Monday, July 14, 2008

consumer - artibration - standard to vacate award

Gateway Funding Diversified Mortgage Services v. Field - ED Pa. - July 10, 20008

There was no basis in this case to overcome the "exceedingly deferential standard necessary to vacate, modify or amended an arbitration award which was sought to be confirmed under 9 USC sec. 9."

Section 9 of the Federal Arbitration Act (FAA) states that the court must grant an order confirming an arbitration award unless the award is vacated, modified, or corrected as prescribed in Sections 10 and 11 of this title. 9 U.S.C.A. § 9.

The review of an arbitration award is “extremely deferential” and vacatur is appropriate only in “exceedingly narrow” circumstances....An arbitration award may be set aside where there is an adequate showing of fraud, partiality, misconduct, violation of a specific command of law, or showing that enforcement would be contrary to public policy....The court’s ability to vacate an arbitration award is almost exclusively limited to these grounds, although an award found to be in manifest disregard of the law can also be vacated by the court.

In addition, procedural irregularities may result in such fundamental unfairness as to warrant the vacation of an arbitral award. For example, a court can vacate an arbitration award where an arbitrator received ex parte informati on to the prejudice of one of the parties; or where the arbitrator refused to admit certain evidence in rebuttal without giving parties warning about the application of evidentiary rules); or because the neutral arbitrator rendered decision without obtaining the signatures of the partisan arbitrators, so that there was a lack of evidence of any significant decision-making process by the majority of the board.

The net result of a court’s application of this standard is generally to affirm easily the arbitration award under this extremely deferential standard - a result that is squarely in line with the purpose behind the FAA where courts are tasked with reviewing an arbitration decision. When an arbitrator resolves disputes regarding the application of a contract, and no dishonesty is alleged, the arbitrator's “improvident, even silly, fact-finding” does not provide a basis for a reviewing court to refuse to enforce the award.

In discussing the courts' limited role in reviewing the merits of arbitration awards, we have stated that “‘courts ... have no business weighing the merits of the grievance [or] considering whether there is equity in a particular claim.’ ”.../When the judiciary does so, “it usurps a function which ... is entrusted to the arbitration tribunal.”