"And If You Didn't Hear Us the Last Time": More Emphasis on Arbitral Award Finality

by Andrew Flake

A just-issued Georgia Court of Appeals opinion underscores a message the state’s appellate courts have been sending for some time: Arbitration awards are not subject to automatic appeal. They are supposed to be, and are presumed to be, final. Despite this clear guidance, which is the same consistent one that federal courts applying the FAA have been delivering for many years, unsuccessful parties to arbitration have been going to trial courts arguing that one or more of the very narrow exceptions to arbitral finality apply, dressing up an ordinary legal appeal with the exception language, frequently in pretty unconvincing fashion. And even where a trial court agrees, and vacates an award on those grounds, the decision is often reversed.

So the late June opinion in Wells v. Wells-Wilson repeats this message of finality, and for those who didn’t receive it, picks up a fork, bangs on the wine glass, and exclaims to everyone at the table: “No, really, we meant it the first time…” It is a lengthy opinion, but I’ve pulled out some of what strikes me as most important and summarized it here.

Manifest Disregard of the law.” The statutory framework for arbitration has fail-safes built in for true problems with the process — whether arbitrator bias or impartiality; an issue decided that was not in the case, or an issue in the case that should have been, but was not, decided — but substantive legal challenges, or disagreements with the arbitrator’s view of the facts, or concerns with her application of legal principles, are just not an appropriate basis for challenge.

Part of this problem is that Georgia’s arbitration act, unlike many jurisdictions, includes a specific exception for “manifest disregard of the law.” If we were reading that language for the first time, without considering the policy of finality and litigation-avoidance behind litigation, it might sound inviting, suggesting the potential to re-argue arbitrated issues before a court considering whether to confirm. But in reality, since the exception moves precisely in the opposite direction as years of court precedent and the policies behind arbitration, it is an already small door, one that judicial decisions continue to brick up and restrict.

That was part of the dynamic in Wells. The underlying dispute, among feuding family members (for simplicity, let’s say Ms. Wells-Wilson, who largely prevailed, and the other “Wells Parties,” who largely lost) concerned voting rights and other governance issues in a family-owned partnership with corporate members. The arbitrator had issued a number of non-final, “interim awards,” prior to the final award, and the trial court, while disagreeing only with aspects limited to attorney’s fees, vacated the entire award and ordered a rehearing.

The Court of Appeals has no patience with the contract arguments in the case, and spends a good amount of time, likely because it is speaking emphatically to the wider audience of arbitration practitioners, addressing manifest disregard: It is an “extremely difficult” showing to make. It requires “clear evidence,” in a “concrete” form in the record, not just that the arbitrator got it wrong and misapplied the law, but of “the arbitrator’s intent to purposefully disregard the law.”

Beyond this discussion, though, there are some important issues concerning arbitration procedure and finality that the Court of Appeals also takes up, issues it has not previously addressed in detail.

Standard of review for vacatur decisions: Previously, confirmation orders by trial court have been reviewed for clear error; no prior decision had addressed the standard of review for trial court vacatur. Looking to Eleventh Circuit treatment of the question, the Court of Appeals adopts a de novo review standard for legal questions, and a clear error standard for questions of law. This more liberal review makes sense, given the presumption of finality, permitting a closer look at those trial court opinions rejecting, as opposed to adopting, the arbitrator’s award.

Successive awards. As noted, the arbitrator in Wells issued a series of interim or partial awards, leading up to a final award. It appears that, as is quite common, he contemplated an initial decision on the merits and entitlement to attorney’s fees, followed by a final award that would consider evidence and resolve disputes, if any, as to amount. As it turned out, he also issued a series of interim awards providing for injunctive relief to enforce his decisions on the contract issues.

What actually happened was that, after the final hearing concluded, the AAA, as the administering organization, issued a letter closing the hearing. As a matter of AAA’s commercial rules, that would normally start a 30-day clock running for a final award. But consistent with his announced intent, close to 30-days later, the arbitrator issued an interim award that “deferred” ruling on issues of injunctive relief and attorney’s fees, and then issued some clarification of his order, along with, ultimately, subsequent awards on injunctive relief and on attorney’s fees. The key to much of what followed is that the arbitrator made clear, in prior rulings, that he intended to reserve jurisdiction over certain issues.

Functus Officio. Distilling a very convoluted series of maneuvers, I gather from the opinion that the Wells Parties, when they saw the merits writing on the wall, used AAA’s record-closing letter as a snare and, despite the arbitrator’s intention to reserve jurisdiction, tried to lock him in to his first interim award and prevent him from finalizing his decision with injunctive relief implementing it. They were claiming the doctrine of “functus officio” applied, an arbitral principal that once a true final award has issued, the arbitrator no longer has jurisdiction. In the Wells Parties’ view of the world, if the arbitration were a basketball game, although the arbitrator was in the key, said he’d be taking a shot, had aimed and thrown the ball, which was gliding into the net, despite of that, the file-closing letter worked like mid-air buzzer; in this view, the “swish” of the arbitrator’s last order of injunctive relief (actually multiple orders), did not count.

The problem with that argument, as Court of Appeals noted, was that the arbitrator had made his intention clear; the final order would come only after a series of interim orders, making the functus officio doctrine, which the court did not adopt in any case, inapplicable. The Court of Appeals also approved of the arbitrator’s incorporation of his prior interim awards into the final award, taking the practical view that no prejudice to the Wells Parties occurred from the “delay” in their finality.

Overstepping: One of the statutory bases for vacatur is the the arbitrator “overstepped his authority,” and a 2000 Court of Appeals opinion, Sweatt v. Intl. Dev. Corp., 242 Ga. App. 753, 531 S.E.2d 192 (2000), is often cited to support an overstepping argument based on contract interpretation. In Sweatt, the arbitrator had awarded actual damages in a breach of contract case where the contract allowed only liquidated damages. The opinion formulates the question of appropriateness of relief as whether it draws its “essence” from the contract. The Court of Appeals used the Wells case to situate Sweatt as a case about contract relief, not interpretation, possibly to tamp down on how frequently it is cited in an effort to have trial court’s revisit the correctness of the arbitrator’s legal analysis.

Final and definite award. The Court of Appeals notes that authority in Georgia on this exception — the failure of an arbitral award to address all issues properly in the proceeding — is “scant.” Clarifying that an award can leave certain remedial acts to be undertaken in the future, without rendering the award indefinite, so long as sufficient guidance is provided to the parties and all underlying disputes are resolved, the opinion draws the line at making anything contingent on court action. No future litigation should be necessary, contemplated or required. In the Wells dispute, the arbitrator had not provided enough of a formula to permit the parties to recalculate reimbursement of certain fees, which rendered that aspect of the award indefinite.

Issues Left Open. The opinion also references two undecided issues, both the subject of academic commentary. First, the opinion references some tension between the manifest disregard standard and the ability of an arbitrator, also made express in the Georgia Arbitration Act, to award relief that a court of law would be unable to award, a point that in the overall context of the opinion suggests a preference for more arbitrator flexibility and authority. But ultimately, it may be the Legislature that needs to take up the continued need for a manifest disregard exception, especially as it has been constrained by the courts.

Second, in a preview of how it or the Supreme Court may later decide another issue, the opinion points out that although a 2010 decision refers to vacatur as all or nothing, both current practice and concerns of efficiency and judicial economy would suggest the possibility of vacating only a portion of an award, severing just one issue or certain issues to vacate and/or send back for rehearing.

To bring us back full circle, I mentioned earlier that the Court of Appeals seemed to be speaking to the perennial hope of the losing party at arbitration for some further basis for challenge. The last footnote in the case, which cites to another option, makes this point:

The length of this opinion is due to the nature and the number of charges made by the [appellants]…. While it still remains true, that as long as even a glint of hope remains for judicial interference with the merits of an arbitration award, we must regretfully anticipate continued efforts to press contentions similar to that rejected here, hopefully this case may persuade others from pursuing such efforts.

In other words: Yes, we really, really, really meant it.

The case is Wells v. Wells-Wilson, A21A0198, 2021 WL 2678476, at *10 (Ga. Ct. App. June 30, 2021), reconsideration denied (July 14, 2021). A disclosure: One of my law partners represents one of the appellees, although I have had and will have no involvement in the case.


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