist at law or in equity for the revocation of any contract.... (b) The making of an agreement described in this section providing for arbitration in this state confers jurisdiction on the court to enforce the agreement under this part and to enter judgment on an award thereunder. Tenn.Code Ann. § 29-5-302. We have held that [a] judgment by consent is in substance a contract of record made by the parties and approved by the court. Third Nat. Bank v. Scribner, 212 Tenn. 400, 370 S.W.2d 482, 486 (1963); accord Harbour v. Brown, 732 S.W.2d 598, 599-600 (Tenn. 1987). Thus, the parties' agreement to arbitrate embodied in the consent order falls within the scope of the TUAA. Three statutes describe the judicial review that a court must apply when asked to enforce an arbitration award pursuant to the TUAA. See Tenn.Code Ann. §§ 29-5-312 to -314. Pursuant to section 29-5-312, the court shall confirm an award, unless, within the time limits hereinafter imposed, grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in §§ 29-5-313 and 29-5-314. (Emphasis added). The grounds enumerated in sections 29-5-313 and 29-5-314 for vacating, modifying, or correcting an arbitration award are narrow. [3] In this case, however, the parties agree that they did not intend to invoke the narrow judicial review provisions provided in the TUAA. To obtain review pursuant to the TUAA, one of the parties was required to request that the trial court vacate, modify, or correct the arbitrator's award pursuant to the limited grounds set forth in the TUAA. See id. §§ 29-5-313, -314. Neither party objected to the trial court's confirmation of the award, and therefore neither party preserved a basis for appeal from the trial court's confirmation. See id. § 29-5-312. Instead, the parties in this case attempted to appeal the arbitrator's award, not the trial court's confirmation of the award. To do so, the parties included a provision in their consent order stating that the arbitrator's award shall be appealable, using the same standards of review, as if the finding, ruling or judgment in question was issued by [the trial court]. Simply put, they attempted to make the decision of the arbitrator the judgment or ruling of the trial court and to permit an appeal therefrom. We therefore must determine whether an arbitration agreement may provide for a judicial review of an arbitration award that is broader than the scope of review provided by the TUAA or whether the application of the TUAA limits the manner in which the arbitrator's award may be reviewed. This is an issue of law, which we review de novo. Edwards v. Allen, 216 S.W.3d 278, 284 (Tenn.2007). We have not addressed this issue directly, but we previously have touched on the role of trial courts in arbitration. In Arnold v. Morgan Keegan & Co., Inc., we observed that the language of the TUAA evinced the General Assembly's intent to limit the trial court's authority to retry issues decided by arbitration. 914 S.W.2d 445, 448 (Tenn. 1996). We also emphasized the importance of finality in the arbitration award process: To permit a dissatisfied party to set aside the arbitration award and to invoke the Court's judgment upon the merits of the cause would render arbitration merely a step in the settlement of the dispute, instead of its final determination. Id. at 452. In Arnold, we relied heavily on the United Stated Supreme Court's decision in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), which concerned the Federal Arbitration Act (FAA). We explained that both the FAA and the TUAA were adopted to promote private settlement of disputes, thereby bypassing the courts. As such, the scope of review advanced by the United States Supreme Court has equal application in a case under the [TUAA] to the extent that such review furthers the common goal of acts. [4] Arnold, 914 S.W.2d at 448 n. 2. For the same reason, the United States Supreme Court's decision in Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008), also concerning the FAA, guides our analysis of the issue presented in this case. In Hall Street, the Supreme Court rejected the parties' agreement to expand the trial court's review of their arbitration awards under the FAA. The arbitration agreement between the parties in Hall Street provided that the trial court shall vacate, modify or correct any award: (i) where the arbitrator's findings of facts are not supported by substantial evidence, or (ii) where the arbitrator's conclusions of law are erroneous. Id. at 579, 128 S.Ct. 1396. The arbitration agreement was executed and entered as an order of the trial court during the course of litigation, like the consent order in this case, and did not expressly invoke the FAA. Id. at 590-91, 128 S.Ct. 1396. Like the TUAA, three statutes describe the judicial review that a court must apply when asked to enforce an arbitration award pursuant to the FAA. 9 U.S.C. §§ 9-11 (2006). Pursuant to section 9 of the FAA, a court must confirm an arbitration award unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11. Like sections 29-5-313 and 29-5-314 of the TUAA, the grounds for vacating, modifying, or correcting an arbitration award under sections 10 and 11 of the FAA are narrow. [5] In Hall Street, the Court applied basic interpretive principles to these judicial review provisions to determine whether the FAA has textual features at odds with enforcing a contract to expand judicial review following the arbitration. Hall Street, 552 U.S. at 586, 128 S.Ct. 1396. The Court characterized the grounds for review under the FAA as remedies for egregious departures from the parties' agreed-upon arbitration, id., and concluded that these grounds evinced a national policy favoring arbitration with just the limited review needed to maintain arbitration's essential virtue of resolving disputes straightaway. Id. at 588, 128 S.Ct. 1396. In the Supreme Court's view, permitting parties to expand the FAA's judicial review provisions would open[ ] the door to the full-bore legal and evidentiary appeals that can `rende[r] informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process,' and bring arbitration theory to grief in post-arbitration process. Id. (citations omitted). The Hall Street majority carefully limited its holding, however, explaining that its interpretation of the FAA did not exclude more searching [judicial] review based on authority outside the statute. Id. at 590, 128 S.Ct. 1396. Parties may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable. Id. We have reviewed the language of the TUAA and have concluded, in short, that the rationale proffered by the United States Supreme Court in Hall Street applies with equal force to the case before us. We first observe that the language of the judicial review provisions in the TUAA are substantially similar to those in the FAA. Compare Tenn.Code. Ann. §§ 29-5-312 to -314 with 9 U.S.C. §§ 9-11. To the extent that these statutory schemes are different, the judicial review provisions in the TUAA are more restrictive. In reaching its conclusion that the FAA's judicial review provisions are mandatory, the Hall Street Court emphasized the language in section 9 stating that a court must grant confirmation unless the award is vacated, modified, or corrected as prescribed by sections 10 and 11. Hall Street, 552 U.S. at 587, 128 S.Ct. 1396 (quoting 9 U.S.C. § 9). Likewise, section 29-5-312 of the TUAA employs mandatory language, stating that the court shall confirm an award, unless ... grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in §§ 29-5-313 and 29-5-314. (Emphasis added). However, the FAA employs permissive language in sections 10 and 11, stating that the reviewing court may vacate, modify, or correct an award pursuant to the enumerated circumstances. The TUAA, on the other hand, continues to employ mandatory language in sections 29-5-313 and 29-5-314, stating that the reviewing court shall vacate, modify, or correct an award pursuant to the enumerated circumstances. We also held in Arnold that an arbitration award cannot be vacated under the TUAA because it is irrational while federal courts have held that an award could be vacated on this ground under the FAA. Arnold, 914 S.W.2d at 451. We rested our holding on two observations. First, we noted that while the TUAA provides for vacation of an award because [t]he arbitrators exceeded their powers, Tenn.Code Ann. § 29-5-313(a)(3), the FAA provides for vacation of an award on broader grounds: 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(a)(4). Second, we noted that the FAA does not include the limiting language of section 29-5-313(a) of the TUAA expressly disallowing vacation of an award on the ground that the relief was such that it could not or would not be granted by a court of law or equity. Tenn.Code Ann. § 29-5-313(a)(5). Finally, the General Assembly has directed that the TUAA be construed so as to effectuate its general purpose to make uniform the law of those states which enact it. Tenn.Code Ann. § 29-5-320. We look to other states for guidance. Id. A slim majority of state courts that have addressed whether parties may expand the scope of judicial review provided in their own versions of the UAA have taken the position espoused in Hall Street. See Brucker v. McKinlay Transp., Inc., 454 Mich. 8, 557 N.W.2d 536, 541 (1997) (holding that the parties' arbitration agreement was unenforceable to the extent its definition of the role of a the circuit court conflicted with the Michigan arbitration statute); John T. Jones Constr. Co. v. City of Grand Forks, 665 N.W.2d 698, 704 (N.D. 2003) (holding that parties to an arbitration agreement cannot contractually expand the scope of judicial review beyond that provided by statute); Barnett v. Hicks, 119 Wash.2d 151, 829 P.2d 1087, 1095 (1992) (en banc) (holding that the nature and scope of review of the arbitrator's decision cannot be stipulated to by the parties). But see Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal.4th 1334, 82 Cal.Rptr.3d 229, 190 P.3d 586, 589 (2008) (holding on statutory and contractual grounds that parties may obtain judicial review on the merits by express agreement); HH E. Parcel, LLC v. Handy & Harman, Inc., 287 Conn. 189, 947 A.2d 916, 926 n. 16 (2008) (Parties to agreements remain ... free to contract for expanded judicial review of an arbitrator's findings.). For the above-stated reasons, we hold that the TUAA governs judicial review of arbitration awards. Pugh's and Jaycon's consent order therefore impermissibly expanded the scope of judicial review beyond the scope of review provided in Tennessee Code Annotated sections 29-5-312, -313, and -314.