The Failure of Judicial Review for Reasons - Chapter 4 - The Reasoned Arbitration Award in the United States: Its Promise, Problems, Preparation and Preservation
John Burritt McArthur has been serving as an arbitrator since 1994. He has 23 years of experience as an arbitrator, 34 years as a trial lawyer in state and federal courts around the country, and is licensed to practice in Texas, California, and Alaska as well as in a variety of federal courts. He was a Partner at Susman Godfrey LLP, worked for Hosie McArthur LLP for several years, and today has a solo practice that combines arbitration practice with complex commercial trials. He has major litigation and arbitrator experience in five main areas: Energy, Oil and Gas, Electricity; Contract and Tort Business Disputes, including UCC Disputes; Antitrust; Investment Disputes, Fiduciary and Joint Venture Claims, Securities and Insurance. Mr. McArthur's broad work experience is equally suited to business and commercial arbitrations. He has represented plaintiffs and defendants in large, often highly technical commercial cases throughout his career. He has handled federal and state court cases, arbitrations, cases in MDL proceedings and class actions. His clients have ranged from some of the world's largest corporations, including Aetna and British Petroleum, to Alaska native corporations, States, individuals and small businesses. Mr. McArthur has been acknowledged for his litigation experience by his peers. He is currently chair of the LCA's International Institute on Natural Resources, Energy and Environmental Law. He has long held an "av" rating from Martindale-Hubbell. He is a member of the Million-Dollar and Multi-Million-Dollar Advocates Forum. He has published dozens of articles on legal issues, including on energy issues, arbitration, case management, various aspects of deregulation, and antitrust. He has also served as an expert in energy cases.
A statement of his arbitration philosophy can be found at http://www.johnmcarthurlaw.com/arbitration.htmz.
Chapters Four–Eight: How courts often fail to uphold the reasoned requirement, the most common forms of “unreasoning,” and the flaws in the vulnerability and efficiency attacks on reasoned awards. Our domestic arbitration, unlike international arbitration, still is battered by pressures that undercut reasoned awards. Parties need to be aware of these negative influences so that they can best protect their right to a true explanation and best decide when they should challenge a defectively reasoned award. Part Two addresses the barriers to full reasoning.
Chapter Four is the book’s core chapter. It demonstrates in detail that American arbitration has a problem with reasoned awards. While the chapter should help lawyers who need to decide whether their clients did not get what they bargained for, and therefore may want to mount a challenge, it is primarily directed at courts, arbitrators, and providers, all of whom have a role to play in fixing this problem. Chapter Four discusses defective awards, the defective opinions confirming these awards, and the cloud they cast on American arbitration. It shows that domestic arbitration indeed has a problem of too many unreasoned or only partially reasoned awards. Its pages contain a large number of unexplained awards that arbitrators submitted as reasoned and that were confirmed. Chapter Four explores what is wrong with the dominant judicial standard for testing awards for reasons. Today’s failed test emerged in the Eleventh Circuit’s 2011 Cat Charter, LLC v. Schurtenberger opinion. Other courts took up the Cat Charter mantle and rooted it further in the foundations of our law. This standard makes judicial review of awards for reasons largely meaningless. Even the most opaque awards usually survive as “reasoned” under this standard of review.
Chapter Four is a relatively long chapter. But readers will not fully understand the deep flaws and utter inadequacy of today’s leading cases on judicial review of awards for reasons without comparing the conclusory awards in Chapter Four to what really was in issue in the underlying arbitrations. Only by looking beneath the surface of the awards, as that chapter does, will readers see how poorly the awards were crafted, how much they omitted, how they thus slighted the true claims and evidence, and how damaging, how discrediting, such awards are to arbitration.
Chapters One and Four together contrast the two main judicial approaches to reviewing awards for reasons: Chapter One discusses opinions that screen efficiently for reasons, Chapter Four the opinions that espouse the dominant but defective Cat Charter approach.
from Chapter Four. The Failure of Judicial Review for Reasons
The reasoned award standard is being corroded, even as the use of the form keeps spreading. Worse, the courts have put their imprimatur behind the erosion. The courts that created today’s dominant standard for judging whether awards are reasoned have struggled with the concept of reasoned awards and ultimately failed to create an effective test for reasons. The standard they use is so broad that it does not weed out unreasoned awards.
These courts may have gone astray in part because they are correct that provider rules, arbitration treatises, guidebooks, and case law all lack a meaningful definition of a “reasoned award.” The absence of a widely accepted, existing, well-articulated standard has encouraged too many courts to claim that they can find no reliable direction at all.
This chapter explores the standards these courts and their followers apply and the defective awards that they mistake for reasoned awards. Any test for reasons must be sufficiently stringent to make arbitrators state why they decide for one side and not the other and to be effective must consistently lead courts to overturn unreasoned awards. The most influential of the currently dominant, but flawed, tests is the one authored by the Eleventh Circuit in Cat Charter, LLC v. Schurtenberger.
A. The Original Sin: The Eleventh Circuit’s Upholding a Standard Award as Reasoned in Cat Charter, LLC
Cat Charter is the decision most responsible for installing the current, too-porous test for reasons. The Eleventh Circuit recognized the lack of a clear test for reasoned awards. It admirably set out on a praiseworthy quest to remedy that problem. Its opinion has beneficially spread the understanding that failure to provide reasons when they are due is a vacatable error. Unfortunately, the court went astray during its quest and ended up with a hopelessly broad definition of “reasoned” that will protect many awards that are not reasoned at all. Instead of clarifying standards, then, the court diluted them. Something of a cottage industry erupted thereafter as courts applied Cat Charter and, like the Eleventh Circuit, watered down what “reasoned” requires.