Fifth Circuit Affirms Order Despite Alleged Arbitrator Misconduct

In an unpublished opinion, the United States Fifth Circuit Court of Appeals has affirmed a lower court’s refusal to vacate an arbitration award and reopen a case despite alleged arbitrator misconduct.  In Bain Cotton Company v. Chesnutt Cotton Company, No. 12-11138, (5th Cir. June 24, 2013), Bain Cotton Company engaged in arbitral proceedings with Chesnutt Cotton Company.  During arbitration, an arbitral panel denied a number of Bain’s discovery requests and apparently evidenced partiality when they “summarily condemned Bain for failing to provide proof supporting its claims.”

According to the appeals court,

This appeal presents a quintessential example of a principal distinction between arbitration and litigation, especially in the scope of review. Had this discovery dispute arisen in and been ruled on by the district court, it is not unlikely that the denial of Bain’s pleas would have led to reversal; however, under the “strong federal policy favoring arbitration, judicial review of an arbitration award is extremely narrow.” Under §10 of the FAA, an arbitration award may be vacated only if the reviewing court finds that the award was procured by corruption, fraud, or undue means; that there was evident partiality or corruption in the arbitrators; that the arbitrators were guilty of misconduct in refusing to postpone the hearing on sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or any other misbehavior by which the rights of any party are prejudiced, or the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

Because the lower court’s reasoning was sound and the arbitrators’ decision failed to meet any of the statutory requirements for reversal, the Fifth Circuit affirmed the trial court’s decision to deny Bain’s “motion to reopen the case, vacate the arbitration award, and obtain additional discovery.”