If “Grave Error” Is Not Enough to Vacate An Arbitrator’s Decision, What Is?
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The recent Sutter decision drives home repeatedly that a court may not vacate an arbitrator’s decision under the FAA just because a judge thinks the arbitrator reached the wrong result. Justice Kagan said that under Section 10(a)(4) the court cannot second-guess the award, not even in the face of “grave error.” Instead, the award must be confirmed, whether it is “good, bad, or ugly.” If an ugly and gravely erroneous arbitration award does not establish that an arbitrator “exceeded his or her powers,” what does?
In general, the answer relates back to the fact that arbitration is a matter of contract. If an arbitrator forgets that he or she is an all powerful genie only within the confines of his or her own lamp, which is defined by the arbitration agreement, there is a risk that the award can be vacated. (Can you tell I watched “Aladdin” with the kids on my ArbitrationVacation?) Here are a few examples of recent cases finding an arbitrator exceeded his or her powers, that would likely survive the test articulated in Sutter.
When an arbitrator issued an award that significantly rewrote the parties’ contract, the Third Circuit held that the award exceeded the arbitrator’s powers. In particular, the court noted that the relief “was not sought by either party, and was completely irrational because [the arbitrator] wrote material terms of the contract out of existence.” PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., 2010 WL 4409655 (3d Cir. 2010). See also Nat’l Hockey League Players’ Assoc. v. Nat’l Hockey League, 30 F. Supp. 2d 1025, 1029 (N.D. Ill. 1998) (vacating an award when the arbitrator considered evidence the parties had specifically agreed to exclude).
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