All’s quiet on the judicial front. However, there are two important filings – only one of which is a judicial decision. The case discusses when a court may remand an award to the arbitrator for clarification. The second item is a brief which the U.S. Solicitor General has filed, addressing mandatory arbitration of a whistleblower’s claims of retaliation. The amicus brief is worth reading by anyone handling employment matters or representing federal contractors.
Functus Officio; Reasoned Award; Arbitrators Exceeding Their Powers
The doctrine of functus officio provides that, once an arbitrator or panel enters their final award, they have no power to revise their decision on the merits of the controversy. Nathan v. Fieger & Fieger, P.C., 2022 U.S. App. LEXIS 9459 (6th Cir. April 8, 2022)(Senior Judge Boggs, writing for himself and Judges Thapar and Bush), addresses the scope of the doctrine.
The case arises out of a dispute between the Respondent law firm and one of its former attorney employees, Romanzi, over the latter’s right to a share of a $3.55 Million dollar fee. During the dispute, Romanzi’s creditors filed an involuntary Chapter VII bankruptcy against him, and the court appointed Nathan as Trustee. The parties agreed to send the case to a three-member arbitration panel, under a provision which provided that the arbitrators were to “render a brief reasoned decision” that “shall include all claims and defenses of the parties.” Two of the arbitrators found for the Trustee and entered an award in his favor for approximately $1.3 Million. However, the operative part of the one paragraph award provided only that “the Panel as of November 18, 20218 has decided in full and final resolution of the issues submitted for determination that Respondent [Firm] is liable for and shall pay to Claimant [Trustee] damages, including interest to date, in the amount of $1,325.247.84.” (Brackets in opinion). When the Trustee moved to confirm, the firm, to quote the Court of Appeals, “suggested that the brevity of the award violated the agreement’s requirement that the arbitrators produce a ‘brief reasoned decision.’” (Quotation and emphasis in Court of Appeals opinion). The District Court remanded the case to the panel for “clarification,” holding “that the arbitrators’ decision had not been ‘reasoned’ because it failed to ‘include all claims and defenses of the parties as set forth in the agreement.” Specifically, the remand instructed the arbitrators to provide “the following information: 1) A discussion of Plaintiff’s claims, 2) A discussion of Defendant’s defenses, 3) the Arbitrator’s justification for the award.”
The arbitration panel requested views of the parties, to which the Trustee responded, but the firm did not. The arbitrators then entered a supplemental award, addressing the issues which the District Court raised. The Trustee, again, moved to confirm the award; the firm, to vacate it. The District Court confirmed. This appeal ensured. The Court of Appeals affirms.
Respondent moved to vacate under multiple provisions of Section 10 of the Federal Arbitration Act. The “clearest argument”, the Court opines, falls under Section 10(a)(4), which authorizes vacatur when the arbitrators exceed their powers. Using dictionary definitions, the Court holds that “exceeding” one’s authority is to “go beyond a limit set” thereby. Here, the court finds, the panel did what they were instructed to do; they issued a disposition. Where they failed to fulfill their function was not that they went too far, but that ”more was required of [them].” Where, as here, the arbitrator has improperly failed to explain the award, the proper remedy is for the court to remand to the same arbitrators for clarification, citing Green v. Ameritech Corp., 200 F. 3d 967 (6th Cir. 2000).
The court, then, moves to functus officio. The doctrine “likens the end of arbitration to a judge’s resignation, given that the arbitrators leave, in effect, a temporary judgeship to return to their full-time professions.” Since the judge – or arbitrator – would no longer be employed on the matter, “less-professional adjudicators [would] become more open to informal communications.” However, quoting Judge Posner, the court opines that the doctrine is “riddled with exceptions [and] it is hanging on by its fingernails.” Among those exceptions is one for clarification-completion, which applies to cases in which the “award . . . is susceptible to more than one interpretation. . . .” The Court rejects the firm’s argument that the panel’s first award, even if too brief, is “incapable of being misunderstood” and, therefore, that there is no need for clarification. Judge Boggs uses a great baseball analogy, holding that an umpire’s call of “strike,” while definitive, tells you nothing about the reasoning for the call. “Was it at the knees? Or did it graze the edge of the plate? Only by asking the umpire for clarification can the batter understand why he is skulking back to the dugout instead of trotting to first.” “Because the arbitrators’ first award was plainly capable of clarification, the proper remedy was to remand to the original arbitrators, and the district court thus correctly disposed of the first award by remanding under the clarification-completion exception to functus officio.” Addressing the supplemental award, the court easily disposes of various claims of ex parte communications between the parties and the arbitrators by finding that the Respondent either initiated or chose not to engage in those contacts.
Whistleblower Suits and Arbitration
The other issue of interest in the last couple of days is not a case, but, rather, an amicus brief filed yesterday by the Solicitor General’s office in Robertson v. Intratek Computer, Inc., Dkt. No. 20-1229 (U.S. Supreme Court). The case raises the question of whether an employer may compel arbitration of claims under 41 U.S.C. § 4712. That statute provides protection for whistleblowers against retaliation. It establishes a scheme for those who believe that they were subject to reprisal, which includes administrative proceedings and culminates in a District Court jury trial. The statute specifically provides that “rights and remedies provided in this section may not be waived by any agreement, policy, form or condition of employment.” As part of his employment, Robertson entered into an arbitration agreement with Intratek. When he sought protection under the whistleblower statute, Intratek invoked the arbitration clause. The District Court granted Respondent’s motion to compel, and the Fifth Circuit affirmed in part and remanded in part. Both held that a jury trial under the statute was merely “one way to vindicate a whistle-blower’s statutory rights after the whistleblower exhausts administrative remedies.” Arbitration was simply another road to that end. Robertson filed a petition for certiorari to the Fifth Circuit. In October, SCOTUS “invited” the U.S. to express its views.
Yesterday, the Solicitor General filed those views. While recommending that the Supreme Court deny cert. since there is no Circuit split and such cases do not arise frequently, the amicus brief makes clear the United States’ position that the statute prohibits mandatory arbitration. The Solicitor General argues that Congress intended that the terms “remedy” and “right” include the entire remedial structure, not just the ultimate recovery of damages. Thus, Congress has carved out an exception to the arbitration scheme established under the Federal Arbitration Act.
The Eighth Circuit characterized the case as one of first impression, and the Solicitor General may be right that this question arises rarely. However, for anyone representing federal contractors, this brief is one to keep handy. The Government has laid out the employer’s position in detail, complete with citations and legislative history. In addition, for those addressing the question of whether any statute implicitly carves out an exception to either state or federal arbitration acts, the thought process followed by the Solicitor General is a good road map. The amicus brief is available in full at the SCOTUS blog. 20220411120007621_20-1229 Robertson US CVSG Br.pdf (supremecourt.gov)
Have a good weekend. See you Friday.
David A. Reif, FCIArb