Court Opinion

ID: 9515290
Source: CourtListenerOpinion
Date Created: 2023-08-06 22:55:25.821205+00
Date Added: 2024-06-11T09:06:27.574159
License: Public Domain

ZINTER, Justice
(dissenting).
[¶ 28.] I agree that the parties did not verbally “agree” to a “reasoned award.” *490Supra ¶ 19.2 There is also no dispute that there was no written agreement for a reasoned award. Therefore, the right to require a reasoned award was lost by Broin under the American Arbitration Association’s (AAA’s) Construction Industry Arbitration Rules, which were incorporated into the parties’ arbitration agreement. Under those rules, the arbitrator had express authority, in fact, unfettered discretion, to ultimately determine whether it was “appropriate” to render his decision in the form of a reasoned award. Because the arbitrator had express and absolute authority to determine whether a reasoned award was appropriate, this Court mistakenly concludes that “[t]his award exceeded the arbitrator’s powers” and was not a “final.and definite” award. Supra ¶¶21-23 (emphasis added).
[¶ 29.] Our standard of review of an arbitrator’s decision concerning the form of the award is, like most arbitration matters, limited. Even if this Court is convinced that the arbitrator committed serious error, as “long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority,” arbitration awards must be confirmed. Schoch v. InfoUSA, Inc., 341 F.3d 785, 788 (8th Cir.2003) (citation omitted). See also United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 371, 98 L.Ed.2d 286, 299 (1987); Gas Aggregation Services, Inc. v. Howard Avista Energy, LLC, 319 F.3d 1060, 1064 (8th Cir.2003); Bureau of Engraving, Inc. v. Graphic Communication Int’l Union, Local 1B, 284 F.3d 821, 824 (8th Cir.2002).
[¶ 30.] With respect to the form of the award, “[i]t is usually held that the law requires only that an arbitrator announce his award, not that he state detailed reasons therefor.” Meharry v. Midwestern Gas Transmission Co., 103 Ill.App.3d 144, 58 Ill.Dec. 887, 430 N.E.2d 1138, 1140 (1981) (citation omitted). As the Iowa Supreme Court explained:
Arbitrators need not disclose the facts or reasons behind their award unless the arbitration agreement or submission, or an applicable statute, requires them to do so. Otherwise, they are no more bound to go into particulars, or to give reasons for their award, than a jury is for its verdict. When acting within the scope of their authority, being the chosen judges of the parties and the law unto themselves, they may award according to their notions of justice and without assigning any reason.
Reicks v. Farmers Commodities Corp., 474 N.W.2d 809, 811 (Iowa 1991) (citation omitted).
[¶ 31.] In this case, the scope of the arbitrator’s authority to determine the form of the award was governed by the AAA Rules because the parties’ agreement incorporated those rules. Rule R-43(b) expressly defined the scope of the arbitrator’s authority over the form of the award. It provided:
Form of Award
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(b) The arbitrator shall provide a concise, written breakdown of the award. If requested in writing by all parties prior to the appointment of the arbitrator, or if the arbitrator believes it is appropriate to do so, the arbitrator shall provide a written explanation of the award.
(Emphasis added). Thus, under this unambiguous rule, the parties either had to *491have agreed in writing3 to a reasoned award or the decision was left to the sole discretion of the arbitrator.
[¶ 32.] In this case, there was no written agreement, and therefore, the arbitrator was within the clear scope of his authority to issue a non-reasoned award. Simply stated, absent a written agreement,4 Rule R-43(b) gave the arbitrator absolute discretion to determine the form of the award he deemed “appropriate.” Because the arbitrator possessed that authority, the arbitrator did not exceed his powers or so imperfectly execute them that a mutual, final, and definite award was not made under the vacation provisions of 9 U.S.C. § 10(a)(4).
[¶ 33.] The Court concludes otherwise, reasoning that the arbitrator exceeded his powers because he “violated the rules he agreed to follow” and did not enter a final and definite award. Supra ¶¶ 21-23 (emphasis added). The Court points out that the arbitrator entered a preliminary hearing scheduling order that indicated a reasoned award would be entered. The Court then concludes that the arbitrator had no authority, after issuing a preliminary hearing scheduling order, to change his decision and issue a non-reasoned award. The Court reasons that “[o]nce the arbitrator ordered that the award he would issue would be reasoned, his powers were defined. The arbitrator’s decision to issue a reasoned award bestowed a substantive right on Broin and, at the same time, imposed a substantive duty upon the arbitrator.” Supra ¶ 23. From this premise, the Court ultimately concludes that the arbitrator’s change of decision and failure to amend the preliminary order “constituted a substantive error under the [Federal Arbitration Act] and the AAA rules he operated under.” Id. However, the Court misinterprets Rule R-43(b) and the express language of the preliminary order. The Court fails to consider that an arbitrator, like any other comparable judicial officer, is authorized to change preliminary decisions that have not become final.
[¶ 34.] The weakness of the Court’s conclusions is first demonstrated by its own description of the uncertain nature of the arbitrator’s preliminary decision regarding a reasoned award. The Court can only state that “a reasoned award was apparently consented to by the arbitrator,” supra ¶ 15 (emphasis added), or that “the arbitrator must have determined that it was appropriate to give a reasoned award.” See supra ¶ 20 (emphasis added). These slender findings hardly demonstrate a binding preliminary determination, let alone a binding final decision, as to the form of the award.5
*492[¶ 35.] But, more fundamentally, the Court’s reasoning (that an arbitrator may not change his decision before a final award is entered because a preliminary order bestows unalterable substantive rights and duties) is legally unsupportable. It is unsupportable because first, as both parties acknowledge, the preliminary order was expressly modifiable by the arbitrator at any time. Indeed, Paragraph 12 of the preliminary order provided it was interlocutory and subject to change at any time: “This order shall continue in effect unless and until amended by subsequent order of the Arbitrator (s).” (Emphasis added.) Similarly, the case manager’s report, which confirmed the terms of the preliminary hearing and this arbitration, indicated that the preliminary order would “continue in effect unless and until amended by subsequent order of the arbitrator.” (Emphasis added.) Thus, by the terms of the preliminary order itself, the arbitrator retained express authority to change the form of the award.
[¶ 36.] Second, it must be remembered that the authority to change a preliminary or interlocutory order is well recognized in the federal and state law governing dispute resolutions. It is specifically recognized that preliminary and interlocutory orders6 do not bestow unalterable rights and duties. That is because the federal courts have recognized there is “inherent power to reconsider and modify an interlocutory order any time prior to entry of judgment.” Viehweg v. Mello, 5 FSupp2d 752, 757 (E.D.Mo.1998). A departure from an earlier holding is allowed when the Court is “convinced that the holding is incorrect.” Id. See also Lovett v. General Motors Corp., 975 F.2d 518, 522 (8th Cir. 1992) (stating that until the district court entered judgment on all claims, it could consider earlier rulings on an issue). Similarly, we have consistently held that “[a] trial court has the inherent power to reconsider and modify an order any time prior to entry of judgment.” Moore v. Michelin Tire Co., Inc., 1999 SD 152, ¶ 46, 603 N.W.2d 513, 525 (citations omitted). Therefore, it is no surprise that arbitrators also have this authority to reconsider their earlier rulings until the time they become final. Foreman v. Cargill, 1986 WL 9910 (Del.Super.Ct.).
[¶ 37.] Third, contrary to the majority opinion, there is no requirement under Rule R-43(b) or the FAA that an arbitrator must issue a formal “amended order” to retain authority to re-determine the form of the award that the arbitrator will ultimately utilize. On the contrary, there is only one way an arbitrator can lose his authority and become bound to a particular form of award under the rules of this arbitration; i.e. if a reasoned award is “requested in writing by all parties prior to the appointment of the arbitrator.” Id. That did not occur.
*493[¶ 38.] Finally, even if the technicality of a formal amendment were preferable under Rule R-43(b), the arbitrator possessed other authority to issue a non-reasoned final award without amending the preliminary order. This authority was granted in Rule R-54, which gave the arbitrator authority to “interpret and apply” Rule R-43(b) insofar as it relates to the arbitrator’s powers and duties. Thus, having authority to interpret and apply Rule R-43(b), it is immaterial under arbitration standards of review whether the arbitrator correctly or incorrectly exercised that authority and changed the form of the final award without amending the preliminary order. Even if the arbitrator had incorrectly interpreted Rule R-43(b) to not require a formal amendment before issuing a non-reasoned award, it was within the scope of the arbitrator’s authority to interpret and apply that rule in a manner that the final award superseded any preliminary orders. See generally Koch Oil, S.A. v. Transocean Gulf Oil Co., 751 F.2d 551, 554 (2d Cir.1985) (construing the same AAA “power to interpret and apply the AAA rules,” to “obligate ... the parties to abide by the AAA’s determination, at least within reasonable limits, of what constitutes such compliance” with other AAA rules); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Burke, 741 F.Supp. 191, 194 (N.D.Cal.1990) (stating that “interpretations of the law by the arbitrators in contrast to manifest disregard are not subject ... to judicial review for error in interpretation.” (quoting Wilko v. Swan, 346 U.S. 427, 436, 74 S.Ct. 182, 187, 98 L.Ed. 168, 176 (1953)).
[¶ 39.] In the final analysis, the outcome of this case is controlled by the fact that there was no written agreement for a reasoned award. Therefore, this arbitrator had the sole authority to determine the form of the award. Moreover, his preliminary order was subject to change in the final award. Thus, after hearing the facts and law at the hearing, the arbitrator had authority to determine that the case only merited a non-reasoned award. I therefore dissent.

. As the Court notes, absent a credibility determination by the trial court, it is impossible to determine whether the parties verbally agreed to a reasoned award at the preliminary hearing.

.Broin also argues that Rule R-l allowed the parties to modify these rules. However, Rule R-l also required a "written agreement,” which was undisputedly absent here. Therefore, there is no need to address Broin's argument under Rule R-l (providing in relevant part that "[t]he parties shall be deemed to have made these rules a part of their arbitration agreement.... The parties, by written agreement, may vary the procedures set forth in these rules. After appointment of the arbitrator, such modifications may be made only with the consent of the arbitrator.”). (Emphasis added.)

. Even if the parties had verbally agreed to a ’ reasoned award at the preliminary hearing, there is no dispute that these parties never agreed in writing. Therefore, Broin may not rely on Rule R-43(b) or R-l to require a reasoned award.

. The Court’s equivocal description of the preliminary order is due to the nature of the record in arbitrations. The record reflects that this issue was discussed at the preliminary hearing. Thereafter, a confirming preliminary scheduling order indicated a reasoned award would be utilized. However, for reasons not disclosed in the record, the arbitrator subsequently changed his decision and *492decided not to issue a reasoned award. Because of the nature of the record in arbitra-tions, we simply do not know why the arbitrator changed his decision as to the form of the award. All we do know is that Rule R-43(b) expressly authorized the arbitrator to determine the form of the award he deemed “appropriate/' and there is no provision of the Federal Arbitration Act that invalidates this authority.

. The preliminary hearing order regarding the form of the award under Rule R-43(b) was clearly interlocutory in nature. See Mobil Oil Indonesia Inc. v. Asamera Oil (Indonesia) Ltd., 43 N.Y.2d 276, 401 N.Y.S.2d 186, 372 N.E.2d 21, 23 (1977) (stating that when arbitrators make what in judicial proceedings might be described as an interlocutory order, they decide which of two alternative sets of arbitration rules the particular arbitration proceeding should thereafter be conducted under — this is an intermediate procedural determination.).