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The Biggest Mistake You Can Make When Arbitration Goes Badly


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11/20/2018
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Tragically, a number of people who have contacted me about trying to undo less than favorable results they received at arbitration faced insurmountable hurdles - even though, from an objective view of the facts, they should have been able to prevail.

"How can that be?" you ask.

It's really simple; they committed the cardinal sin when it comes to arbitration.

The Worst (Avoidable) Mistake You Can Make When it Comes to Adverse Arbitration Judgments

To borrow a cliche, they sat on their hands, or buried their proverbial head in the sand (take your pick), and failed to move quickly to vacate the arbitration award.

Here's why that's such a big problem:

Under the Federal Arbitration Act a/k/a the "FAA" (the prevailing law that usually governs arbitrations), you only have ninety (90) days to move to vacate an adverse arbitration award. After that time, you're stuck with the award, good, bad or otherwise. To that end, the Federal courts have articulated this rule as follows:

"The FAA provides that “[n]otice of a motion to vacate ... an award must be served upon the adverse party or his attorney within three months after the awardis filed or delivered.” 9 U.S.C. § 12. The three month deadline is “not subject to extension.” Florasynth, Inc. v. Pickholz, 750 F.2d 171, 175 (2d Cir. 1984) ...“[F]ailure to move to vacate the award within the three month time provided precludes [a party] from later seeking that relief when a motion is made to confirm the award.” Florasynth, 750 F.2d at 175; see also Santos v. Gen. Elec. Co., No. 10-CV-6948, 2011 WL 5563544, at *12 (S.D.N.Y. Sept. 28, 2011) (noting the losing party in an arbitration “cannot challenge confirmation of [an] award on the grounds that she [or he] might have asserted in support of a vacatur order”)."

An Important Caveat

If the parties' agreement is not governed by the FAA, but is governed by New York State law instead, the rule is quite different. In that case, New York’s courts have made clear that a party seeking to vacate an arbitration award need not affirmatively move for that relief within 90 days of the award; they can wait to respond to the plaintiff’s motion to confirm the award. See, e.g., Karlan Construction Co. v. Burdick Associates Owners Corp., 166 A.D.2d 416, 560 N.Y.S.2d 480 (2d Dep't 1990); 2d Rep.Leg.Doc. (1958) No.13, p.144; Siegel’s New York Practice, § 601 (5th ed.) (“It is apparently not mandatory that the losing party make an affirmative application to vacate or modify. The loser, by way of opposing a motion to confirm, which can be made any time within a year, can interpose whatever vacatur or modification grounds he may have, and can do this even though the 90-day period in which to make an independent application to vacate or modify has expired”).

The Takeaways

Regardless of whether your arbitration is governed by the FAA or New York State law (in which case you may have a bit more time to seek vacatur of the award), your time within which to vacate an adverse arbitration award is extremely limited, and the bases and procedures for doing so successfully are complicated. Therefore, and at the risk of stating the obvious, it is critical that you contact an attorney with knowledge and experience in this area - promptly - if you need to vacate an adverse arbitration award. 

 



Category: Business Litigation

Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer

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