Case Information
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M. SMITH, Circuit Judge:
Appellants Carolyn Burton, Robert Mills, the Mills Law Firm, and Carol LaPlant (collectively, the Burton Group) appeal from the district court’s confirmation of an arbitration award allocating attorneys’ fees. The Burton Group contends that the district court erred in declining to vacate the arbitration award pursuant to § 10(a) of the Federal Arbitration Act (FAA), 9 U.S.C. § 10(a). Appellee Robert Bonsignore counters that we lack jurisdiction to hear this appeal because the parties agreed to binding, non-appealable arbitration. Alternatively, Bonsignore argues that the district court correctly found that there was no basis for vacatur under the FAA.
This appeal presents a question of first impression in this circuit: Is a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under § 10 of the FAA, enforceable? We conclude that it is not. Accordingly, we proceed to the merits of the Burton Group’s claims, and affirm the district court’s confirmation of the arbitration award in a memorandum disposition filed contemporaneously with this opinion.
FACTUAL AND PROCEDURAL BACKGROUND This appeal arises out of a protracted dispute over attorneys’ fees awarded in the Wal-Mart wage and hour multidistrict litigation, MDL 1735, in the United States District Court for the District of Nevada (the Wal-Mart Litigation). On April 25, 2006, the district court appointed Robert Bonsignore and Carolyn Burton as plaintiffs’ co-lead counsel. Carol LaPlant was named liaison counsel for the Wal-Mart Litigation.
On December 14, 2008, the parties to the Wal-Mart Litigation participated in a mediation with the Honorable Layn R. Phillips (retired). The parties agreed to a global settlement (Settlement Agreement) whereby Wal-Mart agreed to pay up to $85 million to settle all claims against it. The parties also agreed that any fee disputes among plaintiffs’ counsel would be arbitrated by Phillips (the Arbitrator).
The district court preliminarily approved the Settlement Agreement on May 28, 2009, and granted final approval on November 2, 2009. On November 20, 2009, the district court awarded plaintiffs approximately $28 million in attorneys’ Because the Burton Group did not seek review of the arbitration award under § 11 of the FAA, which allows a district court to modify or correct an arbitration award, we do not reach the question whether a party could waive review under its terms.
fees. The district court’s approval of the settlement was unanimously affirmed by a different panel of our court on August 10, 2010.
During the course of the Wal-Mart Litigation, the relationships among plaintiffs’ counsel deteriorated. Plaintiffs’ counsel quarreled concerning the proper allocation of the $28 million fee award, and were unable to resolve their dispute. Consequently, the fee dispute was submitted to “binding, non-appealable arbitration” before the Arbitrator, as provided in the Settlement Agreement.
On January 10, 2011, the Arbitrator handed down an opinion and order allocating the $28 million fee award amongst plaintiffs’ counsel. The Arbitrator allocated over $6 million to the Burton Group, over $11 million to Bonsignore, and over $730,000 to LaPlant. Bonsignore moved to confirm the Arbitrator’s award on January 26, 2011, while the Burton Group filed a motion to vacate the award on April 11, 2011. The district court granted Bonsignore’s motion on October 11, 2011, and found no legal basis for vacating the Arbitrator’s award. The district court entered judgment on October 19, 2011, and this appeal followed.
DISCUSSION
We ordinarily have jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(1)(D) to review a district court order confirming an arbitration award. However, Bonsignore questions whether we have jurisdiction in the present action because § 22.9 of the Settlement Agreement contains a non- *5 6 I N R E : W AL -M ART appealability clause. [2] Specifically, § 22.9 provides, in relevant part:
Class Counsel agree on behalf of themselves, their clients, and all Class Counsel to submit any disputes concerning fees (including, but not limited to, disputes concerning the fee allocation to any Class Counsel as recommended by Co-Lead Counsel, and disputes between Co-Lead Counsel regarding the determination of appropriate fee allocations) to binding, non-appealable arbitration to the Honorable Layn Phillips within fourteen (14) days of the fee The Burton Group contends that § 15.2 of the Settlement Agreement, read in conjunction with § 22.9, preserves its rights to challenge the fairness of the arbitration process and to appeal any decision of the district court to our court. Section 15.2 provides, in relevant part:
In the event that the Court does not approve the Attorneys’ Fees and Costs in the amount requested by Class Counsel, or in the event that the Attorneys’ Fees and Costs requested by Class Counsel is reduced, that finding shall not be a basis for rendering any unrelated section of Settlement null, void, or unenforceable. Class Counsel retain their right to appeal any decision by the Court regarding the Attorneys’ Fees and Costs and such appeal shall not be deemed an appeal of the Settlement.
We reject this argument because § 15.2, by its terms, concerns only the award of attorneys’ fees and costs by the district court, and preserves appellate review of any decision of the district court regarding that award. It does not encompass the Arbitrator’s decision concerning the allocation of those fees, which is governed solely by § 22.9.
allocations set forth by and/or recommended by Co-Lead Counsel.
Courts have construed non-appealability clauses like that
in § 22.9 in two different ways. First, as the district court
concluded, the phrase “binding, non-appealable arbitration”
may be understood to preclude only federal court review of
the merits of the Arbitrator’s decision, and not to eliminate
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the parties’ right to appeal from the Arbitrator’s decision
under § 10 of the FAA, which provides grounds for the
vacatur of an arbitration award. The district court’s reasoning
tracks that employed by some of our sister circuits, which
have held that a contract provision stating that arbitration is
non-appealable signifies that the parties only waive review of
the merits of the arbitration.
See Southco, Inc. v. Reell
Precision Mfg. Corp.
, 331 F. App’x 925, 927–28 (3d Cir.
2009) (citing
Tabas v. Tabas
,
A second possible construction of the “binding, non-
appealable arbitration” clause is that the arbitration clause
divests both the district court and our court
[3]
of jurisdiction to
[3]
This arbitration clause is different from the clause at issue in
MACTEC,
Inc. v. Gorelick
, which stated in relevant part that “
[j]udgment
upon the
award rendered by the arbitrator shall be final and nonappealable . . . .”
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review the Arbitrator’s fee allocation on any ground,
including those enumerated in § 10 of the FAA.
[4]
See Hoeft
v. MVL Grp., Inc.
, 343 F.3d 57, 63–64 (2d Cir. 2003),
overruled on other grounds by Hall St. Assocs., L.L.C. v.
Mattel, Inc.
,
Thus, the arbitration clause is ambiguous. We need not resolve the question of which interpretation is correct if we conclude that the second possible construction is unenforceable because it eliminates judicial review under § 10 of the FAA.
The FAA provides for expedited judicial review of arbitration awards. 9 U.S.C. § 1 et seq. [6] However, federal court review of arbitration awards is almost entirely limited Bonsignore contends that § 22.10 of the Settlement Agreement provides for judicial review of the Arbitrator’s award in the district court. However, that section is expressly limited by § 22.9, which renders the Arbitrator’s decision non-appealable.
[5] In Hoeft , the Second Circuit adopted this reading of a similar arbitration clause, which provided that in the event of a dispute, the parties were to
use their reasonable best efforts to resolve such dispute, and in the event that they are unable to do so such dispute shall be resolved by Steven Sherrill, whose decision in such matters shall be binding and conclusive upon each of the parties hereto and shall not be subject to any type of review or appeal whatsoever.
Hoeft
,
independent jurisdictional basis.
Hall St. Assocs.
,
to the grounds enumerated in the FAA, under which a court
may vacate, modify, or correct an arbitration award.
Id.
§§ 10–11;
Bosack v. Soward
,
(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
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I N R E : W AL -M ART
9 U.S.C. § 10(a).
[7]
The Supreme Court has already clarified
that the statutory grounds for judicial review in the FAA are
exclusive, and may not be supplemented by contract.
Hall St.
Assocs.
,
Congress enacted the FAA to promulgate a “national
policy favoring arbitration and [to] place[] arbitration
agreements on equal footing with all other contracts . . . .”
Buckeye Check Cashing, Inc. v. Cardegna
,
*9 Cir. 2003) (en banc) (“Private parties’ freedom to fashion their own arbitration process has no bearing whatsoever on their inability to amend the statutorily prescribed standards governing federal court review.”).
In Hall Street Associates , for example, Hall Street argued that the arbitration clause in its contract, which expanded judicial review beyond what is provided for in the FAA, was enforceable because arbitration is a “creature of contract.” Hall St. Assocs. , 552 U.S. at 585. The Supreme Court rejected this argument, concluding that Hall Street’s arbitration clause was unenforceable because it was “at odds” with the “textual features” of the FAA, which provide that the grounds for judicial review in §§ 10 and 11 are exclusive. Id. at 586.
Just as the text of the FAA compels the conclusion that
the grounds for vacatur of an arbitration award may not be
supplemented, it also compels the conclusion that these
grounds are not waivable, or subject to elimination by
contract. A federal court “must” confirm an arbitration award
unless, among other things, it is vacated under § 10. 9 U.S.C.
§ 9;
Hall St. Assocs.
,
Permitting parties to contractually eliminate all judicial
review of arbitration awards would not only run counter to
the text of the FAA, but would also frustrate Congress’s
attempt to ensure a minimum level of due process for parties
to an arbitration. Through § 10 of the FAA, Congress
attempted to preserve due process while still promoting the
ultimate goal of speedy dispute resolution.
See Kyocera
Corp.
,
AFFIRMED.
In
Aerojet-General Corp. v. American Arbitration Ass’n
, we noted in
dicta, citing a district court decision from South Carolina, “that parties to
an arbitration can agree to eliminate all court review of the proceedings
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. . . .”