D.C. Appeals Court Finds Limits on Arbitration Review

The D.C. Court of Appeals has concluded that its power to overturn arbitration awards is limited.

In a case of first impression involving 2007 amendments to the D.C. Uniform Arbitration Act, the court ruled in a July 1 opinion that a provision allowing the court to vacate an arbitration award "on other reasonable grounds" does not authorize de novo review of an award. The court’s decision marks a victory for Bingham McCutchen, which had been sued by a former client for alleged overbilling.

In January 2008, A1 Team USA Holdings hired Bingham to represent the racing organization in a franchise dispute. According to the court’s 12-page opinion, written by Judge Inez Smith Reid and joined by Judges Stephen Glickman and Kathryn Oberly, A1 Team USA signed an engagement letter in which it agreed to pay an hourly billing rate ranging from $335 to $750 an hour. Bingham gave a nonbinding estimate in the letter that Phase I of the matter would cost about $75,000. The letter said that any fee disputes would be resolved by arbitration.

When A1 Team USA received a bill for $190,000, it protested and paid only $75,000. In November 2008, A1 Team USA filed an arbitration claim, alleging that Bingham had a conflict of interest due to the firm’s prior representation of A1 Holdings Ltd., the parent company that oversees a series of international auto races in which A1 Team USA competes, and that Bingham had charged an excessive amount for computerized research.

In April 2009, the arbitrator found that there wasn’t a conflict of interest but that the firm had overbilled A1 Team USA by charging $9,542.76 for research, which calculated out to more than $1,100 an hour. The arbitrator determined that A1 Team USA owed Bingham $48,869.

Later that month, Bingham filed a motion in D.C. Superior Court to confirm the award. In July 2009, A1 Team USA filed a motion asking Judge Anita Josey-Herring to vacate the award as “unreasonable” and on “public policy grounds.” Josey-Herring concluded that the “other reasonable grounds” standard in the amended D.C. Uniform Arbitration Act could not be interpreted “as a grant of de novo review to trial courts in vacating arbitral awards.” Therefore, she declined to review the conflict-of-interest allegation and the reasonableness of the legal fees. She entered a $48,869 judgment in favor of Bingham.

On appeal, A1 Team USA, which was represented by George Doumar of Doumar Martin, argued on June 9 that the D.C. Uniform Arbitration Act allows a trial court to vacate an arbitral award on “any reasonable basis.” A1 Team USA also argued that the legislative history leading up to the passage of the 2007 amendments “signals a public policy of protecting plaintiffs by providing for broader judicial review of arbitral awards.”

Bingham, which was represented on appeal by partner Warren Fitch, argued there was no evidence that the amendments required “essentially de novo adjudication by the courts of the countless arbitrations conducted in the District of Columbia each year.”

Reid’s opinion, which affirms the trial court judgment, agrees with Bingham. Reid wrote that the D.C. Council’s amendments, which largely followed the outline created by the National Conference of Commissioners on Uniform State Laws in 2000, were not intended to change the standard for judicial review.

Reid wrote, “We see nothing in the legislative history to support A1’s argument that under the revised Arbitration Act, this court ‘can now vacate an arbitral award on any “reasonable’ basis” ’; but there is support in the drafting history of the revised act that the NCCUSL never intended to abandon the standard of narrow and extremely limited judicial review of an arbitration award. There is also nothing in the legislative history of the Council’s Arbitration Act amendments suggesting any intent to deviate from that standard of review, or to permit vacatur on ‘any “reasonable” basis.’ ”

Reid’s opinion goes on to address A1 Team USA’s claim that there is a public policy exception for vacating arbitral awards. Reid conceded that prior D.C. case law allowed for such an exception, but only in instances where a party can demonstrate "some explicit public policy that is well defined and dominant.”

Noting that A1 Team USA “speaks only in generalities and mentions the general rule that ‘attorneys’ fees must be reasonable,” Reid determined that A1 Team USA failed to meet the public policy standard.

Comments

[Jeff J.]

Good question. Subsection 23 (b) of the NCCUSL and the D.C. Uniform Arbitration Act, the provision at the heart of your question, differ greatly.

Subsection 23 (b) in NCCUSL’s 2000 revision provided: "A [motion] under this section must be filed within 90 days after the [movant] receives notice of the award pursuant to Section 19 or within 90 days after the [movant] receives notice of a modified or corrected award pursuant to Section 20, unless the [movant] alleges that the award was procured by corruption, fraud, or other undue means, in which case the [motion] must be made within 90 days after the ground is known or by the exercise of reasonable care would have been known by the [movant]."

Subsection 23 (b) of the D.C. Uniform Arbitration Act provided: “The court may vacate an award made in the arbitration proceeding on other reasonable ground.”

As the court notes in the opinion, which is now linked to in this post, "When and why subsection (b) was changed to reflect the current language is a mystery; there is no legislative history explaining the substitution of the existing subsection (b) for the NCCUSL’s subsection (b)."

[Avon]

What would be really interesting to know (for those of us not in D.C., anyway) is exactly what the new DC statute did that the 2000 NCCUSL outline doesn't.

Without knowing how the "or other reasonable grounds" clause compares with the national standard, we're all clueless as to whether this court decision bears any relevance.