"A sure and expedited resolution of disputes": the Federal Arbitration Act and the one-year requirement for summary confirmation of arbitration awards.

• Author: Kissling, Matthew R.

INTRODUCTION

Arbitration is a "highly favored" mode of dispute resolution throughout the American judicial system. (1) Generally, arbitration presents an opportunity for parties to settle their differences using an independent third-party arbitrator. (2) The arbitrator serves as the trier of fact, and conducts hearings in lieu of a judicial proceeding. (3) As a result, arbitration offers disputing parties "speedy and inexpensive trial[s] before specialists," while also "eas[ing] the workload of the courts." (4)

In order to further the purposes of arbitration at the national level, Congress enacted the Federal Arbitration Act ("FAA") in 1925. (5) The overall purpose of the FAA is to "reverse the longstanding judicial hostility to arbitration agreements ... and to place arbitration agreements upon the same footing as other contracts." (6) The FAA governs commercial arbitration and provides parties with a series of guidelines and procedures for any disputes that are submitted for resolution. (7) In effect, the FAA creates a body of "federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the [FAA]." (8) By doing so, the FAA guarantees that "arbitration has the same power and ability to decide cases as traditional court litigation." (9)

As a part of these provisions, the FAA provides for summary confirmation of arbitration awards. (10) This confirmation process, governed by 9 U.S.C. [section] 9, allows a prevailing party to file an application with a court to confirm an arbitration award. In relevant part, section 9 states:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, ... then 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, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. (11) Thus, if a party applies for award confirmation under section 9, the court must confirm it unless the award is "vacated, modified, or corrected" pursuant to other provisions of the FAA. (12) This process has the effect of a summary proceeding, which disposes of the award's confirmation in a prompt and efficient manner. (13) Section 9 is critical to arbitration's goals because confirmation of an award renders the arbitrated issue res judicata. (14) As a result, judicial confirmation establishes a sense of finality in matters resolved by arbitration.

While the confirmation process appears relatively straightforward, the language of section 9 has been subject to conflicting interpretations at the federal level. In particular, circuit courts are split over the time period during which a party may file for judicial confirmation under section 9. As noted above, the provision provides that "at any time within one year after the [arbitration] award is made any party to the arbitration may apply to the court ... for an order confirming the award." (15) The courts have struggled over whether this language creates a one-year statute of limitations for summary award confirmation under the FAA.

The Fourth and Eighth Circuits have adopted a permissive interpretation of section 9, holding that the provision does not create a mandatory one-year limitations period. (16) On the other hand, the Second Circuit follows a mandatory interpretation of the statute, holding that section 9 does impose a one-year statute of limitations. (17)

In support of their interpretation, the Fourth and Eighth Circuits argue that a permissive reading of section 9 not only comports with the statute's normal reading (18) but also promotes judicial economy, a key objective of arbitration. (19) The courts argue that if faced with a strict one-year limitations period, parties will be discouraged from utilizing the FAA's devices and will instead file a separate action at law to enforce an award. (20)

Such a permissive interpretation has several important weaknesses. First, the Supreme Court has repeatedly held that the mere presence of permissive language in a statute does not render the provision itself permissive. (21) Instead, courts must look to the statute's structure and legislative purpose for guidance. (22) Second, while a permissive interpretation may encourage parties to submit disputes to arbitration, the Fourth and Eighth Circuits seem to assume that such a decision will be based solely on the type of time limitation imposed by section 9. (23) Finally, a permissive interpretation will essentially leave the FAA's summary confirmation process without a statute of limitations. The Supreme Court has held that in such situations, courts are to utilize analogous state statutes of limitations. (24) The states, however, are not uniform in the necessary time period for summary confirmation. (25) The obvious result is that the availability of section 9 confirmation will be inconsistent on a national scale.

In light of these weaknesses, a permissive interpretation of section 9 is neither appropriate nor necessary. Instead, the mandatory one-year statute of limitations proposed by the Second Circuit better fulfills the intent of Congress and the purposes of FAA arbitration, (26) while also promoting consistency in the availability of summary confirmation on a national scale. Therefore, this Note proposes that the mandatory interpretation should be adopted to impose a one-year statute of limitations for summary confirmation under section 9.

Part I of the Note will provide a brief history of the FAA and the purposes behind the statute's enactment. In addition, it will examine the current circuit split over the interpretation of section 9. Given this Note's advocacy for the Second Circuit's mandatory interpretation, the remaining sections will discuss several reasons in support of this reading. Part II will explain why a mandatory one-year limitations period best fits the language and structure of section 9. Part HI will demonstrate that this interpretation is more effective in not only fulfilling section 9's purpose as an expedited confirmation process but also in promoting both of the primary goals of FAA arbitration: judicial economy and finality.

Part IV will discuss how a mandatory one-year limitations period ensures that section 9's procedures are consistently available on a national scale. Finally, Part V argues that, in light of the ability to toll a statute of limitations, a permissive interpretation of section 9 is simply not necessary to fulfill the objectives of the FAA.

1. BACKGROUND

   1. History and Purpose of the FAA

      Before examining the dispute over section 9's time limitations, it is important first to understand the history and purpose behind the FAA. By enacting the FAA in 1925, Congress intended to curb traditional judicial animosity toward arbitration agreements. (27) The American courts inherited this hostility from their English predecessors at common law. (28) Viewing such animosity as a serious problem, Congress passed the FAA to replace "judicial indisposition to arbitration with a 'national policy favoring [it] and plac[ing] arbitration agreements on equal footing with all other contracts." (29)

      In furtherance of this policy, Congress intended for the FAA to protect the enforceability of arbitration agreements, (30) as well as ensure their "rapid and unobstructed enforcement." (31) To do so, Congress crafted the FAA to include sixteen General Provisions, (32) which govern nearly every stage of an arbitration brought under the FAA. For example, the General Provisions allow for a party to petition a court to compel arbitration, (33) permit a court to stay judicial proceedings if a matter can be referred to arbitration, (34) and allow a court to "vacate, modify, and correct" awards in limited instances. (35) The comprehensive nature of these provisions manifests "a liberal federal policy favoring arbitration" (36) and seeks to resolve disputes "as quickly and easily as possible." (37)

      Summary confirmation of arbitration awards is another device used to further the FAA's policies and objectives and its goal of rapid and efficient enforcement. (38) Section 9 governs the confirmation of arbitration awards, (39) and provides an expedited process through which parties may seek confirmation of an arbitration award as a court judgment. (40) Section 9's language, however, also creates a possible barrier to summary confirmation. Section 9 provides that "at any time within one year after the award is made any party to the arbitration may apply ... for an order confirming the award." (41) The federal circuit courts are split over whether this language imposes a mandatory one-year statute of limitations. The circuits' conflicting interpretations are discussed in more detail below.

   2. Conflicting Interpretations of Section 9

      The circuit dispute centers around whether the phrase "may apply" imposes a one-year statute of limitations for filing an application to confirm an arbitration award. (42) On one side are the Fourth and Eighth Circuits, which hold that use of the word "may" makes section 9 merely permissive. (43) However, the Second Circuit differs and finds that section 9 imposes a mandatory one-year filing period. (44)

      1. The Permissive Interpretation

         The Fourth Circuit first set forth the permissive interpretation in Sverdrup Corp. v. WHC Constructors, Inc. (45) In that case, a dispute arose during the construction of a package development center. (46) Pursuant to an arbitration clause in the parties' contract, Sverdrup and WHC submitted their dispute to arbitration. (47) In September 1990, the arbitrator issued an award in favor of Sverdrup in the amount of $419,456.07. (48)

         Sverdrup, however, did not file for section 9 summary confirmation of the award until October 8, 1991, roughly thirty-eight days after the...