Putting “bottom line up front,” the first paragraph of a recent Eleventh Circuit decision begins:
Long story, short: if you want certain rules to apply to the handling of your arbitration,
the contract must say so clearly and unmistakably. Otherwise, the Federal Arbitration
Act (“FAA”) will apply.
The parties here did not do that. So the FAA’s arbitration-award standards for review
govern.
Gulfstream Aerospace Corporation v Oceltip Aviation 1 Pty Ltd, 31 F.4th 1323 (11th Cir.
2022).
Two sections of the arbitration agreement between Gulfstream Aerospace Corporation and Oceltip Aviation 1 Pty Ltd. read in part:
Section 4.3.1 [requires arbitration] … “by the American Arbitration Association (“AAA”) in
accordance with the provisions of its Commercial Arbitration Rules …” and specifies that
“judgment on the award rendered by the arbitrator(s) may be entered by any court
having jurisdiction thereof.”
Section 4.3.3 directed that the contract “shall be governed by the laws of the State of
Georgia, and the U.N. Convention on Contracts for the International Sale of Goods …
shall not apply, without reference to rules regarding conflicts of law.”
A three-member arbitration tribunal awarded Gulfstream damages, attorney’s fees and expenses.
Gulfstream applied to the United States District Court for the Southern District of Georgia to confirm the award while Oceltip sought vacatur of the award in the Superior Court of Chatham County, Georgia. Gulfstream removed Oceltip’s state court proceeding to the Southern District of Georgia and the District Court consolidated the cases.
Oceltip argued the Agreement’s choice-of-law provision incorporated all Georgia law including the Georgia Arbitration Code and its standards. Gulfstream responded that while Georgia law governs resolution of the merits of the dispute, the federal standards (meaning the FAA standards) control review of the arbitral award. (Resolution of this dispute was important since “manifest disregard of the law” supplies a basis for vacating an award under Georgia law but not under federal law).
In addition to two technical arguments involving the U.N. Convention On Contracts for the International sale of Goods, the Eleventh Circuit also noted the contract required arbitration by AAA Commercial Arbitration Rules demonstrating an implicit choice not to have the Georgia Arbitration Code govern the arbitration.
The lesson -- in the first paragraph of the court decision-- is that the parties need to draft in the standard for confirmation and vacatur into the arbitration agreement.
In Hall Street Associates, LLC v Mattel, Inc., 552 U.S. 576 (U.S. 2008), the Supreme Court contemplats possible enforcement standards other than by the Federal Arbitration Act or a state arbitration act:
In holding that §§ 10 and 11 (of the Federal Arbitration Act) provide exclusive regimes for
the review provided by the statute, we do not purport to say that they exclude more
searching review based on authority outside the statute as well. The FAA is not the only
way into court for parties wanting review of arbitration awards: they may contemplate
enforcement under state statutory or common law, for example, where judicial review of
different scope is arguable.
During the course of litigation in court, Hall Street and Mattel entered into an agreement for arbitration which the court approved and entered as an order which provided in part:
“[t]he United States District Court for the District of Oregon may enter judgment upon
any [arbitration] award, either by confirming the award or by vacating, modifying or
correcting the award. The Court shall vacate, modify or correct any award: (i) where the
arbitrator’s findings of facts are not supported by substantial evidence, or (ii) where the
arbitrator’s conclusions of law are erroneous.”
The Supreme Court noted the District Court apparently thought it was applying the FAA but observed a question raised at oral argument was whether the agreement should be treated as an exercise of the District Court’s authority to manage its cases under Federal Rules of Civil Procedure 16. The Supreme Court left this issue for resolution on remand. I have been unable to find what ultimately happened. This language opens the possibility that the parties may negotiate and agree on arbitration review standards different than the Federal Arbitration Act or a state arbitration act.
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