Winter 2003-12 A judicial review of an arbitration award is very rare

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Number 50
Winter 2003

A judicial review of an arbitration award is very rare

An arbitration award can only be modified by a court in rare circumstances, such as misconduct on the part of the arbitrator. Puerto Rico Ports Authority v. Misener Marine Construction, 2002 U.S. Dist. LEXIS 22628.

The dispute

The Puerto Rico Ports Authority had requested that the U.S. District Court for the District of Puerto Rico vacate or modify an arbitration award rendered by a three person arbitration panel appointed by the American Arbitration Association.

The dispute arose out of a contract for Misener to construct two wharfs in San Juan. While the contractor alleged that PRPA had delayed payment for the completed work, the latter argued that it was not obligated to pay because of construction defects that had became apparent. The difference was submitted to arbitration, as commanded by the contract.

The award

The arbitration panel found in favor of Misener, and ordered PRPA to pay $2,356,153.51. It also ruled that Misener was not responsible for the costs of correcting the failing wharfs. Unhappy with the resolution, PRPA recurred to the federal District Court.

Narrow review

"Judicial review of an arbitration award is extremely narrow and exceedingly deferential," said the court. An award can only be vacated or modified in rare circumstances, such as:

when the arbitrator has engaged in misconduct,

where the award contradicts the plain language of a contract, or

when it is clear from the record that the arbitrator recognized the applicable law, but ignored it.

The court added that while PRPA's legal analysis could well be correct, or preferable to the arbitrators', that is not sufficient reason to vacate. A mere mistake of law cannot serve as the basis for judicial review of an arbitration award. "Provided the arbitrators' analysis is sound and plausible, which it is in this case, we must affirm the award even though as a matter of first impression we might well have decided the case otherwise."

© 2003 Goldman Antonetti