In the multi-district litigation case of Wal-Mart Wage and Hour Employment Practices Litigation, the United States Court of Appeals for the Ninth Circuit on December 17, 2013 addressed the issue of whether a non-appealability clause in an arbitration agreement was enforceable. The Court of Appeals held that the non-appealability clause was not enforceable because it eliminated federal review of the award under Section 10 of the Federal Arbitration Act (“FAA”).
Section 10(a) of the FAA provides four scenarios under which a district court may vacate an arbitration award: 1) where an award is procured by corruption, fraud or undue means, 2) if the arbitrator was corrupt or partial to one side, 3) if the arbitrator was guilty of misconduct or refused to hear material evidence, or 4) where the arbitrator exceeded or imperfectly executed their powers.
In this wage and hour case, the original parties agreed to a global settlement of 85 million, and also agreed to settle any fee disputes amongst Plaintiffs’ counsel by arbitration. The arbitration agreement included a provision for attorney’s fees that the parties would “submit any disputes concerning fees … to binding, non-appealable arbitration …”
Because Plaintiffs’ counsel could not agree on how to divide the 28 million dollar attorney’s fee award, the matter was submitted to arbitration pursuant to the provision above. The attorney who received the bigger portion of the award moved the court to affirm the award and claimed it was not appealable, while the attorney law firm that received the smaller portion of the award moved to vacate the award under section 10(a) of the FAA.
In holding that the non-appealable clause was unenforceable, the court reemphasized that the statutory grounds for judicial review under the FAA are exclusive, and cannot be supplemented, expanded, waived or eliminated by contract. A federal court must confirm an arbitration award unless it is vacated. This enables the court to ensure fairness and protect due process in arbitration proceedings, while promoting speedy resolution of legal matters with minimal court intervention.
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Wal-Mart Wage and Hour Employment Practices Litigation