Can a Court Order a Party Not to Request an Arbitration Remedy the Arbitrator May Not Grant?
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In appropriate circumstances, Courts can vacate under Federal Arbitration Act Section 10(a)(4) an award that does not draw its essence from the parties’ agreement but instead was based on the arbitrators’ own notions of economic justice.
In Benihana, Inc. v. Benihana of Tokyo, LLC, ___ F.3d ___, No. 14-841, slip op. (2d Cir. April 28, 2015), the U.S. Court of Appeals for the Second Circuit was faced with a different issue: whether before an award was made a court can enjoin a party from asking the arbitrators to award it a remedy that the parties’ contract does not authorize them to award.
The Court quite correctly ruled that district courts do not have the discretion to grant such an injunction because, among other things, doing so would violate the Federal Arbitration Act by infringing upon the parties’ agreement to arbitrate. In so holding the court was able to clarify a misunderstanding about arbitrability that is all too common among lay persons, a number of lawyers and apparently even the occasional judge.
Benihana, Inc. (“Benihana U.S.”) and Beni-Hana of Toky (“Benihana Tokyo”) were parties to a 1995 licensing agreement, which granted Benihana Tokyo the right to open Benihana restaurants in Hawaii. The agreement contained a New York choice of law clause.
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