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by Andrew Flake

We have some recent arbitration-related decisions to review in today’s blog, a group we might describe, coming out of the Fourth of July holiday, as a few Georgia sparklers and, from the Eleventh Circuit, one firework of first impression.

Lang Enterprises Ltd. Co. v. Alcue Properties & Interiors, Inc. d/b/a Primrose– Reaffirmation of the difficulty of arguing that an arbitration award reflects “manifest disregard.” The trial court vacated an arbitration award in a construction case, determining that “[t]he arbitration record, as well as [the arbitrator’s] credentials, demonstrate that he was fully aware of the law and disregarded same.” The argument that Primrose made was essentially of legal error, adding the twist, latched on to by the trial court, that the experience of the arbitrator underscored that he was “aware” of the correct result. But manifest disregard must be evident and intentional. Simply pointing to one party’s pleadings and the fact that the arbitrator was experienced do not speak at all to those issues. The case is Lang Enterprises Ltd. Co. v. Alcue Properties & Interiors, Inc., 2023 WL 3913960 (Georgia Court of Appeals, decided June 9, 2023) 

The Eleventh Circuit underscored this principal in an employment case in which the former employee failed by one day to comply with timing provisions, affirming the arbitrator’s dismissal: “Because arbitration is an alternative to litigation, judicial review of arbitration decisions is among the narrowest known to the law.” Smith v. International Business Machines Corp., 2023 WL 3244583, at *3 (11th Circuit, decided May 4, 2023) (citation omitted). Notably, the IBM contract had a strict 180-day notice requirement, mandating that a copy of any demand be sent to an IBM arbitrator coordinator, and the employee’s demand went to JAMs and not to IBM. 

By contrast, NuVasive, Inc. v. Absolute Medical, LLC, an Eleventh Circuit opinion, is notable for illustrating one of those limited instances when an arbitration award is subject to challenge – the FAA’s exception for an award procured by “corruption, fraud, or undue means.” Absolute Medical, a distributor for Nuvasive, put on testimony from surgeon-customers about various reasons they switched from Nuvasive products, allowing Absolute Medical to argue that its breaches of contract were not the reason Nuvasive lost business. In discovery in court over some claims that were not arbitrated, Nuvasive obtained text messages between two of the defendants that suggested one of them was actively coaching the other by text during Zoom testimony to the arbitration panel. Part of the defendants’ oath in the arbitration was that they were alone and not communicating with anyone. 

Fireworks over the East River. License Standard2211, CC BY-SA 3.0, via Wikimedia Commons

For the first time in this Circuit, the Court approved of equitable tolling under the FAA, allowing a motion to vacate outside of the statutorily required 3-month window because of “extraordinary circumstances,” in this case, based on what appeared to be deliberate withholding of evidence that showed the arbitration testimony had been impermissibly coached. The Court relied upon and aligned itself with the reasoning of the Ninth Circuit, which also has permitted equitable tolling. See Move, Inc. v. Citigroup Global Markets, Inc., 840 F.3d 1152, 1158 (9th Cir. 2016). The Court went further, determining that the 3-month requirement was in the nature of a statue of limitations and not jurisdictional,  meaning despite the passage of that period, the district court had authority to consider the request. 

Having allowed the motion to vacate, the Court was then easily able to determine that extraordinary circumstances existed and, based on the same set of evidence, apply the test for fraud:  (1) “the movant must establish the fraud by clear and convincing evidence,” (2) “the fraud must not have been discoverable upon the exercise of due diligence prior to or during the arbitration,” and (3) “the person seeking to vacate the award must demonstrate that the fraud materially related to an issue in the arbitration.”  

The case is NuVasive, Inc. v. Absolute Medical, LLC, 2023 WL 4096037(11th Circuit, decided June 21, 2023) 

The Nuvasive discussion as to the three-month period pairs well with another recent Georgia decision, announcing under the Georgia Arbitration Act what has long been the case under the FAA:  A party wishing to confirm an award does not have to wait 3-months to do so; it can file right away (“There is simply nothing in the plain language of the Georgia Arbitration Code which supports DPSG’s position that the Fulton Superior Court was required to wait until resolution of DPSG’s subsequently filed motion to vacate in a different court before it could rule on the Claimants’ application to confirm.”)

In that case, Defense Products and Services Group, Inc. v. Kinney, the Kinney claimants promptly went to Fulton County to confirm their award, and when that happened, it meant the Respondents needed to make their arguments to vacate in Fulton, not in any of the other counties they might otherwise have had as options. Since DPSG did not respond with arguments for vacatur in Fulton, and instead filed a motion to vacate in Coweta County. After the Fulton Superior Court confirmed the award, noting the lack of any arguments from DPSG for vacatur, the Coweta court dismissed the petition to vacate. A critical practice point, to be sure; Judge Hodges wrote for the Court: “To be clear, this does not deny a party losing in arbitration its right to petition the court to vacate the award; rather, it simply may not be able to do so in its preferred venue if its opponent files an application to confirm in a different statutorily permitted venue first.” The case is  Defense Products and Services Group, Inc. v. Kinney, 2023 WL 4009760, at *2 (Georgia Court of Appeals, decided June 15, 2023).