Can Parties Contract For Expanded Judicial Review Of Arbitration Awards?Posted: September 27, 2012
I’ve been involved in a few cases over the years, at trial and appellate levels, in which the parties to an agreement to arbitrate disputes agreed to broader judicial review of the arbitration award than is allowed under the provisions of the Federal Arbitration Act (“FAA”) or the Connecticut Arbitration Act (“CAA”). Typically the parties agreed to de novo review of questions of law. Frankly, I never gave much thought to whether such agreements were legal; I just assumed they were. I don’t assume that anymore.
A few years ago, in Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), the United States Supreme Court held that parties who avail themselves of the FAA’s procedures for confirming arbitration awards cannot contract for broader judicial review of questions of law than the FAA itself permits. However, the Supreme Court held that its decision did not preclude state courts from reaching a different conclusion when arbitration awards are reviewed under state arbitration acts. Since Hall Street Associates, some state courts have held that parties may contract for judicial review of questions of law when moving to confirm or vacate arbitration awards under their respective state arbitration acts. E.g., Cable Connection, Inc. v. DIRECTV, Inc. 190 P.3d 586 (Cal. 2008).
The Connecticut Supreme Court has not addressed this question directly, but there is some interesting dicta for lawyers to consider. In at least two cases the Court tacitly permitted contractually enhanced judicial review of questions of law. E.g., HH East Parcel v. Handy & Harman, 287 Conn. 189, 204 n.16 (2008); Stutz v. Shepard, 279 Conn. 115, 124 (2006). However, in another case Justices Zarella and Norcott seriously questioned that position. MedValUSA Health Programs, Inc. v. Memberworks, Inc., 273 Conn. 634, 681 (2005) (Zarella, J. dissenting, joined by Norcott, J.) (“With respect to arbitration clauses that provide for expanded judicial review of punitive damage awards, it is clear that General Statutes § 52-418 narrowly circumscribes the grounds on which courts may vacate an arbitration award, and I seriously question whether a party can expand them by contract.”)
How should the state Supreme Court decide this issue when squarely presented with it? In my view, it should hold that parties cannot contract for enhanced judicial review of arbitration awards under the CAA. Here’s why: A statutory proceeding under General Statutes sections 52-417, 52-418, and 52-419 is not the exclusive means for confirming, vacating or modifying an arbitration award. Long before the CAA existed, arbitration awards were enforceable under the common law by way of a traditional civil action. See Spearhead Construction Corp. v. Bianco, 39 Conn.App. 122, 130 (1995). The CAA offers parties a relatively expeditious means (compared to the common law civil action approach) to turn an arbitration award into a judgment of the court. Section 52-420 provides that “[a]ny application under section 52-417, 52-418 or 52-419 shall be heard in the manner provided by law for hearing written motions at a short calendar session, or otherwise as the court or judge may direct, in order to dispose of the case with the least possible delay.” With the sweet, however, comes the bitter. That is, parties seeking to take advantage of the expedited arbitration review process under the CAA must accept the very limited scope of judicial review that the CAA allows. If they want expanded review, they can avail themselves of the slower, common law procedure for enforcing arbitration awards.
To be sure, the decision in Hall Street Associates turned on the specific text of the FAA. However, the language of the relevant federal and state provisions is virtually identical: 9 U.S.C. section 9 states that a court “must” confirm an award “unless” it is vacated, modified or correct “as prescribed” in sections 10 and 11. Similarly, Conn. Gen. Stat. section 52-417 states that “[t]he court or judge shall grant such an order confirming the award unless the award is vacated, modified or corrected as prescribed in sections 52-418 and 52-419.” The latter two sections are counterparts to sections 10 and 11 of the FAA. Given the strong textual similarities between the FAA and CAA, it is difficult (although not impossible) to construct an argument that would lead to a different conclusion about expanded judicial review under the CAA from the conclusion the Supreme Court reached in Hall Street Associates.