Anne’s attorney Robert had been in great form at the three-day arbitration
hearing. The resulting arbitration award gave Anne everything that she
sought. After entry of the award, Anne’s adversary filed a petition in
state court seeking to vacate the award. When he received the petition,
Robert told Anne that the action was a loser. Robert even read to Anne,
word for word, the governing Pennsylvania
statute that says “[t]he award of an arbitrator
. . . is binding and may not be vacated or
modified unless it is clearly shown that a party was denied a hearing or that
fraud, misconduct, corruption or other irregularity caused the rendition of an
unjust, inequitable or unconscionable award.”
Robert received yet more good news: just a few months after filing, the trial
court dismissed the petition. The court found that there was not a shred
of evidence in the record to support vacating the award. But that was two
years ago – and there still is no end to the arbitration. Why?
Because Anne’s adversary appealed from the trial court’s order to Superior
Court, which has not yet decided the appeal.
This brings us to Robert’s brainstorm. Why not prevent an
appeal altogether? Robert then could satisfy the arbitration award within weeks
of entry, and not await trial court and appellate court proceedings. It
would be too late to help Anne. But it would help his clients in future
arbitration proceedings obtain expeditious relief through the arbitration
process. After all, as the United
States Supreme Court recognized, “arbitration
is a matter of contract,” and contracting parties can agree how they want to
structure their private dispute-resolution process.
Here is what Robert had in mind: at the outset of the arbitration, before
either party presents any evidence, the parties would agree not only that the
“arbitrator’s decision shall be final and binding” and that judgment on the
award may be entered in any court having jurisdiction thereof; but also – and
here is the brainstorm – that “the award shall not be subject to any appeal in
any court whatsoever.” Robert added a kicker: “Any party that does not
comply with the preceding sentence shall pay all costs, fees and expenses
(including reasonable attorney’s fees and costs) incurred by the other party in
connection with or relating in any way to the appeal.”
Robert recognized that his adversary could disregard this provision and
appeal from the arbitration award. However, this provision would
accomplish two things: the court might summarily dismiss any appeal, for lack of
jurisdiction (remember Anne’s two-year wait?); and the winning party at the
arbitration would have the right to recover its attorney’s fees and costs
incurred in connection with the appeal.
Would a court enforce a waiver of a right to appeal an arbitration
award? Although Pennsylvania courts have not yet tackled this issue, a New
Jersey court recently considered this question in Van Duren v.
Rzasa-Ormes, 926 A.2d 372 (App. Div. 2007). The Court started off
saying all the right things that would support Robert’s idea: parties can waive
their constitutional right to appeal; public policy favors restricted review of
arbitration awards; and, particularly when they are sophisticated and have equal
bargaining power, parties are free to “invoke” some or all of the procedures set
forth in the governing arbitration statute – so they therefore can decide to
“further constrict the scope of limited judicial scrutiny.”
However, the court in Van Duren did not go all the way. It said
that public policy “compels” limited judicial review and, therefore, that
parties are not free to do away with a trial court’s review because that
would eliminate “judicial oversight of an arbitrator’s award” and would be “void
as against public policy.” Nevertheless, all is not lost for Robert’s
brainstorm. The court enforced the portion of the arbitration agreement
under review that precluded appellate court review of the trial court’s
judgment confirming or vacating the arbitrator’s award. The upshot: the
Van Duren court dismissed the appeal for lack of jurisdiction.
An appellate court in
Pennsylvania following the
reasoning of Van Duren would conclude that it lacks jurisdiction to
consider Anne’s adversary’s appeal from the trial court’s order denying the
petition to vacate. This is not the immediate result that Robert hoped to
achieve. It allows for trial court proceedings – petitions to vacate
arbitration awards – that could drag on for a long time. But a half a loaf
is better than none; and a court following Van Duren could well put a
speedy end to any attempted appellate litigation by forthwith dismissing an
appeal on the basis of a lack of jurisdiction.
If only Robert had thought of this before he filed Anne’s arbitration
claim. For his next arbitration client, however, he will try to persuade
his adversary to agree to a no-proceedings-in-court clause. Or, better
yet, he will insert the clause into a pre-arbitration dispute agreement before
the parties are mad at each other. A
Pennsylvania court might enforce
the provision at the trial court level. And maybe his adversary might
respect the provision and not file a petition to vacate and then an appeal.
