Chapter 20 - § 20.6 • APPLICATION OF STATE OR FEDERAL "APPEAL" LAW: FAA PREEMPTION

• Jurisdiction: Colorado

§ 20.6 • APPLICATION OF STATE OR FEDERAL "APPEAL" LAW: FAA PREEMPTION

Questions arise as to applicable "appeal law" based upon whether the action is in state or federal court, whether the FAA applies, and whether the parties have agreed upon the governing law.

In Atlantic Aviation, Inc. v. EBM Group, Inc.,⁸⁰ the federal district court vacated an arbitration award and directed a "re-arbitration" before a new arbitration panel. On appeal to the Fifth Circuit, the appellee argued that the court lacked jurisdiction because the Texas Arbitration Act had been applied by the district court, and the parties had agreed the Uniform Arbitration Act governed. Under both of these statutes, an appeal of an order vacating an award and directing a rehearing was not appealable. The court rejected the argument, saying: "[T]he FAA governs judicial review of arbitration proceedings notwithstanding any choice of law provision or state law to the contrary."⁸¹

A Tennessee Court of Appeals was confronted with an issue in a state court case to which the FAA applied: whether the Tennessee statute or FAA governed appeals from district court orders. The FAA provides that an appeal may be taken from an order "vacating an award," whereas the state statute permitted an appeal only from "[a]n order vacating the award without directing a re-hearing." The trial court had vacated the award and remanded the case to FINRA for a new arbitration hearing. The court held that the state statute was procedural and applied, and concluded that the statute was not preempted by the FAA.⁸² If a state court found that the FAA was applicable, if the FAA scope of appeal was broader than the state scope of appeal (when arbitration was denied), and it was held that the FAA preempted state scope of appeal law, could that preemption in essence expand the jurisdiction of the state appellate court...