Motions to Vacate Modify, Correct, or Modify an Arbitration Award

The United States Supreme Court established over 160 years ago that courts in the U.S. will not set aside an arbitration for error in law or fact.[1]  The Supreme Court held then that if an arbitrator has “given their honest, incorrupt judgment on the subject-matters submitted to them, after a full and fair hearing of the parties, [the parties] are bound by it; and a court of chancery have no right to annul their award because it thinks it could have made a better.”[2]  The Court argued that by voluntarily choosing by contract to arbitrate rather than litigate a dispute, the parties have bargained to be bound by the arbitrator’s construction of the agreement, which should not be disturbed by the courts.[3]  Further, if a court were to choose to weigh the merits of a grievance, it would “usurp[] a function which is entrusted to the arbitration tribunal.”[4]

In more recent times, the U.S. Congress and state legislatures have codified that original notion, limiting judicial review of arbitration awards.  The Federal Arbitration Act (“FAA”)[5] was enacted in 1925.  The Uniform Arbitration Act (“UAA”), which is codified in 35 states,[6]  was first enacted in 1955.[7]  Each places strong limitations on judicial review of arbitration awards.

Under the FAA, an arbitration award may be set aside or “vacated” under the following limited circumstances:

where the award was procured by corruption, fraud, or undue means;

1. where there was evident partiality or corruption in the arbitrators, or either of them;
2. where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or
3. where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.[8]

Further, courts have noted that the FAA imposes a high burden of proof on the party seeking vacatur of an arbitration award.[9]  The Ninth Circuit has confirmed that manifest disregard of the law remains grounds for vacatur where the arbitrator exceeded his or her powers.[10]

Grounds for vacating an award under the Nevada UAA parallel those in the FAA.  In Nevada, there are 6 independent grounds for vacating an award:

1.         The award was procured by corruption, fraud or other undue means;
2.         The arbitrator displayed evident partiality, corruption, or prejudicing the rights of a party to the arbitral proceeding through misconduct;
3.         An arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to NRS 38.231, so as to prejudice substantially the rights of a party to the arbitral proceeding;
4.         An arbitrator exceeded his or her powers;
5.         There was no agreement to arbitrate, unless the movant participated in the arbitral proceeding without raising the objection under subsection 3 of NRS 38.231 not later than the beginning of the arbitral hearing; or
6.         The arbitration was conducted without proper notice of the initiation of an arbitration as required in NRS 38.223 so as to prejudice substantially the rights of a party to the arbitral proceeding. [11]

Under Nevada common law, an award may be vacated if the arbitrator manifestly disregarded the law or if the award is arbitrary, capricious, or unsupported by the agreement.[12]  The court may nevertheless only vacate the award for manifest disregard if it finds that the law is well-defined, explicit, and clearly applicable,[13] or the arbitrator recognized that the law required a certain result but refused to apply the law.[14]  Under the arbitrary and capricious standard, the court may not review whether the arbitrator misinterpreted the law, but must only determine if the arbitrator’s findings are supported by substantial evidence in the record.[15]

Under either the FAA or the UAA, a petition to vacate, modify, or correct an arbitration award must be filed within three months after the award is issued .[16]

[1] Burchell v. Marsh, 58 U.S. 344 (1855).
[2] Id.at 352.
[3] Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960).
[4] Major League Baseball Players Ass’n v. Garvey, 532 U.S. 504, 509-10 (2001) (quoting Steelworkers v. Am. Mfg. co., 363 U.S. 564, 568- 69 4 L. Ed. 2d 1403, 80 S. Ct. 1343 (1960)).
[5] See the FAA here.
[6] See survey of States enacting the UAA here.
[7] Nevada has codified the 2000 version of the UAA at NRS Chapter 38.
[8] FAA, 9 U.S.C. § 10.
[9] Folkways Music Publishers v. Weiss, 989 F.2d 108, 111 (2d Cir. 1993).
[10] Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009).
[11] NRS 38.241
[12] Clark Cty. Educ. Ass’n v. Clark Cty. Sch. Dist., 131 P.3d 5, 8 (Nev. 2006).
[13] Graber v. Comstock Bank, 905 P.2d 1112, 1116 (Nev. 1995).
[14] Bohlmann v. Printz, 96 P.3d 1155, 1156 (Nev. 2004), overruled on other grounds by Bass-Davis v. Davis, 134 P.3d 103 (Nev. 2006).
[15] Clark Cty. Educ. Ass’n, 131 P.3d at 9-10
[16] FAA, 9 U.S.C. § 12; NRS 38.241(2).