Arbitration Clause: Appellate Review of the Award on the Merits

June 20, 2017 § 3 Comments

Yesterday we talked about Paige Electric Company’s unsuccessful challenge on appeal to an arbitration clause. The company had asked the circuit court to vacate the award because Davis & Feder were negligent as a matter of law, and that the arbitrator had disregarded the evidence and exceeded his authority. When the circuit judge denied their motion and dismissed their case, they appealed.

In Paige Electric Company v. Davis & Feder, P.A., decided on April 11, 2017, the COA affirmed. Judge Barnes wrote the opinion:

¶19. Paige Electric argues that the award should be vacated as Davis & Feder were negligent as a matter of law, and therefore, the arbitrator disregarded the evidence and exceeded the scope of his authority. The United States Supreme Court has held that in reviewing whether an issue is arbitrable, “considerable leeway [should be given] to the arbitrator” and his or her decision should be set aside “only in certain narrow circumstances.” First Options of Chicago Inc. v. Kaplan, 514 U.S. 938, 943 (1995). Errors of law or fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Nothing in the award relative to the merits of the controversy as submitted, however wrongly decided, is ground for setting aside an award in the absence of fraud, misconduct or other valid objections. Wilson, 830 So. 2d at 1156 (¶12) (quoting Hutto v. Jordan, 204 Miss. 30, 36, 36 So. 2d 809, 811 (1948)).

¶20. “[J]udicial review of arbitration award is narrowly limited, and a motion to vacate, modify, or correct an arbitration award is not an opportunity to relitigate issues decided in the arbitration.” City of Hattiesburg v. Precision Constr. LLC, 192 So. 3d 1089, 1096 (¶27) (Miss. Ct. App. 2016). Mississippi Code Annotated section 11-15-23 (Rev. 2004) provides the four grounds upon which an arbitrator’s decision may be vacated:

(a) That such award was procured by corruption, fraud, or undue means;

(b) That there was evident partiality or corruption on the part of the arbitrators, or any one of them;

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent or material to the controversy, or other misbehavior by which the rights of the party shall have been prejudiced;

(d) That the arbitrators exceeded their powers, or that they so imperfectly executed them that a mutual, final, and definite award on the subject matter was not made.

“In Mississippi, we have always considered ‘undue means’ to constitute some nefarious conduct on the part of the arbitrator – not simply an incorrect or sloppy conclusion of law.” Robinson v. Henne, 115 So. 3d 797, 802 (¶17) (Miss. 2013) (citing McClendon v. Stewart, 133 Miss. 253, 258, 97 So. 547 (1923)). The Mississippi Supreme Court has held: “[A] mistake of law, a mistake of fact, or a decision lacking an evidentiary basis is insufficient to constitute a violation of any of the four statutory categories that permit the vacatur of an arbitrator’s decision.” Id. at 803 (¶19).

¶21. The circuit judge found that the arbitrator did not exceed his powers in this instance. She further concluded there was “nothing in this record to indicate that Mr. Latham refused or failed to review the case law, nothing to indicate he had any preconceived notions or opinions and certainly nothing to indicate what evidence he focused on or didn’t focus on.” We find no error in the circuit court’s holding. Giving a reasonable presumption “in favor of the validity of arbitration proceedings,” we affirm the circuit court’s judgment.

Between yesterday’s post and today’s, you can deduce the breathtaking sweep of rights that you cede when you agree to an arbitration clause in a contract. Not only do you give up your right to a jury trial, but you also surrender the right to appellate review except on quite narrow, difficult-to-prove grounds.

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§ 3 Responses to Arbitration Clause: Appellate Review of the Award on the Merits

  • hale1090 says:

    And most agreements – ie take it or leave it contracts of adhesion –
    now contain arbitration clauses.
    Why should an arbitrator receive more deference than a chancery judge? The result may be defined by who picks the arbitrator and how often the arbitrator is picked by the party. After all arbitrators are human and if an arbitrator knows his decision is not subject to review, it is more likely to be arbitrary.

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