On its face, whether to include a binding arbitration clause may seem like the least important aspect of the big contract you have asked your attorney to consider. While it might not be the most important aspect of the deal, an arbitration clause at least warrants a brief discussion with counsel. A dispute is usually resolved faster in arbitration than if it had been litigated in the court system, discovery is informal, and, as a result, the attorney’s fees are often lower. With all that upside, why does anyone still go to court? The very short answer is limited judicial review.
O.C.G.A. §9-9-13(b) provides:
The award shall be vacated on the application of a party who either participated in the arbitration or was served with a demand for arbitration if the court finds that the rights of that party were prejudiced by: (1) Corruption, fraud, or misconduct in procuring the award; (2) Partiality of an arbitrator appointed as a neutral; (3) An overstepping by the arbitrators of their authority or such imperfect execution of it that a final and definite award upon the subject matter submitted was not made; (4) A failure to follow the procedure of this part, unless the party applying to vacate the award continued with the arbitration with notice of this failure and without objection; or (5) The arbitrator's manifest disregard of the law.
“Absent one of these statutory grounds, the trial court must confirm the award.” Airtab Inc. v. Limbach Co. LLC, A08A1909 (2009). Manifest Disregard of the Law If a court returns a verdict that reflects a misapplication of law to fact, the aggrieved party in most cases has a right of appeal. In contrast, if the same dispute were arbitrated, the standard applied is manifest disregard of the law. “[T]he concept of manifest disregard ‘has never been the equivalent of insufficiency of the evidence or a misapplication of the law to the facts.’ It is a much narrower standard, requiring ‘a showing in the record, other than the result obtained, that the arbitrators knew the law and expressly disregarded it.’” Id. (footnotes omitted, emphasis supplied).
Arguably, if an arbitrator were ignorant of the law and ran afoul of it, then a court could not overturn it. Similarly, if an arbitrator knew the law but applied the law to the facts incorrectly without expressly disregarding it, the award would stand. The record must, independent of the result, demonstrate that the arbitrator disregarded the law. Partiality of the Arbitrator One must be prepared when entering arbitration for the differences between an arbitrator and a judge. “According to Airtab, the arbitration panel’s chairman was overly deferential to Limbach, its counsel, and its witnesses; treated Airtab’s witnesses with hostility; and impeded Airtab’s case by questioning witnesses and interrupting counsel.” Limbach disputed this contention and cited arbitral rules which permit the board to question witnesses. The trial court concluded that the chairman “was aggressive in his questioning, but was simply trying to ‘ferret out what really went on’ and exhibited no partiality.”
Arbitration is an expedient method to resolve disputes. However, the parties should consider not only the expediency and reduced cost of arbitration, but also the likely finality of the award given the narrow grounds for judicial intervention.