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GROUNDS TO VACATE ARBITRATION AWARD
Tuesday, 02 May 2006

TRIAL DE NOVO OF AN ARBITRATION AWARD
By David Stern, RPA
Vice President
West Coast Casualty Service, Inc.

There are basically four grounds on which a court may vacate, or overturn, an award from an arbitration and they are:

(1) where the award is the result of corruption, fraud, or undue means.

(2) where the arbitrators were evidently partial or corrupt.

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing or hear pertinent evidence, or where their misbehavior prejudiced the rights of any party.

(4) where the arbitrators exceeded their powers or imperfectly executed them so that a mutual, final, and definite award was not made.

In the 1953 case Wilko v. Swan, 346 U.S. 427, 74 S. Ct. 182, 98 L. Ed. 168, the United States  Supreme Court suggested, in passing, that an award may be set aside if it is in "manifest disregard of the law,".Courts on the federal and state levels have sometimes followed this principle when considering a partys motion to seek relief from an arbitration award.

Public policy can also be grounds for vacating, but this recourse is severely limited to well-defined policy based on legal precedent, a rule emphasized by the United States Supreme Court in the 1987 case United Paperworkers International Union v. Misco, 484 U.S. 29, 108 S. Ct. 364, 98 L. Ed. 2d 286.

The growth of arbitration is taken as a healthy sign by many legal commentators who find that arbitration eases the load on a constantly overworked judicial system while providing parties with a relatively informal, inexpensive means to resolve their problems. The greatest recent boost to arbitration came from the United States Supreme Court, which held in 1991 that age discrimination claims in employment are arbitrable (Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26). Writing for the majority, Justice Byron R. White concluded that arbitration is as effective as a trial for resolving employment disputes. Gilmer has led several major employers to treat all employment claims through binding arbitration, sometimes as a condition of employment.

In California, many courts apply the preceding doctrines and case law when considering an appeal or trial de novo of an arbitration award. In the Federal Ninth Circuit case of LaPine Technology Corp. v. Kyocera Corp., 909 F. Supp. 697, 705 (N.D. Cal. 1995), rev'd, 130 F.3d 884 (9th Cir. 1997), the arbitration agreement avoided the problem of limited judicial review by requiring the arbitrators to make detailed findings of fact and conclusions of law, and provided that a district court could "vacate, modify or correct any award based upon any of the grounds referred to in the Federal Arbitration Act, where the arbitrators' findings of fact are not supported by substantial evidence, or where the arbitrators' conclusions of law are erroneous. This gave the court absolute authority for purposes of review to determine if the award was a matter of law and if the law was applied erroneously.

 

Editor’s Note: This material has been prepared to highlight certain complex issues of construction claims and litigation. It is not meant to be definite nor is it meant to provide legal advice which should be sought from competent legal counsel. This material is for educational purposes only and is not to be utilized in any litigation.

 

 

 

 

 

 
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