In an opinion released yesterday, the Seventh Circuit schooled appellant’s counsel first on the application of the New York Convention and Panama Convention, then on the high standard of review it applies to commercial arbitration awards, and finally expressed profound disappointment with the frequency of motions to vacate arbitration awards.  “Attempts to obtain judicial review of an arbitrator’s decision undermine the integrity of the arbitral process.”  Johnson Controls, Inc. v. Edman Controls, Inc., __ F.3d __, 2013 WL 1098411 (7th Cir. Mar. 18, 2013).  No doubt hoping to reduce that frequency, the court warned that ”challenges to commercial arbitral awards bear a high risk of sanctions.”

In this case, Johnson Controls contracted with an exclusive distributor in Panama.  The contract called for arbitration of any disputes and provided that the prevailing party was entitled to recover its attorneys’ fees and costs.  Johnson Controls started directly competing with the distributor in Panama, so the distributor demanded arbitration and won.  After finding for the distributor on claims of tortious interference and breach of good faith and fair dealing, the arbitrator awarded the distributor over $733,000 in damages, plus almost $300,000 in attorneys’ fees and costs.

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