4th Circuit: Arbitration Award May Be Final, Binding, And Judicially Enforceable Even If Arbitration Agreement Doesn't Explicitly Say So
This past week (Dec. 3) the Fourth Circuit decided a Federal Arbitration Act (FAA) case, Qorvis Communications, LLC v. Wilson, involving a failed attempt to prevent judicial confirmation of an arbitration award.
Qorvis sued Wilson, its former executive employee, for breach of his employment agreement. The agreement had an arbitration clause providing for JAMS arbitration (Judicial Arbitration and Mediation Services, Inc.). They arbitrated, and the arbitrator entered an award of $366,000 against Wilson. After the district court entered judgment on the award, Wilson appealed, arguing that the district court lacked authority to confirm the award.
Why? The parties' arbitration agreement didn't provide that an award would be enforceable by court judgment. Wilson relied on § 9 of the FAA which says, "If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, . . . then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order." 9 U.S.C. § 9 (emphasis added). Relying on the absence of an agreement for judicial enforcement, Wilson argued that the district court lacked authority to enter judgment. In essence, Wilson was arguing that without language in the arbitration agreement stating that a court can enter judgment, the arbitration isn't final and binding; rather it's merely a condition precedent to bringing suit in court.
The Fourth Circuit disagreed. Noting that § 9 need not be satisfied by any magic language, the Court held that other evidence may show that the parties contemplated judicial enforcement of an arbitration award. In this case, that other evidence included other language in the arbitration clause, language in JAMs rules incorporated by the arbitration clause, and the parties' conduct (e.g., the employee moved the court post-arbitration to vacate the award).
The bottom line in the Fourth Circuit appears to be this: if you want to avoid making an award final and binding and subject to judicial enforcement, you have to express that intention explicitly and unambiguously in the arbitration agreement itself. Otherwise the Court will presume an intention for final, binding arbitration with judicial enforcement of arbitration awards.
Qorvis sued Wilson, its former executive employee, for breach of his employment agreement. The agreement had an arbitration clause providing for JAMS arbitration (Judicial Arbitration and Mediation Services, Inc.). They arbitrated, and the arbitrator entered an award of $366,000 against Wilson. After the district court entered judgment on the award, Wilson appealed, arguing that the district court lacked authority to confirm the award.
Why? The parties' arbitration agreement didn't provide that an award would be enforceable by court judgment. Wilson relied on § 9 of the FAA which says, "If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, . . . then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order." 9 U.S.C. § 9 (emphasis added). Relying on the absence of an agreement for judicial enforcement, Wilson argued that the district court lacked authority to enter judgment. In essence, Wilson was arguing that without language in the arbitration agreement stating that a court can enter judgment, the arbitration isn't final and binding; rather it's merely a condition precedent to bringing suit in court.
The Fourth Circuit disagreed. Noting that § 9 need not be satisfied by any magic language, the Court held that other evidence may show that the parties contemplated judicial enforcement of an arbitration award. In this case, that other evidence included other language in the arbitration clause, language in JAMs rules incorporated by the arbitration clause, and the parties' conduct (e.g., the employee moved the court post-arbitration to vacate the award).
The bottom line in the Fourth Circuit appears to be this: if you want to avoid making an award final and binding and subject to judicial enforcement, you have to express that intention explicitly and unambiguously in the arbitration agreement itself. Otherwise the Court will presume an intention for final, binding arbitration with judicial enforcement of arbitration awards.
1 Comments:
That's great information. Thanks for posting it.
Ehren Bragg
www.arbitrationhorrorstories.com
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