Conflicting Interpretations of the One-year Requirement on Motions to Confirm Arbitration Awards

• Jurisdiction: United States,Federal
• Citation: Vol. 38
• Publication year: 2022

38 Creighton L. Rev. 661. CONFLICTING INTERPRETATIONS OF THE ONE-YEAR REQUIREMENT ON MOTIONS TO CONFIRM ARBITRATION AWARDS

Creighton Law Review

Vol. 38

TERESA L. ELLIOTT(fn*)

I. INTRODUCTION

For years, both individuals and businesses have used arbitration to resolve their disputes instead of resorting to the traditional court system.(fn1) Arbitration provides a better choice for businesses because it is less adversarial than traditional litigation and as such, may help foster future business relationships.(fn2) Another advantage is that arbitrators will likely be experts in the business field wherein the dispute arose.(fn3) All of these factors make arbitration an attractive alternative to traditional litigation.

The Federal Arbitration Act ("FAA")(fn4) governs commercial arbitration by providing parties with guidelines and enforcement mechanisms for their arbitrated disputes.(fn5) The FAA allows a party to force arbitration when an agreement exists and the other party is refusing to arbitrate, describes how an arbitrator is to be appointed, gives arbitrators the power to compel the attendance of witnesses, allows a party to confirm an arbitration award as a court judgment, and also allows for the vacation of an arbitration award in limited circumstances.(fn6) Thus, even though arbitration is a form of alternative dispute resolution, the FAA ensures that arbitration has the same power and ability to decide cases as traditional court litigation.

At times, however, courts have disagreed on the meaning and effect of the different sections and language in the FAA.(fn7) Currently, there exists a circuit court split regarding language in § 9 of the FAA (" § 9").(fn8) The legal debate upon which this article focuses involves the statute of limitations aspect of § 9.(fn9) Section 9 states, in relevant part: "at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award . . . ."(fn10) The circuits are split over whether the word "may" means that an application to confirm need not be filed within one year or if § 9 imposes a one-year statute of limitations on applications to confirm an arbitration award.(fn11)

The Fourth and Eighth circuits have held § 9 allows a motion for confirmation to be made beyond a one-year period.(fn12) These circuits reason that the explicit language of § 9 controls.(fn13) According to these circuits, the use of the word "may" in § 9 is significant - Congress would have replaced "may" with "shall" or "must" had Congress intended for § 9 to act as a one-year statute of limitations.(fn14) The Fourth and Eighth circuits also declare that this permissive interpretation furthers judicial economy - an essential policy of the FAA.(fn15) According to the Fourth Circuit, because remedies exist outside the FAA to enforce an arbitration award, reading § 9 as a one-year statute of limitations defeats the FAA policy of judicial economy.(fn16) In this article, the interpretation of the Fourth and Eighth Circuits will be called the "permissive interpretation" of § 9.

The Second Circuit, however, has held that § 9 imposes a one-year statute of limitations for confirming an award.(fn17) The Second Circuit reasoned that the word "may" in § 9 was not as important as the rest of the language in § 9.(fn18) Relying on the United States Supreme Court's decision in Cortez Byrd Chips, Inc. v. Bill Harbert Construction Co.,(fn19) the Second Circuit held the word "may" alone did not automatically lead to a permissive interpretation.(fn20) The court further stated that the phrase "at any time within one year" in § 9 would have no meaning should a permissive interpretation be followed.(fn21) In this article, the interpretation of the Second Circuit will be called the "mandatory interpretation" of § 9.

This article proposes § 9 of the FAA should not impose a one-year statute of limitations on applications to confirm an arbitration award. This is the permissive interpretation.(fn22) The permissive interpretation is the best interpretation because it follows basic statutory construction rules regarding language,(fn23) reconciles the venue and statute of limitations aspects of § 9,(fn24) best furthers the FAA policy of judicial economy,(fn25) enables parties to avoid filing actions at law,(fn26) and is congruous with § 207 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.(fn27)

Part II of this article will provide background information on the FAA and will include an examination of the Cortez case, mentioned earlier, in which the United States Supreme Court addressed an issue that is closest on point to the issue central to this article. Part III will discuss the cases split on this issue: Sverdrup v. WHC Constructors, Inc.,(fn28) out of the Fourth Circuit, Val-U Construction v. Rosebud Sioux Tribe,(fn29) decided by the Eighth Circuit, and the mandatory interpretation as held by the Second Circuit in Photopaint v. Smartlens.(fn30)

Finally, Part IV will analyze the mandatory and permissive interpretations and propose a resolution to the split. As stated above, this article proposes resolving the split by uniformly applying the permissive interpretation to § 9. Part IV will separately discuss each reason that warrants the permissive interpretation: language;(fn31) reconciliation of the venue and statute of limitations aspects of § 9;(fn32) judicial economy;(fn33) avoidance of actions at law;(fn34) and congruity with § 207 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.(fn35)

II. BACKGROUND

A. HISTORY AND PURPOSE OF THE FAA

Congress passed the Federal Arbitration Act ("FAA") to ensure that arbitration agreements were "valid, irrevocable, and enforceable . . . ."(fn36) Before passage of the FAA, "courts frequently permitted parties to renounce commitments to arbitrate commercial disputes."(fn37) In passing the FAA, Congress hoped to "realize the efficiency gains of arbitration" and to "address the courts' reluctance to enforce agreements to arbitrate."(fn38) The U.S. Supreme Court stated that with passage of the FAA, Congress "declared a national policy favoring arbitration."(fn39) According to the Court, one of the purposes of the FAA is "the rapid and unobstructed enforcement of arbitration agreements."(fn40) Today, arbitration provides faster, less expensive resolution, and allows specialists to decide disputes while easing court congestion.(fn41)

B. STATUTORY PROVISIONS

The FAA consists of three chapters: General Provisions, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Inter-American Convention on International Commercial Arbitration.(fn42) The FAA was first enacted on February 12, 1925 and has had only a few additions and amendments since that time.(fn43)

The General Provisions, which contain § 9 - the focus of this article - consist of sixteen sections.(fn44) The General Provisions include sections that allow a court to stay proceedings where the issue involved may be referred to arbitration, allows a party to petition a court to compel arbitration, allows an arbitration award to be confirmed as a court judgment and also allows for vacation, modification and correction of awards in limited circumstances.(fn45) The FAA thus furthers the "national policy favoring arbitration" and its own purpose of "rapid and unobstructed enforcement of arbitration agreements."(fn46)

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards consists of eight sections.(fn47) Section 201 states that the Convention of June 10, 1958, "shall be enforced in United States courts in accordance with this chapter."(fn48) Other sections include rules regarding jurisdiction, venue, and removal.(fn49) Section 207 is cited by the Second Circuit in Photopaint v. Smartlens, as discussed in Part III.(fn50) Section 207 is analogous to § 9 because it also allows confirmation of an arbitration award.(fn51) Section 207 provides:

[W]ithin three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.(fn52)

Thus, the confirmation proceeding under the Convention is similar to that found in § 9 and is so cited by the Second Circuit.(fn53) The Convention, however, allows for three years to confirm awards under the Convention while § 9, as held by the Second Circuit, only allows one year for confirmation.(fn54)

The Inter-American Convention on International Commercial Arbitration is the last chapter of the FAA and consists of seven sections.(fn55) Section 301 states that the Convention of January 30, 1975, "shall be enforced in United States courts in accordance with this chapter" and other sections include rules on enforcement and applicability.(fn56)

C. SECTION NINE OF THE FAA

Section 9 of the FAA allows parties to move the appropriate court, under specific circumstances, for an order confirming the arbitration award.(fn57) Section Nine states:

[I]f the parties in their agreement have agreed that a judgment

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