Arbitration is a creature of contract, and an arbitrator’s powers are in effect defined by the parties’ arbitration agreement. Paradoxically, although an arbitration agreement can be written (double-spaced) on one side of a cocktail napkin, in some cases it may grant greater authority to an arbitrator than a judge has.
For example, in Timegate Studios, Inc. v. Southpeak Interactive, LLC, Case No. 12-20256 (5th Cir. Apr. 9, 2013), the Fifth Circuit confirmed an arbitration award in which the arbitrator substantially reformed the parties’ commercial agreement by, among other things, awarding one a broad perpetual license to certain of the other’s intellectual property, despite the fact that the original agreement had granted only a more narrowly drawn ten-year license. The Fifth Circuit opined that the arbitral award helped fulfill the “essence” of the parties’ contract, and that the arbitrator therefore had not exceeded his authority by awarding relief that the contract itself did not contemplate.
