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Case Spotlight:
Award Finality (Eastern Seaboard)

by ~ Paul E. White (Email) (Web Site)

First Circuit Declines to Vacate Revised Arbitration Award

Finality (or conversely, reviewability) of arbitration awards is often an important consideration in reinsurance disputes. In Eastern Seaboard Construction Co., Inc. v. Gray's Construction, Inc., et al, 553 F.3d 1 (1st Cir. 2008), the First Circuit recently had its first opportunity to consider how a court should apply AAA Rule R-47 (Rule 47), which precludes an arbitrator from redetermining the merits of any dispute and limits corrections to clerical, typographical, technical or computational errors in the award. Although not a reinsurance case, Eastern Seaboard provides important insight into how reinsurance arbitration awards will be reviewed in the First Circuit.

Reviewing the decision of an arbitrator to modify an earlier arbitration award, the Court issued another reminder about the great deference that a reviewing court must accord to the parties' decision to submit their dispute to arbitration, concluding that the seemingly clear mandate of Rule 47 against modifications to an initial arbitration award must yield - even if the initial award appears clear on its face - if the arbitrator's revised award can be construed as clarifying, rather than modifying, the initial decision.

The underlying arbitration was a construction dispute between a general contractor (Gray) and a sub-contractor (Eastern). In an initial award, the arbitrator granted Eastern recovery on all but one of its claims, but also awarded Gray $77,000 "to be deducted from the award paid to Eastern." Eastern moved for clarification of the arbitration award and the arbitrator granted Eastern's motion, issuing an amended award that reduced the $77,000 set-off to $66,613.89. Arguing that Rule 47 prohibits substantive modifications to an arbitration award, Gray moved the dispute to federal court, seeking an order vacating the amended award. The District Court agreed with Gray, and Eastern appealed to the First Circuit.

The First Circuit reversed the District Court and reinstated the amended arbitration award. In so doing, the First Circuit emphasized that the scope of review of an arbitration award by a court is "among the narrowest known in the law" and that, because the parties have contracted to have disputes settled by an arbitrator, "arbitral awards are nearly impervious to judicial oversight." While recognizing that a court may review an arbitration award under Section 10 of the Federal Arbitration Act where an arbitrator has exceeded his powers, the First Circuit reasoned that reversal of an arbitrator's award on this ground is permissible only "where an award is contrary to the plain language of the [contract] and in instances where it is clear from the record that the arbitrator recognized the applicable law - and then ignored it." (internal quotations omitted)

Acknowledging that the actions of the arbitrator here presented a close question, the First Circuit explained that the test in applying Rule 47 is whether the second award is "fundamentally inconsistent" with the initial award, or whether it "simply fleshes out the remedy announced initially". As the Court's reasoning makes clear, however, the distinction between "clarify" and "alter" is not always easy to draw. Since the supposedly undisputed figure of $66,613.89 was not even mentioned in the initial award, the First Circuit acknowledged that the initial award appeared to be complete and unambiguous on its face. Nevertheless, the First Circuit observed, "even seemingly complete awards may omit information or overlook contingencies, failures that AAA Rule 47 would allow the arbitrator to remedy." Giving full effect to the principle of deferential review of arbitration awards, the First Circuit also pointed to a statement of the arbitrator in issuing his amended award that Gray had not disputed the $66,613.89 figure, finding this statement, by itself, to be sufficient to show that the arbitrator had not exceeded his authority. Thus, the Court treated the arbitrator's omission of this amount in the initial award as simply a "clerical, typographical, technical or computational error" which AAA Rule 47 permitted him to clarify.We use the very best in technology to make these elegant cheap handbags uk,cartier replica watches,swiss replica watches and replica watches.

 2009 Sugarman, Rogers, Barshak & Cohen, P.C. All Rights Reserved.

Click Here for more about Eastern Seaboard Construction Co., Inc. v. Gray's Construction, Inc., et al.

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