Arbitration provides a way to resolve complex disputes expeditiously, giving parties the freedom to structure their dispute resolution on mutually acceptable terms that are precisely tailored to their relationship. Unlike in traditional litigation, parties can choose their decision maker (often an individual with specialized expertise), define the arbitrable issues, and select the procedures to be used in the arbitration. These attributes often encourage parties to forgo the traditional judicial process in favor of this faster, more predictable private process.
However, the benefits of arbitration come at a significant price to the nonprevailing party. The Federal Arbitration Act (FAA) and state arbitration laws limit the availability of judicial review to vacate an arbitration award largely to procedural irregularities.
Grounds for Vacating an Award under the FAA
The FAA allows a court to vacate an award only in the following instances:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators;
(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 have been prejudiced; or
(4) 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).
These grounds address the overall fairness and impartiality of the arbitration process but normally not the underlying substantive merits of the award itself. As one court has neatly summarized, review of an arbitrator’s decision under the FAA is “one of the narrowest standards of judicial review in all of American Jurisprudence.” Uhl v. Komatsu Forklift Co., 512 F.3d 294, 305 (6th Cir. 2008).
Winter 2017, Vol. 36 No. 2
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