Fifth Circuit Reaffirms that the FAA Provides the Exclusive Grounds for Vacatur of Arbitration Awards After Hall Street v. Mattel

In United Forming, Inc. v. Faulknerusa, LP, No. 09-50073 (5th Cir. Oct. 27, 2009), FaulknerUSA, LP (Faulkner) is the general contractor at a construction project; United Forming, Inc. (United) is a sub-contractor; and Continental Casualty, Co. (Continental) is the surety of their agreement. After a dispute over United’s work, the parties submitted their claims to arbitration before an American Arbitration Association (AAA) panel. The panel ruled for United and Continental. However, when United filed to confirm the award, Faulkner moved to vacate it. The district court ruled for United and Faulkner now appeals.

The Fifth Circuit, citing Hall Street v. Mattel, Inc., 552 U.S. 576, 128 S. Ct. 1396, 170 L. Ed. 2d 254 (2008), highlighted that “[o]n a motion to vacate an award brought under the Federal Arbitration Act (“FAA”), the FAA sets forth the exclusive grounds for vacatur.”

Then, the court addressed the three arguments raised by Faulkner. First, Faulkner claims that one of the arbitrators failed to make proper pre-arbitration disclosure of conflicts. The court, citing Positive Software Solutions, Inc., v. New Century Mortgage Corp., 476 F.3d 278, 281-85 (5th Cir. 2007) (a decision which discussed circumstances in which nondisclosure is “evident partiality” under the FAA) concluded that in the present case, the undisclosed information was a “speculative impression of bias” and not a “significant compromising relationship.”

Next, the court considered Faulkner’s second claim that two of the arbitrators had “actual bias.” The court stated that ‘evident partiality’ under the FAA means ‘bias’ that is ‘clearly evident in the decision makers’ and concluded that Faulkner failed to meet its burden.

Finally, the court explained that it did not need to reach Faulkner’s third claim that the AAA panel’s award was so contrary to the law that it constitutes “misconduct” or misbehavior” because the court concluded that “such a situation is not presented here.” Accordingly, the court affirmed the confirmation of the award and denied Faulkner’s motion to vacate.

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