Karo v. NAU Country Ins. Co.
297 Neb. 798
Neb.2017Background
- Matt and Michael Karo held federally reinsured crop‑insurance policies serviced by NAU Country; they claimed "prevented planting" in 2012 due to wet conditions.
- NAU denied the claims; the parties submitted the dispute to a mandatory, binding arbitration under the policy. The arbitrator denied the Karos’ claims and issued a final award on January 21, 2014.
- The Karos filed a state‑court “Petition for Judicial Review” under 9 U.S.C. § 10 on May 15, 2014 (outside the three‑month window in 9 U.S.C. § 12) seeking vacatur of the award for excess of powers/manifest disregard.
- NAU moved to dismiss early on Rule 12(b)(6) grounds but did not assert the § 12 three‑month notice requirement in the district court; the court nevertheless denied dismissal, held a summary‑judgment hearing, and vacated the arbitration award.
- On appeal the Nebraska Supreme Court addressed whether the FAA’s § 12 three‑month notice requirement is jurisdictional and thus subject to sua sponte enforcement despite NAU not raising it below.
Issues
| Issue | Plaintiff's Argument (Karos) | Defendant's Argument (NAU) | Held |
|---|---|---|---|
| Does the FAA govern the dispute? | Arbitration arises from a federally reinsured crop policy; FAA applies. | FAA governs because contract involves interstate commerce. | Held: FAA governs. |
| Is the § 12 three‑month notice requirement jurisdictional? | The three‑month bar can be treated like a statute of limitations or claim‑processing rule. | The FAA’s mandatory notice language and § 9 cross‑reference make the timing jurisdictional; untimely service bars review. | Held: § 12’s three‑month notice requirement is jurisdictional. |
| Effect of Karos’ filing/serving >3 months after award? | Timely substantive review could proceed despite delay (or NAU waived time defense). | Failure to serve within three months deprived the district court of authority to hear a § 10 vacatur. | Held: Karos’ untimely service deprived district court of jurisdiction to vacate under the FAA. |
| Validity of district court vacatur and appellate jurisdiction? | Vacatur was proper on merits (manifest disregard/exceeded powers). | Vacatur procedurally defective because court lacked FAA jurisdiction. | Held: District court’s vacatur is void for lack of jurisdiction; appeal dismissed for lack of jurisdiction. |
Key Cases Cited
- Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (describing FAA’s streamlined, limited judicial review of arbitral awards)
- Bowles v. Russell, 551 U.S. 205 (2007) (statutory time limits for filing appeals are jurisdictional)
- John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008) (statutory time bars can be jurisdictional and nonwaivable)
- Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145 (2013) (adopting clear‑statement rule for jurisdictional statutes)
- Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010) (distinguishing claim‑processing rules from jurisdictional limits)
- Cortez Byrd Chips, Inc. v. Bill Harbert Constr. Co., 529 U.S. 193 (2000) (read FAA sections together when interpretable)
- Piccolo v. Dain, Kalman & Quail, Inc., 641 F.2d 598 (8th Cir. 1981) (failure to serve § 12 notice within three months forfeits right to judicial review)