MIAMI BUSINESS LITIGATION: VACATING AN ARBITRATION AWARD

Arbitration is a voluntary process to resolve disputes and is favored by the courts. The Federal Arbitration Act (commonly referred to as the “FAA”) sets forth the requirements for arbitration and rules for judicial review and confirmation of an arbitration decision. Judicial review of commercial arbitration awards is narrowly limited under the FAA. The United States Court of Appeals for the Eleventh Circuit, in Davis v. Prudential Securities, Inc., 59 F.3d 1186 (11th Cir. 1995), explained that the FAA presumes the confirmation of arbitration awards. Earlier precedent from the Eleventh Circuit in Robbins v. Day, 954F.2d 682 (11th Cir. 1992), explained that federal courts should defer to an arbitrator’s decision whenever possible. Under the FAA, 9 U.S.C. Section 10(a), there are four statutory grounds to vacate (i.e., overturn) an arbitration decision: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party may have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, an award upon the subject matter submitted was not made. Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In addition to the four statutory grounds for vacatur, federal case law has identified several non-statutory grounds to vacate an arbitration award. For example, Ainsworth v. Skurnick, 960 F.2d 939 (11th Cir. 1992), explained that a federal court may vacate an arbitration award if the award is “arbitrary and capricious.” Delta Air Lines, Inc. v. Air Line Pilots Ass’n, Int’l, 861 F.2d 665 (11th Cir. 1988), determined that a court may vacate an arbitrator’s award when it is contrary to “public policy.” Montes v. v. Shearson Lehmon Brothers, Inc., 128 F.3d 1456 (11th Cir. 1997), held that the court may overturn the arbitration award if it was made in manifest disregard for the law.

Federal courts narrowly construe the “manifest disregard for the law” basis for vacating an arbitration award. The Montes decision explained that this ground for vacating an arbitration award requires clear evidence that the arbitrator was “conscious of the law and deliberately ignore[d] it.” A showing that the arbitrator merely misinterpreted, misstated, or misapplied the law is insufficient. Federal courts rarely determine that arbitration awards warrant vacatur based on the manifest disregard of the law standard set forth in Montes. For example, Univ Commons-Urbana, Ltd. v. Universal Constructors, Inc., 304 F.3d 1331 (11th Cir. 2002), did not overturn the arbitration award based on the arbitrator’s alleged disregard of the law, stating in pertinent part that, “we have no indication of the arbitrators’ reasons for [their award], and thus, we have no reason to believe that they disregarded the law in doing it.” Similarly, Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217 (11th Cir. 2000), determined that even if the arbitrator applied the wrong legal standard, the appellant did not show that “that this alleged error was intentional or that the arbitrator made a conscious decision not to follow the appropriate legal standard.” Scott v. Prudential Securities, Inc., 141 F.3d 1007 (11th Cir. 1998), held that the appellant’s arguments did not “approach the type of disregard for the law that we found in Montes” and the record and briefs showed “nothing more than a disagreement over the application of the law not its manifest disregard.” Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.