Arbitration ruling upheld despite conflicting law.

Byline: David Ziemer

Even if the Wisconsin Fair Dealership Law entitles a prevailing party to attorneys fees, an arbitrators order that parties pay their own fees cannot be set aside, because no law prohibits parties from agreeing on their own to such a compromise, the Seventh Circuit Court of Appeals held last week.
George Watts & Son, a Milwaukee retailer, sold the products of Tiffany & Co. for many years. After receiving a notice ending that arrangement, Watts filed suit in federal court, alleging breach of contract and violations of the Wisconsin Fair Dealership Law (WFDL).
Prior to a decision, however, the two sides decided to arbitrate. The arbitrators award extended the time during which Watts could resell Tiffanys merchandise, but permitted Tiffany to eventually cease selling to Watts. The award required Tiffany to repurchase any remaining merchandise at retail prices.
The award also required the parties to pay their own attorneys fees.
Watts contested this portion of the award, and asked the district court to award fees, arguing that the WFDL requires that attorneys fees be awarded a prevailing party.
U.S. District Court Judge Thomas J. Curran enforced the order, however, and Watts appealed.
The Seventh Circuit affirmed, in a decision by Judge Frank H. Easterbrook. Judge Anne Claire Williams wrote separately, concurring only in the judgment.
The majority concluded that it need not decide whether the WFDL requires an award of attorneys fees to a prevailing party, and declined to address the subject.
Instead, the Seventh Circuit concluded that, pursuant to the recent U.S. Supreme Court decision in Eastern Associated Coal Corp. v. United Mine Workers, 121 S.Ct. 462 (2000), the order is valid, regardless of what the statute provides.
Under that decision, a court may find that an arbitration order constitutes manifest disregard of the law, and set it aside, only in two circumstances:
1) the order requires the parties to violate the law (such as by requiring a company to employ unlicensed truck drivers); or
2) the order does not adhere to the legal principles specified by contract, contrary to 9 U.S.C. 10(a)(4) such as by declaring that, despite contractual resolution that the dispute be resolved under Wisconsin law, New York law would govern.
In Eastern Associated Coal, the U.S. Supreme Court concluded that judges may not deprive arbitrators of authority to reach compromise outcomes that legal norms leave within the discretion of the parties.
...