Litigation: Courts Award Sanctions for Unsuccessful Challenges to Arbitral Awards
Parties looking to challenge arbitration decisions should ensure claims have strong legal basis.
August 11, 2010 at 08:00 PM
4 minute read
The original version of this story was published on Law.com
Although there is a statute that authorizes federal courts to sanction lawyers and parties for bringing baseless lawsuits or motions (28 U.S.C. ? 1927), it is very rare that courts actually invoke the statute. One area, however, in which parties and lawyers risk being sanctioned is in connection with challenges to arbitral awards that amount to nothing more than an argument that the arbitrator reached an incorrect result.
B.L. Harbert International LLC v. Hercules Steel Co., 441 F.3d 905 (11th Cir.2006) was a case in which the plaintiff challenged an adverse arbitration award arising out of a dispute over a construction project. The challenge was on the ground that the arbitrator manifestly disregarded the law. The district court disagreed and entered judgment enforcing the award. The plaintiff appealed. The Eleventh Circuit explained that the plaintiff's argument was nothing more than a disagreement with the arbitrator's decision, which is not a basis for vacating an arbitral award.
The Eleventh Circuit went on to state as follows: “[T]his Court is exasperated by those who attempt to salvage arbitration losses through litigation that has no sound basis in the law applicable to arbitration awards. The warning this opinion provides is that in order to further the purposes of the FAA and to protect arbitration as a remedy we are ready, willing, and able to consider imposing sanctions in appropriate cases. . .Courts cannot prevent parties from trying to convert arbitration losses into court victories, but it may be that we can and should insist that if a party on the short end of an arbitration award attacks that award in court without any real legal basis for doing so, that party should pay sanctions.”
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