Fifth Circuit Cements Principle of Federal Deference to Arbitration Awards

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In yet another example of the great deference accorded to arbitral decisions by U.S. Federal Courts, the Fifth Circuit recently declined to vacate or modify an award based on allegations of arbitrator misconduct. Despite intimations that the conduct of the opposing party and the arbitrator may have led to a reversal had it occurred in the district court, the Fifth Circuit cited the bedrock principle that, due to a “strong federal policy favoring arbitration,” judicial review of arbitration awards is “extremely narrow,” and refused to vacate the award.

In Bain Cotton Co. v. Chesnutt Cotton Co., No. 12-1138 (June 24, 2013, unpublished), a breach of contract claim was fought in arbitration. Despite allegations by Bain that the arbitrator “evidenced partiality or corruption” by denying discovery requests. The Fifth Circuit affirmed the district court’s refusal to vacate or re-open the case and emphasized that the grounds for such actions are extremely narrow.

The court went on to mention the limited grounds under §10 of the Federal Arbitration Act, which states that an arbitration award may be vacated “only if the reviewing court finds that: (1) the award was procured by corruption, fraud, or undue means; (2) that there was evident partiality or corruption in the arbitrators; (3) that the arbitrators were guilty of misconduct in refusing to postpone the hearing on sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; (4) or any other misbehavior by which the rights of any party are prejudiced, or 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.”

The Fifth Circuit’s decision is stark, short, plain, and unpublished, suggesting that the issue at hand is not controversial. Indeed, it fits in squarely with a central principle strengthened by decades of jurisprudence relating to arbitration: once an award is handed down by an arbitrator, it is extremely difficult to vacate.

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