Arbitration is a method of dispute resolution which can provide a speedy and less costly resolution to disputes. Arbitration is often preferred by the party who is a defendant on the belief that arbitration is better strategically. The speedier resolution of arbitration does not come without a cost. A party to an arbitration aggrieved by an adverse award is often stuck with that award, even if the arbitrator’s decision was wrong. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.
The United States Supreme Court decision AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), explained that the Federal Arbitration Act (FAA) “was enacted in 1925 in response to widespread judicial hostility to arbitration agreements.” According to the FAA, an agreement to arbitrate is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C.A. § 2.
In business litigation, when a trial court makes an incorrect decision there are usually appellate options available to reverse the improper order. By contrast, in arbitration there are very few options for a party aggrieved by what they believe to be the wrong decision. This is by design. If a court can simply reconsider a case on the merits when there is an allegation that the arbitrator was wrong, the arbitration becomes simply a stepping stone in the dispute resolution process rather than its own dispute resolution system.
Th Supreme Court explained in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995). “the court will set [an arbitral] decision aside only in very unusual circumstances.” Particularly, the FAA specifies the following bases for vacation of an arbitration award:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
9 U.S.C.A. § 10(a)(1)-(4).
“Because arbitration is an alternative to litigation, judicial review of arbitration decisions is ‘among the narrowest known to the law.’” Bamberger Rosenheim, Ltd., (Israel) v. OA Dev., Inc., (United States), 862 F.3d 1284 (11th Cir. 2017). This is often beneficial in business litigation cases when a party does not want a very lengthy set of proceedings and instead wants more rapid finality to the case. The law of arbitration encourages finality of business litigation disputes by making it difficult to reverse an arbitrator’s decision. The Supreme Court decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), explained in pertinent part that, “[i]t is not enough for petitioners to show that the panel committed an error—or even a serious error. It is only when [an] arbitrator strays from interpretation and application of the agreement and effectively ‘dispense[s] his own brand of industrial justice’ that his decision may be unenforceable.”
“[A] party seeking to vacate an arbitration award on the ground of manifest disregard of the law may not proceed by merely objecting to the results of the arbitration. To do so would result in relitigation of the claim, in violation of the basic purposes of arbitration: a fast, inexpensive resolution of claims.” O.R. Sec., Inc. v. Prof’l Planning Associates, Inc., 857 F.2d 742 (11th Cir. 1988). “This rule can be a tough pill to swallow for a losing party subjected to what seems like a legally questionable interpretation. […] But we have good reason to defer to the arbitrator’s reasoning, even when it is different than our own.” Gherardi v. Citigroup Glob. Markets Inc., 18-13181, 2020 WL 5553255 (11th Cir. Sept. 17, 2020).
Accordingly, a court reviewing an arbitral award in business litigation does not look to an arbitral award for legal errors. “[T]he sole question for [the court] is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether [s]he got its meaning right or wrong.” Wiregrass Metal Trades Council AFL-CIO v. Shaw Envtl. & Infrastructure, Inc., 837 F.3d 1083 (11th Cir. 2016)
In the recent employment litigation case, Gherardi v. Citigroup Glob. Markets Inc., 18-13181, 2020 WL 5553255 (11th Cir. Sept. 17, 2020), an employer was attempting to get out of an adverse arbitral award. The Gherardi employee-plaintiff was high performing broker and investment advisor for the employer-defendant. The plaintiff allegedly had a history of aggressive behavior. This ultimately led to the employer issuing the plaintiff “final warning” following an incident where the plaintiff was verbally abusive with another employee. The Gherardi plaintiff threatened to take the final warning to arbitration. The plaintiff was fired three days later.
The plaintiff thereafter brought an employment litigation claim in arbitration against the employer for wrongful termination and the panel awarded the plaintiff $4,000,000. While the parties’ contract contained a provision that the plaintiff could be “terminated at any time and for any reason or no reasons, the arbitrators found that language in the employment contract acted as an anti-retaliation provision which was violated by the defendant.
The employer sought to vacate the arbitral award for a few reasons, but the trial court ultimately vacated the award on the basis that the arbitrators exceeded their authority by making a decision which was not supported by the contract itself. Gherardi reversed the trial court, concluding that it was not the court’s role to act in an appellate capacity.
Arbitration can provide a speedy resolution to a dispute, but this speedy resolution comes at a price. A party to arbitration can be left with an award that appears to be objectively wrong with little likelihood that a reviewing court will reverse the arbitrator’s decision. Peter Mavrick is a Miami business litigation attorney who also practices business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.