Dotting the i's (and Sealing the Envelope) In Arbitration-Award Challenges

by Andrew Flake

The Federal Arbitration Act is oriented toward encouraging arbitration and upholding arbitral awards. And just as the substantive bases to challenge an award are narrow, so too are the procedural requirements strict. The Eleventh Circuit reminds us of that in an April 1, 2021 opinion, O’Neal Constructors, LLC v. DRT America, LLC, involving a motion to vacate filed on time but served too late.

The underlying facts are not important, except that the arbitrators awarded seven-figure damages and more than $650,000 in attorney’s fees to O’Neal. With that award delivered in January, DRT had three-months under 9 U.S.C. § 12 within which to challenge it. DRT filed within that three months and at the same time, sent a courtesy copy of its brief to O’Neal counsel. But only after the three-months had expired, a few weeks later, did DRT formally serve its motion.

That three-month period is not optional, so if e-mailing the brief was not good service, DRT was out of luck — and that is what the Eleventh Circuit determined. The analysis and holding are cautionary. DRT invoked the applicable AAA construction rules to argue that e-mail service was sufficient. After parsing the rule in question (R. 44), the Eleventh Circuit determined that it did not authorize e-mail service of a motion to vacate and, more importantly, that it was federal procedure that controlled. Under Fed. R. Civ. P. 5(b)(2)(E), e-mail service is fine so long as the other party consents expressly, which O’Neal had not.

With that, the pincers closed; where a party does not move within three months to vacate, it is also barred from opposing a motion to confirm the award. Whether DCT had a good basis to challenge the award, and could have satisfied the stringent and limited FAA requirements to challenge is another question; in this case, though, for want of quick lick of the envelope, the motion was shut down right out of the gate.

Here’s are the quick takeaways: First, as convenient, ubiquitous, and reliable as e-mail is, we cannot assume that it supplants other prescribed means of service; if you’re going to rely on it, get that stipulation in writing. Second, filing for date-calculation purposes is not always the same as service. And third, in general, challenging an arbitral award is going to be an uphill push, with thorns and briars along the way; even a step off of the path of procedure can cause a stumble. As far as DRT’s motion to vacate, it was more of a tumble, right off of a cliff.

So check, and recheck, and recheck again, not only the arbitral rules but importantly, because a motion to vacate or modify is filed in federal court, the applicable rules of civil procedure. Reliance on what may have been sufficient process in the arbitration context, once the challenge or confirmation phase begins, is not enough.

[The case is O’Neal Constructors, LLC v. DRT America, LLC, No. 20-11045 (11th Cir., decided April 1, 2021).]

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