Advising Clients of Arbitration Awards and Vacatur of an Award
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A significant dispute has arisen in connection with your client’s work on a construction project and, pursuant to the contract documents, the dispute has proceeded to arbitration under the Federal Arbitration Act (FAA). Several days into the arbitration hearing, your client surmises that the arbitration is not going well and there is a high probability of an adverse award. Your client turns to you and says, “This arbitration panel is misinterpreting the facts and not applying the law; we can always seek to overturn the arbitration award, right?”
Without hesitation you recall that, as part of your pre-arbitration checklist, you advised the client about the potential for an adverse award and explained that there are very limited grounds for vacating an arbitration award under the FAA. As you reflect on that discussion, you breathe a sigh of relief because you know that prior to proceeding with arbitration you made the client fully aware of the following:
Applicability of the FAA to Arbitration Proceedings
The FAA (9 U.S.C. §§ 1–16) is substantive law applicable in both federal and state courts.Southland Corp. v. Keating, 465 U.S. 1, 16 (1984); Global Travel Marketing, Inc. v. Shea, 908 So. 2d 392, 396 (Fla. 2005). It applies to arbitration agreements that are a part of written maritime contracts or contracts evidencing a transaction involving interstate commerce.Keating, 465 U.S. at 10; see 9 U.S.C. § 2. State courts are bound to follow the FAA when it applies, and it supersedes inconsistent provisions of state law. See Keating, 465 U.S. at 16. The FAA reflects a strong federal policy in favor of enforcement of agreements to arbitrate. Shea, 908 So. 2d at 396.
Grounds for Vacating an Arbitration Award under the FAA
The review of an arbitration award is guided by the FAA, which presumes that arbitration awards will be confirmed. Roberson v. Charles Schwab & Co., 339 F. Supp. 2d 1337, 1339 (S.D. Fla. 2003); Riccard v. Prudential Insurance Co., 307 F.3d 1277, 1288 (11th Cir. 2002). Courts are expected to give great deference to arbitration awards. First Preservation Capital, Inc., v. Smith Barney, Harris Upham & Co., Inc., 939 F.Supp. 1559, 1563 (S.D. Fla. 1996). As such, an arbitration award can be set aside only in certain narrow circumstances.Roberson, 339 F. Supp. 2d at 1340.
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