On what grounds? Challenging an arbitration award under federal and Florida law.

• Author: Tannen, Jonathan S.
• Position: Appellate Practice

For decades, it has been considered an "axiom of federal and Florida law that written agreements to arbitrate are binding and enforceable." (1) This wasn't always true. Before the enactment of the Federal Arbitration Act (FAA) and its Florida counterpart, the Florida Arbitration Code (FAC), courts were generally hostile to arbitration, viewing it as "an attempt to oust courts of [their] lawful jurisdiction." (2)

This hostility was checked legislatively in 1925 with Congress' passage of the FAA, which "places arbitration agreements on an equal footing with other contracts and requires courts to enforce them according to their terms." (3) Approximately 30 years later, the Florida Legislature followed Congress' lead by creating the FAC. Both schemes declare that arbitration agreements are "valid, irrevocable, and enforceable" (4) and, as a result, arbitration is now accepted as "a favored means of resolving disputes in Florida." (5)

The reasons for choosing arbitration, and the policies supporting enforcement of arbitration agreements, are well recognized. Because arbitrators are not bound by the same procedural constraints as courts, parties often view arbitration as a way to resolve their disputes while avoiding the potentially significant costs and delays that often come with litigation. Courts, for their part, view arbitration as a simple matter of contract: Since the parties have voluntarily chosen arbitration over going to court, courts will "indulge every reasonable presumption" in favor of that choice. (6)

The benefits of arbitration, however, do not come without trade-offs, one of which is the right to traditional appellate review. Just as courts will enforce the parties' initial decision to arbitrate, they will not interfere with that decision after an arbitration award is issued beyond a few limited, statutorily defined grounds. Crucially, these grounds do not include substantive review of the award for "mere" errors of law or fact. As a result, "judicial review of arbitration decisions is among the narrowest known to the law." (7)

This article provides an overview of the current state of the law in Florida concerning review of arbitration awards, including the governing sources of law, the statutory grounds for judicial vacatur, modification, and correction, and recent judicial decisions significantly narrowing the availability of nonstatutory grounds for review. This article also discusses the option of appellate review within the arbitration itself. Because such review, like arbitration generally, is a matter of contract, it is ultimately up to the parties to decide in advance whether the award will be reviewable in a substantive appeal. Unlike a court proceeding, parties to arbitration cannot wait until a decision is issued to decide who gets the last word.

Judicial Review of Arbitration Awards--Governing Law

Under both the FAA and the FAC, a party seeking to challenge an arbitration award must demonstrate one of the statutory grounds for vacatur, modification, or correction in order to succeed. In the absence of a timely motion establishing one of these grounds, "neither a trial court nor a district court of appeal has the authority to overturn the award." (8)

Initially, the party must determine which source of law--the FAA or the FAC--applies to the award. In its recent decision in Visiting Nurse Association of Florida, Inc. v. Jupiter Medical Center, Inc., 154 So. 3d 1115 (Fla. 2014), cert. denied, 135 S. Ct. 2052 (2015), the Florida Supreme Court explained that the FAA "controls when a transaction involves interstate commerce," while "[a]n arbitration clause in a contract not involving interstate commerce is subject to the FAC." Even in cases involving interstate commerce, however, Florida courts should still apply the FAC to the extent it does not conflict with the FAA. Thus, in Visiting Nurse, the court held that although the FAA controlled, it would also apply the FAC in determining whether vacatur was appropriate because, under the facts, the statutes were not in conflict. (9)

Regardless of whether the FAA controls, a motion challenging an arbitration award must be filed in state court unless there is an independent basis for federal subject matter jurisdiction. According to the U.S. Supreme Court, the FAA is "something of an anomaly in the field of federal-court jurisdiction" in that, although it creates a body of federal substantive law governing arbitration, it does not confer jurisdiction on federal courts. (10)

Attorneys should also be careful to make sure they are applying the correct version of the FAC, which was substantially revised in 2013 and renamed the Revised Florida Arbitration Code. (11) The purpose of the revision was to conform the FAC to the Revised Uniform Arbitration Act (RUAA) released in 2000 by the National Conference of Commissioners on Uniform State Laws. (12) While the revisions significantly altered numerous portions of the FAC, the grounds for modification, correction, and vacatur of awards were largely, although not entirely, unchanged. (13) By its terms, the revised code currently applies to arbitration agreements made on or after July 1, 2013, and--until June 30, 2016--in any arbitration proceeding where the parties agree the revised code will apply. Beginning July 1, 2016, all arbitration agreements will be subject to the revised code. (14)

Statutory Grounds for Vacatur

By design, the grounds for vacating an arbitration award--set forth in F.S. [section]682.13 and 9 U.S.C. [section]10--are narrow. Consistent with the policy of enforcing arbitration awards, vacatur is generally limited to defects that taint the arbitration process itself, such as misconduct by a party or the arbitrator, and does not include "mere errors of law, or errors of construction or interpretation of a contract." (15)

* The Award Procured by Fraud, Corruption, or Other Undue Means--The first ground for vacatur focuses on misconduct by a party to the arbitration, and includes, for example, perjury by a party or witness at the arbitration hearing. (16) Courts have adopted a three-part test required to prevail on this ground. The challenging party must 1) prove the fraud by clear and convincing evidence; 2) demonstrate that the fraud was not discoverable by the exercise of due diligence before or during the arbitration hearing; and 3) demonstrate that the fraud was material to an issue in the arbitration. (17) Thus, if the challenger could have discovered the fraud and presented evidence of it at the arbitration hearing, but simply failed to do so, the trial court cannot vacate the award. Likewise, there is no basis for relief if the fraud concerned only a minor or collateral issue. (18)

* Evident Partiality, Corruption, or Prejudicial Misconduct by an Arbitrator --The next ground concerns wrongdoing by the arbitrator. There does not appear to be any definitive test for evaluating whether an arbitrator was "evidently" partial...